UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended: September 30, 2004

OR

For the transition period from ________ to __________

Commission file number: 0-27662

IPC Holdings, Ltd.

American International Building, 29 Richmond Road, Pembroke, HM 08, Bermuda

(441) 298-5100

     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 for 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  [ü]   No [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  [ü]   No [  ]

     The number of outstanding common shares par value U.S. $0.01 per share of IPC Holdings, Ltd., as of November 8, 2004, was 48,290,579.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

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

The accompanying notes are an integral part of these consolidated financial statements

2

IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME

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

The accompanying notes are an integral part of these consolidated financial statements

3

IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Expressed in thousands of United States dollars)

The accompanying notes are an integral part of these consolidated financial statements

4

IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Expressed in thousands of United States dollars, except per share amounts)

The accompanying notes are an integral part of these consolidated financial statements

5

IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of United States dollars)

The accompanying notes are an integral part of these consolidated financial statements

6

IPC HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of United States dollars, except for per share amounts)
(unaudited)

1. GENERAL:

The consolidated interim financial statements presented herein have been prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of IPC Holdings, Ltd. (the “Company”) and its wholly-owned subsidiaries, IPCRe Limited (“IPCRe”) and IPCRe Underwriting Services Limited (“IPCUSL” and, together with the Company and IPCRe, “IPC”) and IPCRe Europe Limited, which is a wholly-owned subsidiary of IPCRe. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the quarter and nine month periods ended September 30, 2004 and 2003, respectively, the balance sheet as of September 30, 2004 and the cash flows for the nine months ended September 30, 2004 and 2003, respectively. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2003, in our report on Form 10-K. The results of operations for any interim period are not necessarily indicative of results for the full year.

2. DIVIDENDS:

		On March 25, 2004 we paid a dividend of $0.20 per share to shareholders of record on March 9, 2004.
		On June 24, 2004 we paid a dividend of $0.20 per share to shareholders of record on June 8, 2004.
		On September 23, 2004 we paid a dividend of $0.24 per share to shareholders of record on September 7, 2004.
		On October 28, 2004 we declared a dividend of $0.24 per share, to be paid on December 16, 2004, to shareholders of record on November 30, 2004.

3. ACCOUNTING FOR STOCK-BASED COMPENSATION AND DISCLOSURE:

		Management has adopted the fair value method of accounting for stock-based employee compensation as prescribed by Financial Accounting Standards Board (“FASB”) issued Statement No. 123 “Accounting for Stock-Based Compensation” (“SFAS 123”) on a prospective basis for all awards granted, modified or settled after January 1, 2003. The amount of the charges recorded in the quarter and nine month periods ended September 30, 2004 were $235 and $704, respectively. In the corresponding periods in 2003, the charges were $81 and $243, respectively.
		On June 13, 2003 the shareholders approved a new stock incentive plan. The plan allows for the issuance of up to five hundred thousand shares as grants of restricted stock to selected employees to compensate them for their contributions to the long-term growth and profits of the Company. The charge recorded for the quarter and nine month periods ended September 30, 2004 were $292 and $1,232, respectively. For the corresponding periods in 2003, the charges were $139 and $387, respectively.

7

The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period in accordance with SFAS 123.

4. NEW ACCOUNTING PRONOUNCEMENTS:

		In December 2003, the FASB revised the previously issued Interpretation No. 46, “Consolidation of Variable Interest Entities” with Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”). FIN 46-R requires a variable interest entity to be consolidated by a company if that company is the primary beneficiary, as defined in FIN 46-R. FIN 46-R was effective as of March 31, 2004. Certain disclosures in relation to IPC’s interests in variable interest entities were provided in the audited consolidated financial statements for the year ended December 31, 2003 in accordance with the transition requirements of FIN 46-R. The adoption of this accounting pronouncement did not have any material impact on IPC’s financial position or results of operations.
		EITF Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (EITF 03-01) was issued in late 2003. EITF 03-01 requires certain disclosures regarding fair values and associated unrealized losses on available-for-sale debt and equity securities accounted for under FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. These disclosures were effective in annual financial statements for fiscal years ended after December 15, 2003 and, accordingly, were provided in our financial statements for the year ended December 31, 2003. EITF 03-01 also provides guidance for evaluating whether an investment is other-than-temporarily impaired. This guidance was scheduled to be effective for reporting periods beginning after June 30, 2004. However, in September 2004 the FASB delayed the effective date of the requirement to record impairment losses in accordance with EITF 03-01 until new guidance is issued and becomes effective. The Company will assess whether this guidance will have a material impact on the Company’s financial position or results of operations once the new guidance is released.

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

		Critical Accounting Policies
		The following is a summary of the accounting policies for the three main components of our balance sheet and statement of (loss) income: premiums, losses (claims) including reserves and investments/investment income.
		Premiums
		Premiums are recorded as written at the beginning of each policy, based upon information received from ceding companies and their brokers, and are earned over the policy period. For excess of loss contracts, the amount of deposit premium is contractually documented at inception, and no management judgement is necessary in accounting for this. Premiums are earned on a pro rata basis over the policy period. For proportional treaties, the amount of premium is normally estimated at inception by the ceding company. We account for such premium using the initial estimates, which are reviewed regularly with respect to the actual premium reported by the ceding company. For the nine months ended September 30, 2004 the net amount of premium recorded resulting from managements’ estimates was less than 1% of total premiums written. We also accrue for reinstatement premiums (premiums paid to reinstate reinsurance coverage following a claim). Such accruals are based upon actual contractual terms applied to the amount of loss reserves expected to be paid, and the only element of management judgement involved is with respect to the amount of loss reserves and associated rates on line, as described below. The amount recorded for the nine months ended September 30, 2004 for estimated reinstatement premiums on Reported But Not Enough losses (“RBNE”) and Incurred But Not Reported (“IBNR”) loss reserves was $15.7 million.
		Loss Reserves
		Under accounting principles generally accepted in the United States of America, we are not permitted to establish loss reserves until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date may be established, with no allowance for the provision of a contingency reserve to account for expected future losses. Claims arising from future catastrophic events can be expected to require the establishment of substantial reserves from time to time.
		Estimating appropriate loss reserves for catastrophes is an inherently uncertain process. Loss reserves represent our estimates, at a given point in time, of ultimate settlement and administration costs of losses incurred (including IBNR and RBNE losses). We regularly review and update these estimates, using the most current information available to us. Consequently, the ultimate liability for a catastrophic loss is likely to differ from the original estimate. Whenever we determine that any existing loss reserves are inadequate, we are required to increase the loss reserves with a corresponding reduction, which could be material, in our operating results in the period in which the deficiency is identified. The establishment of new reserves, or the adjustment of reserves for reported claims, could result in significant upward or downward changes to our financial condition or results of operations in any particular period.
		The reserve for losses and loss adjustment expenses is based upon reports from industry sources, individual case estimates received from ceding companies and/or their brokers, output from commercially available catastrophe loss models and management’s estimates. When a catastrophic event occurs, we first determine which treaties may be affected using our geographic database of exposures. We then contact the respective brokers and ceding companies involved with those treaties, to determine their estimate of involvement and the extent to which the reinsurance program is affected. We may also use computer modeling to measure and estimate loss exposure under the actual event scenario, if available. Since 1993, we have contracted with AIR Worldwide Corporation for the use of their proprietary models — currently CATRADER ® — as part of our modeling approach. These computer-based loss modeling systems utilize A.M. Best’s data and direct exposure information obtained from our clients. Once an event occurs, we establish a specific reserve for that event, based upon estimates of total losses incurred by the ceding insurers as a result of the event and a specific estimate of the portion of such loss we have reinsured. Management’s estimates are used mostly for IBNR or RBNE loss amounts. For certain catastrophic events there is considerable uncertainty underlying the assumptions and associated estimated reserves for losses and loss adjustment expenses. Reserves are reviewed regularly and, as experience develops and additional information becomes known, the reserves are adjusted as necessary. Such adjustments, if necessary, are reflected in results of operations in the period in which they become known. For excess of loss business, which is generally over 90% of the premium we write, we are aided by the fact that each treaty has a defined limit of liability arising from one event. Once that limit has been reached, we have no further exposure to additional losses from that treaty for the same event. For proportional treaties, we generally use an initial estimated loss and loss expense ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned), based upon information provided by the ceding company and/or their broker and our historical experience of that treaty, if any. The estimate is adjusted as actual experience becomes known.

9

		At September 30, 2004 management’s estimates for IBNR/RBNE represented approximately 72% of total loss reserves. The majority of the estimate relates to reserves for claims from the four hurricanes which struck Florida and two of the typhoons which struck Japan, in August and September of this year. If our estimate of IBNR/RBNE at September 30, 2004 was inaccurate by a factor of 10%, our results of operations would be impacted by a positive or negative movement of approximately $16.0 million. If our total reserve for losses at September 30, 2004 was inaccurate by a factor of 10%, our incurred losses would be impacted by approximately $22.4 million, which represents approximately 1.4% of shareholders’ equity. In accordance with IPCRe’s registration under the Bermuda Insurance Act 1978 and Related Regulations (the “Insurance Act”), the loss reserves are certified annually by an independent loss reserve specialist.
		Investments
		In accordance with our investment guidelines, our investments consist of certain marketable equity securities and high-grade marketable fixed income securities. Investments are considered ‘Available for Sale’ and are carried at fair value as determined by the most recently traded price of each security at the balance sheet date. Unrealized gains and losses are included within ‘Accumulated other comprehensive income’ as a separate component of shareholders’ equity. Realized gains and losses on sales of investments are determined on a first-in, first-out basis. Investment income is recorded when earned and includes the amortization of premiums and discounts on investments.
		We regularly monitor the difference between the cost and fair value of our investments, which involves uncertainty as to whether declines in value are temporary in nature. If we believe a decline in value of a particular investment is temporary, we record the decline as an unrealized loss as a separate component of our shareholders’ equity. If we believe the decline is other-than-temporary, we write down the cost basis of the investment to the market price as of the reporting date and record a realized loss in our statement of income. The determination that a security has incurred an other-than-temporary decline in value requires the judgement of IPC’s management, which includes the views of our investment managers and a regular review of our investments. Our assessment of a decline in value includes our current judgement as to the financial position and future prospects of the entity that issued the security. If that judgement changes in the future we may ultimately record a realized loss, after having originally concluded that the decline in value was temporary.
		Generally, we review all securities that are trading at a significant discount to par, amortized cost (if lower) or cost for an extended period of time. We generally focus our attention on all securities whose market value is less than 75% of their cost. The specific factors we consider in evaluating potential impairment include the following:

•		The extent of decline in value
•		The length of time the security is below cost
•		The future prospects of the issuer, or in the case of mutual funds, the future prospects of the fund
•		Whether the decline appears to be related to general market or industry conditions, or is issuer-specific
•		Our intent and ability to hold the security
•		Other qualitative and quantitative factors

		At September 30, 2004 our equity investments comprised investments in the following: a U.S. equity fund, a global equity growth fund, a fund of hedge funds and a fund with attributes similar to those of the S & P 500 Index. None of the funds have a significant concentration in any one business sector; accordingly, the value of our equity funds is principally influenced by macro economic factors rather than issuer-specific factors. Our equity investments are subject to the same analyses as described above for the determination of other-than-temporary declines in value. Since there is a portfolio of securities within each fund, the qualitative issues are usually broader than those for individual securities and therefore the assessment of impairment is inherently more difficult and requires more management judgement.
		At September 30, 2004 we did not hold any fixed maturity securities that are not investment grade, not rated or not traded on a recognized exchange.
		At September 30, 2004 we determined that there was no other-than-temporary impairment of securities.

10

RESULTS OF OPERATIONS, QUARTERS ENDED SEPTEMBER 30, 2004 AND 2003

		The following is a discussion of the results of operations and financial position of IPC Holdings, Ltd. References to “we”, “our” or “IPC” mean IPC Holdings together with its wholly-owned subsidiaries, IPCRe and IPCUSL. This discussion should be read in conjunction with our Consolidated Financial Statements and related notes for the nine months ended September 30, 2004.
		Our net loss for the quarter ended September 30, 2004 was $(17.8) million, compared to net income of $62.1 million for the quarter ended September 30, 2003, a decrease of 129%. The results in the current quarter were significantly impacted by the exceptional sequence of four hurricanes making landfall in Florida, as well as two typhoons striking Japan, as discussed below.
		In the quarter ended September 30, 2004, we wrote premiums of $60.7 million, compared to $45.8 million in the third quarter of 2003, an increase of 32%. Written premiums in the quarter were higher primarily because of reinstatement premiums resulting from the significant amount of losses incurred in the quarter. Reinstatement premiums were $16.7 million in the quarter ended September 30, 2004, compared to $2.1 million in the corresponding quarter of 2003. In addition, we wrote new business of $1.6 million and premiums from existing business were approximately $3.5 million more in the third quarter of 2004 in comparison to the third quarter of 2003, due to larger lines, program re-structuring and foreign exchange rate differences. These additions were offset in part by business which was not renewed because of unsatisfactory terms and conditions, or because the cedant did not purchase the protection, which totaled approximately $1.8 million. Adjustment premiums, which are adjustments generally arising from differences between cedants’ actual premium income and the original estimates thereof, were $3.8 million in the third quarter of 2004 compared to $6.8 million in the third quarter of 2003. We retroceded premiums of $1.4 million in the quarter ended September 30, 2004, compared to $1.0 million ceded in the third quarter of 2003. We entered a new, short-term aviation retrocessional contract at the end of September, 2004. Net premiums earned in the quarter ended September 30, 2004 were $100.0 million, compared to $77.8 million in the third quarter of 2003, an increase of 29%. Net premiums earned were higher primarily because of the increase in reinstatement premiums, together with the overall increase in written premiums during the past twelve months.
		Net investment income was $12.0 million in the quarter ended September 30, 2004, compared to $11.7 million in the third quarter of 2003, an increase of 2%. The overall yield of the fixed income portfolio was less for the quarter ended September 30, 2004 than for the corresponding quarter in 2003, because of changes to interest rates and their adverse impact on the reinvestment of proceeds from maturing and sales of fixed income securities. This negative factor was more than offset by the increase in the average balance of invested assets in the quarter ended September 30, 2004, which was 16% higher than the third quarter of 2003, because of positive operating cash flow in the period.
		There was a net realized loss from investments in the quarter ended September 30, 2004 of $(0.4) million, compared to a net realized gain of $0.3 million in the third quarter of 2003. Generally, net realized gains and losses fluctuate from period to period, depending on the individual securities sold as recommended by IPCRe’s investment advisor.
		In the quarter ended September 30, 2004, we incurred net losses and loss adjustment expenses of $116.0 million, compared to $15.8 million in the third quarter of 2003. Net incurred losses in the third quarter of 2004 included $114.0 million in respect of the four hurricanes which struck Florida and two of the typhoons which struck Japan, which all occurred in August and September of this year. Because of the relative sizes of the events and the fact that excess of loss contracts have only one automatic reinstatement, we believe that a significant proportion of this amount relates to three events: Hurricanes Charley and Ivan, and Typhoon Songda. The Company has only received a small number of actual loss advices from clients impacted by the six events. Accordingly, the estimate of reserves is based on industry loss estimates, output from both industry and proprietary models, a review of contracts potentially affected by the events and ongoing discussions with clients and intermediaries. The reserves are subject to variability reflecting the unusual pattern of multiple storms affecting one geographic area and the resulting impact on claims adjusting by, and communications from, ceding companies. The ultimate impact of losses from the storms on the Company’s results of operations might therefore differ substantially from this estimate.
		Acquisition costs incurred, which consist primarily of commissions and brokerage fees paid to intermediaries for the production of business, were $9.6 million for the quarter ended September 30, 2004, compared to $7.8 million in the third quarter of 2003, an increase of 23%. Acquisition costs increased primarily because of the increase in earned premiums, but not proportionately, because brokerage on reinstatement premiums is typically less than brokerage on deposit or adjustment premiums. General and administrative expenses were $5.6 million in the quarter ended September 30, 2004, compared to $4.7 million in the third quarter of 2003. The major areas of increase were administrative service fees, which are based on earned premiums, and compensation expense as a result of expensing stock grants and options.

11

RESULTS OF OPERATIONS, NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

		Our net income for the nine months ended September 30, 2004 was $130.0 million, compared to $195.2 million for the nine months ended September 30, 2003, a decrease of 33%. Net income was significantly affected by the frequency of catastrophic events in the third quarter of 2004, which more than offset the benefit of increases to written and earned premiums, as discussed below.
		In the nine months ended September 30, 2004, we wrote premiums of $343.8 million, compared to $302.3 million in the nine months ended September 30, 2003, an increase of 14%. Written premiums in the nine months were higher because we wrote new business of $23.8 million, and premium from existing business was approximately $26.5 million more in the nine months ended September 30, 2004 in comparison to the corresponding period of 2003, due to larger lines, program re-structuring and foreign exchange rate differences. These additions were offset in part by business which was not renewed because of unsatisfactory terms and conditions, or because the cedant did not purchase the protection, which totaled approximately $16.4 million in the first nine months of 2004. Adjustment premiums were $11.4 million in the nine months ended September 30, 2004 compared to $16.9 million in the corresponding period of 2003. Reinstatement premiums were $19.8 million in the nine months ended September 30, 2004 compared to $6.7 million in the corresponding period of 2003, as a result of the significant increase in incurred losses in the third quarter of 2004. We retroceded premiums of $18.0 million in the nine months ended September 30, 2004, compared to the $14.7 million ceded in the corresponding period of 2003. Ceded premiums have increased due to the increase in our gross writings, as well as increases in retrocedents’ participation in our Surplus treaty, and increased capacity in our excess of loss retrocessional facility. We also entered a new, short-term aviation retrocessional contract at the end of September, 2004. Net premiums earned in the nine months ended September 30, 2004 were $261.7 million, compared to $224.4 million in the corresponding period in 2003, an increase of 17%. Net premiums earned were higher due to the increase in written premiums over the past twelve months, as well as the increase in reinstatement premiums.