ODYSSEY RE HOLDINGS CORP. Favorable emergence for environmental claims for the year ended December 31, 2004 was offset by strengthening loss reserves for asbestos claims where there has been additional emergence. Net losses and loss adjustment expenses for asbestos claims increased $21.2 million for the year ended December 31, 2004. Environmental net losses and loss adjustment expenses declined $21.2 million for the year ended December 31, 2004. 17. DEBT OBLIGATIONS The components of debt obligations are as follows (in thousands): As of December 31, 2004 2003 7.65% Senior Notes $224,616 $224,572 4.375% Convertible Senior Debentures 109,900 110,000 7.49% Senior Notes 41,524 42,320 Total debt obligations $376,040 $376,892 During the fourth quarter of 2003, the Company issued $225.0 million aggregate principal amount of senior notes due November 1, 2013. The issue was sold at a discount of $0.4 million, which is being amortized over the life of the notes. Interest accrues on the senior notes at a fixed rate of 7.65%, which is due semi-annually on May 1st and November 1st. The senior notes are redeemable at a premium, prior to maturity, at the discretion of the Company. In June 2002, the Company issued $110.0 million aggregate principal amount of 4.375% convertible senior debentures (“Convertible Debt”) due 2022. The Convertible Debt is redeemable at the Company’s option beginning on June 22, 2005. Each holder of Convertible Debt may, at its option, requir the Company to repurchase all or a portion of its Convertible Debt on June 22, 2005, 2007, 2009, 2012 and 2017. Under certain circumstances specified in the indenture under which the Convertible Debt was issued, each Convertible Debt holder has the right to convert its Convertible Debt into 46.9925 shares of the Company’s common stock for every $1,000 principal amount of the Convertible Debt held by such holder; however, as of December 31, 2004 such circumstances had not occurred and therefor the Convertible Debt was not convertible as of such date. Upon conversion of the Convertible Debt, the Company may choose to deliver, in lieu of the Company’s common stock, cash or a combination of cash and common stock. It is the Company’ intent to settle any debt conversion in cash. During the fourth quarter of 2004, the Company retired $0.1 million of the Convertible Debt. The Convertible Debt is reflected on the Company’s balance sheet at a value of $109.9 million, the aggregate principal amount of Convertible Debt outstanding. In December 2001, the Company issued $100.0 million aggregate principal amount of senior notes, due November 30, 2006, pursuant to a private placement. Interest accrues on the senior notes at a fixed interest rate of 7.49%, which is due semi- annually on May 31st and November 30th. The senior notes are r edeemable at a premium, prior to maturity, at the Company’s option. In November 2003 and June 2002, the Company prepaid $50.0 million and $10.0 million, respectively, aggregate principal amount of the senior notes. Immediately following the issuance of the senior notes, the Company entered into an interest rate swap agreement with Bank of America N.A. (“Bank of America”) that effectively converted the fixed 7.49% interest rate into a variable interest rate of London Interbank Offered Rate (“LIBOR”) plus 263 basis points. In May 2003, the Company sold the variable interest rate instrument for a gain of $6.4 million. The gain has been deferred and is being amortized over the remaining life of the senior notes. In conjunction with the prepayment of the senior notes, a portion of the deferred gain was immediately realized. As of December 31, 2004, the aggregate principal amount of senior notes outstanding is $40.0 million and the remaining deferred gain is $1.5 million. 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued