Alterra Capital Reports Third Quarter 2010 Results

Alterra Capital Holdings Limited (NASDAQ: ALTE; BSX: ALTE.BH) ("Alterra”) today reported net income of $82.8 million, or $0.70 per diluted share, for the third quarter of 2010, compared to net income of $95.3 million, or $1.64 per diluted share, for the same quarter of 2009. Alterra, formerly known as Max Capital Group Ltd. ("Max”), was formed on May 12, 2010 by the merger of Max and Harbor Point Limited, a privately held company ("Harbor Point”).

Net operating income for the third quarter of 2010 was $76.0 million, or $0.64 per diluted share, compared to net operating income of $53.7 million, or $0.92 per diluted share, for the same quarter of 2009. Annualized net operating return on average shareholders’ equity for the third quarter of 2010 was 10.2%.

For the nine months ended September 30, 2010, Alterra reported net income of $222.7 million, or $2.50 per diluted share, compared to net income of $183.6 million, or $3.18 per diluted share, for the same period of 2009. Net operating income for the nine months ended September 30, 2010 was $175.5 million, or $1.97 per diluted share, compared to net operating income of $148.4 million, or $2.57 per diluted share, for the same period of 2009. Annualized net operating return on average shareholders’ equity for the nine months ended September 30, 2010 was 10.2%.

The results for Alterra include the results for Harbor Point and its subsidiaries from the date of the consummation of the merger on May 12, 2010. Comparative figures for 2009 represent the former Max results only. As a result, a comparison of Alterra’s gross premiums written from property and casualty underwriting and results of operations for the reinsurance segment for current and prior periods are not meaningful. Selected pro forma combined results of operations for periods prior to the merger for the reinsurance segment are provided in the third quarter financial supplement available on Alterra’s website at www.alterracap.com.

W. Marston (Marty) Becker, President and Chief Executive Officer of Alterra, said: "Alterra had a very solid quarter financially, and also operationally, with the Harbor Point merger integration proceeding as planned and now largely completed. Our balance sheet is very strong, and we are well positioned to respond to market opportunities as they arise.”

Mr. Becker added: "Our gross premiums written during the quarter were down on a pro forma basis, due in part to Alterra’s continued underwriting discipline in the face of a softening market, and to a related trend among primary companies to retain a greater share of business. Coupled with declining yields on invested assets, these factors added pressure to current operating income. We are pleased with the early results of our expansion into Latin America and the continued strong performance of our late 2008 Lloyd’s acquisition. Taken together with the quality underwriting teams that joined us as a result of our recent merger, we are strongly positioned both for today and for the future, with proven insurance and reinsurance capabilities in Bermuda, Dublin, London, and the U.S. – and now Latin America reinsurance as well.

"We remain focused and committed to prudent capital allocation as a means for delivering consistent shareholder value. During the quarter we continued our share repurchase program, buying back shares at an attractive discount to book value. For the year to date, we have returned over $435 million to shareholders in the form of dividends and share repurchases. We have also increased our capital flexibility this quarter by issuing long term debt at a favorable fixed rate of interest, reducing our allocation to short term variable rate borrowing. We believe this will prove beneficial in the future as interest rates inevitably rise from their current levels,” Mr. Becker concluded.

Third quarter 2010 results for Alterra include:

• Property and casualty gross premiums written of $323.9 million, representing an increase of $58.1 million, or 21.9%; net premiums written of $263.4 million, representing an increase of $80.9 million, or 44.3%; and net premiums earned of $341.2 million, representing an increase of $133.3 million, or 64.1%; each as compared to the same quarter of 2009. The percentage increases in these figures primarily reflect incremental growth from recent expansion initiatives, including the merger with Harbor Point - whose premiums are not included in the comparative 2009 results of operations - as well as from new operations in Latin America and new product offerings at Alterra at Lloyd’s. These increases were partially offset by decreases in previously existing operations where writings were reduced due to unattractive returns;
• Property and casualty combined ratio of 86.0% compared to 90.9% in the same quarter of 2009;
• Property catastrophe event and significant per-risk net losses of $14.1 million compared to no material property catastrophe losses in the same quarter of 2009;
• Net favorable development on prior years’ loss reserves of $36.4 million, or 10.6 combined ratio points, compared to $15.2 million, or 7.3 combined ratio points, in the same quarter of 2009;
• Net investment income of $59.7 million compared to $42.8 million in the same quarter of 2009, an increase of 39.5%; and
• Net operating income of $76.0 million, or $0.64 per diluted share, representing an annualized net operating return on average shareholders’ equity of 10.2%.

Gross premiums written from property and casualty underwriting for the third quarter of 2010 were $323.9 million, generated by the segments as follows: insurance - $70.3 million, a decrease of $10.8 million, or (13.3)%; reinsurance - $124.0 million, an increase of $29.9 million, or 31.8%; U.S. specialty - $71.9 million, an increase of $2.5 million, or 3.6%; and Alterra at Lloyd’s - $57.7 million, an increase of $36.6 million, or 173.5%. Gross premiums written included $30.2 million from our operations in Latin America, which started in the first quarter.

Segment combined ratios for the third quarter of 2010 were 56.5% for insurance, 91.1% for reinsurance, 95.4% for U.S. specialty and 90.4% for Alterra at Lloyd’s.

Results for the nine months ended September 30, 2010 include:

• Property and casualty gross premiums written of $1,092.3 million, representing an increase of $37.4 million, or 3.5%; net premiums written of $799.0 million, representing an increase of $121.3 million, or 17.9%; and net premiums earned of $827.2 million, representing an increase of $241.7 million, or 41.3%; each as compared to the same period of 2009. The percentage increases in these figures primarily reflect incremental growth from recent expansion initiatives, including the merger with Harbor Point - whose premiums are not included in the comparative 2009 results of operations - as well as from new operations in Latin America and new product offerings at Alterra at Lloyd’s. These increases were partially offset by decreases in previously existing operations where writings were reduced due to unattractive returns;
• Property and casualty combined ratio of 86.1% compared to 90.5% in the same period of 2009;
• Property catastrophe event and significant per-risk losses of $44.0 million compared to $3.4 million in the same period of 2009;
• Net favorable development on prior years’ loss reserves of $77.6 million, or 9.4 combined ratio points, compared to $47.5 million, or 8.1 combined ratio points, in the same period of 2009;
• Net investment income of $161.4 million compared to $125.1 million in the same period of 2009, an increase of 29.0%; and
• Net operating income of $175.5 million, or $1.97 per diluted share, representing an annualized net operating return on average shareholders’ equity of 10.2%.

Gross premiums written from property and casualty underwriting for the nine months ended September 30, 2010 were $1,092.3 million, generated by the segments as follows: insurance - $269.0 million, a decrease of $33.7 million, or (11.1)%; reinsurance - $398.4 million, a decrease of $23.9 million, or (5.7)%; U.S. specialty - $246.2 million, an increase of $26.9 million, or 12.3%; and Alterra at Lloyd’s - $178.7 million, an increase of $68.1 million, or 61.6%. There were no new contracts written within the life and annuity segment during the nine months ended September 30, 2010.

Segment combined ratios for the nine months ended September 30, 2010 were 72.7% for insurance, 88.7% for reinsurance, 96.9% for U.S. specialty and 82.3% for Alterra at Lloyd’s.

Balance Sheet

Total invested assets, including cash and cash equivalents, were $8.0 billion at September 30, 2010, an increase of $2.7 billion from December 31, 2009, primarily as a result of the merger. The credit quality of Alterra’s fixed maturities investment portfolio as of September 30, 2010 was high. As of September 30, 2010, 96.6% of the fixed maturities portfolio (by carrying value) was investment-grade, unchanged from December 31, 2009. As of September 30, 2010, the weighted average book yield of Alterra’s cash and fixed maturities portfolio was 3.23% and the weighted average duration was 4.1 years.

Net investment income for the third quarter of 2010 increased to $59.7 million from $42.8 million for the same quarter of 2009, and to $161.4 million from $125.1 million for the nine months ended September 30, 2010 and 2009, respectively. The increase in net investment income reflects the additional investment income from the Harbor Point investment portfolio since the consummation of the merger on May 12, 2010, and an increased allocation to higher-yielding fixed maturity securities.

Under the Board-approved share repurchase authorization, Alterra repurchased 2,845,356 of its common shares during the quarter ended September 30, 2010 at an average price of $19.00 per share for a total of $54.1 million. Share repurchases for the nine months ended September 30, 2010 were 5,052,349 common shares at an average price of $19.48 per share for a total of $98.4 million. As of September 30, 2010, $37.1 million remained under the Board-approved share repurchase authorization. On October 29, 2010, Alterra’s Rule 10b5-1 share repurchase plan expired by its terms. During October 2010, under the 10b5-1 plan, Alterra repurchased 699,900 common shares at an average price of $20.55 per share for a total of $14.4 million. Upon expiration of the 10b5-1 plan, $22.7 million remained available under the Board-approved share repurchase authorization.

Shareholders’ equity was $3,036.5 million as of September 30, 2010, an increase of 3.7% from June 30, 2010. Book value per diluted share as of September 30, 2010 was $25.88, an increase of 5.4% from June 30, 2010. Including the unrecognized change in fair value on Alterra’s held to maturity investment portfolio for the quarter ended September 30, 2010, the increase in book value per diluted share would have been 7.4%.

A copy of Alterra’s financial supplement for the third quarter will be available on Alterra’s website at www.alterracap.com shortly after the release of earnings.

Alterra will host a conference call on Wednesday, November 3, 2010 at 10:00am (EDT) to discuss its third quarter results with interested investors and shareholders. The conference call can be accessed via telephone by dialing 1-888-713-4218 (toll-free U.S.) or 1-617-213-4870 (international) and using access code 55954665. A live broadcast of the conference call will also be available through Alterra’s website at www.alterracap.com.

Alterra Capital Holdings Limited is a global enterprise dedicated to providing diversified specialty insurance and reinsurance products to corporations, public entities and property and casualty insurers.

Non-GAAP Financial Measures

In presenting Alterra’s results, management has included and discussed net operating income, net operating income per diluted share, annualized net operating return on average shareholders’ equity and diluted tangible book value per share. These measures are "non-GAAP financial measures” as defined in Regulation G. Management believes that these non-GAAP financial measures, which may be defined differently by other companies, allow for a more complete understanding of Alterra’s business. These measures, however, should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The reconciliation of these measures to their respective most directly comparable U.S. GAAP financial measures is presented in the attached financial information in accordance with Regulation G.

Cautionary Note Regarding Forward-Looking Statements

This release may include forward-looking statements that reflect Alterra’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those suggested by such statements. For further information regarding cautionary statements and factors affecting Alterra’s future results, please refer to the most recent reports on Form 10-K and Form 10-Q and other documents filed by Alterra with the SEC. Alterra undertakes no obligation to update or revise publicly any forward-looking statement whether as a result of new information, future developments or otherwise.

ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per share and share amounts)
				September 30, 2010				December 31, 2009
				(unaudited)
ASSETS
Cash and cash equivalents				$	925,752			$	702,278
Fixed maturities, trading at fair value					243,158				228,696
Fixed maturities, available for sale at fair value					5,425,955				3,007,356
Fixed maturities, held to maturity at amortized cost (fair value $1,106,057)					954,623				1,005,947
Other investments, at fair value					411,275				318,073
Accrued interest income					73,622				57,215
Premiums receivable					664,603				567,301
Losses and benefits recoverable from reinsurers					976,819				1,001,373
Deferred acquisition costs					106,728				65,648
Prepaid reinsurance premiums					173,140				190,613
Trades pending settlement					24,364				76,031
Goodwill and intangible assets					60,670				48,686
Other assets					78,225				70,529
Total assets				$	10,118,934			$	7,339,746
LIABILITIES
Property and casualty losses				$	3,847,366			$	3,178,094
Life and annuity benefits					1,299,190				1,372,513
Deposit liabilities					147,212				152,629
Funds withheld from reinsurers					119,859				140,079
Unearned property and casualty premiums					1,015,831				628,161
Reinsurance balances payable					122,184				146,085
Accounts payable and accrued expenses					90,282				67,088
Senior notes					440,473				90,464
Total liabilities					7,082,397				5,775,113
SHAREHOLDERS' EQUITY
Preferred shares (par value $1.00)
20,000,000 shares authorized;
no shares issued or outstanding					-				-
Common shares (par value $1.00)
200,000,000 shares authorized;
115,898,860 (2009 - 55,867,125) shares issued and outstanding					115,899				55,867
Additional paid-in capital					2,113,732				752,309
Accumulated other comprehensive income					190,325				25,431
Retained earnings					616,581				731,026
Total shareholders' equity					3,036,537				1,564,633
Total liabilities and shareholders' equity				$	10,118,934			$	7,339,746
Book value per share				$	26.20			$	28.01
Diluted book value per share				$	25.88			$	27.36
Diluted tangible book value per share [a]				$	25.37			$	26.51
Diluted shares outstanding					117,321,004				57,178,458
[a] Non-Gaap measure as defined by Regulation G.

ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(Expressed in thousands of United States Dollars, except per share and share amounts)
				Three Months Ended September 30,									Nine Months Ended September 30,
				2010				2009					2010				2009
REVENUES
Gross premiums written				$	325,213			$	265,886				$	1,095,333			$	1,096,668
Reinsurance premiums ceded					(60,611	)			(83,290	)				(293,546	)			(377,338	)
Net premiums written				$	264,602			$	182,596				$	801,787			$	719,330
Earned premiums				$	436,244			$	329,869				$	1,132,964			$	993,871
Earned premiums ceded					(93,812	)			(121,853	)				(303,032	)			(366,788	)
Net premiums earned					342,432				208,016					829,932				627,083
Net investment income					59,711				42,830					161,378				125,073
Net realized and unrealized gains on investments					15,411				24,528					7,047				64,440
Total other-than-temporary impairment losses					(90	)			-					(1,955	)			(5,190	)
Portion of loss recognized in other comprehensive income (loss), before taxes					(61	)			(139	)				1,084				3,037
Net impairment losses recognized in earnings					(151	)			(139	)				(871	)			(2,153	)
Other income					1,327				819					1,946				3,099
Total revenues					418,730				276,054					999,432				817,542
LOSSES AND EXPENSES
Net losses and loss expenses					191,012				131,778					475,794				378,729
Claims and policy benefits					15,060				14,378					46,662				84,117
Acquisition costs					60,859				27,997					133,901				73,686
Interest expense					7,551				5,971					20,409				14,654
Net foreign exchange losses (gains)					3,353				406					267				(6,474	)
Merger and acquisition expenses					550				(41,350	)				(49,276	)			(31,342	)
General and administrative expenses					56,650				40,372					143,827				115,537
Total losses and expenses					335,035				179,552					771,584				628,907
INCOME BEFORE TAXES					83,695				96,502					227,848				188,635
Income tax expense					858				1,176					5,183				5,012
NET INCOME [a]					82,837				95,326					222,665				183,623
Change in net unrealized gains and losses on fixed maturities, net of tax					74,383				95,794					169,039				66,629
Foreign currency translation adjustment					13,224				(4,462	)				(4,145	)			20,372
COMPREHENSIVE INCOME [a]				$	170,444			$	186,658				$	387,559			$	270,624
Basic earnings per share				$	0.71			$	1.67				$	2.52			$	3.22
Diluted earnings per share				$	0.70			$	1.64				$	2.50			$	3.18
Net operating income per diluted share				$	0.64			$	0.92				$	1.97			$	2.57
Weighted average shares outstanding - basic					117,200,505				57,233,115					88,253,609				56,978,901
Weighted average shares outstanding - diluted					117,957,942				58,210,501					89,001,515				57,677,996
[a] Includes the results of Harbor Point Limited from May 12, 2010.

ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
				Nine Months Ended September 30
				2010					2009
Common shares
Balance, beginning of period				$	55,867				$	55,806
Issuance of common shares, net					65,084					1,529
Repurchase of shares					(5,052	)				(322	)
Balance, end of period					115,899					57,013
Additional paid-in capital
Balance, beginning of period					752,309					763,391
Issuance of common shares, net					1,418,214					457
Stock based compensation expense					36,600					16,124
Repurchase of shares					(93,391	)				(6,049	)
Balance, end of period					2,113,732					773,923
Accumulated other comprehensive income (loss)
Balance, beginning of period					25,431					(45,399	)
Holding gains on available for sale securities arising in period [a]					179,482					66,650
Net realized (gains) losses on available for sale securities included in net income [a]					(9,359	)				3,016
Portion of other-than-temporary impairment losses recognised in other comprehensive income [a]					(1,084	)				(3,037	)
Foreign currency translation adjustment					(4,145	)				20,372
Balance, end of period					190,325					41,602
Retained earnings
Balance, beginning of period					731,026					506,533
Net income					222,665					183,623
Dividends					(337,110	)				(16,020	)
Balance, end of period					616,581					674,136
Total shareholders' equity				$	3,036,537				$	1,546,674
[a] Net of tax

ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
				Nine Months Ended September 30
				2010					2009
OPERATING ACTIVITIES
Net income				$	222,665				$	183,623
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation					36,600					16,124
Amortization of premium on fixed maturities					10,973					2,503
Accretion of deposit liabilities					3,940					2,078
Net realized and unrealized gains on investments					(7,047	)				(64,440	)
Net impairment losses recognized in earnings					871					2,153
Negative goodwill gain					(95,788	)				-
Changes in:
Accrued interest income					(822	)				820
Premiums receivable					266,878					12,894
Losses and benefits recoverable from reinsurers					(9,975	)				(130,985	)
Deferred acquisition costs					(38,485	)				(13,645	)
Prepaid reinsurance premiums					10,865					(11,907	)
Other assets					3,407					(2,624	)
Property and casualty losses					(166,930	)				183,163
Life and annuity benefits					(24,819	)				508
Funds withheld from reinsurers					(20,220	)				(21,773	)
Unearned property and casualty premiums					12,092					92,046
Reinsurance balances payable					(28,025	)				(10,515	)
Accounts payable and accrued expenses					(7,167	)				9,828
Cash provided by operating activities					169,013					249,851
INVESTING ACTIVITIES
Purchases of available for sale securities					(1,752,420	)				(783,451	)
Sales of available for sale securities					892,465					175,465
Redemptions/maturities of available for sale securities					702,506					479,310
Purchases of trading securities					(55,812	)				(40,691	)
Sales of trading securities					14,097					28,887
Redemptions/maturities of trading securities					19,361					5,094
Purchases of held to maturity securities					(16,961	)				(33,647	)
Redemptions/maturities of held to maturity securities					23,599					-
Net purchases/sales of other investments					78,985					462,501
Acquisition of subsidiary, net of cash acquired					446,819					-
Cash provided by investing activities					352,639					293,468
FINANCING ACTIVITIES
Net proceeds from issuance of common shares					1,478					1,986
Repurchase of common shares					(98,443	)				(6,371	)
Net proceeds from issuance of senior notes					349,997					-
Net repayments of bank loans					(200,000	)				(375,000	)
Dividends paid					(335,560	)				(16,020	)
Additions to deposit liabilities					3,453					12,422
Payment of deposit liabilities					(12,747	)				(80,748	)
Cash used in financing activities					(291,822	)				(463,731	)
Effect of exchange rate changes on foreign currency cash and cash equivalents					(6,356	)				27,019
Net increase in cash and cash equivalents					223,474					106,607
Cash and cash equivalents, beginning of period					702,278					949,404
CASH AND CASH EQUIVALENTS, END OF PERIOD				$	925,752				$	1,056,011
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $5,394 and $4,943 for the nine months ended September 30, 2010 and 2009, respectively.
Income taxes paid totaled $4,068 and $310 for the nine months ended September 30, 2010 and 2009, respectively.

ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED SEPTEMBER 30, 2010 (Unaudited)
(Expressed in thousands of United States Dollars)
Quarter Segment Information:				Property & Casualty																					Life & Annuity					Corporate					Consolidated
				Insurance				Reinsurance				U.S. Specialty				Alterra at Lloyd's				Total					Reinsurance
Gross premiums written				$	70,271			$	124,004			$	71,871			$	57,734			$	323,880				$	1,333				$	-				$	325,213
Reinsurance premiums ceded					(34,075	)			(2,524	)			(21,513	)			(2,397	)			(60,509	)				(102	)				-					(60,611	)
Net premiums written				$	36,196			$	121,480			$	50,358			$	55,337			$	263,371				$	1,231				$	-				$	264,602
Earned premiums				$	96,777			$	213,510			$	79,200			$	45,424			$	434,911				$	1,333				$	-				$	436,244
Earned premiums ceded					(41,097	)			(15,533	)			(27,770	)			(9,310	)			(93,710	)				(102	)				-					(93,812	)
Net premiums earned					55,680				197,977				51,430				36,114				341,201					1,231					-					342,432
Net investment income					6,209				17,495				1,295				2,256				27,255					12,182					20,274					59,711
Net realized and unrealized gains on investments					188				197				30				883				1,298					3,321					10,792					15,411
Net impairment losses recognized in earnings					-				-				-				-				-					-					(151	)				(151	)
Other income					771				61				337				177				1,346					(43	)				24					1,327
Total revenues					62,848				215,730				53,092				39,430				371,100					16,691					30,939					418,730
Net losses and loss expenses					23,775				117,671				32,199				17,367				191,012					-					-					191,012
Claims and policy benefits					-				-				-				-				-					15,060					-					15,060
Acquisition costs					1,265				45,069				6,880				7,474				60,688					171					-					60,859
Interest expense					80				1,149				-				-				1,229					2,311					4,011					7,551
Net foreign exchange losses (gains)					-				1,478				-				2,089				3,567					-					(214	)				3,353
Merger and acquisition expenses					-				-				-				-				-					-					550					550
General and administrative expenses					6,435				17,580				9,975				7,806				41,796					577					14,277					56,650
Total losses and expenses					31,555				182,947				49,054				34,736				298,292					18,119					18,624					335,035
																										-					-
Income (loss) before taxes				$	31,293			$	32,783			$	4,038			$	4,694			$	72,808				$	(1,428	)			$	12,315				$	83,695
Loss Ratio [a]					42.7	%			59.4	%			62.6	%			48.1	%			56.0	%
Combined Ratio [b]					56.5	%			91.1	%			95.4	%			90.4	%			86.0	%
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–NINE MONTHS ENDED SEPTEMBER 30, 2010 (Unaudited)
(Expressed in thousands of United States Dollars)
Year to Date Segment Information [c]:				Property & Casualty																					Life & Annuity					Corporate					Consolidated
				Insurance				Reinsurance				U.S. Specialty				Alterra at Lloyd's				Total					Reinsurance
Gross premiums written				$	269,004			$	398,433			$	246,245			$	178,653			$	1,092,335				$	2,998				$	-				$	1,095,333
Reinsurance premiums ceded					(118,908	)			(61,223	)			(77,592	)			(35,589	)			(293,312	)				(234	)				-					(293,546	)
Net premiums written				$	150,096			$	337,210			$	168,653			$	143,064			$	799,023				$	2,764				$	-				$	801,787
Earned premiums				$	293,692			$	483,982			$	229,122			$	123,170			$	1,129,966				$	2,998				$	-				$	1,132,964
Earned premiums ceded					(132,019	)			(50,545	)			(96,335	)			(23,899	)			(302,798	)				(234	)				-					(303,032	)
Net premiums earned					161,673				433,437				132,787				99,271				827,168					2,764					-					829,932
Net investment income					18,639				42,107				3,951				7,308				72,005					37,701					51,672					161,378
Net realized and unrealized gains (losses) on investments					391				418				29				(583	)			255					7,377					(585	)				7,047
Net impairment losses recognized in earnings					-				-				-				-				-					-					(871	)				(871	)
Other income					760				216				439				528				1,943					(71	)				74					1,946
Total revenues					181,463				476,178				137,206				106,524				901,371					47,771					50,290					999,432
Net losses and loss expenses					96,981				250,177				82,614				46,022				475,794					-					-					475,794
Claims and policy benefits					-				-				-				-				-					46,662					-					46,662
Acquisition costs					1,753				92,708				19,689				19,311				133,461					440					-					133,901
Interest expense					554				6,207				-				-				6,761					6,350					7,298					20,409
Net foreign exchange losses (gains)					-				1,967				-				(1,802	)			165					-					102					267
Merger and acquisition expenses					-				-				-				-				-					-					(49,276	)				(49,276	)
General and administrative expenses					18,833				41,359				26,433				16,345				102,970					1,876					38,981					143,827
Total losses and expenses					118,121				392,418				128,736				79,876				719,151					55,328					(2,895	)				771,584
Income (loss) before taxes				$	63,342			$	83,760			$	8,470			$	26,648			$	182,220				$	(7,557	)			$	53,185				$	227,848
Loss Ratio [a]					60.0	%			57.7	%			62.2	%			46.4	%			57.5	%
Combined Ratio [b]					72.7	%			88.7	%			96.9	%			82.3	%			86.1	%

[a]		The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned.
[b]		The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned.
[c]		Includes the results of Harbor Point Limited from May 12, 2010.

ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)
Quarter Segment Information:				Property & Casualty																					Life & Annuity					Corporate					Consolidated
				Insurance				Reinsurance				U.S. Specialty				Alterra at Lloyd's				Total					Reinsurance
Gross premiums written				$	81,134			$	94,118			$	69,419			$	21,087			$	265,758				$	128				$	-				$	265,886
Reinsurance premiums ceded					(41,884	)			(11,106	)			(26,259	)			(4,015	)			(83,264	)				(26	)				-					(83,290	)
Net premiums written				$	39,250			$	83,012			$	43,160			$	17,072			$	182,494				$	102				$	-				$	182,596
Earned premiums				$	103,961			$	128,458			$	68,175			$	29,147			$	329,741				$	128				$	-				$	329,869
Earned premiums ceded					(54,814	)			(25,367	)			(37,074	)			(4,572	)			(121,827	)				(26	)				-					(121,853	)
Net premiums earned					49,147				103,091				31,101				24,575				207,914					102					-					208,016
Net investment income					5,898				10,404				1,461				1,749				19,512					13,143					10,175					42,830
Net realized and unrealized gains on investments					1,298				3,040				-				1,400				5,738					11,932					6,858					24,528
Net impairment losses recognized in earnings					-				-				-				-				-					-					(139	)				(139	)
Other income					91				-				52				(33	)			110					-					709					819
Total revenues					56,434				116,535				32,614				27,691				233,274					25,177					17,603					276,054
Net losses and loss expenses					31,756				68,728				21,266				10,028				131,778					-					-					131,778
Claims and policy benefits					-				-				-				-				-					14,378					-					14,378
Acquisition costs					369				20,299				1,926				5,250				27,844					153					-					27,997
Interest expense					-				1,706				-				-				1,706					2,349					1,916					5,971
Net foreign exchange losses					-				-				-				42				42					-					364					406
Merger and acquisition expenses					-				-				-				-				-					-					(41,350	)				(41,350	)
General and administrative expenses					7,281				8,857				7,804				5,423				29,365					829					10,178					40,372
Total losses and expenses					39,406				99,590				30,996				20,743				190,735					17,709					(28,892	)				179,552
Income before taxes				$	17,028			$	16,945			$	1,618			$	6,948			$	42,539				$	7,468				$	46,495				$	96,502
Loss Ratio [a]					64.6	%			66.7	%			68.4	%			40.8	%			63.4	%
Combined Ratio [b]					80.2	%			94.9	%			99.7	%			84.2	%			90.9	%
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–NINE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)
Year to Date Segment Information:				Property & Casualty																					Life & Annuity					Corporate					Consolidated
				Insurance				Reinsurance				U.S. Specialty				Alterra at Lloyd's				Total					Reinsurance
Gross premiums written				$	302,727			$	422,296			$	219,268			$	110,629			$	1,054,920				$	41,748				$	-				$	1,096,668
Reinsurance premiums ceded					(146,076	)			(80,574	)			(118,579	)			(31,963	)			(377,192	)				(146	)				-					(377,338	)
Net premiums written				$	156,651			$	341,722			$	100,689			$	78,666			$	677,728				$	41,602				$	-				$	719,330
Earned premiums				$	307,709			$	364,994			$	185,609			$	93,811			$	952,123				$	41,748				$	-				$	993,871
Earned premiums ceded					(157,710	)			(74,711	)			(111,682	)			(22,539	)			(366,642	)				(146	)				-					(366,788	)
Net premiums earned					149,999				290,283				73,927				71,272				585,481					41,602					-					627,083
Net investment income					16,861				29,607				4,549				3,216				54,233					37,626					33,214					125,073
Net realized and unrealized gains on investments					3,537				8,467				148				2,587				14,739					29,146					20,555					64,440
Net impairment losses recognized in earnings					-				-				-				-				-					-					(2,153	)				(2,153	)
Other income					1,238				12				272				475				1,997					-					1,102					3,099
Total revenues					171,635				328,369				78,896				77,550				656,450					108,374					52,718					817,542
Net losses and loss expenses					106,029				192,756				46,500				33,444				378,729					-					-					378,729
Claims and policy benefits					-				-				-				-				-					84,117					-					84,117
Acquisition costs					(1,503	)			53,496				5,873				14,797				72,663					1,023					-					73,686
Interest expense					-				2,400				-				-				2,400					2,803					9,451					14,654
Net foreign exchange gains					-				-				-				(5,124	)			(5,124	)				-					(1,350	)				(6,474	)
Merger and acquisition expenses					-				-				-				-				-					-					(31,342	)				(31,342	)
General and administrative expenses					17,825				23,604				21,195				15,856				78,480					2,180					34,877					115,537
Total losses and expenses					122,351				272,256				73,568				58,973				527,148					90,123					11,636					628,907
Income before taxes				$	49,284			$	56,113			$	5,328			$	18,577			$	129,302				$	18,251				$	41,082				$	188,635
Loss Ratio [a]					70.7	%			66.4	%			62.9	%			46.9	%			64.7	%
Combined Ratio [b]					81.6	%			93.0	%			99.5	%			89.9	%			90.5	%

[a]		The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned.
[b]		The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned.

ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA–NINE MONTHS ENDED SEPTEMBER 30, 2010 (Unaudited)
(Expressed in thousands of United States Dollars)
			Gross Premiums Written by Type of Risk:					Nine Months Ended September 30, 2010							Nine Months Ended September 30, 2009
								Gross Premiums Written			Percentage of Total Gross Premiums Written		Movement on Prior Year Period		Gross Premiums Written			Percentage of Total Gross Premiums Written
			Property & Casualty:
			Insurance:
			Aviation		S			$	17,211		1.6%		(43.2%)		$	30,314		2.8%
			Excess Liability		L				71,230		6.5%		(18.2%)			87,084		7.9%
			Professional Liability		L				129,462		11.8%		(4.0%)			134,845		12.3%
			Property		S				51,101		4.7%		1.2%			50,484		4.6%
									269,004		24.6%		(11.1%)			302,727		27.6%
			Reinsurance [a]:
			Agriculture		S				30,628		2.8%		(64.9%)			87,338		8.0%
			Auto		S				10,317		0.9%		n/a			-		-
			Aviation		S				28,696		2.6%		13.3%			25,335		2.3%
			Credit/ Surety		L				1,078		0.1%		n/a			-		-
			General Casualty		L				30,699		2.8%		31.2%			23,404		2.1%
			Marine & Energy		S				17,930		1.6%		21.8%			14,722		1.3%
			Medical Malpractice		L				31,837		3.0%		(43.5%)			56,397		5.1%
			Other		S				2,264		0.2%		(0.2%)			2,268		0.2%
			Professional Liability		L				81,889		7.5%		78.3%			45,922		4.2%
			Property		S				141,850		13.0%		58.6%			89,414		8.2%
			Whole Account		S/L				4,703		0.4%		(44.7%)			8,509		0.8%
			Workers' Compensation		L				16,542		1.5%		(76.0%)			68,987		6.3%
									398,433		36.4%		(5.7%)			422,296		38.5%
			U.S. Specialty:
			General Liability		L				76,205		7.0%		10.4%			69,026		6.3%
			Marine		S				49,696		4.5%		8.2%			45,917		4.2%
			Professional Liability		L				9,526		0.8%		n/a			-		-
			Property		S				110,818		10.1%		6.2%			104,325		9.5%
									246,245		22.4%		12.3%			219,268		20.0%
			Alterra at Lloyd's:
			Accident & Health		S				25,351		2.3%		18.7%			21,357		2.0%
			Aviation		S				10,914		1.0%		n/a			-		-
			Financial Institutions		L				19,064		1.7%		3.7%			18,376		1.7%
			International Casualty		L				28,330		2.6%		n/a			-		-
			Professional Liability		L				15,387		1.4%		5.4%			14,599		1.3%
			Property		S				79,607		7.3%		41.4%			56,297		5.1%
									178,653		16.3%		61.5%			110,629		10.1%
			Aggregate Property & Casualty					$	1,092,335		99.7%		3.5%		$	1,054,920		96.2%
			Life & Annuity:
			Annuity					$	6		0.0%		n/a		$	-		-
			Life						2,992		0.3%		(92.8%)			41,748		3.8%
			Aggregate Life & Annuity					$	2,998		0.3%		(92.8%)		$	41,748		3.8%
			Aggregate Property & Casualty and Life & Annuity					$	1,095,333		100.0%		(0.1%)		$	1,096,668		100.0%
			S = Short tail lines					$	578,735		53.0%				$	532,026		50.4%
			L = Long tail lines						513,600		47.0%					522,894		49.6%
			Aggregate Property & Casualty					$	1,092,335						$	1,054,920

[a] Includes the results of Harbor Point Limited from May 12, 2010.

ALTERRA CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS (Unaudited)
Net Operating Income and Net Operating Income per Diluted Share
(Expressed in thousands of United States Dollars, except per share and share amounts)
				Three Months Ended September 30,									Nine Months Ended September 30,
				2010				2009					2010				2009
Net income before tax				$	83,695			$	96,502				$	227,848			$	188,635
	Net realized and unrealized (gains) losses on non-hedge fund investments, before tax [a]				(10,440	)			(1,189	)				2,692				(109	)
	Foreign exchange losses (gains), before tax				3,353				406					267				(6,474	)
	Merger and acquisition expenses, before tax				550				(41,350	)				(49,276	)			(31,342	)
Net operating income before tax				$	77,158			$	54,369				$	181,531			$	150,710
Net income				$	82,837			$	95,326				$	222,665			$	183,623
	Net realized and unrealized (gains) losses on non-hedge fund investments, net of tax [a]				(10,104	)			(711	)				2,672				1,166
	Foreign exchange losses (gains), net of tax				2,758				395					780				(5,043	)
	Merger and acquisition expenses, net of tax				550				(41,350	)				(50,621	)			(31,342	)
Net operating income				$	76,041			$	53,660				$	175,496			$	148,404
Net income per diluted share				$	0.70			$	1.64				$	2.50			$	3.18
	Net realized and unrealized (gains) losses on non-hedge fund investments, net of tax [a]				(0.08	)			(0.01	)				0.03				0.02
	Foreign exchange losses (gains), net of tax				0.02				0.01					0.01				(0.09	)
	Merger and acquisition expenses, net of tax				-				(0.72	)				(0.57	)			(0.54	)
Net operating income per diluted share				$	0.64			$	0.92				$	1.97			$	2.57
Weighted average shares outstanding - basic					117,200,505				57,233,115					88,253,609				56,978,901
Weighted average shares outstanding - diluted					117,957,942				58,210,501					89,001,515				57,677,996
[a]	Net realized and unrealized (gains) losses on non-hedge fund investments includes realized and unrealized (gains) losses on trading securities, realised (gains) losses on available for sale securities, net impairment losses recognized in earnings, earnings from equity method investments and changes in fair value of investment derivatives, catastrophe bonds and structured deposits.
Annualized Net Operating Return on Average Shareholders' Equity
(Expressed in thousands of United States Dollars)
				Three Months Ended September 30,									Nine Months Ended September 30,
				2010				2009					2010				2009
Net income				$	82,837			$	95,326				$	222,665			$	183,623
Annualized net income					331,348				381,304					296,887				244,831
Net operating income				$	76,041			$	53,660				$	175,496			$	148,404
Annualized net operating income					304,164				214,640					233,995				197,872
Average shareholders' equity [b]				$	2,981,752			$	1,455,072				$	2,297,438			$	1,346,611
Annualized return on average shareholders' equity					11.1	%			26.2	%				12.9	%			18.2	%
Annualized net operating return on average shareholders' equity					10.2	%			14.8	%				10.2	%			14.7	%
[b]	Average shareholders' equity is computed as the average of the quarterly shareholders' equity balances. The average for the nine months ended September 30, 2010 has been weighted to include Harbor Point Limited from May 12, 2010.
Diluted Tangible Book Value Per Share
(Expressed in thousands of United States Dollars, except per share and share amounts)
				September 30, 2010				December 31, 2009
Shareholders' equity				$	3,036,537			$	1,564,633
Goodwill and intangible assets					(60,670	)			(48,686	)
Tangible book value				$	2,975,867			$	1,515,947
Diluted shares outstanding					117,321,004				57,178,458
Diluted tangible book value per share				$	25.37			$	26.51

ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA– SEPTEMBER 30, 2010 (Unaudited)
(Expressed in thousands of United States Dollars)
Type of Investment			As of September 30, 2010				Investment Distribution				As of December 31, 2009				Investment Distribution
Cash and cash equivalents			$	925,752				11.6	%		$	702,278				13.4	%
U.S. government and agencies				1,049,245				13.2	%			525,427				10.0	%
Non-U.S. governments				81,878				1.0	%			82,027				1.5	%
Corporate securities				2,766,645				34.7	%			1,375,999				26.2	%
Municipal securities				226,946				2.9	%			83,658				1.6	%
Asset-backed securities				82,982				1.0	%			102,006				1.9	%
Residential mortgage-backed securities				1,112,602				14.0	%			763,974				14.5	%
Commercial mortgage-backed securities				348,815				4.4	%			302,961				5.8	%
Fixed maturities at fair value			$	5,669,113				71.2	%		$	3,236,052				61.5	%
U.S. government and agencies			$	22,690				0.3	%		$	14,050				0.3	%
Non-U.S. governments				549,238				6.9	%			573,250				10.9	%
Corporate securities				381,695				4.8	%			418,647				7.9	%
Asset-backed securities				1,000				0.0	%			-				0.0	%
Fixed maturities at amortized cost			$	954,623				12.0	%		$	1,005,947				19.1	%
Other investments			$	411,275				5.2	%		$	318,073				6.0	%
Total invested assets			$	7,960,763				100.0	%		$	5,262,350				100.0	%
Credit Rating			As of September 30, 2010				Ratings Distribution				As of December 31, 2009				Ratings Distribution
U.S. government and agencies [a]			$	2,064,495				31.2	%		$	1,214,895				28.6	%
AAA				1,155,082				17.4	%			720,364				17.0	%
AA				634,250				9.6	%			325,997				7.7	%
A				1,364,226				20.6	%			731,723				17.3	%
BBB				227,276				3.4	%			100,841				2.4	%
BB				33,378				0.5	%			34,781				0.8	%
B or lower				190,406				2.9	%			107,451				2.5	%
Fixed maturities at fair value			$	5,669,113				85.6	%		$	3,236,052				76.3	%
U.S. government and agencies			$	22,690				0.3	%		$	14,050				0.3	%
AAA				654,700				9.9	%			717,954				16.9	%
AA				113,634				1.7	%			101,675				2.4	%
A				149,422				2.3	%			158,141				3.7	%
BBB				12,749				0.2	%			12,672				0.3	%
BB				-				-				-				-
B or lower				1,428				0.0	%			1,455				0.1	%
Fixed maturities at amortized cost			$	954,623				14.4	%		$	1,005,947				23.7	%
Total fixed maturities			$	6,623,736				100.0	%		$	4,241,999				100.0	%
[a] Included within U.S. government and agencies are agency-issued residential mortgage-backed securities with a fair value of $1,015,250 (December 31, 2009: $689,468)
			Three Months Ended September 30,								Nine Months Ended September 30,
			2010				2009				2010				2009
Net investment income			$	59,711			$	42,830			$	161,378			$	125,073
Realized and unrealized gains (losses) on trading fixed maturities				883				1,400				(583	)			2,587
Net realized gains (losses) on available for sale fixed maturities				6,395				(655	)			9,658				(1,348	)
Change in fair value of hedge funds				4,820				23,200				8,868				62,178
Change in fair value of non-hedge fund other investments				3,313				583				(10,896	)			1,023
Net realized and unrealized gains on investments			$	15,411			$	24,528			$	7,047			$	64,440
Net impairment losses recognized in earnings			$	(151	)		$	(139	)		$	(871	)		$	(2,153	)