The following discussion and analysis reflects the consolidated results of the Company and its subsidiaries for the years ended December 31, 2012, 2011 and 2010.

Executive Overview

The Company is a leading global reinsurer, with a broadly diversified and balanced portfolio of traditional reinsurance risks and capital markets risks.

Successful risk management is the foundation of the Company's value proposition, with diversification of risks at the core of its risk management strategy. The Company's ability to succeed in the risk assumption and management business is dependent on its ability to accurately analyze and quantify risk, to understand volatility and how risks aggregate or correlate, and to establish the appropriate capital requirements and limits for the risks assumed. All risks, whether they are reinsurance related risks or capital market risks, are managed by the Company within an integrated framework of policies and processes to ensure the intelligent and consistent evaluation and valuation of risk, and to ultimately provide an appropriate return to shareholders. For further discussion of the Company's risk management framework, see Risk Management in Item 1 of Part I of this report.

The Company's economic objective is to manage a portfolio of risks that will generate growth in compound annual diluted book value per share and share equivalents outstanding over a reinsurance cycle. Management assesses this economic objective over the reinsurance cycle, rather than any particular quarterly or annual period, given the Company's profitability is significantly affected by the level of large catastrophic losses that it incurs each period. The Company uses a number of metrics to monitor its performance in meeting its economic objective, which are discussed further below under Key Financial Measures.

The following discussion provides an overview of the Company's business and trends and commentary regarding the outlook for 2013 in each business.

Non-life reinsurance business, trends and 2013 outlook

The Company generates its Non-life reinsurance revenue from premiums. Premium rates and terms and conditions vary by line of business depending on market conditions. Pricing cycles are driven by supply of capital in the industry and demand for reinsurance and other risk transfer products. The reinsurance business is also influenced by several other factors, including variations in interest rates and financial markets, changes in legal, regulatory and judicial environments, loss trends, inflation and general economic conditions.

In its reinsurance portfolio, the Company writes all lines of business in virtually all markets worldwide, and differentiates itself through its risk management strategy and its financial strength. In assuming its clients' risks, the Company removes the volatility associated with those risks from the client, and then manages those risks and the risk-related volatility. Through its broad product and geographic diversification, its execution capabilities and its local presence in most major markets, the Company is able to stabilize returns, respond quickly to market needs, and capitalize on business opportunities virtually anywhere in the world.

A key challenge facing the Company is to successfully manage risk through all phases of the reinsurance cycle. The Company believes that its long-term strategy of closely monitoring the progression of each line of business, being selective in the business that it writes, and maintaining the diversification and balance of its portfolio, will optimize returns over the reinsurance cycle. Individual lines of business and markets have their own unique characteristics and are at different stages of the reinsurance pricing cycle at any given point in time. Management believes it has achieved appropriate portfolio diversification by product, geography, line and type

of business, length of tail, and distribution channel. Further, Management believes that this diversification, in addition to the financial strength of the Company and its strong global franchise, will help to mitigate cyclical declines in underwriting profitability and achieve a more stable return over the reinsurance cycle.

The Non-life reinsurance market has historically been highly cyclical in nature. The reinsurance cycle is driven by competition, the amount of capital and capacity in the industry, loss events and investment returns. The Company's long-term strategy to generate shareholder value focuses on broad product, asset and geographic diversification of risks.

The cyclicality of the Non-life reinsurance market is characterized by cycles of growth and decline, known as hard and soft insurance cycles. Since late 2003, the Company began to see the emergence of a soft market across most lines of business with general decreases in pricing and profitability. With the exception of lines and markets impacted by specific catastrophic or large loss events, this trend continued throughout the decade. In 2011 and 2012, the Company experienced increases in pricing in certain loss affected lines of business and markets, which were primarily related to the increased catastrophic and large loss activity during 2011. In addition, the impact of Superstorm Sandy in 2012 has resulted in rate increases in the loss affected lines of business and markets at the January 1, 2013 renewals. In lines of business and markets that have not been specifically impacted by any recent large losses, during 2012 and for the January 1, 2013 renewals, the terms and conditions continued to be mainly static and soft in most markets, with price deteriorations observed in some markets.

During the January 2013 renewals, the Company experienced an increase of approximately 12% in renewable Non-life treaty business, on a constant foreign exchange basis. The increase in expected premium volume was driven by new business and growth opportunities in all Non-life sub-segments, with the exception of the Catastrophe sub-segment, where the Company experienced a modest decline in the premium volume as a result of slightly declining pricing in some markets that were not loss affected. The renewal of the 2013 U.S. agriculture book remains in process and is expected to be completed in the first quarter of 2013, however, Management expects a significant increase in premium in this line compared to the January 1, 2012 renewals due to new business.

Life reinsurance business, trends and 2013 outlook

The Company's Life segment derives revenues primarily from renewal premiums from existing reinsurance treaties and new premiums from existing or new reinsurance treaties. The long-term profitability of the Life segment mainly depends on the volume and amount of death claims incurred and the ability to adequately price the risk the Company assumes. The life reinsurance policies are often in force for the remaining lifetime of the underlying individuals insured, with premiums earned typically over a period of 10 to 30 years. The volume of the business may be reduced each year by terminations of the underlying treaties related to lapses, voluntary surrenders, death of insureds and recaptures by ceding companies. While death claims are reasonably predictable over a period of many years, claims become less predictable over shorter periods and can fluctuate significantly from quarter to quarter or from year to year.

Within the Company's Life segment, the reinsurance market is differentiated between mortality (including disability) and longevity products, with mortality being the larger market. In addition, in December 2012 the Company acquired Presidio, a U.S. specialty accident and health insurance and reinsurance writer. The acquisition of Presidio provides additional specialty risks not previously written by the Company. Management believes the existing life business and Presidio's business provides the Company with diversification benefits and balance to its portfolio as they are generally non-correlated to the Company's Non-life business.

Currently, Presidio principally operates as a Managing General Underwriter (MGU), writing all of its business on behalf of third party insurance companies and earning a fee for producing the business. The third party insurance companies then cede a portion of the original business written through quota-share reinsurance agreements to Presidio's reinsurance subsidiary, such that Presidio participates in the original premiums and

losses incurred related to the business it has produced and ensuring an alignment of interests with the third party insurance companies. During 2013, the Company will obtain the necessary licenses and approvals to write this business directly itself and will transition these relationships from the third party insurance companies.

For the years ended December 31, 2012, 2011 and 2010, the Company did not write any new life business in the U.S., however, following the acquisition of Presidio on December 31, 2012, the Company expects to write accident and health business in the U.S. in future periods.

The acquisition of Presidio is expected to result in substantial overall premium growth in the Company's Life segment in 2013 and beyond once the aforementioned transition is complete. In terms of the Company's existing Life portfolio, the majority of the premium arises from in-force contracts that are written on a continuous basis. The active January 1 renewals impact a relatively limited portion of the in-force premium in the mortality line. For those treaties that actively renewed, pricing conditions and terms were generally unchanged from the January 1, 2012 renewals. The expected premium volume from the Company's January 1, 2013 renewal, at constant foreign exchange rates, increased due to new short-term mortality business. Management expects moderate continued growth in the Company's existing Life portfolio in 2013, assuming constant foreign exchange rates.

Capital markets business, trends and 2013 outlook

The Company generates revenue from its high quality investment portfolio, as well as the investments underlying the funds held - directly managed account, through net investment income, including coupon interest on fixed maturities and dividends on equities, and realized and unrealized gains and losses on investments.

For the Company's capital markets risks, which include both public and private market investments, diversification of risk is critical to achieving the risk and return objectives of the Company. The Company's investment policy distinguishes between liquid, high quality assets that support the Company's liabilities, and the more diversified, higher risk asset classes that make up the Company's capital funds. While there will be years where capital markets risks achieve less than the risk-free rate of return, or potentially even negative results, the Company believes the rewards for assuming these risks in a disciplined and measured way will produce a positive excess return to the Company over time. Additionally, since capital markets risks are not fully correlated with the Company's reinsurance risks, this increases the overall diversification of the Company's total risk portfolio.

The Company follows prudent investment guidelines through a strategy that seeks to maximize returns while managing investment risk in line with the Company's overall objectives of earnings stability and long-term book value growth. The Company allocates its invested assets into two categories: liability funds and capital funds. See the discussion of liability funds and capital funds in Financial Condition, Liquidity and Capital Resources. A key challenge for the Company is achieving the right balance between current investment income and total returns (that include price appreciation or depreciation) in changing market conditions. The Company regularly reviews the allocation of investments to asset classes within its investment portfolio and its funds held - directly managed account and allocates investments to those asset classes the Company anticipates will outperform in the near future, subject to limits and guidelines. Similarly, the Company reduces its exposure to risk asset classes where returns are underperforming. The Company may also lengthen or shorten the duration of its fixed maturity portfolio in anticipation of changes in interest rates, or increase or decrease the amount of credit risk it assumes, depending on credit spreads and anticipated economic conditions.

The Company's capital markets and investment operations, including public and private market investments, have experienced volatile market conditions since the middle of 2007. While the market conditions remained volatile in 2012, there were some improvements in the worldwide equity markets. During 2012, the Company shortened the duration of its fixed maturity portfolio given historically low interest rates and to limit the impact of a potential rise in interest rates.

Assuming constant foreign exchange rates, Management expects net investment income to continue to decrease in 2013 compared to 2012 primarily due to lower reinvestment rates with low yields expected to continue throughout 2013. Management expects this decrease to be partially offset by expected positive cash flow from operations (including net investment income).

Overview of the Results of Operations

The Company measures its performance in several ways. Among the performance measures accepted under U.S. GAAP is diluted net income or loss per share, a measure that focuses on the return provided to the Company's common shareholders. Diluted net income or loss per share is obtained by dividing net income or loss available to common shareholders by the weighted average number of common shares and common share equivalents outstanding. Net income or loss available to common shareholders is defined as net income or loss less preferred dividends. See the discussion of the non-GAAP performance measures that the Company uses (operating earnings or loss and Operating ROE) and the reconciliation of those non-GAAP performance measures to the most directly comparable GAAP measures in Key Financial Measures below.

Net income (loss), preferred dividends, net income (loss) available to common shareholders and diluted net income (loss) per share for the years ended December 31, 2012, 2011 and 2010 were as follows (in millions of U.S. dollars, except per share data):

                                                        2012        2011         2010
  Net income (loss)                                    $ 1,135     $  (520 )    $   853
  Less: preferred dividends                                 62          47           35

  Net income (loss) available to common shareholders   $ 1,073     $  (567 )    $   818
  Diluted net income (loss) per share                  $ 16.87     $ (8.40 )    $ 10.46

The year over year comparison of the Company's net income (loss) and diluted net income (loss) per share is primarily affected by the level of losses related to large catastrophic and large loss events and continued volatility in the capital and credit markets during the years ended December 31, 2012, 2011 and 2010.

To the extent that these events have affected the year over year comparison of the Company's results, their impact has been quantified and discussed in each of the relevant sections.

2012 compared to 2011

The increase in net income of $1,655 million in 2012 compared to 2011 resulted primarily from:

• an increase of $1,429 million in the Non-life underwriting result, which was primarily driven by a decrease of $1,417 million in large catastrophic losses and large losses, from $1,733 million related to the 2011 catastrophic events in 2011 to $316 million related to Superstorm Sandy and the U.S. drought which impacted the agriculture line of business in the North America sub-segment in 2012; and

• an increase of $427 million in pre-tax net realized and unrealized investment gains primarily as a result of narrowing credit spreads, improvements in worldwide equity markets and decrease in risk-free rates; partially offset by

• an increase of $135 million in income tax expense, resulting from a higher pre-tax net income; and

• a decrease of $58 million in net investment income, primarily driven by lower reinvestment rates.

The increase in net income available to common shareholders and diluted net income per share in 2012 compared to 2011 was primarily due to the above factors, partially offset by an increase in preferred dividends following the issuance of preferred shares in June 2011. For diluted net income per share specifically, the increase was also due to a decrease in the diluted number of common shares outstanding as a result of share repurchases during 2012.

2011 compared to 2010

The decrease in net income of $1,373 million in 2011 compared to 2010 resulted primarily from:

• a decrease in the Non-life underwriting result of $1,177 million, which was almost entirely driven by an increase of $1,174 million in large catastrophic losses and large losses, from $559 million in 2010 to $1,733 million related to the 2011 catastrophic events in 2011; and

• a decrease in pre-tax net realized and unrealized investment gains of $335 million; partially offset by

• a decrease in other corporate operating expenses of $67 million, primarily driven by the charges related to the Company's voluntary termination plan in 2010; and

• a decrease in income tax expense of $60 million, resulting from a lower pre-tax net income.

The decrease in net income available to common shareholders and diluted net income per share from income in 2010 to losses in 2011 was primarily due to the above factors and an increase in preferred dividends following the issuance of preferred shares in June 2011. For diluted net income per share specifically, the decrease was partially offset by a decrease in the diluted number of common shares outstanding as a result of share repurchases during 2011.

These factors affecting the year over year comparison of the Company's results are discussed below in Review of Net Income (Loss), Results by Segment and Financial Condition, Liquidity and Capital Resources, and may continue to affect our results of operations and financial condition in the future.

Large catastrophic and large loss events

As the Company's reinsurance operations are exposed to low frequency and high severity risk events, some of which are seasonal, results for certain periods may include unusually low loss experience, while results for other periods may include significant catastrophic losses. For example, the Company's results for 2012 and 2010 included comparatively lower level of catastrophic losses, while 2011 included an unusually high frequency of high severity catastrophic events as discussed further below. The total impact of large catastrophic losses and large losses on pre-tax net income (loss) for the years ended December 31, 2012, 2011 and 2010 were as follows:

Year ended December 31, Total (1)

                      2012                      $        318
                      2011                             1,790
                      2010                               559

(1) Large catastrophic losses and large losses are shown net of any reinsurance, reinstatement premiums and profit commissions.

The following tables reflects the combined impact of the large catastrophic losses and large losses, the impact on the Company's technical result, net realized and unrealized investment gains or losses, pre-tax net income or loss, loss ratio, technical ratio and combined ratio by segment and sub-segment, and the large catastrophic losses and large losses by event for the years ended December 31, 2012, 2011 and 2010 (in millions of U.S. dollars):

                                                      Global              Global                                  Total
                                    North           (Non-U.S.)          (Non-U.S.)                              Non-life           Life          Corporate
2012                               America             P&C              Specialty           Catastrophe          Segment          segment        and Other        Total
Net losses and loss expenses
and life policy benefits          $     157        $          2        $         87        $          82        $     328        $      -        $       -        $  328
Reinstatement premiums                   -                   -                   (1 )                (11 )            (12 )             -                -           (12 )

Impact on technical result        $     157        $          2        $         86        $          71        $     316        $      -        $       -        $  316
Net realized and unrealized
investment losses                                                                                                      -                -                 2            2


Impact on pre-tax net income                                                                                    $     316        $      -        $        2       $  318
Impact on the loss ratio               13.4 %               0.3 %               6.3 %               17.8 %            8.7 %
Impact on the technical ratio          13.4                 0.3                 6.3                 17.6              8.7
Impact on the combined ratio                                                                                          8.7 %




                   2012                            Total  (1)
                   Superstorm Sandy               $        227
                   U.S. drought                             91

                   Impact on pre-tax net income   $        318

(1) Large catastrophic losses and large losses are shown net of any reinsurance, reinstatement premiums and profit commissions.

                                                     Global              Global                                  Total
                                    North          (Non-U.S.)          (Non-U.S.)                               Non-life           Life          Corporate
2011                               America             P&C             Specialty           Catastrophe          segment           segment        and Other         Total
Net losses and loss expenses
and life policy benefits          $      56        $       149        $         65        $       1,511        $    1,781        $       3       $        5       $ 1,789
Reinstatement premiums                   -                  -                   -                   (33 )             (33 )             -                -            (33 )
Acquisition costs                        (6 )               -                   -                    (9 )             (15 )             -                -            (15 )

Impact on technical result        $      50        $       149        $         65        $       1,469        $    1,733        $       3       $        5       $ 1,741
Net realized and unrealized
investment losses                                                                                                      -                -                49            49

Impact on pre-tax net loss                                                                                     $    1,733        $       3       $       54       $ 1,790
Impact on the loss ratio                4.9 %             19.7 %               4.8 %              262.1 %            45.9 %
Impact on the technical ratio           4.4               19.7                 4.8                260.1              45.3
Impact on the combined ratio                                                                                         45.2 %




 2011                                                                Total  (1)
 Japan Earthquake                                                   $        919
 February and June 2011 New Zealand Earthquakes                              455
 Thailand Floods                                                             120
 U.S. tornadoes                                                              107
 Aggregate contracts covering losses in New Zealand and Australia            100
 Australian Floods                                                            41
 Additional IBNR (2)                                                          48

 Impact on pre-tax net loss                                         $      1,790

(1) Large catastrophic losses and large losses are shown net of any reinsurance, reinstatement premiums and profit commissions.

                                                     Global              Global                                  Total
                                    North          (Non-U.S.)          (Non-U.S.)                               Non-life           Life          Corporate
2010                               America             P&C             Specialty           Catastrophe          segment           segment        and Other        Total
Net losses and loss expenses
and life policy benefits          $       5        $       157        $        126        $         280        $      568        $      -        $       -        $  568
Reinstatement premiums                   -                  (1 )                (2 )                 (6 )              (9 )             -                -            (9 )

Impact on technical result
and pre-tax net income            $       5        $       156        $        124        $         274        $      559        $      -        $       -        $  559
Impact on the loss ratio                0.5 %             17.1 %               8.9 %               41.2 %            14.1 %
Impact on the technical ratio           0.5               17.1                 8.9                 41.2              13.9
Impact on the combined ratio                                                                                         13.9 %




  2010                                                               Total  (1)
  Chile Earthquake                                                  $        288
  New Zealand Earthquake                                                     149
  Deepwater Horizon                                                           74
  Aggregate contract covering losses in Australia and New Zealand             48

  Impact on pre-tax net income                                      $        559

(1) Large catastrophic losses and large losses are shown net of any reinsurance, reinstatement premiums and profit commissions.

Volatility in capital and credit markets

In 2012, credit spreads narrowed, equity markets improved and U.S. and European risk-free interest rates decreased, while the U.S. dollar ending exchange rate at December 31, 2012 weakened against most major currencies compared to December 31, 2011. As a result of these movements, the value of the Company's investment portfolio and cash and cash equivalents at December 31, 2012 . . .