Exhibit 13.1

MANANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion highlights material factors affecting Trenwick Group
Ltd.'s results of operations for the three years ended December 31, 2001,
December 31, 2000, and September 30, 1999. This discussion and analysis should
be read in conjunction with the consolidated financial statements and notes
thereto of Trenwick Group Ltd. for the calendar years ended December 31, 2001
and December 31, 2000 and the fiscal year ended September 30, 1999 contained in
this annual report.

Trenwick Group Ltd. discloses operating and non-operating income to enable the
reader to understand how management evaluates Trenwick Group Ltd.'s results of
operations. These disclosures are not defined under accounting principles
generally accepted in the United States of America; accordingly the use of these
disclosures may not be comparable to other registrants.

Overview

Trenwick Group Ltd. is a Bermuda holding company headquartered in Hamilton,
Bermuda whose principal subsidiaries underwrite specialty insurance and
reinsurance. Trenwick Group Ltd. was formed in 1999 to acquire Trenwick Group
Inc., LaSalle Re Holdings Limited and LaSalle Re Limited. The transaction was
completed on September 27, 2000. Shareholders of Trenwick Group Inc., LaSalle Re
Holdings Limited and LaSalle Re Limited exchanged their shares on a one-for-one
basis for newly-issued shares of Trenwick Group Ltd. LaSalle Re Holdings Limited
was the accounting acquiror in the Trenwick/LaSalle business combination, and as
such the financial statements reflect the results of operations of LaSalle Re
Holdings Limited prior to September 27, 2000 and the combined results of
operations of LaSalle Re Holdings Limited and Trenwick Group Inc. on and after
September 27, 2000.

Trenwick Group Ltd. conducts its specialty insurance and reinsurance business in
the following five business segments:

     o    Worldwide property catastrophe reinsurance;

     o    United States treaty reinsurance;

     o    International specialty insurance and reinsurance;

     o    Lloyd's insurance and reinsurance; and

     o    United States specialty program insurance.

     Trenwick Group Ltd. operates through the following five principal operating
     platforms:

     o    LaSalle Re Limited, which is located in Hamilton, Bermuda, underwrites
          property catastrophe reinsurance on a worldwide basis;

     o    Trenwick America Reinsurance Corporation, which is located in Stamford
          Connecticut, underwrites treaty reinsurance on United States property
          and casualty risks, including United States reinsurance business
          previously written by Chartwell Re Corporation subsidiaries;

     o    Trenwick International Limited, which is located in London, England,
          underwrites specialty insurance and treaty and facultative reinsurance
          on a worldwide basis;


                                       1
<PAGE>


     o    Chartwell Managing Agents Limited, which is located in London,
          England, manages underwriting syndicates in the Lloyd's market,
          principally for Trenwick Group Ltd.'s own account; and

     o    Canterbury Financial Group Inc., which is located in Stamford,
          Connecticut, underwrites specialty insurance through its operating
          subsidiaries, Chartwell Insurance Company, The Insurance Corporation
          of New York and Dakota Specialty Insurance Company.

All of Trenwick Group Ltd.'s principal operating subsidiaries are rated A-
(Excellent) by A.M. Best Company and have been assigned a financial strength
rating of A- by Standard and Poor's. All of Chartwell Managing Agents Limited's
syndicates enjoy the benefit of the ratings of Lloyd's which is rated "A-"
(Excellent) by A.M. Best Company and has an A financial strength rating from
Standard & Poor's. These ratings are based upon factors that may be of concern
to policy or contract holders, agents and intermediaries, but may not reflect
the considerations applicable to an equity investment in a reinsurance or
insurance company. A change in any such rating is at the discretion of the
respective rating agencies.

Results of Operations - Years Ended December 31, 2001 and 2000
(monetary amounts in tables expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                                           2001               2000
                                                           Year               Year             Change
                                                     ---------------     ---------------    --------------
<S>                                                     <C>                <C>               <C>
Underwriting loss                                       $(289,981)         $(35,452)         $(254,529)
Net investment income                                     129,114            58,715             70,399
Interest expense and dividends on
   preferred stock of subsidiaries                        (39,142)          (11,775)           (27,367)
General and administrative expenses                       (15,926)           (5,897)           (10,029)
Other income, net                                           3,389             1,477              1,912
                                                        ---------          --------          ---------
Pretax operating income (loss)                           (212,546)            7,068           (219,614)
Applicable income taxes (benefit)                         (56,123)           (5,905)           (50,218)
                                                        ---------          --------          ---------
Operating income (loss)                                  (156,423)           12,973           (169,396)
Minority interest in operating (income) loss of
subsidiary                                                     --            (1,297)             1,297
Net realized investment gains (losses), net of
minority interest and income taxes                          8,520            (1,040)             9,560
Foreign currency gains (losses), net of minority
interest and income taxes                                  (1,679)             (733)              (946)
Restructuring costs                                        (4,815)             (452)            (4,363)
                                                        ---------          --------          ---------
Net income (loss)                                       $(154,397)         $  9,451          $(163,848)
                                                        =========          ========          =========
</TABLE>

The operating loss of $156.4 million in 2001 represented a $169.4 million
decrease from the operating income of $13.0 million recorded in 2000. This
decline was principally the result of abnormal catastrophe losses resulting from
the September 11th terrorist attacks and reserve strengthening. The $154.4
million net loss in 2001 compared to the $9.5 million in net income in 2000 was
the result of the net operating losses offset in part by realized investment
gains which are discussed on page [6] under the caption "Non-Operating Income
and Expenses."


                                       2
<PAGE>


Underwriting Income (Loss)

The underwriting result for 2000 included the results of LaSalle Re Holdings
Limited alone for the first nine months of 2000 and the combined results of
LaSalle Re Holdings Limited and Trenwick Group Inc. for the fourth quarter of
2000.

<TABLE>
<CAPTION>
                                                        2001                 2000
                                                        Year                 Year               Change
                                                    -----------           ---------           ---------
<S>                                                 <C>                   <C>                 <C>
Net premiums earned                                 $   889,506           $ 302,749           $ 586,757
                                                    -----------           ---------           ---------

Claims and claims expenses incurred                    (827,406)           (227,707)           (599,699)
Acquisition costs and underwriting expenses            (352,082)           (110,494)           (241,588)
                                                    -----------           ---------           ---------
Total expenses                                       (1,179,488)           (338,201)           (841,287)
                                                    -----------           ---------           ---------
Net underwriting loss                               $  (289,982)          $ (35,452)          $(254,530)
                                                    ===========           =========           =========

Loss ratio                                                 93.0%               75.2%               17.8%
Underwriting expense ratio                                 39.6%               36.5%                3.1%
Combined ratio                                            132.6%            111.7 %                20.9%

</TABLE>

The underwriting loss of $290.0 million in 2001 represented a $254.5 million
increase compared to the underwriting loss of $35.5 million in 2000. The
underwriting results for 2001 included catastrophe losses of $158.0 million and
additions to loss reserves of $120.9 million, which is further discussed on page
[4] under the caption "Claims and Claims Expenses." The underwriting loss in
2000 included both catastrophe losses of $6.5 million and additions to prior
years' reserves of $20.4 million on business underwritten by LaSalle Re Limited,
together with underwriting losses of $28.4 million associated with Trenwick
Group Inc. business acquired through the Trenwick/LaSalle business combination.

The increase in the combined ratio in 2001 compared to 2000 resulted from the
significant increase in the loss ratio due to the unusual level of catastrophic
losses and reserve strengthening in 2001.

Premiums Written

Gross premiums written for 2001 were $1.5 billion compared to $428.6 million for
2000 an increase of $1.0 billion or 239%. Details of gross premiums written are
provided below:

<TABLE>
<CAPTION>
                                                             2001              2000
                                                             Year              Year              Change
                                                          ----------         --------         -----------
<S>                                                       <C>                <C>              <C>
Worldwide property catastrophe reinsurance                $  138,173         $101,026         $    37,147
U.S. treaty reinsurance                                      339,257           92,703             246,554
International specialty insurance and reinsurance            234,966           51,145             183,821
Lloyd's syndicates:
   Continuing                                                443,977          121,279             322,698
   Runoff                                                      4,449           18,270             (13,821)
U.S. specialty program insurance                             291,433           44,221             247,212
                                                          ----------         --------         -----------
Gross premiums written                                    $1,452,255         $428,644         $ 1,023,611
                                                          ==========         ========         ===========
</TABLE>

The increase in worldwide property catastrophe reinsurance gross premium
writings for 2001 compared to 2000 resulted primarily from an increase in new
property catastrophe business and reinstatement premiums following the
catastrophe losses from the September 11th terrorist attack.

The increase in Lloyd's gross written premiums for 2001 compared to 2000 was due
to the addition of Trenwick Group Inc.'s Lloyd's operations managed by Chartwell
Managing Agents Limited from the Trenwick/LaSalle business combination. A
majority of the Lloyd's syndicate gross written premiums in 2000 represent the
fourth quarter bookings of business managed by


                                       3
<PAGE>


Chartwell Managing Agents Limited. The majority of Lloyd's business underwritten
by LaSalle Re Holdings Limited prior to the combination with Trenwick Group Inc.
was not renewed as of December 31, 2000 and have been classified as runoff.
Additionally, results of operations from Lloyd's syndicates which were sold by
Trenwick Group Inc. in 1999 have also been classified as runoff.

U.S. treaty reinsurance, international specialty insurance and reinsurance and
U.S. specialty program insurance gross premiums written increased from $92.7
million, $51.1 million and $44.2 million, respectively, for 2000 to $339.3
million, $235.0 million and $291.4 million, respectively, for 2001. Trenwick
Group Ltd. did not underwrite these businesses prior to the Trenwick/LaSalle
business combination in September of 2000.

Premiums Earned

<TABLE>
<CAPTION>
                                                                            2001               2000
                                                                            Year               Year               Change
                                                                        -----------          ---------          -----------
<S>                                                                     <C>                  <C>                <C>
Gross premiums written                                                  $ 1,452,255          $ 428,644          $ 1,023,611
Change in gross unearned premiums                                          (130,260)           (10,006)            (120,254)
                                                                        -----------          ---------          -----------
Gross premiums earned                                                     1,321,995            418,638              903,357
                                                                        -----------          ---------          -----------

Gross premiums ceded                                                       (481,937)          (126,012)            (355,925)
Change in ceded unearned premiums                                            49,448             10,123               39,325
                                                                        -----------          ---------          -----------
Ceded premiums earned                                                      (432,489)          (115,889)            (316,600)
                                                                        -----------          ---------          -----------
Net premiums earned                                                     $   889,506          $ 302,749          $   586,757
                                                                        ===========          =========          ===========
</TABLE>

Gross premiums ceded for 2001 were $481.9 million compared to $126.0 million for
2000. The increase in gross premiums ceded of $355.9 million was due primarily
to cessions relating to business acquired in the Trenwick/LaSalle business
combination and reinstatement premiums. Businesses acquired in the
Trenwick/LaSalle business combination included Lloyd's syndicates, international
specialty insurance and reinsurance and U.S. specialty program insurance, all of
which have significantly larger reinsurance and retrocessional programs than
LaSalle Re Limited.

Net premiums earned for 2001 were $889.5 million compared to $302.7 million for
2000. The increase in net premiums earned is commensurate with the increase in
net premiums written.

Claims and Claims Expenses
Claims and claims expenses for 2001 were $827.4 million, an increase of $599.7
million compared to claims and claims expenses of $227.7 million for 2000. The
increase in claims and claims expenses in 2001 resulted from an increase in
business acquired in the Trenwick/LaSalle business combination in September
2000, a significant increase in catastrophe losses, in particular losses
stemming from the September 11th terrorist attacks and reserve strengthening.
Trenwick Group Ltd.'s estimated loss from the September 11th terrorist attacks
is approximately $366.3 million before reinsurance recoverable of approximately
$268.1 million. The principal losses related to aviation risks underwritten by
Trenwick Group Ltd.'s operations at Lloyd's and property and related risks
including business interruption, underwritten by LaSalle Re. Of the $268.1
million of reinsurance recoverables, 93% are from reinsurers rated A or better
by Standard & Poor's or, alternatively, A.M. Best Company. Trenwick Group Ltd.
also incurred premium costs of approximately $25.2 million to reinstate various
reinsurance protections in its property catastrophe business and to purchase
back-up reinsurance covers for its aviation business at Lloyd's to minimize any
further deterioration in its results following the September 11th terrorist
attacks. Trenwick Group Ltd.'s estimate of its losses from aviation risks from
this event is based on two maximum losses and two partial losses. Estimates of
its property and related losses is based on an assessment of individual policies
which it has determined has exposure to the World


                                       4
<PAGE>


Trade Center loss. This assessment included market share analysis, probable
maximum loss analysis, independent risk modeling analysis and cedant loss
estimates.

Trenwick Group Ltd.'s 2001 results also included other catastrophe losses
totaling $24 million. The largest of these losses was tropical storm Allison and
storms affecting the Midwest United States amounting to $10.5 million and the
November 12, 2001 American Airlines crash in Queens, New York of $7.8 million.

Trenwick strengthened its prior year loss reserves in 2001 by $110.9 million.
This reserve strengthening includes $15.7 million related to the treaty
reinsurance segment's liability business, which was underwritten prior to 2001
and $11.5 million related to prior participation in the Excess and Casualty
Reinsurance Association Pool. In addition, $13.9 million of the loss reserve
strengthening related to the specialty program insurance segment. Also included
in the reserve strengthening was $20.4 million relating principally to the
Lloyd's segment directors and officers liability business. Lastly, the reserve
strengthening included $48.3 million stemming from deterioration in discontinued
businesses and reviews of the property insurance and small premium liability
business lines at the international specialty insurance and reinsurance segment.

LaSalle Re Limited's claims and claims expenses incurred in the 2000 year
included $6.5 million of catastrophe losses relating to U.K. floods and an
increase of $20.4 million in prior period occurrences, principally losses
relating to two storms, Martin and Anatol, which hit Europe in late December
1999.

Acquisition Costs and Underwriting Expenses

<TABLE>
<CAPTION>
                                      2001              2000
                                      Year              Year             Change
                                    --------          --------          --------
<S>                                 <C>               <C>               <C>
Policy acquisition costs            $273,066          $ 78,603          $194,463
Underwriting expenses                 79,016            31,891            47,125
                                    --------          --------          --------
Total acquisition costs and
   underwriting expenses            $352,082          $110,494          $241,588
                                    ========          ========          ========
Expense ratio                           39.6%             36.5%              3.1%
                                    ========          ========          ========
</TABLE>

Policy acquisition costs and underwriting expenses for 2001 increased by $241.6
million compared to 2000. Similar to claims and claims expenses, the increase
was attributable to expenses incurred on business acquired in the
Trenwick/LaSalle business combination. Acquisition costs and underwriting
expenses as a percentage of net premiums earned, or the expense ratio, were
39.6% for the 2001 year compared to 36.5% for the 2000 year. The increase in the
expense ratio occurred principally because of an increase in policy acquisition
costs relating to casualty business. A majority of the premium writings
resulting from the Trenwick/LaSalle business combination was casualty business.
This business, which consisted of both treaty insurance and reinsurance,
generally has a higher policy acquisition cost ratio than property catastrophe
business.

Underwriting expenses for the 2001 year as a percentage of earned premium was
8.9%, a modest decrease from 10.5% for 2000.


                                       5
<PAGE>


Net Investment Income

<TABLE>
<CAPTION>
                                             2001                 2000
                                             Year                 Year                Change
                                          -----------           ---------           -----------
<S>                                       <C>                   <C>                 <C>
Average invested assets                   $ 2,250,261           $ 979,468           $ 1,270,793
Average annualized yields                         6.3%                6.2%                  0.1%
                                          -----------           ---------           -----------
Investment income - portfolio                 141,959              60,727                81,232
Investment income - non-portfolio               2,601               2,805                  (204)
Investment expenses                           (15,446)             (4,817)              (10,629)
                                          -----------           ---------           -----------
Net investment income                     $   129,114           $  58,715           $    70,399
                                          ===========           =========           ===========

</TABLE>

Net investment income for 2001 was $129.1 million compared to $58.7 million for
2000. The principal reason for the increase in net investment income in 2001 was
the increase in invested assets resulting from the Trenwick/LaSalle business
combination. Investment expense for 2001 includes interest expense on funds
withheld of $11.3 million under the terms of stop loss reinsurance agreements
purchased by Trenwick America Reinsurance Corporation prior to 2000. The balance
of the increase in investment expense in 2001 results from the increase in
Trenwick Group Ltd.'s invested assets under management following the
Trenwick/LaSalle business combination.

Interest Expense and Subsidiary Preferred Share Dividends

Interest expense and subsidiary preferred share dividends was $39.1 million for
2001, an increase of $27.4 million from the 2000 fiscal year. The increase
resulted from the increase in debt outstanding as a result of the Trenwick Group
Inc. debt assumed by Trenwick Group Ltd.'s subsidiaries in the Trenwick/LaSalle
business combination.

Non-Operating Income and Expenses

Minority interest represents the minority interest in common shares of LaSalle
Re Limited held by third party investors prior to the Trenwick/LaSalle business
combination on September 27, 2000. Net income attributed to the minority
interest was calculated as 23.5% of net income in 2000 prior to the
Trenwick/LaSalle business combination.

Net realized gains on investments, net of minority interest and income taxes,
were $8.5 million during 2001, compared to net realized losses of $1.0 million
for 2000. Both the losses and gains were made as a result of security sales
executed pursuant to an investment policy designed to protect the total returns
on the portfolio. The 2001 amount is net of $3.4 million of realized losses on
investments to recognize declines in value that were other than temporary.

Trenwick Group Ltd. recorded foreign currency losses, net of minority interest
and income taxes, of $1.7 million for 2001, compared to foreign currency losses
of $0.7 million for 2000 due to the decline in the value of European currencies
in 2001 and 2000, principally the British pound sterling, against the US dollar.

Restructuring costs incurred in 2001 and 2000 were $4.8 million and $0.5
million, respectively. The 2001 costs primarily relate to non-recurring
severance costs, and the 2000 costs represent non-recurring expenses related to
the Trenwick/LaSalle business combination.


                                       6
<PAGE>


Results of Operations - Year Ended December 31, 2000 and Year Ended
September 30, 1999
(monetary amounts in tables expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                                                                    2000                1999
                                                                                    Year                Year                Change
                                                                                -----------      ----------------    ---------------
<S>                                                                              <C>                  <C>                  <C>
Underwriting income (loss)                                                       $(35,452)            $(38,109)            $  2,657
Net investment income                                                              58,715               33,847               24,868
Interest expense and dividends on
   preferred stock of subsidiaries                                                (11,775)              (1,714)             (10,061)
General and administrative expenses                                                (5,897)                (788)              (5,109)
Other income, net                                                                   1,477                   --                1,477
                                                                                 --------             --------             --------
Pretax operating income (loss)                                                      7,068               (6,764)              13,832
Applicable income taxes (benefit)                                                  (5,905)                  --               (5,905)
                                                                                 --------             --------             --------
Operating income (loss)                                                            12,973               (6,764)              19,737

Minority interest in operating (income) loss of subsidiary                         (1,297)               3,099               (4,396)
Net realized investment gains (losses), net of minority
interest and income taxes                                                          (1,040)                 471               (1,511)
Foreign currency gains (losses), net of minority  interest
and income taxes                                                                     (733)                 360               (1,093)
Restructuring costs                                                                  (452)                  --                 (452)
                                                                                 --------             --------             --------
Net income (loss)                                                                $  9,451             $ (2,834)            $ 12,285
                                                                                 ========             ========             ========
</TABLE>

Operating income of $13.0 million in 2000 represented a $19.7 million increase
over the operating loss of $6.8 million recorded in fiscal year 1999. This
improvement was principally the result of an increase in net investment income
in 2000, which was due to the increase in the size of the investment portfolio
from the Trenwick/LaSalle business combination. The increase of $12.3 million in
net income in 2000 when compared to fiscal year 1999 was the result of the
increase in net operating income, offset in part by minority interest, realized
investment losses and foreign exchange losses which are discussed on page [11]
under the caption "Non-Operating Income and Expenses."

Underwriting Income (Loss)
The underwriting result for 2000 included the results of LaSalle Re Holdings
Limited alone for the first nine months of 2000 and the combined results of
LaSalle Re Holdings Limited and Trenwick Group Inc. for the fourth quarter of
2000. The underwriting results for the 1999 fiscal year only included those of
LaSalle Re Holdings Limited.

<TABLE>
<CAPTION>
                                                                          2000                    1999
                                                                          Year                    Year                     Change
                                                                       ---------                ---------                ---------
<S>                                                                    <C>                      <C>                      <C>
Net premiums earned                                                    $ 302,749                $ 126,615                $ 176,134
                                                                       ---------                ---------                ---------

Claims and claims expenses incurred                                     (227,707)                (131,147)                 (96,560)
Acquisition costs and underwriting expenses                             (110,494)                 (33,577)                 (76,917)
                                                                       ---------                ---------                ---------
Total expenses                                                          (338,201)                (164,724)                (173,477)
                                                                       ---------                ---------                ---------
Net underwriting loss                                                  $ (35,452)               $ (38,109)               $   2,657
                                                                       =========                =========                =========

Loss ratio                                                                  75.2%                   103.6%                   (28.4)%
Underwriting expense ratio                                                  36.5%                    26.5%                    10.0%
Combined ratio                                                             111.7%                   130.1%                   (18.4)%
</TABLE>


                                       7
<PAGE>

The underwriting loss of $35.5 million in 2000 represented a $2.7 million
decrease compared to the underwriting loss of $38.1 million in fiscal year 1999.
The underwriting loss in 2000 included both catastrophe losses of $6.5 million
and additions to prior years' reserves of $20.4 million on business underwritten
by LaSalle Re Limited, together with underwriting losses of $28.4 million
associated with Trenwick Group Inc. business acquired through the
Trenwick/LaSalle business combination. Also included in 2000 is a $5.4 million
benefit recovered under the terms of the contingent interest notes. The
underwriting results for 1999 included both catastrophe losses of $25.6 million
and additions to loss reserves of $44.5 million on business underwritten by
LaSalle Re Limited, which is further discussed on pages [9 and 10] under the
caption "Claims and Claims Expenses."

The decrease in the combined ratio in 2000 compared to fiscal year 1999 resulted
from a significant change in Trenwick Group Ltd.'s mix of business following the
Trenwick/LaSalle business combination. While the combined ratio was lower in
2000, the premium volume on business acquired effective September 27, 2000 was
significantly greater, which resulted in a higher dollar amount of underwriting
loss. Both the decrease in the loss ratio and the increase in the underwriting
expense ratio in 2000 compared to fiscal year 1999 resulted from the inclusion
of Trenwick Group Inc.'s casualty business in the underwriting results in the
fourth quarter of 2000. The decline in the loss ratio in 2000 also occurred due
to the lower number of catastrophic events compared to fiscal year 1999.

Premiums Written
Gross premiums written for 2000 were $428.6 million compared to $139.0 million
for the 1999 fiscal year, an increase of $289.6 million or 208%. Details of
gross premiums written are provided below:

<TABLE>
<CAPTION>
                                                                                2000                  1999
                                                                                Year                  Year                  Change
                                                                              --------              --------              ---------
<S>                                                                           <C>                   <C>                   <C>
Worldwide property
   catastrophe reinsurance                                                    $101,026              $116,621              $ (15,595)
U.S. treaty reinsurance                                                         92,703                    --                 92,703
International specialty insurance and reinsurance                               51,145                    --                 51,145
Lloyd's syndicates:
   Continuing                                                                  121,279                 6,430                114,849
   Runoff                                                                       18,270                15,959                  2,311
U.S. specialty program insurance                                                44,221                    --                 44,221
                                                                              --------              --------              ---------
Gross premiums written                                                        $428,644              $139,010              $ 289,634
                                                                              ========              ========              =========
</TABLE>

The decrease in worldwide property catastrophe reinsurance gross premium
writings for 2000 compared to the 1999 fiscal year resulted primarily from the
non-renewal of certain accounts following a re-evaluation of LaSalle Re
Limited's worldwide aggregate exposures. The most significant reduction in
aggregate exposures came from a reduction in accounts covering European risks.

The increase in Lloyd's gross written premiums for 2000 compared to the 1999
fiscal year was due to the addition of Trenwick Group Inc.'s Lloyd's operations
managed by Chartwell Managing Agents Limited from the Trenwick/LaSalle business
combination. A majority of the Lloyd's syndicate gross written premiums in 2000
represent the fourth quarter bookings of business managed by Chartwell Managing
Agents Limited. The majority of Lloyd's business underwritten by LaSalle Re
Holdings Limited prior to the combination with Trenwick Group Inc.


                                       8
<PAGE>

was not renewed as of December 31, 2000 and have been classified as runoff.
Additionally, results of operations from Lloyd's syndicates which were sold by
Trenwick Group Inc. in 1999 have also been classified as runoff.

U.S. treaty reinsurance, international specialty insurance and reinsurance and
U.S. specialty program insurance gross premiums written increased from $0 for
the 1999 fiscal year to $92.7 million, $51.1 million and $44.2 million,
respectively, for 2000. Trenwick Group Ltd. did not underwrite these businesses
prior to the Trenwick/LaSalle business combination.

Premiums Earned

<TABLE>
<CAPTION>
                                                                         2000                      1999
                                                                         Year                      Year                     Change
                                                                      ---------                 ---------                 ---------
<S>                                                                   <C>                       <C>                       <C>
Gross premiums written                                                $ 428,644                 $ 139,010                 $ 289,634
Change in gross unearned premiums                                       (10,006)                    6,070                   (16,076)
                                                                      ---------                 ---------                 ---------
Gross premiums earned                                                   418,638                   145,080                   273,558
                                                                      ---------                 ---------                 ---------
Gross premiums ceded                                                   (126,012)                  (28,191)                  (97,821)
Change in ceded unearned premiums                                        10,123                     9,726                       397
                                                                      ---------                 ---------                 ---------
Ceded premiums earned                                                  (115,889)                  (18,465)                  (97,424)
                                                                      ---------                 ---------                 ---------
Net premiums earned                                                   $ 302,749                 $ 126,615                 $ 176,134
                                                                      =========                 =========                 =========
</TABLE>

Gross premiums ceded for 2000 were $126.0 million compared to $28.2 million for
the 1999 fiscal year. The increase in gross premiums ceded of $97.8 million was
due primarily to cessions relating to business acquired in the Trenwick/LaSalle
business combination. Businesses acquired in the Trenwick/LaSalle business
combination included Lloyd's syndicates, international specialty insurance and
reinsurance and U.S. specialty program insurance, all of which have
significantly larger reinsurance and retrocessional programs than LaSalle Re
Limited.

Net premiums earned for 2000 were $302.7 million compared to $126.6 million for
the 1999 fiscal year. The increase in net premiums earned is commensurate with
the increase in net premiums written.

Claims and Claims Expenses
Claims and claims expenses for 2000 were $227.7 million, an increase of $96.6
million compared to claims and claims expenses of $131.1 million for the 1999
fiscal year. The increase in claims and claims expenses in 2000 resulted from
claim activity of $152.5 million relating to business acquired in the
Trenwick/LaSalle business combination. Excluding these losses, claims and claims
expenses incurred by LaSalle Re Limited in 2000 were $80.6 million. This
compares to $131.1 million in claims and claims expenses incurred during the
1999 fiscal year. The reduction in claims and claims expenses incurred by
LaSalle Re Limited in 2000 was due to the reduced number of catastrophe losses
in 2000 and the absence of the significant prior year reserve strengthening that
occurred in the 1999 fiscal year. LaSalle Re Limited's claims and claims
expenses incurred in the 2000 year included $6.5 million of catastrophe losses
relating to U.K. floods and an increase of $20.4 million in prior period
occurrences, principally losses relating to two storms, Martin and Anatol, which
hit Europe in late December 1999. During the 1999 fiscal year, LaSalle Re
Limited incurred net losses of $25.6 million from five catastrophic events,
including Hurricane Floyd, an earthquake which hit Turkey and Typhoon Olga which
hit North Korea. During that same year, LaSalle Re Limited recorded additions to
prior year reserves of $14.5 million in respect of Hurricane Georges, which
occurred in September 1998, due to an increase from prior market estimates of
the aggregate damage caused by the hurricane. LaSalle Re Limited also incurred
$16.0 million of additional reserves in 1999 following the completion of


                                       9
<PAGE>

an evaluation of its catastrophe reserving methodology. In addition, LaSalle Re
Limited recorded approximately $14.0 million of additional reserves in the 1999
fiscal year relating to contracts written in prior years, including contracts
relating to its Lloyd's extended warranty business.

Acquisition Costs and Underwriting Expenses

<TABLE>
<CAPTION>
                                                            2000             1999
                                                            Year             Year             Change
                                                          --------          -------          -------
<S>                                                       <C>               <C>              <C>
Policy acquisition costs                                  $ 78,603          $19,844          $58,759
Underwriting expenses                                       31,891           13,733           18,158
                                                          --------          -------          -------
Total acquisition costs and underwriting expenses         $110,494          $33,577          $76,917
                                                          ========          =======          =======
Expense ratio                                                 36.5%            26.5%            10.0%
                                                          ========          =======          =======

</TABLE>

Policy acquisition costs and underwriting expenses for 2000 increased by $76.9
million compared to policy acquisition costs and underwriting expenses for the
1999 fiscal year. Similar to claims and claims expenses, the increase was
attributable to expenses incurred on business acquired in the Trenwick/LaSalle
business combination. Acquisition costs and underwriting expenses as a
percentage of net premiums earned, or the expense ratio, were 36.5% for the year
ended December 31, 2000 compared to 26.5% for the fiscal year ended September
30, 1999. The increase in the expense ratio occurred principally because of an
increase in policy acquisition costs relating to casualty business. A majority
of the premium writings resulting from the Trenwick/LaSalle business combination
was casualty business. This business, which consisted of both treaty insurance
and reinsurance, generally has a higher policy acquisition cost ratio than
property catastrophe business.

Underwriting expenses for the 2000 year as a percentage of earned premium was
10.5%, a modest decrease from 10.8% for the 1999 fiscal year.

Net Investment Income

<TABLE>
<CAPTION>
                                            2000                 1999
                                            Year                 Year               Change
                                          ---------           ---------           ---------
<S>                                       <C>                 <C>                 <C>
Average invested assets                   $ 979,468           $ 575,571           $ 403,897
Average annualized yields                       6.2%                5.7%                0.5%
Investment income - portfolio                60,727              32,776              27,951
Investment income - non-portfolio             2,805               1,937                 868
Investment expenses                          (4,817)               (866)             (3,951)
                                          =========           =========           =========
Net investment income                     $  58,715           $  33,847           $  24,868
                                          =========           =========           =========
</TABLE>

Net investment income for 2000 was $58.7 million compared to $33.8 million for
the 1999 fiscal year. The principal reason for the increase in net investment
income in 2000 was the increase in invested assets resulting from the
Trenwick/LaSalle business combination. Investment expense for 2000 includes
interest expense on funds withheld of $2.9 million under the terms of stop loss
reinsurance agreements purchased by Trenwick America Reinsurance Corporation
prior to 2000. The balance of the increase in investment expense in 2000 results
from the increase in Trenwick Group Ltd.'s invested assets under management
following the Trenwick/LaSalle business combination.

Interest Expense and Dividends on Preferred Stock of Subsidiaries

Interest expense and dividends on preferred stock of subsidiaries was $11.8
million for 2000, an increase of $10.1 million from the 1999 fiscal year. The
increase resulted from the increase in


                                       10
<PAGE>

debt outstanding as a result of the Trenwick Group Inc. debt assumed by Trenwick
Group Ltd.'s subsidiaries in the Trenwick/LaSalle business combination.

Non-Operating Income and Expenses

Minority interest represents the minority interest in common shares of LaSalle
Re Limited held by third party investors prior to the Trenwick/LaSalle business
combination on September 27, 2000. Net income attributed to the minority
interest was calculated as 23.5% of net income in 2000 prior to the
Trenwick/LaSalle business combination and was calculated as 23.2% of net income
in fiscal 1999.

Net realized losses on investments, net of minority interest and income taxes,
were $1.0 million during 2000, compared to net realized gains of $0.5 million
for the 1999 fiscal year. Both the losses and gains were made as a result of
security sales executed pursuant to an investment policy designed to protect the
total returns on the portfolio.

Trenwick Group Ltd. recorded foreign currency losses, net of minority interest
and income taxes, of $0.7 million for 2000, compared to foreign currency gains
of $0.4 million for the 1999 fiscal year due to the decline in the value of
European currencies in 2000, principally the British pound sterling, against the
US dollar.

Restructuring costs of $0.5 million incurred in 2001 related to non-recurring
expenses incurred in connection with the Trenwick/LaSalle business combination.

Investments

Trenwick Group Ltd.'s investment objective is to fund policyholder and other
liabilities in a manner that enhances shareholder value, subject to appropriate
risk constraints. Trenwick Group Ltd. seeks to meet this investment objective
through a mix of investments that reflect the characteristics of the liabilities
they support; diversify the types of investment risks by interest rate,
liquidity, credit and equity price risk; and achieve asset diversification by
investment type, industry, issuer and geographic location. Trenwick Group Ltd.
regularly projects duration and cash flow characteristics of its liabilities and
makes appropriate adjustments in its investment portfolios. At December 31,
2001, Trenwick Group Ltd. had investments, cash and cash equivalents of $2.3
billion, an increase of 3% compared to combined investments, cash and cash
equivalents of LaSalle Re Holdings Limited and Trenwick Group Inc. of $2.2
billion at December 31, 2000. This increase resulted principally from positive
operating cash flow and an increase in the market value of its portfolio of debt
securities. All debt and publicly traded equity investments are classified as
available for sale and reported at fair value with the unrealized gain or loss,
net of income taxes, reported in other comprehensive income. During 2001, the
market value of Trenwick Group Ltd.'s debt and equity investments increased by
$16.4 million principally as a result of the declining interest rate environment
in 2001.

Trenwick Group Ltd.'s debt securities consisted primarily of investment grade
securities, with 74% having a quality rating of Aa or better at December 31,
2001. High yield, or non-investment grade debt securities carry a rating of
below BBB-/Baa3. These securities, along with unrated securities, represented
approximately 5% of the portfolio at December 31, 2001 and 4% of the portfolio
at December 31, 2000.

The average maturity of Trenwick Group Ltd.'s debt securities at December 31,
2001 was 4.8 years compared to 5.1 years at December 31, 2000 and 5.3 years for
the combined portfolio of


                                       11
<PAGE>

LaSalle Re Holdings Limited and Trenwick Group Inc. at December 31, 1999. The
shortening of the average maturity during 2001 resulted from the sale of longer
maturity municipal securities and the decline in the expected maturity of
mortgage backed securities resulting from declining interest rates.

During the first quarter of 2001, Trenwick Group Ltd. sold almost all of its
equity securities and reinvested the proceeds in debt securities to increase
operating earnings and decrease the volatility of unrealized investment gains
and losses. Trenwick Group Ltd. also liquidated the remainder of its tax
advantaged municipal government portfolio in early 2001 to increase its taxable
yield. Both of these actions were taken to maximize taxable income following the
significant losses incurred by Trenwick Group Ltd.'s U.S. operations in recent
years.

Trenwick Group Ltd. has not invested in derivative financial instruments such as
futures, forward contracts, swaps, options or other financial instruments with
similar characteristics such as interest rate caps or floors and fixed-rate loan
commitments. Trenwick Group Ltd.'s portfolio includes market sensitive
instruments, such as mortgage-backed and asset-backed securities, which amounted
to approximately $670 million at December 31, 2001 or 25.8% of cash and invested
assets. There are various categories of mortgage-backed and asset-backed
securities that are subject to different degrees of risk from changes in
interest rates and, for those mortgage-backed and asset-backed securities that
are not agency-backed, defaults. Approximately 54% of Trenwick Group Ltd.'s
mortgage-backed and asset-backed securities holdings were backed by government
agencies, such as GNMA, FNMA and FHLMC, at December 31, 2001. The principal
risks inherent in holding mortgage-backed and asset-backed securities are
prepayment and extension risks related to dramatic decreases and increases in
interest rates, resulting in the repayment of principal from the underlying
mortgages either earlier or later than originally anticipated. At December 31,
2001, Trenwick Group Ltd. does not have any mortgage-backed and asset-backed
securities that are subject to more prepayment and extension risk (such as
interest-or principal-only strips) than traditional mortgage-backed and
asset-backed securities.

Deferred Income Tax Assets

At year end 2001, Trenwick Group Ltd. had net deferred income tax assets of
$139.9 million, which is attributable to the estimated future income tax effects
of temporary differences and carryforwards. These net deferred income taxes
arise principally from operations in the United States and the United Kingdom.
Trenwick Group Ltd. also has operations in other jurisdictions, principally
Bermuda; Bermuda operations are not currently subject to income taxation.

Net deferred income tax assets for U.S. operations totaled $66.6 million at year
end 2001 (assets of $116.8 million, net of liabilities of $50.3 million), of
which $48.8 million relates to net operating loss carryforwards totaling $139.4
million. These net operating loss carryforwards are available to offset U.S.
taxable income prior to their expirations between 2007 and 2021. Details of U.S
net operating loss carryforwards, the year of their expiration and any annual
limitations on their utilization are described in Note 7 of the Notes to the
Consolidated Financial Statements.

At year end 2001, no valuation allowance was established against the U.S.
carryforwards, as management has concluded that is more likely than not that the
results of future U.S. operations will generate sufficient taxable income to
realize the carryforwards in the near term and prior to their expiration.

Trenwick Group Inc. began its U.S. operations in 1984. Historically, there has
been a positive correlation between U.S. pre-tax accounting income and U.S.
taxable income. Between 1984 and


                                       12
<PAGE>

1998 Trenwick Group Inc. had U.S. taxable income of $232 million, excluding an
additional $150 million of investment income that was not taxable due to its
nature.

For 2001 and 2000, a reconciliation of U.S. accounting income (loss) before
federal income taxes to U.S. taxable follows (monetary amounts in table
expressed in thousands of United States dollars; 2000 balances include amounts
incurred by Trenwick Group Ltd. subsequent to September 27, 2000, the effective
date of the Trenwick/LaSalle business combination):

<TABLE>
<CAPTION>
                                                                   2001              2000
                                                                 --------          --------
<S>                                                              <C>               <C>
U.S. pre-tax income (loss)                                       $(63,822)         $(19,030)
   Tax-exempt investment income                                    (2,813)           (3,645)
   Amortization of goodwill                                         1,512               355
   Claims and claim expense and unearned premium reserve
   discounting, net of policy acquisition cost expensing            6,037              (728)
   Contingent interest note adjustments                            (8,962)           (4,704)
   Other book-tax differences                                        (987)             (739)
                                                                 --------          --------
U.S. taxable income (loss)                                       $(69,035)         $(28,491)
                                                                 ========          ========
</TABLE>

During the 2000 year and 2001 first quarter, Trenwick Group Ltd. management
liquidated its portfolio of tax-exempt securities and substantially all of its
portfolio of equity securities. The proceeds of approximately $500 million were
then reinvested in taxable debt securities in order to increase the taxable
investment income and decrease volatility of unrealized investment gains and
losses.

At year end 2001, management prepared business plans, including plans for its
U.S. operations. Projections in the plans support the utilization of all
available U.S. net operating loss carryforwards ($119.7 million of $139.4
million) by year end 2004, at which time, the U.S. operations could begin to
utilize its alternative minimum tax credit carryforwards. The alternative
minimum tax credits of $5.9 million have no expiration or annual limitations.
The remaining $19.6 million of U.S. net operating loss carryforwards are subject
to annual limitations, and can be utilized over the next four years in annual
amounts of $5.2 million, prior to their expiration in 2018. The business plans
used to prepare these projections give effect to the increased taxable
investment income resulting from restructuring of the investment portfolio of
approximately $25 million annually and also to the January 1, 2002 reinsurance
renewal season, which reflects significant assumptions about increased premium
volume and improved rates and profitability. In the January 1, 2001 renewal
season, the U.S. operations have participated in a manner consistent with its
plans.

While not considered in the business plans, the U.S. operations currently have
$47.5 million in unrealized gains on debt and equity securities for income tax
purposes. These gains, if realized, are available to increase its taxable income
with the sales proceeds being reinvested at current market yields.

Net deferred income tax assets for U.K. operations totaled $73.4 million at year
end 2001 (assets of $74.9 million, net of liabilities of $1.5 million), of which
$0.9 million relates to net operating loss carryforwards totaling $3.1 million.
An additional $36.0 million relates to operating losses of Lloyd's syndicates
totaling $119.9 million for their open years of account. (Lloyd's syndicates do
not report taxable income or loss until a year of account is closed, typically
after three years. Thus the 2001, 2000 and 1999 years of account are considered
open years of account at year end 2001.)


                                       13
<PAGE>


Unlike the U.S. operating losses, the U.K. operating losses have no expiration
and no annual limitation on their utilization. Also, through ownership transfer,
they may be available to be utilized by another entity that engages in the same
trade, insurance.

At year end 2001, management concluded there was not sufficient evidence to
support the realization of the U.K. net operating losses of $3.1 million and
established a valuation allowance of $0.9 million against the recorded value of
the deferred income tax asset. For the remaining U.K. operating losses for open
years of account totaling $119.9 million, management has concluded that it is
more likely than not that the results of future U.K. operations will generate
sufficient taxable income to realize the carryforwards in the near term.

New U.K. legislation was recently enacted which makes it possible to group the
current year profit and losses of U.K. companies that have a common ultimate
parent. Pursuant to this legislation, the U.K. operations of Trenwick
International Limited and Chartwell Managing Agents Limited may offset their
current year separate company profits and loss. In addition, new legislation was
introduced effective for tax years beginning on or after January 1, 2000, which
permits U.K. insurers and Lloyd's members to disclaim claims and claims expense
liabilities for tax purposes. By electing to disclaim these liabilities, current
year taxable income is increased. The disclaimed liabilities are temporary
differences and will give rise to future taxable deductions. The new legislation
also provides a calculation whereby additional receipts or expense may be
included in taxable income depending upon the payout of claims relative to the
liabilities taken into account for tax purposes within a margin of error. We are
amending our 2000 U.K. returns and electing to disclaim a portion of our
technical liabilities.

Due to the disclaiming of claim and claim expense liabilities for U.K./ income
tax purposes, there is not a positive correlation between U.K. pre-tax
accounting income and U.K. taxable income for the 2001 and 2000 years. A
reconciliation of U.K. pre-tax accounting income (loss) to taxable income for
2001 and 2000 follows (monetary amounts in table expressed in thousands of
United States dollars; 2000 balances include amounts incurred by Trenwick Group
Ltd. subsequent to September 27, 2000, the effective date of the
Trenwick/LaSalle business combination):


<TABLE>
<CAPTION>
                                                            2001               2000
                                                          ---------          --------
<S>                                                       <C>                <C>
U.K. pre-tax income (loss)                                $(112,652)         $  1,456
   Pre-tax loss prior to business combination                    --           (74,021)
   Pre-tax losses on open years of account, net              24,054            39,695
   Disclaimed claim and claim expenses                       88,598            37,388
   Utilization of net operating loss carryforward                --            (4,518)
                                                          ---------          --------
U.K. taxable income (loss)                                       --                --
                                                          =========          ========
</TABLE>

At year end 2001 business plans prepared by management also included plans for
its U.K operations. Projections in the plans support the utilization of U.K. net
operating loss carryforwards from open years of account by year end 2005,
together with a return to normal levels of disclaimed claim and claim expense
liabilities by year end 2008. The business plans used to prepare these
projections give effect to the discontinuation of unprofitable lines of business
and the October 1, 2001 renewal season, which reflects significant assumptions
about increased premium volume and improved rates and profitability. In the
October 1, 2001 renewal season, the U.K. operations have participated in a
manner consistent with its plans. The projections are based on the assumption
that the company will provide LOC capacity at levels sufficient to support the
projected increased premium volume. The letter of credit facility is scheduled
to expire in November 2002. In the event that Trenwick Group Ltd. is unable to
obtain


                                       14
<PAGE>

a replacement letter of credit facility or post sufficient collateral to support
its Lloyd's underwriting activities, it will be required to reduce or cease its
underwriting activities at Lloyd's for the 2003 year of account.

Liquidity and Capital Resources

Cash Flows

Trenwick Group Ltd. is a holding company whose principal assets are its
investments in the common stock of its operating subsidiaries. As a holding
company, Trenwick Group Ltd.'s principal source of funds consists of permissible
dividends, tax allocation payments and other statutorily permissible payments
from its operating subsidiaries. Trenwick Group Ltd.'s principal use of cash is
dividends to its shareholders. Trenwick Group Ltd.'s United States and United
Kingdom intermediate holding companies utilize cash in order to service their
respective debt obligations; its Bermuda subsidiary uses cash to pay dividends
on its preferred shares. Trenwick Group Ltd.'s operating subsidiaries receive
cash from premiums, investment income and proceeds from sales and maturities of
portfolio investments. They utilize cash to pay claims, purchase their own
reinsurance protections, meet operating and capital expenses and purchase debt
and equity securities.

Cash from Trenwick Group Ltd.'s operating activities in 2001 was $63.2 million
compared to cash used in Trenwick Group Ltd.'s operating activities of $16.7
million in 2000 and cash provided by Trenwick Group Ltd.'s operating activities
of $19.9 million in the 1999 fiscal year. The increase in cash flow from
operations was due to several factors. 2001 includes the full year results of
Trenwick Group Ltd. following the Trenwick/LaSalle Business Combination. Growth
in premium writings in Trenwick Group Ltd.'s U.S. and U.K. operations and the
reduced effect from run-off operations have significantly improved cash flow
from operations. Catastrophe loss payments in LaSalle following the September
11th terrorist attack have not been significant in 2001. Loss payments from this
event are expected to be significant in 2002 and 2003. Aviation losses from
Trenwick Group Ltd.'s operations pertaining to the liability portion of the risk
are expected to be paid over several years. Cash from financing activities in
2001 included $14 million borrowed under Trenwick Group Ltd.'s bank credit
facility. The borrowed funds were used for general corporate purposes.

Trenwick Group Ltd.'s current liquidity objectives are to maximize the use of
available cash to fund ongoing operating needs, pay shareholder dividends and
strategically invest in core businesses. Net cash used in financing activities
in 2001 included $5.9 million of dividends paid to common shareholders. Net cash
used in financing and operating activities in 2000 included $1.5 million of
dividends paid to common shareholders and $6.6 million of dividends paid to
LaSalle Re Holdings Limited's preferred shareholders. In the 1999 fiscal year,
net cash used in financing and operating activities included $37.5 million of
dividends to common shareholders and $6.6 million to preferred shareholders.

Trenwick Group Ltd.'s ability to service its debt obligations is highly
dependent upon dividends and other statutorily permissible payments from its
operating subsidiaries in the United States and Bermuda. As a result of recent
losses incurred by Trenwick Group Ltd.'s United States and Bermuda operating
companies, their respective cash distribution capacities have been significantly
reduced. Refer to Note 11 of consolidated financial statements. Further,
maintaining the current dividend capacity is dependent upon the future
profitability of these operating subsidiaries. If Trenwick Group Ltd.'s
operating subsidiaries generated future losses instead of


                                       15
<PAGE>

profits, the impact on Trenwick Group Ltd.'s ability to service its outstanding
debt obligations could be significant.

Dividends

Trenwick Group Ltd. paid a dividend of $0.04 per common share in each quarter of
2001 and the fourth quarter of 2000. Trenwick Group Inc. paid a quarterly
dividend of $.26 per common share in the first three quarters of 2000 and in
each quarter of 1999. LaSalle Re Holdings Limited paid dividends on its common
shares of $0.38 per share in each of January, April and July 1999. LaSalle Re
Holdings Limited did not pay any dividends on its common shares subsequent to
July 1999. LaSalle Re Holdings Limited paid a quarterly dividend of $.55 per
share on its Series A preferred shares in each of the four quarters of 2001,
2000 and 1999. Trenwick Group Ltd.'s Board of Directors reviews Trenwick Group
Ltd.'s common share dividend each quarter. Among the factors considered by the
Board of Directors in determining the amount of each dividend are Trenwick Group
Ltd.'s results of operations and the capital requirements, growth and other
characteristics of its businesses.

Financings, Financing Capacity and Capitalization

Trenwick Group Ltd. continually monitors existing and alternative financing
sources to support Trenwick Group Ltd.'s capital and liquidity needs, including,
but not limited to, debt issuance, preferred or common stock issuance,
intercompany borrowings and pledging or selling of assets. Trenwick Group Ltd.'s
total debt to capital ratio (indebtedness divided by the sum of indebtedness,
minority interest and shareholders' equity) was 31.2% on December 31, 2001 and
26.3% on December 31, 2000. The increase is primarily due to an increase of
$14.0 million of borrowings under its senior credit facilities, combined with a
decrease in shareholders' equity.

Trenwick Group Ltd.'s financing obligations generally include debt and lease
payment obligations. At December 31, 2001, annual principal payments required by
Trenwick Group Ltd., through 2006, relating to these financing obligations are
as follows (monetary amounts in tables expressed in thousands of United States
dollars):

<TABLE>
<CAPTION>
                                                                                         Payments Due by Period
                                                                 -------------------------------------------------------------------
Contractual                                                       Less than              1-3                4-5              After 5
Obligations                                      Total             1 Year               Years              Years              Years
                                               --------            -------            --------            -------            -------
<S>                                            <C>                 <C>                <C>                 <C>                <C>
Indebtedness and minority
   interest                                    $359,770            $46,268            $192,021            $35,131            $86,350
Operating leases                                 21,628              4,951               9,256              5,027              2,394
                                               --------            -------            --------            -------            -------
Total contractual cash
   obligations                                 $381,398            $51,219            $201,277            $40,158            $88,744
                                               ========            =======            ========            =======            =======

</TABLE>


                                       16
<PAGE>

Trenwick Group Ltd.'s other commercial commitments principally consist of
reimbursement obligations for standby letters of credit issued in support of its
underwriting activities at Lloyd's. The amounts and expiration of Trenwick Group
Ltd.'s other commercial commitments are as follows (monetary amounts in table
expressed in thousands of United States dollars):

<TABLE>
<CAPTION>
                                                                                Expiration Periods
                                                        ----------------------------------------------------------------
Other Commercial                                        Less than             1-3                4-5          After 5
Commitments                             Total             1 Year              Years             Years          Years
                                      --------           -------            --------           -------        -------
<S>                                   <C>                <C>                 <C>               <C>            <C>
Lines of credit                       $  5,091           $ 5,091            $     --           $    --        $ --
Standby letters of credit              332,177            18,784             299,138            14,255          --
                                      --------           -------            --------           -------          --
Total commercial
   commitments                        $337,268           $23,875            $299,138           $14,255        $ --
                                      ========           =======            ========           =======        ====
</TABLE>

Other than as noted above, Trenwick Group Ltd. does not have any material
off-balance sheet arrangements, trading activities involving non-exchange traded
contracts accounted for at fair value or relationships with persons or entities
that derive benefits from a non-independent relationship with Trenwick Group
Ltd. or its related parties.

Concurrent with the Trenwick/LaSalle business combination, Trenwick America
Corporation and Trenwick Holdings Limited, Trenwick Group Ltd.'s U.S. and U.K.
holding companies, entered into an amended and restated $490 million credit
agreement with various lending institutions. The credit agreement consisted of
both a $260 million revolving credit facility and a $230 million letter of
credit facility. The revolving credit facility has subsequently been converted
into a four-year term loan. Trenwick America Corporation is the primary obligor
with respect to the revolving credit facility, and Trenwick Holdings Limited is
the primary obligor with respect to the letter of credit facility. Guarantees
are provided by LaSalle Re Holdings Limited and Trenwick Group Ltd. with respect
to both Trenwick America Corporation's and Trenwick Holdings Limited's
obligations and additionally by Trenwick America Corporation with respect to
Trenwick Holdings Limited's obligations. The credit agreement provides for a
letter of credit facility which may only be used to support the Lloyd's
syndicate participations of Trenwick Group Ltd.'s subsidiaries. The letter of
credit facility is scheduled to expire in November 2002. In the event that
Trenwick Group Ltd. is unable to obtain a replacement letter of credit facility
or post sufficient collateral to support its Lloyd's underwriting activities, it
will be required to reduce or cease its underwriting activities at Lloyd's for
the 2003 year of account. The applicable interest rate on borrowings under the
credit facility is generally 2.5% above the London Interbank Offered Rate and
was 4.7% at year end 2001. The term loan facility is subject to scheduled
principal amortization over the four-year period in accordance with the
following schedule: 2002, 22.5%; 2003, 27.5%; 2004, 32.5%; 2005, 17.5%.

Trenwick America Corporation is obligated to repay a portion or all of the term
loan in the event of equity issuances, asset sales or debt issuances by Trenwick
Group Ltd. or its subsidiaries. At year end 2001, $195.0 million of term loans
were outstanding, and $230.0 million of letters of credit were outstanding under
the credit facility.

The credit agreement contains general covenants and restrictions as well as
financial covenants relating to, among other things, Trenwick Group Ltd.'s
minimum interest coverage, debt to capital leverage, minimum earned surplus,
maintenance of a minimum A.M. Best Company rating of A- and tangible net worth.
As of year end 2001, Trenwick Group Ltd. was in compliance with the credit
agreement covenants.


                                       17
<PAGE>

The financial covenants relating to interest coverage, risk based capital and
tangible net worth (each as defined by the financial covenants in the credit
agreement) were revised downward in an amendment to the credit agreement
executed following the September 11th terrorist attacks. The amendment set
Trenwick Group Ltd.'s minimum interest coverage ratio at 1.5 to 1 for the fourth
quarter of 2001, 2.0 to 1 for the first quarter of 2002 and 2.5 to 1 thereafter.
Trenwick Group Ltd.'s interest coverage ratio at December 31, 2001 was 2.0 to 1.
The amendment adjusted downward the minimum risk-based capital requirement for
Trenwick Group Ltd.'s subsidiary, Chartwell Insurance Company, from 300% to 225%
through December 31, 2002. Thereafter, the minimum risk-based capital for
Chartwell Insurance Company returns to 300%. The risk based capital for
Chartwell Insurance Company as of December 31, 2001 was 257%. The amendment
lowered the base minimum tangible net worth Trenwick Group Ltd. must maintain
from $560 million to $425 million until the reporting of quarterly results of
operations as of March 31, 2002, which are due no later than May 15, 2002. After
May 15, 2002, Trenwick Group Ltd. minimum tangible net worth reverts to $560
million. Trenwick Group Ltd.'s tangible net worth as of December 31, 2001 was
$428 million. If Trenwick Group Ltd. is unable to meet the credit agreement's
financial covenants at the end of the first quarter of 2002, it may be required
to repay the outstanding indebtedness and collateralize the outstanding letters
of credit issued under the credit agreement through additional financing, asset
sales, subsidiary dividends or similar transactions.

In connection with the Trenwick/LaSalle business combination, Trenwick America
Corporation assumed, effective September 27, 2000, Trenwick Group Inc.'s
obligations with respect to $75 million aggregate principal amount of 6.70%
Senior Notes, which are due April 1, 2003. Interest is payable semi-annually on
April 1 and October 1 of each year; interest payments commenced on October 1,
1998. The notes are not subject to redemption prior to maturity. They are
unsecured obligations and rank senior in right of payment to all existing and
future subordinated indebtedness of Trenwick America Corporation.

Trenwick America Corporation also assumed, effective September 27, 2000,
Trenwick Group Inc.'s 8.82% Junior Subordinated Deferrable Interest Debentures
held by Trenwick Capital Trust I in respect of the $110 million in 8.82%
Subordinated Capital Income Securities issued by the Trust. Under the terms of
the debentures, Trenwick America Corporation is not restricted from incurring
indebtedness, but is subject to limits on its ability to incur secured
indebtedness for borrowed money.

Upon consummation of the acquisition of Chartwell Re Corporation in 1999,
Trenwick Group Inc. became the successor obligor under Chartwell Re
Corporation's Contingent Interest Notes due June 30, 2006. Effective September
27, 2000, Trenwick America Corporation assumed Trenwick Group Inc.'s obligations
under the contingent interest notes in connection with the Trenwick/LaSalle
business combination. The contingent interest notes were issued in an aggregate
principal amount of $1 million, which accrues interest at a rate of 8% per
annum, compounded annually. The interest is not payable until the maturity or
earlier redemption of the contingent interest notes. In addition, the contingent
interest notes entitle their holders to receive at maturity, in proportion to
the principal amount of the contingent interest notes held by them, an aggregate
of from $1 million up to $55 million in contingent interest. The amount of
contingent interest payable under the contingent interest notes is dependent
upon the level of loss and loss adjustment expense reserves related to business
written by Trenwick Group Ltd.'s subsidiary, The Insurance Corporation of New
York, prior to 1996. Settlement of the contingent interest notes may be made by
payment of cash or, under certain specified conditions, by delivery of Trenwick
Group Ltd.'s common shares.


                                       18
<PAGE>

Trenwick Group Ltd.'s ability to refinance its existing debt obligations or
raise additional capital is dependent upon several factors, including financial
conditions with respect to both the equity and debt markets and the ratings of
its securities as established by the rating agencies. Following Trenwick Group
Ltd.'s claims and claims expense liability reserve increase in the second
quarter of 2001 and the losses it sustained in the September 11th terrorist
attacks, its senior debt ratings were downgraded by Standard & Poors Corporation
to BBB- and by Moody's Investors Service to Ba2. Trenwick Group Ltd.'s ability
to refinance its outstanding debt obligations, as well as the cost of such
borrowings, could be adversely affected by these ratings downgrades or if its
ratings were downgraded further.

Catastrophe Equity Put

On September 27, 2000, Trenwick Group Ltd. assumed the benefits and obligations
of LaSalle Re Holdings Limited under a $100 million catastrophe equity put
option. The catastrophe put option was amended and restated as of January 1,
2001 and amended as of January 25, 2002. As amended, the catastrophe equity put
enables Trenwick Group Ltd. to raise up to $55 million of equity, through the
issue of convertible preferred shares to the option writer in the event there is
a qualifying catastrophic event or events occurring prior to January 1, 2002.
The preferred shares can be redeemed by Trenwick Group Ltd. at any time
following their issuance. In addition, the option writer can convert its
preferred shares into common shares of Trenwick Group Ltd. at any time after
they have been outstanding for five years or upon a change in control of
Trenwick Group Ltd. or a decline in Trenwick Group Ltd.'s net worth below a
specified level. Conversion is at the greater of the book value of Trenwick
Group Ltd. at the date of conversion or the market value of the common shares
based on the 30-day trading average prior to conversion. The annual net option
premium for the catastrophe equity put has been charged to additional paid in
capital.

As a result of the terrorist attacks of September 11, 2001, Trenwick Group Ltd.
has incurred $120 million in catastrophe losses as defined under the option
agreement. If these losses develop to $140 million prior to March 11, 2003,
Trenwick Group Ltd. will be entitled to exercise the catastrophe equity put and
raise $55 million of equity, subject to regulatory approvals.

Common Share Transactions

In November 2000, Trenwick Group Ltd.'s Board of Directors authorized the
repurchase of one million common shares. Trenwick Group Ltd. did not repurchase
any of its common shares in 2000 or 2001 other than 397 shares repurchased in
connection with the vesting of restricted shares in 2001.

Trenwick Group Ltd. issued 209,954 and 1,405 common shares in 2001 and 2000,
respectively, pursuant to employee compensation, direct compensation, stock
purchase and stock option plans and on exercises of warrants. Prior to the
Trenwick/LaSalle business combination, LaSalle Re Holdings Limited issued 22,167
and 79,481 common shares during the 2000 and 1999 years, respectively, under
employee compensation, stock purchase and stock option plans.

Restrictions on Certain Payments within Trenwick

Because Trenwick Group Ltd.'s operations are conducted through its operating
subsidiaries, Trenwick Group Ltd. is dependent upon the ability of its operating
subsidiaries to transfer funds, principally in the form of cash dividends, tax
reimbursements and other statutorily permissible payments. In addition to
general legal restrictions on payments of dividends and other distributions to
shareholders applicable to all corporations, Trenwick Group Ltd.'s insurance


                                       19
<PAGE>

subsidiaries are subject to further regulations that, among other things,
restrict the amount of dividends and other distributions that may be paid to
their parent corporations. Management believes that current levels of cash flow
from operations and assets held at the holding company level will provide
Trenwick Group Ltd. with sufficient liquidity to meet its operating needs in the
short-term (over the next twelve months). Since the ability of Trenwick Group
Ltd. to meet its obligations in the long-term (beyond such twelve month period)
is dependent upon such factors as market changes, insurance regulatory changes
and economic conditions, no assurance can be given that the available net cash
flow will be sufficient to meet its operating needs. Trenwick Group Ltd. expects
that, in order to repay the principal amount of certain currently outstanding
indebtedness at maturity or otherwise, it will be required to seek additional
financing, engage in asset sales, subsidiary dividends or similar transactions.

Reinsurance

Trenwick Group Ltd.'s operating subsidiaries purchase reinsurance to reduce its
exposure to catastrophe claims and the frequency and severity of claims in all
lines of business. In 2001, 2000 and 1999, Trenwick America Reinsurance
Corporation's reinsurance treaties consisted principally of property catastrophe
reinsurance treaties. In 1999, Trenwick America Reinsurance Corporation also
entered into an excess of loss treaty for its facultative casualty business. In
addition, Trenwick America Reinsurance Corporation purchased an annual aggregate
excess of loss ratio treaty for casualty business effective January 1, 1999.
Trenwick Group Ltd. ceased buying aggregate excess of loss ratio treaties in
subsequent years. Trenwick International Limited and Chartwell Managing Agents
Limited, as is customary with companies operating in the London market and at
Lloyd's, buy larger amounts of reinsurance to protect themselves. Reinsurance
and retrocessional coverage is customized for each class of business. LaSalle Re
Limited purchased various reinsurance protections in order to reduce its
exposure to large catastrophe losses. LaSalle Re Limited's reinsurance
principally consisted of non-proportional excess of loss treaties. On December
31, 2000, LaSalle Re Limited terminated a quota share arrangement with CNA,
which incepted April 1, 1999. Canterbury Financial Group Inc. purchased specific
reinsurance programs for each of the programs underwritten by its insurance
companies.

As part of its merger with Trenwick Group Inc., Chartwell Re Corporation
purchased, on October 27, 1999, a reinsurance policy providing for up to $100
million in coverage in order to indemnify Trenwick Group Inc. against
unanticipated increases in Chartwell Re Corporation's reserves for business
written on or before the date the Trenwick/Chartwell merger was completed. The
reinsurance policy applied to all of Chartwell Re Corporation's business,
including its operations at Lloyd's and was fully utilized as of year end 2000.
In addition, as part of the merger, Chartwell Re Corporation commuted several
aggregate stop-loss reinsurance treaties.

Reinsurance agreements provide for recovery of a portion of certain claims and
claims expenses from reinsurers. Trenwick Group Ltd. remains liable in the event
that the reinsurer is unable to meet its obligation; however, Trenwick Group
Ltd. holds partial collateral under several of these agreements in order to
mitigate the risk. Letters of credit, trust accounts and funds withheld in the
aggregate amount of $332.2 million (including interest) have been arranged in
favor of Trenwick Group Ltd. collateralizing reinsurance recoverables with
respect to certain retrocessionaires.


                                       20
<PAGE>

Critical Accounting Policies

The accounting policies described below are those Trenwick Group Ltd. considers
critical in preparing its consolidated financial statements. These policies
include significant estimates made by management using information available at
the time the estimates are made. However, as described below, these estimates
could change materially if different information or assumptions were used. The
descriptions below are summarized and have been simplified for clarity. A more
detailed description of the significant accounting policies used by Trenwick
Group Ltd. in preparing its financial statements is included in the Notes to the
Consolidated Financial Statements and the note references are included below.

Unpaid Claims and Claims Expenses

Trenwick Group Ltd. establishes liabilities for claims and claims expenses that
have been reported but not paid and claims and claims expenses that have been
incurred but not reported under its insurance and reinsurance contracts. These
liabilities are developed using actuarial principles and assumptions which
consider a number of factors, including historical claims and claims expense
patterns, which are described in the Notes to the Consolidated Financial
Statements. An extensive degree of judgment is used in this estimation process.
Because the future cannot be predicted with certainty, the actual future claims
and claims expense payments are usually different from the previously recorded
liability estimates. Sometimes the differences are significant. Any adjustments
to Trenwick Group Ltd.'s liabilities for claims and claims expenses are included
in Trenwick Group Ltd.'s results of operations in the period in which the need
for the adjustment becomes known. Due to the considerable variability of the
insurance and reinsurance business underwritten by Trenwick Group Ltd.,
adjustments to its liabilities for claims and claims expenses may occur each
quarter and are sometimes significant.

In particular, Trenwick Group Ltd. cautions that the unpaid claims and claims
expenses related to the September 11th terrorist attacks remain subject to
future adjustment. Because of the scope and uniqueness of these events, standard
loss modeling and assessment methodologies have limited relevance. As a result,
the expected Trenwick Group Ltd. losses reflect the industry's and Trenwick
Group Ltd.'s current estimates. As additional information regarding the claims
and claims expenses related to the September 11th terrorist attacks becomes
available, Trenwick Group Ltd. may be required to adjust its estimate in the
future. If the unpaid claims and claims expenses develop to $140 million prior
to March 11, 2003, Trenwick Group Ltd. will be entitled to exercise a
catastrophe equity put and raise $55 million of equity, subject to regulatory
approvals. Also see Note 4 and 6 of Notes to the Consolidated Financial
Statements.

Reinsurance Recoverable Balances

Trenwick Group Ltd. purchases reinsurance to reduce its exposure on individual
risks, catastrophic losses and other large losses. Trenwick Group Ltd. estimates
the amount of uncollectable receivables from its reinsurers each period and
establishes an allowance for uncollectable amounts. The amount of the allowance
is based on the age of unpaid amounts, information about the creditworthiness of
Trenwick Group Ltd.'s reinsurers, and other relevant information. Estimates of
uncollectable reinsurance amounts are revised each period, and changes are
recorded in the period they become known. A significant change in the level of
uncollectable reinsurance amounts would have a significant effect on Trenwick
Group Ltd.'s results of operations. Also see Note 4 of Notes to the Consolidated
Financial Statements.


                                       21
<PAGE>

Investments

Investments are classified as available for sale and recorded at fair value, and
unrealized investment gains and losses are reflected in shareholders' equity.
Investment income is recorded when earned, and capital gains and losses are
recognized when investments are sold. Investments are reviewed periodically to
determine if they have suffered an impairment of value that is considered other
than temporary. If investments are determined to be impaired, a capital loss is
recognized at the date of determination.

Testing for impairment of investments also requires significant management
judgment. The identification of potentially impaired investments, the
determination of their fair value and the assessment of whether any decline in
value is other than temporary are the key judgment elements. The discovery of
new information and the passage of time can significantly change these
judgments. Revisions of impairment judgments are made when new information
becomes known, and any resulting impairment adjustments are made at that time.
The current economic environment and recent volatility of securities markets
increase the difficulty of determining fair value and assessing investment
impairment. The same influences tend to increase the risk of potentially
impaired assets.

Trenwick Group Ltd. seeks to match the maturities of invested assets with the
payment of expected liabilities. By doing this, Trenwick Group Ltd. attempts to
make cash available as payments become due. If a significant mismatch of the
maturities of assets and liabilities were to occur and Trenwick Group Ltd. had
to liquidate investments prior to their maturity, it may incur realized losses
and, the effect on Trenwick Group Ltd.'s results of operations could be
significant. Also see Note 5 of Notes to the Consolidated Financial Statements.

Deferred Income Taxes

Trenwick Group Ltd. recorded as an asset as of December 31, 2001 $139.9 million
of net deferred income taxes. The net deferred income taxes represent the
expected future tax benefit of losses previously incurred by Trenwick Group
Ltd.'s United States and United Kingdom operations. Trenwick Group Ltd.'s
Bermuda operations are not subject to income tax. The future tax benefit in the
United States must be used on or before 2021. The future tax benefit in the
United Kingdom is not limited by time. In order to maintain its net deferred
income taxes as an asset, Trenwick Group Ltd. is required to determine that it
is more likely than not that it will be able to realize the future tax benefit
of its previously incurred losses in the United States and the United Kingdom.
In making this determination, Trenwick Group Ltd. is required to make estimates
as to its future income. If Trenwick Group Ltd.'s estimates of its future income
in the United States and the United Kingdom were to be revised and it became
more likely than not that Trenwick Group Ltd. would not be able to realize the
future tax benefit of its previously incurred losses, the effect on Trenwick
Group Ltd.'s results of operations could be significant. Also see Note 7 of
Notes to the Consolidated Financial Statements.

Regulatory Matters

Trenwick Group Ltd. and its subsidiaries are subject to regulatory oversight
under the insurance statutes and regulations of the jurisdictions in which they
conduct business, including all states of the United States, the United Kingdom
and Bermuda. These regulations vary from jurisdiction to jurisdiction and are
generally designed to protect ceding insurance companies and policyholders by
regulating Trenwick Group Ltd.'s financial integrity and solvency in its
business transactions and operations. Many of the insurance statutes and
regulations applicable to Trenwick Group


                                       22
<PAGE>

Ltd.'s subsidiaries relate to reporting and enable regulators to closely monitor
their performance. Reports typically require the inclusion of information
concerning Trenwick Group Ltd.'s capital structure, ownership, financial
condition and general business operations.

Quantitative and Qualitative Disclosure About Market Risk
The following sections address the significant market risks associated with
Trenwick Group Ltd.'s business activities as of December 31, 2001 and 2000.
Trenwick Group Ltd.'s primary market risk exposures are:

o    foreign currency exchange risk, in particular the U.S. dollar to the
     British pound sterling;

o    interest rate risk on fixed and variable rate U.S. dollar and British pound
     sterling denominated short and long-term instruments; and

o    equity price risk.

With respect to Trenwick Group Ltd.'s investment portfolio, the risk management
strategy is to place its investments with high credit quality issuers and to
limit the amount of credit exposure with respect to particular ratings
categories and any one issuer. Trenwick Group Ltd. selects investments with
characteristics such as duration, yield, currency and liquidity to reflect the
underlying characteristics of related estimated claim liabilities.

As of December 31, 2001, Trenwick Group Ltd.'s exposure to high yield
investments was minimal. While these investments are more susceptible to credit
risk, their total market value represents less than 5% of total investments and
cash, and therefore management believes that the exposure to credit risk is not
material. Trenwick Group Ltd. has no derivatives and its investments do not
contain terms that may result in potential losses due to leverage.

The borrowings of Trenwick Group Ltd. are summarized in note 6 to the financial
statements, and "Financings, Financing Capacity and Capitalization" on page [16]
of this management's discussion and analysis of financial condition and results
of operations.

Foreign Currency Exchange Rate Risk
Foreign currency risk is the risk that Trenwick Group Ltd. will incur economic
losses due to adverse changes in foreign currency exchange rates. This risk
arises from Trenwick Group Ltd.'s international operations, debt obligations and
securities denominated in foreign currencies and foreign equity investments.
Trenwick Group Ltd. generally conducts its international businesses through
foreign operating entities which generally maintain assets and liabilities in
local currencies, substantially limiting exchange rate risk to net assets
denominated in the foreign currency. Trenwick Group Ltd.'s foreign currency
denominated net assets are principally in British pound sterling. At December
31, 2001 and December 31, 2000, Trenwick Group Ltd.'s net liabilities of foreign
subsidiaries was approximately $43.5 million and $(39.1) million, respectively.
Debt obligations denominated in foreign currencies were $13.0 million at
December 31, 2001. Foreign debt securities and foreign cash on deposit were $2.2
million and $14.2 million, respectively, at December 31, 2001.

Trenwick Group Ltd.'s reinsurance, international insurance and Lloyd's
operations all have exposures to movements in various currencies around the
world (particularly the British pound sterling, the Euro and the Canadian
dollar) as such businesses are denominated in those currencies. Therefore,
changes in currency exchange rates affect Trenwick Group Ltd.'s balance sheet,
statement of operations and statement of cash flows. This exposure is somewhat
mitigated by the fact that premiums received are invested in the same currency
portfolios, to partially offset related unpaid claims and claims expense
liabilities denominated in the same currency.


                                       23
<PAGE>

Management estimates that a 10% immediate unfavorable change in each of the
foreign currency exchange rates to which Trenwick Group Ltd. is exposed as of
December 31, 2001 would have decreased the fair value of Trenwick Group Ltd.'s
foreign denominated net assets by approximately $4.0 million, which was
comprised primarily of exposure to the British pound sterling. At December 31,
2000, the same 10% shift in foreign currency exchange rates would have resulted
in a potential loss in fair value of approximately $8.5 million.

Interest Rate Risk

Trenwick Group Ltd.'s fixed maturity investments and indebtedness are subject to
interest rate risk. Increases and decreases in prevailing interest rates
generally translate into decreases and increases in the fair value of fixed
maturity investments and the interest payable on Trenwick Group Ltd.'s
outstanding variable rate debt. Additionally, the fair value of interest rate
sensitive instruments may be affected by the creditworthiness of the issuer, a
prepayment option, relative values of alternative investments, liquidity of the
investment and other general market conditions.

Trenwick Group Ltd. monitors its sensitivity to interest rate risk by evaluating
the change in its financial assets and liabilities relative to hypothetical
increases and decreases in interest rates. It is assumed that the changes occur
immediately and uniformly to each category of instrument containing interest
rate risks. The hypothetical changes in market interest rates reflect what could
be deemed best or worst case scenarios. Significant variations in market
interest rates could produce changes in the timing of repayments due to
prepayment options available. The fair value of such instruments could be
affected and therefore actual results might differ from those reflected in this
summary.

A 100 basis point increase in market interest rates would have resulted in an
estimated pre-tax loss in the fair value of these instruments of $60.2 million
and $50.4 million at December 31, 2001 and December 31, 2000, respectively.
Similarly, a 100 basis point decrease in market interest rates would have
resulted in an estimated pre-tax gain in the fair value of these instruments of
$56.0 million and $48.4 million at December 31, 2001 and December 31, 2000,
respectively.

Equity Price Risk

The carrying values of investments subject to equity price risks are based on
quoted market prices or management's estimates of fair value as of the balance
sheet date. Market prices are subject to fluctuation and, consequently, the
amount realized in the subsequent sale of an investment may significantly differ
from the reported market value. Fluctuation in the market price of a security
may result from perceived changes in the underlying economic characteristics of
the investee, the relative price of alternative investments and general market
conditions. Furthermore, amounts realized in the sale of a particular security
may be affected by the relative quantity of the security being sold.

Of Trenwick Group Ltd.'s $24.2 million equity portfolio at December 31, 2001,
$9.5 million of common equity investments were not subject to equity risk.
Trenwick Group Ltd.'s potential exposure on equity securities is estimated in
terms of an immediate 10% drop in equity prices across all equity securities
holdings from those prevailing at December 31, 2001 which would have resulted in
a $1.5 million loss. An immediate 10% drop in equity prices across all equity
securities holdings from those prevailing at December 31, 2000 would have
resulted in a $9.5 million loss.


                                       24
<PAGE>

The fair value estimates shown are based on the composition of the equity
security portfolio at year-end and these exposures will change as a result of
ongoing portfolio activities in response to management's assessment of changing
market conditions and available investment opportunities.

The above analyses do not take into account any correlation among foreign
currency exchange rates, or any correlation among various markets (i.e., the
fixed income markets and foreign exchange and equity markets). Trenwick Group
Ltd.'s actual experience may differ from the results noted above due to the
correlation assumptions utilized, or if events occur that were not included in
the methodology, such as significant liquidity or market events. The selection
of the amount of increases or decreases in currency exchange rates, interest
rates and equity values in the above analyses should not be construed as a
prediction of future market events, but rather, to illustrate the potential
impact of such events.

Effects of Inflation

The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local economy. The effects of inflation are
considered in pricing and in estimating reserves for unpaid claims and claim
expenses. The actual effects of inflation on Trenwick Group Ltd.'s results
cannot be accurately known until claims are ultimately settled.

Accounting Standards

In July 2001, the Financial Accounting Standards Board issued a statement
covering goodwill and other intangible assets, which is required to be adopted
at the beginning of 2002. The statement requires that the goodwill be tested for
impairment under either market value or cash flow tests and any impairment be
recorded as of January 1, 2002 as the cumulative effect of an accounting change.
The impairment tests must be completed by the reporting of quarterly results of
operations as of June 30, 2002. The new statement also requires that negative
goodwill balances not be tested, but be credited to operations as of January 1,
2002 as the cumulative effect of an accounting change. We will conduct
impairment tests on the remaining goodwill and implement the statement during
the first or second quarter of 2002.

Effective January 1, 2001, Trenwick Group Ltd. implemented a new accounting
standard for accounting for derivative instruments and hedging activities. The
standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The adoption of the
standard had no significant effect on Trenwick Group Ltd.'s consolidated
financial statements.

Safe Harbor Disclosure

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Trenwick Group Ltd. sets forth below cautionary
statements identifying important risks and uncertainties that could cause its
actual results to differ materially from those that might be projected,
forecasted or estimated in its "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, made by or on behalf of Trenwick Group Ltd. in this Annual
Report and in press releases, written statements or documents filed with the
Securities and Exchange Commission, or in its communications and discussions
with investors and analysts in the normal course of business through meetings,
phone calls and conference calls. Such statements may include, but are not
limited to, projections of premium revenue, investment income, other revenue,
losses, expenses, earnings (including earnings per share), cash flows, plans for
future operations, common shareholders' equity (including book value per share),
investments, financing needs, capital plans,


                                       25
<PAGE>

dividends, plans relating to products or services of Trenwick Group Ltd. and
estimates concerning the effects of litigation or other disputes, as well as
assumptions for any of the foregoing and generally expressed with words such as
"believes," "estimates," "expects," "anticipates," "plans," "projects,"
"forecasts," "goals," "could have," "may have," and similar expressions.

Forward-looking statements involve known and unknown risks and uncertainties,
which may cause Trenwick Group Ltd.'s results to differ materially from such
forward-looking statements. These risks and uncertainties include, but are not
limited to, the following:

     -    Changes in the level of competition in the domestic and international
          reinsurance or primary insurance markets that affect the volume or
          profitability of Trenwick Group Ltd.'s property/casualty business.
          These changes include, but are not limited to, changes in the
          intensity of price competition, the entry of new competitors, existing
          competitors exiting the market and the development of new products by
          new and existing competitors;

     -    Changes in the demand for reinsurance, including changes in ceding
          companies' risk retentions and changes in the demand for excess and
          surplus lines insurance coverages;

     -    Changes in reinsurance purchasing and distribution patterns;

     -    The ability of Trenwick Group Ltd. to execute its strategies in its
          property/casualty operations;

     -    Catastrophe losses in Trenwick Group Ltd.'s domestic and international
          property/casualty businesses;

     -    Adverse development on property/casualty claims and claims expense
          liabilities related to business written in prior years, including, but
          not limited to, evolving case law and its effect on environmental and
          other latent injury claims, changing government regulations, newly
          identified toxins, newly reported claims, new theories of liability,
          or new insurance and reinsurance contract interpretations;

     -    Changes in Trenwick Group Ltd.'s property/casualty retrocessional
          arrangements;

     -    Lower than estimated retrocessional or reinsurance recoveries on
          unpaid losses, including, but not limited to, losses due to a decline
          in the creditworthiness of Trenwick Group Ltd.'s retrocessionaires or
          reinsurers;

     -    Increases in interest rates, which may cause a reduction in the market
          value of Trenwick Group Ltd.'s fixed income portfolio, and its common
          shareholders' equity;

     -    Decreases in interest rates which may cause a reduction of income
          earned on new cash flow from operations and the reinvestment of the
          proceeds from sales or maturities of existing investments;

     -    A decline in the value of Trenwick Group Ltd.'s equity investments;

     -    Changes in the composition of Trenwick Group Ltd.'s investment
          portfolio;

     -    Credit losses on Trenwick Group Ltd.'s investment portfolio;


                                       26
<PAGE>

     -    Adverse results in litigation matters, including, but not limited to,
          litigation related to environmental, asbestos and other potential mass
          tort claims;

     -    The passage of federal or state legislation subjecting LaSalle Re
          Limited to United States taxation or regulation;

     -    A contention by the United States Internal Revenue Service that
          LaSalle Re Limited is subject to United States taxation;

     -    The impact of mergers and acquisitions;

     -    Gains or losses related to changes in foreign currency exchange rates;

     -    Changes in Trenwick Group Ltd.'s capital needs;

     -    The ability of Trenwick Group Ltd. to obtain the necessary letters of
          credit or collateral to support its Lloyd's underwriting operation;

     -    The ability of Trenwick Group Ltd. to refinance or repay its
          outstanding indebtedness; and

     -    Changes in the financial strength ratings assigned to Trenwick Group
          Ltd. and its operating subsidiaries or Lloyd's.

In addition to the factors outlined above that are directly related to Trenwick
Group Ltd.'s businesses, Trenwick Group Ltd. is also subject to general business
risks, including, but not limited to, adverse state, federal or foreign
legislation and regulation, adverse publicity or news coverage, changes in
general economic factors and the loss of key employees.

The facts set forth above should be considered in connection with any
forward-looking statement contained in this Annual Report. The important factors
that could affect such forward-looking statements are subject to change, and
Trenwick Group Ltd. does not intend to update any forward-looking statement or
the foregoing list of important factors. By this cautionary note Trenwick Group
Ltd. intends to avail itself of the safe harbor from liability with respect of
forward-looking statements provided by Section 27A and Section 21E referred to
above.


                                       27

<PAGE>


                        Report of Independent Accountants


To the Board of Directors and
Shareholders of Trenwick Group Ltd.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, of changes in
shareholders' equity and of cash flows present fairly, in all material respects,
the financial position of Trenwick Group Ltd. and its subsidiaries at December
31, 2001 and December 31, 2000, and the results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

The financial statements of Trenwick Group Ltd. as of December 31, 1999 and for
the period from October 31, 1999 to December 31, 1999, and for the year ended
September 30, 1999 were audited by other independent accountants whose report
dated November 10, 2000 expressed an unqualified opinion on those statements.

PricewaterhouseCoopers LLP
New York, New York
February 27, 2002


                                      -1-

<PAGE>

                               Trenwick Group Ltd.
                           Consolidated Balance Sheet
            (Amounts expressed in thousands of United States dollars,
                        except share and per share data)
                           December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                                                                    2001                     2000
                                                                                               -----------              -----------
<S>                                                                                            <C>                      <C>
Assets:
Debt securities available for sale, at fair value                                              $ 1,960,600              $ 1,813,678
Equity securities, at fair value                                                                    24,164                  115,901
Cash and cash equivalents                                                                          331,350                  311,001
Accrued investment income                                                                           38,278                   38,171
Premiums receivable                                                                                535,281                  478,729
Reinsurance recoverable balances, net                                                            1,411,469                  932,051
Prepaid reinsurance premiums                                                                       197,169                  147,399
Deferred policy acquisition costs                                                                  115,870                  100,423
Net deferred income taxes                                                                          139,926                  104,889
Goodwill                                                                                            41,653                   20,939
Other assets                                                                                       132,795                  166,315
                                                                                               -----------              -----------
Total assets                                                                                   $ 4,928,555              $ 4,229,496
                                                                                               ===========              ===========

Liabilities:
Unpaid claims and claims expenses                                                              $ 3,032,748              $ 2,408,926
Unearned premium income                                                                            612,290                  496,338
Reinsurance balances payable                                                                       225,255                  137,120
Indebtedness                                                                                       291,263                  286,805
Other liabilities                                                                                  125,554                   96,350
                                                                                               -----------              -----------
Total liabilities                                                                                4,287,110                3,425,539
                                                                                               -----------              -----------
Minority interest:
Mandatorily redeemable preferred capital securities of subsidiary
 trust holding solely junior subordinated debentures of U.S. subsidiary                             68,119                   76,770
Minority interest in preferred shares of Bermuda subsidiary                                         75,000                   75,000
                                                                                               -----------              -----------
Total minority interest                                                                            143,119                  151,770
                                                                                               -----------              -----------
Common shareholders' equity:
Common shares, $0.10 par value, 36,845,141
 and 36,665,103 shares issued and outstanding                                                        3,685                    3,667
Additional paid in capital                                                                         578,018                  575,401
Deferred compensation under share award plans                                                       (4,766)                  (2,660)
Retained earnings (accumulated deficit)                                                           (101,830)                  58,485
Accumulated other comprehensive income                                                              23,219                   17,294
                                                                                               -----------              -----------
Total common shareholders' equity                                                                  498,326                  652,187
                                                                                               -----------              -----------
Total liabilities, minority interest and shareholders' equity                                  $ 4,928,555              $ 4,229,496
                                                                                               ===========              ===========
</TABLE>

      The accompanying notes are an integral part of these statements.


                                      -2-
<PAGE>

                               Trenwick Group Ltd.
          Consolidated Statement of Operations and Comprehensive Income
            (Amounts expressed in thousands of United States dollars,
                             except per share data)
                     Years Ended December 31, 2001 and 2000,
  Three Month Period Ended December 31, 1999 and Year Ended September 30, 1999

<TABLE>
<CAPTION>
                                                                  2001                2000               1999                1999
                                                                  Year                Year              Period               Year
                                                             -----------           ---------           --------           ---------
<S>                                                          <C>                   <C>                 <C>                <C>
Revenues:
 Net premiums earned                                         $   889,506           $ 302,749           $ 30,391           $ 126,615
 Net investment income                                           129,114              58,715              8,588              33,847
 Net realized investment gains (losses)                            8,796              (1,386)                --                 615
 Other income                                                      3,389               1,477                 --                  --
                                                             -----------           ---------           --------           ---------
     Total revenues                                            1,030,805             361,555             38,979             161,077
                                                             -----------           ---------           --------           ---------
Expenses:
 Claims and claims expenses incurred                             827,405             227,707             46,642             131,147
 Policy acquisition costs                                        273,066              78,603              5,878              19,844
 Underwriting expenses                                            79,016              31,891              4,533              13,733
 General and administrative expenses                              20,855               6,090              1,383                 788
 Goodwill amortization                                             1,071                 259                 --                  --
 Interest expense and subsidiary
  preferred share dividends                                       39,142              11,775                346               1,714
 Foreign currency losses (gains)                                   2,452               1,015                 28                (470)
                                                             -----------           ---------           --------           ---------
     Total expenses                                            1,243,007             357,340             58,810             166,756
                                                             -----------           ---------           --------           ---------
 Income (loss) before income taxes
  and other minority interest                                   (212,202)              4,215            (19,831)             (5,679)
 Other minority interest in
  subsidiary net income (loss)                                        --                 839             (4,990)             (2,845)
                                                             -----------           ---------           --------           ---------
 Income (loss) before income taxes                              (212,202)              3,376            (14,841)             (2,834)
 Applicable income taxes (benefit)                               (57,805)             (6,075)                --                  --
                                                             -----------           ---------           --------           ---------
 Net income (loss)                                              (154,397)              9,451            (14,841)             (2,834)
 Preferred share dividends
  prior to business combination                                       --               4,923              1,641               6,563
                                                             -----------           ---------           --------           ---------
 Net income (loss) available to
  common shareholders                                        $  (154,397)          $   4,528           $(16,482)          $  (9,397)
                                                             ===========           =========           ========           =========
Earnings per COMMON share:
 Basic and diluted earnings (loss) per share                 $     (4.19)          $    0.21           $  (1.06)          $   (0.60)
                                                             ===========           =========           ========           =========
Comprehensive income (loss):
Net income (loss)                                            $  (154,397)          $   9,451           $(14,841)          $  (2,834)
                                                             -----------           ---------           --------           ---------
Other comprehensive income (loss):
    Net unrealized investment gains (losses)                      10,299              26,956             (3,429)            (17,886)
    Foreign currency translation adjustments                      (4,374)             (1,253)                --                  --
                                                             -----------           ---------           --------           ---------
        Total other comprehensive income (loss)                    5,925              25,703             (3,429)            (17,886)
                                                             -----------           ---------           --------           ---------
Comprehensive income (loss)                                  $  (148,472)          $  35,154           $(18,270)          $ (20,720)
                                                             ===========           =========           ========           =========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                      -3-
<PAGE>

                               Trenwick Group Ltd.
                      Consolidated Statement of Cash Flows
            (Amounts expressed in thousands of United States dollars)
                     Years Ended December 31, 2001 and 2000,
  Three Month Period Ended December 31, 1999 and Year Ended September 30, 1999

<TABLE>
<CAPTION>
                                                                 2001               2000              1999               1999
                                                                 Year               Year             Period              Year
                                                            -----------          ---------          --------          ---------
<S>                                                         <C>                  <C>                <C>               <C>
Operating activities:
 Premiums collected, net of acquisition costs               $ 1,037,848          $ 294,874          $ 22,609          $ 114,315
 Ceded premiums paid, net of acquisition costs                 (311,272)          (101,519)           (7,050)           (21,326)
 Claims and claims expenses paid                               (865,288)          (266,991)          (12,048)           (93,622)
 Claims and claims expenses recovered                           182,453             66,270               531              1,985
 Underwriting expenses paid                                     (91,304)           (50,837)              500            (13,736)
                                                            -----------          ---------          --------          ---------
Cash from (for) underwriting activities                         (47,563)           (58,203)            4,542            (12,384)
Net investment income received                                  147,822             57,176             5,756             34,828
Other income received, net of expenses                            1,891             (2,671)               --                 --
General and administrative expenses paid                        (22,707)            (3,002)           (1,383)              (788)
Interest expense and subsidiary
  preferred share dividends paid                                (33,565)           (10,280)             (346)            (1,714)
Income taxes recovered                                           17,349                278                --                 --
                                                            -----------          ---------          --------          ---------
Cash from (for) operating activities                             63,227            (16,702)            8,569             19,942
                                                            -----------          ---------          --------          ---------
Investing activities:
 Debt securities sales                                        1,062,125            393,235            49,980            305,671
 Debt securities maturities                                     284,017             92,596            10,000             24,710
 Equity securities sales                                         99,359             29,337                --                 --
 Debt securities purchases                                   (1,469,136)          (370,680)          (62,430)          (299,882)
 Equity securities purchases                                     (2,597)           (29,270)               --                 --
 Cash acquired in business combination                               --            188,917                --                 --
 Cash effect of exchange rate translation                        (4,372)             2,239                --                 --
 Other investing activities                                      (8,475)              (867)               --                 --
                                                            -----------          ---------          --------          ---------
Cash from (for) investing activities                            (39,079)           305,507            (2,450)            30,499
                                                            -----------          ---------          --------          ---------
Financing activities:
 Indebtedness proceeds                                           14,000             24,000                --                 --
 Indebtedness issuance costs paid                                (1,474)            (1,834)               --                 --
 Indebtedness repayment                                            (647)                --                --                 --
 Capital securities purchases                                    (8,462)            (9,902)               --                 --
 Common share sales proceeds                                        418                460                74                412
 Share and option repurchases                                      (397)            (3,176)               --             (1,346)
 Equity put option premium payments                              (1,319)              (825)             (611)            (1,850)
 Preferred share dividends paid
   prior to business combination                                     --             (4,923)           (1,641)            (6,563)
 Common share dividends paid                                     (5,918)            (1,468)               --            (37,533)
                                                            -----------          ---------          --------          ---------
Cash from (for) financing activities                             (3,799)             2,332            (2,178)           (46,880)
                                                            -----------          ---------          --------          ---------
Change in cash and cash equivalents                              20,349            291,137             3,941              3,561
Cash and cash equivalents, beginning of period                  311,001             19,864            15,923             12,362
                                                            -----------          ---------          --------          ---------
Cash and cash equivalents, end of period                    $   331,350          $ 311,001          $ 19,864          $  15,923
                                                            ===========          =========          ========          =========

</TABLE>

The accompanying notes are an integral part of these statements.


                                      -4-
<PAGE>

                               Trenwick Group Ltd.
            Consolidated Statement of Changes in Shareholders' Equity
   (Amounts expressed in thousands of United States dollars except share data)
                     Years Ended December 31, 2001 and 2000,
  Three Month Period Ended December 31, 1999 and Year Ended September 30, 1999


<TABLE>
<CAPTION>
                                                                  2001              2000               1999               1999
                                                                  Year              Year              Period              Year
                                                              ---------          ---------          ---------          ---------
<S>                                                           <C>                <C>                <C>                <C>
Shareholders' equity, beginning
 of period                                                    $ 652,187          $ 361,960          $ 382,197          $ 430,053
Preferred and common shares and
 and additional paid in capital:
  Common shares issued in business combination                       --            343,005                 --                 --
  Preferred shares reclassified to minority
   interest in business combination                                  --            (75,000)                --                 --
  Common shares sold under employee
   stock purchase plan                                              174                247                 37                300
  Common shares issued on exercise of
   options and warrants                                             243                143                 --                660
  Common shares issued under director
   and employee compensation plan                                    29                  7                 --                 81
  Restricted common shares awarded                                4,119                 --                 --              1,092
  Common shares repurchased                                        (397)                --                 --             (1,097)
  Restricted common shares canceled                                (619)               (64)                --                 --
  Compensation recognized under employee plans                      405                247                 22                  4
  Equity put option cost recognized,
   net of applicable minority interest                           (1,319)              (742)              (469)            (1,420)
  Minority interest change                                           --               (684)                10             (1,068)
Deferred compensation under share award plan
Compensation deferred, net of
 applicable minority interest                                    (4,119)            (2,803)                --             (1,092)
Compensation expense recognized,
 net of applicable minority interest                              1,394                597                 69                576
Restricted common shares canceled                                   619                 64                 --                 --
Minority interest change                                             --                  2                 --                 --
Minority interest acquired in business combination                   --                (73)                --                 --
Retained earnings (accumulated deficit):
 Net income (loss)                                             (154,397)             9,451            (14,841)            (2,834)
 Preferred share dividends declared
  prior to business combination                                      --             (4,923)            (1,641)            (6,563)
 Common share dividends declared                                 (5,918)            (1,468)                --            (17,543)
 Shares repurchased on exercise of share options                     --             (2,439)                --               (712)
 Minority interest change                                            --               (176)                 5               (289)
Accumulated other comprehensive income:
 Other comprehensive income (loss)                                5,925             25,703             (3,429)           (17,886)
 Minority interest change                                            --                 24                 --                (65)
 Minority interest acquired in business combination                  --               (891)                --                 --
                                                              ---------          ---------          ---------          ---------
Common shareholders' equity, end of period                    $ 498,326          $ 652,187          $ 361,960          $ 382,197
                                                              =========          =========          =========          =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      -5-
<PAGE>

                               TRENWICK GROUP LTD.
                   Notes to Consolidated Financial Statements
            (Amounts expressed in thousands of United States dollars
                        except share and per share data)
                     Years Ended December 31, 2001 and 2000,
  Three Month Period Ended December 31, 1999 and Year Ended September 30, 1999

Note 1              Organization
Organization        Trenwick Group Ltd. was formed as a holding company in
and Basis of        Bermuda to acquire two publicly held companies and the
Presentation        minority interest in a subsidiary of one of those companies.
                    That transaction, in which Trenwick Group Ltd. issued common
                    shares to acquire LaSalle Re Holdings Limited, Trenwick
                    Group Inc. and the minority interest in LaSalle Re Limited,
                    was completed on September 27, 2000. Trenwick Group Inc. had
                    earlier acquired another publicly held company, Chartwell Re
                    Corporation, on October 27, 1999. More details of these
                    transactions are disclosed in Note 2.

                    Trenwick Group Ltd.'s principal subsidiaries underwrite
                    specialty insurance and reinsurance through five business
                    platforms: LaSalle Re Limited, Trenwick America Reinsurance
                    Corporation, Trenwick International Limited, Chartwell
                    Managing Agents Limited and Canterbury Financial Group Inc.
                    More details on business segments and geographic information
                    are disclosed in Note 3.

                    Basis of Presentation

                    We include the accounts of Trenwick Group Ltd. and its
                    subsidiaries in these financial statements after elimination
                    of significant intercompany accounts and transactions.
                    Subsidiaries' accounts include the percentage of the assets,
                    liabilities, revenues and expenses of those Lloyd's
                    syndicates managed for our own account. We have reclassified
                    certain items in prior financial statements to conform to
                    current presentation.

                    We prepared these financial statements in conformity with
                    accounting principles that are generally accepted in the
                    United States of America, sometimes referred to as U.S.
                    GAAP. In preparing these financial statements, we are
                    required to make estimates and assumptions that affect the
                    reported amounts of assets and liabilities and disclosure of
                    contingent assets and liabilities at the date of the
                    financial statements, as well as the reported amounts of
                    revenues and expenses during the reporting periods. Actual
                    amounts will differ from these estimates.

                    We translate the assets and liabilities of operations whose
                    functional currency is other than the U.S. dollar at the
                    rates of exchange at the balance sheet dates. We translate
                    revenues and expenses of these operations at the average
                    exchange rates during each period. We record the effects of
                    these translation adjustments, net of applicable income
                    taxes, as a cumulative translation adjustment within other
                    comprehensive income; we include transaction gains and
                    losses on currencies other than the U.S. dollar in
                    operations.

                    We accounted for the business combination between LaSalle Re
                    Holdings Limited and Trenwick Group Inc. as a purchase by
                    LaSalle Re Holdings Limited of Trenwick Group Inc. and of
                    the minority interest in LaSalle Re Limited. Accordingly, in
                    these financial statements:

                    o    We have included the assets and liabilities and the
                         revenues and expenses of LaSalle Re Holdings Limited
                         for all periods presented;

                    o    We have eliminated the minority interest in common
                         shares and minority interest in net income of LaSalle
                         Re Limited as of September 30, 2000 and from October 1,
                         2000, respectively;


                                      -6-
<PAGE>

                    o    We have included the assets and liabilities and the
                         revenues and expenses of Trenwick Group Inc. as of
                         September 30, 2000 and from October 1, 2000,
                         respectively.

                    On September 18, 2000, LaSalle Re Holdings Limited changed
                    its fiscal year end from September 30 to December 31,
                    effective for the calendar year beginning January 1, 2000. A
                    three month transition period from October 1, 1999 through
                    December 31, 1999 which preceded the start of the new fiscal
                    year is presented separately in these financial statements.

                    Other significant accounting policies are presented in
                    italics within the appropriate footnotes.

Note 2              Trenwick/LaSalle Business Combination
Business            On December 19, 1999, LaSalle Re Holdings Limited, LaSalle
Combinations        Re Limited and Trenwick Group Inc. signed a definitive
                    agreement to combine under a new holding company, Trenwick
                    Group Ltd. On September 27, 2000, following shareholder and
                    regulatory approval, the newly formed Trenwick Group Ltd.
                    issued 36,668,599 of its common shares on a one-for-one,
                    tax-free basis to the former shareholders of LaSalle Re
                    Holdings Limited (15,634,394 shares, including 26,656
                    restricted shares issued under share award plans), the
                    minority shareholders of LaSalle Re Limited, then a 77.5%
                    owned subsidiary of LaSalle Re Holdings (4,797,649 shares),
                    and the former shareholders of Trenwick Group Inc.
                    (16,236,551 shares, including 224,331 restricted shares
                    issued under share award plans).

                    We accounted for the Trenwick/LaSalle business combination
                    as a purchase by LaSalle Re Holdings Limited of the minority
                    interest in LaSalle Re Limited and of Trenwick Group Inc.
                    Under the purchase basis of accounting, we allocated the
                    purchase price ($346,178) to the identifiable assets
                    acquired and liabilities assumed, based on their estimated
                    fair values at the date of acquisition and recorded the
                    unallocated excess ($21,198 as of year end 2001) as
                    goodwill. During the 2001 year, we refined our estimates
                    used in the calculation of the fair value of the net assets
                    acquired in this business combination, principally for the
                    deferred income tax asset, and recorded an additional
                    $21,663 of goodwill. Pending changes in accounting for
                    goodwill and its amortization are described in Note 12.

                    Trenwick Group Inc. / Chartwell Re Corporation Merger
                    On October 27, 1999, Trenwick Group Inc. issued 7,964,998 of
                    its common shares in exchange for all of the common shares
                    of Chartwell Re Corporation, a publicly held insurer and
                    reinsurer. The merger of Chartwell Re Corporation with and
                    into Trenwick Group Inc. was accounted for as a purchase by
                    Trenwick Group Inc. of Chartwell Re Corporation and the
                    $153,315 excess of the purchase price ($231,326) over the
                    fair value of Chartwell Re Corporation's net assets
                    ($78,011) was recorded as goodwill. On September 27, 2000,
                    the unamortized goodwill resulting from this transaction was
                    eliminated in connection with the Trenwick/LaSalle business
                    combination as noted above.

Note 3              Segment Information
Segment             Trenwick Group Ltd. conducts its specialty insurance and
And Geographic      reinsurance business in the following five business
Information         segments:

                    o    Worldwide property catastrophe reinsurance, principally
                         through its Bermuda subsidiary, LaSalle Re Limited;

                    o    United States treaty reinsurance, principally through
                         its U.S. subsidiary, Trenwick America Reinsurance
                         Corporation;

                    o    International specialty insurance and reinsurance,
                         principally through its U.K. subsidiary, Trenwick
                         International Limited;

                    o    Lloyd's insurance and reinsurance, principally through
                         its U.K. subsidiary, Chartwell Managing Agents Limited;
                         and


                                      -7-
<PAGE>

                    o    United States specialty program insurance, principally
                         through its U.S. subsidiary, Canterbury Financial
                         Group, Inc., and its operating subsidiaries, including
                         the Insurance Corporation of New York.

                    Lloyd's syndicates and Excess and Casualty Reinsurance
                    Association Pool ("ECRA Pool") runoff, which includes
                    insurance and reinsurance that was either sold or
                    non-renewed are excluded from the aforementioned segments.

                    The following tables present business segment financial
                    information for Trenwick Group Ltd. at year end 2001 and
                    2000 and for the other periods presented:

<TABLE>
<CAPTION>
                                                                                         2001             2000
                                                                                     -------------     ------------
<S>                                                                                      <C>              <C>
                    Total assets:
                      Worldwide property catastrophe reinsurance                         $667,442         $557,401
                      U.S. treaty reinsurance                                           1,611,359        1,769,122
                      International specialty insurance and reinsurance                   553,801          473,612
                      Lloyd's syndicates continuing                                     1,393,057          808,483
                      Lloyd's syndicates and ECRA Pool runoff                              99,021          157,627
                      U.S. specialty program insurance                                    554,874          372,933
                      Unallocated                                                          49,001           90,318
                                                                                     -------------     ------------
                      Total assets                                                     $4,928,555       $4,229,496
                                                                                     =============     ============
</TABLE>

<TABLE>
<CAPTION>
                                                                     2001        2000       1999        1999
                                                                     Year        Year      Period       Year
                                                                -----------   ---------   --------   ---------
<S>                                                             <C>           <C>         <C>        <C>
                    Total revenues:
                     Worldwide property
                       catastrophe reinsurance                  $   121,479   $ 119,638   $ 35,855   $ 147,808
                     U.S. treaty reinsurance                        335,867     100,276         --          --
                     International specialty
                       insurance and reinsurance                    193,532      41,168         --          --
                     Lloyd's syndicates continuing                  268,947      71,268        604       4,142
                     Lloyd's syndicates and
                       ECRA Pool runoff                               9,482      14,239      2,520       9,127
                     U.S. specialty program insurance                97,178      14,696         --          --
                     Unallocated                                      4,320         270         --          --
                                                                -----------   ---------   --------   ---------
                     Total revenues                             $ 1,030,805   $ 361,555   $ 38,979   $ 161,077
                                                                ===========   =========   ========   =========

                    Net income (loss):
                       Worldwide property
                         catastrophe reinsurance                $   (13,644)  $  32,678   $(13,893)  $  (1,043)
                       U.S. treaty reinsurance                        4,863      (2,850)        --          --
                       International specialty
                         insurance and reinsurance                  (38,646)     (6,365)        --          --
                       Lloyd's syndicates continuing                (55,650)     (3,467)      (575)       (412)
                       Lloyd's syndicates and
                         ECRA Pool runoff                           (17,256)     (5,396)      (373)     (1,379)
                       U.S. specialty program insurance                  44        (135)        --          --
                       Unallocated interest expense and
                         subsidiary  preferred share dividends      (27,944)     (6,404)        --          --
                       Other unallocated                             (6,164)      1,390         --          --
                                                                -----------   ---------   --------   ---------
                       Net income (loss)                        $  (154,397)  $   9,451   $(14,841)  $  (2,834)
                                                                ===========   =========   ========   =========

</TABLE>


                                      -8-
<PAGE>

                    Revenues from transactions between operating segments have
                    been eliminated in consolidation. Unallocated net income
                    (loss) consists mainly of interest expense, net of income
                    taxes.

                    Geographic Information
                    The following table presents Trenwick Group Ltd.'s gross
                    premiums written allocated to the geographic region in which
                    the risks originate:

<TABLE>
<CAPTION>
                                                                        2001        2000      1999       1999
                                                                        Year        Year     Period      Year
                                                                     ----------   --------   -------   --------
<S>                                                                  <C>          <C>        <C>       <C>
                    Gross premiums written:
                     United States                                   $  797,262   $205,819   $   719   $ 60,074
                     United Kingdom                                     317,895    115,273     3,337     32,161
                     Europe, excluding United Kingdom                   133,762     20,429        --      9,555
                     Australia, New Zealand and Far East                 31,578     13,934       647      7,383
                     Worldwide                                          171,758     73,189     5,604     29,837
                                                                     ----------   --------   -------   --------
                     Gross premiums written                          $1,452,255   $428,644   $10,307   $139,010
                                                                     ==========   ========   =======   ========

</TABLE>

Note 4              Premiums
Underwriting        We accrue insurance and reinsurance premiums on contracts on
Activities          an estimated basis throughout the term of such contracts.
                    For retrospectively rated and other experience rated
                    reinsurance contracts, we estimate and accrue premiums based
                    on the difference between total costs before and after the
                    experience under the contract (the with-and-without method).
                    We make premium estimates based on statistical and other
                    data and record subsequent adjustments in the period in
                    which they become known. We account for short-duration
                    contracts as reinsurance when they provide indemnification
                    against loss or liability relating to insurance risk and as
                    deposits when they do not.

                    We earn insurance and reinsurance premiums (net of
                    reinsurance ceded) on a pro-rata basis over the related
                    contract period. We record unearned premium income for the
                    portion of premiums applicable to the unexpired portion of
                    premium coverage with renewal dates later than year-end. We
                    compute premium income for direct business and excess of
                    loss reinsurance using pro-rata methods; for proportional
                    business, we compute premium income based on reports
                    received from ceding companies. We record reinsurance
                    premiums as prepaid expenses and amortize them over the
                    contract period in proportion to the amount of reinsurance
                    protection provided. Where the contract provides for return
                    premiums, we make accruals based on loss experience through
                    the date of the balance sheet.

                    The components of premiums written and earned follow:

<TABLE>
<CAPTION>
                                                                2001          2000         1999          1999
                                                                Year          Year        Period         Year
                                                           -----------     ---------     --------     ---------
<S>                                                        <C>             <C>           <C>          <C>
                    Assumed premiums written               $   579,000     $ 249,910     $ 10,307     $ 139,010
                    Direct premiums written                    873,255       178,734           --            --
                                                           -----------     ---------     --------     ---------
                    Gross premiums written                   1,452,255       428,644       10,307       139,010
                    Ceded premiums written                    (481,937)     (126,012)        (897)      (28,191)
                                                           -----------     ---------     --------     ---------
                    Net premiums written                   $   970,318     $ 302,632     $  9,410     $ 110,819
                                                           ===========     =========     ========     =========

                    Assumed premiums earned                $   490,126     $ 301,640     $ 37,460     $ 145,080
                    Direct premiums earned                     831,869       116,998           --            --
                                                           -----------     ---------     --------     ---------
                    Gross premiums earned                    1,321,995       418,638       37,460       145,080
                    Ceded premiums earned                     (432,489)     (115,889)      (7,069)      (18,465)
                                                           -----------     ---------     --------     ---------
                    Net premiums earned                    $   889,506     $ 302,749     $ 30,391     $ 126,615
                                                           ===========     =========     ========     =========
</TABLE>


                                      -9-
<PAGE>

                    Policy Acquisition Costs

                    Policy acquisition costs primarily consist of commissions
                    and brokerage expenses that vary with and are primarily
                    related to the acquisition of business. We defer and
                    amortize policy acquisition costs over the period in which
                    the related premiums are earned. We periodically review
                    deferred policy acquisition costs to determine that they do
                    not exceed recoverable amounts after allowing for
                    anticipated investment income.

                    The components of policy acquisition costs follow:

<TABLE>
<CAPTION>
                                                                         2001         2000       1999      1999
                                                                         Year         Year      Period     Year
                                                                      ---------    ---------    ------   -------
<S>                                                                   <C>          <C>          <C>      <C>
                    Gross policy acquisition costs deferred           $ 358,564    $ 209,764    $9,319   $21,377
                    Ceded policy acquisition costs deferred             (70,051)     (39,208)       --        --
                                                                      ---------    ---------    ------   -------
                    Net policy acquisition costs deferred             $ 288,513    $ 170,556    $9,319   $21,377
                                                                      =========    =========    ======   =======
                    Policy acquisition costs expensed                 $ 273,066    $  78,603    $5,878   $19,844
                                                                      =========    =========    ======   =======
</TABLE>

                    Trenwick Group Ltd. earned commissions on cessions to
                    retrocessionaires of $180,308 and $13,959 for the 2001 and
                    2000 years, respectively. Prior to the Trenwick/LaSalle
                    business combination, earned commissions on cessions to
                    retrocessionaires were not material.

                    Claims and Claims Expenses

                    We record claims and claims expenses as incurred, at
                    management's best estimate, in order to match claims and
                    claims expense costs with premiums over the contract
                    periods. The amount provided for unpaid claims and claims
                    expenses consists of any unpaid reported claims and claims
                    expenses and estimates for incurred but not reported claims
                    and claims expenses, net of salvage and subrogation. We
                    developed the estimates for claims and claims expenses
                    incurred but not reported based on historical claims and
                    claims expense experience and an actuarial evaluation of
                    expected claims and claims expense experience. We discount
                    workers' compensation indemnity liabilities that are
                    considered fixed and determinable using an interest rate of
                    3.5%. Insurance liabilities are based on estimates, and the
                    ultimate liability will vary from our estimates. Adjustments
                    to these estimates are reflected in income when known.

                    The components of net claims and claims expenses incurred
                    are as follows:

<TABLE>
<CAPTION>
                                                            2001            2000          1999           1999
                                                            Year            Year         Period          Year
                                                        -----------      ---------      --------      ---------
<S>                                                     <C>              <C>            <C>           <C>
                    Gross claims and claims             $ 1,554,813      $ 325,761      $ 55,849      $ 142,232
                      expenses incurred
                    Ceded claims and claims
                      expenses incurred                    (727,408)       (98,054)       (9,207)       (11,085)
                                                        -----------      ---------      --------      ---------
                    Net claims and claims
                      expenses incurred                 $   827,405      $ 227,707      $ 46,642      $ 131,147
                                                        ===========      =========      ========      =========

</TABLE>


                                      -10-
<PAGE>

                    The following table presents a reconciliation of the
                    beginning and ending balances of net liabilities for unpaid
                    claims and claims expenses. The gross liabilities for unpaid
                    claims and claims expenses at period ends are as reflected
                    in the balance sheet. The net liabilities for unpaid claims
                    and claims expenses are after deductions for reinsurance
                    recoverable on unpaid claims and claims expenses, also as
                    reflected in the balance sheet.

<TABLE>
<CAPTION>
                                                                        2001         2000        1999       1999
                                                                        Year         Year       Period      Year
                                                                    -----------  -----------  ---------  ---------
<S>                                                                 <C>          <C>          <C>        <C>
                    Net unpaid claims and claims expenses,
                      beginning of period                           $ 1,375,156  $   172,576  $ 137,452  $  97,942
                                                                    -----------  -----------  ---------  ---------
                    Net unpaid claims and claims expenses
                      of Trenwick Group Inc. at date of acquisition          --    1,220,989         --         --
                                                                    -----------  -----------  ---------  ---------
                    Provision, net of reinsurance recoverable:
                       Claims incurred in the current period            716,525      215,555     50,244     82,537
                       Claims incurred prior to the current
                        period                                          120,773       17,523     (3,602)    48,610
                                                                    -----------  -----------  ---------  ---------
                       Total provision                                  837,298      233,078     46,642    131,147
                                                                    -----------  -----------  ---------  ---------
                    Payments, net of reinsurance:
                      Claims incurred in the current period            (142,475)     (54,826)      (899)   (12,821)
                      Claims incurred prior to the current period      (439,799)    (204,484)   (10,619)   (78,816)
                                                                    -----------  -----------  ---------  ---------
                       Total payments                                  (582,274)    (259,310)   (11,518)   (91,637)
                                                                    -----------  -----------  ---------  ---------
                    Foreign currency translation adjustment to net
                      unpaid claims and claims expenses                  (8,210)       7,823         --         --
                                                                    -----------  -----------  ---------  ---------
                    End of period:
                      Net unpaid claims and claims expenses           1,621,970    1,375,156    172,576    137,452
                      Reinsurance recoverable on unpaid claims and
                        claims expenses                               1,390,955      999,968     17,776      9,100
                                                                    -----------  -----------  ---------  ---------
                      Gross unpaid claims and claims expenses       $ 3,012,925  $ 2,375,124  $ 190,352  $ 146,552
                                                                    ===========  ===========  =========  =========
</TABLE>

                    Unpaid claims and claims expense at year end 2001 and 2000
                    of $3,032,748 and $2,408,926, respectively, include amounts
                    approved for payment but unpaid at year end 2001 and 2000
                    ($19,823 and $33,802, respectively). These amounts are
                    reflected in the above table as payments within the period
                    when approved. Reinsurance recoverables on unpaid claims and
                    claims expenses at year end 2001 and 2000 of $1,411,469 and
                    $932,051, respectively, include amounts recoverable from
                    ceding companies which have been approved for payment but
                    not received at year end 2001 and 2000 ($156,373 and
                    $71,083, respectively). These amounts are reflected in the
                    above table as receipts within the period when approved. In
                    addition, the 2001 and 2000 provisions for claims and claims
                    expenses incurred of $827,405 and $227,707, respectively,
                    include benefits related to reductions in the liability
                    under the contingent interest notes ($9,893 and $5,371,
                    respectively). These amounts are not reflected in the above
                    table. Workers' compensation claims subject to discounting
                    were $3,998 and $3,883, respectively, at year end 2001 and
                    2000.

                    Claims in the current period in 2001 include an estimated
                    loss from the September 11th terrorist attacks of $366,300
                    before reinsurance recoverable of approximately $268,100.
                    The principal osses related to aviation risks underwritten
                    by Trenwick Group Ltd.'s operations at Lloyd's and property
                    and related risks including business interruption,
                    underwritten by LaSalle Re Limited. Of the $268,100 of
                    reinsurance recoverables, 93% are from reinsurers rated A or
                    better by Standard & Poor's or, alternatively, A.M. Best
                    Company. Trenwick Group Ltd.'s estimate of its losses from
                    aviation risks from this event is based on two maximum
                    losses and two partial losses. Estimates of its property and
                    related losses is based on two maximum losses and two
                    partial losses. Estimates of its property and related losses
                    is based on an assessment of


                                      -11-
<PAGE>

                    individual policies which it has determined has exposure to
                    the World Trade Center loss. This assessment included market
                    share analysis, probable maximum loss analysis, independent
                    risk modeling analysis and cedant loss estimates.

                    Claims in the current period in 2001 also included other
                    catastrophe losses totaling $24,000. The largest of these
                    losses was tropical storm Allison and storms affecting the
                    Midwest United States amounting to $10,500 and the November
                    12, 2001 American Airlines crash in Queens, New York of
                    $7,800.

                    In the 2001 and 2000 years, Trenwick Group Ltd. recorded a
                    net increase of $110,880 and $12,152, respectively, in
                    estimates for claims occurring in prior accident years. In
                    the 1999 period and the 1999 year, LaSalle Re Holdings
                    Limited recorded a net decrease of $3,602, and a net
                    increase of $48,610, respectively, in estimates for claims
                    occurring in prior accident years. The increase in 2001 is
                    principally due to reserve strengthening recorded on
                    business acquired in the Trenwick/LaSalle business
                    combination. This reserve strengthening includes $15,654
                    related to the treaty reinsurance segment's liability
                    business, which was underwritten prior to 2001 and $11,530
                    related to prior participation in the ECRA Pool. In
                    addition, $13,940 of the loss reserve strengthening related
                    to the specialty program insurance segment. Also included in
                    the reserve strengthening was $20,463 relating principally
                    to the Lloyd's segment directors and officers liability
                    business. Lastly, the reserve strengthening included $48,293
                    stemming from deterioration in discontinued businesses and
                    reviews of the property insurance and small premium
                    liability business lines at the international specialty
                    insurance and reinsurance segment. The increase in 2000 is
                    principally due to unfavorable development of prior year
                    estimates for LaSalle Re Holdings Limited and Trenwick
                    America Reinsurance Corporation offset in part by favorable
                    development of prior year reserves at the Lloyd's syndicates
                    managed by Chartwell Managing Agents Limited. The increase
                    in 2000 reflects a deterioration in market conditions since
                    1997.

                    Inflation

                    Inflation raises the cost of economic losses and
                    non-economic damages covered by insurance contracts and
                    therefore is a factor in determining effective rates of
                    reinsurance. The methods used to estimate individual case
                    reserves and reserves for claims incurred but not yet
                    reported implicitly incorporate the effects of inflation in
                    the projection of ultimate losses. Due to the inherent
                    uncertainties of estimating unpaid claims and claims
                    expenses, actual claims and claims expenses may deviate,
                    perhaps substantially, from estimates reflected in these
                    financial statements. Management believes that its claim
                    estimation methods are reasonable and prudent and that its
                    unpaid claims and claims expenses at year end 2001 are
                    adequate.

                    Latent Injury And Toxic Tort Claims

                    The balance of unpaid claims and claims expenses also
                    includes provisions for latent injury or toxic tort claims
                    that cannot be estimated with traditional techniques. Due to
                    inconsistent court decisions in federal and state
                    jurisdictions and the wide variation among insureds with
                    respect to underlying facts and coverage, uncertainty exists
                    with respect to these claims as to liabilities of ceding
                    companies and, consequently, reinsurance coverage. With the
                    exception of an insurer acquired in the Trenwick/Chartwell
                    merger, Trenwick Group Ltd.'s exposure to such latent losses
                    is not expected to be significant due to its relatively
                    recent entry into the reinsurance business, its low
                    historical levels of premium volume prior to the application
                    of exclusions for asbestos and environmental liabilities and
                    its retrocessional programs. To the extent that there is
                    adverse development in that insurer's loss reserves,
                    including its reserves for latent losses, Trenwick Group
                    Ltd.'s obligation under the contingent interest notes,
                    included in indebtedness, is reduced. More details on that
                    indebtedness are included in Note 6.


                                      -12-
<PAGE>

                    The estimate of net unpaid claims and claims expenses for
                    asbestos and environmental claims at year end 2001 and 2000
                    was $91,050 and $70,547, respectively, comprising gross
                    unpaid claims and claims expenses of $118,688 and $99,474,
                    net of reinsurance recoverable on unpaid claims and claims
                    expenses of $27,638 and $28,927. The above figures include
                    liabilities emanating from Trenwick Group Ltd.'s
                    participation in the ECRA Pool.

                    Reinsurance

                    We enter into reinsurance and retrocessional agreements to
                    reduce our exposure on individual risks, catastrophic losses
                    and other large losses in all lines of business. We classify
                    reinsurance contracts which do not meet insurance accounting
                    risk transfer requirements as deposits. We treat these
                    deposits as financing transactions and credit or charge
                    interest income or interest expense to them according to
                    contract terms.

                    Trenwick America Reinsurance Corporation's reinsurance
                    treaties consist principally of property catastrophe
                    reinsurance treaties. Trenwick International Limited and
                    Chartwell Managing Agents Limited, as is customary with
                    companies operating in the London Market and Lloyd's, buy
                    larger amounts of reinsurance to protect themselves.
                    Canterbury Financial Group Inc. purchases specific
                    reinsurance programs for each of the programs underwritten
                    by its insurance companies.

                    From 1989 to 1999, Trenwick America Reinsurance Corporation
                    purchased aggregate excess of loss ratio treaties from
                    several reinsurers. These facilities provided Trenwick
                    America Reinsurance Corporation with a layer of protection
                    against adverse results from its domestic casualty business
                    in excess of specified loss ratios. Trenwick America
                    Reinsurance Corporation did not purchase an aggregate excess
                    of loss ratio treaty after 1999. Interest expense on funds
                    held under these facilities is recorded as an investment
                    expense, and is included in the funds held offset at year
                    end 2001 and 2000.

                    At the time of the closing of the Trenwick/Chartwell merger
                    (October 27, 1999), Chartwell Re Corporation purchased a
                    reinsurance policy providing for up to $100,000 in coverage
                    in order to indemnify Trenwick Group Inc. against
                    unanticipated increases in Chartwell Re Corporation's
                    reserves for business written on or before the date the
                    merger was completed. Amounts recoverable under the
                    agreement are presented gross in the balance sheet at year
                    end 2001 and 2000 as reinsurance recoverable on unpaid
                    claims and claims expenses ($91,970) and miscellaneous
                    accounts receivable, included in other assets ($8,030). The
                    related benefit for losses ceded to the agreement was
                    reflected as a reduction to claims and claims expenses
                    incurred and the benefit related to other underwriting
                    balances was reflected as a reduction to underwriting
                    expenses in the historical financial statements of Trenwick
                    Group Inc. In addition, as part of the merger, Chartwell Re
                    Corporation commuted several aggregate stop-loss contracts.

                    During 2000 and 1999, LaSalle Re Limited purchased an excess
                    of loss reinsurance program which provided various limits
                    for first, second and third loss occurrences. This contract
                    was cancelled, effective December 31, 2000.


                                      -13-
<PAGE>

                    Reinsurance recoverable balances, net

                    The components of reinsurance recoverable balances, net at
                    year end 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                               2001          2000
                                                                            ----------     --------
<S>                                                                         <C>            <C>
                    Paid claims                                             $  156,373     $ 71,083
                    Unpaid claims and claims expenses,
                      net of funds held offset of $135,859 and $139,000      1,255,096      860,968
                                                                            ----------     --------
                    Reinsurance recoverable balances, net                   $1,411,469     $932,051
                                                                            ==========     ========
</TABLE>

                    Reinsurance recoverable balances at year end 2001 and 2000
                    are net of allowances for doubtful accounts of $54,580 and
                    $22,785, respectively, which includes $22,896 and $8,479 for
                    paid claims and $31,684 and $14,306 for unpaid claims and
                    claims expenses, respectively.

                    Reinsurance agreements provide for recovery of a portion of
                    certain claims and claims expenses from reinsurers. Trenwick
                    Group Ltd. remains liable in the event that the reinsurer is
                    unable to meet its obligation; however, Trenwick Group Ltd.
                    holds collateral under some of these agreements. Letters of
                    credit, trust accounts and funds withheld in the aggregate
                    amount of $354,011 (including interest) have been arranged
                    in favor of Trenwick Group Ltd. collateralizing reinsurance
                    recoverables with respect to certain retrocessionaires.

Note 5              Debt and Equity Security Investments
Investing
Activities          We have classified debt securities as "available for sale"
                    and reported them, as well as equity securities, at
                    estimated fair value principally using quoted market prices
                    or broker dealer quotes. Included in debt security
                    investments at year end 2001 and 2000 are the pro rata
                    shares of Lloyd's syndicates' debt securities managed for
                    our own account ($203,827 and $161,935, respectively).
                    Included in equity securities are limited partnerships in
                    which we hold greater than a 3% interest, and which are
                    reported at their equity value.

                    Fair value and amortized cost or cost of debt and equity
                    securities at year end 2001 and 2000 follow:
<TABLE>
<CAPTION>
                                                                                 2001                          2000
                                                                      -------------------------     -------------------------
                                                                         Fair                           Fair
                                                                         Value           Cost           Value          Cost
                                                                      ----------     ----------     ----------     ----------
<S>                                                                   <C>            <C>            <C>            <C>
                    U.S. and U.K. federal government
                      securities, including agencies                  $  443,683     $  435,994     $  453,640     $  445,492
                    Other foreign government securities                   79,369         77,693        101,134         99,488
                    U.S. municipal government securities                     125            125        249,700        244,234
                    Mortgage and other asset-backed securities           670,279        652,908        378,931        371,601
                    Corporate and other debt securities                  767,144        759,309        630,273        625,847
                                                                      ----------     ----------     ----------     ----------
                    Debt securities fair value and amortized cost     $1,960,600     $1,926,029     $1,813,678     $1,786,662
                                                                      ==========     ==========     ==========     ==========
                    Publicly traded common and preferred stock        $   14,619     $    7,865     $   95,179     $   97,243
                    Limited partnerships                                   9,545         9,5451         19,722         19,722(1)
                    Private placement stock                                   --             --          1,000          1,000
                                                                      ----------     ----------     ----------     ----------
                    Equity securities fair value and cost             $   24,164     $   17,410     $  115,901     $  117,965
                                                                      ==========     ==========     ==========     ==========

                        (1) Amounts represent cost adjusted for changes in equity of the limited partnerships.

</TABLE>


                                      -14-
<PAGE>

                    Gross unrealized gains and losses on debt and equity
                    securities at year end 2001 and 2000 follow:

<TABLE>
<CAPTION>
                                                                           2001                     2000
                                                                   --------------------      -------------------
                                                                    Gains       Losses        Gains       Losses
                                                                   -------     --------      -------     -------
<S>                                                                <C>         <C>           <C>         <C>
                    U.S. and U.K. federal government
                     securities, including agencies                $ 9,812     $ (2,123)     $ 8,266     $  (117)
                    Other foreign government securities              1,946         (270)       1,787        (142)
                    U.S. municipal government securities                --           --        5,466          --
                    Mortgage and other asset-backed securities      17,842         (471)       7,448        (118)
                    Corporate and other debt securities             23,111      (15,276)      10,763      (6,337)
                                                                   -------     --------      -------     -------
                    Debt securities gross gains and losses         $52,711     $(18,140)     $33,730     $(6,714)
                                                                   =======     ========      =======     =======
                    Equity securities gross gains and losses       $ 6,754     $     --      $ 3,892     $(5,956)
                                                                   =======     ========      =======     =======
</TABLE>

                    The fair value and amortized cost for debt securities at
                    year end 2001 are shown below by contractual maturity
                    periods, except mortgage-backed and asset-backed securities
                    which are included based on expected maturity dates. Actual
                    maturities will differ from contractual maturities because
                    borrowers generally have the right to prepay obligations.

<TABLE>
<CAPTION>
                                                                  Fair         Amortized
                                                                  Value           Cost
                                                               ----------     ----------
<S>                                                            <C>            <C>
                    Due in one year or less                    $  160,664     $  157,451
                    Due after one year through five years       1,020,835        989,324
                    Due after five years through ten years        591,733        588,201
                    Due after ten years                           187,368        191,053
                                                               ----------     ----------
                    Debt securities total maturities           $1,960,600     $1,926,029
                                                               ==========     ==========
</TABLE>

                    Net Investment Income and Net Investment Gains (Losses)

                    We recognize investment income, consisting principally of
                    interest and dividends, when earned, net of investment
                    expenses. In computing interest income, we amortize premiums
                    and accrete discounts on debt securities utilizing the
                    interest method. We adjust the amortization and accretion
                    for mortgage-backed and other asset-backed securities, when
                    sufficient information exists to estimate the probability
                    and timing of their prepayments, to the amount that would
                    have existed had the new effective yield been applied since
                    the acquisition of the security. We classify imputed
                    interest on the funds held offset to reinsurance recoverable
                    in investment expense.

                    We generally limit investments in debt securities that are
                    rated below investment grade, as these investments are
                    subject to a higher degree of credit risk than investment
                    grade securities. We monitor the creditworthiness of the
                    portfolio, including below investment grade securities, and
                    we write down investments when fair values decline for
                    reasons other than changes in interest rates or other
                    perceived temporary conditions. We determine realized gains
                    or losses on disposition of investments on the basis of
                    specific identification.


                                      -15-
<PAGE>

                    Sources of net investment income follow:

<TABLE>
<CAPTION>
                                                                    2001          2000         1999           1999
                                                                    Year          Year        Period          Year
                                                                 ---------      --------      -------      --------
<S>                                                              <C>            <C>           <C>          <C>
                    Debt securities interest                     $ 120,866      $ 49,518      $ 6,100      $ 26,299
                    Equity securities dividends and earnings         5,366           421           --            --
                    Cash and cash equivalents interest              15,727        10,788        2,332         6,477
                    Other investment income                          2,602         2,805          375         1,937
                                                                 ---------      --------      -------      --------
                    Gross investment income                        144,561        63,532        8,807        34,713
                    Imputed interest expense                       (11,342)       (2,850)          --            --
                    Other investment expenses                       (4,105)       (1,967)        (219)         (866)
                                                                 ---------      --------      -------      --------
                    Net investment income                        $ 129,114      $ 58,715      $ 8,588      $ 33,847
                                                                 =========      ========      =======      ========
</TABLE>

                    Net realized gains (losses) on sales of investments and
                    their effect on net income follow:

<TABLE>
<CAPTION>
                                                                   2001          2000         1999
                                                                   Year          Year         Year
                                                                 --------      -------      -------
<S>                                                              <C>           <C>          <C>
                    Debt securities realized gains               $ 24,487      $ 1,221      $ 4,082
                    Equity securities realized gains                1,132           97           --
                    Debt securities realized losses                (9,159)      (2,658)      (3,467)
                    Equity securities realized losses              (7,664)         (46)          --
                                                                 --------      -------      -------
                    Net realized investment gains (losses)          8,796       (1,386)         615
                    Applicable minority interest                       --         (450)         144
                                                                 --------      -------      -------
                    Net realized investment gains (losses)
                      included in income before income taxes        8,796         (936)         471
                    Applicable income taxes                           276          104           --
                                                                 --------      -------      -------
                    Net realized investment gains (losses)
                      included in net income                     $  8,520      $(1,040)     $   471
                                                                 ========      =======      =======
</TABLE>

                    During 2001, Trenwick Group Ltd. wrote down the fair value
                    of certain securities by $3,441 and reflected the
                    write-downs as realized losses on investments to recognize
                    declines in value that were other than temporary. No
                    securities were written down during the 2000 year, the 1999
                    period or the 1999 year.

                    Net unrealized gains (losses) on investments and their
                    effect on other comprehensive income (loss) follow:

<TABLE>
<CAPTION>
                                                                          2001         2000        1999          1999
                                                                          Year         Year       Period         Year
                                                                        -------     --------      -------      --------
<S>                                                                     <C>         <C>           <C>          <C>
                    Debt securities net gains (losses)                  $22,904     $ 35,404      $(4,471)     $(22,684)
                    Equity securities net gains (losses)                  2,285       (2,013)          --            --
                                                                        -------     --------      -------      --------
                    Net investment gains (losses)                        25,189       33,391       (4,471)      (22,684)

                    Applicable minority interest                             --          966       (1,042)       (5,269)
                                                                        -------     --------      -------      --------
                    Net investment gains (losses) included in
                      comprehensive income before income taxes           25,189       32,425       (3,429)      (17,415)
                    Applicable income taxes                               6,370        6,509           --            --
                                                                        -------     --------      -------      --------
                    Net investment gains (losses) included
                      in comprehensive income (loss)                     18,819       25,916       (3,429)      (17,415)
                    Less net realized investment gains (losses)
                      included in net income (loss)                       8,520       (1,040)          --           471
                                                                        -------     --------      -------      --------
                    Net unrealized investment gains (losses)
                      included in other comprehensive income (loss)     $10,299     $ 26,956      $(3,429)     $(17,886)
                                                                        =======     ========      =======      ========
</TABLE>


                                      -16-
<PAGE>

                    Net Unrealized Investment Gains (Losses)

                    We calculate unrealized investment gains (losses) as the
                    difference between recorded values (fair value) and
                    amortized cost or cost. We include net unrealized investment
                    gains and losses, net of applicable deferred income taxes,
                    in common shareholders' equity as accumulated other
                    comprehensive income.

                    Components of net unrealized investment gains (losses) at
                    year end 2001 and 2000 follow:

<TABLE>
<CAPTION>
                                                                          2001        2000
                                                                        -------     --------
<S>                                                                     <C>         <C>
                    Debt securities net unrealized gains                $34,571     $ 27,016
                    Equity securities net unrealized gains (losses)       6,754       (2,064)
                                                                        -------     --------
                    Net unrealized gains before income taxes             41,325       24,952
                    Applicable deferred income taxes                     12,479        6,405
                                                                        -------     --------
                    Net unrealized investment gains                     $28,846     $ 18,547
                                                                        =======     ========
</TABLE>

Note 6              Indebtedness and Minority Interest
Financing
Activities          We have recorded indebtedness and other mandatorily
                    redeemable obligations at their fair value at the date of
                    the Trenwick/LaSalle business combination or at principal
                    amounts advanced subsequent thereto. We accrete discount on
                    these obligations utilizing the interest method. For our
                    contingent interest note obligations, we adjust the
                    principal amount of the notes for any adverse development in
                    the applicable liability for claims and claims expenses. For
                    mandatorily redeemable preferred capital securities, we
                    eliminate in consolidation the capital securities held as an
                    investment by a subsidiary.

                    Carrying value and fair value of indebtedness and minority
                    interest at year end 2001 and 2000 follow:
<TABLE>
<CAPTION>
                                                                         2001                     2000
                                                                ---------------------     ---------------------
                                                                Carrying       Fair       Carrying       Fair
                                                                  Value        Value        Value        Value
                                                                --------     --------     --------     --------
<S>                                                             <C>          <C>          <C>          <C>
                    Senior notes                                $ 73,920     $ 63,750     $ 73,143     $ 73,155
                    Senior credit facility                       195,035      195,035      181,379      181,379
                    Contingent interest notes                     19,923       19,923       28,767       28,767
                    Other debt                                     2,385        2,385        3,516        3,516
                                                                --------     --------     --------     --------
                       Total indebtedness                        291,263      281,093      286,805      286,817
                                                                --------     --------     --------     --------
                    Mandatorily redeemable preferred
                      capital securities of U.S. subsidiary       68,119       43,175       76,770       74,777
                    Preferred shares of
                      Bermuda subsidiary                          75,000       67,530       75,000       64,500
                                                                --------     --------     --------     --------
                       Total minority interest                   143,119      110,705      151,770      139,277
                                                                --------     --------     --------     --------
                    Total indebtedness and
                      minority interest                         $434,382     $391,798     $438,575     $426,094
                                                                ========     ========     ========     ========
</TABLE>

                    Future Minimum Principal Payments on Indebtedness and
                    Minority Interest

                    Future minimum principal payments on indebtedness and
                    minority interest at year end 2001 follow: 2002, $46,268;
                    2003, $128,635; 2004, $63,386; 2005, $34,131; 2006, $1,000
                    and thereafter $86,350.


                                      -17-
<PAGE>

                    Senior Notes

                    The senior notes, with a par value of $75,000, are due April
                    1, 2003, and are not subject to redemption prior to
                    maturity. They are unsecured obligations and rank senior in
                    right of payment to all existing and future subordinated
                    indebtedness of Trenwick America Corporation, Trenwick Group
                    Ltd.'s U.S. holding company. Under the terms of the notes,
                    Trenwick America Corporation is not restricted from
                    incurring indebtedness, but is subject to limits on its
                    ability to incur secured indebtedness for borrowed money.
                    Interest on the notes is payable semi-annually at an annual
                    rate of 6.7%; interest charged to operations is at the
                    imputed rate of 7.9%.

                    Senior Credit Facility

                    Concurrent with the Trenwick/LaSalle business combination,
                    Trenwick Group Ltd.'s U.S. and U.K. holding companies
                    entered into an amended and restated $490,000 credit
                    agreement with various lending institutions. The agreement
                    consists of both a $260,000 revolving credit facility and a
                    $230,000 letter of credit facility. Trenwick Group Ltd's
                    U.S. holding company, Trenwick America Corporation, is the
                    primary obligor with respect to the revolving credit
                    facility, and Trenwick Group Ltd.'s U.K. holding company,
                    Trenwick Holdings Limited, is the primary obligor with
                    respect to the letter of credit facility. Guarantees are
                    provided by LaSalle Re Holdings Limited and Trenwick Group
                    Ltd. with respect to both the U.S. and U.K. holding
                    companies' obligations and additionally by the U.S. holding
                    company with respect to the U.K. holding company's
                    obligations.

                    On September 30, 2001, the U.S. holding company converted
                    the outstanding borrowings under the revolving credit
                    facility to a four year term loan facility. The applicable
                    interest rate on the term loan is generally 2.5% above the
                    London Interbank Offered Rate and was 4.7% at year end 2001.
                    The scheduled principal repayments of the $195,035
                    outstanding at year end 2001 are as follows: 2002, $43,883;
                    2003, $53,635; 2004, $63,386; and 2005, $34,131.
                    Additionally, the U.S. holding company is obligated to repay
                    a portion or all of the term loan in the event of equity
                    issuances, asset sales and debt issuances by Trenwick Group
                    Ltd. or its subsidiaries.

                    The credit agreement also provides for a letter of credit
                    facility to be issued for the account of Lloyd's to support
                    the syndicate participations of Trenwick Group Ltd.'s
                    subsidiaries. At year end 2001, the letter of credit portion
                    of the credit facility was fully utilized at $230,000.
                    Trenwick Group Ltd.'s letter of credit facility is scheduled
                    to expire in November, 2002. In the event that Trenwick
                    Group Ltd. is unable to obtain a replacement letter of
                    credit facility, it will be required to post sufficient
                    collateral at Lloyd's or reduce or refrain from underwriting
                    at Lloyd's in the 2003 year of account.

                    The credit agreement contains general covenants and
                    restrictions as well as financial covenants relating to,
                    among other things, Trenwick Group Ltd.'s minimum interest
                    coverage, debt to capital leverage, minimum earned surplus,
                    maintenance of a minimum A.M. Best Company rating of A- and
                    tangible net worth. As of year end 2001, Trenwick Group Ltd.
                    was in compliance with the credit agreement covenants.

                    The financial covenants relating to interest coverage, risk
                    based capital and tangible net worth (each as defined by the
                    financial covenants) were revised downward in an amendment
                    to the credit agreement executed following the September
                    11th terrorist attacks. The amendment set Trenwick Group
                    Ltd.'s minimum interest coverage ratio at 1.5 to 1 for the
                    fourth quarter of 2001, 2.0 to 1 for the first quarter of
                    2002 and 2.5 to 1 thereafter. Trenwick Group Ltd.'s interest
                    coverage ratio at December 31, 2001 was 2.0 to 1. The
                    amendment adjusted downward the minimum risk-based capital
                    requirement for Trenwick Group Ltd.'s subsidiary, Chartwell
                    Insurance Company, from 300% to 225% through December 31,
                    2002. Thereafter, the minimum risk-based capital for
                    Chartwell Insurance Company returns to 300%. The risk based


                                      -18-
<PAGE>

                    capital for Chartwell Insurance Company as of December 31,
                    2001 was 257%. The amendment lowered the base minimum
                    tangible net worth Trenwick Group Ltd. must maintain from
                    $560,000 to $425,000 until the reporting of quarterly
                    results of operations as of March 31, 2002, which are due no
                    later than May 15, 2002. After May 15, 2002, Trenwick Group
                    Ltd. minimum tangible net worth reverts to $560,000.
                    Trenwick Group Ltd.'s tangible net worth as of December 31,
                    2001 was $428,000. If Trenwick Group Ltd. is unable to meet
                    the credit agreement's financial covenants at the end of the
                    first quarter of 2002, it may be required to repay the
                    outstanding indebtedness and collateralize the outstanding
                    letters of credit issued under the credit agreement through
                    additional financing, asset sales, subsidiary dividends or
                    similar transactions.

                    Contingent Interest Notes

                    The contingent interest notes were issued immediately prior
                    to Chartwell Re Corporation's acquisition of The Insurance
                    Corporation of New York to protect Chartwell Re Corporation
                    against the possibility of adverse development of that
                    insurer's liability for claims and claims expenses and
                    long-tail casualty exposures, which are more fully described
                    in Note 4. Trenwick Group Inc. assumed the obligations of
                    Chartwell Re Corporation under the notes in the
                    Trenwick/Chartwell merger, described in Note 2, and Trenwick
                    Group Ltd.'s U.S. holding company subsequently assumed the
                    obligations of Trenwick Group Inc. under the notes in the
                    Trenwick/LaSalle business combination, also described in
                    Note 2. The notes were issued in an aggregate principal
                    amount of $1,000 with principal accruing interest at a rate
                    of 8% per annum, compounded annually. The interest will not
                    be payable until maturity or earlier redemption of the
                    notes. In addition, the notes entitle the holders thereof to
                    receive at maturity, in proportion to the principal amount
                    of the notes held by them, an aggregate of from $1,000, up
                    to $55,000, in contingent interest. Settlement of the notes
                    may be made by payment of cash or, under certain specified
                    conditions, by delivery of registered Trenwick Group Ltd.
                    common shares. For purposes of any settlement of the notes
                    in Trenwick Group Ltd.'s common shares, the value ascribed
                    to each common share would be 85% of an average of the
                    closing sales prices of the common stock prior to the
                    settlement date. The notes mature on June 30, 2006.

                    At year end 2001, the notes were recorded at the present
                    value of the amount which is reasonably determined to be
                    payable at maturity. Trenwick Group Ltd. believes that the
                    applicable liability for unpaid claims and claims expenses
                    at year end 2001 is an appropriate estimate of projected
                    ultimate losses and loss adjustment expenses to be paid and
                    therefore, the amount of contingent interest on the notes
                    presently expected to be paid at maturity is $34,582. During
                    the 2001 and 2000 years, Trenwick Group Ltd. recorded $9,893
                    and $5,371, respectively, of reductions to its underwriting
                    losses incurred in connection with adverse development
                    covered under the terms of the contingent interest notes.
                    The notes contain covenants which relate to the maintenance
                    of certain records and limitations on certain indebtedness.
                    At year end 2001 Trenwick Group Ltd. was in compliance with
                    those covenants.

                    Letters of Credit

                    At year end 2001, Trenwick Group Ltd. has $332,177 in
                    letters of credit outstanding. This amount includes $259,255
                    in letters of credit outstanding to provide capital to
                    support the participation in certain Lloyd's syndicates, of
                    which $230,000 of the letters of credit are outstanding
                    under the senior credit facility. The remaining balance of
                    the letters of credit outstanding relates primarily to the
                    worldwide property catastrophe segment's United States
                    business.


                                      -19-
<PAGE>

                    Lines of Credit

                    A Trenwick Group Ltd. subsidiary has established a line of
                    credit under which it can borrow up to $3,636 at a rate of
                    1.25% above the lending bank's base rate. Another subsidiary
                    has established a line of credit under which it can borrow
                    up to $1,455 at a rate of 1.0% above the lending bank's base
                    rate. There were no borrowings outstanding under these lines
                    of credit during the 2001 year.

                    Mandatorily Redeemable Preferred Capital Securities

                    The mandatorily redeemable preferred capital securities,
                    with a par value of $110,000, are obligations of a business
                    trust subsidiary of Trenwick Group Ltd.'s U.S. holding
                    company, Trenwick America Corporation. The capital
                    securities mature in 2037, require preferential cumulative
                    semi-annual cash distributions at an annual rate of 8.82%
                    and are guaranteed by the U.S. holding company, within
                    certain limits, as to distribution payments and liquidation
                    or redemption payments. Interest charged to operations on
                    the capital securities is at the imputed interest rate of
                    11.2%.

                    The business trust issuing the capital securities holds an
                    investment in subordinated debentures of the U.S. holding
                    company that have an aggregate principal amount of $113,403,
                    and interest from that investment is the source of cash
                    distributions on the capital securities. The capital
                    securities are subject to mandatory redemption in certain
                    circumstances pertaining to the U.S. holding company's
                    prepayment or repayment of its subordinated debentures held
                    by the trust. In the event of a default by the U.S. holding
                    company with respect either to making required payments on
                    the subordinated debentures or to its guarantee, holders of
                    the capital securities may institute a direct action against
                    the U.S. holding company. In the first quarter of 2001 and
                    the fourth quarter of 2000, a Trenwick Group Ltd. subsidiary
                    purchased $10,650 and $13,000, respectively, par value of
                    the capital securities in the open market for $8,462 and
                    $9,902, respectively. The carrying value of these securities
                    and the related dividends have been eliminated in
                    consolidation.

                    Preferred Shares of Subsidiary

                    In connection with the Trenwick/LaSalle business
                    combination, as described in Note 2, the outstanding Series
                    A preferred shares of LaSalle Re Holdings Limited have been
                    classified as minority interest in Trenwick Group Ltd.'s
                    balance sheet at their liquidation preference value. The
                    preferred shares have a par value of $1.00 per share and are
                    entitled to a liquidation preference of $25.00 per share
                    ($75,000 aggregate). Dividends on the preferred shares are
                    cumulative at 8.75% of the liquidation preference per annum
                    ($2.1875 per share or $6,563 aggregate). Subsequent to the
                    Trenwick/LaSalle business combination, preferred share
                    dividends which were previously deducted from retained
                    earnings have been deducted from Trenwick Group Ltd.'s
                    operations and are reflected as subsidiary preferred share
                    dividends. On or after March 27, 2007, the preferred shares
                    may be redeemed, in whole or in part, at a redemption price
                    of $25.00 per share. Prior thereto, under certain
                    circumstances, the preferred shares may be redeemed in whole
                    at a redemption price of $26.00 per share ($78,000
                    aggregate).

                    Interest Expense and Subsidiary Preferred Share Dividends
                    We accrue and recognize interest expense and subsidiary
                    preferred share dividends when incurred. In computing
                    interest expense and dividends on capital securities, we
                    accrete discount on certain obligations utilizing the
                    interest method. For our mandatorily redeemable preferred
                    capital securities, we eliminated in consolidation the
                    dividends on capital securities held as an investment by a
                    subsidiary. Reductions in the liability under the contingent
                    interest notes, which were previously included as reductions
                    to interest expense, have been reclassified as reductions to
                    the appropriate underwriting accounts for the 2001 and 2000
                    years.


                                      -20-
<PAGE>

                    Components of interest expense and subsidiary preferred
                    share dividends for the 2001 and 2000 years follow:

<TABLE>
<CAPTION>
                                                                       2001        2000
                                                                       Year        Year
                                                                     -------     -------
<S>                                                                  <C>         <C>
                    Senior notes interest                            $ 5,803     $ 1,462
                    Senior credit facility interest                   11,162       3,641
                    Contingent interest notes accretion                2,860         696
                    Other indebtedness interest                          147          14
                                                                     -------     -------
                    Interest expense                                  19,972       5,813
                    U.S. subsidiary capital securities dividends       7,815       2,419
                    Bermuda subsidiary preferred share dividends       6,563       1,640
                    Letter of credit fees                              3,809         724
                    Commitment and other fees                            983       1,179
                                                                     -------     -------
                    Total                                            $39,142     $11,775
                                                                     =======     =======
</TABLE>

                    Share Capital

                    At year end 2001, the authorized share capital of Trenwick
                    Group Ltd. was 150,000,000 shares of par value $.10 each,
                    which includes both common and preferred shares. At year end
                    2001 Trenwick Group Ltd. had outstanding 36,845,141 issued
                    and fully paid common shares and no preferred shares. Shares
                    reserved for future issuance at year end 2001 totaled
                    3,748,361, including shares reserved for the future exercise
                    of warrants (153,843), options (3,394,518) and the
                    shareholder rights plan (200,000).

                    For matters that are put to shareholder vote, common
                    shareholders of Trenwick Group Ltd. are generally entitled
                    to one vote per common share owned. Trenwick Group Ltd.'s
                    bye-laws limit the voting rights of those shareholders
                    holding 10% or more of Trenwick Group Ltd.'s outstanding
                    common shares. The voting limitation is to prevent Trenwick
                    Group Ltd. from being characterized as a U.S. controlled
                    foreign corporation and the adverse tax consequences that
                    can result.

                    At year end 2001, there were warrants outstanding for the
                    purchase of 153,843 common shares at prices of $25.45 and
                    $26.67 per share ($4,017 aggregate). Warrants for 70,125
                    shares at an exercise price of $25.45 per share expire on
                    March 6, 2002 and warrants for 83,718 shares having an
                    average exercise price of $26.67 per share expire on January
                    15, 2003. Warrants for 580 common shares at a price of
                    $25.45 per share were exercised in December 2000.

                    During the 2001 and 2000 years, Trenwick Group Ltd. issued
                    224,539 and 1,405 common shares, respectively, under
                    employee compensation, director compensation, stock purchase
                    and stock option plans and on exercises of warrants. Prior
                    to the Trenwick/LaSalle business combination, LaSalle Re
                    Holdings Limited issued 22,167, 3,390 and 798,481 common
                    shares during the 2000 year, the 1999 period and the 1999
                    year, respectively, under employee compensation, stock
                    purchase and stock option plans. See note 8 for additional
                    information on restricted common share awards and employee
                    share purchase plan purchases.

                    During the 2001 and 2000 years, Trenwick Group Ltd. paid
                    dividends of $0.16 and $0.04, respectively, per common
                    share. During the 1999 year, LaSalle Re Holdings paid
                    dividends of $1.13 per common share in addition to the
                    dividends it paid on its preferred stock.


                                      -21-
<PAGE>

                    Catastrophe Equity Put

                    On September 27, 2000, Trenwick Group Ltd. assumed the
                    benefits and obligations of LaSalle Re Holdings under a
                    $100,000 catastrophe equity put option. The catastrophe
                    equity put option was amended and restated as of January 1,
                    2001 and amended as of January 25, 2002. As amended, the
                    catastrophe equity put option enables Trenwick Group Ltd. to
                    raise up to $55,000 of equity, through the issue of Trenwick
                    Group Ltd. convertible preferred shares to the option
                    writer, in the event there is a qualifying catastrophic
                    event or events occurring prior to January 1, 2002. The
                    preferred shares can be redeemed by Trenwick Group Ltd. at
                    any time after the one year anniversary of their issue. In
                    addition, the option writer can convert its preferred shares
                    into common shares of Trenwick Group Ltd. at any time after
                    they have been outstanding for five years or upon a change
                    in control of Trenwick Group Ltd. or a decline in Trenwick
                    Group Ltd.'s net worth below a specified level. Conversion
                    is at the greater of the book value of Trenwick Group Ltd.
                    at the date of conversion or the market value of the common
                    shares based on the 30-day trading average prior to
                    conversion. The net option premium has been charged to
                    additional paid in capital.

                    As a result of the terrorist attacks of September 11, 2001,
                    Trenwick Group Ltd. has incurred $120,000 in catastrophe
                    losses, as defined under the option agreement. If these
                    losses develop to $140,000 prior to March 11, 2003, Trenwick
                    Group Ltd. will be entitled to exercise the catastrophe
                    equity put and raise $55,000 of equity, subject to
                    regulatory approvals.

                    Shareholder Rights Plan

                    In September 2000, Trenwick Group Ltd. adopted a new
                    shareholder rights plan. Shareholders of record received one
                    right for each common share held. The rights are exercisable
                    only if a person or group acquires beneficial ownership of
                    15% or more of Trenwick Group Ltd.'s common shares or
                    commences a tender or exchange offer for 15% or more of
                    Trenwick Group Ltd.'s common shares. Each right entitles a
                    common shareholder to buy 1/200th of a junior participating
                    preferred share at an exercise price of $85.00.

                    In the event that an acquirer accumulates 15% or more of
                    Trenwick Group Ltd.'s common shares, all rights holders
                    except the acquirer may purchase, for the exercise price, in
                    lieu of the preferred shares, Trenwick Group Ltd. common
                    shares having a market value of twice the exercise price of
                    each right. If Trenwick Group Ltd. is acquired in a merger
                    or other business combination after the acquisition of 15%
                    of Trenwick Group Ltd.'s common shares, all rights holders
                    except the acquirer may purchase the acquirer's shares at a
                    similar discount. Trenwick Group Ltd. is entitled to redeem
                    the rights at $0.01 per right, subject to certain
                    restrictions. The rights will expire on September 27, 2010.

Note 7              Trenwick Group Ltd. and certain of its subsidiaries are
Income              incorporated under the laws of Bermuda and are subject to
Taxation            Bermuda law with respect to taxation. Under current Bermuda
                    law, they are not taxed on any Bermuda income or capital
                    gains taxes and they have received an undertaking from the
                    Bermuda Minister of Finance that, in the event of any
                    Bermuda income or capital gains taxes being imposed, they
                    will be exempt from those taxes until 2016. Trenwick Group
                    Ltd.'s U.S. subsidiaries are subject to federal, and state
                    income taxes imposed by U.S. authorities; its UK
                    subsidiaries, including its Lloyd's corporate names,
                    are subject to U.K. corporation taxes and the Lloyd's
                    corporate names are also subject to U.S. taxation on
                    their U.S. connected income. Other branches of Trenwick
                    Group Ltd.'s subsidiaries are subject to the
                    relevant local income taxes.

                    We provide income taxes based upon amounts reported in the
                    financial statements and the provisions of currently enacted
                    tax laws. We allocate income taxes to operations, other
                    comprehensive income and shareholders' equity, as
                    applicable.


                                      -22-
<PAGE>

                    We recognize current income tax assets and liabilities, for
                    estimated income taxes refundable or payable based on the
                    current year's income tax returns, and deferred income tax
                    assets and liabilities, for the estimated future income tax
                    effects of temporary differences and carryforwards.
                    Temporary differences are the differences between the
                    financial statement carrying amounts of assets and
                    liabilities and their tax bases, as well as the timing of
                    income or expense recognition for financial reporting and
                    tax purposes of items not related to assets and liabilities.
                    We establish valuation allowances to reduce the carrying
                    amount of deferred income tax assets, if necessary, to
                    amounts that are more likely than not to be realized. We
                    periodically review the adequacy of these valuation
                    allowances and record any reduction in allowances through
                    earnings or, for allowances established in the
                    Trenwick/LaSalle business combination, as an offset to
                    goodwill.

                    Income (loss) before income taxes and the provision for
                    income taxes by jurisdiction and by allocation between
                    current and deferred for the 2001 and 2000 years follow
                    (2000 balances include amounts incurred by Trenwick Group
                    Ltd. subsequent to September 27, 2000, the effective date of
                    the Trenwick/LaSalle business combination):

<TABLE>
<CAPTION>
                                                                             2001          2000
                                                                          ---------      --------
<S>                                                                       <C>            <C>
                    Income (loss) before income taxes
                      by jurisdiction:
                        Bermuda                                           $ (36,747)     $ 20,950
                        United States                                       (63,822)      (19,030)
                        United Kingdom                                     (112,652)        1,456
                        Other                                                 1,019            --
                                                                          ---------      --------
                     Total                                                $(212,202)     $  3,376
                                                                          =========      ========
                    Income taxes by jurisdiction:
                     U.S. federal income tax expense (benefit)            $ (26,671)     $ (7,236)
                     U.S. state income tax expense                            1,512           441
                     U.K. federal income tax expense (benefit)              (32,418)          750
                     Other jurisdictions income tax expense (benefit)          (228)          (30)
                                                                          ---------      --------
                     Total income tax benefit                             $ (57,805)     $ (6,075)
                                                                          =========      ========
                    Current and deferred income taxes:
                     Current income tax expense (benefit)                 $   1,355      $(17,218)
                     Deferred income tax expense (benefit)                  (59,160)       11,143
                                                                          ---------      --------
                     Total income tax benefit                             $ (57,805)     $ (6,075)
                                                                          =========      ========
</TABLE>

                    For jurisdictions other than the U.S. and UK, there are no
                    significant differences between the effective tax rates for
                    each jurisdiction and the applicable statutory tax rates.
                    For the 2001 and 2000 years, the U.S. federal effective tax
                    rates of 40.8% and 37.2%, respectively, and the U.K.
                    effective tax rates of 28.8% and 51.5%, respectively,
                    differs from the statutory tax rates of 35% (U.S.) and 30%
                    (U.K.) as follows:


                                      -23-
<PAGE>

<TABLE>
<CAPTION>
                                                                              2001          2000
                                                                           ---------      --------
<S>                                                                        <C>            <C>
                    U.S. loss before income taxes                          $ (63,822)     $(19,030)
                    State income taxes                                        (1,521)         (441)
                                                                           ---------      --------
                    U.S. loss before U.S. federal income taxes             $ (65,343)     $(19,471)
                                                                           ---------      --------
                    Income tax benefit at 35% statutory rate               $ (22,870)     $ (6,815)
                    Tax-exempt investment income effect                         (984)         (951)
                    Non-deductible goodwill amortization effect                  529           124
                    Adjustment for prior year income taxes                    (3,039)           --
                    Other book-tax differences                                  (307)          406
                                                                           ---------      --------
                    Total U.S. federal income tax benefit                  $ (26,671)     $ (7,236)
                                                                           =========      ========
                                                                                2001          2000
                                                                           ---------      --------
                    U.K. income (loss) before U.K. income taxes            $(112,652)     $  1,456
                                                                           ---------      --------
                    Income tax expense (benefit) at 30% statutory rate     $ (33,796)     $    437
                    Valuation allowance                                          945            --
                    Other U.K. differences                                       433           313
                                                                           ---------      --------
                    Total U.K. federal income tax expense (benefit)        $ (32,418)     $    750
                                                                           =========      ========
</TABLE>

                    At year-end 2001, Trenwick Group Ltd. has net operating loss
                    carryforwards in the U.S. and the U.K. The U.S. subsidiaries
                    have a U.S. net operating loss carryforward of $139,378 that
                    will be available to offset regular taxable income during
                    the carryforward periods, which expire between 2007 through
                    2021. As a result of the Trenwick/LaSalle business
                    combination, an ownership change took place on September 27,
                    2000, and approximately $41,852 of the total U.S. net
                    operating loss carryforward became limited to a cumulative
                    annual utilization of $5,228. The remaining $97,526 in U.S.
                    net operating loss carryforwards are not so limited. Details
                    of the U.S. net operating loss carryforwards and the year of
                    their expiration are described below:

                            Net Operating
                                Loss                   Year of
                            Carryforwards            Expiration
                            -------------            ----------
                              $  9,655                  2007
                                32,197                  2018
                                28,491                  2020
                                69,035                  2021
                              --------
                              $139,378
                              ========

                    The U.K. subsidiaries' net operating loss carryforwards are
                    a result of Lloyd's underwriting losses in both open and
                    closed years of accounts. The trading losses that have been
                    declared on closed years of accounts through 1997 amount to
                    approximately $3,149. These underwriting losses may be
                    carried forward indefinitely to offset future trading
                    profits of the specific U.K. company that generated the
                    loss. At year-end 2001, management concluded that there was
                    not sufficient evidence to support the realization of this
                    deferred tax asset as more likely than not and consequently
                    established a valuation allowance in the amount of $945.

                    The remaining U.K. net operating loss carryforwards from
                    open years of account have been determined on a loss reserve
                    accrual basis and will not be finalized until the close of
                    the underwriting year of account. At year end 2001, these
                    losses totaled $119,859.

                    In April 2000, it became possible to group the current year
                    profits and losses of U.K. companies that have a common
                    worldwide parent. Pursuant to this legislation, Trenwick
                    Group Ltd. may group its profits and losses among its London
                    insurer and Lloyd's members. In addition, new legislation
                    was introduced effective for tax years beginning on or after
                    January 1, 2000, which


                                      -24-
<PAGE>

                    permits U.K. insurers and Lloyd's members to disclaim claims
                    and claims expense liabilities for tax purposes. The new
                    legislation also provides a calculation whereby additional
                    receipts or expense may be included in taxable income
                    depending upon the payout of claims relative to the reserves
                    taken into account for tax purposes within a margin of
                    error. Management has reviewed the new legislation and is
                    amending its 2000 U.K. returns and electing to disclaim a
                    portion of its claims and claims expense liabilities. Each
                    year management will re-evaluate the appropriateness of the
                    amount of disclaimed claims and claims expense liabilities.
                    At year end 2001, disclaimed liabilities the 2000 and 2001
                    tax years totals $125,986. Disclaimed claims and claims
                    expense liabilities are temporary differences that represent
                    future tax deductions.

                    Deferred income tax assets (liabilities) attributable to
                    temporary differences at year end 2001 and 2000,
                    respectively, follow:


<TABLE>
<CAPTION>
                                                                                          2001           2000
                                                                                        ---------      ---------
<S>                                                                                     <C>            <C>
                    U.S. deferred income tax assets:
                     Claims and claim expenses discounted                               $  37,950      $  33,947
                     Unearned premium income discounted                                    10,845          7,930
                     Contingent interest note adjustments, net of interest accreted         6,416          9,552
                     Investment securities, purchase accounting adjustments                 1,309          7,419
                     U.S. net operating losses                                             48,782         33,711
                     Alternative minimum tax credits                                        5,859          5,256
                     Foreign tax credits                                                      410          4,579
                     Unrealized foreign exchange loss                                         855             --
                     Other                                                                  4,676          5,751
                     Valuation allowance                                                     (267)        (2,976)
                                                                                        ---------      ---------
                        Total U.S. deferred income tax assets                             116,835        105,169
                                                                                        ---------      ---------
                    U.S. deferred income tax liabilities:
                     Deferred policy acquisition costs                                    (15,890)       (12,693)
                     Unrealized investment gains                                          (11,020)        (5,074)
                     Equity securities, purchase accounting adjustments                    (4,489)        (2,781)
                     Debt securities market discount accretion                             (2,362)        (1,796)
                     Indebtedness purchase accounting adjustment                           (8,437)        (8,679)
                     Deferred gain from purchase accounting                                (7,510)        (8,549)
                     Unrealized foreign exchange loss                                          --             (4)
                     Other                                                                   (567)        (1,995)
                                                                                        ---------      ---------
                        Total U.S. deferred income tax liabilities                        (50,275)       (41,571)
                                                                                        ---------      ---------
                        Total U.S. net deferred income tax asset                        $  66,560      $  63,598
                                                                                        =========      =========

                    U.K. deferred income tax assets:
                     Claims and claims expenses disclaimed                              $  37,796      $      --
                     Net operating losses                                                     945         12,161
                     Open years of account operating losses                                35,958         33,822
                     Unrealized foreign exchange loss                                         421            125
                     Other                                                                    712             --
                     Valuation allowance                                                     (945)            --
                                                                                        ---------      ---------
                        Total U.K. deferred income tax assets                              74,887         46,108
                                                                                        ---------      ---------
                    U.K. deferred income tax liabilities:
                     Unrealized investment gains                                           (1,521)        (1,331)
                     Other                                                                     --         (3,486)
                                                                                        ---------      ---------
                        Total U.K. deferred income tax liabilities                         (1,521)        (4,817)
                                                                                        ---------      ---------
                        Total U.K. net deferred income tax assets                       $  73,366      $  41,291
                                                                                        =========      =========
                        Total net deferred income tax asset                             $ 139,926      $ 104,889
                                                                                        =========      =========
</TABLE>


                                      -25-
<PAGE>

                    In connection with the Trenwick/LaSalle business
                    combination, Trenwick Group Ltd. recorded a valuation
                    allowance against its deferred income tax asset relating to
                    its foreign tax credits in the U.S. In evaluating the need
                    for this valuation allowance at year end 2001, it is
                    management's judgment that there has not been a significant
                    change in circumstances and therefore the valuation
                    allowance relative to its remaining foreign tax credits has
                    been maintained. As mentioned above, at year end 2001, an
                    additional valuation allowance of $945 was established
                    through income against the U.K. trading losses. There is no
                    valuation allowance recorded against the U.S. net operating
                    losses or the U.K. operating losses on open years of account
                    because, in management's judgment, it is more likely than
                    not that these amounts will be realized from future
                    operations. Management's judgment is based on its assessment
                    of business plans and related projections of future taxable
                    income that reflect significant assumptions about increased
                    premium volume and improved rates and profitability and, for
                    U.K. operations, the ability to secure letters of credits or
                    other funding sufficient to support the assumptions about
                    increased premium volume.

Note 8              Retirement and Savings Plans
Employee            We recognize expenses for employee retirement and savings
Benefits and        plans as they are incurred.
Compensation
Arrangements        Trenwick Group Ltd. has defined contribution plans for
                    substantially all full-time employees, through which it
                    contributes between 5% and 20% of an eligible employee's
                    total compensation to the plan, dependent upon each
                    employee's salary and age. No employee contributions are
                    made to these plans.

                    Additionally, Trenwick Group Ltd. maintains a 401(k) savings
                    plan for substantially all U.S. full-time employees, through
                    which employees contribute up to the maximum amount
                    allowable by the Internal Revenue Service. Trenwick Group
                    Ltd. contributes up to 6% of a participating employee's
                    compensation to the plan.

                    Trenwick Group Ltd.'s provisions for employee retirement and
                    savings plans were as follows:

<TABLE>
<CAPTION>
                                                   2001      2000     1999    1999
                                                   Year      Year    Period   Year
                                                  ------    ------   ------   ----
<S>                                               <C>       <C>       <C>     <C>
                    Defined contribution plans    $4,054    $  956    $33     $200
                    401(k) savings plan              660        99     --       --
                                                  ------    ------    ---     ----
                    Total                         $4,714    $1,055    $33     $200
                                                  ======    ======    ===     ====
</TABLE>

                    Restricted Common Share Awards

                    We record deferred compensation for the fair value of
                    restricted common share awards and present deferred
                    compensation as a separate, offsetting component of
                    shareholders' equity. We recognize compensation expense over
                    the vesting period of the restricted common shares.

                    Trenwick Group Ltd. awards restricted common shares to key
                    employees. During the 2001 year, Trenwick Group Ltd. awarded
                    194,116 restricted common shares at an average fair value of
                    $21.22 per share. On September 27, 2000, Trenwick Group Ltd.
                    awarded 224,331 restricted common shares in exchange for
                    restricted common shares previously awarded by Trenwick
                    Group Inc. at an average fair value of $13.05. During the
                    2000 year, 4,896 restricted common shares were canceled due
                    to employee terminations. LaSalle Re Holdings Limited
                    awarded 58,643 restricted common shares during the 1999 year
                    at a fair value of $18.62 per share.

                    The scheduled vesting of the 346,586 restricted common
                    shares outstanding at year end 2001 is as follows: 2002,
                    78,762 shares; 2003, 83,487 shares; 2004, 74,602 shares;
                    2005, 74,051


                                      -26-
<PAGE>

                    shares; and 2006, 35,684 shares. Trenwick Group Ltd.
                    recognized $1,394, $597, $69 and $576, respectively, of
                    compensation expense for the 2001 and 2000 years, and the
                    1999 period and year.

                    Prior to the Trenwick/LaSalle business combination, LaSalle
                    Re Holdings Limited granted common shares to employees on
                    the fifth anniversary date of their hire. At the time of the
                    award, the market value of the shares was recognized as
                    compensation expense. During the 2000 and 1999 years, 635
                    and 1,379 shares were awarded to employees, and $9, $28,
                    respectively, was recognized as compensation expense.

                    Employee Share Purchase Plan

                    We record shares sold to employees in connection with
                    employee share purchase plans at fair value; we recognize
                    compensation expense for the difference between fair value
                    and the discounted sales price.

                    Trenwick Group Ltd. is authorized to sell up to 300,000
                    common shares to its employees at a 15% discount from market
                    value under an employee share purchase plan adopted as of
                    February 1, 2001. During the 2001 year, Trenwick Group Ltd.
                    issued 15,840 shares under the plan and recognized $26 of
                    compensation expense.

                    LaSalle Re Holdings Limited had a similar plan which it
                    terminated in connection with the Trenwick/LaSalle business
                    combination. Prior to termination, LaSalle Re Holdings
                    issued 21,532, 3,390 shares and 19,459 shares, respectively,
                    under the plan during the 2000 year and the 1999 period and
                    year, and recognized $47, $7 and $59, respectively, of
                    compensation expense.

                    Share Options

                    We grant options for a fixed number of common shares to
                    employees and non-employee directors. These options have an
                    exercise price equal to the market value of the shares at
                    the date of grant. The current accounting standard
                    establishes a fair value based method of accounting for
                    stock-based compensation plans; however, it permits an
                    entity to continue to apply the accounting provisions of a
                    previous standard and make pro forma disclosures of net
                    income and earnings per share, as if the fair market value
                    based method had been applied. We continue to account for
                    the share option grants in accordance with the previous
                    standard and have included the pro forma disclosures
                    required by the fair value based method below.


                                      -27-
<PAGE>

                    Trenwick Group Ltd. has several plans through which it makes
                    options in common shares available to employees at the
                    discretion of its board of directors. Non-employee directors
                    receive automatic grants under a separate plan. Exercise
                    prices are generally fixed at the market value at the date
                    of grant. Options vest and are exercisable on various terms,
                    usually either over a five year period or up to a ten year
                    period. All options have an expiration date not exceeding
                    ten years. Transactions under the share option plans during
                    the periods presented follow:

<TABLE>
<CAPTION>
                                                                   2001            2000          1999         1999
                                                                   Year            Year         Period        Year
                                                                -----------     ----------    ----------    --------
<S>                                                             <C>             <C>           <C>           <C>
                    Number of shares:
                    Options outstanding, beginning of period      2,824,616        459,436       466,436     401,436
                    Options granted in exchange for
                      Trenwick Group Inc. options                        --      2,435,042            --          --
                    Other options granted                           687,398             --            --     233,000
                    Options canceled                               (106,054)       (69,037)       (7,000)   (148,200)
                    Options exercised                               (11,442)          (825)           --     (19,800)
                                                                -----------     ----------    ----------    --------
                    Options outstanding, end of period            3,394,518      2,824,616       459,436     466,436
                                                                ===========     ==========    ==========    ========

                    Options exercisable, and of period            2,369,598      2,311,678       237,986     168,943
                                                                ===========     ==========    ==========    ========

                    Range of exercise price:
                    Options granted                               $20 - $22     $13 - $41             --    $19 - $26
                    Options exercised                                   $21     $18 - $19             --    $19 - $20
                    Options outstanding, end of period            $13 - $41     $13 - $41     $19 - $32     $19 - $32
                    Options exercisable, end of period            $13 - $41     $19 - $41     $19 - $32     $19 - $32
                                                                ===========     ==========    ==========    =========

                    Weighted average exercise price:
                    Options granted                             $     21.02     $    26.51            --    $  23.87
                    Options exercised                           $     21.30     $    18.56            --    $  19.25
                    Options outstanding, end of period          $     25.28     $    26.29    $    24.89    $  24.90
                    Options exercisable, end of period          $     28.39     $    29.20    $    24.10    $  24.39
                                                                ===========     ==========    ==========    ========
</TABLE>

                    Concurrent with the Trenwick/LaSalle business combination,
                    all of the options under LaSalle Re Holdings Limited's plans
                    and all of the options granted under Trenwick Group Inc.'s
                    plans prior to the 2000 year became fully vested.

                    Pro Forma Information
                    All of the outstanding share options were issued at an
                    exercise price equal to fair market value on the date of
                    grant; therefore no compensation expense has been recognized
                    for these grants. Had the fair value based method described
                    above been applied, net income (loss) available to common
                    shareholders and net income (loss) per common share would
                    have been the pro forma amounts shown below:

<TABLE>
<CAPTION>
                                                            2001           2000          1999           1999
                                                            Year           Year         Period          Year
                                                         -----------     ---------    ----------     ----------
<S>                                                      <C>             <C>          <C>            <C>
                    Net income (loss) available to
                      common shareholders:
                        As reported                      $  (154,397)    $   4,528    $  (16,482)    $   (9,397)
                        Pro forma                        $  (155,264)    $   3,743    $  (16,585)    $  (10,021)

                    Basic and diluted earnings (loss)
                      per common share:
                        As reported                      $     (4.19)    $    0.21    $    (1.06)    $    (0.60)
                      Pro forma                          $     (4.22)    $    0.18    $    (1.06)    $    (0.64)
</TABLE>


                                      -28-
<PAGE>

                    The pro forma adjustments relating to options granted from
                    1995 to 2001 are based on a fair value method using the
                    Black-Scholes option pricing model; no effect has been given
                    to options granted prior to 1995. Valuation and related
                    assumption information are for options granted in each of
                    the periods below are as follows:

<TABLE>
<CAPTION>
                                                            2001                   2000             1999 Period
                                                            Year                   Year               and Year
                                                       --------------         --------------        -----------
<S>                                                    <C>                    <C>                      <C>
                    Expected volatility                38.0% to 59.8%         32.0% to 34.4%           27.0%
                    Risk-free interest rate                      4.1%                   5.0%            6.2%
                    Common share dividend yield                  0.9%                   0.6%            4.0%
</TABLE>

                    The Black-Scholes option valuation model was developed for
                    use in estimating the fair value of options which have no
                    vesting restrictions and are fully transferable. In
                    addition, option valuation models require the input of
                    highly subjective assumptions including the expected share
                    price volatility. Because Trenwick Group Ltd.'s share
                    options have characteristics significantly different from
                    those of traded options, and because changes in the
                    subjective input assumptions can materially affect the fair
                    value estimate, in Trenwick Group Ltd.'s opinion the
                    existing models do not necessarily provide a reliable
                    measure of the fair value of its share options.

                    Stock Appreciation Rights

                    Under a plan now terminated, we recorded a liability for
                    stock appreciation rights at each period end based on the
                    excess of the current fair value of the underlying common
                    stock over the fair value at the time of grant. We
                    recognized compensation expense for adjustments to the
                    liability.

                    In consideration for entering into an employment agreement,
                    LaSalle Re Holdings Limited granted stock appreciation
                    rights to its former chairman and chief executive officer.
                    During the 2001 year, Trenwick Group Ltd. paid $1,451 in
                    settlement of his exercisable rights. During the 2001 and
                    2000 years, and the 1999 period and year, Trenwick Group
                    Ltd. recognized $(278), $765, $242 and $1,490, respectively,
                    of compensation expense under this agreement. At year end
                    2001, there are no stock appreciation rights outstanding.

Note 9              We record other comprehensive income for the change in the
Other               net unrealized appreciation of investments and the change in
Comprehensive       foreign currency translation adjustments, both net of income
Income              taxes.

                    The components of accumulated other comprehensive income at
                    year end 2001 and 2000 follow:

<TABLE>
<CAPTION>
                                                                                  2001         2000
                                                                                --------     --------
<S>                                                                             <C>          <C>
                    Unrealized investment gains (losses), net of
                     applicable deferred income taxes of $12,479 and $6,405     $ 28,846     $ 18,547
                    Foreign currency translation adjustment, net of
                     applicable deferred income taxes of $(1,277) and $(122)      (5,627)      (1,253)
                                                                                --------     --------
                    Accumulated other comprehensive income                      $ 23,219     $ 17,294
                                                                                ========     ========
</TABLE>

Note 10             The computation of basic and diluted earnings per common
Earnings Per        share follows:
Common
Share


                                      -29-
<PAGE>

<TABLE>
<CAPTION>
                                                                        2001            2000          1999            1999
                                                                        Year            Year         Period           Year
                                                                    ------------    -----------   ------------    ------------
<S>                                                                 <C>             <C>           <C>             <C>
                    Income available to common shareholders:

                    Net income (loss) available to common
                      shareholders - basic and diluted              $   (154,397)   $     4,528   $    (16,482)   $     (9,397)
                                                                    ============    ===========   ============    ============

                    Weighted average common shares outstanding:
                    Weighted average shares outstanding - basic       36,825,637     21,084,030     15,603,503      15,628,650

                    Net weighted average shares issuable
                      (when dilutive):
                      Stock options and warrants exercise                     --        121,901             --              --
                      Stock  appreciation rights exercise                     --         65,168             --              --
                                                                    ------------    -----------   ------------    ------------
                    Weighted average shares outstanding - diluted     36,825,637     21,271,099     15,603,503      15,628,650
                                                                    ============    ===========   ------------    ------------
                    Basic and diluted earnings (loss)
                      per common share                              $      (4.19)   $      0.21   $      (1.06)   $      (0.60)
                                                                    ============    ===========   ============    ============
</TABLE>

                    As of year end 2001 and 2000, period end 1999 and year end
                    1999, 3,061,151, 2,474,521, 5,172,400 and 5,213,098,
                    respectively, aggregate share options, stock appreciation
                    rights, contingently issuable shares and warrants were
                    excluded from the computation of diluted earnings per share
                    because their effect would have been antidilutive on the
                    calculation for the respective period.

Note 11             Trenwick Group Ltd.'s insurance subsidiaries are subject to
Insurance           insurance laws and regulations in the jurisdictions in which
Regulation          they operate. These regulations include restrictions that
                    limit the amount of dividends or other distributions
                    available to be paid to Trenwick Group Ltd. by its insurance
                    subsidiaries without prior approval of the insurance
                    regulatory authorities.

                    Bermuda Regulation

                    LaSalle Re Limited, Trenwick Group Ltd.'s Bermuda insurance
                    subsidiary, is subject to Bermuda insurance regulations,
                    which mandate minimum solvency margins and liquidity ratios.
                    LaSalle Re Limited must maintain a minimum statutory capital
                    and surplus level of the greater of $100,000, 50% of net
                    premiums written ($47,478 for 2001), or 15% of net loss
                    reserves ($33,496 at year end 2001). In addition, Bermuda
                    insurance regulations restrict the payment of dividends from
                    retained earnings or additional paid-in-capital which exceed
                    certain thresholds without prior approval from the Bermuda
                    Minister of Finance. At year end 2001, LaSalle Re Limited
                    had $63,166 available for the payment of dividends.
                    Statutory capital and surplus of LaSalle Re Limited was
                    $430,463 and $453,766 at year end 2001 and 2000,
                    respectively; statutory net income (loss) was $(13,757),
                    $9,992 and $(7,013) for the 2001 year, the fifteen months
                    ended December 31, 2000 and the 1999 year, respectively.

                    U.S. Regulation

                    Each of Trenwick Group Ltd.'s U.S. insurance subsidiaries
                    are subject to restrictions on the payment of dividends
                    without prior approval from the state insurance regulator in
                    their respective state of domicile. These restrictions are
                    based upon certain measures of statutory surplus and net
                    income. At year end 2001, the U.S. insurance subsidiaries
                    had $14,482 available for the payment of dividends in 2002
                    without prior regulatory approval. Additionally, the
                    insurance regulators in each of the U.S. insurance
                    subsidiaries' states of domicile require insurance companies
                    to calculate and report certain information under a
                    risk-based capital formula which measures statutory capital
                    and surplus needs based on the risks in a company's mix of
                    business and investment portfolio. Based upon calculations
                    at year end 2001, the U.S.


                                      -30-
<PAGE>

                    insurance subsidiaries each exceeded the capital levels
                    prescribed by the risk-based capital formula.

                    Trenwick Group Ltd.'s U.S. insurance subsidiaries file
                    financial statements prepared in accordance with statutory
                    accounting practices prescribed or permitted by insurance
                    regulators in each of the subsidiaries' states of domicile.
                    Combined statutory surplus of the U.S. insurance
                    subsidiaries was $374,835 and $438,738 at year end 2001 and
                    2000; their combined statutory net loss was $119,085,
                    $16,157 and $47,603 for the 2001, 2000 and 1999 years,
                    respectively.

                    Effective January 1, 2001, the domiciliary state insurance
                    departments of Trenwick Group Ltd.'s U.S. insurance
                    subsidiaries adopted the codification of statutory
                    accounting principles. The codification provides guidance
                    for areas where statutory accounting has been silent and
                    changes current statutory accounting in some areas. The
                    cumulative effect of the adoption of the codification,
                    $14,305, was recorded as an adjustment to increase statutory
                    surplus of the U.S. insurance subsidiaries on January 1,
                    2001, primarily due to the recording of net deferred income
                    tax assets. Additionally, one of the state insurance
                    departments adopted certain prescribed accounting practices
                    that differ from those found in the codification. The most
                    significant of these practices is that deferred income tax
                    assets and liabilities are not recorded. The monetary effect
                    on the combined statutory capital and surplus of Trenwick
                    Group Ltd.'s U.S. insurance subsidiaries of using accounting
                    practices prescribed by that state insurance department was
                    a decrease of $9,042.

                    A state insurance department has permitted one of Trenwick
                    Group Ltd.'s insurance subsidiaries domiciled in that state
                    to account for the reinsurance agreement purchased in
                    connection with the Trenwick/Chartwell merger on a
                    prospective basis in its statutory basis financial
                    statements. This treatment is consistent with the U.S. GAAP
                    accounting treatment of the contract. Another state
                    insurance department has required another of Trenwick Group
                    Ltd.'s insurance subsidiaries, domiciled that state, to
                    account for that reinsurance agreement on a retroactive
                    basis. The difference in these statutory accounting
                    practices does not have an effect on the combined statutory
                    surplus or net income of Trenwick Group Ltd.'s U.S.
                    insurance subsidiaries. The terms of this reinsurance
                    agreement are described in Note 4.

                    Debt securities and cash with a carrying value of $47,585 at
                    year end 2001 were on deposit with various state or
                    governmental insurance departments in order to comply with
                    insurance laws.

                    U.K. Regulation

                    Under the applicable U.K. laws, Trenwick Group Ltd.'s U.K.
                    insurance subsidiaries may make distributions only from
                    accumulated realized profits, net of accumulated realized
                    losses. In addition, Trenwick International Limited is not
                    permitted to make any distribution that would reduce its net
                    assets ($83,677 at year end 2001) below the required minimum
                    margin of solvency which, as determined under the applicable
                    rules, is approximately $27,000 at year end 2001. Trenwick
                    International Limited must also notify its U.K. regulator of
                    any proposal to declare or pay a dividend on any of its
                    share capital. Under Lloyd's regulations, Chartwell Managing
                    Agents Limited is not permitted to make any distribution
                    that would cause its net assets to fall below a specified
                    level, which was $1,018 at year end 2001.

Note 12             Goodwill represents the unamortized excess of purchase price
Goodwill            over the fair value of identifiable net assets of acquired
                    entities. Through the 2001 year, we amortized goodwill on a
                    straight-line basis over twenty-five years. On a periodic
                    basis, we estimate the future undiscounted cash flows of the
                    business to which the goodwill relates in order to ensure
                    that its carrying value has not been impaired.


                                      -31-
<PAGE>

                    In July 2001, the Financial Accounting Standards Board
                    issued a statement covering goodwill and other intangible
                    assets, which is required to be adopted at the beginning of
                    2002. The statement requires that the goodwill be tested for
                    impairment under either market value or cash flow tests and
                    any impairment be recorded as of January 1, 2002 as the
                    cumulative effect of an accounting change. The impairment
                    tests must be completed by the reporting of quarterly
                    results of operations as of June 30, 2002. The new statement
                    also requires that negative goodwill balances not be tested,
                    but be credited to operations as of January 1, 2002 as the
                    cumulative effect of an accounting change. We will conduct
                    impairment tests on the remaining goodwill and implement the
                    statement during the first or second quarter of 2002.

                    The goodwill resulting from the Trenwick/LaSalle Re business
                    combination is recorded by Trenwick Group Ltd., ($1,120, net
                    of accumulated amortization of $73) Trenwick Group Ltd.'s
                    U.S. holding company, Trenwick America Corporation,
                    ($52,119, net of accumulated amortization of $1,866 at year
                    end 2001) and by its Bermuda holding company, LaSalle Re
                    Holdings Limited, ($(11,586) net of accumulated accretion of
                    $610 at year end 2001). The net amount ($41,653 at year end
                    2001) is presented as goodwill in these financial
                    statements.

Note 13             We record our investments in managing general agencies,
Other Assets        through which we write primary insurance business and in
and Other           which we hold ownership interests of between 20% and 30%, in
Liabilities         other assets on the balance sheet. Based on the ownership
                    interest and our ability to exercise significant influence
                    on the operating and financial policies of these managing
                    general agencies, we account for these investments under the
                    equity method.

                    We record premises and equipment, including leasehold
                    improvements and capitalized software costs, at cost and
                    amortize or depreciate them using the straight-line method
                    over their useful lives.

                    The components of other assets and other liabilities at year
                    end 2001 and 2000 follow:

<TABLE>
<CAPTION>
                    Other assets:                                           2001       2000
                                                                          --------   --------
<S>                                                                       <C>        <C>
                    Investments in managing general agencies              $  9,010   $  9,968
                    Premises and equipment, net of accumulated
                      depreciation of $7,462 and $1,220                     20,506     10,035
                    Funds held by insurers and other insurance deposits     44,424     68,597
                    Prepaid expenses and other deposits                     15,135     17,477
                    Current income taxes recoverable                         5,229     24,389
                    Contingent commissions receivable                        8,666      3,960
                    Other receivables                                       13,262     15,952
                    Other                                                   16,563     15,937
                                                                          --------   --------
                    Total                                                 $132,795   $166,315
                                                                          --------   --------

                    Other liabilities:
                    Accounts payable and accrued expenses                 $ 98,400   $ 71,467
                    Security deposits for insureds                           9,548      7,788
                    Contingent commission payable                            4,746      5,484
                    Other                                                   12,860     11,611
                                                                          --------   --------
                    Total                                                 $125,554   $ 96,350
                                                                          ========   ========
</TABLE>

                    During the 2001 and 2000 years, Trenwick Group Ltd. recorded
                    $1,944 and $239, respectively, in equity income related to
                    investments in managing general agencies. Depreciation and


                                      -32-
<PAGE>

                    amortization on items included in other assets charged to
                    operations for the 2001, 2000 and 1999 years was $7,158,
                    $1,229 and $354, respectively.

                    Operating Lease Agreements

                    Trenwick Group Ltd. leases office space under non-cancelable
                    operating leases which expire at various dates through 2015.
                    Trenwick Group Ltd.'s future minimum lease commitments at
                    year end 2001 total $21,628 and are payable as follows:
                    2002, $4,951; 2003, $4,816; 2004, $4,440; 2005, $2,833;
                    2006, $2,194; and thereafter, $2,394.

                    Total office rent expense for the 2001 and 2000 years, and
                    the 1999 period and year was $4,963, $2,113, $227 and $328,
                    respectively.

Note 14             We define the fair value of a financial instrument as the
Fair Value of       amount at which the instrument could be exchanged in a
Financial           current transaction between willing parties. We estimate
Instruments         fair values based upon quoted market prices or broker dealer
                    quotes and these estimates may vary in the near term.

                    The carrying amounts and estimated fair values of financial
                    instruments in summary form at year end 2001 and 2000
                    follow:

<TABLE>
<CAPTION>
                                                                      2001                     2000
                                                            -----------------------   -----------------------
                                                             Carrying       Fair       Carrying       Fair
                                                              Amount        Value       Amount        Value
                                                            ----------   ----------   ----------   ----------
<S>                                                         <C>          <C>          <C>          <C>
                    Assets:
                    Debt securities (Note 5)                $1,960,600   $1,960,600   $1,813,678   $1,813,678
                    Equity securities (Note 5)                  24,164       24,164      115,901      115,901
                    Cash and cash equivalents                  331,350      331,350      311,001      311,001
                    Deposits                                     7,800        7,800       48,969       48,969

                    Liabilities:
                    Indebtedness (Note 6)                      291,263      281,093      286,805      286,817
                    Preferred capital securities (Note 6)       68,119       43,175       76,770       74,777
</TABLE>

Note 15             Restrictions on Certain Payments within Trenwick Because
Commitments,        Trenwick Group Ltd.'s operations are conducted through its
Contingencies,      operating subsidiaries, Trenwick Group Ltd. is dependent
Concentrations      upon the ability of its operating subsidiaries to transfer
and                 funds, principally in the form of cash dividends, tax
Related-Party       reimbursements and other statutorily permissible payments.
Transactions        In addition to general legal restrictions on payments of
                    dividends and other distributions to shareholders applicable
                    to all corporations, Trenwick Group Ltd.'s insurance
                    subsidiaries are subject to further regulations that, among
                    other things, restrict the amount of dividends and other
                    distributions that may be paid to their parent corporations,
                    as more fully described in Note 11. Management believes that
                    current levels of cash flow from operations and assets held
                    at the holding company level, together with receipt of
                    dividends from Trenwick Group Ltd.'s operating subsidiaries,
                    will provide Trenwick Group Ltd. with sufficient liquidity
                    to meet its operating needs over the next twelve months.

                    Litigation

                    Trenwick Group Ltd. is party to various legal proceedings
                    generally arising in the normal course of its business.
                    Trenwick Group Ltd. does not believe that the eventual
                    outcome of any such proceeding will have a material effect
                    on its financial condition or results of operations or cash
                    flows. Trenwick Group Ltd.'s subsidiaries are regularly
                    engaged in the investigation and the defense of claims
                    arising out of the conduct of their business. Pursuant to
                    Trenwick Group


                                      -33-
<PAGE>

                    Ltd.'s insurance and reinsurance arrangements, disputes are
                    generally required to be finally settled by arbitration.

                    Investments and Cash Held as Collateral or on Deposit
                    Debt securities and cash with a carrying value of $145,981
                    are being held in trust as collateral for certain
                    reinsurance obligations. In addition, cash in the amount of
                    $2,054 has been pledged as collateral for letters of credit
                    for reinsurance obligations.

                    At year end 2001 Trenwick Group Ltd. had cash of $2,384 held
                    in a collateral account in conjunction with a loan
                    guarantee, and funds held as collateral for sponsored names
                    guarantees of $185.

                    Additionally, Trenwick Group Ltd. has debt securities and
                    cash with a carrying value of $30,506 being held as
                    collateral for Lloyd's syndicates operations.

                    Concentrations

                    During 2001, Trenwick Group Ltd. received 50.7% of its gross
                    written premiums through five brokers of which Aon
                    Reinsurance Agency accounted for 19.4%, Marsh and McLennan
                    accounted for 16.0%, Reinsurance Alternatives accounted for
                    7.5%, Heath Lambert accounted for 5.8%, and Benfield Blanch
                    accounted for 1.9%. During 2000, Aon Reinsurance Agency
                    accounted for 18%, Marsh and McLennan accounted for 13%,
                    Heath Lambert accounted for 6%, Reinsurance Alternatives
                    accounted for 5% and Benfield Blanch accounted for 3%.
                    During the 1999 period and the 1999 year, Marsh and McLennan
                    provided 40% and 20% of Trenwick Group Ltd.'s gross written
                    premiums, respectively, and Aon Reinsurance Agency provided
                    4% and 18%, respectively.

                    Loss of all or a substantial portion of the business
                    provided by these brokers could have a material adverse
                    effect on the business and operations of Trenwick Group Ltd.
                    Trenwick Group Ltd. does not believe, however, that the loss
                    of such business would have a long-term adverse effect
                    because of Trenwick Group Ltd.'s competitive position within
                    the reinsurance market and the availability of business from
                    other brokers.

                    No one ceding company accounted for more than 3% of Trenwick
                    Group Ltd.'s gross written premiums in the 2001 or 2000
                    years, or the 1999 period or year.

                    At year end 2001, 26% of Trenwick Group Ltd.'s net
                    reinsurance recoverable is recoverable from five principal
                    retrocessionaires. The reinsurance recoverable balances, net
                    of funds held liabilities, were from ERC Frankona Ltd.
                    ($118,205), London Life and Casualty Reinsurance Corporation
                    ($81,878), AIOI Insurance Company of Europe Limited
                    ($68,235), Centre Solutions (U.S.) Limited ($50,096), and
                    Transatlantic Reinsurance Company ($48,374). Each of these
                    companies is rated A or better by A.M. Best Company.

                    Related Party Transactions

                    Included in other assets are Trenwick Group Ltd.'s
                    investments in managing general agencies through which it
                    writes primary insurance business, as more fully described
                    in Note 13. At year end 2001 and 2000, the carrying value of
                    these investments totaled $9,010 and $9,968, respectively.
                    During 2001 and 2000, Trenwick Group Ltd. incurred $11,655
                    and $8,059 of commission expense to these managing general
                    agencies, respectively. At year end 2001 and 2000, Trenwick
                    Group Ltd.'s balance sheet includes $19,231 and $25,494,
                    respectively, of agents' balances receivable from these
                    managing general agencies including installment premiums
                    deferred and not yet due. The current portion of balances
                    due from these managing general agencies are settled on a
                    monthly basis.


                                      -34-
<PAGE>

                    Two of LaSalle Re Holdings Limited's founding shareholders
                    were CNA Financial and Aon. Their ownership of LaSalle Re
                    Holdings Limited during the period prior to the
                    Trenwick/LaSalle business combination was between 15.6% and
                    18.3% for CNA and 15.3% and 18.0% for Aon. LaSalle Re
                    Holdings Limited had numerous business relationships with
                    both companies, the principal ones of which are summarized
                    below:

<TABLE>
<CAPTION>
                                                                        2000   1999 Period
                                                                        Year     and Year
                                                                      -------  -----------
<S>                                                                   <C>        <C>
                    Premiums assumed through Aon                      $30,340    $25,448
                    Brokerage costs on premiums assumed through Aon     3,034      2,544
                    Investment management services from Aon               821      1,000

                    Premiums assumed from CNA                             668      8,386
                    Premiums ceded to CNA                               6,556      7,909
                    Override and profit commissions on premiums
                      ceded to CNA                                      1,244        644
                    Underwriting support services from CNA                685      1,634
</TABLE>


                    At year end 2000, the net amount receivable from CNA and Aon
                    related to these business relationships was $608 and the
                    amount payable to CNA and Aon under these agreements was
                    $7,351.

                    While the 2001 underwriting support services agreement
                    between LaSalle Re Holdings Limited and CNA did not
                    terminate until September 30, 2001, LaSalle Re Holdings
                    Limited did not utilize CNA's underwriting support services
                    following the Trenwick/LaSalle business combination.
                    Consequently, all fees payable between September 30, 2000
                    and September 30, 2001 were accrued and expensed at the date
                    of the business combination.

                    The investment management services agreement between LaSalle
                    Re Holdings Limited and Aon terminated at year end 2000.


                                      -35-
<PAGE>

Note 16             Operating activities are presented in the consolidated
Additional          statement of cash flows on a direct basis. The indirect
Operating           basis reconciles net income (loss) to cash from (for)
Cash Flows          operating activities. This reconciliation follows:
Information

<TABLE>
<CAPTION>
                                                                       2001          2000        1999        1999
                                                                       Year          Year       Period       Year
                                                                     ---------    ---------    --------    --------
<S>                                                                  <C>          <C>          <C>         <C>
                    Net income (loss)                                $(154,397)   $   9,451    $(14,841)   $ (2,834)
                    Adjustments to reconcile net income (loss)
                      to net cash from (for) operating activities:
                    Investment premium amortization, net                 2,991         (786)       (692)        154
                    Net realized investment losses (gains)              (8,796)       1,386          --        (615)
                    Unrealized loss (gain) on foreign exchange          (2,196)         419         193         193
                    Minority interest in undistributed
                     net income (loss) of subsidiaries                      --          839      (4,990)     (2,845)
                    Contingent interest note adjustments                (8,700)      (4,675)         --          --
                    Deferred income taxes                              (59,160)      11,143          --          --
                    Uncollectible accounts provision                     3,320        4,081          --          --
                    Other fair value adjustment accretion                  458          365          --          --
                    Other                                                4,448       (3,546)         91         751
                    Changes in assets and liabilities, net
                     of effect from purchases of subsidiary:
                      Accrued investment income                           (945)      (3,697)     (2,139)        981
                      Premiums receivable                             (111,729)      10,449      14,770      (6,354)
                      Reinsurance recoverable balances, net           (475,833)    (102,861)     (8,676)     (9,100)
                      Prepaid reinsurance premiums                     (51,289)     (10,141)      6,172      (9,726)
                      Deferred policy acquisition costs                (16,876)      (5,743)      3,441       1,533
                      Other assets                                      22,741          751      (1,000)     (5,916)
                      Unpaid claims and claims expenses                662,661       70,570      43,593      48,403
                      Unearned premium income                          122,713        8,964     (27,154)     (6,070)
                      Reinsurance balances payable                     101,575      (15,055)     (2,243)      9,778
                             Other liabilities                          32,241       11,384       2,044       1,609
                                                                     ---------    ---------    --------    --------
                    Cash from (for) operating activities             $  63,227    $ (16,702)   $  8,569    $ 19,942
                                                                     =========    =========    ========    ========
</TABLE>


                                      -36-
<PAGE>

Note 17             Summarized unaudited quarterly financial data for the years
Unaudited           presented follow:
Quarterly
Financial
Data

<TABLE>
<CAPTION>
                                                    Quarter               2001           2000
                                                 --------------         --------       --------
<S>                                              <C>                    <C>            <C>
                    Net premiums earned          Fourth quarter         $222,298       $220,010
                                                 Third quarter           239,862         26,751
                                                 Second quarter          224,571         28,776
                                                 First quarter           202,774         27,212

                    Net investment income        Fourth quarter          $32,973         30,937
                                                 Third quarter            30,770          9,591
                                                 Second quarter           33,186          9,251
                                                 First quarter            32,184          8,936

                    Net realized investment      Fourth quarter            $ 968            530
                      gains (losses)             Third quarter            (3,302)           270
                                                 Second quarter            2,272             38
                                                 First quarter             8,859         (2,224)

                    Net income (loss)            Fourth quarter         $(26,397)         1,795
                                                 Third quarter           (96,107)         8,552
                                                 Second quarter          (50,806)        12,912
                                                 First quarter            18,913        (13,808)

                    Net income (loss)            Fourth quarter         $(26,397)         1,795
                      available to common        Third quarter           (96,107)         6,911
                      shareholders               Second quarter          (50,806)        11,271
                                                 First quarter            18,913        (15,449)

                    Diluted income (loss)        Fourth quarter           $(0.72)         $0.05
                      per common share           Third quarter            $(2.61)         $0.44
                                                 Second quarter           $(1.38)         $0.71
                                                 First quarter             $0.51         $(0.98)
</TABLE>

                                      -37-
<PAGE>

                               TRENWICK GROUP LTD.
                                FIVE YEAR SUMMARY
                    Year Ended December 31, 2001 and 2000 and
                  Years Ended September 30, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                       2001             2000             1999           1998          1997
                                   -----------       -----------     -----------     -----------   -----------
<S>                                <C>                <C>             <C>              <C>           <C>
Income Statement Data
New Premiums written               $   970,318        $  302,632      $ 110,819        $147,501      $163,693
New investment income                  129,114            58,715         33,847          34,288        33,109
Net income (loss) available
   common shareholders                (154,397)            4,528         (9,397)         45,243        93,723
GAAP combined ratio                      132.6%            113.5%         130.1%           82.2%         42.6%
Per Share Data
Net income (loss) per
   common share:
Basic earnings (loss) per
   common share                    $     (4.19)       $     0.21      $   (0.60)       $   2.99      $   6.02
Diluted earnings (loss)
   per common share                      (4.19)             0.21          (0.60)           2.68          5.14
Dividends per common share                0.16              0.04           1.13            3.00          2.84
Book Value per common share              13.52             17.79          19.69           23.39         23.23
Balance Sheet Data
Total Assets                       $ 4,928,555        $4,229,496      $ 736,107        $757,290      $686,088
Total investments and cash           2,316,114         2,240,580        556,976         606,757       553,043
Unpaid claims and
   claims expenses                   3,032,748         2,408,926        146,552          97,942        45,491
Indebtedness                           291,263           286,805             --              --            --
Minority interest                      143,119           151,770         93,055         105,569        93,355
Common shareholders' equity            498,326           652,187        307,197         355,053       350,226
Common shares outstanding               36,845            36,665         15,600          15,179        15,074
</TABLE>

Amounts for 2001 and 2000 reflect the results of Trenwick Group Inc. and its
subsidiaries, accounted for as a purchase, from September 27, 2000, the date of
the acquisition.



                                      -38-