Throughout this Quarterly Report on Form 10-Q, Transatlantic Holdings, Inc. and its subsidiaries (collectively "TRH") presents its operations in the way it believes will be most meaningful. TRH's unpaid losses and loss adjustment expenses net of related reinsurance recoverable ("net loss reserves") and TRH's combined ratio and its components are included herein and presented in accordance with principles prescribed or permitted by insurance regulatory authorities as these are standard measures in the insurance and reinsurance industries.

Financial Statements

The following discussion refers to the consolidated financial statements of TRH as of September 30, 2008 and December 31, 2007 and for the three and nine month periods ended September 30, 2008 and 2007, which are presented elsewhere herein. Financial data discussed below have been affected by certain transactions between TRH and related parties. (See Note 9 of Notes to Condensed Consolidated Financial Statements ("Note 9") and Note 13 of Notes to Condensed Consolidated Financial Statements ("Note 13").)

Executive Overview

The operations of Transatlantic Holdings, Inc. (the "Company") are conducted principally by its three major operating subsidiaries - Transatlantic Reinsurance Company® ("TRC"), Trans Re Zurich ("TRZ") and Putnam Reinsurance Company ("Putnam") - and managed based on its geographic segments. Through its operations on six continents, TRH offers reinsurance capacity on both a treaty and facultative basis - structuring programs for a full range of property and casualty products, with an emphasis on specialty lines, which may exhibit greater volatility of results over time than most other lines. Such capacity is offered through reinsurance brokers and, to a lesser extent, directly to domestic and foreign insurance and reinsurance entities.

TRH conducts its business and assesses performance through segments organized along geographic lines. The Domestic segment principally includes financial data from branches in the United States except Miami, as well as revenues and expenses of the Company (including interest expense on the Company's senior notes) and stock-based compensation expense. Data from the London and Paris branches and from TRZ are reported in the aggregate as International - Europe and considered as one segment due to operational and regional similarities. Data from the Miami (which serves Latin America and the Caribbean), Toronto, Hong Kong and Tokyo branches are grouped as International - Other and represent the aggregation of non-material segments.

TRH's operating strategy emphasizes product and geographic diversification as key elements in managing its level of risk concentration. TRH also adjusts its mix of business to take advantage of market opportunities. Over time, TRH has most often capitalized on market opportunities when they arise by strategically expanding operations in an existing location or opening a branch or representative office in new locations. TRH's operations that serve international markets leverage TRH's product knowledge, worldwide resources and financial strength, typically utilizing indigenous management and staff with a thorough knowledge of local markets and product characteristics.

In recent periods, casualty lines have comprised approximately 70% of TRH's net premiums written, while property lines comprised the balance. In addition, treaty reinsurance has totaled approximately 97% of net premiums written in such periods, with the balance representing facultative accounts. Moreover, business written by international branches has represented approximately half of net premiums written in such periods. (See Operational Review for detailed period to period comparisons of such measures.)

American International Group, Inc. ("AIG"), which through its subsidiaries is one of the largest providers of insurance and investment products and services to businesses and individuals around the world, beneficially owned approximately 59% of the common stock of the Company as of September 30, 2008. In September 2008, AIG experienced a severe strain on its liquidity that resulted in AIG entering into an $85 billion revolving credit facility and a guarantee and pledge agreement with the Federal Reserve Bank of New York (the "New York Fed"). AIG has pledged the 39.1 million shares of the Company's common stock that it beneficially owns to secure the credit facility. None of TRH's assets were pledged to secure AIG's obligations under the credit facility. Under the credit facility agreement, AIG agreed to issue a new series of perpetual, non-redeemable Convertible Participating Serial Preferred Stock (the "AIG Preferred Stock") to a trust that will hold the AIG Preferred Stock for the benefit of the United States Treasury. Among other things, the AIG Preferred Stock will vote with AIG's common stock on all matters submitted to AIG stockholders, and will hold approximately, but not in excess of, 79.9% of the aggregate voting power of the AIG common stock, treating the AIG Preferred Stock as if converted. The AIG Preferred Stock will remain outstanding even if the credit facility is repaid in full or otherwise terminates. On September 29, 2008, AIG filed an amendment to its Schedule 13D relating to the Company stating, among other things, that "AIG is exploring all strategic alternatives in connection with the potential disposition or other monetization of its… interest in the Company." (See Part II, Item 1A. Risk Factors for the potential impact of AIG's disposition of its interest in the Company.)

TRH's major sources of revenues are net premiums earned for reinsurance risks undertaken and net investment income earned on investments made. The great majority of TRH's investments are classified as fixed maturity securities on the Consolidated Balance Sheet with an average duration of 6.2 years as of September 30, 2008. In general, premiums are received significantly in advance of related claims payments.

     Consolidated Results

     The following table summarizes TRH's revenues, (loss) income before income
taxes and net (loss) income for the periods indicated:


                                            Three Months Ended                    Nine Months Ended
                                              September 30,                         September 30,
                                     --------------------------------     ---------------------------------
                                       2008        2007       Change        2008         2007       Change
                                     --------------------------------     ---------------------------------
                                                             (dollars in millions)

Revenues                             $  979.8    $ 1,086.8       (9.8 )%  $ 3,182.4    $ 3,252.7       (2.2 )%
(Loss) income before income taxes      (153.7 )      174.7          -          98.4        463.3      (78.8 )
Net (loss) income                      (107.5 )      141.7          -          97.9        374.6      (73.9 )

Revenues for the third quarter and first nine months of 2008 decreased compared to the same prior year periods principally due to significant realized net capital losses in the 2008 periods partially offset by increases in net premiums earned. The significant realized net capital losses, including significant other-than-temporary impairment write-downs, in the 2008 periods generally resulted from declines in market values due to the downturn in the U.S. economy, ongoing turmoil in the financial markets and issuer-specific credit events in recent periods. The increases in net premiums earned emanated primarily from Domestic and, for the nine month period only, International - Europe operations. In general, changes in net premiums earned between periods are influenced by prevailing market conditions in recent periods.

The third quarter and first nine months of 2008 includes pre-tax net catastrophe costs of $146.1 million and $143.8 million, respectively, principally related to Hurricane Ike. The third quarter of 2007 includes pre-tax net catastrophe costs of $2.9 million. The first nine months of 2007 includes pre-tax net catastrophe costs of $56.6 million, principally relating to European Windstorm Kyrill and floods in the U.K. Catastrophe costs include losses and related reinstatement premiums, the details of which can be found in Note 8 of Notes to Condensed Consolidated Financial Statements ("Note 8"). Reinstatement premiums may arise on both assumed and ceded business as a result of contractual provisions found in certain catastrophe excess-of-loss reinsurance contracts that require additional premium to be paid in the event of a loss to reinstate coverage for the remaining portion of the contract period. Net assumed (ceded) reinstatement premiums serve to increase (decrease) net premiums written and earned.

(Loss) income before income taxes and net (loss) income decreased in the third quarter and first nine months of 2008 as compared to the same 2007 periods principally due to significant realized net capital losses, including significant other-than-temporary impairment write-downs, and decreases in underwriting profit (loss) in the 2008 periods. The decrease in net (loss) income in the third quarter of 2008 compared to the same prior year quarter was partially offset by income tax benefits on the loss before income taxes. The decrease in net income in the first nine months of 2008 compared to the same 2007 period was partially offset by a much lower effective tax rate in the 2008 period. The decrease in underwriting profit (loss) is due to a significant increase in net catastrophe costs partially offset by a decrease in estimated net loss reserve development in the 2008 periods. Increased net catastrophe costs and estimated net loss reserve development, in the aggregate, decreased underwriting profit (loss) by $139.3 million in the third quarter of 2008 as compared to the third quarter of 2007 and decreased underwriting profit (loss) by $56.8 million in the first nine months of 2008 as compared to the first nine months of 2007.

Underwriting profit (loss) is defined as net premiums earned less net losses and loss adjustment expenses ("LAE") incurred, net commissions and other underwriting expenses, plus (minus) the increase (decrease) in deferred acquisition costs.

The following paragraphs supplement and update information and discussion included in Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Conditions and Outlook in the 2007 Annual Report on Form 10-K (the "2007 10-K") to reflect developments in or affecting TRH's business to date during 2008.

The market conditions under which TRH operates 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 the periods under discussion, the reinsurance market has been characterized by significant competition worldwide in most lines.

Given the amount of capital attracted to the reinsurance industry by year-end 2006, catastrophe exposed domestic accounts renewing on January 1, 2007 saw a slowing of upward rate movements on programs. Starting in the second half of 2007, property catastrophe rates began to decline as did the pricing for primary property risks in general. Nevertheless, TRH believes rates for U.S. catastrophe exposed business remained at an attractive level through the first nine months of 2008. Internationally, 2007 storm and flood activity did not lead to widespread rate improvements, but did curtail rate reductions. Through the first nine months of 2008, catastrophe rates in the U.K. exhibited minor downward trends and in continental Europe slightly larger reductions. In other peak exposure regions, rates exhibited modest downward trends, with greater decreases in minor territories as reinsurers sought greater diversification.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MD&A - CONTINUED
SEPTEMBER 30, 2008

Throughout 2007 and the first quarter of 2008, casualty lines continued to experience steady rate reductions in the insurance markets on a global basis, but reinsurance rates did not experience the same amount of downward pressure. In recent months, primary rates for most casualty lines continued to decline meaningfully with the exception of some professional liability lines, such as financial institution directors' and officers' liability. Reinsurance terms, however, saw very little pressure in general, as market discipline remained strong. TRH anticipates there will be a large amount of casualty business that will remain attractive throughout 2008.

Significant third quarter catastrophe losses, the current illiquidity of the credit markets and the significant decline of equity markets have caused a meaningful drop in the collective surplus of the property and casualty insurance and reinsurance industries. This decline may impair the capacity of some insurance companies to take on additional risk or, perhaps, even maintain their current risk tolerance levels. The amount of surplus that has recently left insurance companies' balance sheets is expected to far exceed any previous individual catastrophe loss absorbed by the industry. With capital currently extremely difficult to raise in both the debt and equity markets, the demand for reinsurance to address capital declines is expected to increase. Furthermore, with many reinsurers also experiencing capital declines, the supply of reinsurance capacity as a whole is expected to decline as well. This reduction in insurance company surplus, coupled with a decline in reinsurance capacity, could potentially lead to a more favorable pricing environment.

In April 2008, the Brazilian reinsurance market was opened to the private sector. As an Admitted Reinsurer in Brazil, TRC expects to see new opportunities arise in Brazil in future periods.

The existence of favorable 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 conditions will remain in effect in the future.

Additionally, as a practical matter, the rates charged by primary insurers and the policy terms of primary insurance agreements may affect the rates charged and the policy terms associated with reinsurance agreements, particularly for pro rata reinsurance business.

Starting in mid-2007 and continuing through 2008, the U.S. residential mortgage market and the global credit market have been experiencing serious disruptions. TRH's operating results and financial condition have been adversely affected and may continue to be adversely affected by this disruption (see Disruption in Global Credit Markets).

Further information relating to items discussed in this Executive Overview may be found throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A").

Critical Accounting Estimates

This discussion and analysis of financial condition and results of operations is based on TRH's condensed consolidated financial statements which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts and related disclosures. TRH relies on historical experience and on various other assumptions that it believes to be reasonable, under the circumstances, to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

TRH believes its most critical accounting estimates are those with respect to loss reserves, fair value measurements of certain financial assets, other-than-temporary impairments, premium revenues and deferred acquisition costs, as they require management's most significant exercise of judgment on both a quantitative and qualitative basis used in the preparation of TRH's condensed consolidated financial statements and footnotes. The accounting estimates that result require the use of assumptions about certain matters that are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, TRH's results of operations and financial condition would be affected. A discussion of the most critical accounting estimates follows:

(a) Loss Reserves

Estimates of loss reserves take into account TRH's assumptions with respect to many factors that will affect ultimate loss costs but are not yet known. The ultimate process by which actual carried reserves are determined considers not only actuarial estimates but a myriad of other factors. Such factors, both internal and external, which contribute to the variability and unpredictability of loss costs, include trends relating to jury awards, social inflation, medical inflation, worldwide economic conditions, tort reforms, court interpretations of coverages, the regulatory environment, underlying policy pricing, terms and conditions and claims handling, among others. In addition, information gathered through underwriting and claims audits is also considered. To the extent that these assumptions underlying the loss reserve estimates are significantly incorrect, ultimate losses may be materially different from the estimates included in the financial statements and may materially affect results of operations and financial condition. The impact of those differences is reflected in the period they become known.

The reserving process is inherently difficult and subjective, especially in view of changes in the legal and tort environment which impact the development of loss reserves, and therefore quantitative techniques frequently have to be supplemented by subjective considerations and managerial judgment. In addition, trends that have affected development of liabilities in the past may not necessarily occur or affect development to the same degree in the future.

While this process is difficult for ceding companies, the inherent uncertainties of estimating loss reserves are even greater for reinsurers, due primarily to the longer term nature of much reinsurance business, the diversity of development patterns among different types of reinsurance treaties or facultative contracts, the necessary reliance on the ceding companies for information regarding reported claims and differing reserving practices among ceding companies, which are subject to change without notice. Nevertheless, data received from cedants is subjected to audits periodically by TRH claims and underwriting personnel, to help ensure that reported data is supported by proper documentation and conforms to contract terms, and analyzed, as appropriate, by TRH underwriting and actuarial personnel. Such analysis often includes a detailed review of reported data to assess the underwriting results of reinsurance assumed and to explain any significant departures from expected performance. Over time, reported loss information is ultimately corroborated when such information eventually attains paid status.

Standard actuarial methodologies employed to estimate ultimate losses incorporate the inherent "lag" from the time claims are reported to the cedant to when the cedant reports the claims to the reinsurer. Certain actuarial methodologies may be more appropriate than others in instances where this "lag" may not be consistent from period to period. Consequently, additional actuarial judgment is employed in the selection of methodologies to best incorporate the potential impact of this situation.

Generally, for each line of business, significant actuarial judgments are made with respect to the following factors used in the loss reserve setting process:

• Loss trend factors are used to establish expected loss ratios ("ELRs") for subsequent accident years based on the projected loss ratios for prior accident years. Provisions for inflation and social inflation (e.g., awards by judges and juries which progressively increase in size at a rate exceeding that of general inflation) and trends in court interpretations of coverage are among the factors which must be considered.

• ELRs for the latest accident years generally reflect the ELRs from prior accident years adjusted for the loss trend (see loss trend factors discussion immediately above), as well as the impact of rate level changes and other quantifiable factors. For certain longer tail lines of business that are typically lower frequency, higher severity classes, such as excess medical malpractice and directors' and officer's liability ("D&O"), ELRs are often utilized for the last several accident years.

• Loss development factors are used to arrive at the ultimate amount of losses incurred for each accident year based on reported loss information. These factors, which are initially calculated based on historical loss development patterns (i.e., the emergence of reported losses over time relative to the ultimate losses to be paid), are then adjusted for current trends.

During the loss settlement period, which can be many years in duration, additional facts regarding individual claims and trends usually become known. As these facts and trends emerge, it usually becomes necessary to refine and adjust the loss reserves upward or downward and even then the ultimate net liability may be materially different from the revised estimates. There is potential for significant variation in the development of loss reserves when actual costs differ from those costs implied by the use of the assumptions employed in the reserve setting process. This is particularly true for assumed reinsurance of long-tail casualty classes. Among the most critical assumptions are those made for ELRs and loss development factors.

The actuarial methods that TRH employs to determine the appropriate loss reserves for short tail lines of business are the same as those employed for longer tailed lines. However, the judgments that are made with regard to factors such as loss trends, ELRs and loss development factors for shorter tailed lines generally have much less of an effect on the determination of the loss reserve amount than when those same judgments are made with respect to the longer tailed lines of business. In contrast to the longer tailed lines of business, reported losses for the shorter tailed classes, such as the property lines of business (e.g., fire and homeowners') and certain marine and energy classes, generally reach the ultimate level of incurred losses in a relatively short period of time. Rather than having to rely on assumptions regarding ELRs and loss development factors for many accident years for a given line, these assumptions are generally only relevant for the most recent accident year or two. Therefore, these assumptions tend to be less critical and the reserves calculated pursuant to these assumptions are subject to less variability for the shorter tailed lines of business.

The characteristics of each line of business are considered in the reserving process. TRH's major lines of business are discussed below:

Excess Casualty: The vast majority of this class, which is a key component of the other liability line of business, consists of domestic treaties, including pro rata and excess-of-loss contracts of general liability business. Excess casualty is dominated by umbrella business, some of which have very high attachment points. This business is generally very long tailed and characterized by relatively low frequency and high severity type losses.

D&O and Errors and Omissions Liability ("E&O"): These classes, which are significant components of the other liability line of business, are dominated by high layer excess-of-loss D&O business as well as E&O classes such as lawyers and accountants. Much of this business is domestic, although significant amounts are written by the London branch. This business is reviewed separately by operating branch and for pro rata versus excess-of-loss contracts, treaty versus facultative and D&O separately from E&O. Additionally, homogeneous groupings of accountants, lawyers, and architects and engineers risks are reviewed separately. These classes are long tailed in nature, often characterized by very high attachment points.

Healthcare Professional: This business, which is the most significant component of TRH's medical malpractice line of business, is reviewed separately for treaty and facultative contracts. Pro rata contracts are reviewed separately from excess-of-loss contracts. There is significant volume in all categories. This class is also quite long tailed due to the excess-of-loss nature of most of the contracts.

Shorter tailed lines: These would include the property lines of business (such as fire and homeowners'), accident and health ("A&H") and certain marine and energy classes. These lines are written by several of TRH's worldwide offices and the reserves are reviewed separately for each operating branch. Where sufficiently credible experience exists, these lines are generally reviewed after segregating pro rata contracts from excess-of-loss contracts. As a reinsurer, these lines do not develop to ultimate loss as quickly as when written on a primary basis; however, they are significantly shorter tailed than the casualty classes discussed earlier.

Net loss reserves include amounts for risks relating to environmental impairment and asbestos-related illnesses. The majority of TRH's environmental and asbestos-related net loss reserves arose from contracts entered into after 1985 that were underwritten specifically as environmental or asbestos-related coverages rather than as standard general liability coverages, where the environmental or asbestos-related liabilities were neither clearly defined nor specifically excluded. The reserves carried for these claims, including loss and loss adjustment expenses incurred but not reported ("IBNR"), are based upon known facts and current law. However, significant uncertainty exists in determining the amount of ultimate liability for environmental impairment and asbestos-related losses, particularly for those occurring in 1985 and prior. This uncertainty is due to inconsistent court resolutions and judicial interpretations with respect to underlying policy intent and coverage and uncertainties as to the allocation of responsibility for resultant damages, among other things.

See discussion of estimated net adverse development on losses occurring in . . .