IPC Holdings, Ltd. Reports Second Quarter 2007 Results And Announces Appointments Of New Directors

Pembroke, Bermuda: July 25, 2007 -- IPC Holdings, Ltd.

(NASDAQ: IPCR) today reported net income for the quarter ended June 30,

2007 of $28.0 million, or $0.37 per common share, compared to $108.8

million, or $1.50 per common share, for the second quarter of 2006. For the

six months ended June 30, 2007 IPC reported net income of $105.2 million,

or $1.48 per common share, compared to $171.5 million, or $2.36 per common

share, for the first six months of 2006.

                          Quarter ended June 30,    Six months ended June 30,

                              2007       2006           2007           2006

                         (unaudited) (unaudited)    (unaudited)    (unaudited)

                                (expressed in thousands of U.S. Dollars,

                                      except per share amounts)

    NET OPERATING INCOME  $   26,104   $ 104,301     $   94,634     $ 179,562

    Net gains (losses)

     on investments            1,868       4,521         10,545        (8,093)

    NET INCOME            $   27,972   $ 108,822      $ 105,179     $ 171,469

    Preferred dividend         4,378       4,378          8,564         8,612

    NET INCOME AVAILABLE

     TO COMMON

     SHAREHOLDERS          $  23,594   $ 104,444     $   96,615     $ 162,857

    Basic net income available

     to common shareholders,

     per common share        $  0.37     $  1.64        $  1.52      $   2.56

    Diluted net income

     per common share        $  0.37     $  1.50        $  1.48      $   2.36

    Net operating income

     per common share

     (diluted)               $  0.41     $  1.44        $  1.33      $   2.47

    Weighted average number

     of common shares

     - basic              63,194,240  63,630,224     63,445,797    63,621,492

    Weighted average

     number of common

     shares - diluted     63,210,001  72,635,057     70,979,971    72,626,599

    Non-GAAP Financial Measures:

    In addition to the GAAP financial measures set forth herein, IPC

Holdings, Ltd. (the "Company") has included certain non-GAAP financial

measures in this Press Release within the meaning of Regulation G as

promulgated by the U.S. Securities and Exchange Commission. "Net operating

income" and its per share equivalent, as used herein, differ from "net

income" and its per share equivalent under GAAP, which the Company believes

is the most directly comparable GAAP measure. Net operating income is a

common performance measurement which, as calculated by the Company,

corresponds to net income excluding net gains and losses on investments.

These items are excluded because they are not considered by management to

be relevant indicators of the performance of or trends in our business

operations, but rather of the investment and credit markets in general. We

believe that the presentation of net operating income provides useful

information regarding our results of operations because it follows industry

practice, is followed closely by securities analysts and rating agencies,

and enables investors and securities analysts to make performance

comparisons with our peers in the insurance industry. This measure may not,

however, be comparable to similarly titled measures used by companies

outside of the insurance industry. Investors are cautioned not to place

undue reliance on net operating income as a non-GAAP measure in assessing

IPC's overall financial performance.

    Results of Operations:

    For the quarter ended June 30, 2007, our net operating income was $26.1

million, or $0.41 per common share, compared to $104.3 million, or $1.44

per common share for the second quarter of 2006. For the six months ended

June 30, 2007, our net operating income was $94.6 million, or $1.33 per

common share, compared to $179.6 million, or $2.47 per common share, for

the corresponding period in 2006. Please note that our "weighted average

number of common shares - diluted" for the quarter ended June 30, 2007 does

not contain the effect of the preferred share conversion as this would be

anti- dilutive for GAAP purposes.

    President and Chief Executive Officer Jim Bryce commented: "2007

continues to provide us with a number of challenges, including a growing

number of medium severity catastrophe events around the globe. The most

recent events in Australia and the U.K. are unusual inasmuch as flooding

has not been a significant cause of loss in these territories for a very

long time, and yet these events have resulted in some of the largest losses

ever experienced there. The fact that the modelling tool is not generally

available for the peril of flood has added difficulty to the loss

estimation process. The silver lining to these clouds is that the size of

these events should result in positive pressure being put on rates in the

affected areas. However, since negotiations for July 1 renewals had been

mostly concluded by the time these events took place, there will be little

impact until the January 1, 2008 renewals. Terms and conditions for U.S.

business remained healthy through the July 1 renewal period, despite

concerns regarding the impact of changes to legislation in Florida earlier

this year. It remains to be seen what impact a windstorm making landfall in

Florida might have on market conditions there. Outside of the U.S., the

U.K. and Australia, we expect pricing to continue to be under pressure,

with single digit/low double digit reductions the norm. Overall, market

conditions are still healthy."

    In the quarter ended June 30, 2007, we wrote gross premiums of $109.3

million, compared to $120.3 million in the second quarter of 2006. We wrote

premiums in respect of new business totaling $4.1 million; however premiums

from existing business were approximately $6.7 million less in the second

quarter of 2007 in comparison to the second quarter of 2006, mostly due to

program re-structuring. Business which was not renewed because of

unsatisfactory terms and conditions, or because the cedant did not purchase

the protection, totaled approximately $6.7 million. Excess of loss premium

adjustments, which are adjustments generally arising from differences

between cedants' actual exposure base and their original estimates thereof,

were $3.1 million less in the quarter ended June 30, 2007 in comparison to

the second quarter of 2006. Reinstatement premiums in the second quarter of

2007 were $1.2 million higher than in the second quarter of 2006, primarily

due to accruals for reinstatement premiums resulting from anticipated

claims from the U.K. floods, offset in part by a reduction in reinstatement

premiums for prior year events where estimated ultimate losses have

reduced, as noted below. For the six months ended June 30, 2007, we wrote

gross premiums of $345.5 million, compared to $355.9 million for the

corresponding period of 2006. The effect of changes to business written for

existing clients, including pricing, changes to program structure and/or

renewal dates, as well as changes to foreign exchange rates, was an

increase of $21.5 million. Business which was not renewed in the six months

ended June 30, 2007 totalled $59.5 million, which was only partly offset by

new business totaling $18.0 million during the same period. Excess of loss

premium adjustments were $2.9 million less in the first six months of 2007

compared to the corresponding period of 2006, while reinstatement premiums

were $12.5 million more in the first six months of 2007 in comparison with

the first six months of 2006, mostly due to accruals resulting from

anticipated claims from U.K. floods and windstorm Kyrill.

    In the second quarter of 2007, we ceded $7.1 million of premiums to our

retrocessional facilities, compared with $7.0 million for the quarter ended

June 30, 2006. The actual contracts ceded are at IPC's underwriters'

judgement in optimizing the risk profile of the portfolio, which can cause

premiums ceded to vary as a proportion of our gross writings, from quarter

to quarter. In addition, a proportion of reinstatement premiums accrued as

a result of U.K. flood losses, in the amount of $1.6 million, were also

ceded for those contracts where we had benefitted from retrocessional

recoveries. In the first six months of 2007, we ceded $14.7 million to our

retrocessional facilities, compared to $15.4 million ceded in the first six

months of 2006.

    Net premiums earned in the quarter ended June 30, 2007 were $98.8

million, compared to $100.8 million in the second quarter of 2006. For the

six months ended June 30, 2007, earned premiums were $203.5 million,

compared to $187.7 million in the first six months of 2006, an increase of

8%, which was mostly due to the impact of increased reinstatement premiums

as a result of increased loss activity in the period.

    We earned net investment income of $31.9 million in the quarter ended

June 30, 2007, compared to $31.1 million in the second quarter of 2006. In

the second quarter of 2007 we received dividends of $6.7 million from our

investments in equity funds and a fund of hedge funds, compared to

dividends of $7.3 million received from these investments in the second

quarter of 2006. In addition, we also benefitted from an increase in the

average yield of our fixed income investment portfolio. For the six months

ended June 30, 2007 we earned net investment income of $65.0 million,

compared to $55.7 million in the corresponding period in 2006. We received

dividends of $14.6 million for the investments noted above, compared to

$9.4 million in dividends in the corresponding period of 2006.

    We recognized a net gain of $1.9 million from investments in the

quarter ended June 30, 2007, compared to $4.5 million in the second quarter

of 2006. As discussed in our first quarter, 2007 earnings press release,

effective January 1, 2007 we early-adopted SFAS 159, the Fair Value Option

for Financial Assets and Financial Liabilities, with respect to our

investment portfolio. As a result, all unrealized gains and losses in our

investment portfolio were reclassified from accumulated other comprehensive

income within shareholders' equity on our consolidated balance sheets, to

retained earnings as of January 1, 2007. Further, all subsequent changes to

the fair value of our investment portfolio are recorded as net gains

(losses) on investments in our consolidated statements of income. In June

2006, we sold our investment in an equity fund with attributes similar to

those of the S & P 500 Index, realizing a $27.8 million gain. However,

realized losses in the second quarter of 2006 included a write-down of

$18.0 million in the cost basis of certain fixed income securities where

management had determined there had been a decline in value which was other

than temporary. For the six months ended June 30, 2007 there was a net gain

from investments of $10.5 million, compared to a net loss from investments

of $(8.1) million in the first six months of 2006. In addition to the gain

realized from the equity fund sale described above, net realized losses in

the first six months of 2006 included a write-down of $25.7 million for

other-than-temporary impairment.

    In the quarter ended June 30, 2007, we incurred net losses and loss

adjustment expenses of $87.2 million, compared to $13.4 million in the

second quarter of 2006. Net incurred losses in the second quarter of 2007

included $62.6 million with respect to the flooding which impacted parts of

northern England in June of this year, and $50.1 million with respect to

the storm and subsequent flooding which affected parts of New South Wales,

Australia in early June 2007. These losses were offset in part by

reductions to reserves for prior events totaling $26.0 million, the largest

component of which was a reduction of $16.0 million to our estimate of

ultimate loss from hurricane Katrina. Complexity resulting from the ongoing

floods in several areas of England introduces additional uncertainty to the

normally difficult process of estimating catastrophe losses. The resulting

impact on claims adjusting (including allocation of claims to the multiple

events because of the time periods covered and the effect of demand surge

on the cost of building materials, labour and additional living expenses),

is likely to cause delays to the timing with which we are notified of loss

estimates by ceding companies. Our loss ratio, which is the ratio of net

losses and loss adjustment expenses to net premiums earned, was 88.2% for

the quarter ended June 30, 2007, compared to 13.3% for the second quarter

of 2006. In the six months ended June 30, 2007, we incurred net losses and

loss adjustment expenses of $140.2 million, compared to $35.5 million in

the first six months of 2006. In addition to the events noted above, we

incurred net losses of $46 million from windstorm Kyrill, which swept

across northern Europe in late January 2007. Incurred losses in the first

six months of 2006 included claims from cyclone Larry, which struck

Queensland, Australia in March 2006, in the amount of $8 million. The

balance of the incurred losses in the first six months of 2006 related to

development from the major windstorms of 2005 ($17 million), two accidents

which occurred in 2005 -- an explosion which occurred in the U.K. in

December 2005, and a train wreck and associated chemical spill which took

place in S. Carolina in January 2005 (combined amount $7.3 million) -- and

reserves established for pro rata treaty business. Our loss ratio was 68.8%

for the first six months of 2007, compared to 18.9% for the first six

months of 2006.

    Our net acquisition costs, which are primarily commissions and fees

paid to brokers for the production of business were $10.4 million for the

quarter ended June 30, 2007, compared to $9.0 million in the second quarter

of 2006. These costs have increased disproportionately to earned premiums

as a result of an increase to our accrual for profit commissions payable to

cedants for prior year business, in particular relating to several pro rata

treaties where estimated losses have been reduced. In the first six months

of 2007, net acquisition costs amounted to $20.6 million, compared to $17.8

million for the corresponding period of 2006. In addition to the cost

increase described above, acquisition costs have also increased because

earned premiums have increased. General and administrative expenses were

$6.8 million in the quarter ended June 30, 2007, compared to $8.8 million

in the second quarter of 2006. The primary area of decrease was

administrative service fee expense, which was $1.8 million less in the

second quarter of 2007 compared to the second quarter of 2006. In addition

there were reductions in bank charges, letter of credit and credit facility

fees, and legal fees, offset in part by an increase in salaries and other

compensation. For the six months ended June 30, 2007, general and

administrative expenses were $14.0 million, compared to $15.1 million in

the first six months of 2006. The reasons for the decrease are as described

above, in particular the reduction in administrative service fees, which

were $3.6 million less for the six months ended June 30, 2007, than for the

corresponding period of 2006, as a result of amendments made to the

Administrative Service agreement which were effective July 1, 2006. This

reduction was mostly offset by the increase in salaries and compensation,

but complemented by reductions in bank charges, letter of credit and credit

facility fees, and legal fees.

    Our expense ratio, which is the ratio of net acquisition costs plus

general and administrative expenses to net premiums earned, was 17.5% for

the second quarter of 2007, compared to 17.7% for the second quarter of

2006. For the six months ended June 30, 2007 our expense ratio was 17.0%,

compared to 17.6% for the corresponding period of 2006.

    On July 25, 2007 the Board of Directors declared a quarterly dividend

of $0.20 per common share, payable on September 20, 2007, to shareholders

of record on September 4, 2007. In addition, the Board of Directors

declared a preferred dividend of $0.475781 per Series A Mandatory

Convertible preferred share, payable on August 15, 2007 to preferred

shareholders of record on August 1, 2007.

    Retirement and Appointment of Directors

    On July 25, 2007, Dr. the Honourable Clarence James announced his

retirement from the Board of Directors of IPC Holdings and associated

companies, with immediate effect. Dr. James had served as a director of IPC

since February 1996. Also on July 25, 2007, two new directors were

appointed to the Board: Mr. Mark Bridges, currently President of Rosemont

Re and formerly a partner at KPMG, and Mr. Anthony Joaquin, formerly a

partner at Ernst & Young. IPC's Chairman, Mr. Frank Mutch, thanked Dr.

James for his many years of service and contributions to IPC, and welcomed

the new directors.

    Conference Call

    Our management will be holding a conference call to discuss these

results at 8:30 a.m. EDT tomorrow, July 26, 2007. To participate, call

1-800-909 5202; the conference ID is IPC. This conference call will be

broadcast simultaneously on the internet and can be accessed from our

website at http://www.ipcre.bm, under the 'News' / 'Webcasts' section, and a

replay of the call will also be available at this site from 10:30 a.m. EDT

time until 12:00 midnight EDT time on Thursday, August 2, 2007.

    This press release contains certain forward-looking statements within

the meaning of the U.S. federal securities laws. Statements that are not

historical facts, including statements about our beliefs, plans or

expectations, are forward-looking statements. These statements are based on

our current plans, estimates and expectations. Some forward-looking

statements may be identified by our use of terms such as "believes,"

"anticipates," "intends," "expects" and similar statements of a future or

forward-looking nature. In light of the inherent risks and uncertainties in

all forward-looking statements, the inclusion of such statements in this

press release should not be considered as a representation by us or any

other person that our objectives or plans will be achieved. A non-exclusive

list of important factors that could cause actual results to differ

materially from those in such forward-looking statements includes the

following: (a) the occurrence of natural or man-made catastrophic events

with a frequency or severity exceeding our expectations; (b) the adequacy

of our loss reserves and the need to adjust such reserves as claims develop

over time; (c) any lowering or loss of one of our financial ratings of our

wholly-owned subsidiary, IPCRe Limited; (d) the effect of competition on

market trends and pricing; (e) changes in general economic conditions,

including changes in interest rates and/or equity values in the United

States of America and elsewhere; and (f) other factors set forth in our

most recent reports on Form 10-K, Form 10-Q and other documents on file

with the Securities and Exchange Commission. Readers are cautioned not to

place undue reliance on these forward-looking statements, which speak only

as of the date on which they are made. We do not intend, and are under no

obligation, to update any forward-looking statement contained in this press

release.

    IPC Holdings, Ltd., through its wholly-owned subsidiary IPCRe Limited,

provides property catastrophe reinsurance and, to a limited extent,

aviation, property-per-risk excess and other short-tail reinsurance on a

worldwide basis.

                  IPC HOLDINGS, LTD. AND SUBSIDIARIES

                      CONSOLIDATED BALANCE SHEETS

    (Expressed in thousands of United States dollars, except for per

                             share amounts)

                                               As of       As of

                                              June 30,  December 31,

                                                2007        2006

    ASSETS:                                 (unaudited)

    Fixed maturity investments, at

     fair value                              $1,774,705  $1,819,561

    Equity investments, at fair

     value                                      625,865     577,549

    Cash and cash equivalents                    35,948      88,415

    Reinsurance premiums

     receivable                                 219,208     113,811

    Deferred premiums ceded                       7,973       2,823

    Losses and loss adjustment

     expenses recoverable                        25,572       1,989

    Accrued investment income                    28,243      28,469

    Deferred acquisition costs                   22,876       9,551

    Prepaid expenses and other

     assets                                       4,429       3,261

       TOTAL ASSETS                          $2,744,819  $2,645,429

    LIABILITIES:

    Reserve for losses and loss

     adjustment expenses                       $536,019    $548,627

    Unearned premiums                           212,441      80,043

    Reinsurance premiums payable                  9,889       4,680

    Deferred fees and commissions                 1,347       1,150

    Accounts payable and accrued

     liabilities                                 19,693      19,974

       TOTAL LIABILITIES                        779,389     654,474

    SHAREHOLDERS' EQUITY:

    Share capital:

      Common shares outstanding,

       par value U.S.$0.01                          607         637

      Mandatory convertible

       preferred shares, par value

       U.S.$0.01                                     90          90

    Additional paid-in capital                1,403,434   1,474,092

    Retained earnings                           561,985     388,826

    Accumulated other

     comprehensive income                          (686)    127,310

       TOTAL SHAREHOLDERS' EQUITY             1,965,430   1,990,955

       TOTAL LIABILITIES AND

        SHAREHOLDERS'

        EQUITY                               $2,744,819  $2,645,429

                     IPC HOLDINGS, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF INCOME

              (Expressed in thousands of United States dollars)

                             Quarter ended June 30, Six months ended June 30

                                2007        2006        2007     2006

    REVENUES:                (unaudited)(unaudited)(unaudited) (unaudited)

    Gross premiums written    $109,259    $120,325    $345,502  $355,918

    Premiums ceded              (7,062)     (6,964)    (14,718)  (15,389)

    Net premiums written       102,197     113,361     330,784   340,529

    Change in unearned

     premium reserve, net       (3,348)    (12,591)   (127,248) (152,816)

    Net premiums earned         98,849     100,770     203,536   187,713

    Net investment income       31,904      31,064      65,014    55,668

    Net gains (losses) on

     investments                 1,868       4,521      10,545    (8,093)

    Other income                   261         925         887     1,762

                               132,882     137,280     279,982   237,050

    EXPENSES:

    Net losses and loss

     adjustment expenses        87,210      13,387     140,163    35,483

    Net acquisition costs       10,437       9,043      20,585    17,832

    General and administrative

     expenses                    6,799       8,772      13,958    15,121

    Net exchange loss (gain)       464      (2,744)         97    (2,855)

                               104,910      28,458     174,803    65,581

    NET INCOME                 $27,972    $108,822    $105,179  $171,469

    Preferred dividend           4,378       4,378       8,564     8,612

    NET INCOME Available

     to Common Shareholders     23,594     104,444     $96,615  $162,857

    Loss and loss expense

     ratio (1)                   88.2%       13.3%       68.8%     18.9%

    Expense ratio (2)            17.5%       17.7%       17.0%     17.6%

    Combined ratio

     (Sum of 1 + 2)             105.7%       31.0%       85.8%     36.5%