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                                                                   Exhibit 10.16


                       [LETTERHEAD OF ANNUITY & LIFE RE]

September 4, 2002
(as revised December 19, 2002)

Richard Tucker
c/o Annuity and Life Re (Holdings), Ltd.
P.O. Box HM 98
Hamilton, HM 11
Bermuda

RE: RETENTION AGREEMENT

Dear Rich:

         The Board of Directors of Annuity and Life Re (Holdings), Ltd. ("ANR")
is currently exploring the possibility of a significant capital raising or other
strategic transaction. Because you are an important part of the management and
professional team of ANR and its subsidiary Annuity & Life Reassurance, Ltd.
(the "Operating Company"), the Board of Directors of ANR has determined that it
is in the best interests of ANR and its shareholders to offer you appropriate
incentives to continue to focus on the business of ANR and the Operating Company
during this period while a transaction is being considered. Please note that, as
used herein, the term "Company" refers to both ANR and the Operating Company,
and all terms included in this letter agreement and not otherwise defined have
the meanings given them in your Employment Agreement with the Company (the
"Employment Agreement").

         In consideration of your continued employment with the Company, the
Company hereby offers, and you, intending to be legally bound, hereby accept,
the following modifications to your employment arrangements with the Company:

         1.       Your base salary, payable in accordance with Section 4 of the
                  Employment Agreement, shall be $225,000, effective as of
                  September 1, 2002.

         2.       The Company shall pay you a retention bonus of $80,000 (the
                  "Retention Bonus"). $20,000 of the Retention Bonus was paid to
                  you in September 2002, with the balance to be paid on the
                  earlier of May 31, 2003 or the occurrence of a Change in
                  Control, as defined below, (such date, the "Bonus Date"), so
                  long as you are still an employee of the Company on the Bonus
                  Date; provided, however, that if your employment with the
                  Company is terminated before the Bonus Date,

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                  you will still be paid the balance of the Retention Bonus if
                  such termination is by the Company other than for Serious
                  Cause, including in the event of your death or disability, or
                  by you for Good Reason. If, before the Bonus Date, (i) your
                  employment with the Company is terminated for Serious Cause or
                  (ii) you terminate your employment with the Company other than
                  for Good Reason, then you shall immediately repay to the
                  Company the portion of the Retention Bonus already paid and
                  you further acknowledge that you will not be eligible to
                  receive the balance of the Retention Bonus.

         3.       Except as expressly provided herein, the terms of the
                  Employment Agreement shall remain in full force and effect.

         For purposes of this letter, a "Change in Control" shall be deemed to
have occurred if (a) any person, including a group of persons acting in concert,
becomes the beneficial owner of shares of ANR having 50 percent or more of the
total number of votes that may be cast for the election of directors of ANR; (b)
there occurs any cash tender or exchange offer for shares of ANR, merger or
other business combination, or any combination of the foregoing transactions,
and as a result of or in connection with any such event persons who were
directors of ANR before the event shall cease to constitute a majority of the
board of directors of ANR or any successor to ANR; or (c) there occurs a sale,
conveyance, or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of ANR.

         Please sign below to indicate that you acknowledge and agree to the
terms and conditions set forth in this letter agreement.

                                       By: /s/ Frederick S. Hammer
                                           _____________________________
                                       Name:  Frederick S. Hammer
                                       Title: Chairman of the Board of Directors

I hereby acknowledge and agree to the terms and conditions set forth in this
letter agreement.

By: /s/ Richard Tucker
    ______________________________
Name: Richard Tucker

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