TRANSATLANTIC HOLDINGS INC, 10-K, 1999-03-30

TRANSATLANTIC HOLDINGS INC
10-K, 1999-03-30
FIRE, MARINE & CASUALTY INSURANCE

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K

(MARK ONE)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10545

------------------------
TRANSATLANTIC HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

<TABLE>
<S> <C>
DELAWARE 13-3355897
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

80 PINE STREET, NEW YORK, NEW YORK 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

(212) 770-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------------------------------------- ---------------------------------------------------------
<S> <C>
Common Stock, Par Value $1.00 per Share New York Stock Exchange, Inc.
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

------------------------

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 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the shares of all classes of voting stock of
the registrant held by non-affiliates of the registrant on January 31, 1999 was
approximately $1,142,911,454 computed upon the basis of the closing sales price
of the Common Stock on that date. For purposes of this computation, shares held
by directors (and shares held by any entities in which they serve as officers)
and officers of the registrant have been excluded. Such exclusion is not
intended, nor shall it be deemed, to be an admission that such persons are
affiliates of the registrant.
As of January 31, 1999, there were outstanding 34,683,862 shares of Common
Stock, $1.00 par value, of the registrant.

------------------------

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement filed or to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
involving the election of directors at the annual meeting of the shareholders of
the registrant scheduled to be held on May 20, 1999 are incorporated by
reference in Part III of this Form 10-K.

________________________________________________________________________________
________________________________________________________________________________

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I

Item 1. Business....................................................................................... 1
Item 2. Properties..................................................................................... 17
Item 3. Legal Proceedings.............................................................................. 18
Item 4. Submission of Matters to a Vote of Security Holders............................................ 18

PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters....................... 20
Item 6. Selected Financial Data........................................................................ 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 22
Item 8. Financial Statements and Supplementary Data.................................................... 31
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 56

PART III

Item 10. Directors and Executive Officers of the Registrant............................................. 56
Item 11. Executive Compensation......................................................................... 56
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 56
Item 13. Certain Relationships and Related Transactions................................................. 56

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 57
</TABLE>

The Private Securities Litigation Reform Act of 1995 provides a 'safe
harbor' for forward-looking statements. This Form 10-K, the Company's Annual
Report to Stockholders, any proxy statement, any Form 10-Q or any Form 8-K of
the Company or any other written or oral statements made by or on behalf of the
Company may include forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. These
forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail elsewhere in this Form 10-K) include, but are not limited to,
uncertainties relating to general economic conditions and cyclical industry
conditions, uncertainties relating to government and regulatory policies,
volatile and unpredictable developments (including catastrophes), the legal
environment, the uncertainties of the reserving process, the competitive
environment in which the Company operates, the uncertainties inherent in
international operations, and interest rate fluctuations. The words 'believe,'
'expect,' 'anticipate,' 'project' and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

PART I

ITEM 1. BUSINESS

INTRODUCTION

Transatlantic Holdings, Inc. (the 'Company') is a holding company
incorporated in the state of Delaware. Originally formed in 1986 under the name
PREINCO Holdings, Inc. as a holding company for Putnam Reinsurance Company
(Putnam), the Company's name was changed to Transatlantic Holdings, Inc. on
April 18, 1990 following the acquisition on April 17, 1990 of all of the common
stock of Transatlantic Reinsurance Company (TRC) in exchange for shares of
common stock of the Company (the 'Share Exchange'). Prior to the Share Exchange,
American International Group, Inc. (AIG) held a direct and indirect interest of
approximately 25% in the Company and an indirect interest of 49.99% in TRC. As a
result of the Share Exchange, AIG became the beneficial owner of approximately
41% of the Company's outstanding common stock and TRC became a wholly-owned
subsidiary of the Company. In June 1990, certain stockholders of the Company
(other than AIG) sold shares of the Company's common stock in a registered
public offering, with the result that approximately 35% of the Company's
outstanding common stock became publicly owned. Since that date, additional
shares of the Company's common stock have become publicly owned as a result of
sales by such stockholders. During 1998, AIG increased its 49% beneficial
ownership of the Company's outstanding common stock to 52% as of year end. As of
March 11, 1999, AIG's beneficial ownership interest increased to approximately
55% as a result of additional share purchases.

The Company, through its wholly-owned subsidiaries, TRC, Trans Re Zurich
(TRZ), acquired by TRC in 1996 (See Note 1 of Notes to Consolidated Financial
Statements), and Putnam (contributed by the Company to TRC in 1995), offers
reinsurance capacity for a full range of property and casualty products on a
treaty and facultative basis, directly and through brokers, to insurance and
reinsurance companies, in both the domestic and international markets. One or
both of TRC and Putnam is licensed, accredited, authorized or can serve as a
reinsurer in 50 states, Puerto Rico, Guam and the District of Columbia in the
United States. TRC is licensed by the federal government of and seven provinces
in Canada. TRC is also licensed in Japan, the United Kingdom and the Dominican
Republic and is registered or authorized as a foreign reinsurer in Peru,
Colombia, Argentina (where it also maintains a representative office in Buenos
Aires, Transatlantic Re (Argentina) S.A.), Brazil (where it maintains a
representative office in Rio de Janeiro, Transatlantic Re (Brasil) Ltda.) Chile,
Mexico, Ecuador, Guatemala, Venezuela and France. In addition, TRC is licensed
in the Hong Kong Special Administrative Region, People's Republic of China, and
maintains a branch in Hong Kong. Also, TRC is authorized to maintain a
representative office in Shanghai, People's Republic of China. TRZ is licensed
as a reinsurer in Switzerland. TRH's (Transatlantic Holdings, Inc. and its
subsidiaries) principal lines of reinsurance include general liability
(including directors' and officers' liability and other professional liability),
automobile liability (including nonstandard risks), ocean marine and aviation,
medical malpractice and surety and credit in the casualty lines, and fire and
allied lines in the property lines. Reinsurance is provided for most major lines
of insurance on both excess-of-loss and pro rata bases.

Each of TRC and Putnam is currently rated 'A++ (Superior)', the highest
rating classification, by A.M. Best Company (Best's) and 'AA', the second
highest major rating classification, by Standard and Poor's (S&P). TRC is also
rated Aa1 ('Excellent'), the second highest rating classification, by Moody's
Investors Service (Moody's) and TRZ is rated 'A' by S&P. Best's, S&P and Moody's
are independent industry rating organizations. A publication of Best's indicates
that the 'A++ (Superior)' rating is assigned to those companies that, in Best's
opinion, have, on balance, superior financial strength, operating performance
and market profile when compared to standards established by Best's and that
have a very strong ability to meet their ongoing obligations to policyholders. A
publication of S&P advises that companies that receive an insurer financial
strength rating of 'AA' have very strong financial security characteristics
differing only slightly from those rated higher, and that companies that receive
a rating of 'A' have strong financial security characteristics but are somewhat
more likely to be affected by adverse business conditions than are insurers with
higher ratings. A publication of Moody's advises that an insurance financial
strength rating of Aa1 is assigned to those ranked at the higher end

of insurance companies offering excellent financial security, but whose
long-term risks appear somewhat larger than companies in the highest rating
category. These ratings are based upon factors that may be of concern to policy
or contract holders, but may not reflect the considerations applicable to an
equity investment in an insurance or reinsurance company.

The statutory surplus of TRC of $1,343.7 million, as of December 31, 1998,
ranked TRC as the 5th largest domestic reinsurer according to statistics
distributed by the Reinsurance Association of America. Although TRC and its
wholly-owned subsidiary, Putnam, are separate entities, together they would have
ranked as the 4th largest domestic reinsurer based upon combined statutory net
premiums written of $1,257.3 million and 5th based upon combined statutory net
income of $208.9 million for the year ended December 31, 1998, according to such
statistics.

THE REINSURANCE BUSINESS

Reinsurance is an arrangement whereby one or more insurance companies, the
'reinsurer,' agrees to indemnify another insurance company, the 'ceding
company,' for all or part of the insurance risks underwritten by the ceding
company. Reinsurance can provide certain basic benefits to the ceding company.
It reduces net liability on individual risks, thereby enabling the ceding
company to underwrite more business than its own resources can support; it
provides catastrophe protection to lessen the impact of large or multiple
losses; it stabilizes results by leveling fluctuations in the ceding company's
loss ratio; and it helps the ceding company maintain acceptable surplus and
reserve ratios.

There are two major classes of reinsurance: treaty reinsurance and
facultative reinsurance. Treaty reinsurance is a contractual arrangement that
provides for the automatic reinsuring of a type or category of risk underwritten
by the ceding company. Facultative reinsurance is the reinsurance of individual
risks. Rather than agreeing to reinsure all or a portion of a class of risk, the
reinsurer separately rates and underwrites each risk. Facultative reinsurance is
normally purchased to cover risks not covered by treaty reinsurance or for
individual risks covered by reinsurance treaties that are in need of capacity
beyond that provided by such treaties.

A ceding company's reinsurance program may involve pro rata and
excess-of-loss reinsurance on both a treaty and facultative basis. Under pro
rata reinsurance (also referred to as proportional), the ceding company and the
reinsurer share the premiums as well as the losses and expenses in an agreed
proportion. Under excess-of-loss reinsurance, the reinsurer agrees to reimburse
the ceding company for all losses in excess of a predetermined amount up to a
predetermined limit. Premiums paid by the ceding company to the reinsurer for
excess-of-loss coverage are generally not proportional to the premiums that the
ceding company receives because the reinsurer does not assume a proportionate
risk.

In pro rata reinsurance, the reinsurer generally pays the ceding company a
ceding commission. Generally, the ceding commission is based on the ceding
company's cost of obtaining the business being reinsured (i.e., brokers' and
agents' commissions, local taxes, settlement costs and administrative expenses).
There is usually no ceding commission on excess-of-loss reinsurance and
therefore the pricing mechanism used by reinsurers is a rate applicable to
premiums of the individual policy or policies subject to the reinsurance
agreement.

In general, casualty insurance protects the insured against financial loss
arising out of its obligation to others for loss or damage to their person or
property. Property insurance protects the insured against financial loss arising
out of the loss of property or its use caused by an insured peril. Property and
casualty reinsurance protects the ceding company against loss to the extent of
the reinsurance coverage provided. A greater degree of unpredictability is
generally associated with casualty risks and catastrophe-exposed property risks,
and there tends to be a greater lag in the reporting and settlement of casualty
reinsurance claims, due to the nature of casualty risks and their greater
potential for litigation.

GENERAL

TRH reinsures risks from a broad spectrum of industries throughout the
United States and foreign countries. A portion of the reinsurance written by TRH
is assumed from AIG and its subsidiaries (the 'AIG Group') and therefore
reflects their underwriting philosophy and diversified insurance products.

In 1998, TRH's activities in the United States were conducted through its
worldwide headquarters in New York and its regional office in Chicago. All
domestic treaty business is underwritten by, or under the close supervision of,
senior officers of TRH located in New York. TRH's headquarters in New York, the
Miami office (underwriting business from Latin America and the Caribbean) and
international offices in Toronto, London, Paris, Zurich, Hong Kong and Tokyo can
offer treaty as well as facultative reinsurance. In addition, TRH operates
representative offices in Buenos Aires, Rio de Janeiro and Shanghai; the latter
two offices opened in early 1998. In addition, in late 1998, TRH entered into an
exclusive arrangement with a representative agency in Johannesburg, South
Africa. Non-U.S. business (representing risks underwritten by the Miami office
and the other international offices) accounted for approximately 49%, 48% and
40% of net premiums written in 1998, 1997 and 1996, respectively. (See
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Management's Discussion) for a discussion of premium fluctuations
between years and Note 13 of Notes to Consolidated Financial Statements for
financial data by business segment.) In addition, London branch net premiums
written in 1998 totaled $304.4 million, or 22% of worldwide net premiums
written. (For a discussion of certain conditions associated with international
business see 'Regulation' and Note 13 of Notes to Consolidated Financial
Statements.)

Casualty reinsurance constitutes the larger portion of TRH's business,
accounting for 71% of net premiums written in 1998 and 67% in 1997 and 1996. As
a general matter, due to the longer period of time necessary to settle casualty
claims, casualty reinsurance underwriting tends to involve variables (such as
those discussed in the paragraph immediately following) that are not as
predictable as those in property reinsurance underwriting. The greater degree of
uncertainty associated with casualty business as a result of these variables may
produce a more volatile result over a period of time, although property
reinsurance, including property catastrophe business, is also subject to
significant year to year volatility due to major natural disasters. TRH also
seeks to focus on more complex risks within the casualty and property lines, and
to adjust its mix of business to take advantage of market opportunities.

In general, the overall operating results (including investment
performance) and other changes to stockholders' equity of property and casualty
insurance and reinsurance companies, and TRH, in particular, are subject to
significant fluctuations due to competition, catastrophic events, economic and
social conditions, foreign currency rate fluctuations, interest rates and other
factors, such as changes in tax laws, tort laws and the regulatory environment.

The following table presents certain underwriting information concerning
TRH's casualty and property business for the periods indicated:(5)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
NET
LOSSES AND LOSS
NET PREMIUMS WRITTEN NET PREMIUMS EARNED ADJUSTMENT EXPENSES
------------------------------ ------------------------------ --------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- -------- -------- ------ ------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Casualty
General liability(1)(2)....... $ 274.7 $ 185.9 $ 203.7 $ 248.2 $ 187.9 $ 213.8 $ 149.2 $141.9 $183.4
Automobile liability.......... 270.9 223.9 168.7 273.0 201.8 161.9 212.6 161.6 156.9
Ocean marine and
aviation(2)(3).............. 190.3 179.5 142.0 192.8 180.5 143.3 194.5 147.1 100.2
Medical malpractice(2)........ 90.3 129.8 131.9 91.7 133.0 135.6 39.3 113.0 121.1
Surety and credit(3)(4)....... 63.0 66.4 52.6 65.4 58.7 45.3 57.0 50.1 29.6
Accident and health........... 63.3 34.8 10.6 69.8 27.3 10.1 56.3 18.8 4.9
Other(3)(4)................... 37.3 48.0 50.7 40.9 40.4 51.7 18.8 19.8 42.1
-------- -------- -------- -------- -------- -------- -------- ------ ------
Total casualty............ 989.8 868.3 760.2 981.8 829.6 761.7 727.7 652.3 638.2
-------- -------- -------- -------- -------- -------- -------- ------ ------
Property
Fire.......................... 168.9 205.8 190.3 176.8 210.4 174.1 138.6 149.3 107.0
Allied lines(2)(4)............ 69.4 59.6 68.7 68.5 69.8 70.1 38.1 39.3 29.7
Homeowners multiple peril..... 57.9 71.4 34.8 64.2 55.2 41.1 47.0 36.8 19.0
Automobile physical damage.... 64.2 45.2 32.3 44.3 44.0 23.6 39.7 32.1 18.2
Other(3)(4)................... 43.5 43.8 56.2 45.0 50.3 60.0 29.8 23.2 29.4
-------- -------- -------- -------- -------- -------- -------- ------ ------
Total property............ 403.9 425.8 382.3 398.8 429.7 368.9 293.2 280.7 203.3
-------- -------- -------- -------- -------- -------- -------- ------ ------
Total................. $1,393.7 $1,294.1 $1,142.5 $1,380.6 $1,259.3 $1,130.6 $1,020.9 $933.0 $841.5
-------- -------- -------- -------- -------- -------- -------- ------ ------
-------- -------- -------- -------- -------- -------- -------- ------ ------

<CAPTION>
LOSS AND LOSS
ADJUSTMENT EXPENSE
RATIO
----------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Casualty
General liability(1)(2)....... 60.1 75.5 85.8
Automobile liability.......... 77.9 80.1 96.9
Ocean marine and
aviation(2)(3).............. 100.9 81.5 69.9
Medical malpractice(2)........ 42.9 84.9 89.3
Surety and credit(3)(4)....... 87.2 85.3 65.4
Accident and health........... 80.6 68.8 48.5
Other(3)(4)................... 46.1 49.0 81.3
Total casualty............ 74.1 78.6 83.8
Property
Fire.......................... 78.4 71.0 61.5
Allied lines(2)(4)............ 55.6 56.3 42.3
Homeowners multiple peril..... 73.2 66.5 46.2
Automobile physical damage.... 89.6 72.9 77.2
Other(3)(4)................... 66.2 46.3 49.0
Total property............ 73.5 65.3 55.1
Total................. 73.9 74.1 74.4
</TABLE>

- ------------
(1) A significant portion of this line includes more complex risks such as
professional liability (other than medical malpractice), directors' and
officers' liability, errors and omissions and environmental impairment
liability.

(2) In 1998, development on reserves held at December 31, 1997 significantly
decreased the loss ratios in general liability, medical malpractice and
allied lines and significantly increased the loss ratios in ocean marine and
aviation.

(3) In 1997, development on reserves held at December 31, 1996 significantly
decreased the loss ratios in other casualty and other property lines and
significantly increased the loss ratios in ocean marine and aviation, and
the surety and credit area.

(4) In 1996, development on reserves held at December 31, 1995 significantly
decreased the loss ratios in other casualty, allied lines and other property
lines and significantly increased the loss ratio in surety and credit.

(5) See Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of TRH's underwriting components.

Treaty reinsurance constitutes the larger portion of TRH's business,
accounting for 95%, 94% and 90% of net premiums written in 1998, 1997 and 1996,
respectively.

The following table presents certain information concerning TRH's treaty
and facultative business for the periods indicated:

<TABLE>
<CAPTION>
TREATY
--------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------
1998(1) 1997(2) 1996
-------- -------- --------
(in millions)
<S> <C> <C> <C>
Gross premiums written............................................... $1,438.5 $1,323.5 $1,145.0
Net premiums written................................................. 1,320.2 1,214.4 1,033.7
Net premiums earned.................................................. 1,311.1 1,163.9 1,013.0

<CAPTION>
FACULTATIVE
--------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997(2) 1996
-------- -------- --------
(in millions)
<S> <C> <C> <C>
Gross premiums written............................................... $ 128.4 $ 139.8 $ 170.9
Net premiums written................................................. 73.5 79.7 108.8
Net premiums earned.................................................. 69.5 95.4 117.6
</TABLE>

- ------------
(1) In 1998 compared to 1997, international treaty premiums increased in
specialty casualty classes (particularly other professional liability, which
is included in general liability), automobile physical damage, automobile
liability and aircraft lines, and decreased in the fire line. Domestic
treaty premiums increased in the automobile liability line (including
nonstandard risks) and certain specialty casualty classes (particularly
other professional liability and accident and health lines), and decreased
in the medical malpractice line.

(2) In 1997 compared to 1996, international treaty premiums increased in
automobile liability, automobile physical damage, fire and allied lines. The
majority of these increases resulted from the inclusion of a full year of
TRZ premiums in 1997 versus six months data reflected in 1996, following its
acquisition in the third quarter of that year by TRH. Facultative business
comprises a small portion of overall international premiums. Domestically,
treaty premium decreases in general casualty, allied lines and automobile
liability (including nonstandard risks) were partially offset by increases
in homeowners multiple peril, aircraft and accident and health lines.
Domestic facultative premiums declined in property and general casualty
classes, partially offset by modest increases in specialty casualty classes.

TREATY REINSURANCE

Treaty reinsurance accounted for approximately $1,438.5 million of gross
premiums written and $1,320.2 million of net premiums written in 1998,
approximately 71% of which resulted from casualty lines treaties, with the
remainder from property lines treaties. Approximately 64% of treaty gross
premiums written in 1998 represented treaty reinsurance written on a pro rata
basis and the balance represented treaty reinsurance written on an
excess-of-loss basis. Approximately 7% of treaty gross premiums written in 1998
were attributable to the AIG Group. Such premiums were primarily written on a
pro rata basis. The majority of TRH's non-AIG Group treaty premiums were also
written on a pro rata basis. As pro rata business is a proportional sharing of
premiums and losses among ceding company and reinsurer, generally, the
underwriting results of such business more closely reflect the underwriting
results of the business ceded than do the results of excess-of-loss business.

TRH's treaty business consists primarily of lines of business within
general liability (including directors' and officers' liability and other
professional liability), automobile liability (including nonstandard risks),
ocean marine and aviation, medical malpractice, surety and credit, fire and
allied lines. A significant portion of TRH's business within these lines
(primarily general liability and medical malpractice) is derived from certain
more complex risks. TRH also underwrites non-traditional reinsurance, which
blends funding characteristics with more traditional risk transfer.

TRH's treaty underwriting process emphasizes a team approach between TRH's
underwriters, actuaries and claims staff, as appropriate. Treaties are reviewed
for compliance with TRH's underwriting guidelines and objectives and certain
larger treaties are evaluated in part based upon actuarial analyses conducted by
TRH. The generic actuarial models used in such analyses are tailored in each
case to the exposures and experience underlying the specific treaty and the loss
experience for the risks covered thereunder. TRH also at times conducts
underwriting audits at the offices of a prospective ceding company before
entering into major treaties, because reinsurers, including TRH, do not
separately evaluate each of the individual risks assumed under their treaties
and, consequently, are largely dependent on the original underwriting decisions
made by the ceding company. Such

dependence subjects TRH and reinsurers in general to the possibility that the
ceding companies have not adequately evaluated the risks to be reinsured and,
therefore, that the premiums ceded in connection therewith may not adequately
compensate the reinsurer for the risk assumed.

TRH offers brokers full service with large capacity for both casualty and
property risks. For non-AIG business, TRH generally seeks to lead treaty
arrangements. The lead reinsurer on a treaty generally accepts one of the
largest percentage shares of the treaty and represents the other participating
reinsurers in negotiating price, terms and conditions. TRH believes that this
strategy has enabled it to influence more effectively the terms and conditions
of the treaties in which it has participated. TRH has generally not set terms
and conditions as lead underwriter with respect to AIG Group treaty reinsurance,
although it may do so in the future. When TRH does not lead the treaty, it may
still suggest changes to any aspect of the treaty. In either case, TRH may
reject any treaty business offered to it by the AIG Group or others based upon
its assessment of all relevant factors. Such factors include type and level of
risk assumed, actuarial and underwriting judgment with respect to rate adequacy,
various treaty terms, prior and anticipated loss experience on the treaty, prior
business experience with the ceding company, overall financial position,
operating results and Best's, S&P and Moody's ratings of the ceding company and
social, legal, regulatory, environmental and general economic conditions
affecting the risks assumed or the ceding company.

TRH currently has approximately 5,125 treaties in effect for the current
underwriting year. In 1998, no single treaty exceeded 3% of treaty gross
premiums written. No ceding company accounted for more than 4% of total treaty
gross premiums written in 1998 other than AIG Group companies (see 'Relationship
with the AIG Group') and members of Lloyd's of London, which accounted for 9% of
treaty gross premiums written.

Non-U.S. treaty business accounted for approximately 47% of TRH's total net
premiums written for the year ended December 31, 1998.

FACULTATIVE REINSURANCE

During 1998, TRH wrote approximately $128.4 million of gross premiums
written and $73.5 million of net premiums written of facultative reinsurance,
approximately 73% of which represented casualty risks with the balance
comprising property risks. The majority of facultative gross premiums written in
1998 represented facultative reinsurance written on an excess-of-loss basis.
Facultative coverages are generally offered for most lines of business. However,
the great majority of premiums are within the other liability (including
specialty casualty classes) and fire lines. Underwriting expenses associated
with facultative business are generally higher in proportion to related premiums
than those associated with treaty business, reflecting, among other things, the
more labor-intensive nature of underwriting and servicing facultative business.
Approximately 51% of facultative gross premiums written in 1998 were
attributable to AIG Group companies. Except for AIG Group companies, no single
ceding company accounted for more than 5% of total facultative gross premiums
written in 1998. Non-U.S. facultative business accounted for approximately 2% of
TRH's total net premiums written for the year ended December 31, 1998.

RETENTION LEVELS AND RETROCESSION ARRANGEMENTS

TRH enters into retrocession arrangements for many of the same reasons
primary insurers seek reinsurance, including reducing the effect of individual
or aggregate losses and increasing gross premium writings and risk capacity
without requiring additional capital.

Under TRH's underwriting guidelines and retrocession arrangements in effect
at the end of 1998, the maximum net amounts generally retained per risk, the
maximum amounts retroceded and the maximum gross capacities are set forth in the
table below.

<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM NET MAXIMUM GROSS
RETENTION RETROCESSION CAPACITY
----------- ------------ -----------
(in millions)
<S> <C> <C> <C>
Property
Treaty
Catastrophe excess-of-loss...................... $18 $ 12 $30
Other........................................... 20 10 30
Facultative.......................................... 2 28 30
Casualty
Treaty
Marine and aviation............................. 5 30 35
Other........................................... 8 2 10
Facultative.......................................... 8 2 10
</TABLE>

For 1999, TRH is protected by catastrophe reinsurance agreements that would
generally result in a maximum net retention by TRH of $20 million, with a
property catastrophe limit of up to $200 million.

Average gross lines and net retentions on risks assumed historically have
been smaller than the maximums permissible under the underwriting guidelines.
Underwriting guidelines, including gross lines and net retention levels, may be
changed and limited exceptions are made by TRH from time to time.

Retrocession arrangements do not relieve TRH from its obligations to the
insurers and reinsurers from whom it assumes business. The failure of
retrocessionnaires to honor their obligations could result in losses to TRH. TRH
holds substantial amounts of funds and letters of credit to collateralize
reinsurance recoverables. Such funds and letters of credit can be drawn on for
amounts remaining unpaid beyond contract terms. In addition, an allowance has
been established for estimated unrecoverable amounts.

As of December 31, 1998, TRH had in place 53 active retrocessional
arrangements for current and prior underwriting years with 362
retrocessionnaires, and reinsurance recoverable on paid and unpaid losses
totaled $464.2 million. (See Note 12 of Notes to Consolidated Financial
Statements for amounts recoverable from AIG Group companies.)

MARKETING

TRH provides property and casualty reinsurance capacity through brokers and
directly to insurance and reinsurance companies in both the domestic and
international markets. TRH believes its worldwide network of offices and its
relationship with the AIG Group help position TRH to take advantage of market
opportunities.

AIG Group business is obtained directly from the ceding company. No ceding
company, other than the AIG Group companies, has accounted for more than 10% of
TRH's revenues in any of the last five years.

Non-AIG Group treaty business is produced primarily through brokers, while
non-AIG Group facultative business is produced both directly and through
brokers. In 1998, approximately 87% of TRH's non-AIG Group business was written
through brokers and the balance was written directly. Companies controlled by
Aon Corporation, TRH's largest brokerage source of business, accounted for 19%
of TRH's consolidated revenues and 21% of gross premiums written in 1998. In
addition, TRH's largest 10 brokers accounted for an aggregate of approximately
61% of such gross premiums written. Brokerage fees generally are paid by
reinsurers. TRH believes that its emphasis on seeking the lead position in
non-AIG Group reinsurance treaties in which it participates is beneficial in
obtaining business.

Brokers do not have the authority to bind TRH with respect to reinsurance
agreements, nor does TRH commit in advance to accept any portion of the business
that brokers submit to it. Reinsurance business from any ceding company, whether
new or renewal, is subject to acceptance by TRH.

Effective January 1, 1995, TRC and Putnam entered into a quota share
reinsurance agreement whereby TRC ceded 5% of its total reinsurance liabilities,
net of retrocessions, to Putnam. Thereafter, TRC cedes 5% of its assumed
reinsurance, net of other retrocessions, to Putnam pursuant to this quota share
reinsurance agreement. Presently all of Putnam's business is assumed from TRC
pursuant to this quota share reinsurance agreement. From January 1, 1991 through
December 31, 1994, TRC ceded 33% of its assumed reinsurance, net of other
retrocessions, to Putnam, pursuant to an agreement with terms similar to the
current agreement discussed immediately above. These agreements were entered
into for operational reasons and had no material impact on TRH's financial
position or results of operations.

CLAIMS

Claims are managed by TRH's professional claims staff whose
responsibilities include the review of initial loss reports, creation of claim
files, determination of whether further investigation is required, establishment
and adjustment of case reserves and payment of claims. In addition to claims
assessment, processing and payment, the claims staff conducts comprehensive
claims audits of both specific claims and overall claims procedures at the
offices of selected ceding companies, which TRH believes benefit all parties to
the reinsurance arrangement. Claims audits are conducted in the ordinary course
of business. In certain instances, a claims audit may be performed prior to
assuming reinsurance business.

RESERVES FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

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. To recognize liabilities for unpaid losses and loss
adjustment expenses (LAE), insurers and reinsurers establish reserves, which are
balance sheet liabilities representing estimates of future amounts needed to pay
claims and related expenses with respect to insured events which have occurred
on or before the balance sheet date, including events which have not been
reported to the ceding company.

Upon receipt of a notice of claim from the ceding company, TRH establishes
its own case reserve for the estimated amount of the ultimate settlement, if
any. Case reserves usually are based upon the amount of reserves recommended by
the ceding company and may be supplemented by additional amounts as deemed
necessary. In certain instances, TRH establishes case reserves even when the
ceding company does not report any liability to the reinsurer.

TRH also establishes reserves to provide for the estimated expenses of
settling claims, including legal and other fees, and the general expenses of
administering the claims adjustment process (i.e., LAE), and the losses and loss
adjustment expenses incurred but not reported (IBNR). TRH calculates LAE and
IBNR reserves by using generally accepted actuarial reserving techniques to
project the ultimate liability for losses and loss adjustment expenses. Such
reserves are periodically revised by TRH to adjust for changes in the expected
loss development pattern over time. TRH has an in-house actuarial staff which
periodically reviews its loss reserves, and therefore does not retain any
outside actuarial firm to review its loss reserves.

Losses and loss adjustment expenses, net of related reinsurance
recoverable, are charged to income as incurred. Unpaid losses and loss
adjustment expenses represent the accumulation of case reserves and IBNR.
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) are implicitly considered in the overall reserve setting process as
an element of the numerous judgments which are made as to expected trends in
average claim severity. Legislative changes may also affect TRH's liabilities,
and evaluation of the impact of such changes is made in the reserve setting
process.

The methods of determining estimates for reported and unreported losses and
establishing resulting reserves and related reinsurance recoverable are
continually reviewed and updated, and adjustments resulting therefrom are
reflected in income currently. The process relies upon the basic assumption that
past experience, adjusted for the effect of current developments and likely
trends, is an appropriate

basis for predicting future events. However, estimation of loss reserves is a
difficult process, 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
liability development to the same degree in the future.

While the reserving process is difficult and subjective for the ceding
companies, the inherent uncertainties of estimating such reserves are even
greater for the reinsurer, due primarily to the longer-term nature of most
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. Thus, actual losses and loss
adjustment expenses may deviate, perhaps substantially, from estimates of
reserves reflected in the Company's consolidated financial statements.

During the loss settlement period, which can be many years in duration,
additional facts regarding individual claims and trends usually become known. As
these become apparent, it usually becomes necessary to refine and adjust the
reserves upward or downward and even then the ultimate net liability may be less
than or greater than the revised estimates. TRH does not otherwise adjust
downward those claims reported to it by ceding companies or discount any of its
reserves for reported or unreported claims in any line of its business for
anticipated investment income.

Included in TRH's reserves are amounts related to environmental impairment
and asbestos-related illnesses, net of related reinsurance recoverable, which
totaled $69 million as of December 31, 1998. The majority of TRH's environmental
and asbestos-related liabilities arise from contracts entered into after 1984
and 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. Significant uncertainty exists as to the ultimate settlement of these
liabilities since, among other things, there are inconsistent court resolutions
with respect to underlying policy intent and coverage and uncertainties as to
the allocation of responsibility for resultant damages. (See Management's
Discussion and Note 2(e) of Notes to Consolidated Financial Statements for
further discussion.)

The 'Analysis of Consolidated Net Loss and Loss Adjustment Expense Reserve
Development' which follows presents the development of balance sheet loss and
loss adjustment expense reserves for calendar years 1988 through 1998. The upper
half of the table shows the cumulative amounts paid during successive years
related to the opening reserve. For example, with respect to the net loss and
loss adjustment expense reserve of $889.7 million as of December 31, 1989, by
the end of 1998 (nine years later) $678.6 million had actually been paid in
settlement of those reserves. In addition, as reflected in the lower section of
the table, the original reserve of $889.7 million was reestimated to be $953.9
million at December 31, 1998. This change from the original estimate would
normally result from a combination of a number of factors, including losses
being settled for different amounts than originally estimated. The original
estimates will also be increased or decreased as more information becomes known
about the individual claims and overall claim frequency and severity patterns.
The net deficiency or redundancy depicted in the table, for any particular
calendar year, shows the aggregate change in estimates over the period of years
subsequent to the calendar year reflected at the top of the respective columns.
For example, the net redundancy of $59.5 million at December 31, 1998 related to
December 31, 1997 net loss and loss adjustment expense reserves of $2,522.7
million, represents the cumulative amount by which net reserves for 1997 have
developed favorably during 1998.

Each amount other than the original reserves in the table below includes
the effects of all changes in amounts for prior periods. For example, if a loss
settled in 1991 for $150,000 was first reserved in 1988 at $100,000 and remained
unchanged until settlement, the $50,000 deficiency (actual loss minus original
estimate) would be included in the cumulative net deficiency in each of the
years in the period 1988 through 1990 shown in the following table. Conditions
and trends that have affected development of liability in the past may not
necessarily occur in the future. Accordingly, it may not be appropriate to
extrapolate future development based on this table.

ANALYSIS OF CONSOLIDATED NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE
DEVELOPMENT(1)(2)(3)
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994
--------- -------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net unpaid losses and
loss adjustment
expenses,
December 31:(4)...... $ 691,046 $889,742 $1,064,214 $1,241,160 $1,386,092 $1,503,389 $1,727,380
Paid (cumulative) as
of:
One year later..... 149,228 170,680 190,484 198,463 281,641 312,923 338,947
Two years later.... 235,860 303,175 336,547 396,739 497,557 506,681 594,508
Three years
later............ 313,810 383,518 443,578 526,776 633,737 681,388 797,841
Four years later... 355,899 460,239 534,824 614,555 760,091 824,468 899,232
Five years later... 406,292 519,814 586,303 699,667 851,734 885,415
Six years later.... 446,659 550,019 645,657 770,270 922,778
Seven years
later............ 463,757 599,451 703,101 825,981
Eight years
later............ 505,859 643,240 750,275
Nine years later... 539,889 678,641
Ten years later.... 572,889
Net liability
reestimated as of:(4)
End of year........ 691,046 889,742 1,064,214 1,241,160 1,386,092 1,503,389 1,727,380
One year later..... 682,449 887,830 1,062,280 1,238,929 1,409,008 1,518,361 1,723,926
Two years later.... 665,867 887,991 1,072,552 1,250,809 1,425,146 1,516,299 1,729,924
Three years
later............ 682,267 909,820 1,084,635 1,260,763 1,426,424 1,522,635 1,718,844
Four years later... 711,611 928,640 1,095,054 1,268,476 1,437,271 1,511,825 1,657,393
Five years later... 737,070 942,530 1,102,404 1,269,583 1,426,466 1,468,903
Six years later.... 754,906 947,862 1,110,499 1,252,455 1,394,401
Seven years
later............ 758,012 963,041 1,096,961 1,226,855
Eight years
later............ 778,386 956,346 1,085,248
Nine years later... 781,924 953,892
Ten years later.... 791,661
Net (deficiency)
redundancy....... $(100,615) $(64,150) $ (21,034) $ 14,305 $ (8,309) $ 34,486 $ 69,987

<CAPTION>
1995 1996 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net unpaid losses and
loss adjustment
expenses,
December 31:(4)...... $1,985,786 $2,383,528 $2,522,728 $2,656,103
Paid (cumulative) as
of:
One year later..... 396,647 549,635 543,539
Two years later.... 685,485 765,380
Three years
later............ 855,809
Four years later...
Five years later...
Six years later....
Seven years
later............
Eight years
later............
Nine years later...
Ten years later....
Net liability
reestimated as of:(4)
End of year........ 1,985,786 2,383,528 2,522,728 2,656,103
One year later..... 1,978,062 2,368,965 2,463,239
Two years later.... 1,961,041 2,289,951
Three years
later............ 1,885,897
Four years later...
Five years later...
Six years later....
Seven years
later............
Eight years
later............
Nine years later...
Ten years later....
Net (deficiency)
redundancy....... $ 99,889 $ 93,577 $ 59,489
</TABLE>

- ------------
(1) This table excludes data related to TRZ, a non-U.S. subsidiary acquired in
the third quarter of 1996, for 1995 and prior years as such data is not
available.

(2) This table is on a calendar year basis and does not present accident or
underwriting year data.

(3) Data have been affected by transactions between TRH and the AIG Group. (See
'Relationship with the AIG Group' and Notes 10 and 12 of Notes to
Consolidated Financial Statements.)

(4) Represents gross liability for unpaid losses and loss adjustment expenses
net of related reinsurance recoverable.

ANALYSIS OF NET UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
AND NET REESTIMATED LIABILITY(1)

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
End of year:
Gross liability................. $1,769,486 $1,890,178 $2,167,316 $2,388,155 $2,733,055 $2,918,782 $3,116,038
Related reinsurance
recoverable................... 383,394 386,789 439,936 402,369 349,527 396,054 459,935
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net liability.............. $1,386,092 $1,503,389 $1,727,380 $1,985,786 $2,383,528 $2,522,728 $2,656,103
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
One year later:
Gross reestimated liability..... $1,807,550 $1,930,343 $2,138,947 $2,326,770 $2,755,288 $2,864,610
Reestimated related reinsurance
recoverable................... 398,542 411,982 415,021 348,708 386,323 401,371
---------- ---------- ---------- ---------- ---------- ----------
Net reestimated
liability................ $1,409,008 $1,518,361 $1,723,926 $1,978,062 $2,368,965 $2,463,239
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Two years later:
Gross reestimated liability..... $1,857,100 $1,945,407 $2,091,724 $2,340,639 $2,664,858
Reestimated related reinsurance
recoverable................... 431,954 429,108 361,800 379,598 374,907
---------- ---------- ---------- ---------- ----------
Net reestimated
liability................ $1,425,146 $1,516,299 $1,729,924 $1,961,041 $2,289,951
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Three years later:
Gross reestimated liability..... $1,875,877 $1,894,754 $2,110,823 $2,246,095
Reestimated related reinsurance
recoverable................... 449,453 372,119 391,979 360,198
---------- ---------- ---------- ----------
Net reestimated
liability................ $1,426,424 $1,522,635 $1,718,844 $1,885,897
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Four years later:
Gross reestimated liability..... $1,818,521 $1,909,734 $2,034,135
Reestimated related reinsurance
recoverable................... 381,250 397,909 376,742
---------- ---------- ----------
Net reestimated
liability................ $1,437,271 $1,511,825 $1,657,393
---------- ---------- ----------
---------- ---------- ----------
Five years later:
Gross reestimated liability..... $1,849,050 $1,881,933
Reestimated related reinsurance
recoverable................... 422,584 $ 413,030
---------- ----------
Net reestimated
liability................ $1,426,466 $1,468,903
---------- ----------
---------- ----------
Six years later:
Gross reestimated liability..... $1,828,676
Reestimated related reinsurance
recoverable................... 434,275
----------
Net reestimated
liability................ $1,394,401
----------
----------
Gross (deficiency) redundancy as of
December 31, 1998.................. $ (59,190) $ 8,245 $ 133,181 $ 142,060 $ 68,197 $ 54,172
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>

- ------------
(1) This table excludes data related to TRZ for 1995 and prior years.

The trend depicted in the latest development year in the reestimated net
liability portion of the 'Analysis of Consolidated Net Loss and Loss Adjustment
Expense Reserve Development' table and in the 'Analysis of Net Unpaid Losses and
Loss Adjustment Expenses and Net Reestimated Liability' table reflects net
favorable development. Net favorable development of $59.5 million was recorded
in 1998 on losses occurring in prior years. (See Management's Discussion.)

The deficiencies shown in the table for the reserves carried for all years
prior to 1993 generally reflect the adverse development for losses occurring
from 1981 to 1985 which is common throughout the industry. A number of industry
and external factors combined during this period to drive loss frequency and
severity to unexpectedly high levels.

From 1988 to 1991, casualty business generally had increased as a
percentage of net premiums written. As a result of this change in the underlying
book of business, TRH believes that the length of time needed for TRH's unpaid
loss and loss adjustment expense reserves to be ultimately paid for those years
will generally continue to increase. For 1992 through 1998, the length of time
needed for reserves to be ultimately paid may decrease compared to 1991 due, in
large part, to a shift in the business mix towards lines with shorter loss
payment patterns and the return of loss and loss adjustment expense reserves
associated with the reduced participation in one of TRH's then largest assumed
treaties from 1992 through 1995.

The following table presents a reconciliation of beginning and ending net
reserve balances for the years indicated. For domestic subsidiaries, there is no
difference in reserves for losses and loss adjustment expenses net of
reinsurance recoverable on unpaid losses and loss adjustment expenses whether
determined in accordance with generally accepted accounting principles or
statutory accounting principles.

RECONCILIATION OF RESERVE
FOR NET LOSSES AND LOSS ADJUSTMENT EXPENSES

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Reserve for net unpaid losses and loss adjustment expenses at beginning
of year(1)............................................................ $2,522,728 $2,383,528 $1,985,786
---------- ---------- ----------
Trans Re Zurich reserves acquired, as of acquisition date............... -- -- 176,260
---------- ---------- ----------
Net losses and loss adjustment expenses incurred in respect of losses
occurring in:
Current year....................................................... 1,080,377 947,578 849,235
Prior years........................................................ (59,489) (14,563) (7,724)
---------- ---------- ----------
Total......................................................... 1,020,888 933,015 841,511
---------- ---------- ----------
Net losses and loss adjustment expenses paid in respect of losses
occurring in:
Current year....................................................... 343,974 244,180 172,875
Prior years........................................................ 543,539 549,635 447,154
---------- ---------- ----------
Total......................................................... 887,513 793,815 620,029
---------- ---------- ----------
Reserve for net unpaid losses and loss adjustment expenses at end of
year(1)............................................................... $2,656,103 $2,522,728 $2,383,528
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

- ------------
(1) In TRH's balance sheet and in accordance with Statement of Financial
Accounting Standards (SFAS) No. 113, unpaid losses and loss adjustment
expenses are presented before deduction of related reinsurance recoverable.
(See Notes 2 and 5 of Notes to Consolidated Financial Statements.)

In each of 1998, 1997 and 1996, the increase in current year paid losses
compared to the prior year is attributable, in large part, to increases in
premium volume and a shift in the business mix to lines with shorter payment
patterns in recent years, and in 1998 only, catastrophe losses paid. (See
Management's Discussion for further analysis of incurred and paid loss
activity.)

INVESTMENT OPERATIONS

TRH's investments must comply with the insurance laws of the state of New
York, the state of domicile of TRC and Putnam, and of the other states and
jurisdictions in which the Company and its subsidiaries are regulated. These
laws prescribe the kind, quality and concentration of investments which may be
made by insurance companies. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in federal, state and
municipal obligations, corporate bonds, preferred and common stocks, real estate
mortgages and real estate. The Finance Committee of the Company's Board of
Directors and senior management oversee investments, establish TRH's investment
strategy and implement investment decisions with the assistance of certain AIG
Group companies, which act as financial advisors and managers of TRH's
investment portfolio and, in connection therewith, make the selection of
particular investments. Other than as set forth above, there are no guidelines
or policies with respect to the specific composition of TRH's overall investment
portfolio or the composition of its bond portfolio by rating or maturity. A
significant portion of TRH's domestic investments are in tax-exempt bonds.

TRH's current investment strategy seeks to maximize after-tax income
through a high quality diversified taxable bond and tax-exempt municipal bond
portfolio, while maintaining an adequate level of liquidity. TRH adjusts its mix
of taxable and tax-exempt investments, as appropriate, generally as a result of
strategic investment and tax planning considerations. During recent years, the
yields on bonds purchased have generally been lower than yields on bonds sold or
otherwise disposed of. Tax-exempt bonds carry lower pre-tax yields than taxable
bonds that are comparable in risk and term to maturity due to their
tax-advantaged status. (See Management's Discussion.) The equity portfolio is
structured to achieve capital appreciation primarily through investment in
quality growth companies. The great majority of other invested assets represent
investments in partnerships.

The following table reflects investment results for TRH for each of the
five years in the period ended December 31, 1998.

INVESTMENT RESULTS

<TABLE>
<CAPTION>
PRE-TAX NET PRE-TAX
AVERAGE INVESTMENT EFFECTIVE PRE-TAX REALIZED
YEARS ENDED DECEMBER 31, INVESTMENTS(1) INCOME(2) YIELD(3) NET CAPITAL GAINS
- ------------------------------------------------------ -------------- ----------- --------- -----------------
(dollars in thousands)
<S> <C> <C> <C> <C>
1998.................................................. $4,145,607 $ 222,000 5.4% $ 120,899
1997.................................................. 3,781,217 207,646 5.5 32,939
1996.................................................. 3,286,514 192,636 5.9 18,668
1995.................................................. 2,742,704 172,876 6.3 11,119
1994.................................................. 2,427,894 153,594 6.3 14,911
</TABLE>

- ------------
(1) Average of the beginning and ending carrying values of investments and cash
for the year, excluding non-interest bearing cash. Bonds available for
sale, common stocks, nonredeemable preferred stocks and other invested
assets are carried at fair market value. Other bonds and redeemable
preferred stocks are carried at amortized cost.

(2) After investment expenses, excluding realized net capital gains.

(3) Pre-tax net investment income for the year divided by average investments
for the same year.

The following table summarizes the investments of TRH (on the basis of
carrying value) as of December 31, 1998:

<TABLE>
<CAPTION>
BREAKDOWN OF
INVESTMENTS
---------------------
DECEMBER 31, 1998
---------------------
AMOUNT PERCENT
---------- -------
(dollars in
thousands)
<S> <C> <C>
Bonds held to maturity (at amortized cost):
Domestic and foreign municipal bonds................................................. $1,124,455 26.4%
---------- -------
Bonds available for sale (at market value):
Corporate bonds...................................................................... 523,134 12.3
U.S. Government and government agency bonds.......................................... 526,630 12.4
Foreign government bonds............................................................. 453,560 10.6
Domestic and foreign municipal bonds................................................. 905,730 21.3
---------- -------
2,409,054 56.6
---------- -------
Preferred stocks.......................................................................... 62,967 1.5
---------- -------
Common stocks............................................................................. 511,431 12.0
---------- -------
Other invested assets..................................................................... 125,285 2.9
---------- -------
Short-term investments.................................................................... 25,052 0.6
---------- -------
Total investments............................................................... $4,258,244 100.0%
---------- -------
---------- -------
</TABLE>

The carrying value of bonds and equities available for sale are subject to
significant volatility from changes in their market values. (See Management's
Discussion.)

As of December 31, 1998, the market value of the total investment portfolio
was $4,344.3 million.

The following table indicates the composition of the bond portfolio of TRH
by rating as of December 31, 1998:

<TABLE>
<CAPTION>
HELD TO AVAILABLE
BREAKDOWN OF BOND PORTFOLIO BY RATING MATURITY FOR SALE TOTAL
- ---------------------------------------------------------------------------------- -------- ------------ -----
<S> <C> <C> <C>
Aaa............................................................................... 17.6% 43.8% 61.4%
Aa................................................................................ 12.7 18.2 30.9
A................................................................................. 1.2 2.2 3.4
Baa............................................................................... 0.3 0.3 0.6
Ba................................................................................ -- 0.6 0.6
B................................................................................. -- 2.2 2.2
Not rated......................................................................... -- 0.9 0.9
-------- ----- -----
Total........................................................................ 31.8% 68.2% 100.0%
-------- ----- -----
-------- ----- -----
</TABLE>

At December 31, 1998, TRH had no real estate or derivative instruments.
(See Note 3 of Notes to Consolidated Financial Statements.)

In addition, TRH's operations are exposed to market risk which could result
in the loss of fair market value resulting from adverse fluctuations in
interest, foreign currency exchange rates and equity prices. TRH has performed a
Value at Risk (VaR) analysis to determine the maximum loss of fair value that
could occur over a period of one month at a confidence level of 95%. (See
Management's Discussion).

COMPETITION

The reinsurance business is highly competitive in virtually all lines. With
certain limited exceptions, conditions (including pricing and contract terms) in
these lines have continued to weaken in recent years. With the property and
casualty insurance and reinsurance industry just having completed its eleventh
consecutive year of generally soft market conditions, the Company cannot predict
with any reasonable certainty, if, when or to what extent market conditions as a
whole will improve.

TRH faces competition from new market entrants and from market participants
that devote greater amounts of capital to the types of business written by TRH.
In recent years, increased market capacity, significant domestic and
international merger and acquisition activity, and since 1996, the reemergence
of Lloyd's of London, have added to competitive pressures. The ultimate impact
on the market of these events is uncertain.

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

TRH competes in the United States and international reinsurance markets
with numerous major international reinsurance companies and numerous domestic
reinsurance companies, some of which have greater financial and other resources
than TRH. While TRC and Putnam, on a combined basis, would rank 4th, on the
basis of statutory net premiums written, they are a less significant reinsurer
in international reinsurance markets. TRH's competitors include independent
reinsurance companies, subsidiaries or affiliates of established worldwide
insurance companies, reinsurance departments of certain primary insurance
companies and domestic and European underwriting syndicates. Many of these
competitors have been operating for substantially longer than TRH and have
established long-term and continuing business relationships throughout the
industry, which can be a significant competitive advantage. Although most
reinsurance companies operate in the broker market, most of TRH's largest
competitors work directly with ceding companies, competing with brokers.
According to the Reinsurance Association of America, there were 38 domestic
reinsurers for which results were reported in their quarterly survey as of
December 31, 1998.

TRH believes that the reinsurance industry, including the brokerage
industry, will continue to undergo further consolidation (i.e., the largest
reinsurers will write a larger portion of total industry premiums) and, to
compete effectively, significant size and financial strength will attain even
greater importance.

EMPLOYEES

At December 31, 1998, TRH had approximately 370 employees. Approximately
189 employees were located in the New York headquarters; 36 employees were
located in Chicago and Miami (serving Latin America) and 145 employees were
located in other international offices. None of TRH's employees in the United
States are represented by labor unions.

REGULATION

The rates and contract terms of reinsurance agreements are generally not
subject to regulation by any governmental authority. This contrasts with primary
insurance agreements, the rates and policy terms of which are generally closely
regulated by state insurance departments. As a practical matter, however, 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.

The Company, TRC, TRZ and Putnam are subject to the insurance statutes,
including insurance holding company statutes, of various states and
jurisdictions. The insurance holding company laws and regulations vary from
jurisdiction to jurisdiction, but generally require domestic insurance holding
companies and insurers and reinsurers that are subsidiaries of insurance holding
companies to register with the applicable state regulatory authority and to file
with that authority certain reports which provide information concerning their
capital structure, ownership, financial condition and general business
operations.

Such holding company laws generally also require prior regulatory agency
approval of changes in 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 TRC or
Putnam, or acquire control of the Company and thus indirect control of TRC and
Putnam, unless such

corporation or person has obtained the prior approval of the New York Insurance
Department for such acquisition. For the purposes of the New York Insurance Law,
any investor acquiring ten percent or more of the Common Stock of the Company
would be presumed to be acquiring 'control' of the Company and its subsidiaries,
unless the New York Insurance Department determines upon application that such
investor would not control the Company. An investor who would be deemed to be
acquiring control of the Company would be required to obtain the approval of the
New York Insurance Department prior to such acquisition. In addition, such
investor would become subject to various ongoing reporting requirements in New
York and in certain other states.

TRC, TRZ and Putnam, in common with other reinsurers, are subject to
regulation and supervision by the states and by other jurisdictions in which
they do business. Within the United States, the method of such regulation varies
but generally has its source in statutes that delegate regulatory and
supervisory powers to an insurance official. The regulation and supervision
relate primarily to the standards of solvency that must be met and maintained,
including risk-based capital measurements, the licensing of reinsurance, the
nature of and limitations on investments, restrictions on the size of risks
which may be insured under a single contract, deposits of securities for the
benefit of ceding companies, methods of accounting, periodic examinations of the
affairs of insurance companies, the form and content of reports of financial
condition required to be filed, and reserves for unearned premiums, losses and
other purposes. In general, such regulation is for the protection of the ceding
companies and, ultimately, their policyholders rather than securityholders.

Risk Based Capital (RBC) is designed to measure the adequacy of an
insurer's statutory surplus in relation to the risks inherent in its business.
Thus, inadequately capitalized insurance companies may be identified. The RBC
formula develops a risk adjusted target level of statutory surplus by applying
certain factors to various asset, premium and reserve items. Higher factors are
applied to items deemed to have more risk by the National Association of
Insurance Commissioners and lower factors are applied to items that are deemed
to have less risk. Thus, the target level of statutory surplus varies not only
as a result of the insurer's size, but also on the risk profile of the insurer's
operations. The RBC Model Law provides for four incremental levels of regulatory
attention for insurers whose surplus is below the calculated RBC target. These
levels of attention range in severity from requiring the insurer to submit a
plan for corrective action to placing the insurer under regulatory control. The
statutory surplus of each of the Company's domestic subsidiaries significantly
exceeded the risk-based capital requirements as of December 31, 1998.

TRC and Putnam are subject to examination of their affairs by the insurance
departments of the states in which they are licensed, authorized or accredited.
The insurance department of New York, TRC's and Putnam's domiciliary state,
generally conducts a triennial examination of insurance companies domiciled in
New York. The most recent examinations of TRC and Putnam covered the years from
1989 for TRC and 1990 for Putnam through December 31, 1993. The report on
examination for TRC has not been filed. The Putnam report was filed as of
November 22, 1995. The Putnam report and reports filed related to the
immediately prior triennial examinations of both companies disclosed no material
deficiencies.

Through the 'credit for reinsurance' mechanism, TRC and Putnam are
indirectly subject to the effects of regulatory requirements imposed by
jurisdictions in which TRC's and Putnam's ceding companies are licensed. In
general, an insurer which obtains reinsurance from a reinsurer that is licensed,
accredited or authorized by the state in which the insurer files statutory
financial statements is permitted to take a credit on its statutory financial
statements in an aggregate amount equal to the reinsurance recoverable on paid
losses and the liabilities for unearned premiums and loss and loss adjustment
expense reserves ceded to the reinsurer, subject to certain limitations where
amounts of reinsurance recoverable on paid losses are more than 90 days overdue.
Certain states impose additional requirements that make it difficult to become
so authorized, and certain states do not allow credit for reinsurance ceded to
reinsurers that are not licensed or accredited in that state without additional
provision for security.

In addition to licensing requirements, TRH's international operations are
also regulated in various jurisdictions with respect to currency, amount and
type of security deposits, amount and type of reserves and amount and type of
local investment, and are subject to local economic, political and social

conditions. In addition, TRH's 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. (See Note 7 of Notes to Consolidated Financial
Statements.) Regulations governing constitution of technical reserves and
remittance balances in some countries may hinder remittance of profits and
repatriation of assets.

RELATIONSHIP WITH THE AIG GROUP

AIG

AIG is a holding company which, through its subsidiaries, is primarily
engaged in a broad range of insurance and insurance-related activities and
financial services in the United States and abroad. U.S.-based property and
casualty insurance subsidiaries of AIG currently attain the highest rating
classification assigned by Best's and S&P. The AIG Group is one of the largest
purchasers of reinsurance in the insurance industry based on premiums ceded.

CONTROL OF THE COMPANY

During 1998, AIG increased its 49% beneficial ownership of the Company's
outstanding common stock to 52% as of year end. As of March 11, 1999, AIG's
beneficial ownership interest increased to approximately 55% as a result of
additional share purchases. Four of the Company's 10 current directors,
including the Chairman, are officers of AIG and hold the following positions
with AIG: Mr. Greenberg is a Director and the Chairman and Chief Executive
Officer; Mr. Matthews is a Director and Vice Chairman; Mr. Smith is a Director
and the Executive Vice President, Chief Financial Officer and Comptroller and
Mr. Tizzio is a Director and Senior Vice Chairman.

AIG GROUP REINSURANCE

From 1977 through June 1990, TRH and AIG had an agreement granting TRH a
right of first acceptance to participate in substantially all property and
casualty reinsurance purchased by the AIG Group. AIG continues to grant TRH a
right of first acceptance under terms similar to those in effect under the above
mentioned agreement. TRH either accepts or rejects the AIG Group reinsurance
offered based upon TRH's assessment of risk selection, pricing, terms and
conditions. Historically, and with few exceptions, TRH has generally not set
terms and conditions as lead underwriter with respect to the AIG Group treaty
reinsurance; however, TRH may in the future set terms and conditions with
respect to such business as lead underwriter and intends that the terms and
conditions of any such reinsurance will be negotiated on an arms' length basis.
The operating management of TRH is not employed by the AIG Group, and the
Underwriting Committee of the Board of Directors of the Company, which includes
directors of the Company who are not employees of the AIG Group, monitor TRH's
underwriting policies.

Approximately $167 million (11%), $181 million (12%) and $232 million (18%)
of gross premiums written by TRH in the years 1998, 1997 and 1996, respectively,
were attributable to reinsurance purchased by the AIG Group, for the production
of which TRH paid ceding commissions to the AIG Group of approximately $31
million, $32 million and $33 million, respectively, in such years. TRH has no
goal with respect to the proportion of AIG Group versus non-AIG Group business
it accepts. TRH's objective in determining its business mix is to evaluate each
underwriting opportunity individually with a view to maximizing overall
underwriting results.

TRH retroceded gross premiums written to the AIG Group in the years 1998,
1997 and 1996 of approximately $93.4 million, $84.4 million and $80.8 million,
respectively, and received ceding commissions of approximately $12.4 million,
$8.4 million and $8.0 million, respectively, for the production of such business
in such years.

ITEM 2. PROPERTIES

One-half of the office space of TRH's New York headquarters, and its Hong
Kong and Toronto offices are rented from AIG, which either owns the property or
leases it from others. The remaining

office space of TRH's headquarters and the Chicago, Miami, Buenos Aires, Rio de
Janeiro, Zurich, London, Paris, Shanghai and Tokyo offices, are rented from
third parties. The leases for the office space occupied by TRH's New York
headquarters expire in 2005.

ITEM 3. LEGAL PROCEEDINGS

TRH, in common with the reinsurance industry in general, is subject to
litigation in the normal course of its business. TRH does not believe that any
pending litigation will have a material adverse effect on its consolidated
results of operations, financial position or cash flows.

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

There were no matters submitted to a vote of security holders during the
fourth quarter of 1998.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The table below sets forth the names, positions and ages of the persons who
are the directors and executive officers of the Company as of March 25, 1999.

<TABLE>
<CAPTION>
SERVED AS
DIRECTOR OR
NAME POSITION AGE OFFICER SINCE
- ---------------------------------------------- --------------------------------------- --- -------------
<S> <C> <C> <C>
Robert F. Orlich.............................. President, Chief Executive Officer 51 1990(1)
and Director
Paul A. Bonny................................. Executive Vice President, President 42 1994(2)
International Operations
Steven S. Skalicky............................ Executive Vice President, Chief 50 1995
Financial Officer
Javier E. Vijil............................... Executive Vice President, President 46 1996(3)
Latin American Division
Robert V. Mucci............................... Senior Vice President and Actuary 41 1990(1)
Donald R. Allard.............................. Vice President and General Counsel 42 1998(4)
Elizabeth M. Tuck............................. Secretary 43 1991
M.R. Greenberg................................ Chairman of the Board 73 1986
James Balog................................... Director 70 1988
C. Fred Bergsten.............................. Director 57 1998
Ikuo Egashira................................. Director 68 1995
John M. Fowler................................ Director 50 1989
John J. Mackowski............................. Director 73 1990
Edward E. Matthews............................ Director 67 1986
Howard I. Smith............................... Director 54 1994
Thomas R. Tizzio.............................. Director 61 1990(1)
</TABLE>

- ------------

(1) Prior to April 1990, such person was a director or an officer of TRC and
Putnam, but not of the Company.

(2) Prior to May 1994, Mr. Bonny was an officer of TRC and Putnam, but not of
the Company.

(3) Mr. Vijil was elected as an Executive Vice President, President Latin
American Division of the Company in October 1998. From May 1996 to October
1998, Mr. Vijil was a Senior Vice President of the Company. From November
1994 to May 1996, Mr. Vijil was a Senior Vice President of TRC and Putnam,
but not of the Company. From August 1993 to November 1994, Mr. Vijil was an
officer of TRC and Putnam, but not of the Company.

(4) Mr. Allard was elected as a Vice President and General Counsel of the
Company in June 1998. From May 1996 to May 1998, Mr. Allard was an officer
of CNA. From August 1994 to May 1996, Mr. Allard was an officer of
Professional Claims Managers, Inc. From July 1990 to August 1994, Mr. Allard
was an officer of Great American Insurance Company.

Except as noted, each of the executive officers has, for more than five
years, occupied an executive position with the Company or companies that are now
its subsidiaries. For more than one year prior to joining the Company in
February 1995, Mr. Skalicky served as an officer of certain AIG Group companies,
with his most recent position as Assistant Vice President and Deputy
Comptroller, AIG. Since January 1991, Ms. Tuck has also served as the Secretary
of a number of AIG Group companies.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a) The following table sets forth the high and low closing sales prices
per share of the Company's Common Stock, as reported on the New York Stock
Exchange Composite Tape for each of the four quarters of 1998 and 1997, as
adjusted for the 3-for-2 common stock split effected in the form of a 50% stock
dividend, paid on July 18, 1997:

<TABLE>
<CAPTION>
1998 1997
------------ -------------
HIGH LOW High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter................................................ 77 9/16 69 9/16 58 13/16 51 1/16
Second Quarter............................................... 77 7/8 74 1/16 68 9/16 53 5/16
Third Quarter................................................ 94 3/8 78 1/8 74 3/8 66 9/16
Fourth Quarter............................................... 85 3/8 74 1/8 75 5/8 68 7/16
</TABLE>

(b) As of January 31, 1999, the approximate number of holders of Common
Stock, including those whose Common Stock is held in nominee name, was 5,000.

(c) In 1998, the Company declared a quarterly dividend of $0.10 per common
share in March and $0.11 per common share in each of May, October, and December.
In 1997, the Company declared a quarterly dividend of $0.09 per common share in
March and $0.10 per common share in each of May, September and December. The
Company paid each dividend in the quarter following the date of declaration
except for the October 1998 dividend, which was paid in the same quarter as the
date of declaration. All dividend information has been adjusted to reflect the
3-for-2 stock split paid on July 18, 1997.

The declaration and payment of future dividends, if any, by the Company
will be at the discretion of the Board of Directors and will depend upon many
factors, including the Company's consolidated earnings, financial condition and
business needs, capital and surplus requirements of the Company's operating
subsidiaries, regulatory considerations and other factors.

The Company is a holding company whose principal source of income is
dividends from TRC. The payment of dividends by TRC and its wholly-owned
subsidiaries, TRZ and Putnam, is restricted by insurance regulations. (See Note
11 of Notes to Consolidated Financial Statements.)

ITEM 6. SELECTED FINANCIAL DATA

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

The following Selected Consolidated Financial Data is prepared in
accordance with generally accepted accounting principles. This data should be
read in conjunction with the Consolidated Financial Statements and accompanying
notes included elsewhere herein.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1998(1) 1997(1) 1996(1) 1995 1994
---------- ---------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net premiums written.................. $1,393,700 $1,294,136 $1,142,515 $1,009,227 $ 866,665
Net premiums earned................... 1,380,570 1,259,251 1,130,633 981,177 851,183
Net investment income................. 222,000 207,646 192,636 172,876 153,594
Realized net capital gains............ 120,899 32,939 18,668 11,119 14,911
Total revenues........................ 1,723,469 1,499,836 1,341,937 1,165,172 1,019,688
Operating income...................... 323,580 236,096 197,518 165,320 122,545
Income before income taxes............ 323,351 234,726 196,320 163,799 119,262
Net income............................ 247,523 185,500 154,860 131,858 101,627
PER COMMON SHARE:(2)
Net income:(3)
Basic............................ $ 7.15 $ 5.37 $ 4.49 $ 3.83 $ 2.96
Diluted.......................... 7.10 5.34 4.48 3.82 2.95
Cash dividends declared............... 0.43 0.39 0.33 0.28 0.25
SHARE DATA:(2)(3)
Weighted average common shares
outstanding:
Basic............................ 34,636 34,546 34,474 34,409 34,353
Diluted.......................... 34,865 34,751 34,594 34,525 34,424
BALANCE SHEET DATA (AT YEAR END):
Investments and cash.................. $4,328,833 $3,992,519 $3,589,889 $2,987,915 $2,497,062
Total assets.......................... 5,253,249 4,834,980 4,379,141 3,898,967 3,457,779
Unpaid losses and loss adjustment
expenses............................ 3,116,038 2,918,782 2,733,055 2,388,155 2,167,316
Unearned premiums..................... 386,652 366,640 343,936 291,568 249,098
Stockholders' equity.................. 1,610,139 1,356,659 1,137,306 988,502 763,368
</TABLE>

- ------------
(1) TRH, through its wholly-owned subsidiary TRC, acquired Trans Re Zurich (TRZ)
in the third quarter of 1996. TRZ's results for the second half of 1996 and
thereafter are included in the Consolidated Financial Statements and
accompanying notes included elsewhere herein.

(2) Share and per share data have been retroactively adjusted to reflect a
3-for-2 common stock split effected in the form of a 50% stock dividend,
paid July 18, 1997.

(3) All periods reflect the adoption of the accounting standard related to
earnings per share (SFAS No. 128).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FINANCIAL STATEMENTS

The following discussion refers to the consolidated financial statements of
Transatlantic Holdings, Inc. and its subsidiaries (TRH) as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998,
which are presented elsewhere herein.

During 1998, American International Group, Inc. (AIG, and collectively,
with its subsidiaries, the AIG Group) increased its 49% beneficial ownership of
Transatlantic Holdings, Inc. (the 'Company') outstanding common stock to 52% as
of year end. Financial data discussed below have been affected by certain
transactions between TRH and the AIG Group. (See Notes 10 and 12 of Notes to
Consolidated Financial Statements.)

ACQUISITION OF TRANS RE ZURICH

In the third quarter of 1996, the Company, through its wholly-owned
subsidiary, Transatlantic Reinsurance Company (TRC), acquired all of the
outstanding shares of Trans Re Zurich (TRZ), formerly known as Guardian
Ruckversicherungs-Gesellschaft (Guardian Re), an international reinsurance
company based in Zurich, Switzerland, for approximately $105 million in cash.
Assets of TRZ totaled $366.8 million at the date of acquisition.

This acquisition was accounted for as a purchase. Accordingly, TRZ's
results for the second half of 1996 and thereafter are included in the
consolidated results of the Company. This acquisition has not had a material
effect on financial position or net income.

OPERATIONAL REVIEW

TRH derives its revenue from two principal sources: premiums from
reinsurance assumed net of reinsurance ceded (i.e., net premiums earned) and
income from investments. Gross premiums assumed and reinsurance ceded are
initially deferred and then are credited or charged to income, respectively,
over the terms of the underlying contracts or certificates in force. The
deferred amounts constitute the unearned premium reserve or prepaid reinsurance
premium and are generally ratably credited or charged, respectively, to income
over the contract periods. The relationship between net premiums written and net
premiums earned will, therefore, vary depending generally on the volume and
inception dates of the business assumed and ceded and the mix of such business
between pro rata and excess-of-loss reinsurance.

The following table shows net premiums written, net premiums earned and net
investment income of TRH for the periods indicated:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
% CHANGE % Change % Change
FROM From From
AMOUNT PRIOR YEAR Amount Prior Year Amount Prior Year
-------- ---------- -------- ---------- -------- ----------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Net premiums written..................... $1,393.7 7.7% $1,294.1 13.3% $1,142.5 13.2%
Net premiums earned...................... 1,380.6 9.6 1,259.3 11.4 1,130.6 15.2
Net investment income.................... 222.0 6.9 207.6 7.8 192.6 11.4
</TABLE>

Increasingly in more recent years, the reinsurance market has been
characterized by significant competition worldwide in most classes. The
increases in net premiums written were primarily from treaty business and
resulted from increased coverage provided. On a worldwide basis, casualty lines
business represented 71.0% of net premiums written in 1998 versus 67.1% in the
prior year. The balance represented property lines. Treaty business represented
94.7% of net premiums written versus 93.8% in the prior year. The balance
represented facultative accounts.

Net premiums written by international offices increased in 1998 by $57.8
million, or 9.3%, over the prior year, to $682.0 million. Most international
offices recorded increases in net premiums written, led by Paris and London. TRZ
recorded a significant decrease compared to 1997 as a result of the shift of

their business to certain other TRH offices, closer to source, and the selective
retention of business in its core areas. International net premiums written
increased significantly in specialty casualty classes (particularly other
professional liability), automobile physical damage, automobile liability and
aircraft lines, and decreased significantly in the fire line. International
business represented 48.9% of 1998 net premiums written compared to 48.2% in
1997.

Domestic net premiums written increased by $41.7 million, or 6.2%, over
1997, to $711.7 million, with significant increases recorded in the automobile
liability line (including nonstandard risks) and certain specialty casualty
classes (particularly other professional liability and accident and health
lines), and a significant decrease recorded in the medical malpractice line.

Net premiums written increased in 1997 compared to the prior year,
generally as a result of more favorable conditions in certain sectors of the
market in 1997 as compared to other sectors, and due to the inclusion of a full
year of net premiums written from TRZ in 1997 compared to six months net
premiums written in 1996, when TRZ was acquired. Such net premiums written by
TRZ amounted to $172.3 million in 1997 and $78.2 million in 1996.

Net premiums written by international offices increased by $161.5 million,
or 34.9%, to $624.2 million in 1997. Nearly all such offices recorded premium
increases, led by TRZ, which reported an increase of $94.1 million as discussed
in the paragraph immediately above. International net premiums written increased
significantly in automobile liability, automobile physical damage, fire and
allied lines. International business represented 48.2% of total net premiums
written in 1997 as compared to 40.5% in 1996. Domestic net premiums written
decreased 1.5% to $669.9 million. Significant decreases in general casualty,
property and automobile liability lines (including nonstandard risks) were
partially offset by increases in homeowners' multi-peril, aircraft and accident
and health lines. On a worldwide basis, casualty lines business represented
67.1% of net premiums written in 1997 compared to 66.5% in the prior year. The
balance represented property lines. Treaty business represented 93.8% of net
premiums written compared to 90.5% in 1996. The balance represented facultative
accounts. The net increases noted above were primarily from treaty business and
resulted from increased coverage provided.

The increase in net premiums earned in each of 1998 and 1997 compared to
the respective prior year amounts resulted primarily from the significant growth
in net premiums written in both years. Net investment income grew each year due
to significant cash flow available for investment which was generated by
operating activities. The percentage of growth has decreased in each succeeding
year due to generally lower available yields on bonds purchased as compared to
yields on bonds disposed of in recent years and reduced operating cash flow in
1998 and 1997 compared to the immediately preceding year. In 1997, the lower
yields are also due to the fact that TRH had primarily been purchasing tax-
exempt bonds for its domestic portfolio to benefit its after-tax results.
Tax-exempt bonds carry lower pre-tax yields than taxable bonds that are
comparable in risk and term to maturity due to their tax-advantaged status. In
addition, in 1997 compared to 1996, $9.5 million of the increase in net
investment income emanated from TRZ, due to the inclusion of its net investment
income in 1996 only subsequent to its mid-year acquisition date. (See Note 3 of
Notes to Consolidated Financial Statements.)

The property and casualty insurance and reinsurance industries use the
combined ratio as a measure of underwriting profitability. The combined ratio
reflects only underwriting results, and does not include income from
investments. Generally, a combined ratio under 100 indicates an underwriting
profit and a combined ratio exceeding 100 indicates an underwriting loss.

The following table sets forth TRH's combined ratios and the components
thereof for the years indicated:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Loss and loss adjustment expense ratio....................................... 73.9 74.1 74.4
Underwriting expense ratio................................................... 27.4 26.0 26.9
Combined ratio............................................................... 101.3 100.1 101.3
</TABLE>

TRH's 1998 results included losses incurred of $20 million related to
Hurricane Georges. In addition, as a result of net decreases in estimates of
losses occurring in prior years, net losses and loss adjustment expenses were
reduced by $59.5 million in 1998. Significant favorable development was recorded
in 1998 on losses occurring in years subsequent to 1986 in the other liability
line, in 1996 and 1997 in the medical malpractice line and in 1993 through 1996
in the fire and allied lines. These reductions to incurred losses were partially
offset by adverse development in 1998 on losses occurring in 1996 and 1997 in
the ocean marine line, prior to 1984 in the other liability line and in 1997 in
the fire line.

TRH's 1997 results did not include any significant catastrophe loss
activity. In addition, as a result of net decreases in estimates of losses
occurring in prior years, net losses and loss adjustment expenses were reduced
by $14.6 million in 1997. Significant favorable development was recorded in 1997
on losses occurring in years subsequent to 1986 in the other liability line, in
1996 in the medical malpractice line and in 1995 and 1994 in certain property
lines. These reductions to incurred losses were partially offset by adverse
development in 1997 on losses occurring in 1996 in aircraft and surety lines, in
1995 and 1994 in the medical malpractice line and in 1983 and prior in the other
liability line.

TRH's 1996 results did not include any significant catastrophe loss
activity. In addition, as a result of net decreases in estimates of losses
occurring in prior years, net losses and loss adjustment expenses incurred were
reduced by $7.7 million in 1996. In the other liability line, favorable
development on losses occurring in more recent years was offset by adverse
development in 1984 and prior years. In addition, in more recent years,
favorable development, particularly in the fire, allied line and aircraft lines
was partially offset by adverse development in the automobile liability line.

At December 31, 1998, reserves for unpaid losses and loss adjustment
expenses totaled $3.12 billion, an increase of $197.3 million, or 6.8%, over the
prior year. Also at December 31, 1998, reinsurance recoverable on unpaid losses
and loss adjustment expenses totaled $446.9 million, an increase of $64.1
million, or 16.8%, from the prior year. (See Note 12 of Notes to Consolidated
Financial Statements.) TRH's reserves and related recoverables represent
estimates of all future liability and reinsurance recoverable thereon for losses
occurring on or prior to the balance sheet date. Net losses and loss adjustment
expenses are charged to income as incurred. Unpaid losses and loss adjustment
expenses are principally based on reports and individual case estimates received
from ceding companies. A provision is included for losses and loss adjustment
expenses incurred but not reported on the basis of past experience and other
factors. The methods of making such estimates and for establishing the resulting
reserves and related recoverables are continually reviewed and updated, and any
adjustments resulting therefrom are reflected in income currently. 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)
are implicitly considered in the overall reserve setting process as an element
of numerous judgments which are made as to expected trends in average claim
severity. Because the reserving process is inherently difficult and subjective,
actual net losses and loss adjustment expenses may deviate, perhaps
substantially, from estimates of reserves and reinsurance recoverable on such
amounts reflected in TRH's consolidated financial statements.

Reserves for the reinsurance of risks related to environmental impairment
and asbestos-related illnesses amounted to $69 million and $74 million at
December 31, 1998 and 1997, respectively. The majority of TRH's environmental
and asbestos-related liabilities arise from contracts entered into after 1984.
These obligations generally arose from contracts underwritten specifically as
environmental or asbestos-related coverages rather than from standard general
liability coverages where the environmental or asbestos-related liabilities were
neither clearly defined nor specifically excluded. The reserves carried for such
claims, including incurred but not reported claims (IBNR), are based upon known
facts and current law. However, significant uncertainty exists as, among other
things, there are inconsistent court resolutions with respect to underlying
policy intent and coverage and uncertainties as to the allocation of
responsibility for resultant damages. Further, while there is always the threat
of changes in statutes, laws, regulations and other factors that could have a
material effect on these liabilities and, accordingly, future earnings, TRH
believes that these claims reserves, as well as all other claims reserves
carried at December 31, 1998, are adequate.

The increase of the underwriting expense ratio in 1998 compared to 1997 and
the decrease of the underwriting expense ratio in 1997 compared to 1996 were
both due to changes in the ratio of net commissions to net premiums written,
caused, in large part, by slight shifts in the mix of business between years.

Other deductions generally include currency transaction gains and losses
and other miscellaneous income and expense items.

Realized net capital gains on the disposition of investments totaled $120.9
million in 1998, $32.9 million in 1997 and $18.7 million in 1996. The high level
of realized capital gains in 1998 compared to the other years presented resulted
principally from the strategic realignment of the equity portfolio.

Income before income taxes was $323.4 million in 1998, $234.7 million in
1997 and $196.3 million in 1996. The increase in income before income taxes in
1998 over 1997 resulted from increased realized capital gains and net investment
income partially offset by a deterioration in underwriting results caused by
losses from Hurricane Georges. The increase in income before income taxes in
1997 over the prior year resulted from increased net investment income and
realized net capital gains, and improved underwriting results.

The provisions for federal and foreign income taxes were $75.8 million in
1998, $49.2 million in 1997 and $41.5 million in 1996. The Company and its
domestic subsidiaries, TRC and Putnam Reinsurance Company (Putnam), filed
consolidated federal income tax returns for the years under discussion, except
those for 1998 which are not yet due. The tax burden among the companies is
allocated in accordance with a tax sharing agreement. TRC will include as part
of its taxable income those items of income of the non-U.S. subsidiary, TRZ,
which are subject to U.S. income tax currently, pursuant to Subpart F income
rules of the Internal Revenue Code, and included, as appropriate, in the
consolidated federal income tax return.

The effective tax rates were 23.5% in 1998, 21.0% in 1997 and 21.1% in
1996. The increased effective tax rate in 1998 is due to the fact that while
tax-exempt income remained relatively level compared to the prior year, income
subject to tax increased significantly, principally as a result of the increase
in realized net capital gains.

Net income and net income per common share on a diluted basis,
respectively, were as follows: 1998 -- $247.5 million, $7.10; 1997 -- $185.5
million, $5.34; 1996 -- $154.9 million, $4.48. Reasons for these increases are
as discussed above. Per share amounts have been retroactively adjusted to
reflect the 3-for-2 common stock split paid in July 1997. (See Note 2(j) of
Notes to Consolidated Financial Statements.)

FINANCIAL CONDITION AND LIQUIDITY

As a holding company, the Company's assets consist primarily of the stock
of TRC and the Company's future cash flows depend on the availability of
dividends or other statutorily permissible payments from TRC and its
wholly-owned operating subsidiaries, TRZ and Putnam. (See Note 11 of Notes to
Consolidated Financial Statements for a discussion of restrictions on dividend
payment.) During 1998, the Company received cash dividends of $14.9 million from
TRC. Sources of funds for the operating subsidiaries consist primarily of
premiums, reinsurance recoverables, investment income and proceeds from sales,
redemptions and the maturing of investments. Funds are applied primarily to
payments of claims, ceded reinsurance premiums, insurance operating expenses,
income taxes and investments in fixed income and equity securities. Premiums are
generally received substantially in advance of related claims payments. Cash and
cash equivalents are maintained for the payment of claims and expenses as they
become due. TRH does not anticipate any material capital expenditures in the
foreseeable future.

At December 31, 1998, total investments and cash were $4,328.8 million
compared to $3,992.5 million at December 31, 1997. This increase is principally
due to net cash provided by operating activities which totaled $227.0 million in
1998, realized capital gains of $120.9 million and an increase during the year
in net unrealized appreciation of investments available for sale of $4.9
million. (See Note 3 of Notes to Consolidated Financial Statements.)

TRH's operating cash flow in 1998 declined compared to 1997. This decrease
was due to a significant increase in paid losses and taxes paid and lesser
increases in net commissions and operating expenses, offset in part by increased
net premiums and net investment income received. In addition, TRH's operating
cash flow in 1997 declined compared to 1996. This decrease was due to a
significant increase in paid losses and lesser increases in net commissions,
operating expenses and taxes paid, offset in part by increased net premiums and
net investment income received. In each of 1998 and 1997 as compared to the
respective prior year, the increase in paid losses was principally due to
increases in premium volume, a shift in the business mix in more recent years
towards lines with shorter loss payment patterns, and in 1998, increased
catastrophe losses paid. International operations, most significantly London,
accounted for approximately 43%, 43% and 41% of operating cash flow in 1998,
1997 and 1996, respectively.

TRH believes that its balance of cash and cash equivalents of $70.6 million
as of December 31, 1998 and its future cash flows will be sufficient to meet
TRH's cash requirements through the end of 1999 and thereafter for a period the
length of which is difficult to predict, but which TRH believes will be at least
one year.

TRH's fixed maturity investments, approximately 83.0% of total investments
as of December 31, 1998, are predominantly investment grade, liquid securities
concentrated in maturities of less than 10 years. Also as of that date,
approximately 13.5% of total investments were in common and nonredeemable
preferred stocks, approximately 2.9% of total investments were in other invested
assets, including investments in partnerships, and the remaining 0.6% consisted
of short-term investments. Based on the foregoing, TRH considers its liquidity
to be adequate through the end of 1999 and thereafter for a period the length of
which is difficult to predict, but which TRH believes will be at least one year.

As of December 31, 1998, a significant portion of the bond portfolio was
classified as available-for-sale and carried at market value. Fixed maturity
investments are carried at amortized cost when it is TRH's positive intent to
hold these securities to maturity and TRH has the ability to do so. Most
activity within the bonds available for sale portfolio for the years under
discussion represented strategic portfolio realignments, partially for tax
purposes. TRH adjusts its mix of taxable and tax-exempt investments, as
appropriate, generally as a result of strategic investment and tax planning
considerations. As of December 31, 1998, bonds held to maturity had gross
unrealized gains of $86.1 million and no gross unrealized losses. Gross
unrealized gains and losses on bonds available for sale as of December 31, 1998
amounted to $92.9 million and $6.5 million, respectively.

As of December 31, 1998, 92.3% of the bond portfolio were rated Aaa or Aa,
an additional 4.0% were also rated investment grade or better, 2.8% were rated
below investment grade and 0.9% were not rated. Also, as of December 31, 1998,
TRH had no derivative instruments. (See Note 3 of Notes to Consolidated
Financial Statements.)

TRH's operations are exposed to market risk. Market risk is the risk of
loss of fair market value resulting from adverse fluctuations in interest and
foreign currency exchange rates and equity prices.

Measuring potential losses in fair values has recently become the focus of
risk management efforts by many companies. Such measurements are performed
through the application of various statistical techniques. One such technique is
Value at Risk (VaR). VaR is a summary statistical measure that uses historical
interest and foreign currency exchange rates and equity prices and estimates the
volatility and correlation of each of these rates and prices to calculate the
maximum loss that could occur over a defined period of time given a certain
probability.

TRH believes that statistical models alone do not provide a reliable method
of monitoring and controlling market risk. While VaR models are relatively
sophisticated, the quantitative market risk information generated is limited by
the assumptions and parameters established in creating the related models.
Therefore, such models are tools and do not substitute for the experience or
judgment of senior management.

TRH has performed a VaR analysis to estimate the maximum potential loss of
fair value for financial instruments for each type of market risk. In this
analysis, financial instrument assets include all

investments and cash and accrued investment income. Financial instrument
liabilities include unpaid losses and loss adjustment expenses, net of
reinsurance, and unearned premiums.

TRH calculated the VaR as of December 31, 1998. This calculation used the
variance-covariance (delta-normal) methodology. The calculation also used daily
historical interest and foreign currency exchange rates and equity prices in the
two years ended December 31, 1998. The VaR model estimated the volatility of
each of these rates and equity prices and the correlation among them. For
interest rates, each country's yield curve was constructed using eleven separate
points on this curve to model possible curve movements. Inter-country
correlations were also used. The redemption experience of municipal and
corporate fixed maturities as well as the use of financial modeling were
employed in the analysis process. Thus, the VaR measured the sensitivity of the
asset and the liability portfolios to each of the aforementioned market risk
exposures. Each sensitivity was estimated separately to capture the market risk.
The following table presents the VaR of each component of market risk as of
December 31, 1998:

<TABLE>
<CAPTION>
MARKET RISK AMOUNT
- ----------- -------------
(in millions)
<S> <C>
Interest rate......................................................... $24
Currency.............................................................. 8
Equity................................................................ 62
</TABLE>

Each sensitivity was then applied to a database which contained both
historical ranges of movements in all market factors and the correlations among
them. The results were aggregated to provide a single amount that depicts the
maximum potential loss in fair value at a confidence level of 95 percent for a
time period of one month. VaR with respect to the aggregate of the three
components of market risk cannot be derived by summing the individual risk
amounts in the table above. At December 31, 1998, the VaR for TRH's financial
instruments was approximately $69 million.

TRH's stockholders' equity increased to $1.61 billion at December 31, 1998,
an increase of $253.5 million over year-end 1997. The net increase was comprised
principally of net income of $247.5 million and an increase in accumulated other
comprehensive income of $17.8 million (principally unrealized currency
translation gain, net of income taxes), partially offset by dividends declared
of $14.9 million. Unrealized appreciation (depreciation) of investments, net of
deferred income taxes, a component of accumulated other comprehensive income, is
subject to significant volatility resulting from changes in the market value of
bonds and equities available for sale. Market values may fluctuate due to
changes in general economic conditions, market interest rates and other factors.

Risk-based capital (RBC) standards, promulgated by the National Association
of Insurance Commissioners (NAIC), relate an individual company's statutory
policyholders' surplus to the risk inherent in its overall operations and sets
thresholds at which certain company and regulatory corrective actions are
mandated. At December 31, 1998, the statutory surpluses of TRC and Putnam each
significantly exceeded RBC requirements.

ACCOUNTING STANDARDS

In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, 'Accounting for
Stock-Based Compensation.' This statement established new financial accounting
and reporting standards for stock-based employee compensation plans, including
stock option and stock purchase plans. Compensation resulting from the award of
stock-based compensation must be determined based on the fair value of
consideration received or fair value of the equity instrument issued, whichever
is more reliably measurable. Such compensation expense, net of income taxes, may
be recognized in the Statement of Operations over the service period of the
employee (generally the vesting period). In lieu of recording such compensation
expense, entities are permitted to disclose its pro forma impact, net of income
taxes, on reported net income and earnings per share. Entities choosing such
disclosure will continue to measure compensation expense from stock-based
compensation in the Statement of Operations based on the intrinsic value method
prescribed in Accounting Principles Board (APB) No. 25, 'Accounting for Stock
Issued to Employees.'

In accordance with the standard, TRH adopted SFAS No. 123 beginning with
the 1996 annual financial statements and chose the pro forma disclosure option
of implementation. (See Note 9 of Notes to Consolidated Financial Statements.)

In June 1996, the FASB issued SFAS No. 125, 'Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.' This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. In addition,
it provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings.

SFAS No. 125 was effective as of January 1, 1997 and was to be applied
prospectively. However, SFAS No. 127, 'Deferral of the Effective Date of Certain
Provisions of SFAS No. 125,' deferred for one year the effective date of certain
provisions of SFAS No. 125 which affect repurchase agreements, dollar-rolls,
securities lending and similar transactions. The implementation of these
standards, which occurred on their respective effective dates, did not have a
material impact on results of operations, financial position or cash flows.

In February 1997, the FASB issued SFAS No. 128, 'Earnings Per Share.' As
compared to the prior standard, SFAS No. 128 simplifies computational
guidelines, revises disclosure requirements and increases earnings per share
(EPS) comparability on an international basis.

Basic EPS, which is calculated by dividing net income by the weighted
average number of common shares outstanding, replaced primary EPS from the prior
standard. For all periods reported by TRH prior to implementation of the
standard, basic EPS would have been the same as primary EPS, since the impact of
the Company's common stock equivalents (principally stock options) for those
periods did not reach the significance threshold prescribed to require
adjustment under the prior standard. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS from the prior standard.

For all entities with complex capital structures, basic and diluted EPS
must be shown on the face of the income statement with equal prominence. In
addition, a reconciliation of the numerator and denominator from the basic EPS
computation to the diluted EPS computation is required. (See Note 2(j) of Notes
to Consolidated Financial Statements.)

Pursuant to the standard, TRH adopted SFAS No. 128 for the 1997 annual
financial statements and restated all prior period EPS data presented.

Also in February 1997, the Securities and Exchange Commission (SEC) issued
Financial Reporting Release (FRR) No. 48, 'Disclosure of Accounting Policies for
Derivative Financial Instruments and Derivative Commodity Instruments and
Disclosure of Quantitative and Qualitative Information about Market Risk
Inherent in Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments.'

FRR No. 48 amends rules and forms for registrants and requires
clarification and expansion of existing disclosures for derivative financial
instruments, other financial instruments and derivative commodity instruments,
as defined therein. The amendments require enhanced disclosure with respect to
these derivative instruments in the notes to financial statements. During the
three year period ending December 31, 1998, TRH has had no derivative
instruments.

Additionally, the amendments expand existing disclosure requirements to
include quantitative and qualitative discussions in Management's Discussion and
Analysis of Financial Condition and Results of Operations (Management's
Discussion) with respect to market risk inherent in market risk sensitive
instruments such as equity and fixed maturity securities, as well as derivative
instruments. These amendments are designed to provide additional information
about market risk sensitive instruments which investors can use to better
understand and evaluate market risk exposures of registrants. For TRH, these
disclosures are included for 1998 in Management's Discussion which accompanies
these financial statements and related notes.

In June 1997, the FASB adopted SFAS No. 130, 'Reporting Comprehensive
Income.' This statement established standards for reporting and display of
comprehensive income and its components

(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. Comprehensive income is defined as the change in
stockholders' equity during a period from transactions and other events and
circumstances from non-owner sources and includes net income and all changes in
stockholders' equity except those resulting from investments by owners and
distribution to owners.

This standard requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.

In accordance with the standard, TRH adopted SFAS No. 130 in 1998.
Comparable data from prior years are presented in conformity with the new
standard.

Also in June 1997, the FASB adopted SFAS No. 131, 'Disclosure about
Segments of an Enterprise and Related Information.' This statement establishes
standards for the way that public business enterprises report information about
operating segments in annual and interim financial statements and requires
presentation of a measure of profit or loss, certain specific revenue and
expense items and segment assets. It also establishes standards for related
disclosures about products and services, geographic areas and major customers,
superseding most of SFAS No. 14, 'Financial Reporting for Segments of a Business
Enterprise.'

SFAS No. 131 requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Generally,
financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The enterprise must report information about the revenues
derived, countries in which it earns revenues and holds assets and major
customers regardless of whether that information is used in making operating
decisions. However, this statement does not require an enterprise to report
information that is not prepared for internal use if reporting it would be
impracticable.

SFAS No. 131 is effective for TRH's 1998 financial statements. This
statement need not be applied to interim financial statements in the initial
year of its application, but comparative information for interim periods in the
initial year of application is to be reported in financial statements for
interim periods in the second year of application. TRH has adopted this standard
for the 1998 annual financial statements and has provided comparable prior year
data.

In June 1998, the FASB issued SFAS No. 133, 'Accounting for Derivative
Instruments and Hedging Activities.' This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. All
derivatives must be recognized as either assets or liabilities in the balance
sheet and measured at fair value. The accounting recognition for the change in
the fair value of a derivative depends on a number of factors, including the
intended use of the derivative. SFAS No. 133 is effective for TRH as of January
1, 2000 and may not be applied retroactively. TRH presently has no derivative
instruments.

In October 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-7, 'Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk.'
This statement provides guidance on how to account for insurance and reinsurance
contracts that do not transfer both required elements of insurance risk (i.e.,
underwriting risk and timing risk). SOP 98-7 will be effective for TRH on
January 1, 2000. Restatement of previously issued annual financial statements is
not permitted. Management believes that the impact of applying this statement
will not be material to results of operations, financial position or cash flows.

OTHER MATTERS

The Year 2000 (Y2K) issue arises from the historic usage of two, rather
than four, digit date fields in computer equipment, software packages and other
devices using embedded chip technology, causing a date field '00' to be
recognized as the year 1900, rather than the year 2000. Failure to recognize,
repair or replace affected devices and systems could cause systems failures or
other disruptions resulting

in, among other things, an inability to process transactions, collect premiums,
pay invoices or engage in similar normal business activities.

Most TRH systems and software packages were installed or purchased within
the last five years, when the Y2K issue had already been identified and was
usually a consideration in the development process. TRH has taken steps to
identify its significant systems and programs, new and existing, hardware and
software information technology (IT) as well as non-IT (e.g., telephone systems,
fax machines and copiers), where Y2K failures could surface, and has effected
remedial changes and conducted appropriate testing. This process is essentially
complete for all critical systems. The costs associated with this process, which
are expensed as incurred, have not had and are not expected to have a material
effect on net income, financial position, cash flows or other non-Y2K IT
projects and initiatives.

In addition, TRH has identified those ceding companies, brokers,
reinsurers, vendors and other business partners (collectively 'third parties')
that are significant to its business and has asked each to advise on the steps
they are taking to address the Y2K issue. Responses have been received from most
and follow-up requests have been sent to those who failed to respond or whose
responses were not satisfactory. The completion of these activities and
corrective actions, where necessary, will continue during 1999.

TRH does not presently believe that Y2K issues related to its internal IT
and non-IT systems pose significant operational problems. Although TRH continues
to monitor third party readiness, it cannot provide assurance that unresolved
Y2K issues of such parties will not have a material adverse impact on TRH's
operations or financial results. TRH will continue to consider the effects of
potential unresolved Y2K issues of third parties on its business and develop
contingency plans, as necessary. Such plans may include the selection of
alternate third parties or other actions designed to mitigate the effects of a
third party's lack of preparedness.

On January 1, 1999, certain of the member nations of the European Economic
and Monetary Union (EMU) adopted a common currency, the Euro. Once the national
currencies are phased out, the Euro will be the sole legal tender of each of
these nations. During the transition period, commerce of these nations will be
transacted in the Euro or in the currently existing national currency.

TRH has taken the necessary steps to transact business in the Euro, has
identified the significant issues and will be prepared with respect to the
continued phase in of and ultimate redenomination to the Euro. Any costs
associated with the adoption of the Euro are expensed as incurred and are not
material to TRH's net income, financial position or cash flows.

Any statements contained in this discussion that are not historical facts,
or that might be considered an opinion or projection, whether expressed or
implied, are meant as, and should be considered, forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on assumptions and opinions concerning a
variety of known and unknown risks. If any assumptions or opinions prove
incorrect, any forward-looking statements made on that basis may also prove
materially incorrect.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................................................... 32
Consolidated Balance Sheets as of December 31, 1998 and 1997............................................... 33
Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996................. 34
Consolidated Statements of Comprehensive Income for the years ended December 31, 1998, 1997 and 1996....... 35
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996....... 36
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996................. 37
Notes to Consolidated Financial Statements................................................................. 38
</TABLE>

Schedules:

<TABLE>
<S> <C> <C>
I -- Summary of Investments -- Other than Investments in Related Parties as of December 31, 1998..... S-1
II -- Condensed Financial Information of Registrant as of December 31, 1998 and 1997 and for the years
ended December 31, 1998, 1997 and 1996.......................................................... S-2
III -- Supplementary Insurance Information as of December 31, 1998, 1997 and 1996 and for the years
then ended...................................................................................... S-5
IV -- Reinsurance for the years ended December 31, 1998, 1997 and 1996................................ S-6
VI -- Supplementary Information Concerning Property/Casualty Insurance Operations as of December 31,
1998, 1997 and 1996 and for the years then ended................................................ S-7
</TABLE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
TRANSATLANTIC HOLDINGS, INC.:

In our opinion, the consolidated financial statements listed in the index
on page 31 of this Form 10-K present fairly, in all material respects, the
financial position of Transatlantic Holdings, Inc. and Subsidiaries at December
31, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules listed in the index on page 31 of this Form 10-K
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedules are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

New York, New York
February 8, 1999

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
---------- ----------
(in thousands, except
share data)
<S> <C> <C>
ASSETS
Investments and cash:
Fixed maturities:
Bonds held to maturity, at amortized cost (market value:
1998 -- $1,210,534; 1997 -- $1,313,382)................................... $1,124,455 $1,230,015
Bonds available for sale, at market value (amortized cost:
1998 -- $2,322,704; 1997 -- $2,145,717)................................... 2,409,054 2,210,910
Equities:
Common stocks available for sale, at market value (cost:
1998 -- $358,223; 1997 -- $289,701)....................................... 511,431 458,153
Nonredeemable preferred stocks available for sale, at market value (cost:
1998 -- $62,214; 1997 -- $5,014).......................................... 62,967 5,973
Other invested assets............................................................ 125,285 --
Short-term investments, at cost which approximates market value.................. 25,052 16,731
Cash and cash equivalents........................................................ 70,589 70,737
---------- ----------
Total investments and cash............................................. 4,328,833 3,992,519
Accrued investment income............................................................. 65,503 70,799
Premium balances receivable, net...................................................... 193,868 188,816
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses:
Affiliates....................................................................... 231,043 189,690
Other............................................................................ 233,116 212,475
Deferred acquisition costs............................................................ 67,578 64,752
Prepaid reinsurance premiums.......................................................... 30,596 22,056
Deferred income taxes................................................................. 71,166 71,981
Other assets.......................................................................... 31,546 21,892
---------- ----------
Total assets........................................................... $5,253,249 $4,834,980
---------- ----------
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses............................................ $3,116,038 $2,918,782
Unearned premiums..................................................................... 386,652 366,640
Reinsurance balances payable.......................................................... 89,521 124,365
Current income taxes payable.......................................................... 224 19,531
Other liabilities..................................................................... 50,675 49,003
---------- ----------
Total liabilities...................................................... 3,643,110 3,478,321
---------- ----------
Commitments and contingent liabilities
Preferred Stock, $1.00 par value; shares authorized: 5,000,000........................ -- --
Common Stock, $1.00 par value; shares authorized: 50,000,000; shares issued:
1998 -- 35,466,836; 1997 -- 35,362,870.............................................. 35,467 35,363
Additional paid-in capital............................................................ 198,425 195,494
Accumulated other comprehensive income................................................ 158,552 140,724
Retained earnings..................................................................... 1,227,695 995,078
Treasury Stock, at cost; 800,000 shares............................................... (10,000) (10,000)
---------- ----------
Total stockholders' equity............................................. 1,610,139 1,356,659
---------- ----------
Total liabilities and stockholders' equity............................. $5,253,249 $4,834,980
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C>
Income:
Net premiums written............................................... $1,393,700 $1,294,136 $1,142,515
Increase in net unearned premiums.................................. (13,130) (34,885) (11,882)
---------- ---------- ----------
Net premiums earned................................................ 1,380,570 1,259,251 1,130,633
Net investment income.............................................. 222,000 207,646 192,636
---------- ---------- ----------
1,602,570 1,466,897 1,323,269
---------- ---------- ----------
Expenses:
Net losses and loss adjustment expenses............................ 1,020,888 933,015 841,511
Net commissions.................................................... 333,069 294,481 270,873
Other operating expenses........................................... 48,758 42,296 35,722
Increase in deferred acquisition costs............................. (2,826) (6,052) (3,687)
---------- ---------- ----------
1,399,889 1,263,740 1,144,419
---------- ---------- ----------
202,681 203,157 178,850
Realized net capital gains.............................................. 120,899 32,939 18,668
---------- ---------- ----------
Operating income........................................................ 323,580 236,096 197,518
Other deductions........................................................ (229) (1,370) (1,198)
---------- ---------- ----------
Income before income taxes.............................................. 323,351 234,726 196,320
---------- ---------- ----------
Income taxes (benefits):
Current............................................................ 86,010 51,620 48,000
Deferred........................................................... (10,182) (2,394) (6,540)
---------- ---------- ----------
75,828 49,226 41,460
---------- ---------- ----------
Net income.............................................................. $ 247,523 $ 185,500 $ 154,860
---------- ---------- ----------
---------- ---------- ----------

Net income per common share:
Basic.............................................................. $ 7.15 $ 5.37 $ 4.49
Diluted............................................................ 7.10 5.34 4.48

Weighted average common shares outstanding:
Basic.............................................................. 34,636 34,546 34,474
Diluted............................................................ 34,865 34,751 34,594
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Net income.................................................................. $ 247,523 $185,500 $154,860
--------- -------- --------

Other comprehensive income:
Net unrealized appreciation of investments:
Net unrealized holding gains arising during period................ 125,758 119,989 22,337
Related income tax effect......................................... (44,015) (41,996) (7,818)
Reclassification adjustment for gains included in net income...... (120,899) (32,939) (18,668)
Related income tax effect......................................... 42,315 11,529 6,534
--------- -------- --------
3,159 56,583 2,385
--------- -------- --------
Net unrealized currency translation gain (loss)........................ 22,566 (22,098) 313
Related income tax effect.............................................. (7,897) 7,733 (109)
--------- -------- --------
14,669 (14,365) 204
--------- -------- --------
Other comprehensive income.................................................. 17,828 42,218 2,589
--------- -------- --------
Comprehensive income........................................................ $ 265,351 $227,718 $157,449
--------- -------- --------
--------- -------- --------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C>
Common Stock:
Balance, beginning of year......................................... $ 35,363 $ 23,813 $ 23,750
Stock split effected as a dividend................................. -- 11,516 --
Issued under stock option and purchase plans....................... 104 34 63
---------- ---------- ----------
Balance, end of year.......................................... 35,467 35,363 23,813
---------- ---------- ----------
Additional paid-in capital:
Balance, beginning of year......................................... 195,494 201,930 199,243
Stock split effected as a dividend................................. -- (11,516) --
Excess of proceeds over par value of common stock issued under
stock option and purchase plans and other........................ 2,931 5,080 2,687
---------- ---------- ----------
Balance, end of year.......................................... 198,425 195,494 201,930
---------- ---------- ----------
Accumulated other comprehensive income:
Balance, beginning of year......................................... 140,724 98,506 95,917
Net change for year................................................ 27,425 64,952 3,982
Income tax effect on change........................................ (9,597) (22,734) (1,393)
---------- ---------- ----------
Balance, end of year.......................................... 158,552 140,724 98,506
---------- ---------- ----------
Retained earnings:
Balance, beginning of year......................................... 995,078 823,057 679,592
Net income......................................................... 247,523 185,500 154,860
Cash dividends declared (per common share: 1998 -- $0.43;
1997 -- $0.39; 1996 -- $0.33).................................... (14,906) (13,479) (11,395)
---------- ---------- ----------
Balance, end of year.......................................... 1,227,695 995,078 823,057
---------- ---------- ----------
Treasury Stock:
Balance, beginning and end of year................................. (10,000) (10,000) (10,000)
---------- ---------- ----------
Total stockholders' equity.................................... $1,610,139 $1,356,659 $1,137,306
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 247,523 $185,500 $154,860
--------- -------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Changes in unpaid losses and loss adjustment expenses, unearned
premiums and prepaid reinsurance premiums....................... 208,728 212,992 179,651
Changes in premium and reinsurance balances receivable and
payable, net.................................................... (91,660) (48,765) 47,821
Change in deferred acquisition costs.............................. (2,826) (6,052) (3,687)
Change in accrued investment income............................... 5,296 (7,586) (6,407)
Realized net capital gains........................................ (120,899) (32,939) (18,668)
Changes in current and deferred income taxes...................... (28,092) (1,755) 836
Change in net unrealized currency translation adjustment.......... 5,031 17,757 17,484
Changes in other assets and liabilities, net...................... 150 (3,814) (3,887)
Other, net........................................................ 3,726 3,585 5,365
--------- -------- --------
Total adjustments............................................ (20,546) 133,423 218,508
--------- -------- --------
Net cash provided by operating activities.................... 226,977 318,923 373,368
--------- -------- --------
Cash flows from investing activities:
Proceeds of bonds available for sale sold.............................. 375,580 334,315 472,008
Proceeds of bonds held to maturity redeemed or matured................. 109,372 72,545 19,253
Proceeds of bonds available for sale redeemed or matured............... 267,373 262,781 169,581
Proceeds of equities sold.............................................. 357,640 175,014 156,895
Purchase of bonds held to maturity..................................... -- (175,834) (265,741)
Purchase of bonds available for sale................................... (802,010) (893,039) (587,663)
Purchase of equities................................................... (371,400) (147,374) (212,030)
Purchase of other invested assets...................................... (126,133) -- --
Net (purchase) proceeds of short-term investments...................... (7,591) 42,460 (46,317)
Investment in Trans Re Zurich, net of cash acquired.................... -- -- (66,479)
Other, net............................................................. (8,132) (32,192) 28,228
--------- -------- --------
Net cash used in investing activities........................ (205,301) (361,324) (332,265)
--------- -------- --------
Cash flows from financing activities:
Dividends to stockholders.............................................. (14,550) (13,132) (11,395)
Proceeds from common stock issued and other............................ 3,035 5,114 2,750
Net (disbursements) proceeds from reinsurance deposits................. (10,230) 47,718 --
--------- -------- --------
Net cash from financing activities........................... (21,745) 39,700 (8,645)
--------- -------- --------
Effect of exchange rate changes on cash and cash equivalents................ (79) (4,085) (2,767)
--------- -------- --------
Change in cash and cash equivalents.......................... (148) (6,786) 29,691
Cash and cash equivalents, beginning of year................................ 70,737 77,523 47,832
--------- -------- --------
Cash and cash equivalents, end of year....................... $ 70,589 $ 70,737 $ 77,523
--------- -------- --------
--------- -------- --------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

Transatlantic Holdings, Inc. (the 'Company') is a holding company,
incorporated in the state of Delaware, which owns all of the common stock of
Transatlantic Reinsurance Company (TRC). TRC owns all of the common stock of
Putnam Reinsurance Company (Putnam).

In addition, in the third quarter of 1996, TRC acquired all of the
outstanding shares of Trans Re Zurich (TRZ), formerly known as Guardian
Ruckversicherungs-Gesellschaft (Guardian Re), an international reinsurance
company based in Zurich, Switzerland, for approximately $105 million in cash.
The acquisition was accounted for as a purchase. Accordingly, TRZ's results for
the second half of 1996 and thereafter are included in the consolidated results
of the Company. This acquisition has not had a material effect on financial
position or net income.

Transatlantic Holdings, Inc. and subsidiaries (TRH), through its operating
subsidiaries TRC, TRZ and Putnam, offers reinsurance capacity for a full range
of property and casualty products to insurers and reinsurers on a treaty and
facultative basis, with an emphasis on specialty classes. Including domestic as
well as international risks, TRH's principal lines of business are general
liability (including directors' and officers' liability and other professional
liability), automobile liability (including nonstandard risks), medical
malpractice and marine and aviation in the casualty lines, and fire and allied
lines in the property lines (which include property catastrophe risks). Casualty
lines represent 71.0%, 67.1% and 66.5% of net premiums written in 1998, 1997 and
1996, respectively. The balance represents property lines.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION: The accompanying
consolidated financial statements have been prepared on the basis of generally
accepted accounting principles (GAAP). Certain reclassifications have been made
to conform prior years' presentations with 1998.

The preparation of 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 reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

These consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions have
been eliminated.

(b) INVESTMENTS: Bonds are classified as held-to-maturity and carried at
amortized cost if TRH has the positive intent and ability to hold each of these
securities to maturity. The balance of TRH's bonds are classified as
available-for-sale and carried at market value. Common and nonredeemable
preferred stocks are carried principally at market value. Market values for
fixed maturity securities and equities are generally based upon quoted market
prices. For certain fixed maturity securities for which market prices were not
readily available, market values were estimated using values obtained from
independent pricing services. Other invested assets consist primarily of
investments in partnerships and other investments which are carried primarily at
market value. A portion of other invested assets consists of a short-term bond
fund managed by an American International Group, Inc. (AIG, and collectively,
with its subsidiaries, the AIG Group) subsidiary. (See Note 10.) Short-term
investments are carried at cost, which approximates market value.

Realized gains or losses on the sale of investments are determined on the
basis of specific identification. Changes in unrealized appreciation
(depreciation) of bonds available for sale, equity investments and other
invested assets are charged or credited, net of deferred income taxes, directly
to accumulated other comprehensive income (See Note 7), a component of
stockholders' equity. Investment income is recorded as earned. Amortization of
bond premium and the accrual of bond discount are charged or credited to net
investment income.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) CASH EQUIVALENTS: A portion of cash equivalents consists of a money
market fund managed by an AIG subsidiary. (See Note 10.)

(d) DEFERRED ACQUISITION COSTS: Acquisition costs, consisting primarily of
net commissions incurred on business conducted through reinsurance contracts or
certificates, are deferred, and then amortized over the period in which the
related premiums are earned, generally one year. Anticipated losses and loss
adjustment expenses and estimated remaining costs of servicing the contracts are
considered in determining acquisition costs to be deferred. Anticipated
investment income is not considered in the deferral of acquisition costs.

(e) LOSSES AND LOSS ADJUSTMENT EXPENSES: Losses and loss adjustment
expenses, net of related reinsurance recoverable, are charged to income as
incurred. Unpaid losses and loss adjustment expenses are principally based on
reports and individual case estimates received from ceding companies. An amount
is included for losses and loss adjustment expenses incurred but not reported
(IBNR) on the basis of past experience. The methods of making such estimates and
for establishing the resulting reserves are continually reviewed and updated,
and any adjustments resulting therefrom are reflected in income currently. TRH
does not discount its unpaid losses and loss adjustment expenses.

Unpaid losses and loss adjustment expenses include certain amounts for the
reinsurance of risks related to environmental impairment and asbestos-related
illnesses. The majority of TRH's environmental and asbestos-related liabilities
arise from contracts entered into after 1984. These obligations generally arose
from contracts underwritten specifically as environmental or asbestos-related
coverages rather than from standard general liability coverages where the
environmental or asbestos-related liabilities were neither clearly defined nor
specifically excluded. The reserves carried at December 31, 1998 for such
claims, including IBNR, are based upon known facts and current law. However,
significant uncertainty exists as, among other things, there are inconsistent
court resolutions with respect to underlying policy intent and coverage and
uncertainties as to the allocation of responsibility for resultant damages.
Further, there is always the threat of changes in statutes, laws, regulations
and other factors that could have a material effect on these liabilities and,
accordingly, future earnings.

(f) UNEARNED PREMIUMS: Unearned premiums represent the portion of gross
premiums written which is applicable to the unexpired terms of reinsurance
contracts or certificates in force. Accordingly, premiums written are taken into
income as earned. Unearned premiums are calculated principally by the monthly
pro rata method or are based on reports received from ceding companies. In the
Consolidated Statements of Operations, the change in unearned premiums is
presented net of the change in prepaid reinsurance premiums.

(g) DEFERRED INCOME TAXES: Deferred income taxes are provided for the
expected tax effect of temporary differences between the amounts of assets and
liabilities used for financial reporting purposes and the amounts used in tax
returns.

(h) REINSURANCE DEPOSITS: Amounts received pursuant to reinsurance
contracts that are not expected to indemnify the ceding company against loss or
liability are recorded as deposits and included in the Consolidated Balance
Sheet as 'reinsurance balances payable.' These deposits are treated as financing
transactions and are credited with interest according to contract terms.

(i) CURRENCY TRANSLATION: Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at year-end exchange rates. Income
and expense accounts are translated at average exchange rates for the year. The
resulting net unrealized currency translation gain (loss) for functional
currencies is reflected in accumulated other comprehensive income, a component
of stockholders' equity.

Transaction gains and losses on assets and liabilities denominated in
foreign currencies which are not designated as functional currencies are
reflected in results of operations during the period in which they occur.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) NET INCOME PER COMMON SHARE: Net income per common share has been
computed in the following table in accordance with Statement of Financial
Accounting Standards No. 128, 'Earnings Per Share' (See Note 2(k)), based upon
weighted average common shares outstanding. Share amounts have been
retroactively adjusted to reflect a 3-for-2 split of the common stock in the
form of a 50% stock dividend, paid in July 1997.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(in thousands, except per share
data)
<S> <C> <C> <C>
Net income (numerator)....................................................... $247,523 $185,500 $154,860
-------- -------- --------
-------- -------- --------
Weighted average common shares outstanding used in the computation of net
income per share:
Average shares issued................................................... 35,436 35,346 35,274
Less: Average shares in treasury........................................ 800 800 800
-------- -------- --------
Average outstanding shares -- basic (denominator)....................... 34,636 34,546 34,474
Average potential shares, principally stock options..................... 229 205 120
-------- -------- --------
Average outstanding shares -- diluted (denominator)..................... 34,865 34,751 34,594
-------- -------- --------
-------- -------- --------
Net income per common share:
Basic................................................................... $ 7.15 $ 5.37 $ 4.49
Diluted................................................................. 7.10 5.34 4.48
</TABLE>

(k) ACCOUNTING STANDARDS:

In accordance with the standard, TRH adopted SFAS No. 123 beginning with
the 1996 annual financial statements and chose the pro forma disclosure option
of implementation. (See Note 9.)

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Pursuant to the standard, TRH adopted SFAS No. 128 for the 1997 annual
financial statements and restated all prior period EPS data presented.

In June 1997, the FASB adopted SFAS No. 130, 'Reporting Comprehensive
Income.' This statement established standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. Comprehensive income is
defined as the change in stockholders' equity during a period from transactions
and other events and circumstances from non-owner sources and includes net
income and all changes in stockholders' equity except those resulting from
investments by owners and distribution to owners.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In accordance with the standard, TRH adopted SFAS No. 130 in 1998.
Comparable data from prior years are presented in conformity with the new
standard.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENTS

(a) STATUTORY DEPOSITS: Investments, the substantial majority of which are
bonds and common stocks available for sale, were deposited with governmental
authorities as required by law and amounted to approximately $122,000,000 and
$123,000,000 at December 31, 1998 and 1997, respectively.

(b) NET INVESTMENT INCOME: An analysis of net investment income of TRH
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Fixed maturities............................................................. $216,994 $206,714 $191,348
Equities..................................................................... 9,645 9,077 5,695
Other........................................................................ 2,524 (1,273) 1,723
-------- -------- --------
Total investment income................................................. 229,163 214,518 198,766
Investment expenses.......................................................... (7,163) (6,872) (6,130)
-------- -------- --------
Net investment income................................................... $222,000 $207,646 $192,636
-------- -------- --------
-------- -------- --------
</TABLE>

(c) INVESTMENT GAINS AND LOSSES: The realized net capital gains and change
in net unrealized appreciation (depreciation) of investments are summarized as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Realized net capital gains on sale of investments:
Fixed maturities......................................................... $ 9,197 $ 3,526 $ 415
Equities................................................................. 111,811 29,375 18,223
Other.................................................................... (109) 38 30
-------- -------- --------
Realized net capital gains.......................................... $120,899 $ 32,939 $ 18,668
-------- -------- --------
-------- -------- --------
Change in net unrealized appreciation (depreciation) of investments:*
Fixed maturities carried at amortized cost............................... $ 2,712 $ 25,787 $(15,849)
Fixed maturities carried at market....................................... 21,157 13,790 (35,998)
Equities................................................................. (15,450) 73,260 39,667
Other.................................................................... (846) -- --
-------- -------- --------
Change in net unrealized appreciation (depreciation) of investments........... $ 7,573 $112,837 $(12,180)
-------- -------- --------
-------- -------- --------
</TABLE>

- ------------

* Before deferred income tax effect.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENTS (CONTINUED)

(d) FIXED MATURITIES: The amortized cost and market value of bonds at
December 31, 1998 and 1997 are summarized as follows:

<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED -----------------
COST GAINS LOSSES MARKET VALUE
---------- ------- ------ ------------
(in thousands)
<S> <C> <C> <C> <C>
1998
BONDS HELD TO MATURITY AND CARRIED AT AMORTIZED COST:
States, foreign and domestic municipalities and political
subdivisions............................................. $1,124,455 $86,079 $ -- $1,210,534
---------- ------- ------ ------------
---------- ------- ------ ------------

BONDS AVAILABLE FOR SALE AND CARRIED AT MARKET VALUE:
U.S. Government and government agency bonds................ $ 508,580 $18,517 $ 467 $ 526,630
States, foreign and domestic municipalities and political
subdivisions............................................. 874,445 31,461 176 905,730
Foreign governments........................................ 432,482 21,082 4 453,560
Corporate.................................................. 507,197 21,828 5,891 523,134
---------- ------- ------ ------------
Totals................................................ $2,322,704 $92,888 $6,538 $2,409,054
---------- ------- ------ ------------
---------- ------- ------ ------------
</TABLE>

<TABLE>
<CAPTION>
Gross Unrealized
Amortized -----------------
Cost Gains Losses Market Value
---------- ------- ------ ------------
(in thousands)
<S> <C> <C> <C> <C>
1997
Bonds held to maturity and carried at amortized cost:
States, foreign and domestic municipalities and political
subdivisions............................................. $1,230,015 $83,367 $ -- $1,313,382
---------- ------- ------ ------------
---------- ------- ------ ------------

Bonds available for sale and carried at market value:
U.S. Government and government agency bonds................ $ 516,338 $11,633 $ 107 $ 527,864
States, foreign and domestic municipalities and political
subdivisions............................................. 830,710 29,368 177 859,901
Foreign governments........................................ 425,458 13,638 385 438,711
Corporate.................................................. 373,211 11,731 508 384,434
---------- ------- ------ ------------
Totals................................................ $2,145,717 $66,370 $1,177 $2,210,910
---------- ------- ------ ------------
---------- ------- ------ ------------
</TABLE>

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENTS (CONTINUED)

The amortized cost and market value of bonds at December 31, 1998 by
contractual maturity, are summarized below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Investments in fixed
maturities exclude short-term investments.

<TABLE>
<CAPTION>
AMORTIZED
COST MARKET VALUE
---------- ------------
(in thousands)
<S> <C> <C>
BONDS HELD TO MATURITY:
Due in one year or less.............................................................. $ 22,525 $ 23,528
Due after one year through five years................................................ 250,069 268,382
Due after five years through ten years............................................... 194,769 212,492
Due after ten years.................................................................. 657,092 706,132
---------- ------------
Totals.......................................................................... $1,124,455 $1,210,534
---------- ------------
---------- ------------
BONDS AVAILABLE FOR SALE:
Due in one year or less.............................................................. $ 278,339 $ 282,280
Due after one year through five years................................................ 1,080,221 1,125,050
Due after five years through ten years............................................... 385,592 402,546
Due after ten years.................................................................. 578,552 599,178
---------- ------------
Totals.......................................................................... $2,322,704 $2,409,054
---------- ------------
---------- ------------
</TABLE>

Gross gains of $7,625,000, $2,930,000 and $6,771,000 and gross losses of
$647,000, $1,325,000 and $6,903,000 were realized on sales of investments in
fixed maturities available for sale in 1998, 1997 and 1996, respectively.

(e) EQUITIES: Gross gains of $122,685,000, $35,507,000 and $23,621,000 and
gross losses of $10,874,000, $6,132,000 and $5,398,000 were realized on sales of
equities in 1998, 1997 and 1996, respectively. At December 31, 1998 and 1997,
net unrealized appreciation of equities (before applicable income taxes)
included gross gains of $160,160,000 and $171,130,000 and gross losses of
$6,199,000 and $1,719,000, respectively.

4. FEDERAL AND FOREIGN INCOME TAXES

(a) The Company files a U.S. consolidated federal income tax return with
its domestic subsidiaries, TRC and Putnam. TRC will include as part of its
taxable income those items of income of the non-U.S. subsidiary, TRZ, which are
subject to U.S. income tax currently, pursuant to Subpart F income rules of the
Internal Revenue Code, and included, as appropriate, in the consolidated federal
income tax return.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. FEDERAL AND FOREIGN INCOME TAXES (CONTINUED)
The U.S. Federal Income tax rate is 35% for 1998, 1997 and 1996. Actual tax
expense on income before income taxes differs from the 'expected' amount
computed by applying the U.S. Federal income tax rate because of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1998 1997 1996
----------------------- ----------------------- -----------------------
PERCENT OF Percent of Percent of
INCOME BEFORE Income Before Income Before
AMOUNT INCOME TAXES Amount Income Taxes Amount Income Taxes
-------- ------------- -------- ------------- -------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
'Expected' tax expense................. $113,173 35.0% $ 82,154 35.0% $ 68,712 35.0%
Adjustments:
Tax-exempt interest............... (31,832) (9.8) (31,505) (13.4) (27,554) (14.0)
Dividends received deduction...... (1,648) (0.5) (1,404) (0.6) (1,064) (0.6)
Other............................. (3,865) (1.2) (19) -- 1,366 0.7
-------- ------ -------- ------ -------- ------
Actual tax expense........... $ 75,828 23.5% $ 49,226 21.0% $ 41,460 21.1%
-------- ------ -------- ------ -------- ------
-------- ------ -------- ------ -------- ------
Foreign and domestic components of
actual tax expense (benefit):
Foreign........................... $ 10,421 $ 14,485 $ 19,770
Domestic:
Current...................... 75,589 37,135 28,230
Deferred..................... (10,182) (2,394) (6,540)
-------- -------- --------
$ 75,828 $ 49,226 $ 41,460
-------- -------- --------
-------- -------- --------
</TABLE>

(b) The components of the net deferred income tax asset at December 31,
1998 and 1997 were as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Deferred income tax assets:
Unpaid losses and loss adjustment expenses, net of related reinsurance recoverable... $158,470 $151,789
Unearned premiums, net of prepaid reinsurance premiums............................... 24,409 24,121
Allowance for unrecoverable reinsurance.............................................. 4,562 4,655
Other................................................................................ 1,982 1,912
-------- --------
Total deferred income tax assets................................................ 189,423 182,477
-------- --------
Deferred income tax liabilities:
Deferred acquisition costs........................................................... 23,652 22,663
Net unrealized appreciation of investments........................................... 83,812 82,111
Other................................................................................ 10,793 5,722
-------- --------
Total deferred income tax liabilities........................................... 118,257 110,496
-------- --------
Net deferred income tax asset................................................... $ 71,166 $ 71,981
-------- --------
-------- --------
</TABLE>

No valuation allowance has been recorded.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
At beginning of year:
Unpaid losses and loss adjustment expenses......................... $2,918,782 $2,733,055 $2,388,155
Less reinsurance recoverable....................................... 396,054 349,527 402,369
---------- ---------- ----------
Net unpaid losses and loss adjustment expenses................ 2,522,728 2,383,528 1,985,786
---------- ---------- ----------
Trans Re Zurich reserves acquired, as of acquisition date............... -- -- 176,260
---------- ---------- ----------
Net losses and loss adjustment expenses incurred in respect of losses
occurring in:
Current year....................................................... 1,080,377 947,578 849,235
Prior years........................................................ (59,489) (14,563) (7,724)
---------- ---------- ----------
Total......................................................... 1,020,888 933,015 841,511
---------- ---------- ----------
Net losses and loss adjustment expenses paid in respect of losses
occurring in:
Current year....................................................... 343,974 244,180 172,875
Prior years........................................................ 543,539 549,635 447,154
---------- ---------- ----------
Total......................................................... 887,513 793,815 620,029
---------- ---------- ----------
At end of year:
Net unpaid losses and loss adjustment expenses..................... 2,656,103 2,522,728 2,383,528
Plus reinsurance recoverable....................................... 459,935 396,054 349,527
---------- ---------- ----------
Unpaid losses and loss adjustment expenses.................... $3,116,038 $2,918,782 $2,733,055
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

As a result of net decreases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses were reduced by $59.5 million in
1998. Significant favorable development was recorded in 1998 on losses occurring
in years subsequent to 1986 in the other liability line, in 1996 and 1997 in the
medical malpractice line and in 1993 through 1996 in the fire and allied lines.
These reductions to incurred losses were partially offset by adverse development
in 1998 on losses occurring in 1996 and 1997 in the ocean marine line, prior to
1984 in the other liability line and in 1997 in the fire line.

As a result of net decreases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses were reduced by $14.6 million in
1997. Significant favorable development was recorded in 1997 on losses occurring
in years subsequent to 1986 in the other liability line, in 1996 in the medical
malpractice line and in 1995 and 1994 in certain property lines. These
reductions to incurred losses were partially offset by adverse development in
1997 on losses occurring in 1996 in aircraft and surety lines, in 1995 and 1994
in the medical malpractice line and in 1983 and prior in the other liability
line.

As a result of net decreases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses incurred were reduced by $7.7
million in 1996. In the other liability line, favorable development on losses
occurring in more recent years was offset by adverse development in 1984 and
prior years. In addition, in more recent years, favorable development,
particularly in the fire, allied line and aircraft lines was partially offset by
adverse development in the automobile liability line.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMON STOCK

Common stock activity for each of the three years in the period ended
December 31, 1998 was as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Shares outstanding, beginning of year................................... 34,562,870 23,012,796 22,949,582
Issued under stock option and purchase plans............................ 103,966 33,908 63,214
Stock split effected as a dividend...................................... -- 11,516,166 --
---------- ---------- ----------
Shares outstanding, end of year......................................... 34,666,836 34,562,870 23,012,796
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

As a result of a common stock split in the form of a 50% stock dividend,
common stock increased and additional paid-in capital decreased by $11.5 million
in 1997. This stock split was paid on July 18, 1997 to holders of record on
June 27, 1997.

7. ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of accumulated other comprehensive income and changes in
such amounts between years are as follows:

<TABLE>
<CAPTION>
NET
NET UNREALIZED
UNREALIZED CURRENCY
APPRECIATION TRANSLATION ACCUMULATED
OF INVESTMENTS, GAIN (LOSS), OTHER
NET NET COMPREHENSIVE
OF INCOME TAX OF INCOME TAX INCOME
--------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Balance, December 31, 1995....................................... $ 93,525 $ 2,392 $ 95,917
Change during year............................................... 2,385 204 2,589
--------------- ------------- -------------
Balance, December 31, 1996....................................... 95,910 2,596 98,506
Change during year............................................... 56,583 (14,365) 42,218
--------------- ------------- -------------
Balance, December 31, 1997....................................... 152,493 (11,769) 140,724
Change during year............................................... 3,159 14,669 17,828
--------------- ------------- -------------
Balance, December 31, 1998....................................... $ 155,652 $ 2,900 $ 158,552
--------------- ------------- -------------
--------------- ------------- -------------
</TABLE>

8. PENSION, SAVINGS AND STOCK PURCHASE PLANS

TRH's employees participate in benefit plans administered by AIG (See Note
9) including a noncontributory defined benefit pension plan and a voluntary
savings plan (a 401(k) plan) which provides for certain matching contributions.
These plans cover a substantial majority of TRH's employees. Certain of these
plans do not separately identify plan benefits and plan assets attributable to
employees of participating companies. In the opinion of management, no material
additional liability would accrue to TRH were such plan benefits and plan assets
identifiable.

Under TRH's 1990 Employee Stock Purchase Plan, as amended, all full time
employees with at least one year of employment with the Company or any of its
subsidiaries are eligible to receive privileges to purchase shares of the
Company's common stock at a price which is 85% of the fair market value of such
stock on the date of subscription or the date of grant of the purchase
privilege, whichever is greater. An aggregate of 750,000 shares of common stock
has been authorized for subscription and 7,115 shares were purchased under the
plan in 1998.

The charges made to operations for these plans for 1998, 1997 and 1996 were
$676,000, $732,000 and $678,000, respectively.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCK OPTION PLANS

In 1995, the Company's Board of Directors adopted, and the stockholders
approved, the '1995 Stock Option Plan' (the 1995 Plan). This plan, as amended,
provides that options may be granted to certain key employees and non-employee
directors to purchase a maximum of 1,500,000 shares of the Company's common
stock at prices not less than their fair market value at the date of grant. At
December 31, 1998, 816,611 shares were reserved for future grants under the 1995
Plan. Options granted under the plan may be used to purchase the Company's
common stock at the fair market value of each share at the date of grant. The
Company also maintains the 'Transatlantic Holdings, Inc. 1990 Stock Option Plan'
(the 1990 Plan) which operates under substantially the same terms as the 1995
Plan. The 1995 Plan and the 1990 Plan are together hereinafter referred to as
the Company Plans.

In each of 1994 and 1992, the Stock Option and Purchase Plan Committee
granted 30,000 options to certain non-employee directors of the Company who are
also directors, officers and employees of AIG. These options may be used to
purchase shares of the Company's common stock at $34.00 per share and $35.00 per
share for the 1994 and 1992 options, respectively, representing the fair market
value of a share of the Company's common stock at the date of grant. Such
options were granted outside of, but on substantially the same terms and
conditions as, the 1990 Plan. As of December 31, 1998, all of these options were
exercisable as none have been exercised or forfeited. The impact of the above
options on the financial statements is not material.

Each of the above plans provide that 25% of the options granted become
exercisable on the anniversary date of the grant in each of the four years
following the grant and expire 10 years from the date of grant. No further
options can be granted under the 1990 Plan, although options outstanding
continue in force until exercise, expiration or forfeiture.

A summary of the status of the Company Plans as of December 31, 1998, 1997
and 1996 and changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- --------------------------
WEIGHTED Weighted Weighted
NUMBER AVERAGE Number Average Number Average
OF SHARES EXERCISE PRICE of Shares Exercise Price of Shares Exercise Price
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year....... 847,856 $47.56 711,156 $40.24 655,522 $34.98
Granted.............................. 178,450 75.44 179,150 71.88 216,525 51.33
Exercised............................ (112,811) 30.93 (38,040) 25.51 (90,482) 28.97
Forfeited............................ (49,400) 55.87 (4,410) 45.96 (70,409) 39.86
--------- --------- ---------
Outstanding, end of year............. 864,095 55.01 847,856 47.56 711,156 40.24
--------- ------- --------- ------- --------- -------
--------- ------- --------- ------- --------- -------
Exercisable, end of year............. 429,586 $43.36 398,907 $36.46 290,423 $31.33
--------- ------- --------- ------- --------- -------
--------- ------- --------- ------- --------- -------
Weighted average fair value of
options granted during the year.... $18.36 $19.05 $16.95
</TABLE>

The weighted average fair value of each option grant is estimated on the
date of grant using the 'Binomial Option Price Model' with the following
weighted average assumptions used for grants in 1998, 1997 and 1996,
respectively: expected volatility of 18.0%, 15.0% and 22.5%; risk-free interest
rates of 4.6%, 5.8% and 6.2%; and expected lives of six years for each grant. An
increasing dividend schedule is used in the binomial model based on historical
experience.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCK OPTION PLANS (CONTINUED)

The following table summarizes information about the Company Plans'
outstanding and exercisable options at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- --------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OF SHARES LIFE EXERCISE PRICE OF SHARES EXERCISE PRICE
- ---------------------------------------------- --------- ----------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$14.42 TO $19.75.............................. 27,665 2.7years $19.06 27,665 $19.06
$34.00 TO $51.33.............................. 495,831 6.7 44.15 361,383 42.02
$71.88 TO $75.44.............................. 340,599 9.4 73.74 40,538 71.88
--------- ---------
$14.42 TO $75.44.............................. 864,095 7.7 55.01 429,586 43.36
--------- ---------
--------- ---------
</TABLE>

The Company accounts for its stock options based on the intrinsic value
method prescribed in APB No. 25 and related interpretations, as permitted under
SFAS No. 123. Had compensation cost been charged to earnings in accordance with
the fair value method discussed in SFAS No. 123, the Company's net income and
net income per share (on a pro forma basis) would have been as follows:

The effects of applying SFAS No. 123 in the immediately preceding pro forma
data may not be indicative of future amounts as this standard does not apply to
options granted prior to 1995. Additional grants in future years are
anticipated.

10. RELATED PARTY TRANSACTIONS

In April 1996, AIG increased its beneficial ownership of the Company's
outstanding common stock from 48% to 49%. In August 1998, AIG acquired
additional shares, placing its beneficial ownership interest over 50%. As of
December 31, 1998, AIG beneficially owned approximately 52% of the Company's
outstanding shares.

TRH has service and expense agreements and certain other agreements with
the AIG Group which provide for the reimbursement to the AIG Group of certain
administrative and operating expenses which include, but are not limited to,
investment advisory and cash management services, office space and payroll
processing services. In 1998, 1997 and 1996, $9,800,000, $9,300,000 and
$8,500,000, respectively, of operating and investment expenses relate to
services and expenses provided by the AIG Group under these agreements.

Approximately $167 million (11%), $181 million (12%) and $232 million (18%)
of gross premiums written by TRH in 1998, 1997 and 1996, respectively, were
attributable to reinsurance purchased by the AIG Group, for the production of
which TRH paid ceding commissions to the AIG Group of $31

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. RELATED PARTY TRANSACTIONS (CONTINUED)

million, $32 million and $33 million, respectively, in such years. (See Note 12
for information relating to reinsurance ceded to related parties.)

11. DIVIDEND RESTRICTION AND STATUTORY FINANCIAL DATA

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. Generally, the maximum amount of
dividends that a company may pay without regulatory approval in any twelve-month
period is the lesser of adjusted net investment income or 10% of statutory
policyholders' surplus as of the end of the most recently reported quarter
unless the New York Insurance Department, upon prior application, approves a
greater dividend distribution. Adjusted net investment income is defined for
this purpose to include net investment income for the twelve months immediately
preceding the declaration or distribution of the current dividend increased by
the excess, if any, of net investment income over dividends declared or
distributed during the period commencing thirty-six months prior to the
declaration or distribution of the current dividend and ending twelve months
prior thereto. 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,
1998, TRC had statutory earned surplus of $789,736,000 and, in 1999, could pay
dividends of approximately $134,366,000 without such regulatory approval.

Statutory surplus and net income as reported to the New York Insurance
Department were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- --------
(in thousands)
<S> <C> <C> <C>
TRC
Statutory surplus.................................................... $1,343,659 $1,163,856 $952,707
Statutory net income................................................. 209,752 163,353 185,887
Putnam
Statutory surplus.................................................... 109,771 108,991 108,327
Statutory net income................................................. 9,872 8,981 12,221
</TABLE>

TRC and Putnam each prepare statutory financial statements in accordance
with accounting practices prescribed or permitted by New York -- their state of
domicile. Prescribed statutory accounting practices are discussed in a variety
of publications of the National Association of Insurance Commissioners (NAIC),
as well as in state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. All material statutory accounting practices of TRC and Putnam are
prescribed in the authoritative literature described above.

12. REINSURANCE CEDED

In the normal course of business, TRH purchases reinsurance from its
retrocessionnaires to reduce the effect of individual or aggregate losses and to
allow increased gross premium writings and afford greater risk capacity without
necessarily requiring additional capital.

TRH's ceded reinsurance agreements consist of pro rata and excess-of-loss
contracts. Under pro rata reinsurance, TRH and its retrocessionnaires share
premiums, losses and expenses in an agreed upon proportion. For consideration,
generally based on a percentage of premiums of the individual policy or policies
subject to the reinsurance agreement, excess-of-loss contracts provide
reimbursement to TRH for losses in excess of a predetermined amount up to a
predetermined limit.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. REINSURANCE CEDED (CONTINUED)

Premiums written and earned and losses and loss adjustment expenses
incurred are comprised as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Gross premiums assumed.................................................. $1,566,885 $1,463,318 $1,315,937
---------- ---------- ----------
Reinsurance ceded:
AIG Affiliates..................................................... 93,413 84,355 80,755
Other.............................................................. 79,772 84,827 92,667
---------- ---------- ----------
173,185 169,182 173,422
---------- ---------- ----------
Net premiums written.................................................... $1,393,700 $1,294,136 $1,142,515
---------- ---------- ----------
---------- ---------- ----------
Gross premiums earned................................................... $1,545,215 $1,432,994 $1,317,155
---------- ---------- ----------
Reinsurance ceded:
AIG Affiliates..................................................... 83,472 88,241 78,698
Other.............................................................. 81,173 85,502 107,824
---------- ---------- ----------
164,645 173,743 186,522
---------- ---------- ----------
Net premiums earned..................................................... $1,380,570 $1,259,251 $1,130,633
---------- ---------- ----------
---------- ---------- ----------
Gross incurred losses and loss adjustment expenses...................... $1,226,992 $1,040,623 $ 842,409
Reinsurance ceded....................................................... 206,104 107,608 898
---------- ---------- ----------
Net losses and loss adjustment expenses................................. $1,020,888 $ 933,015 $ 841,511
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Amounts recoverable from retrocessionnaires are recognized in a manner
consistent with the claims liabilities associated with the retrocession and are
presented on the balance sheet as reinsurance recoverable on paid and unpaid
losses and loss adjustment expenses. Such balances at December 31, 1998 and 1997
are comprised as follows:

<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
AIG AIG
AFFILIATES OTHER Affiliates Other
---------- -------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C>
Paid............................................................. $ 8,602 $ 8,655 $ 5,091 $ 14,320
Unpaid........................................................... 222,441 224,461 184,599 198,155
---------- -------- ---------- --------
Total....................................................... $ 231,043 $233,116 $ 189,690 $212,475
---------- -------- ---------- --------
---------- -------- ---------- --------
</TABLE>

Ceded reinsurance arrangements do not relieve TRH from its obligations to
the insurers and reinsurers from whom it assumes business. The failure of
retrocessionnaires to honor their obligation could result in losses to TRH;
consequently, an allowance has been established for estimated unrecoverable
reinsurance on paid and unpaid losses totaling $13.0 million and $13.3 million
in 1998 and 1997, respectively. TRH evaluates the financial condition of its
retrocessionnaires through a security committee. With respect to reinsurance
recoverable on paid and unpaid losses and prepaid reinsurance premiums, TRH
holds substantial amounts of funds and letters of credit to collateralize these
amounts. Such funds and letters of credit can be drawn on for amounts remaining
unpaid beyond contract terms. No uncollateralized amounts recoverable from a
single retrocessionnaire, other than amounts due from AIG affiliates, are
considered material to the financial position of TRH.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. SEGMENT INFORMATION

TRH conducts its business and assesses performance through segments
organized along geographic lines. Financial data from offices in London, Paris
and Zurich are reported in the aggregate as Europe and considered as one segment
due to operational and regional similarities. Data from offices in the Americas,
other than those in the United States which underwrite primarily domestic
business, and from offices in the Asia Pacific region are grouped as
International -- Other and represent the aggregation of non-material segments.
In each segment, property and casualty reinsurance is provided to insurers and
reinsurers on a treaty and facultative basis, through brokers or directly to
ceding companies.

A significant portion of assets and liabilities of TRH's international
operations relate to the countries where ceding companies and reinsurers are
located. Most investments are located in the country of domicile of these
operations. In addition to licensing requirements, TRH's international
operations are regulated in various jurisdictions with respect to currency,
amount and type of security deposits, amount and type of reserves and amount and
type of local investment. Regulations governing constitution of technical
reserves and remittance balances in some countries may hinder remittance of
profits and repatriation of assets.

While the great majority of premium revenues and assets relate to the
regions where particular offices are located, a portion of such amounts are
derived from other regions of the world. In addition, approximately 19% of
consolidated revenues, with a significant portion in each segment, were obtained
through a large international reinsurance broker.

The following table is a summary of financial data by segment:

<TABLE>
<CAPTION>
INTERNATIONAL
----------------------
DOMESTIC EUROPE(3) OTHER CONSOLIDATED
---------- ---------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998
REVENUES(1)(2)........................................... $ 986,552 $ 610,063 $126,854 $1,723,469
INCOME BEFORE INCOME TAXES(2)............................ 287,486 40,502 (4,637) 323,351
SEGMENT ASSETS(4)........................................ 3,851,473 1,018,009 383,767 5,253,249
</TABLE>

<TABLE>
<CAPTION>
International
----------------------
Domestic Europe(3) Other Consolidated
---------- ---------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C>
1997
Revenues(1)(2)........................................... $ 839,979 $ 534,839 $125,018 $1,499,836
Income before income taxes(2)............................ 174,312 45,137 15,277 234,726
Segment assets(4)........................................ 3,598,583 904,624 331,773 4,834,980
</TABLE>

<TABLE>
<CAPTION>
International
----------------------
Domestic Europe(3) Other Consolidated
---------- ---------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C>
1996
Revenues(1)(2)........................................... $ 840,868 $ 386,126 $114,943 $1,341,937
Income before income taxes(2)............................ 140,750 44,515 11,055 196,320
Segment assets(4)........................................ 3,259,818 788,600 330,723 4,379,141
</TABLE>

- ------------
(1) Revenues represent the sum of net premiums earned, net investment income and
realized net capital gains.

(2) Domestic revenues and income before income taxes include realized net
capital gains of $118,601, $31,727 and $15,913 in 1998, 1997 and 1996,
respectively. Realized net capital gains for other segments in each of the
years presented is not material.

(3) Includes revenues from the London, England office of $331,944, $298,523 and
$279,617 in 1998, 1997 and 1996, respectively, and revenues from the Zurich,
Switzerland office of $155,628, $186,780 and $87,954 in 1998, 1997 and 1996,
respectively.

(4) As of December 31.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. SEGMENT INFORMATION (CONTINUED)

Net premiums earned by major product grouping are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Casualty
General liability*................................................. $ 248,175 $ 187,869 $ 213,814
Automobile liability............................................... 272,950 201,755 161,872
Ocean marine and aviation.......................................... 192,827 180,455 143,317
Medical malpractice................................................ 91,749 133,034 135,586
Surety and credit.................................................. 65,366 58,710 45,276
Accident and health................................................ 69,835 27,343 10,072
Other.............................................................. 40,856 40,382 51,772
---------- ---------- ----------
Total casualty................................................ 981,758 829,548 761,709
---------- ---------- ----------
Property
Fire............................................................... 176,834 210,387 174,041
Allied lines....................................................... 68,544 69,814 70,135
Homeowners multiple peril.......................................... 64,214 55,227 41,140
Automobile physical damage......................................... 44,252 43,985 23,616
Other.............................................................. 44,968 50,290 59,992
---------- ---------- ----------
Total property................................................ 398,812 429,703 368,924
---------- ---------- ----------
Total......................................................... $1,380,570 $1,259,251 $1,130,633
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

- ------------
* A significant portion of this product grouping includes more complex risks
such as professional liability (other than medical malpractice),
directors' and officers' liability, errors and omissions and environmental
impairment liability.

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of unaudited quarterly financial data for each
of the years ended December 31, 1998 and 1997. However, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
to present fairly the results of operations for such periods have been made.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998 1998
--------- -------- ------------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
NET PREMIUMS WRITTEN...................................... $ 332,528 $330,208 $ 379,094 $351,870
NET PREMIUMS EARNED....................................... 314,397 340,247 362,915 363,011
NET INVESTMENT INCOME..................................... 53,674 55,600 56,324 56,402
REALIZED NET CAPITAL GAINS................................ 7,277 29,339 69,414 14,869
OPERATING INCOME.......................................... 60,144 85,231 105,759 72,446
NET INCOME................................................ 47,830 64,668 78,686 56,339
NET INCOME PER COMMON SHARE:
BASIC................................................ 1.38 1.87 2.27 1.63
DILUTED.............................................. 1.37 1.86 2.25 1.62
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net premiums written...................................... $ 303,108 $309,788 $ 352,912 $328,328
Net premiums earned....................................... 284,181 306,030 333,179 335,861
Net investment income..................................... 50,020 51,015 53,025 53,586
Realized net capital gains................................ 4,179 4,198 9,183 15,379
Operating income.......................................... 52,913 55,537 61,035 66,611
Net income................................................ 41,621 43,144 47,956 52,779
Net income per common share:
Basic................................................ 1.20 1.25 1.39 1.53
Diluted.............................................. 1.20 1.24 1.38 1.52
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no changes in nor any disagreements with accountants on
accounting and financial disclosure within the twenty-four months ended
December 31, 1998.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item concerning directors of the Company is
included in the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders, filed with the Securities and Exchange Commission within 120 days
after the end of the Company's fiscal year (the '1999 Proxy Statement'), in the
section captioned 'Election of Directors,' and such information is incorporated
herein by reference. Information required by this Item concerning the executive
officers of the Company is included in Part I of this Annual Report on Form 10-K
under the section captioned 'Directors and Executive Officers of the
Registrant.' Information required by this Item concerning compliance with
Section 16(a) of the Securities Exchange Act of 1934, as amended, is included in
the 1999 Proxy Statement under the caption 'Election of Directors: `Ownership of
Certain Securities,' ' and such information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this Item is included in the 1999 Proxy Statement
in the sections captioned 'Election of Directors: `Compensation of Directors and
Executive Officers,' `Compensation Committee Interlocks and Insider
Participation' and `Pension Benefits,' ' and such information is incorporated
herein by reference. The sections of the 1999 Proxy Statement captioned
'Election of Directors: `Committee Reports on Executive Compensation' and
`Performance Graph' ' are not incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this Item is included in the 1999 Proxy Statement
in the sections captioned 'Beneficial Ownership' and 'Election of Directors:
`Ownership of Certain Securities,' ' and such information is incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item is included in the 1999 Proxy Statement
in the sections captioned 'Election of Directors: `Compensation Committee
Interlocks and Insider Participation,' `Relationship with AIG,' `AIG Group
Reinsurance,' `Certain Transactions with the AIG Group' and `Relationship with
SICO and Starr,' ' and such information is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Exhibits

1. Financial Statements and Schedules

See accompanying Index to Consolidated Financial Statements in
Item 8. Schedules not included in the accompanying index have been
omitted because they are not applicable.

2. Exhibits

3.2 -- Amended and Restated By-Laws, as of March 25, 1999.

21.1 -- Subsidiaries of Registrant.

23.1 -- Consent of PricewaterhouseCoopers LLP.

27.1 -- Financial Data Schedule.

See accompanying Exhibit Index for additional Exhibits incorporated
by reference.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of 1998.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

TRANSATLANTIC HOLDINGS, INC.

By: /s/ ROBERT F. ORLICH
.................................
Robert F. Orlich
Title: President and Chief Executive
Officer

March 25, 1999

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ ROBERT F. ORLICH President and Chief Executive Officer March 25, 1999
......................................... (principal executive officer); Director
Robert F. Orlich

/s/ STEVEN S. SKALICKY Executive Vice President and Chief Financial March 25, 1999
......................................... Officer (principal financial and
Steven S. Skalicky accounting officer)

/s/ JAMES BALOG Director March 25, 1999
.........................................
James Balog

/s/ C. FRED BERGSTEN Director March 25, 1999
.........................................
C. Fred Bergsten

/s/ IKUO EGASHIRA Director March 25, 1999
.........................................
Ikuo Egashira

Director
.........................................
John M. Fowler

/s/ M. R. GREENBERG Director March 25, 1999
.........................................
M. R. Greenberg

/s/ JOHN J. MACKOWSKI Director March 25, 1999
.........................................
John J. Mackowski

Director
.........................................
Edward E. Matthews

/s/ HOWARD I. SMITH Director March 25, 1999
.........................................
Howard I. Smith

/s/ THOMAS R. TIZZIO Director March 25, 1999
.........................................
Thomas R. Tizzio
</TABLE>

SCHEDULE I

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
AMOUNT AT
WHICH SHOWN
COST OR IN THE
AMORTIZED MARKET BALANCE
TYPE OF INVESTMENT COST* VALUE SHEET
- ----------------------------------------------------------------------- ---------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government agencies and
authorities................................................ $ 508,580 $ 526,630 $ 526,630
States, foreign and domestic municipalities and political
subdivisions............................................... 1,998,900 2,116,264 2,030,185
Foreign governments.......................................... 432,482 453,560 453,560
Public utilities............................................. 100,037 104,302 104,302
All other corporate.......................................... 407,160 418,832 418,832
---------- ---------- -----------
Total fixed maturities.................................. 3,447,159 3,619,588 3,533,509
---------- ---------- -----------
Equities:
Common stocks:
Public utilities............................................. 33,665 43,008 43,008
Banks, trust and insurance companies......................... 42,676 57,502 57,502
Industrial, miscellaneous and all other...................... 281,882 410,921 410,921
---------- ---------- -----------
Total common stocks..................................... 358,223 511,431 511,431
Nonredeemable preferred stocks.................................... 62,214 62,967 62,967
---------- ---------- -----------
Total equities.......................................... 420,437 574,398 574,398
---------- ---------- -----------
Other invested assets.................................................. 126,133 125,285 125,285
---------- ---------- -----------
Short-term investments................................................. 25,052 25,052 25,052
---------- ---------- -----------
Total investments....................................... $4,018,781 $4,344,323 $4,258,244
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

- ------------
* Investments in fixed maturities are shown at amortized cost.

S-1

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(PARENT COMPANY ONLY)
AS OF DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
---------- ----------
(in thousands)
<S> <C> <C>
Assets:
Bonds available for sale, at market value (amortized cost: 1998 -- $12,014;
1997 -- $9,011)................................................................. $ 12,205 $ 9,098
Cash and cash equivalents........................................................ 415 291
Investment in subsidiaries....................................................... 1,599,335 1,348,438
Other assets..................................................................... 799 933
Dividends due from subsidiaries.................................................. 3,815 3,460
---------- ----------
Total assets................................................................ $1,616,569 $1,362,220
---------- ----------
---------- ----------
Liabilities:
Dividends payable................................................................ $ 3,815 $ 3,460
Accrued liabilities.............................................................. 2,615 2,101
---------- ----------
Total liabilities........................................................... 6,430 5,561
---------- ----------
Stockholders' equity:
Preferred Stock.................................................................. -- --
Common Stock..................................................................... 35,467 35,363
Additional paid-in capital....................................................... 198,425 195,494
Accumulated other comprehensive income........................................... 158,552 140,724
Retained earnings................................................................ 1,227,695 995,078
Treasury Stock, at cost; 800,000 shares.......................................... (10,000) (10,000)
---------- ----------
Total stockholders' equity.................................................. 1,610,139 1,356,659
---------- ----------
Total liabilities and stockholders' equity.................................. $1,616,569 $1,362,220
---------- ----------
---------- ----------
</TABLE>

See Notes to Condensed Financial Information of Registrant -- (Parent Company
Only)

S-2

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
STATEMENTS OF OPERATIONS
(PARENT COMPANY ONLY)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Revenues:
Net investment income (principally dividends from subsidiaries)......... $ 15,618 $ 14,710 $ 12,426
Equity in undistributed income of subsidiaries.......................... 233,138 172,494 143,536
-------- -------- --------
Total revenues..................................................... 248,756 187,204 155,962
Operating expenses........................................................... 1,527 2,338 1,493
-------- -------- --------
Income before income taxes................................................... 247,229 184,866 154,469
Income tax benefits -- current............................................... (294) (634) (391)
-------- -------- --------
Net income......................................................... $247,523 $185,500 $154,860
-------- -------- --------
-------- -------- --------
</TABLE>

See Notes to Condensed Financial Information of Registrant -- (Parent Company
Only)

S-3

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
STATEMENTS OF CASH FLOWS
(PARENT COMPANY ONLY)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 247,523 $ 185,500 $ 154,860
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in undistributed income of subsidiaries.................. (233,138) (172,494) (143,536)
Changes in receivable and payable to subsidiary, net............ (355) (349) 7
Changes in other assets and accrued liabilities................. 638 950 221
--------- --------- ---------
Total adjustments.......................................... (232,855) (171,893) (143,308)
--------- --------- ---------
Net cash provided by operating activities.................. 14,668 13,607 11,552
--------- --------- ---------
Cash flows from investing activities:
Purchase of bonds.................................................... (3,029) (1,474) (2,917)
--------- --------- ---------
Net cash used in investing activities...................... (3,029) (1,474) (2,917)
--------- --------- ---------
Cash flows from financing activities:
Dividends to stockholders............................................ (14,550) (13,132) (11,395)
Proceeds from common stock issued.................................... 3,035 1,014 2,750
--------- --------- ---------
Net cash from financing activities......................... (11,515) (12,118) (8,645)
--------- --------- ---------
Change in cash and cash equivalents........................ 124 15 (10)
Cash and cash equivalents, beginning of year.............................. 291 276 286
--------- --------- ---------
Cash and cash equivalents, end of year.................................... $ 415 $ 291 $ 276
--------- --------- ---------
--------- --------- ---------
</TABLE>

- ------------
Notes to Condensed Financial Information of Registrant -- (Parent Company Only)

(1) The condensed financial information of registrant should be read in
conjunction with the Consolidated Financial Statements and Notes to
Consolidated Financial Statements included elsewhere herein.

(2) Investment in subsidiaries is reflected on the equity method.

S-4

SCHEDULE III

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
AS OF DECEMBER 31, 1998, 1997 AND 1996 AND FOR THE YEARS THEN ENDED
<TABLE>
<CAPTION>
NET
UNPAID COMMISSIONS
LOSSES AND NET LOSSES AND CHANGE
DEFERRED LOSS NET NET AND LOSS IN DEFERRED OTHER
ACQUISITION ADJUSTMENT UNEARNED PREMIUMS INVESTMENT ADJUSTMENT ACQUISITION OPERATING
COSTS EXPENSES PREMIUMS EARNED INCOME EXPENSES COSTS EXPENSES
----------- ---------- --------- ---------- ---------- ---------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
PROPERTY-CASUALTY....... $67,578 $3,116,038 $386,652 $1,380,570 $222,000 $1,020,888 $ 330,243 $48,758
1997
Property-Casualty....... $64,752 $2,918,782 $366,640 $1,259,251 $207,646 $ 933,015 $ 288,429 $42,296
1996
Property-Casualty....... $58,700 $2,733,055 $343,936 $1,130,633 $192,636 $ 841,511 $ 267,186 $35,722

NET
PREMIUMS
WRITTEN
----------

<S> <C>
1998
PROPERTY-CASUALTY....... $1,393,700
1997
Property-Casualty....... $1,294,136
1996
Property-Casualty....... $1,142,515
</TABLE>

S-5

SCHEDULE IV

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
PERCENTAGE
OF
CEDED TO ASSUMED AMOUNT
GROSS OTHER FROM OTHER ASSUMED
AMOUNT COMPANIES COMPANIES NET AMOUNT TO NET
------- --------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
1998
PREMIUMS WRITTEN:
PROPERTY-CASUALTY....................... -- $173,185 $1,566,885 $1,393,700 112%
1997
Premiums written:
Property-Casualty....................... -- $169,182 $1,463,318 $1,294,136 113%
1996
Premiums written:
Property-Casualty....................... -- $173,422 $1,315,937 $1,142,515 115%
</TABLE>

S-6

SCHEDULE VI

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING
PROPERTY/CASUALTY INSURANCE OPERATIONS
AS OF DECEMBER 31, 1998, 1997 AND 1996 AND FOR THE YEARS THEN ENDED
<TABLE>
<CAPTION>
NET LOSSES AND LOSS NET
UNPAID ADJUSTMENT EXPENSES NET PAID COMMISSIONS
LOSSES AND RELATED TO LOSSES AND AND CHANGE
DEFERRED LOSS DISCOUNT NET NET -------------------- LOSS IN DEFERRED
ACQUISITION ADJUSTMENT IF ANY UNEARNED PREMIUMS INVESTMENT CURRENT PRIOR ADJUSTMENT ACQUISITION
COSTS EXPENSES DEDUCTED PREMIUMS EARNED INCOME YEAR YEARS EXPENSES COSTS
----------- ---------- --------- -------- ---------- ---------- ---------- -------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998..... $67,578 $3,116,038 -- $386,652 $1,380,570 $222,000 $1,080,377 $(59,489) $887,513 $ 330,243
1997..... $64,752 $2,918,782 -- $366,640 $1,259,251 $207,646 $ 947,578 $(14,563) $793,815 $ 288,429
1996..... $58,700 $2,733,055 -- $343,936 $1,130,633 $192,636 $ 849,235 $ (7,724) $620,029 $ 267,186

NET
PREMIUMS
WRITTEN
----------
<S> <C>
1998..... $1,393,700
1997..... $1,294,136
1996..... $1,142,515
</TABLE>

S-7

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
- -------- ---------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
3.1 -- Certificate of Incorporation, as amended......... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
3.2 -- Amended and Restated By-Laws, as of March 25,
1999.............................................. Filed herewith.
4.1 -- Form of Common Stock Certificate................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.1 -- Amended and Restated Shareholders Agreement among
American Express Company, Gulf Insurance Company,
The Lambert Brussels Financial Corporation,
Stoneridge Limited, Mavron Ltd., American
International Group, Inc., American Home Assurance
Company, Metropolitan Life Insurance Company,
certain trustees under an Indenture of Trust made
by SwissRe Holding Limited, SwissRe Holding
Limited, General Re Corporation, Compagnie
Financiere et de Reassurance du Groupe AG, Daido
Mutual Life Insurance Company, The Nichido Fire
and Marine Insurance Company, Limited,
Transatlantic Reinsurance Company, and PREINCO
Holdings, Inc., dated January 5, 1990............ Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.2 -- Exclusive Agency Agreement between Transatlantic
Reinsurance Company and American Home Assurance
Company, dated February 27, 1980................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.3 -- Service and Expense Agreement among PREINCO
Holdings, Inc., Putnam Reinsurance Company, and
American International Group, Inc. dated July 1,
1986............................................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.4 -- Service and Expense Agreement between
Transatlantic Reinsurance Company and American
International Group, Inc., dated December 15,
1977............................................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.5 -- Investment Management Contract between
Transatlantic Reinsurance Company and AIG Global
Investors, Inc. dated August 1, 1986............. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
- -------- ---------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
10.6 -- Investment Management Contract between Putnam
Reinsurance Company and AIG Global Investors,
Inc. dated August 1, 1986........................ Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.7 -- Transatlantic Holdings, Inc. 1990 Stock Option
Plan*............................................ Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.7(a) -- Transatlantic Holdings, Inc. 1990 Employee Stock
Purchase Plan*................................... Filed as exhibit to the Company's Registration
Statement (File No. 33-41474) and incorporated
herein by reference.
10.7(b) -- Amended Transatlantic Holdings, Inc. 1990 Stock
Option Plan*..................................... Filed as exhibit to the Company's 1992 Quarterly
Report on Form 10-Q for the quarter ended June 30,
1992 (File No. 1-10545) and incorporated herein by
reference.
10.7(c) -- Transatlantic Holdings, Inc. 1995 Stock Option
Plan and form of Director Option Agreement*...... Filed as exhibits to the Company's Registration
Statement on Form S-8 (File No. 33-99764) and
incorporated herein by reference.
10.7(d) -- Amendment to Transatlantic Holdings, Inc. 1990
Employee Stock Purchase Plan, effective as of
December 7, 1995*................................ Filed as exhibit to the Company's Current Report on
Form 8-K (File No. 1-10545) dated January 31,
1996, and incorporated herein by reference.
10.8 -- Transatlantic Reinsurance Company 1989 Stock
Option Plan*..................................... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference
10.9 -- Transatlantic Reinsurance Company 1984 Stock
Option Plan*..................................... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.10 -- Transatlantic Reinsurance Company 1979 Stock
Option Plan*..................................... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.11 -- Quota Share Reinsurance Treaty between National
Union Fire Insurance Company of Pittsburgh, Pa.
and Transatlantic Reinsurance Company, dated
June 5, 1978..................................... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
- -------- ---------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
10.12 -- Quota Share Reinsurance Treaty between New
Hampshire Insurance Company and Transatlantic
Reinsurance Company, dated February 9, 1978...... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.13 -- Quota Share Reinsurance Treaty between American
International Underwriters Overseas Ltd. and
Transatlantic Reinsurance Company, dated
September 22, 1978............................... Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.14 -- Surplus Treaty between American International
Group Companies and Transatlantic Reinsurance
Company, dated September 29, 1989................ Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.15 -- Quota Share Reinsurance Treaty among Lexington
Insurance Company, Landmark Insurance Company,
New Hampshire Insurance Company and Transatlantic
Reinsurance Company, dated February 28, 1990..... Filed as exhibit to the Company's Registration
statement (File No. 33-34433) and incorporated
herein by reference.
10.16 -- Representative Facultative Insurance Certificate
for Casualty Reinsurance Risk (Certificate
between National Union Fire Insurance Company of
Pittsburgh, Pa. and Transatlantic Reinsurance
Company, dated January 9, 1990).................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.17 -- Representative Facultative Insurance Certificate
for Property Reinsurance Risk (Certificate
between American Home Assurance Company and
Transatlantic Reinsurance Company,
dated March 7, 1990)............................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.18 -- Agreement between American International Group,
Inc. and Transatlantic Reinsurance Company,
dated December 15, 1977, providing Transatlantic
Reinsurance Company with a right of first
acceptance of reinsurance of risks insured by
affiliates of American International Group,
Inc.............................................. Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
- -------- ---------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
10.19 -- Aggregate Excess Treaty between Transatlantic
Reinsurance Company and National Union Fire
Insurance Company of Pittsburgh, Pa., dated
November 15, 1989................................ Filed as exhibit to the Company's Registration
Statement (File No. 33-34433) and incorporated
herein by reference.
10.20 -- Management Agreement between Transatlantic
Reinsurance Company and Putnam Reinsurance
Company, dated February 15, 1991................. Filed as exhibit to the Company's 1995 Annual Report
on Form 10-K (File No. 1-10545) and incorporated
herein by reference.
10.21 -- Quota Share Reinsurance Agreement between
Transatlantic Reinsurance Company and Putnam
Reinsurance Company, dated December 6, 1995...... Filed as exhibit to the Company's 1995 Annual Report
on Form 10-K (File No. 1-10545) and incorporated
herein by reference.
21.1 -- Subsidiaries of the registrant................... Filed herewith.
23.1 -- Consent of PricewaterhouseCoopers LLP............ Filed herewith.
27.1 -- Financial Data Schedule.......................... Provided herewith.
</TABLE>

- ------------
* Management compensation plan.

<PAGE>

EXHIBIT 3.2

AMENDED AND RESTATED
TRANSATLANTIC HOLDINGS, INC.
BY-LAWS
AS OF MARCH 25, 1999

ARTICLE I
STOCKHOLDERS

SECTION 1.1. Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place either within or
without the State of Delaware as may be designated by the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.

SECTION 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the President, the Secretary or
the Board of Directors, to be held at such date, time and place either within or
without the State of Delaware as may be stated in the notice of the meeting. A
special meeting of stockholders shall be called by the Secretary upon the
written request, stating the purpose of the meeting, of stockholders who
together own of record twenty-five percent of the outstanding stock entitled to
vote at such meeting.

SECTION 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of
such meeting to each stockholder entitled to vote at such meeting. If mailed,
such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the stockholder at such stockholder's address
as it appears on the records of the Corporation. No business other than that
stated in the notice shall be transacted at any special meeting without the
unanimous consent of all the stockholders entitled to vote thereat.

SECTION 1.4. Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken;
provided, that if the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. At the adjourned meeting the Corporation may transact any
business which might have been transacted at the original meeting.

SECTION 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the Certificate of Incorporation or these By-Laws,
the holders of a majority of the outstanding shares of stock entitled to vote on
a matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, where a separate vote by
class or classes is required for any matter, the holders of a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be considered a single
class if the holders thereof are entitled to vote together as a single class at
the meeting. In the absence of a quorum of the holders of any class of stock
entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by section 1.4 of these By-Laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.

SECTION 1.6. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or in the absence of the Chairman of the
Board by the President, or in the absence of the President by a Vice President,
or in the absence of the foregoing persons by a chairman designated by the Board
of Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, or in the absence
of the Secretary an Assistant Secretary shall so act, or in their absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.

SECTION 1.7. Classes or Series of Stock; Voting; Proxies. Unless otherwise
provided in the Certificate of Incorporation, each stockholder entitled to vote
at any meeting of stockholders shall be entitled to one vote for each share of
stock held by such stockholder which has voting power upon the matter in
question. Each stockholder entitled to vote at a meeting of stockholder or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or if filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding stock entitled to vote thereon present in person or by proxy
at such meeting shall so determine. Directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. With respect to other
matters, unless otherwise provided by law or by the Certificate of Incorporation
or other provisions of these By-Laws, the affirmative vote of the holders of a
majority of the shares of all classes of stock present in person or represented
by proxy at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders. Where a separate vote by class or classes is required,
the affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, except as otherwise provided by law or by the Certificate of
Incorporation or these By-Laws.

SECTION 1.8. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of any meeting, nor more than sixty days
prior to any other action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board is necessary, shall
be the day on which the first written consent is expressed; and (3) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

SECTION 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the

meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.

SECTION 1.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required by law to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.

SECTION 1.11. Advance Notice of Stockholder Nominations and Proposals. At
any annual or special meeting of stockholders, proposals by stockholders and
persons nominated for election as directors by stockholders shall be considered
only if advance notice thereof has been timely given as provided herein and such
proposals or nominations are otherwise proper for consideration under applicable
law and the Certificate of Incorporation and By-Laws of the Corporation. Notice
of any proposal to be presented by any stockholder or of the name of any person
to be nominated by any stockholder for election as a director of the Corporation
at any meeting of stockholders shall be delivered to the Secretary of the
Corporation at its principal executive offices not less than 90 nor more than
120 days prior to the date of the meeting; provided, however, that if the date
of the meeting is first publicly announced or disclosed (in a public filing or
otherwise) less than 100 days prior to the date of the meeting, such advance
notice shall be given not more than ten days after such date is first so
announced or disclosed. Public notice shall be deemed to have been given more
than 100 days in advance of the annual meeting if the Corporation shall have
previously disclosed, in these By-Laws or otherwise, that the annual meeting in
each year is to be held on a determinable date, unless and until the Board
determines to hold the meeting on a different date. Any stockholder who gives
notice of any such proposal shall deliver therewith the text of the reasons why
the stockholder favors the proposal and setting forth such stockholder's name
and address, the number and class of all shares of each class of stock of the
Corporation beneficially owned by such stockholder and any material interest of
such stockholder in the proposal (other than as a stockholder). Any stockholder
desiring to nominate any person for election as a director of the Corporation
shall deliver with such notice a statement in writing setting forth the name of
the person to be nominated, the number and class of all shares of each class of
stock of the Corporation beneficially owned by such person, the information
regarding such person required by paragraphs (a), (e) and (f) of Item 401 of
Regulation S-K adopted by the Securities and Exchange Commission (or the
corresponding provisions of any regulation subsequently adopted by the
Securities and Exchange Commission applicable to the Corporation), such person's
signed consent to serve as a director of the Corporation if elected, such
stockholder's name and address and the number and class of all shares of each
class of stock of the Corporation beneficially owned by such stockholder and
such other information as is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, (the
'Exchange Act') and Rule 14a-11 thereunder. Notwithstanding anything of this
Section 1.11 to the contrary, in the event that the number of directors to be
elected to the Board of the Corporation is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board made by the Corporation at least 100 days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required under this Section 1.11 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business within ten days following the
day on which such public announcement is first made by the Corporation. As used
herein, shares 'beneficially owned' shall mean all shares as to which such
person, together with such person's affiliates and associates (as defined in
Rule 12b-2 under the Exchange Act), may be deemed to beneficially own pursuant
to Rules 13d-3 and 13d-5 under the Exchange Act, as well as all shares as to
which such person, together with such person's affiliates and associates, has
the right to become the beneficial owner pursuant to any agreement or
understanding, or upon the exercise of warrants, options or rights to convert or
exchange (whether such rights are exercisable immediately or only after the

passage of time or the occurrence of conditions). The person presiding at the
meeting, in addition to making any other determinations that may be appropriate
to the conduct of the meeting, shall determine whether such notice has been duly
given and shall direct that proposals and nominees not be considered if such
notice has not been given. Notwithstanding the foregoing provisions of this
Section 1.11, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 1.11.

ARTICLE II
BOARD OF DIRECTORS

SECTION 2.1. Powers; Number; Qualifications. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the Certificate of
Incorporation. The Board shall consist of one or more members, the number
thereof to be determined from time to time by the Board; provided, however, that
in determining the number of directors no account shall be taken of any
non-voting director, including any advisory or honorary director, that may be
elected from time to time by a majority of the Board of Directors. Directors
need not be stockholders.

SECTION 2.2. Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until the annual meeting of stockholders next
succeeding his or her election and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any director may
resign at any time upon written notice to the Board of Directors or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and no acceptance of such resignation
shall be necessary to make it effective. Any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors. Whenever the
holders of any class or series of stock are entitled to elect one or more
directors by the Certificate of Incorporation, the provisions of the preceding
sentence shall apply, in respect to the removal without cause of a director or
directors so elected, to the vote of the holders of the outstanding shares of
that class or series and not to the vote of the outstanding shares as a whole.
Unless otherwise provided in the Certificate of Incorporation or these By-Laws,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class or from any other cause may be filled by a
majority of the directors then in office, although less than a quorum, or by the
sole remaining director.

SECTION 2.3. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board may from time to time determine, and if so determined notice
thereof need not be given.

SECTION 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the President or by the Secretary on the written request of
any two directors. Reasonable notice thereof shall be given by the person
calling the meeting.

SECTION 2.5. Participation in Meetings by Conference Telephone Permitted.
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.

SECTION 2.6. Quorum; Vote Required for Action. At all meetings of the Board
of Directors a majority of the entire Board shall constitute a quorum for the
transaction of business except as otherwise provided for in the Certificate of
Incorporation or these By-Laws. The vote of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board unless
the Certificate of Incorporation or other provisions of these By-Laws shall
require a vote of a greater number. In case at any meeting of the Board a quorum
shall not be present, a majority of the members of the Board present may adjourn
the meeting from time to time until a quorum shall attend, and notice need not
be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which adjournment is taken.

SECTION 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the President, or in their absence by a chairman chosen
at the meeting. The Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the absence of the
Secretary and any Assistant Secretary the chairman of the meeting may appoint
any person to act as secretary of the meeting.

SECTION 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.

SECTION 2.9. Compensation of Directors. The Board of Directors shall have
the authority to fix the compensation of directors.

ARTICLE III
COMMITTEES

SECTION 3.1. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors or in these By-Laws,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, removing or indemnifying directors or amending these By-Laws; and,
unless a resolution of the Board of Directors, these By-Laws or the Certificate
of Incorporation expressly so provides, no such committee shall have the power
or authority to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger.

SECTION 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, a majority
of the members of such committee shall constitute a quorum for the transaction
of business, the vote of a majority of the members present at a meeting at the
time of such vote if a quorum is then present shall be the act of such
committee, and in other respects each committee shall conduct its business in
the same manner as the Board conducts its business pursuant to Article II of
these By-Laws.

ARTICLE IV
OFFICERS

SECTION 4.1. Officers; Election. As soon as practicable after the annual
meeting of stockholders in each year, the Board of Directors shall elect a
President, a Treasurer and a Secretary, and it may, if it so

determines, elect from among its members a Chairman of the Board. The Board may
also elect one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Secretaries and one or more Assistant Treasurers and such
other officers as the Board may deem desirable or appropriate and may give any
of them such further designations or alternate titles as it considers desirable.
Any number of offices may be held by the same person.

SECTION 4.2. Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until the first meeting of the Board
after the annual meeting of stockholders next succeeding his or her election and
until his or her successor is elected and qualified, or until his or her earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board or to the President or the Secretary of the Corporation. Such
resignation shall have taken effect at the time specified therein, and no
acceptance of such resignation shall be necessary to make it effective. Unless
otherwise provided by the By-Laws, the Board may remove any officer with or
without cause at any time. Any such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation, but the
election of an officer shall not of itself create contractual rights. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled for the unexpired portion of the term by the
Board at any regular or special meeting.

SECTION 4.3. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he or she shall be present and shall have and may exercise such powers
as may, from time to time, be assigned to him or her by the Board and as may be
provided by law.

SECTION 4.4. President. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. The President shall be the
chief executive officer and shall have general charge and supervision of the
business of the Corporation and, in general, shall perform all duties generally
pertaining to the office of president of a corporation and such other duties as
may, from time to time, be assigned to him or her by the Board or as may be
provided by law.

SECTION 4.5. Vice Presidents. The Vice President or Vice Presidents shall
have such powers and shall perform all duties generally pertaining to the office
of vice president of a corporation and such duties as may, from time to time, be
assigned to him or her or them by the Board or the President or as may be
provided by law.

SECTION 4.6. Secretary. The Secretary shall have the duty to record the
proceedings of the meetings of the stockholders, the Board of Directors and any
committees in a book to be kept for that purpose, shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as required by
law, shall be custodian of the records of the Corporation, may affix the
corporate seal to any document the execution of which, on behalf of the
Corporation, is duly authorized, and when so affixed may attest the same, and,
in general, shall perform all duties generally pertaining to the office of
secretary of a corporation and such other duties as may, from time to time, be
assigned to him or her by the Board or the President or as may be provided by
law.

SECTION 4.7. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by or under
authority of the Board of Directors. If required by the Board, the Treasurer
shall give a bond for the faithful discharge of his or her duties, with such
surety or sureties as the Board may determine. The Treasurer shall keep or cause
to be kept full and accurate records of all receipts and disbursements in books
of the Corporation, shall render to the President and to the Board, whenever
requested, an account of the financial condition of the Corporation, and, in
general, shall perform all the duties generally pertaining to the office of
treasurer of a corporation and such other duties as may, from time to time, be
assigned to him or her by the Board or the President or as may be provided by
law.

SECTION 4.8. Other officers. The other officers, if any, of the Corporation
shall have such powers and duties in the management of the Corporation as shall
be stated in a resolution of the Board of Directors which is not inconsistent
with these By-Laws and, to the extent not so stated, as generally

pertain to their respective offices, subject to the control of the Board. The
Board may require any officer, agent or employee to give security for the
faithful performance of his or her duties.

ARTICLE V
STOCK

SECTION 5.1. Certificates. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by or in the name of the Corporation by
the Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such holder in the Corporation. If such certificate is manually signed
by one officer or manually countersigned by a transfer agent or by a registrar,
any other signature on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.

If the Corporation is authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided by law, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.

SECTION 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.

ARTICLE VI
MISCELLANEOUS

SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.

SECTION 6.2. Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors. The corporate seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.

SECTION 6.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever notice is required to be given by law or under any
provision of the Certificate of Incorporation or these By-Laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation
or these By-Laws.

SECTION 6.4. Indemnification of Directors, Officers and Employees. The
Corporation shall indemnify to the full extent and in the manner authorized by
law any person made or threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that such person or such person's
testator or intestate is or was a director, officer or employee of the
Corporation or serves or served at the request

of the Corporation any other enterprise as a director, officer, employee or
agent. Expenses incurred by any such person in defending any such action, suit
or proceeding shall be paid or reimbursed by the Corporation promptly upon
receipt by it of an undertaking of such person to repay such expenses if it
shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation. For purposes of this By-Law, the term
'Corporation' shall include any predecessor of the Corporation and any
constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation or merger; the term 'other enterprise' shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service 'at the request of the Corporation' shall include service as a
director, officer or employee of the Corporation which imposes duties on, or
involves services by, such director, officer or employee with respect to an
employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan which such person
reasonably believes to be in the interest of the participants and beneficiaries
of such plan shall be deemed to be action not opposed to the best interests of
the Corporation.

SECTION 6.5. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or her or their
votes are counted for such purpose, if: (1) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.

SECTION 6.6. Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of account
and minute books, may be kept on, or be in the form of computer disks, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.

SECTION 6.7. Dividends. Subject to the provisions of the Certificate of
Incorporation and these By-Laws, the Board of Directors may, out of funds
legally available therefor at any regular or special meeting, declare dividends
upon the capital stock of the Corporation as and when they deem expedient.
Before declaring any dividend, the Board may cause to be set apart out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time in their discretion deem proper for working capital
or as a reserve fund to meet contingencies or for equalizing dividends or for
such other purposes as the directors shall deem conducive to the interests of
the Corporation.

SECTION 6.8. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents of the
Corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.

SECTION 6.9. Amendment of By-Laws. These By-Laws may be amended or
repealed, and new By-Laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional By-Laws and may amend or
repeal any By-Law whether or not adopted by them.

<PAGE>

EXHIBIT 21.1

TRANSATLANTIC HOLDINGS, INC.
SUBSIDIARIES OF REGISTRANT

<TABLE>
<CAPTION>
% OF VOTING
SECURITIES
OWNED BY ITS
JURISDICTION OF IMMEDIATE
NAME OF CORPORATION INCORPORATION PARENT
- -------------------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
Transatlantic Reinsurance Company......................................... New York, U.S.A. 100%
Putnam Reinsurance Company........................................... New York, U.S.A. 100%*
Trans Re Zurich...................................................... Zurich, Switzerland 100%*
Transatlantic Re (Argentina) S.A..................................... Argentina 100%*
Transatlantic Re (Brasil) Ltda....................................... Brazil 100%*
</TABLE>

- ------------------

* The common stock is owned 100% by Transatlantic Reinsurance Company.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statements
of Transatlantic Holdings, Inc. on Forms S-8 (File No. 33-99764 and File No.
33-41474) of our report dated February 8, 1999, on our audits of the
consolidated financial statements and financial statement schedules of
Transatlantic Holdings, Inc. and Subsidiaries as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998, which
report is included in this Annual Report on Form 10-K.

PRICEWATERHOUSECOOPERS LLP

New York, New York
March 26, 1999

<PAGE>

<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TRANSATLANTIC HOLDINGS, INC.'S FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<DEBT-HELD-FOR-SALE> 2,409,054
<DEBT-CARRYING-VALUE> 1,124,455
<DEBT-MARKET-VALUE> 1,210,534
<EQUITIES> 574,398
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,258,244
<CASH> 70,589
<RECOVER-REINSURE> 464,159
<DEFERRED-ACQUISITION> 67,578
<TOTAL-ASSETS> 5,253,249
<POLICY-LOSSES> 3,116,038
<UNEARNED-PREMIUMS> 386,652
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 35,467
<OTHER-SE> 1,574,672
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<PAGE>