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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2006

OR

[   ] TRANSITION REPORT PUSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 34-0-26512

RENAISSANCERE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)


Bermuda 98-014-1974
(State or Other Jurisdiction of
Incorporation or Organization)		 (I.R.S. Employer
Identification Number)

Renaissance House, 8-20 East Broadway, Pembroke HM 19 Bermuda

(Address of principal executive offices)

(441) 295-4513

(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 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 a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Large accelerated filer (X), Accelerated filer (   ), Non-accelerated filer (   ).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (   ) No (X)

The number of outstanding shares of RenaissanceRe Holdings Ltd.'s common shares, par value US $1.00 per share, as of July 21, 2006 was 72,031,809.

Total number of pages in this report: 60



Table of Contents

RenaissanceRe Holdings Ltd.

INDEX TO FORM 10-Q

Part I — FINANCIAL INFORMATION


Item 1 — Financial Statements  
 
  Consolidated Balance Sheets at June 30, 2006
(Unaudited) and December 31, 2005		 3
 
  Unaudited Consolidated Statements of Operations for
the three and six months ended June 30, 2006 and 2005		 4
 
  Unaudited Consolidated Statements of Changes in Shareholders'
Equity for the six months ended June 30, 2006 and 2005		 5
 
  Unaudited Consolidated Statements of Cash Flows
for the six months ended June 30, 2006 and 2005		 6
 
  Notes to Unaudited Consolidated Financial Statements 7
 
Item 2 — Management's Discussion and Analysis of Financial Condition and
              Results of Operations		 21
 
Item 3 — Quantitative and Qualitative Disclosures About Market Risk 52
 
Item 4 — Controls and Procedures 54
 
Part II — OTHER INFORMATION 55
 
Item 1     — Legal Proceedings 55
 
Item 1A    — Risk Factors 56
 
Item 2     — Unregistered Sales of Equity Securities and Use of Proceeds 56
 
Item 3     — Defaults Upon Senior Securities 56
 
Item 4     — Submission of Matters to a Vote of Security Holders 57
 
Item 5     — Other Information 57
 
Item 6     — Exhibits 57
 
Signature     — RenaissanceRe Holdings Ltd. 59
 

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PART I — FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Balance Sheets
(in thousands of United States Dollars)


  At
  June 30, 2006 December 31, 2005
  (Unaudited) (Audited)
Assets  
 
Fixed maturity investments available for sale, at fair value
(Amortized cost $3,067,464 and $2,864,402 at June 30, 2006 and December 31, 2005, respectively)		 $ 3,079,855
$ 2,872,294
Short term investments, at cost 1,911,693
1,653,618
Other investments, at fair value 526,844
586,467
Investments in other ventures, under equity method 186,979
178,774
Total investments 5,705,371
5,291,153
Cash and cash equivalents 187,340
174,001
Premiums receivable 857,687
363,105
Ceded reinsurance balances 241,315
57,134
Losses recoverable 464,556
673,190
Accrued investment income 37,639
25,808
Deferred acquisition costs 158,600
107,951
Other assets 86,121
178,919
Total assets $ 7,738,629
$ 6,871,261
Liabilities, Minority Interest and Shareholders' Equity  
 
Liabilities  
 
Reserve for claims and claim expenses $ 2,347,525
$ 2,614,551
Reserve for unearned premiums 1,113,391
501,744
Debt 485,000
500,000
Subordinated obligation to capital trust 103,093
103,093
Reinsurance balances payable 477,477
292,307
Other liabilities 118,191
142,815
Total liabilities 4,644,677
4,154,510
Minority Interest – DaVinciRe 555,433
462,911
Shareholders' Equity  
 
Preference shares 500,000
500,000
Common shares and additional paid-in capital 356,462
351,285
Accumulated other comprehensive income 4,993
4,760
Retained earnings 1,677,064
1,397,795
Total shareholders' equity 2,538,519
2,253,840
Total liabilities, minority interest, and shareholders' equity $ 7,738,629
$ 6,871,261

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Operations
For the three and six months ended June 30, 2006 and 2005
(in thousands of United States Dollars, except per share amounts)
(Unaudited)


  Three months ended Six months ended
  June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
Revenues  
 
 
 
Gross premiums written $    742,551
$    443,483
$ 1,490,943
$ 1,137,816
Net premiums written $ 512,244
$ 387,889
$ 1,210,079
$ 1,003,682
Increase in unearned premiums (81,303
)
 (49,136
)
 (427,466
)
 (363,428
)
Net premiums earned 430,941
338,753
782,613
640,254
Net investment income 74,012
45,769
154,446
96,984
Net foreign exchange (losses) gains (2,441
)
 7,134
582
7,848
Equity in earnings of other ventures 9,221
7,798
15,773
15,365
Other (loss) income (84
)
 3,205
(1,763
)
 (310
)
Net realized (losses) gains on investments (24,348
)
 1,583
(41,104
)
 (8,606
)
Total revenues 487,301
404,242
910,547
751,535
Expenses  
 
 
 
Net claims and claim expenses incurred 207,336
108,799
306,514
310,447
Acquisition expenses 74,597
45,574
143,411
97,082
Operational expenses 29,056
23,377
49,987
42,220
Corporate expenses 5,571
8,694
11,310
20,033
Interest expense 10,370
6,967
19,671
13,572
Total expenses 326,930
193,411
530,893
483,354
Income before minority interest and taxes 160,371
210,831
379,654
268,181
Minority interest – DaVinciRe 21,207
30,283
52,664
34,667
Income before taxes 139,164
180,548
326,990
233,514
Income tax expense (94
)
 —
(277
)
 —
Net income 139,070
180,548
326,713
233,514
Dividends on preference shares 8,662
8,566
17,325
17,229
Net income available to common shareholders $ 130,408
$ 171,982
$ 309,388
$ 216,285
Net income available to common shareholders
per Common Share – basic		 $ 1.84
$ 2.44
$ 4.36
$ 3.07
Net income available to common shareholders
per Common Share – diluted		 $ 1.81
$ 2.39
$ 4.31
$ 3.00
Dividends declared per common share $ 0.21
$ 0.20
$ 0.42
$ 0.40

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
For the six months ended June 30, 2006 and 2005
(in thousands of United States Dollars)
(Unaudited)


  Six months ended
  June 30, 2006 June 30, 2005
Preference shares $ 500,000
$ 500,000
Common stock and additional paid-in capital  
 
Balance – January 1 351,285
328,896
Exercise of options and issuance of restricted stock awards 5,177
8,779
Balance – June 30 356,462
337,675
Accumulated other comprehensive income  
 
Balance – January 1 4,760
78,960
Net unrealized gains (losses) on securities, net of
adjustment (see disclosure below)		 233
(17,599
)
Balance – June 30 4,993
61,361
Retained earnings  
 
Balance – January 1 1,397,795
1,736,186
Net income 326,713
233,514
Dividends on Common Shares (30,119
)
 (28,547
)
Dividends on Preference Shares (17,325
)
 (17,229
)
Balance – June 30 1,677,064
1,923,924
Total Shareholders' Equity $ 2,538,519
$ 2,822,960
Comprehensive income  
 
Net income $ 326,713
$ 233,514
Other comprehensive gain (loss) 233
(17,599
)
Comprehensive income $ 326,946
$ 215,915
Disclosure regarding net unrealized gains (losses)  
 
Net unrealized holding losses arising during period $ (40,871
)
 $ (26,205
)
Net realized losses included in net income 41,104
8,606
Change in net unrealized gains (losses) on securities $ 233
$ (17,599
)

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the six months ended June 30, 2006 and 2005
(in thousands of United States Dollars)
(Unaudited)


  Six months ended
  June 30, 2006 June 30, 2005
Cash flows provided by operating activities  
 
Net income $ 326,713
$ 233,514
Adjustments to reconcile net income to net cash
provided by operating activities 		 
 
Amortization and depreciation (3,963
)
 5,575
Net realized investment losses 41,104
8,606
Equity in undistributed earnings of other ventures (3,307
)
 1,875
Net unrealized gains included in investment income (25,544
)
 (9,435
)
Net unrealized losses included in other loss 5,527
2,090
Minority interest in undistributed net income of DaVinciRe 52,664
34,667
Change in:  
 
Premiums receivable (494,582
)
 (345,880
)
Ceded reinsurance balances (184,181
)
 (34,483
)
Deferred acquisition costs (50,649
)
 (48,999
)
Reserve for claims and claim expenses, net (58,392
)
 1,815
Reserve for unearned premiums 611,647
397,912
Reinsurance balances payable 185,170
138,323
Other (18,753
)
 39,815
Net cash provided by operating activities 383,454
425,395
Cash flows used in investing activities  
 
Proceeds from sales and maturities of investments
available for sale		 2,813,652
13,353,812
Purchases of investments available for sale (2,979,108
)
 (13,379,965
)
Net purchases of short term investments (258,075
)
 (79,064
)
Net sales (purchases) of other investments 85,167
(144,174
)
Net purchases of investments in other ventures (7,500
)
 (10,000
)
Net cash used in investing activities (345,864
)
 (259,391
)
Cash flows used in financing activities  
 
Dividends paid – common shares (30,119
)
 (28,547
)
Dividends paid – preference shares (17,325
)
 (17,229
)
Net increase in minority interest 38,193
—
Net repayment of debt (15,000
)
 —
Net cash used in financing activities (24,251
)
 (45,776
)
Net increase in cash and cash equivalents 13,339
120,228
Cash and cash equivalents, beginning of period 174,001
66,740
Cash and cash equivalents, end of period $       187,340
$ 186,968

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)

1.  The consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States (‘‘GAAP’’) for interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position and results of operations as at the end of and for the periods presented. All significant intercompany accounts and transactions have been eliminated from these statements. The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The major estimates reflected in the Company's consolidated financial statements include, but are not limited to, the reserve for claims and claim expenses, losses recoverable, including allowances for losses recoverable deemed uncollectible, estimates of written and earned premiums, and the fair value of other investments and financial instruments. This report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. RenaissanceRe Holdings Ltd. and Subsidiaries include the following principal entities:
•  RenaissanceRe Holdings Ltd. (‘‘RenaissanceRe’’ or the ‘‘Company’’), was formed under the laws of Bermuda on June 7, 1993. Through its subsidiaries, the Company provides reinsurance and insurance to a broad range of customers.
•  Renaissance Reinsurance Ltd. (‘‘Renaissance Reinsurance’’) is the Company's principal subsidiary and provides property catastrophe and specialty reinsurance coverages to insurers and reinsurers on a worldwide basis.
•  The Company also manages property catastrophe and specialty reinsurance business written on behalf of joint ventures, principally including Top Layer Reinsurance Ltd. (‘‘Top Layer Re’’) and Starbound Holdings Ltd. (‘‘Starbound’’), both recorded under the equity method of accounting, and DaVinci Reinsurance Ltd. (‘‘DaVinci’’). The Company owns a minority equity interest in, but controls a majority of the outstanding voting power of, DaVinci's parent, DaVinciRe Holdings Ltd. (‘‘DaVinciRe’’). The results of DaVinci and DaVinciRe are consolidated in the Company's financial statements. Minority interests represent the interests of external parties with respect to the net income and shareholders' equity of DaVinciRe. Renaissance Underwriting Managers Ltd., a wholly owned subsidiary, acts as exclusive underwriting manager for these joint ventures in return for fee-based income and profit participation.
•  The Company's Individual Risk operations include direct insurance and quota share reinsurance written through the operating subsidiaries of Glencoe Group Holdings Ltd. (‘‘Glencoe Group’’). These operating subsidiaries principally include Stonington Insurance Company (‘‘Stonington’’), which writes business on an admitted basis, and Glencoe Insurance Ltd. (‘‘Glencoe’’) and Lantana Insurance Ltd. (‘‘Lantana’’), which write business on an excess and surplus lines basis, and also provide reinsurance coverage, principally through quota share contracts, which are analyzed on an individual risk basis.

Certain comparative information has been reclassified to conform to the current presentation. Because of the seasonality of the Company's business, the results of operations and cash flows for any interim period will not necessarily be indicative of the results of operations and cash flows for the full fiscal year or subsequent quarters.

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2.  The Company purchases reinsurance and other protection to manage its risk portfolio and to reduce its exposure to large losses. The Company currently has in place contracts that provide for recovery of a portion of certain claims and claim expenses from reinsurers in excess of various retentions. The Company remains liable to the extent that any third-party reinsurer or other obligor fails to meet its obligations. The earned reinsurance premiums ceded were $96.7 million and $99.7 million for the six months ended June 30, 2006 and 2005, respectively. In addition to loss recoveries, certain of the Company's ceded reinsurance contracts provide for recoveries of additional premiums, reinstatement premiums and for lost no-claims bonuses, which are incurred when losses are ceded to other reinsurance contracts. Total reinsurance recoveries netted against claims and claim expenses incurred for the six months ended June 30, 2006 were $12.5 million compared to $12.9 million for the six months ended June 30, 2005.
3.  Basic earnings per common share is based on weighted average common shares and excludes any dilutive effects of stock options and restricted stock. Diluted earnings per common share assumes the exercise of all dilutive stock options and restricted stock grants. The following tables set forth the computation of basic and diluted earnings per common share:

Three months ended June 30, 2006 2005
(in thousands of U.S. dollars, except share and per share data)    
Numerator:  
 
Net income available to common shareholders $ 130,408
$ 171,982
Denominator:  
 
Denominator for basic income per common share –  
 
Weighted average common shares 71,048,845
70,585,079
Per common share equivalents of employee stock
options and restricted shares		 876,678
1,431,104
Denominator for diluted income per common share –  
 
Adjusted weighted average common shares and
assumed conversions		 71,925,523
72,016,183
Basic income per common share $ 1.84
$ 2.44
Diluted income per common share $ 1.81
$ 2.39

Six months ended June 30, 2006 2005
(in thousands of U.S. dollars, except share and per share data)    
Numerator:  
 
Net income available to common shareholders $ 309,388
$ 216,285
Denominator:  
 
Denominator for basic income per common share –  
 
Weighted average common shares 70,991,781
70,471,604
Per common share equivalents of employee stock
options and restricted shares		 864,193
1,511,822
Denominator for diluted income per common share –  
 
Adjusted weighted average common shares and
assumed conversions		 71,855,974
71,983,426
Basic income per common share $ 4.36
$ 3.07
Diluted income per common share $ 4.31
$ 3.00

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4.  The Board of Directors of RenaissanceRe declared, and RenaissanceRe paid, a dividend of $0.21 per share to shareholders of record on each of March 15 and June 15, 2006.

The Board of Directors has authorized a share repurchase program of $150 million. RenaissanceRe's decision to repurchase common shares will depend on, among other matters, the market price of the common shares and capital requirements of RenaissanceRe. The Company did not repurchase any shares under the share repurchase program during the six months ended June 30, 2006. See ‘‘Part II — Other Information — Item 2.’’

5.  Effective January 1, 2006, the Company adopted FASB Statement No. 123 (revised 2004), Share-Based Payment (‘‘FAS 123(R)’’), using the modified prospective transition method. Under the modified prospective transition method, compensation cost recognized for the six months ending June 30, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested, as of January 1, 2006 based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation (‘‘FAS 123’’) and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of FAS 123(R). The adoption of FAS 123(R) did not have a material impact on the Company.

Prior to adopting FAS 123(R), the Company accounted for stock-based compensation under the fair value recognition provisions of FAS 123 with effect from January 1, 2003 for all stock-based employee compensation granted, modified or settled after January 1, 2003 under the prospective method described in FASB Statement No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. Prior to January 1, 2003, the Company accounted for stock-based employee compensation under the recognition and measurement provisions of APB Opinion Number 25, Accounting for Stock Issued to Employees, and related interpretations.

Stock Compensation Plans

The Company has a stock incentive plan (the ‘‘2001 Stock Incentive Plan’’) under which all employees of the Company and its subsidiaries may be granted stock options and restricted stock awards. A stock option award under the Company's 2001 Stock Incentive Plan allows for the purchase of the Company's common shares at a price that is equal to the five day average closing price of the common shares immediately prior to the date of grant. Options to purchase common shares are granted periodically by the Board of Directors, generally vest over four years and expire ten years from the date of grant. Restricted common shares are granted periodically by the Board of Directors and generally vest ratably over a four or five year period. The Company has also established a Non-Employee Director Stock Incentive Plan to issue stock options and shares of restricted stock to the Company's non-employee directors.

The Company's 2001 Stock Incentive Plan allows for the issuance of share-based awards, the issuance of restricted common shares, the issuance of reload options for shares tendered in connection with option exercises and a provision in the calculation of shares available for issuance thereunder that deems the number of shares tendered to or withheld by the Company in connection with certain option exercises to be so available.

In August 2004, the Company's shareholders approved the RenaissanceRe Holdings Ltd. 2004 Stock Option Incentive Plan (the ‘‘Premium Option Plan’’) under which 6,000,000 common shares were reserved for issuance upon the exercise of options granted under the Premium Option Plan. As described in the Company's Proxy Statement relating to the required shareholder vote, filed with the Securities and Exchange Commission (‘‘SEC’’) in July 2004, the Premium Option Plan provides for, among other things, mandatory premium pricing such that options can generally only be issued thereunder with a strike price at a minimum of 150% of the fair market value on the date of grant, minimum 4-year cliff vesting (subject to waiver by the compensation committee of the Board of Directors), and no discretionary repricing. The Premium Option Plan includes a dividend protection feature that reduces the strike price for extraordinary dividends and a change

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in control feature that reduces the strike price based on a pre-established formula in the event of a change in control. Grantees under the Premium Option Plan must satisfy performance criteria which are determined by the Company's Compensation Committee. Other terms are substantially similar to the 2001 Plan.

Valuation Assumptions

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average-assumptions:


  Stock Options
  Three months ended June 30, Six months ended June 30,
  2006(1) 2005(1) 2006 2005
Volatility N/A
N/A
24
%
 23
%
Term (in years) N/A
N/A
5
5
Dividend yield N/A
N/A
2.0
%
 1.6
%
Risk-free interest rate N/A
N/A
4.6
%
 4.2
%
(1) No stock options were issued during the three months ended June 30, 2006 and 2005

Expected Volatility:    The expected volatility is estimated by the Company based on the Company's historical stock volatility.

Expected Term:    The expected term is estimated by looking at historical experience of similar awards, giving consideration to the contractual terms of the award, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock option awards.

Expected Dividend Yield:    The expected dividend yield is estimated by reviewing the most recent dividend declared by the Board of Directors.

Risk-Free Interest Rate:    The risk free rate is estimated based on the yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the stock option grants.

The fair value of restricted shares is determined based on the market value of the Company's shares on the grant date.

Under the fair value recognition provisions of FAS 123(R), the estimated fair value of employee stock options and other share-based payments, net of estimated forfeitures, is amortized as an expense over the requisite service period. When estimating forfeitures, the Company considers its historical forfeitures as well as expectations about employee behavior. The Company currently uses an 8% forfeiture rate.

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Summary of Stock Compensation Activity:

The following is a summary of activity under the Company's existing stock compensation plans for the six months ended June 30, 2006:

2001 Stock Incentive and Non-Employee Director Stock Incentive Plans


  Weighted
options
outstanding		 Weighted
average
exercise price		 Fair value
of options		 Weighted
average
remaining
contractual
life		 Aggregate
intrinsic
value		 Range of
exercise
prices
Balance, December 31, 2005 3,151,180
$ 35.44
 
 
 
 
Options granted 841,482
42.86
$ 10.33
 
 
$42.66 – $44.30
Options forfeited (18,716
)
 51.02
 
 
 
 
Options expired (2,470
)
 53.96
 
 
 
 
Options exercised (1,800
)
 12.83
 
 
$ 60,696
 
Balance, March 31, 2006 3,969,676
36.94
 
6.7
$ 32,176,311
$11.09 – $53.96
Total options exercisable  
 
 
 
 
 
at March 31, 2006 2,205,436
$ 31.85
 
4.6
$ 28,613,371
$11.98 – $52.64
Balance, March 31, 2006 3,969,676
$ 36.94
 
 
 
 
Options granted —
—
 
 
 
 
Options forfeited (71,201
)
 48.12
 
 
 
 
Options expired —
—
 
 
 
 
Options exercised (1,500
)
 39.07
 
 
$ 6,360
 
Balance, June 30, 2006 3,896,975
36.74
 
6.4
$ 47,806,400
$11.09 – $53.96
Total options exercisable  
 
 
 
 
 
at June 30, 2006 2,259,565
$ 32.19
 
4.4
$ 37,911,496
$11.98 – $52.62

Premium Option Plan


  Weighted
options
outstanding		 Weighted
average
exercise price		 Fair value
of options		 Weighted
average
remaining
contractual
life		 Aggregate
intrinsic
value		 Range of
exercise
prices
Balance, December 31, 2005 5,174,000
$ 80.15
   
 
 
Options granted —
—
   
 
 
Options forfeited —
—
   
 
 
Options expired —
—
   
 
 
Options exercised —
—
   
 
 
Balance, March 31, 2006 5,174,000
$ 80.15
  8.5
$    —
$73.06 – $98.98
Total options exercisable  
 
   
 
 
at March 31, 2006 2,500,000
$ 86.61
  8.4
$ —
$74.24 – $98.98
Balance, March 31, 2006 5,174,000
$ 80.15
   
 
 
Options granted —
—
   
 
 
Options forfeited (700,000
)
 —
   
 
 
Options expired —
—
   
 
 
Options exercised —
—
   
 
 
Balance, June 30, 2006 4,474,000
$ 81.07
  8.2
$ —
$73.06 – $98.98
Total options exercisable  
 
   
 
 
at June 30, 2006 2,500,000
$ 86.61
  8.2
$ —
$74.24 – $98.99

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Restricted Stock


  Employee
restricted stock		 Non-employee director
restricted stock		 Total
restricted stock
  Number of
shares		 Weighted
average grant-
dated fair
value		 Number of
shares		 Weighted
average grant-
dated fair
value		 Number of
shares		 Weighted
average grant-
dated fair
value
Nonvested at December 31, 2005 631,592
$ 44.90
27,523
$ 48.43
659,115
$ 45.05
Awards granted 349,806
42.80
22,420
44.60
372,226
42.91
Awards vested (44,023
)
 42.20
(8,057
)
 43.08
(52,080
)
 42.34
Awards canceled/expired/forfeited (7,644
)
 48.44
—
—
(7,644
)
 48.44
Nonvested at March 31, 2006 929,731
$ 43.78
41,886
$ 46.15
971,617
$ 43.88
Awards granted 1,334
$ 45.47
2,205
$ 45.34
3,539
45.39
Awards vested (73,201
)
 42.43
(5,100
)
 45.72
(78,301
)
 42.64
Awards canceled/expired/forfeited (21,128
)
 46.99
—
—
(21,128
)
 46.99
Nonvested at June 30, 2006 836,736
$ 43.83
38,991
$ 46.16
875,727
$ 43.93

Shares available for issuance under the Company's 2001 Stock Incentive Plan, Premium Option Plan and Non-Employee Director Stock Incentive Plan totaled 5.2 million at June 30, 2006. The total fair value of shares vested during the three and six months ended June 30, 2006 was $3.5 million and $5.4 million, respectively. There was no cash received from employees as a result of employee stock option and similar awards during the three and six months ended June 30, 2006. In connection with these exercises, there was no tax benefit realized by the Company due to the Company's tax status in Bermuda. The Company issues new shares upon the exercise of an option.

As of June 30, 2006, there was $26.7 million of total unrecognized compensation cost related to restricted shares and $19.5 million related to stock options expense which will be recognized during the next 1.96 years and 2.64 years, respectively.

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In accordance with the transitional disclosure provisions of FAS 148, the following table sets out the effect on the Company's net income and earnings per share for all reported periods had compensation cost been calculated based upon the fair value method recommended in FAS 123:


Three months ended June 30, 2006 2005
(in thousands of U.S. dollars, except per share data)  
 
   
 
Net income available to common shareholders, as reported $ 130,408
$ 171,982
Add:   stock based employee compensation cost included in determination of net income 5,053
5,120
Deduct:   fair value compensation cost under FAS 123 (5,053
)
 (5,498
)
Pro-forma net income available to common shareholders $ 130,408
$ 171,604
Income per share      
 
Basic – as reported $ 1.84
$ 2.44
Basic – pro-forma $ 1.84
$ 2.43
Diluted – as reported $ 1.81
$ 2.39
Diluted – pro-forma $ 1.81
$ 2.38
Six months ended June 30, 2006 2005
(in thousands of U.S. dollars, except per share data)  
 
   
 
Net income attributable to common shareholders, as reported $ 309,388
$ 216,285
Add:   stock based employee compensation cost included in determination of net loss 6,146
10,190
Deduct:   fair value compensation cost under FAS 123 (6,146
)
 (10,996
)
Pro-forma net income available to common shareholders $ 309,388
$ 215,479
Income per share      
 
Basic – as reported $ 4.36
$ 3.07
Basic – pro-forma $ 4.36
$ 3.06
Diluted – as reported $ 4.31
$ 3.00
Diluted – pro-forma $ 4.31
$ 2.99
6.  We conduct our business through two reportable segments, Reinsurance and Individual Risk. Our Reinsurance segment provides reinsurance through our property catastrophe reinsurance and specialty reinsurance business units and through joint ventures and other activities managed by our Ventures unit. Only Ventures' business activities that appear in our consolidated underwriting results, such as DaVinci and certain reinsurance transactions, are included in our Reinsurance segment results. The results of Top Layer Re, Starbound, ChannelRe Holdings Ltd. (‘‘ChannelRe’’), Tower Hill Holdings Inc. (‘‘Tower Hill’’) and Platinum Underwriters Holdings Ltd. (‘‘Platinum’’) are included in the Other category of our segment results.

Our Individual Risk segment provides primary insurance and quota share reinsurance. The Company does not manage its assets by segment; accordingly, net investment income and total assets are not allocated to the individual segments.

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A summary of the significant components of our revenues and expenses for the three and six month periods ended June 30, 2006 and 2005 is as follows:


<
Three months ended June 30, 2006 Reinsurance Individual Risk Other Total
(in thousands of U.S. dollars, except ratios)        
Gross premiums written (1) $    531,722
$    210,829
$ —
$    742,551
Net premiums written $ 361,558
$ 150,686
—
$ 512,244
Net premiums earned $ 278,061
$ 152,880
—
$ 430,941
Net claims and claim expenses incurred 97,945
109,391
—
207,336
Acquisition expenses 31,091
43,506
—
74,597
Operational expenses 19,763
9,293