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Transatlantic Holdings Inc – ‘424B4’ on 5/28/09

On:  Thursday, 5/28/09, at 7:29am ET   ·   Accession #:  930413-9-2914   ·   File #:  333-155811

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/28/09  Transatlantic Holdings Inc        424B4                  1:2.7M                                   Command Financial

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                          HTML   2.05M 

Filed Pursuant to Rule 424(b)(4)
Registration No. 333-155811

The information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated May 28, 2009.

Prospectus Supplement to Prospectus dated May 28, 2009.

26,000,000 Shares

Transatlantic Holdings, Inc.

Common Stock

All of the shares of common stock in this offering are being sold by the selling stockholder identified in this prospectus supplement. Transatlantic Holdings, Inc. will not receive any of the proceeds from the sale of the shares being sold by the selling stockholder.

The common stock is listed on the New York Stock Exchange under the symbol “TRH.” The last reported sale price of the common stock on May 27, 2009, was $37.87 per share.

See “Risk Factors” on page S-11 of this prospectus supplement and page 4 of the accompanying prospectus to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement and the accompanying prospectus. Any representation to the contrary is a criminal offense.

To the extent that the underwriters sell more than 26,000,000 shares of common stock, the underwriters have the option to purchase up to an additional 3,900,000 shares from the selling stockholder at the initial price to public less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on  , 2009.

Prospectus Supplement dated  , 2009.

TABLE OF CONTENTS

Prospectus Supplement

Prospectus

We have not, and the underwriters have not, authorized any dealer, salesperson or other person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus supplement or the accompanying prospectus.

ABOUT THIS PROSPECTUS SUPPLEMENT

This document has two parts. The first part consists of this prospectus supplement, which describes the specific terms of this offering and the securities offered. The second part, the accompanying prospectus, provides more general information about securities which may be offered, some of which does not apply to this offering. If the description of the offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

Before purchasing any shares of our common stock, you should carefully read both this prospectus supplement and the accompanying prospectus, together with the additional information described under the heading “Incorporation by Reference” in the accompanying prospectus.

This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate, nor do this prospectus supplement and the accompanying prospectus constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The information contained in this prospectus supplement and the accompanying prospectus, or incorporated by reference in these documents, is accurate only as of the date of the applicable document. When we deliver this prospectus supplement and the accompanying prospectus or make a sale pursuant to this prospectus supplement and the accompanying prospectus, we are not implying that the information is current as of the date of the delivery or sale.

NOTICE TO INVESTORS

We are subject to the insurance holding company laws of New York. These laws generally require controlled insurers to register and file certain reports, including information concerning their holding company’s capital structure, ownership, financial condition and general business operations. Such holding company laws generally also require prior regulatory agency approval of changes to direct or indirect control of an insurer or reinsurer and of certain material intercorporate transfers of assets within the holding company structure. The New York Insurance Law provides that no corporation or other person, except an authorized insurer, may acquire direct control of Transatlantic Reinsurance Company, or TRC, or Putnam Reinsurance Company, or Putnam, or acquire control of Transatlantic Holdings, Inc. and thus indirect control of TRC and Putnam, unless such corporation or person has obtained prior approval of the Superintendent of the New York State Insurance Department, or NYS ID, for such acquisition. For the purposes of the New York Insurance Law, any investor acquiring 10% or more of Transatlantic Holdings, Inc. shares would be presumed to be acquiring “control” of the Transatlantic Holdings, Inc. An investor who would be deemed to be acquiring control of Transatlantic Holdings, Inc. would be required to obtain approval of the Superintendent of the NYS ID prior to such acquisition. In addition, information concerning such investor would become subject to various ongoing reporting requirements in New York and in certain other states.

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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights information contained in this prospectus supplement, the accompanying prospectus or the documents that we have filed with the Securities and Exchange Commission, or SEC, that are incorporated herein by reference. Before investing in our common stock, you should read this prospectus supplement, the accompanying prospectus and the documents incorporated herein by reference carefully, including the section entitled “Risk Factors” in this prospectus supplement. Unless otherwise stated or the context requires otherwise, as used in this prospectus supplement and the accompanying prospectus, all references to “Transatlantic Holdings” or the “Company” are only to Transatlantic Holdings, Inc., a Delaware corporation, and all references to “TRH,” “we,” “us” and “our” and all similar references are to Transatlantic Holdings, Inc. and its subsidiaries.

Our Company

History and Development

Transatlantic Holdings, Inc. is a Delaware corporation originally incorporated in 1986. Since the Company’s initial public offering in June 1990, its headquarters and principal executive offices have been located in New York City. The Company began as a domestic reinsurance company, but it has expanded its international operations over the past 20 years and now has 23 locations globally. In 2008, international locations represented approximately half of the $4.1 billion in net premiums written by the Company and its subsidiaries.

Our Business

Through our wholly owned subsidiaries, Transatlantic Reinsurance Company, or TRC, Trans Re Zurich, or TRZ, and Putnam Reinsurance Company, or Putnam, we offer reinsurance capacity for a full range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. Through our subsidiaries we are licensed, accredited, authorized or can serve as a reinsurer in each of the 50 states and the District of Columbia in the United States and in Puerto Rico and Guam. Through our international locations, we have operations worldwide, including Canada, five countries in Europe, three countries in Central and South America, one country in Africa, one country in Asia (excluding Japan), Japan and Australia.

We focus solely on property and casualty reinsurance. Casualty lines reinsurance approximated 70% of net premiums written in 2008 and 71% of net premiums written in 2007. In each year, property lines comprised the balance. In addition, treaty reinsurance approximated 97% of net premiums written in 2008 and 96% of net premiums written in 2007, with the balance in each year representing facultative accounts. We also primarily focus on claims-made policies rather than occurrence-based policies as we believe we can earlier identify and more accurately measure our potential losses under claims-made policies.

The casualty line includes directors’ and officers’ liability, or D&O, errors and omissions liability, or E&O, medical malpractice, ocean marine and aviation, auto liability (including non-standard risks), accident and health, surety and credit and general casualty. The property line includes fire, allied lines, auto physical damage and homeowners multiple peril. Reinsurance is provided for most major lines of insurance on both excess-of-loss and pro rata bases.

Our major sources of revenues are net premiums earned for reinsurance risks undertaken and income from investments. As of March 31, 2009, the great majority of our investments were in fixed maturity securities held to maturity and available for sale with an average duration of 6.1 years. In general, premiums are received significantly in advance of related claims payments.

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Industry Trends

The market conditions in which we operate have historically been cyclical, experiencing cycles of price erosion followed by rate strengthening as a result of catastrophes or other significant losses that affect the overall capacity of the industry to provide coverage. For several years, the reinsurance market has been characterized by significant competition worldwide in most lines of business. Additionally, we are exposed to the operating cycles of primary insurers as the rates charged by, and the policy terms associated with, primary insurance agreements may affect the rates charged by, and the policy terms associated with, reinsurance agreements, particularly for pro rata reinsurance business.

Following improvements in the U.S. property marketplace after significant catastrophe losses in 2004 and 2005, additional capacity entered the reinsurance market in the form of new companies in Bermuda as well as the entrance of capacity from the capital markets via sidecars, catastrophe bonds and other derivative products. The entrance of the new capacity slowly eroded property insurance and reinsurance rates through the first half of 2008, although the marketplace remained generally favorable.

During the second half of 2008, however, the global credit and financial crisis began to significantly impact the insurance and reinsurance markets. First, many alternative reinsurance solutions (such as sidecars) were terminated or not renewed. Second, the impairment of insurance company balance sheets meant historical risk levels in many cases now represented a higher than desired percentage of surplus. Third, Hurricane Ike produced one of the highest insured losses from a natural peril event despite being only a category 2 storm. These changes produced an increase in demand for traditional reinsurance from insurance companies as they could not raise capital by issuing debt; did not want to issue equity at depressed stock prices; and lost the ability to access the capital markets for alternative reinsurance solutions. In addition, many reinsurers, affected by similar issues, could not maintain the levels of capacity that they had in recent years to take on risk.

The increase in demand coupled with a decrease in supply led to a significant increase in property and off-shore energy reinsurance pricing in the first quarter of 2009, most notably in the peak U.S. catastrophe zones such as the Southeast, West and Northeast. This pricing effect was much less noticeable in areas of the country where there is less catastrophe risk and internationally as well, where loss experience has been favorable, but some moderate improvements were evident in peak European and Japanese areas.

The casualty market did not enjoy the same type of pricing increases in the first quarter of 2009 as the property market except for certain areas such as financial institution D&O, related E&O covers, surety and credit and fidelity. In fact, some areas of casualty business saw deterioration of pricing levels. Terms and conditions generally remained acceptable.

We expect that pricing in the U.S. property catastrophe reinsurance marketplace will continue to improve during 2009, especially where there is coastal storm or earthquake exposure. Casualty rates should also begin to improve as loss trends emerge and the cost of capital increases. Internationally, most lines of business and markets continue to be impacted by overcapacity, but increased reinsurance industry discipline and contracting capacity may potentially lead to stabilization or improvement of market conditions in 2009. The reinsurance marketplace as a whole continues to be disciplined.

Additionally, in April 2008, the Brazilian reinsurance market was opened to the private sector. As an Admitted Reinsurer in Brazil, we expect to see new opportunities arise in Brazil in the future.

The existence of favorable or improving market conditions in certain regions and lines of business does not necessarily translate into ultimate pricing adequacy for business written under such conditions. In addition, there can be no assurance that these favorable or improving conditions will occur or remain in effect in the future.

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Competitive Advantages

We believe that we have the following competitive advantages:

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Business Strategy

Our business strategy is to maintain a leading position in the casualty and property reinsurance markets using a disciplined approach to underwriting while at the same time achieving attractive long-term returns for stockholders. In this regard, we intend to continue to:

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American International Group

The Selling Stockholder

American International Group, Inc., which we refer to as AIG or, collectively with one or more of its subsidiaries (other than us), the AIG Group, is a holding company which, through its subsidiaries, is engaged in a broad range of insurance and insurance-related activities in the United States and abroad. AIG’s primary activities include both general and life insurance and retirement services operations. Other significant activities include financial services and asset management.

The AIG Group beneficially owns 39,092,662 shares of our common stock, representing approximately 58.91% of our outstanding common stock. The AIG Group is the selling stockholder in this offering. After this offering (and assuming no exercise of the underwriter’s option to purchase additional shares), the AIG Group will beneficially own 13,092,662 shares of our common stock, representing approximately 19.73% of our outstanding common stock. One of our seven current directors, Mr. Thomas Tizzio, is the retired Senior Vice Chairman—General Insurance of AIG. Certain subsidiaries of AIG own $450 million aggregate principal amount of our 5.75% senior notes due 2015, or senior notes, representing 64% of the total outstanding principal amount of such notes as of March 31, 2009.

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AIG Group Reinsurance

Through our wholly owned subsidiaries TRC, Putnam and TRZ, we either accept or reject reinsurance offered by subsidiaries of AIG based upon our assessment of risk selection, pricing, terms and conditions. We have generally not set terms and conditions as lead underwriter with respect to treaty reinsurance with subsidiaries of AIG, except in situations in which, by prearrangement, we have decided to reinsure a substantial portion of particular insurance business written by AIG subsidiaries. We may in the future, however, act as lead underwriter with respect to such business, and we expect that the terms and conditions of any such reinsurance will be negotiated on an arms-length basis.

In 2008, approximately 8%, or $366 million, of gross premiums written by us was assumed from the AIG Group and then retained by us. Included in that amount is approximately $57 million of gross premiums that, principally as a result of the marketing efforts of our wholly owned subsidiary Professional Risk Management Services, Inc., or PRMS, were insured initially by the AIG Group and then ceded to us, which we refer to as prearrangement. In addition to the $366 million, we also had $183.9 million in gross premiums written that were assumed from certain members of the AIG Group and then ceded in an equal amount to other members of the AIG Group, thereby not affecting our net premiums written.

Certain Agreements with the AIG Group

Historically, the AIG Group has furnished to us, at our expense, certain services, including office space, human resource-related activities and limited administrative services; an AIG subsidiary has acted as investment manager for us; and our employees have participated in benefit plans administered by AIG. Prior to or simultaneously with the closing of this offering, we and the AIG Group will enter into the following agreements to effect a transition and separation.

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The AIG Group has also agreed that, immediately prior to the closing of this offering, in its capacity as the holder of a majority of our outstanding shares of common stock, it will execute a consent to amend and restate the Company’s certificate of incorporation to increase the number of authorized shares of common stock and preferred stock that we may issue and to effect other changes. Such restatement of the certificate of incorporation will be effected, in accordance with the rules of the SEC, no earlier than 20 calendar days after we have mailed an information statement regarding such consent to our stockholders. We intend to file the information statement shortly after the closing of this offering. See “Description of Capital Stock” for more information.

Risks Affecting Us

You should carefully consider the information under the heading “Risk Factors” beginning on page S-11 of this prospectus supplement and all other information in this prospectus supplement, the accompanying prospectus and the documents incorporated herein by reference before investing in our common stock.

Corporate and Other Information

Our principal executive offices are located at 80 Pine Street, New York, New York 10005, and our telephone number is (212) 770-2000. Our website is www.transre.com. The information contained in, or that can be accessed through, our website is not a part of this prospectus supplement or the accompanying prospectus and should not be relied upon in determining whether to make an investment in our common stock.

This prospectus supplement refers to brand names, trademarks, service marks and trade names of us and other companies and organizations, and these brand names, service marks and trade names are the property of their respective holders.

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THE OFFERING

The number of shares of our common stock outstanding excludes:

As of May 27, 2009, the AIG Group beneficially held approximately 58.91% of our outstanding shares of common stock. After giving effect to this offering, and assuming no exercise by the underwriters of their option to purchase additional shares, the AIG Group would have held approximately 19.73% of our outstanding shares of common stock as of that date. See “Selling Stockholder.”

Except as otherwise indicated, all of the information in this prospectus supplement assumes no exercise of the underwriters’ option to purchase additional shares.

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Summary Historical Financial Data

The following tables set forth summary consolidated financial data. You should read the summary financial data presented below in conjunction with our consolidated financial statements and the notes to our consolidated financial statements included in or incorporated by reference into this prospectus supplement and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus supplement. The summary consolidated financial data presented below as of December 31, 2008, 2007 and 2006 and for each of the fiscal years then ended, have been derived from our audited consolidated financial statements. The summary consolidated financial data presented below as of March 31, 2009 and 2008, and for the three months ended March 31, 2009 and 2008, have been derived from our unaudited consolidated financial statements and include all adjustments, consisting of normal and recurring adjustments, that we consider necessary for a fair statement of the financial position and results of operations as of and for such periods. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009 or for other future periods.

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RISK FACTORS

The purchase of our common stock involves significant investment risks. You should consider the risks set forth below, as well as other information contained in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein carefully before making a decision to invest in our common stock. If any of the following risks actually materializes, then our business, financial condition and results of operations would suffer. In addition, there may be risks of which we are currently unaware or that we currently regard as immaterial based on the information available to us that later prove to be material. These risks may adversely affect our business, financial condition and operating results. As a result, the trading price of our common stock could decline, and you could lose some or all of your investment. You should read the section entitled “Forward-Looking Statements” immediately following these risk factors for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein.

Risks Related to Our Business

The occurrence of severe catastrophic events could have a material adverse effect on our financial condition, results of operations and operating cash flows.

Because we underwrite property and casualty reinsurance and have large aggregate exposures to natural and man-made disasters, we expect that our loss experience will from time to time include events of great severity. The frequency and severity of catastrophe losses are inherently unpredictable, particularly in light of the acceleration of climate change. Consequently, the occurrence of losses from a severe catastrophe or series of catastrophes could have a material adverse effect on our financial condition, results of operations and cash flows. Increases in the values and geographic concentrations of insured property and the effects of inflation have historically resulted in increased severity of industry losses in recent years, and we expect that those factors will increase the severity of catastrophe losses in the future.

If we are required to increase our liabilities for loss reserves, our financial condition and results of operations may be materially adversely affected.

Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss to the ceding company and the reinsurer, and the ceding company’s payment of that loss and subsequent payments to the ceding company by the reinsurer. We are required by applicable insurance laws and regulations and U.S. generally accepted accounting principles, or GAAP, to establish liabilities on our consolidated balance sheet for payment of losses and loss adjustment expenses, or LAE, that will arise in the future from our reinsurance products for losses that have occurred as of the balance sheet date. Under GAAP, we are not permitted to establish liabilities until an event occurs that may give rise to a loss. Once such an event occurs, liabilities are established in our financial statements for our losses, based upon estimates of losses incurred by the ceding companies. As a result, only liabilities applicable to losses incurred up to the reporting date may be established, with no allowance for the provision of a contingency reserve to account for expected or unexpected future losses. Losses arising from future events will be estimated and recognized at the time the losses occur. Although we annually review the adequacy of our established reserves for losses and LAE, there can be no assurance that our loss reserves will not develop adversely and have a material effect on our results of operations. To the extent these liabilities may be insufficient to cover actual losses or LAE, we will have to add to these liabilities and incur a charge to our earnings, which could have a material adverse effect on our financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus supplement for a further discussion of the risks and uncertainties relating to loss reserves.

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Uncertainty about the continued ownership by the AIG Group of a significant portion of our outstanding shares of common stock may have an adverse effect on us.

In the second half of 2008, the AIG Group experienced an unprecedented strain on its liquidity. This strain led to a series of transactions with the Federal Reserve Bank of New York, or the NY Fed, and the U.S. Department of the Treasury, or the U.S. Treasury. On September 22, 2008, AIG entered into an $85 billion credit agreement (subsequently reduced to $60 billion), which we refer to as the AIG Fed Credit Agreement, with the NY Fed. The AIG Group pledged approximately 17.1 million shares of our common stock held directly by AIG to secure its obligations to the NY Fed. Subsequently, AIG announced its intention to dispose of its interest in us.

We expect that, upon the closing of this offering, the lien on the AIG Group’s shares of our common stock will be released to the extent necessary for the AIG Group to sell its shares free and clear of the lien. As to shares of our common stock that the AIG Group continues to hold after this offering, in the event the AIG Group defaults on its obligations under the AIG Fed Credit Agreement and the NY Fed forecloses upon our shares pledged to secure the AIG Group’s obligations, we may be further negatively impacted as some companies may be restricted from doing business with or may become more cautious about doing business with us or our subsidiaries. If the AIG Group does not sell a significant portion of its position in this offering, continuing uncertainty surrounding the AIG Group’s ownership interest in us and its recent liquidity problems may continue to negatively affect perceptions of our ability to meet our financial obligations, impact our ability to obtain new and renewal business, result in employee retention issues and further negatively impact our financial strength and credit ratings, all of which could adversely impact our financial results in future periods. In addition, as the AIG Group currently provides certain services to us, a sale of the AIG Group’s interest in us may result in additional operating expenses in the future.

A downgrade in the ratings assigned to our operating subsidiaries could adversely affect our ability to write new business and may adversely impact our existing agreements.

Standard & Poor’s, or S&P, Moody’s Investors Service, or Moody’s, and A.M. Best Company, or Best, are generally considered to be significant rating agencies with respect to the evaluation of insurance and reinsurance companies. Financial strength and credit ratings by these rating agencies are important factors in establishing a competitive position for insurance and reinsurance companies. Financial strength ratings measure a company’s ability to meet its insurance and reinsurance obligations to contract holders. Credit ratings measure a company’s ability to repay its debt obligations and directly affect the cost and availability of unsecured financing. Ratings are subject to periodic review at the discretion of each respective rating agency and may be revised downward or revoked at their sole discretion. Rating agencies also may increase their scrutiny of rated companies, revise their rating standards or take other action. In addition, a ceding company’s own rating may be adversely affected by a downgrade in the rating of its reinsurer or an affiliated company. Therefore, a downgrade of a rating of the Company or its operating subsidiaries may dissuade a ceding company from reinsuring with us in the future and may influence a ceding company to reinsure with one of our competitors that has a higher financial strength rating. In general, if TRC’s, Putnam’s or TRZ’s insurer financial strength ratings and/or financial strength ratings from these rating agencies fall below “A-,” certain rating agency triggers in our contracts would allow customers to elect to take a number of actions such as 1) terminating the contracts on a run-off or cut-off basis; 2) requiring us to post collateral for all or a portion of the obligations; or 3) require commutation under the contract as described below. A downgrade of our debt ratings may also increase future borrowing costs.

On January 20, 2009, S&P lowered our ratings stating that this action reflected “TRH’s inability to meet operating performance expectations over time and, to a lesser extent, concerns that the uncertainty surrounding the majority ownership stake of AIG could put constraints on the company’s financial flexibility in the coming months.” S&P lowered the counterparty credit ratings and insurer financial strength ratings on each of TRC, Putnam and TRZ to “A+” (Strong) from “AA-” (Very Strong). The Company’s counterparty credit rating was lowered to “BBB+” from “A-.” The outlook for these ratings is stable. The Company’s senior unsecured debt rating and senior notes’ rating were also lowered to “BBB+” from “A-.” The counterparty credit rating and insurer financial strength rating “A+”

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represents the fifth highest level. The counterparty credit rating “BBB+” represents the eighth highest level.

Moody’s maintains an insurance financial strength rating of “Aa3” (Excellent) on TRC. This rating is the fourth highest rating level. On September 15, 2008, while affirming TRC’s financial strength rating of “Aa3,” Moody’s lowered the senior unsecured debt rating of the Company to “A3” from “A2,” noting that the debt rating previously incorporated one notch of rating uplift from the AIG Group’s ownership stake and that Moody’s increasingly assesses us on a stand-alone basis. The Company’s senior unsecured debt rating, “A3,” is the seventh highest level. On October 3, 2008, following AIG’s announcement of a restructuring plan related to the AIG Fed Credit Agreement with the NY Fed, Moody’s placed these ratings on review with direction uncertain, signaling potential sales to buyers whose credit profiles could be stronger, weaker or similar to that of the AIG Group.

Best maintains financial strength ratings on our major operating subsidiaries, TRC, Putnam and TRZ, of “A (Excellent)” and issuer credit ratings of “a”. Best maintains an issuer credit rating of “bbb” on the Company. All of these ratings have negative outlooks. The financial strength rating “A (Excellent)” represents the third highest rating level. The issuer credit rating “a” represents the sixth highest rating level and the issuer credit rating “bbb” represents the ninth highest rating level. On May 11, 2009, Best affirmed all of these ratings.

All of these ratings are current opinions of S&P, Moody’s and Best, respectively. As such, they may be changed, suspended or withdrawn at any time by the respective rating agencies as a result of changes in, or unavailability of, information or based on other circumstances, including our relationship with the AIG Group. Ratings may also be withdrawn at the request of our management. Ratings are not a recommendation to buy, sell or hold securities or our reinsurance products and each rating should be evaluated independently of any other rating.

A significant portion of our in-force treaty contracts as of December 31, 2008 permit the ceding company to cancel the contract on a cut-off or run-off basis if our operating subsidiaries’ financial strength rating is downgraded below a certain rating level, generally “A-”. TRC’s and TRZ’s financial strength ratings are at least two levels above the most common trigger point. In addition, contracts may also permit the ceding company to cancel the contract if there is a significant decline in the statutory surplus of TRC, generally of at least 20%.

Contracts may contain one or both of the aforementioned contractual provisions, certain other cancellation triggers or other stipulations, such as a requirement to post collateral for all or a portion of our obligations or require commutation under the contract if a triggering event occurs. Whether a ceding company would exercise any of these cancellation rights would depend on, among other factors, the reason and extent of such downgrade or surplus reduction, the prevailing market conditions and the pricing and availability of replacement reinsurance coverage.

When a contract is cancelled on a “cut-off” basis, as opposed to a “run-off” basis, the liability of the reinsurer under policies which became effective under the treaty prior to the cancellation date of such treaty ceases with respect to losses resulting from events taking place on and after said cancellation date. Accordingly, unearned premiums on that business as of the cut-off date are returned to the ceding company, net of a proportionate share of the original ceding commission. In the accounting period of the cancellation effective date, the amount of unearned premiums returned would be recorded as a reduction of gross premiums written with a like reduction in gross unearned premiums with no effect on gross premiums earned. Thus, the canceling of a contract generally has liquidity and future implications to our business but rarely affects premiums already earned.

We cannot predict in advance the extent to which these cancellation rights would be exercised, if at all, or what effect such cancellations would have on our financial condition or future operations, but such effect potentially could be material.

We may secure our obligations under our various reinsurance contracts using trusts and letters of credit. We may enter into agreements with ceding companies that require us to provide collateral for our obligations under certain reinsurance contracts with these ceding companies under various circumstances, including where our obligations to these ceding companies exceed negotiated thresholds. These thresholds may vary depending on our ratings and a downgrade of our ratings or

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a failure to achieve a certain rating may increase the amount of collateral we are required to provide. We may provide the collateral by delivering letters of credit to the ceding company, depositing assets into trust for the benefit of the ceding company or permitting the ceding company to withhold funds that would otherwise be delivered to us under the reinsurance contract. The amount of collateral we are required to provide typically represents all or a portion of the obligations we may owe the ceding company, often including estimates made by the ceding company of incurred but not reported, or IBNR, claims. Since we may be required to provide collateral based on the ceding company’s estimate, we may be obligated to provide collateral that exceeds our estimates of the ultimate liability to the ceding company. An increase in the amount of collateral we are obligated to provide to secure our obligations may have an adverse impact on our ability to write additional reinsurance.

If our risk management methods and pricing models are not effective, our financial condition, results of operations and cash flows could be materially adversely affected.

Our property and casualty reinsurance contracts cover unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions, fires, industrial explosions, freezes, riots, floods and other natural or man-made disasters, including those that may result from terrorist activity. We are also exposed to multiple insured losses arising out of a single occurrence that have the potential to accumulate to material amounts and affect multiple risks/programs and classes of business. We use modeling techniques to manage certain of such risks to acceptable limits, although current techniques used to estimate the exposure may not accurately predict the probability of such an event or the extent of resulting losses. In addition, we may purchase retrocession protection designed to limit the amount of losses that we may incur. Retrocession arrangements do not relieve us from our obligations to the insurers and reinsurers from whom we assume business. The failure of retrocessionnaires to honor their obligations could result in losses to us. Moreover, from time to time, market conditions may limit and in some cases prevent reinsurers from obtaining the types and amounts of reinsurance that they consider adequate for their risk management. It is likely that we will face more difficulty obtaining certain retrocession protection in the future given current market conditions, and will also be required to pay higher prices for such protections than in the recent past. If we are unable to obtain retrocessional coverage in the amounts we desire or on acceptable terms, our capacity and appetite for risk could change, and our financial condition and results of operations may be materially adversely affected.

Various provisions of our contracts, such as limitations to or exclusions from coverage or choice of forum, may not be enforceable in the manner we intend, due to, among other things, disputes relating to coverage and choice of legal forum. Underwriting is a matter of judgment, involving important assumptions about matters that are inherently difficult to predict and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance. One or more catastrophic or other events could result in claims that substantially exceed our expectations, which could have a material adverse effect on our financial condition, results of operations and cash flows.

The property and casualty reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable pricing.

Historically, property and casualty reinsurers have experienced significant fluctuations in operating results. Demand for reinsurance is influenced significantly by underwriting and investment results of primary insurers and prevailing general economic and market conditions, all of which affect ceding companies’ decisions as to the amount or portion of risk that they retain for their own accounts and consequently how much they decide to cede to reinsurance companies. The supply of reinsurance is related to prevailing prices, the levels of insured losses, and levels of industry surplus, among other factors, that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the reinsurance industry. In addition, the supply of reinsurance is affected by a reinsurer’s confidence in its ability to accurately assess the probability of expected underwriting outcomes, particularly with respect to catastrophe losses. As a result, the property and casualty reinsurance business historically has been a cyclical industry, characterized by periods of intense price competition

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due to excessive underwriting capacity as well as periods when shortages of capacity permitted favorable pricing.

The cyclical trends in the industry and the industry’s profitability can also be affected significantly by volatile and unpredictable developments, including what we believe to be a trend of courts to grant increasingly larger awards for certain damages, changes in the political, social or economic environment, natural disasters (such as catastrophic hurricanes, windstorms, tornadoes, earthquakes and floods), man-made disasters (such as those arising from terrorist activities), fluctuations in interest rates, changes in the investment environment that affect market prices of and returns on investments and inflationary pressures that may affect the size of losses experienced by primary insurers. We cannot predict whether market conditions will improve, remain constant or deteriorate. Unfavorable market conditions may affect our ability to write reinsurance at rates that we consider appropriate relative to the risk assumed. If we cannot write property and casualty reinsurance at appropriate rates, our ability to transact reinsurance business would be significantly and adversely affected.

Increased competition could adversely affect our profitability.

The property and casualty reinsurance industry is highly competitive in virtually all lines. We could face increased competition from new market entrants, existing market participants devoting additional capital to the types of business written by us, alternatives to reinsurance available to cedants, such as capital market alternatives, and government sponsored reinsurance entities.

Competition in the types of reinsurance in which we are engaged is based on many factors, including the perceived overall financial strength of the reinsurer, the ratings of S&P, Moody’s and Best, the states or other jurisdictions where the reinsurer is licensed, accredited, authorized or can serve as a reinsurer, capacity and coverages offered, premiums charged, specific terms and conditions of the reinsurance offered, services offered, speed of claims payment and reputation and experience in the lines of business underwritten.

We compete in the United States and international reinsurance markets with numerous major international reinsurance companies and numerous domestic reinsurance companies, some of which have greater resources than us or operate in different regulatory jurisdictions and tax environments. Our competitors include independent reinsurance companies, subsidiaries or affiliates of established worldwide insurance companies, reinsurance departments of certain primary insurance companies, domestic and European underwriting syndicates and in some instances government-owned or subsidized facilities. Certain of these competitors have been operating substantially longer than we have and have established long-term and continuing business relationships throughout the industry, which can be a significant competitive advantage.

Traditional reinsurers as well as capital market participants from time to time produce alternative products or reinsurance vehicles (such as reinsurance securitizations, catastrophe bonds, various derivatives such as swaps and sidecars) that may compete with certain types of reinsurance, such as property catastrophe. Hedge funds may provide reinsurance and retrocessional protections through captive companies or other alternative transactions on a fully collateralized basis for property and energy catastrophe business. Over time, these numerous initiatives could significantly affect supply, pricing and competition in the reinsurance industry.

In January 2007, Florida enacted legislation that doubled the aggregate reinsurance capacity of the Florida Hurricane Catastrophe Fund, or FHCF, the reinsurance facility established by the state, from $16 billion to approximately $32 billion. In addition, the legislation reduced the industry loss retention level from $6 billion to $5 billion, $4 billion or $3 billion, as determined by participants. During the 2008 to 2009 hurricane seasons, the legislation also adds coverage above and below the existing FHCF program. Under the Florida legislation, the state-run insurer of last resort, Citizens Property Insurance Corporation, was authorized to increase its underwriting capacity and charge lower rates. In addition, Citizens Property Insurance Corporation has recently obtained approval to write commercial property insurance business. The increase in capacity, lower retention levels and authorization to write commercial property insurance will lead to an increase in government-sponsored entities’ share of Florida’s property catastrophe reinsurance market. Other U.S. states are considering similar legislation. This measure and similar measures will likely reduce the demand for catastrophe reinsurance within

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the Florida market and other markets in which similar legislation is passed, which may compel current market participants to seek greater participation in other regions and thus increase competition in other regions such as Latin America, the Caribbean, and the Coastal Mid-Atlantic and New England states.

A limited number of brokers account for a large portion of our revenues; the loss of all or a substantial portion of the business provided by them may have an adverse effect on us.

The great majority of our business from non-affiliates is written through brokers. In 2008, companies controlled by Aon Corporation and Marsh & McLennan Companies, Inc. accounted for 27% and 15% of our consolidated revenues, respectively, and, accounted for 25% and 14%, respectively, of total gross premiums written. In addition, our largest 10 brokers accounted for 58% of total gross premiums written in 2008. These brokers also have, or may in the future acquire, ownership interests in insurance and reinsurance companies that may compete with us. The loss of all or a substantial portion of the business provided by our brokers could have a material adverse effect on us.

Liquidity risk represents our potential inability to meet all payment obligations when they become due.

Our liquidity could be impaired by unforeseen significant outflows of cash. This situation may arise due to circumstances specific to us or that we may be unable to control, such as a general market disruption or an operational problem that affects third parties or us. We depend on dividends, distributions and other payments from our subsidiaries to fund dividend payments and to fund payments on our obligations, including debt obligations. Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, certain of our branches or subsidiaries are subject to laws and regulations, including those in foreign jurisdictions, that authorize regulatory bodies to block or reduce transfers of funds to the home office in the U.S. or our affiliates. These laws and regulations may hinder our ability to access funds that we may need to make payments on our obligations.

Certain of our investments may become illiquid. Our investments include fixed maturities (including asset-backed securities), equity investments and limited partnerships (including hedge funds and private equities). The current disruption in the credit and financial markets may materially affect the liquidity of our investments, including residential mortgage-backed securities which represent 3% of total investments as of March 31, 2009. If we require significant amounts of cash on short notice in excess of normal cash requirements in a period of market illiquidity, then we may have difficulty selling investments in a timely manner or may be forced to dispose of them for less than what we might otherwise have been able to under other conditions.

Furthermore, we do not currently have a credit facility to help us respond to any liquidity problems we may encounter, and we expect that it will be difficult to obtain a credit facility in the short term. In addition, the current disruptions in the credit and financial markets, combined with the recent decline in our stock price, will make it more difficult for us to raise cash in the capital markets.

Concentration of our investment portfolios in any particular segment of the economy may have adverse effects.

Concentration of our investment portfolios in any particular industry, group of related industries, asset classes, such as residential mortgage-backed securities, or geographic sector could have an adverse effect on our investment portfolios and consequently on our consolidated results of operations or financial condition. While we seek to mitigate this risk by having a broadly diversified portfolio, events or developments that have a negative effect on any particular industry, asset class, group of related industries or geographic region may have a greater adverse effect on investment portfolios to the extent that the portfolios are concentrated rather than diversified. Further, our ability to sell assets relating to such particular groups of related assets may be limited if other market participants are seeking to sell at the same time.

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The valuation of our investments includes methodologies, estimations and assumptions which are subject to differing interpretations; these differing interpretations could result in changes to investment valuations that may adversely affect our results of operations or financial condition.

The vast majority of our investments are fixed maturity investments, which are subject to the classification provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” or SFAS 157. SFAS 157 requires assets recorded at fair value in the consolidated balance sheet to be measured and classified in a hierarchy for disclosure purposes consisting of three “levels” based on the observability of inputs available in the marketplace used to measure the fair values.

Level 1 assets use fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets.

Level 2 assets use fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active markets and inputs other than quoted prices that are observable for the asset, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 assets use fair value measurements based on valuation techniques that use at least one significant input that is unobservable. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. At March 31, 2009, we classified $171.0 million of assets measured at fair value on a recurring basis as Level 3. This represented 1.9% of total assets measured at fair value on a recurring basis.

Securities that are less liquid are more difficult to value and trade. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain of the securities in our investment portfolio, if trading becomes less frequent or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, more securities may fall to Level 3 and thus require more subjectivity and management judgment. In addition, prices provided by independent pricing services and independent broker quotes can vary widely even for the same security.

As such, valuations may include inputs and assumptions that are less observable or require greater estimation as well as valuation methods which are more sophisticated, thereby resulting in values which may be greater or less than the value at which the investments may be ultimately sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in this prospectus supplement for a further discussion of the risks and uncertainties relating to critical accounting estimates.

The determination of the amount of impairments taken on our investments is subjective and could materially impact our results of operations or financial position.

The determination that a security has incurred an other-than-temporary decline in value requires the judgment of our management and consideration of the fundamental condition of the issuer, its near-term prospects and all relevant facts and circumstances.

At each balance sheet date, we evaluate our securities holdings with unrealized losses. When we do not intend to hold such securities until they have recovered their cost basis, we record the unrealized loss in income as a realized capital loss. If a loss is recognized from a sale subsequent to a balance sheet date pursuant to changes in circumstances, the loss is recognized in the period in which the intent to hold the securities to recovery no longer exists. There can, however, be no assurance that

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we have accurately assessed the level of impairments reflected in our financial statements. Furthermore, additional impairments may need to be taken in the future. Historical trends may not be indicative of future impairments.

An investment is impaired if its fair value falls below its cost or amortized cost. The determination of whether an impairment is other-than-temporary is subjective and involves considerable judgment and the consideration of various factors and circumstances. The significant factors include:

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition and Liquidity” included in this prospectus supplement for a further discussion of the risks and uncertainties relating to critical accounting estimates and our investment portfolio.

The impact of governmental actions made in response to the economic crisis on us is difficult to determine at this time.

In response to the financial crises affecting the credit and financial markets and concern about financial institutions’ ongoing viability, numerous regulatory and governmental actions have been taken or proposed. Within the U.S., the Federal Reserve has taken action through reduced federal funds rates and the expansion of acceptable collateral for its loans to provide additional liquidity. Numerous financial institutions have received and may continue to receive capital both in the form of emergency loans and direct Treasury equity investments. In addition, in February 2009, the U.S. Congress passed a $787 billion “economic stimulus” plan. Within the United Kingdom and Europe, similar actions, including interest rate cuts and capital injections into financial institutions, have been undertaken. It is possible that some of our competitors may participate in some of these programs.

An additional regulatory concern involving residential mortgage-backed securities is “cram-down legislation” currently under consideration in the U.S. Congress. If passed, this legislation would reallocate losses from defaults on the underlying residential mortgages across all tranches of the security, effectively negating the contractual terms of the security. We have investments in residential mortgage-backed securities. Should this legislation become law, certain securities held by us could be put at greater risk for loss and could be downgraded to below investment grade by one or more rating agencies.

There can be no assurance as to the effect that any such governmental actions will have on the financial markets generally or on our financial condition, results of operations and cash flows in particular.

Difficult and volatile conditions in the global capital and credit markets and in the overall economy could materially and adversely affect our operating results, investment portfolio and financial condition.

Ongoing disruption and volatility in the global capital and credit markets and in the overall economy affects our business in a number of ways, including the following:

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It is difficult to predict how long these conditions will exist and how our markets, business and investments will continue to be adversely affected. Accordingly, these conditions could have a material adverse effect on our consolidated financial condition or results of operations in future periods.

We may be adversely affected by the impact of market volatility and interest rate and foreign currency exchange rate fluctuations.

Our principal invested assets are fixed maturity investments and other interest rate sensitive securities, which are subject to the market risk of potential losses from adverse changes in interest rates, credit spreads or trading liquidity and may also be adversely affected by foreign currency exchange rate fluctuations. Depending on our classification of investments as available for sale or other, changes in the fair value of our securities are reflected in our consolidated balance sheet and/or statement of operations. Our investment portfolio is also subject to credit risk resulting from adverse changes in the issuers’ ability to repay the debt or the ability of bond insurers to meet their obligations to provide insurance if an issuer is unable to repay its debt. Moreover, many issuers are facing liquidity pressures as a result of the current economic downturn and, in turn, may be subject to downgrades by the credit rating agencies in the future. These risks could materially adversely affect our results of operations and financial condition.

A principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. The possibility exists that we may incur foreign currency exchange gains or losses as we ultimately settle claims required to be paid in foreign currencies. To mitigate this risk, we also maintain investments denominated in certain foreign currencies in which the claims payments will be made. To the extent we do not seek to hedge our foreign currency risk or hedges prove ineffective, the resulting impact of a movement in foreign currency exchange rates could materially adversely affect our results of operations or financial condition.

Our businesses are heavily regulated, and changes in regulation may reduce our profitability and limit our growth.

Our reinsurance subsidiaries are subject to extensive regulation and supervision in the jurisdictions in which they conduct business. This regulation is generally designed to protect the interests of policyholders, as opposed to reinsurers and their stockholders and other investors, and relates to authorization to transact certain lines of business, capital and surplus requirements, investment limitations, underwriting limitations, transactions with affiliates, dividend limitations, changes in control and a variety of other financial and non-financial components of an insurance company’s business.

In recent years, the state insurance regulatory framework in the U.S. has come under increased federal scrutiny, and some state legislatures have considered or enacted laws that may alter or increase state authority to regulate insurance and reinsurance companies and insurance holding companies. Further, the National Association of Insurance Commissioners, or the NAIC, and state insurance regulators are re-examining existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws. Any proposed or future legislation or NAIC initiatives may be more restrictive than current regulatory requirements or may result in higher costs.

Within the European Union, or the EU, the EU Reinsurance Directive of November 2005, or the Directive, was to be phased in commencing October 2007 and fully implemented no later than October 2008. As of December 31, 2008, not all EU members have adopted the Directive. The Directive will lift

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barriers to trade within the EU for companies that are domiciled in an EU country. We operate within the EU through a series of foreign branches and continue to evaluate the potential impact of the implementation of the Directive which could vary from country to country. We have contacted insurance regulators throughout the EU to ascertain their regulatory intent and to discuss each country’s rule applicable to us. Currently, we continue to conduct business within the EU through our foreign branches with no significant impact on our operations. As each country within the EU adopts rules implementing the Directive, we could be materially adversely affected by the adopted rules. We may be required to post additional collateral in EU countries or may need to consider restructuring our business in order to comply with the rules adopted in EU countries implementing the Directive.

In addition to the Directive, the EU is phasing in a new regulatory regime for regulation of financial services known as “Solvency II.” Solvency II is a principles-based regulatory regime that seeks to enhance transparency, promote uniformity, and encourage a proactive approach to company solvency. It is built on a risk-based approach to setting capital requirement of insurers and reinsurers. Solvency II is scheduled to be introduced for insurers and reinsurers in 2010 and implemented by 2012. We could be materially impacted by the implementation of Solvency II depending on the costs associated with implementation by each EU country, any increased capitalization requirements and any costs associated with adjustment to our corporate operating structure.

Traditionally, regulatory and legislative changes affecting the insurance and reinsurance industries, as well as the financial services industry as a whole, are conducted in an organized and structured manner usually encompassing the issuance of draft legislation or regulations and a significant period for review, evaluation and comment by the industry and markets. As a result of the displacement in the financial markets and its impact on the insurance and reinsurance industry, legislators and/or regulators may feel compelled to pass new rules in an expedited manner without the normal review periods. The passage of new regulatory rules on an expedited basis may have a materially adverse impact on us if those rules increase the cost of doing business or restrict our ability to underwrite certain lines of business and/or make certain investments without providing us with the normal amount of time to review the new rules, assess their impact on us and allow us to alter our business strategies or restructure in the most efficient manner.

Our offices that operate in jurisdictions outside the United States are subject to certain limitations and risks that are unique to foreign operations.

Our international operations are also regulated in various jurisdictions with respect to licensing requirements, currency, amount and type of security deposits, amount and type of reserves, amount and type of local investment and other matters. International operations and assets held abroad may be adversely affected by political and other developments in foreign countries, including possibilities of tax changes, nationalization and changes in regulatory policy, as well as by consequences of hostilities and unrest. The risks of such occurrences and their overall effect upon us vary from country to country and cannot easily be predicted. In addition, our results of operations and net unrealized currency translation gain or loss (a component of accumulated other comprehensive income) are subject to volatility as the value of the foreign currencies fluctuate relative to the U.S. dollar. Regulations governing constitution of technical reserves and remittance balances in some countries may hinder remittance of profits and repatriation of assets.

The decline in our common stock price and the uncertainty relating to the AIG Group’s continued ownership interest in us may prevent us from retaining key personnel.

We rely upon the knowledge and talent of our employees to successfully conduct business. The decline in our common stock price, particularly since the fall of 2008, has reduced the value of equity awards previously made to key employees. In addition, if the AIG Group does not sell a substantial portion of our common stock, the uncertainty around the continued ownership by the AIG Group of our common stock may result in competitors seeking to hire our key employees. See “Risk Factors—Uncertainty about the continued ownership by the AIG Group of a significant portion of our outstanding shares of common stock may have an adverse effect on us.” We have implemented a retention program to seek to keep certain of our key employees, but there can be no assurance that the program

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is sufficient or will be effective. A loss of key personnel could have a material effect on our results of operations, financial condition and cash flows in future periods.

The current investigations into certain non-traditional, or loss mitigation, insurance products and other legal matters could have a material adverse effect on our financial condition or results of operations.

Various regulators, including the United States Department of Justice, or the DOJ, the SEC, the Office of the New York State Attorney General, or the NYAG, and the NYS ID have been conducting investigations relating to certain insurance and reinsurance business practices, non-traditional insurance products and assumed reinsurance transactions within the industry and at AIG. In connection with these investigations, the AIG Group requested that the Company, as a subsidiary of AIG, review our documents and practices, and we have cooperated with the AIG Group in all such requests.

On February 9, 2006, the AIG Group announced that it reached a resolution of claims and matters under investigation by the DOJ, SEC, NYAG and NYS ID. The AIG Group stated that the settlements resolved investigations conducted by the SEC, NYAG and NYS ID against the AIG Group and concluded negotiations with these authorities and the DOJ in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers compensation premium taxes and other assessments.

As part of these settlements, the AIG Group agreed to retain, for a period of three years, an independent consultant to conduct a review that included, among other things, the adequacy of the AIG Group’s internal controls over financial reporting, the policies, procedures and effectiveness of the AIG Group’s regulatory, compliance and legal functions and the remediation plan that the AIG Group has implemented as a result of its own internal review. The Company, as a majority-owned subsidiary of AIG, is cooperating with the terms of the settlements, and after this offering, the Company expects to continue to comply with any terms that are applicable to it.

In addition, from time to time, other regulators have commenced, and may in the future commence, investigations into insurance brokerage practices relating to contingent commissions and other industry-wide practices as well as other broker-related conduct, such as alleged bid-rigging, finite insurance and reinsurance transactions and other reinsurance practices. We have cooperated, and will continue to cooperate, in producing documents and other information in response to subpoenas and other requests. While we do not believe that any of these inquiries will have a material impact on our business or financial results, it is not possible to predict with any certainty at this time what impact, if any, these inquiries may have on our business or financial results.

Risks Related to This Offering

The AIG Group may continue to be a holder of a significant portion of our common stock after the completion of this offering, which may adversely affect the market price of our common stock.

Upon completion of this offering, the AIG Group may continue to own a significant portion of our common stock. As a result of this ownership, the AIG Group may have significant influence over the outcome of votes on all matters requiring approval by the holders of our common stock, including the election of directors, the adoption of amendments to our certificate of incorporation and by-laws and approval of significant corporate transactions. If the AIG Group continues to own a significant portion of our common stock after this offering, the AIG Group may also be able to take actions that have the effect of delaying or preventing a change in control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. See “Certain Agreements with the AIG Group—Stockholders Agreement.”

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This offering or the transactions the AIG Group has entered into with the NY Fed may be deemed a change in control of us, in which case certain of our counterparties may acquire certain rights, which could negatively affect us.

We are parties to numerous contracts, agreements, licenses, permits, authorizations and other arrangements, which we refer to as the applicable arrangements and authorizations, that contain provisions giving counterparties certain rights (including, in some cases, termination rights) in the event of a change in control of us or our subsidiaries.

The transactions that the AIG Group has entered into with the NY Fed may be deemed to have constituted, and a sale of the AIG Group’s interest in us, either pursuant to this offering or otherwise, may in the future be deemed to constitute, a change in control of us under a significant portion of our reinsurance agreements. For a description of recent actions taken by the AIG Group that may constitute a change in control of us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Actions by the AIG Group.”

If a change in control occurs, cedants may be permitted to cancel contracts on a cut-off or run-off basis, and we may be required to provide collateral to secure premium and reserve balances or be required to cancel and commute the contract, subject to an agreement between the parties that may be settled in arbitration. If the contract is cancelled on a cut-off basis, we may be required to return unearned premiums, net of commissions.

Whether a ceding company would have cancellation rights in the event of the closing of this offering depends upon the language of its agreement with us and the number of shares of our common stock sold by the AIG Group in this offering. Whether a ceding company would exercise any cancellation rights it did have would depend on, among other factors, such ceding company’s views with respect to the financial strength and business reputation of any new controlling party or other significant owners of our shares, the extent, if any, to which such ceding company currently has reinsurance coverage with such person or its affiliates, the prevailing market conditions, the pricing and availability of replacement reinsurance coverage and our ratings following the change in control.

In certain instances, contracts contain dual triggers, such as a change in control and a ratings downgrade, both of which must be satisfied for the contractual right to be exercisable. For purposes of discussing the impact on us, where a change in control option appears in a contract, the amounts below assume that the ratings downgrade stipulation has been met, thereby providing the exposure under the change in control clause.

In addition, contracts may provide a ceding company with multiple options, such as collateralization or commutation, that would be triggered by a change in control. Collateral requirements may take the form of trust agreements, funded by securities held, or letters of credit. Upon commutation, the amount to be paid to settle the liability for gross loss reserves would typically consider a discount to the financial statement loss reserve value, reflecting the time value of money resident in the ultimate settlement of such loss reserves.

As of March 31, 2009, we estimate that with respect to a change in control of us, approximately $630 million of unearned premiums, which is net of estimated commissions, could be subject either to return to the ceding company should every cedant exercise its contractual termination right, including the right of commutation, or collateralization in the event of a change in control. Of such amount, $100 million relates to unearned premiums, net of commissions, from treaties assumed from AIG subsidiaries.

With respect to unpaid losses and loss adjustment expenses, or gross loss reserves, as of March 31, 2009, approximately $1.17 billion of gross loss reserves are subject to commutation or collateralization in the event of a change in control. Of such amount, $650 million relates to gross loss reserves from treaties assumed from AIG subsidiaries. Should cedants invoke the right to commute, an amount would be payable by us to the respective ceding companies representing both a return of unearned premiums and a settlement of loss reserves. With respect to reinsurance agreements between us and the AIG Group, the AIG Group has agreed to waive its rights to collateralization and commutation in connection with a change in control of us.

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In connection with this offering, we may engage in discussions and activities with counterparties to take necessary actions to remedy, amend or comply with the provisions of the applicable arrangements and authorizations. However, we cannot presently predict the effects, if any, a change in control will have on the applicable arrangements and authorizations, including the extent to which cancellation rights would be exercised, if at all, or on our financial condition, results of operations, or cash flows, but such effect could be material.

Based upon the facts and circumstances known to us as of the date of this prospectus supplement, we do not believe that the exercise of rights, if any, accruing to counterparties as a result of the transactions that the AIG Group has entered into with the NY Fed, will have a material impact on us. If, however, these actions, individually or collectively, or a sale by the AIG Group of its interest in us, either pursuant to this offering or otherwise, is deemed a change in control under the applicable arrangements and authorizations, our business may be materially adversely affected.

Future sales of our common stock, or the perception in the public markets that these sales may occur, could depress the price of our common stock.

Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, we will have 66,364,358 shares of common stock outstanding. Of these shares, 51,820,181 shares of common stock will be freely tradable immediately after the offering, including 26,000,000 shares of common stock sold in this offering (or, if the underwriters exercise in full their option to purchase additional shares, 55,720,181 shares of common stock will be freely tradable, including 29,900,000 shares of common stock sold in this offering). After the lock-up agreements pertaining to this offering expire, an additional 1,451,515 shares will be eligible for sale in the public market, subject to applicable manner of sale and other limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act.

Upon the separation, we intend to enter into a registration rights agreement with the AIG Group. The registration rights agreement will provide the AIG Group with registration rights relating to shares of our common stock held by the AIG Group after the closing of this offering. The AIG Group may require us to register under the Securities Act all or a portion of these shares. The registration rights are subject to certain limitations, including our right to temporarily suspend the registration of the shares. See “Certain Agreements with the AIG Group—Registration Rights Agreement” for more information. If the AIG Group exercises its registration rights and sells a large number of shares of our common stock, the AIG Group could cause the price of our common stock to decline.

Provisions in our certificate of incorporation and by-laws and the insurance laws of the jurisdictions in which we operate could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.

Some provisions of our certificate of incorporation and by-laws may have the effect of delaying, discouraging or preventing a merger, acquisition or other change in control that our stockholders may consider favorable, including transactions in which stockholders may receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors. These provisions include:

In addition, after the closing of this offering and the separation, our board of directors may review our by-laws and, in light of our status as a newly independent public company, decide to amend our by-laws. At any time and without stockholder approval, our board of directors may amend our by-laws in a manner that has the effect of delaying, discouraging or preventing a merger, acquisition or other

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change in control that our stockholders may consider favorable, including transactions in which stockholders may receive a premium for their shares.

We are also subject to the laws governing insurance holding companies of various states and countries where our insurance subsidiaries are domiciled. Under these laws, a person generally must obtain the applicable insurance regulator’s approval to acquire, directly or indirectly, ten percent (or sometimes five percent) or more of the outstanding voting securities of our insurance subsidiaries. These laws may prevent, delay or defer a change in control of us or our insurance company subsidiaries.

The market price of our common stock has been volatile and may continue to be volatile, which may make it difficult or impossible for you to obtain a favorable selling price for your shares.

Our common stock price has been volatile. Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. We currently expect that our common stock price may continue to be volatile due to factors such as:

The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.

The Company is a holding company and depends on the ability of its subsidiaries to distribute funds to it in order to meet its financial and other obligations.

The payment of dividends by the Company is dependent on the ability of its subsidiaries to pay dividends. The payment of dividends by TRC and its wholly owned subsidiaries, TRZ and Putnam, is restricted by insurance regulations. Under New York insurance law, TRC and Putnam may pay dividends only out of their statutory earned surplus. Such dividends are limited by statutory formula unless otherwise approved by the NYS ID. The statutory surplus of TRC includes the statutory surplus of Putnam since all the capital stock of Putnam is owned by TRC. At December 31, 2008, TRC had a statutory earned surplus of $2.16 billion, and, in 2009, in accordance with the statutory formula, could pay dividends of approximately $353.4 million without regulatory approval.

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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein may include, and our officers and representatives may from time to time make, statements which may constitute “forward-looking statements” within the meaning of the U.S. federal securities laws. These forward-looking statements are identified, including without limitation, by their use of such terms and phrases as:

These statements are not historical facts but instead represent only our belief regarding future events and financial performance, many of which, by their nature, are inherently uncertain and outside of our control. These statements may address, among other things, our strategy and expectations for growth, product development, government and industry regulatory actions, legal matters, financial, credit and industry market conditions, financial results and reserves, as well as the expected impact on us of natural and man-made (e.g., terrorist attacks) catastrophic events and political, economic, legal and social conditions.

It is possible that our actual results, financial condition and expected outcomes may differ, possibly materially, from those anticipated in these forward-looking statements. Important factors that could cause our actual results to differ, possibly materially, from those discussed in the specific forward-looking statements may include, but are not limited to, uncertainties relating to economic conditions, financial and credit market conditions, cyclical industry conditions, credit quality, government, regulatory and accounting policies, volatile and unpredictable developments (including natural and man-made catastrophes), the legal environment, legal and regulatory proceedings, failures of pricing models to accurately assess risks, the reserving process, the competitive environment in which we operate, interest rate and foreign currency exchange rate fluctuations, the uncertainties inherent in international operations and the uncertainty surrounding the AIG Group’s continued ownership interest in us.

These factors are further discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in this prospectus supplement. We are not under any obligation to (and expressly disclaim any such obligations to) update or alter any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

We will not receive any proceeds from the sale of shares of our common stock by the AIG Group, except to the extent the AIG Group has agreed to reimburse us for certain of our expenses incurred in connection with this offering.

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DIVIDEND POLICY

The declaration and payment of future dividends, if any, by us will be at the discretion of our board of directors and will depend upon many factors, including our consolidated earnings, financial condition and business needs, capital and surplus requirements of our operating subsidiaries, regulatory considerations and other factors. For a discussion of restrictions on our operating subsidiaries’ ability to pay dividends, see Note 15 of the Notes to Consolidated Financial Statements contained in our annual report on Form 10-K filed with the SEC on March 2, 2009.

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MARKET PRICE OF COMMON STOCK AND DIVIDENDS

Our common stock is listed on the New York Stock Exchange under the symbol “TRH.” The following table lists the high and low sale prices of our common stock as reported on the New York Stock Exchange, as well as cash dividends declared per share of common stock, for the periods indicated.

On May 27, 2009, the last reported sale price of our common stock on the New York Stock Exchange was $37.87 per share.

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CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2009. This table should be read in conjunction with our consolidated financial statements and the notes to our consolidated financial statements for the year ended December 31, 2008 and our condensed consolidated financial statements (unaudited) and the notes to our condensed consolidated financial statements (unaudited) for the three months ended March 31, 2009, each of which are included in this prospectus supplement.

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SELECTED HISTORICAL FINANCIAL DATA

The following tables set forth selected consolidated historical financial data. You should read the selected consolidated historical financial data in conjunction with our consolidated financial statements and the notes to our consolidated financial statements included in or incorporated by reference into this prospectus supplement and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus supplement. The selected consolidated historical financial data presented below as of December 31, 2008, 2007, 2006, 2005 and 2004, and for each of the fiscal years then ended, have been derived from our audited consolidated financial statements. The selected consolidated financial data presented below as of March 31, 2009 and 2008, and for the three months ended March 31, 2009 and 2008, have been derived from our unaudited consolidated financial statements and include all adjustments, consisting of normal and recurring adjustments, that we consider necessary for a fair statement of the financial position and results of operations as of and for such periods. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009 or for other future periods.