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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549

FORM 10-Q

|        |                                                                                       |
|--------|---------------------------------------------------------------------------------------|
|   | QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the quarterly period ended March 31,2004

|        |                                                                                        |
|--------|----------------------------------------------------------------------------------------|
|   | TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the transition period from                     to                     

001-32138Commission filenumber

QUANTA CAPITAL HOLDINGSLTD.

(Exact name of registrant as specifiedin itscharter)

|                                                              |  |                                     |  |  |  |  |
|--------------------------------------------------------------|--|-------------------------------------|--|--|--|--|
| Bermuda                                                      |  | N/A                                 |
| (Stateor other jurisdiction of incorporation ororganization) |  | (I.R.S. Employer IdentificationNo.) |
|                                                              |

1 Victoria Street, FourthFloorHamilton HM11Bermuda(Address ofprincipal executive offices and zipcode)

441-294-6350(Registrant'stelephone number, including areacode)

Indicateby check mark whether the registrant (1) has filed all reports requiredto be filed by Section  13 or 15(d)  of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past90days.        Yes           No   

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Exchange Act Rule12b-2).        Yes           No   

As of May 14, 2004 there were 56,798,218 common shares, $0.01par value per share,outstanding.

    

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QUANTACAPITAL HOLDINGS LTD.

INDEX TO FORM 10-Q

|                                                        |  |                                                                                                                                                          |  |               |  |  |  |  |  |  |
|--------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------|--|---------------|--|--|--|--|--|--|
|                                                   |  |                                                                                                                                                     |  | PageNo.       |
| **PARTI.    FINANCIALINFORMATION** |
| Item1                                                  |  | FinancialStatements                                                                                                                                      |  |
|                                                   |  | CondensedConsolidated Balance Sheets (unaudited) at March 31, 2004 and    December 31,2003                                           |  |   3 |
|                                                   |  | CondensedConsolidated Statements of Operations (unaudited) for the three    months ended March 31, 2004 and2003                      |  |   4 |
|                                                   |  | CondensedConsolidated Statements of Changes in Shareholders' Equity    (unaudited) for the three months ended March 31, 2004 and2003 |  |   5 |
|                                                   |  | CondensedConsolidated Statements of Cash Flows (unaudited) for the three    months ended March 31,2004                               |  |   6 |
|                                                   |  | Notesto Financial Statements (unaudited)                                                                                                                 |  |   7 |
| Item 2                                                 |  | Management'sDiscussion and Analysis of Financial Condition and Results of    Operations                                              |  | 15            |
| Item3                                                  |  | Quantitative and Qualitative Disclosures about MarketRisk                                                                                                |  | 28            |
| Item 4                                                 |  | Controls and Procedures                                                                                                                                  |  | 30            |
| **PART II.    OTHERINFORMATION**   |
| Item 1                                                 |  | Legal Proceedings                                                                                                                                        |  | 31            |
| Item 2                                                 |  | Changes in Securities,Use of Proceeds and Issuer Purchases of Equity    Securities                                                   |  | 31            |
| Item 6                                                 |  | Exhibits and Report onForm 8-K                                                                                                                           |  | 31            |
|                                                        |

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PART 1.    FINANCIALINFORMATION

ITEM 1.    FINANCIAL STATEMENTS

QUANTACAPITAL HOLDINGS LTD. UNAUDITED CONDENSED CONSOLIDATED BALANCESHEETS(Unaudited; expressed in thousands of U.S. dollars exceptfor share and per shareamounts)

|                                                                                                                                        |  |              |         |                 |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------------------------------------------------------|--|--------------|---------|-----------------|--|--------|---------|---------|--|--|
|                                                                                                                                   |  | March31,2004 |         | December31,2003 |
| **Assets**                                                                                                                             |  |
| Investmentsat fair value (amortized cost: March 31, 2004, $454,885; December 31,2003,$465,552)                                         |  | $            | 459,447 |            |  | $      | 467,036 |    |
| Cash andcashequivalents                                                                                                                |  |         | 42,340  |            |  |   | 47,251  |    |
| Accruedinvestmentincome                                                                                                                |  |         | 4,184   |            |  |   | 2,995   |    |
| Premiumsreceivable                                                                                                                     |  |         | 82,973  |            |  |   | 10,961  |    |
| Losses andloss adjustment expensesrecoverable                                                                                          |  |         | 190     |            |  |   | 3,263   |    |
| Other accountsreceivable                                                                                                               |  |         | 7,616   |            |  |   | 8,957   |    |
| Deferredacquisitioncosts                                                                                                               |  |         | 23,478  |            |  |   | 6,616   |    |
| Deferredreinsurancepremiums                                                                                                            |  |         | 6,122   |            |  |   | 1,925   |    |
| Property andequipment, net of accumulated depreciation of $343 (December 31, 2003,$185)                                                |  |         | 1,743   |            |  |   | 1,117   |    |
| Goodwill and otherintangibleassets                                                                                                     |  |         | 21,167  |            |  |   | 21,351  |    |
| Otherassets                                                                                                                            |  |         | 1,720   |            |  |   | 2,289   |    |
| Totalassets                                                                                                                            |  | $            | 650,980 |            |  | $      | 573,761 |    |
| **Liabilities**                                                                                                                        |  |         |    |            |  |   |    |    |
| Reservefor losses and loss adjustmentexpenses                                                                                          |  | $            | 17,276  |            |  | $      | 4,454   |    |
| Unearnedpremiums                                                                                                                       |  |         | 109,407 |            |  |   | 20,044  |    |
| Environmentalliabilitiesassumed                                                                                                        |  |         | 6,868   |            |  |   | 7,018   |    |
| Reinsurancebalances payable                                                                                                            |  |         | 5,277   |            |  |   | 334     |    |
| Accountspayable and accruedexpenses                                                                                                    |  |         | 9,869   |            |  |   | 17,609  |    |
| Net payablefor investmentspurchased                                                                                                    |  |         | 11,630  |            |  |   | 34,766  |    |
| Deferredincome and otherliabilities                                                                                                    |  |         | 4,973   |            |  |   | 2,053   |    |
| Totalliabilities                                                                                                                       |  | $            | 165,300 |            |  | $      | 86,278  |    |
| **Shareholders'equity**                                                                                                                |  |         |    |            |  |   |    |    |
| Preferred shares($0.01 par value; 25,000,000 shares authorized; none issued andoutstanding at March 31, 2004 and December 31,2003)     |  | $            | — |            |  | $      | — |    |
| Commonshares ($0.01 par value; 200,000,000 shares authorized; 56,798,218issued and outstanding at March 31, 2004 and December 31,2003) |  |         | 568     |            |  |   | 568     |    |
| Additional paid-incapital                                                                                                              |  |         | 524,203 |            |  |   | 524,235 |    |
| Accumulateddeficit                                                                                                                     |  |         | (43,002 | )          |  |   | (38,477 | )  |
| Accumulatedother comprehensiveincome                                                                                                   |  |         | 3,911   |            |  |   | 1,157   |    |
| Totalshareholders'equity                                                                                                               |  | $            | 485,680 |            |  | $      | 487,483 |    |
| **Totalliabilities and shareholders'equity**                                                                                           |  | $            | 650,980 |            |  | $      | 573,761 |    |
|                                                                                                                                        |

Theaccompanying notes are an integral part of these unaudited condensedconsolidated financial statements

3

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QUANTA CAPITAL HOLDINGS LTD. UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVEINCOME(Unaudited; expressed in thousands of U.S. dollars exceptfor share and per shareamounts)

|                                                                                              |  |                           |            |               |  |        |           |        |  |  |  |  |  |  |
|----------------------------------------------------------------------------------------------|--|---------------------------|------------|---------------|--|--------|-----------|--------|--|--|--|--|--|--|
|                                                                                         |  | ThreeMonths EndedMarch31, |            |
|                                                                                         |  | 2004                      |            | 2003          |  |
|                                                                                         |  |                      |            | (Predecessor) |  |
| **Revenues**                                                                                 |  |
| Grosspremiumswritten                                                                         |  | $                         | 118,729    |          |  | $      | —   |   |  |
|                                                                                         |  |
| Netpremiumswritten                                                                           |  | $                         | 112,455    |          |  | $      | —   |   |  |
| Change innet unearnedpremiums                                                                |  |                      | (85,220    | )        |  |   | —   |   |  |
| Netpremiumsearned                                                                            |  |                      | 27,235     |          |  |   | —   |   |  |
|                                                                                         |  |
| Consultingrevenues                                                                           |  |                      | 6,507      |          |  |   | 6,271     |   |  |
| Net investmentincome                                                                         |  |                      | 3,235      |          |  |   | 8         |   |  |
| Net realized gains oninvestments                                                             |  |                      | 1,195      |          |  |   | —   |   |  |
| Netforeign exchangegains                                                                     |  |                      | 224        |          |  |   | —   |   |  |
| Otherincome                                                                                  |  |                      | 191        |          |  |   | —   |   |  |
| Totalrevenues                                                                                |  |                      | 38,587     |          |  |   | 6,279     |   |  |
| **Expenses**                                                                                 |  |
| Netlosses and loss expensesincurred                                                          |  |                      | 15,895     |          |  |   | —   |   |  |
| Acquisitionexpenses                                                                          |  |                      | 6,617      |          |  |   | —   |   |  |
| Directconsulting costs                                                                       |  |                      | 4,384      |          |  |   | 3,673     |   |  |
| Generaland administrativeexpenses                                                            |  |                      | 15,829     |          |  |   | 2,129     |   |  |
| Depreciationand amortization ofintangibles                                                   |  |                      | 387        |          |  |   | 53        |   |  |
| Totalexpenses                                                                                |  |                      | 43,112     |          |  |   | 5,855     |   |  |
| (Loss)income before incometaxes                                                              |  |                      | (4,525     | )        |  |   | 424       |   |  |
| Income taxexpense                                                                            |  |                      | —    |          |  |   | —   |   |  |
| **Net(loss)income**                                                                          |  |                      | (4,525     | )        |  |   | 424       |   |  |
| **Othercomprehensive income (loss)**                                                         |  |
| Unrealizedinvestment gains arising during the period, net of incometaxes                     |  |                      | 3,962      |          |  |   | —   |   |  |
| Foreign currencytranslationadjustments                                                       |  |                      | (13        | )        |  |   | —   |   |  |
| Reclassificationof net realized gains on investments included in net loss, net ofincometaxes |  |                      | (1,195     | )        |  |   | —   |   |  |
| Othercomprehensive income                                                                    |  |                      | 2,754      |          |  |   | —   |   |  |
| Comprehensive(loss)income                                                                    |  | $                         | (1,771     | )        |  | $      | 424       |   |  |
| Weightedaverage common share and common share equivalents basic anddiluted                   |  |                      | 56,798,218 |          |  |   | 1,093,250 |   |  |
| Basicand diluted (loss) income pershare                                                      |  | $                         | (0.08      | )        |  | $      | 0.39      |   |  |
|                                                                                              |

Theaccompanying notes are an integral part of these unaudited condensedconsolidated financial statements

4

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QUANTA CAPITAL HOLDINGS LTD. UNAUDTEDCONDENSED CONSOLIDATED STATEMENTS OF CHANGES INSHAREHOLDERS' EQUITY(Unaudited; expressed in thousands ofU.S. dollars except for share and per shareamounts)

|                                                                  |  |                                |         |         |  |  |
|------------------------------------------------------------------|--|--------------------------------|---------|---------|--|--|
|                                                             |  | ThreeMonths EndedMarch 31,2004 |
|                                                             |  |
|                                                             |  |
|                                                             |  |
| **Sharecapital — preferred shares of par value $0.01each** |  | $                              | — |    |
|                                                             |  |
| **Sharecapital — common shares of par value $0.01each**    |  |
| Balance at beginning ofperiod                                    |  |                           | 568     |    |
| Issued duringperiod                                              |  |                           | — |    |
| Balance at end ofperiod                                          |  |                           | 568     |    |
|                                                             |  |
| **Additionalpaid-in capital**                                    |  |
| Balance at beginning ofperiod                                    |  |                           | 524,235 |    |
| Net offeringcosts                                                |  |                           | (32     | )  |
| Balance at end ofperiod                                          |  |                           | 524,203 |    |
|                                                             |  |
| **Accumulatedother comprehensive income**                        |  |
| Balance at beginningof period                                    |  |                           | 1,157   |    |
| Net change in unrealizedgains on investments, net oftax          |  |                           | 2,767   |    |
| Foreign currency translationadjustments                          |  |                           | (13     | )  |
| Balance at end ofperiod                                          |  |                           | 3,911   |    |
|                                                             |  |
| **Accumulateddeficit**                                           |  |
| Balance at beginning ofyear                                      |  |                           | (38,477 | )  |
| Distributions tostockholders                                     |  |                           | — |    |
| Net loss forperiod                                               |  |                           | (4,525  | )  |
| Balance at end ofperiod                                          |  |                           | (43,002 | )  |
|                                                             |  |
| **Totalshareholders'equity**                                     |  | $                              | 485,680 |    |
|                                                                  |

Theaccompanying notes are an integral part of these unaudited condensedconsolidated financial statements

5

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QUANTA CAPITAL HOLDINGS LTD. UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited;expressed in thousands of U.S.dollars)

|                                                                                    |  |                           |          |               |  |        |         |         |  |  |
|------------------------------------------------------------------------------------|--|---------------------------|----------|---------------|--|--------|---------|---------|--|--|
|                                                                               |  | ThreeMonths EndedMarch31, |
|                                                                               |  | 2004                      |          | 2003          |
|                                                                               |  |                      |          | (Predecessor) |
| **Cashflows from operating activities**                                            |  |
| Net (loss)income                                                                   |  | $                         | (4,525   | )        |  | $      | 424     |    |
| **Adjustmentsto reconcile net income to net cash provided by operatingactivities** |  |
| Depreciation of property andequipment                                              |  |                      | 202      |          |  |   | 53      |    |
| Amortization ofintangibles                                                         |  |                      | 185      |          |  |   | — |    |
| Amortizationof discounts oninvestments                                             |  |                      | 924      |          |  |   | — |    |
| Net realizedgains on sale ofinvestments                                            |  |                      | (1,195   | )        |  |   | — |    |
| Netchange in fair value of derivativeinstruments                                   |  |                      | 50       |          |  |   | — |    |
|                                                                               |  |
| Changesin assets and liabilities:                                                  |  |
| Accruedinvestmentincome                                                            |  |                      | (1,189   | )        |  |   | — |    |
| Premiums andother accountsreceivable                                               |  |                      | (72,012  | )        |  |   | — |    |
| Lossesand loss adjustment expensesrecoverable                                      |  |                      | (153     | )        |  |   | — |    |
| Deferredacquisitioncosts                                                           |  |                      | (16,862  | )        |  |   | — |    |
| Deferredreinsurancepremiums                                                        |  |                      | (5,776   | )        |  |   | — |    |
| Otheraccountsreceivable                                                            |  |                      | 1,341    |          |  |   | 2,316   |    |
| Otherassets                                                                        |  |                      | 569      |          |  |   | 166     |    |
| Reserve for lossesand loss adjustmentexpenses                                      |  |                      | 16,048   |          |  |   | — |    |
| Unearnedpremiums                                                                   |  |                      | 90,942   |          |  |   | — |    |
| Environmentalliabilitiesassumed                                                    |  |                      | (150     | )        |  |   | — |    |
| Reinsurancebalancespayable                                                         |  |                      | 4,943    |          |  |   | — |    |
| Accountspayable and accruedexpenses                                                |  |                      | (7,740   | )        |  |   | (1,170  | )  |
| Deferredincome and otherliabilities                                                |  |                      | 2,383    |          |  |   | 172     |    |
| Netcash provided by operatingactivities                                            |  |                      | 7,985    |          |  |   | 1,961   |    |
| **Cashflows used in investing activities**                                         |  |
| Proceeds fromsale of fixed maturities and short-terminvestments                    |  |                      | 281,584  |          |  |   | — |    |
| Purchasesof fixed maturities and short-terminvestments                             |  |                      | (293,619 | )        |  |   | — |    |
| Purchasesof property andequipment                                                  |  |                      | (829     | )        |  |   | (19     | )  |
| Netcash used in investingactivities                                                |  |                      | (12,864  | )        |  |   | (19     | )  |
| **Cashflows used in financing activities**                                         |  |
| Distributionstoshareholders                                                        |  |                      | —  |          |  |   | (800    | )  |
| Repaymentof notespayable                                                           |  |                      | —  |          |  |   | (2      | )  |
| Repayment ofcapital leaseobligations                                               |  |                      | —  |          |  |   | (1      | )  |
| Net offeringcosts                                                                  |  |                      | (32      | )        |  |   | — |    |
| Netcash used in financingactivities                                                |  |                      | (32      | )        |  |   | (803    | )  |
| (Decrease)increase in cash and cashequivalents                                     |  |                      | (4,911   | )        |  |   | 1,139   |    |
| Cash andcash equivalents at beginning ofperiod                                     |  |                      | 47,251   |          |  |   | 73      |    |
| Cashand cash equivalents at end ofperiod                                           |  | $                         | 42,340   |          |  | $      | 1,212   |    |
|                                                                                    |

Theaccompanying notes are an integral part of these unaudited condensedconsolidated financialstatements

6

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QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

|          |                                                  |
|----------|--------------------------------------------------|
| 1.  | Descriptionof business and basis of presentation |

Quanta Capital HoldingsLtd. ("Quanta Holdings"), incorporated on May23, 2003, is a holding company organized under the laws of Bermuda.Quanta Holdings and its subsidiaries (collectively referred to as the"Company") were formed to provide specialtyinsurance, reinsurance, risk assessment and risk consulting servicesand products on a global basis. Quanta Holdings conducts its insuranceand reinsurance operations principally through subsidiariesincorporated in Bermuda and the United States of America.

Interim financial information

The accompanyingunaudited condensed financial statements have been prepared inconformity with generally accepted accounting principles in the UnitedStates of America ("GAAP") for interimfinancial information, and with the instructions for Form 10-Q andArticle 10 of Regulation S-X. Accordingly, certain information andfootnote disclosures normally included in financial statements preparedin accordance with GAAP have been condensed, or omitted, pursuant tothe rules and regulations of the Securities and Exchange Commission. Inthe opinion of management, the statements include all adjustmentsnecessary (consisting of only normal and recurring accruals) for a fairstatement of the results of the interim periods presented. Results forthe three months ended March 31, 2004 are not necessarily indicative ofthe results that may be expected for any other interim period or forthe year ended December 31, 2004.

These financial statementsshould be read in conjunction with the Company's auditedconsolidated financial statements for the year ended December 31, 2003,included in the Registration Statement on Form S-1 filed by the Companywith the Securities and Exchange Commission on May 3, 2004(Registration No. 333-111535) in connection with the registration forresale of Quanta Holdings' common shares (the"Registration Statement").

Managementis required to make estimates and assumptions that affect the reportedamounts of assets and liabilities reported at the date of the unauditedcondensed consolidated financial statements and the reported amounts ofrevenues and expenses during the reporting period. While managementbelieves the amounts included in the unaudited condensed consolidatedfinancial statements reflect management's best estimates andassumptions, the actual results could ultimately be materiallydifferent from the amounts currently provided for in the unauditedcondensed consolidated financial statements. The Company'sprincipal estimates and assumptions relate to the development anddetermination of thefollowing:

|              |                       |
|--------------|-----------------------|
| •  | investmentvaluations; |

|              |                                                   |
|--------------|---------------------------------------------------|
| •  | certain estimated premiumswritten and receivable; |

|              |                                                  |
|--------------|--------------------------------------------------|
| •  | reserves forlosses and loss adjustment expenses; |

|              |                                                |
|--------------|------------------------------------------------|
| •  | thevaluation of goodwill and intangibleassets; |

|              |                                   |
|--------------|-----------------------------------|
| •  | environmental liabilitiesassumed; |

|              |                                       |
|--------------|---------------------------------------|
| •  | deferred income taxes andliabilities; |

|              |                                  |
|--------------|----------------------------------|
| •  | reinsurance balancesrecoverable. |

The unaudited historic condensed financialstatements for the three months ended March 31, 2003 have been derivedfrom the unaudited financial statements of the Company'spredecessor, Environmental Strategies Corporation("ESC").

Certain 2003 amounts havebeen reclassified to conform to the 2004 presentation.

7

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QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

|          |                                |
|----------|--------------------------------|
| 2.  | Significantaccounting policies |

During the three months ended March 31,2004, the Company entered into certain derivative instruments andadopted Statement of Financial Accounting Standards("SFAS") No. 133, "Accountingfor Derivative Instruments and Hedging Activities"("SFAS 133") and SFAS 149,"Amendment of Statement No. 133 on Derivative Instrumentsand Hedging Activities".

The Company generallyenters into investment related derivative transactions, as permitted byits investment guidelines, for the purposes of managing investmentduration, interest rate and foreign currency exposure, and enhancingtotal investment returns. The Company may also, as part of itsbusiness, enter into derivative instruments for the purpose ofreplicating approved investment, insurance or reinsurance transactionsthat meet the Company's investment or underwriting guidelines. Asof March 31, 2004, the Company carries within its available-for-salefixed maturity portfolio a mortality-risk-linked security for which therepayment of principal is dependent on the performance of a predefinedmortality index over a fixed period time. The Company has determinedthat the component of the bond that is linked to the specifiedmortality index is, under SFAS 133, an embedded derivative that is notclearly and closely related to its host contract (a debt security) andis therefore bifurcated and accounted for as a derivative underSFAS133. The Company has not designated any of its derivativeinstruments as hedging instruments.

The Company recognizes allstandalone derivative instruments as either other assets or liabilitiesand recognizes its embedded derivatives as part of their hostinstruments in the condensed consolidated balance sheet. The Companymeasures all derivative instruments at their fair values, which arebased on market prices and data provided by independent third parties.When market data is not readily available, the Company uses analyticalmodels to estimate the fair values of these instruments based on theirstructure, terms and conditions and prevailing market conditions. TheCompany recognizes changes in the fair value of derivative instrumentsin its unaudited condensed consolidated statement of operations andcomprehensive income as part of other income in the period in whichsuch changes occur. Given the nature of derivative instruments and theestimates used in estimating their fair value, changes in the fairvalue of derivative instruments and realized gains and losses onsettled derivative instruments may create significant volatility in theCompany's results of operations in future periods.

Adetailed discussion and analysis of the Company's othersignificant accounting policies is provided in the notes to theCompany's audited financial statements for the year endedDecember 31, 2003 included in the Registration Statement.

|          |                          |
|----------|--------------------------|
| 3.  | Stock-based compensation |

Employeestock awards under the Company's long term incentive compensationplan are accounted for in accordance with Accounting Principles BoardOpinion No. 25, "Accounting for Stock Issued toEmployees" and related interpretations ("APB25"). Compensation expense for stock options andstock-based awards granted to employees is recognized using theintrinsic value method to the extent that the fair value of the stockexceeds the exercise price of the option at the measurement date. Anyresulting compensation expense is recorded over the shorter of thevesting or service period.

The Company provides the disclosureas set forth in SFAS No. 123, "Accounting for Stock-BasedCompensation" ("SFAS 123"),which requires compensation expense for employee stock options to bemeasured as the fair value of the options at their grant date andrecorded over the shorter of the vesting or serviceperiod.

8

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QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

The following table summarizes theCompany's stock-based compensation, net income and earnings pershare for the three months ended March 31, 2004 had the Company electedto recognize compensation cost based on the fair value of the optionsgranted at the grant date as prescribed by SFAS123.

|                                                                                         |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------|--|--------|---------|---------|--|--|
| **Stockcompensation expense**                                                           |  |
| Asreported                                                                              |  | $      | — |    |
| Total stock-based employeecompensation expense determined under fair value based method |  |   | 614     |    |
| Pro forma                                                                               |  | $      | 614     |    |
| **Netloss**                                                                             |  |
| As reported                                                                             |  | $      | (4,525  | )  |
| Total stock-based employee compensationexpense determined under fair value based method |  |   | (614    | )  |
| Proforma                                                                                |  | $      | (5,139  | )  |
| **Basicand diluted loss per share**                                                     |  |
| Asreported.                                                                             |  | $      | (0.08   | )  |
| Pro forma                                                                               |  | $      | (0.09   | )  |
|                                                                                         |

In accordance with SFAS 123, the fairvalue of options granted is estimated on the date of the grant usingthe Black-Scholes option-pricing model with the following weightedaverage assumptions: a dividend yield of 0%; expected volatilityof 24.0%; a risk-free interest rate of 3.73% and anexpected life of the options of approximately 7years.

|          |                       |
|----------|-----------------------|
| 4.  | Recent pronouncements |

InDecember 2003, the Financial Accounting Standards Board("FASB") issued Interpretation No. 46(revised December 2003) ("FIN 46R"),"Consolidation of Variable InterestEntities." In general, a variable interest entity("VIE") is a corporation, partnership, trust,or any other legal structure used for business purposes that either (a)does not have equity investors with voting rights or (b) has equityinvestors that do not provide sufficient financial resources for theentity to support its activities. FIN 46R requires certain VIEs to beconsolidated by the primary beneficiary of the VIE if the equityinvestors do not have the characteristics of a controlling financialinterest or do not have sufficient equity at risk for the entity tofinance its activities without additional subordinated financialsupport from other parties. FIN 46R has not had a material impact onthe Company's unaudited condensed consolidated results ofoperations or financial position.

In March 2004, the FASBEmerging Issues Task Force ("EITF") reached aconsensus on EITF issue 03-01, "The Meaning ofOther-Than-Temporary Impairment and Its Application to CertainInvestments." EITF 03-01 addresses the meaning of the term"other-than-temporary impairment" and itsapplication to the Company's investments in debt and equitysecurities. For the three months ended March 31, 2004, the Company didnot identify any securities with declines in value that were consideredto be other-than-temporary and the Company does not anticipate that theadoption of the new evaluation guidance of EITF 03-01, which will beeffective for the three months ended September 30, 2004, will have amaterial effect on the Company's results of operations, financialcondition or cash flows.

|          |                       |
|----------|-----------------------|
| 5.  | Derivativeinstruments |

The Company is exposed to potential loss on itsderivative activities from various market risks, and manages thesemarket risks based on guidelines established by management. Derivative

9

----

QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

instruments are carried at fair value withthe resulting realized and unrealized gains and losses recognized inincome in the period in which they occur. The change in fair value isincluded in other income in the unaudited condensed consolidatedstatement of operations.

The following table summarizes theseinstruments and the effect on net loss and comprehensive loss for thethree months ended March 31, 2004. The Company's predecessor didnot engage in derivative activities and, accordingly, there is nocomparative derivative financial information for the three months endedMarch 31,2003:

|                                                         |  |                                |     |                   |  |        |         |        |  |  |
|---------------------------------------------------------|--|--------------------------------|-----|-------------------|--|--------|---------|--------|--|--|
|                                                    |  | March31, 2004                  |
|                                                    |  | Net changein unrealized losses |     | Net realizedgains |
| Investmentderivatives                                   |  | $                              | (3  | )            |  | $      | 180     |   |
| Mortalitylinked embeddedderivatives                     |  |                           | (47 | )            |  |   | — |   |
| Netrealized and unrealized (losses) gains onderivatives |  | $                              | (50 | )            |  | $      | 180     |   |
|                                                         |

InvestmentDerivatives

The Company uses foreign currency forwardcontracts to manage its exposure to the effects of fluctuating foreigncurrencies on the value of certain of its foreign currency denominatedfixed maturity investments. These forward currency contracts are notdesignated as specific hedges for financial reporting purposes and,therefore, realized and unrealized gains and losses on these contractsare recorded in income in the period in which they occur. Thesecontracts generally have maturities of three months or less. As ofMarch 31, 2004 the net contractual amount of foreign currency forwardforeign contracts was $0, with a net fair market value of $38 and netunrealized gains of $38. For the three months ended March 31, 2004 netrealized gains on settled foreign currency forward contracts totaledapproximately $150.

During the three months ended March 31,2004, the Company utilized other derivative instruments such as swapsand options and recognized net realized gains on these instruments ofapproximately $30. The Company recorded approximately $15 in netunrealized losses on these investment derivatives as of March 31, 2004,and recognized, in the unaudited condensed consolidated statement ofoperations, approximately $3 of net changes in unrealized losses forthe three months ended March 31, 2004.

Mortalitylinked embedded derivative

The Company holds within itsavailable-for-sale fixed maturity portfolio a mortality-risk-linkedsecurity for which the repayment of principal is dependent on theperformance of a specified mortality index over a fixed period of time.The Company has concluded that the component of the bond that is linkedto the mortality index is an embedded derivative and estimates the fairmarket value of this index linked embedded derivative using ananalytical model that considers the security's term, rating,current market conditions, and structural risk. As of March 31, 2004,the estimated fair value of the embedded derivative was $618 and isrecognized at fair value and included within investments in theunaudited condensed consolidated balance sheet. During the three monthsended March 31, 2004, the Company recorded $47 in unrealized lossesassociated with the change in the fair value of the embeddedderivative.

10

----

QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

|          |             |
|----------|-------------|
| 6.  | Reinsurance |

The effect of reinsurance activity on premiums written, premiumsearned and losses and loss expenses incurred for the three months endedMarch 31, 2004 is shown below. The Company's predecessor did notengage in insurance or reinsurance business and, accordingly, nocomparative reinsurance financial information is provided for the threemonths ended March 31,2003.

|                                  |  |                 |         |                 |  |                                  |        |         |  |        |        |         |  |  |
|----------------------------------|--|-----------------|---------|-----------------|--|----------------------------------|--------|---------|--|--------|--------|---------|--|--|
| Threemonths ended March 31, 2004 |  | PremiumsWritten |         | Premiums Earned |  | Losses and LossExpenses Incurred |
| DirectInsurance                  |  | $               | 38,032  |            |  | $                                | 4,507  |    |  | $      | 2,328  |    |
| ReinsuranceAssumed               |  |            | 80,697  |            |  |                             | 23,226 |    |  |   | 13,720 |    |
| Ceded                            |  |            | (6,274  | )          |  |                             | (498   | )  |  |   | (153   | )  |
| Net                              |  | $               | 112,455 |            |  | $                                | 27,235 |    |  | $      | 15,895 |    |
|                                  |

TheCompany recorded reinsurance recoveries on losses and loss adjustmentexpenses incurred of approximately $153 relating to business cededduring the three months ended March 31, 2004.

|          |                    |
|----------|--------------------|
| 7.  | Earnings per share |

The followingtable sets forth the computation of basic and diluted earnings pershare for the three months ended March 31,2004.

|                                                          |  |        |            |         |  |        |
|----------------------------------------------------------|--|--------|------------|---------|--|--------|
| **Basicearnings per share**                              |  |   |       |    |  |   |   |   |
| Netloss                                                  |  | $      | (4,525     | )  |
| Weighted average common sharesoutstanding —basic   |  |   | 56,798,218 |    |  |   |   |   |
| Basicloss pershare                                       |  | $      | (0.08      | )  |  |   |   |   |
| **Dilutedearnings per share**                            |  |   |       |    |  |   |   |   |
| Netloss                                                  |  | $      | (4,525     | )  |  |   |   |   |
| Weighted averagecommon sharesoutstanding                 |  |   | 56,798,218 |    |  |   |   |   |
| Weightedaverage common shareequivalents                  |  |   |       |    |  |   |   |   |
|     Options                          |  |   | —    |    |
| Weightedaverage common shares outstanding —diluted |  |   | 56,798,218 |    |  |   |   |   |
| Dilutedloss pershare                                     |  | $      | (0.08      | )  |  |   |   |   |
|                                                          |

Due to netlosses for the three months ended March 31, 2004, the assumed netexercise, under the treasury stock method, of options and warrants hasbeen excluded, as the effect would have been anti-dilutive. For thethree months ended March 31, 2004, weighted average common sharesoutstanding exclude 2,871,400 options and 2,542,813 warrants, becausetheir effect is antidilutive.

11

----

QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

|          |                    |
|----------|--------------------|
| 8.  | Segmentinformation |

The following table summarizes the Company'soperating segment results before tax for each operating segment for thethree months ended March 31, 2004. For the three months ended March 31,2003, the Company's predecessor business was wholly allocated tothe consulting operating segment. As a result, a separate statement ofoperations by operating segment for the three months ended March 31,2003 is notprovided.

|                                             |  |                                         |         |             |  |            |         |                             |  |              |         |        |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------------|--|-----------------------------------------|---------|-------------|--|------------|---------|-----------------------------|--|--------------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                        |  | Forthe three months ended March 31,2004 |
| Statement of operations by operatingsegment |  | Insurance                               |         | Reinsurance |  | Consulting |         | Adjustmentsand eliminations |  | Consolidated |
| Grosspremiums written                       |  | $                                       | 38,032  |        |  | $          | 80,697  |                        |  | $            | — |   |  | $      | — |    |  | $      | 118,729 |    |
| Premiumsceded                               |  |                                    | (6,274  | )      |  |       | — |                        |  |         | — |   |  |   | — |    |  |   | (6,274  | )  |
| Netpremiumswritten                          |  | $                                       | 31,758  |        |  | $          | 80,697  |                        |  | $            | — |   |  | $      | — |    |  | $      | 112,455 |    |
| Netpremiums earned                          |  | $                                       | 4,009   |        |  | $          | 23,226  |                        |  | $            | — |   |  | $      | — |    |  | $      | 27,235  |    |
| Consultingrevenues                          |  |                                    | — |        |  |       | — |                        |  |         | 7,185   |   |  |   | (678    | )  |  |   | 6,507   |    |
| Otherincome                                 |  |                                    | — |        |  |       | — |                        |  |         | 159     |   |  |   | — |    |  |   | 159     |    |
| Netlosses and loss expenseincurred          |  |                                    | 2,175   |        |  |       | 13,720  |                        |  |         | — |   |  |   | — |    |  |   | 15,895  |    |
| Directconsultingcosts                       |  |                                    | — |        |  |       | — |                        |  |         | 4,384   |   |  |   | — |    |  |   | 4,384   |    |
| Acquisitionexpenses                         |  |                                    | 822     |        |  |       | 5,795   |                        |  |         | — |   |  |   | — |    |  |   | 6,617   |    |
| Generaland administrativeexpenses           |  |                                    | — |        |  |       | — |                        |  |         | 2,340   |   |  |   | — |    |  |   | 2,340   |    |
| Underwritingor net consultingincome         |  | $                                       | 1,012   |        |  | $          | 3,711   |                        |  | $            | 620     |   |  | $      | (678    | )  |  | $      | 4,665   |    |
| Generaland administrativeexpenses           |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  |   | 13,489  |    |
| Depreciationand amortization ofintangibles  |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  |   | 387     |    |
| Netinvestmentincome                         |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  |   | 3,235   |    |
| Netrealized gains oninvestments             |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  |   | 1,195   |    |
| Otherincome                                 |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  |   | 32      |    |
| Netforeign exchangegains                    |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  |   | 224     |    |
| **Netloss before incometaxes**              |  |                                    |    |        |  |       |    |                        |  |         |    |   |  |   |    |    |  | $      | (4,525  | )  |
|                                             |

Itemsof revenue and expense resulting from charges between operatingsegments are eliminated on consolidation of the segments. During thethree months ended March 31, 2004, the consulting segment charged theunderwriting segments $0.7 million for consulting servicesrendered.

12

----

QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

The following table summarizes theCompany's financial information by geographic location for thethree months ended March 31, 2004. For the three months ended March 31,2003, the Company's predecessor results of operations weregenerated entirely in the U.S. As a result, a separate statement ofoperations by geographic location for the three months ended March 31,2003 is notprovided.

|                                               |  |                                         |         |        |  |        |         |                             |  |              |         |         |  |        |          |         |  |        |         |         |  |  |
|-----------------------------------------------|--|-----------------------------------------|---------|--------|--|--------|---------|-----------------------------|--|--------------|---------|---------|--|--------|----------|---------|--|--------|---------|---------|--|--|
|                                          |  | Forthe three months ended March 31,2004 |
| Statement of operations by geographiclocation |  | Bermuda                                 |         | Europe |  | U.S.   |         | Adjustmentsand eliminations |  | Consolidated |
| Netpremiums earned                            |  | $                                       | 25,673  |   |  | $      | — |                        |  | $            | 1,562   |    |  | $      | —  |    |  | $      | 27,235  |    |
| Consultingrevenues                            |  |                                    | — |   |  |   | — |                        |  |         | 7,185   |    |  |   | (678     | )  |  |   | 6,507   |    |
| Netinvestmentincome                           |  |                                    | 3,001   |   |  |   | 1       |                        |  |         | 233     |    |  |   | —  |    |  |   | 3,235   |    |
| Netrealized gains oninvestments               |  |                                    | 1,080   |   |  |   | — |                        |  |         | 115     |    |  |   | —  |    |  |   | 1,195   |    |
| Netforeign exchangegains                      |  |                                    | 223     |   |  |   | — |                        |  |         | 1       |    |  |   | —  |    |  |   | 224     |    |
| Otherincome                                   |  |                                    | 28      |   |  |   | 432     |                        |  |         | 163     |    |  |   | (432     | )  |  |   | 191     |    |
| Totalrevenues                                 |  |                                    | 30,005  |   |  |   | 433     |                        |  |         | 9,259   |    |  |   | (1,110   | )  |  |   | 38,587  |    |
| Netlosses and loss expenseincurred            |  |                                    | 15,025  |   |  |   | — |                        |  |         | 870     |    |  |   | —  |    |  |   | 15,895  |    |
| Acquisitionexpenses                           |  |                                    | 6,233   |   |  |   | — |                        |  |         | 384     |    |  |   | —  |    |  |   | 6,617   |    |
| Directconsultingcosts                         |  |                                    | — |   |  |   | — |                        |  |         | 4,384   |    |  |   | —  |    |  |   | 4,384   |    |
| Generaland administrativeexpenses             |  |                                    | 5,394   |   |  |   | 543     |                        |  |         | 11,002  |    |  |   | (1,110   | )  |  |   | 15,829  |    |
| Depreciationandamortization                   |  |                                    | 72      |   |  |   | 3       |                        |  |         | 312     |    |  |   | —  |    |  |   | 387     |    |
| Totalexpenses                                 |  |                                    | 26,724  |   |  |   | 546     |                        |  |         | 16,952  |    |  |   | (1,110   | )  |  |   | 43,112  |    |
| **NetIncome (loss) before incometaxes**       |  | $                                       | 3,281   |   |  | $      | (113    | )                      |  | $            | (7,693  | )  |  | $      | —  |    |  | $      | (4,525  | )  |
| **Identifiable assets bygeographiclocation**  |  | $                                       | 639,404 |   |  | $      | 442     |                        |  | $            | 228,064 |    |  | $      | (216,930 | )  |  | $      | 650,980 |    |
|                                               |

Revenues,expenses, investments in and amounts due from affiliated entitiesacross geographic locations are eliminated on the consolidation of thegeographic results of operations and geographic identifiableassets.

|          |                                     |
|----------|-------------------------------------|
| 9.  | Goodwill and other intangibleassets |

The Company accounts for its goodwill and otherintangible assets in accordance with SFAS 142, "Goodwilland Other Intangible Assets" ("SFAS142"). Under the provisions of SFAS 142, goodwill andidentified intangible assets with indefinite useful lives are notsubject to amortization. Rather they are subject to impairment testingon an annual basis, or more often if events or circumstances indicatethat there may be impairment. Identified intangible assets that have afinite useful life are amortized over that life in a manner thatreflects the estimated decline in the economic value of the identifiedintangible asset and are reviewed for impairment when events orcircumstances indicate that there may be impairment. TheCompany's impairment evaluation as of December 31, 2003,indicated that none of its goodwill or other intangible assets wereimpaired.

The carrying amount of goodwill, which was related tothe Company's consulting operating segment, was $7.8 million asof, and for the three months ended, March 31, 2004.

The Companyrecorded $8.9 million of intangible assets representing its U.S.insurance licenses that are not subject to amortization as of March 31,2004.

13

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QUANTACAPITAL HOLDINGS LTD.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited; express in thousandsexcept for share and per shareamounts)

The following table summarizes the grosscarrying amount and accumulated amortization for each of theCompany's classes of intangible assets that are subject toamortization as of March 31,2004:

|                       |  |                      |       |                         |  |        |     |        |  |  |
|-----------------------|--|----------------------|-------|-------------------------|--|--------|-----|--------|--|--|
|                  |  | Grosscarrying amount |       | Accumulatedamortization |
| Customerrelationships |  | $                    | 4,400 |                    |  | $      | 321 |   |
| Non-competeagreements |  |                 | 570   |                    |  |   | 111 |   |
| Total                 |  | $                    | 4,970 |                    |  | $      | 432 |   |
|                       |

Theaggregate amortization expense of intangible assets subject toamortization was $0.4 million for the three months ended March 31,2004. The estimated amortization expense in each of the five yearssubsequent to December 31, 2003, is as follows (in thousands): 2004,$740; 2005, $740 million; 2006, $677; 2007, $550; and 2008,$550.

14

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|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| ITEM2.  | MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

The followingdiscussion and analysis of our financial condition and results ofoperations for the three months ended March 31, 2004, and of ourpredecessor, Environmental Strategies Corporation("ESC") for the three months ended March 31,2003, should be read in conjunction with our unaudited condensedconsolidated financial statements and related notes contained in thisForm 10-Q and the audited consolidated financial statements and relatednotes for the period from May 23, 2003 (date of incorporation) toDecember 31, 2003, as well as "Management'sDiscussion and Analysis of Financial Condition and Results ofOperations," including the discussions of criticalaccounting policies and of estimates and qualitative and quantitativedisclosures about market risk, contained in the RegistrationStatement.

We caution you that, because of our limited operatinghistory, our financial information is not indicative of the actualresults that we expect to achieve in future periods. In addition, thefinancial data of our predecessor presented below and relating to itsconsulting business is neither comparable with nor representative ofthe actual results that we expect to achieve in future periods as wecontinue to develop our core business lines relating to insurance andreinsurance. The consulting business of our predecessor is only a smallportion of our business and is not representative of the principalbusiness we are undertaking.

Safe Harbor Disclosure

ThePrivate Securities Litigation Reform Act of 1995 provides a"safe harbor" for forward-looking statements.Any written or oral statements made by or on our behalf may includeforward-looking statements. Statements using words such as"believes,""expects,""intends,""estimates,""projects,""predicts,""assumes,""anticipates,""plans," and"seeks" and comparable terms, areforward-looking statements. Forward-looking statements are notstatements of historical fact and reflect our views and assumptions asof the date of this report regarding future events and operatingperformance. Because we have a limited operating history, manystatements relating to us and our business, including statementsrelating to our competitive strengths and business strategies, areforward-looking statements.

All forward-looking statementsaddress matters that involve risks and uncertainties. There areimportant factors that could cause our actual results to differmaterially from those indicated in these statements. We believe thatthese factors include but are not limited to thefollowing:

|              |                                                                    |
|--------------|--------------------------------------------------------------------|
| •  | the risk that we may not beable to implement our businessstrategy; |

|              |                                                                                                                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | our lack of any operatinghistory and our present inability to start engaging in certaininsurance and reinsurance business because we have not established andobtained authorization of QuantaU.K.; |

|              |                                                                                                                           |
|--------------|---------------------------------------------------------------------------------------------------------------------------|
| •  | the ineffectiveness orobsolescence of our planned business strategy due to changes in currentor future market conditions; |

|              |                                                                                 |
|--------------|---------------------------------------------------------------------------------|
| •  | changes inregulation or tax laws applicable to us, our brokers or ourcustomers; |

|              |                                                             |
|--------------|-------------------------------------------------------------|
| •  | changes in the availability,cost or quality of reinsurance; |

|              |                                                                                                                                                                                                                                                                                                                                   |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | actualresults, changes in market conditions, the occurrence of catastrophiclosses and other factors outside our control that may require us toalter our anticipated methods of conducting our business, such as thenature, amount and types of risk we assume and the terms and limits ofthe products we write or intend towrite; |

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | our ability to hire, retain andintegrate our management team and otherpersonnel; |

|              |                                                |
|--------------|------------------------------------------------|
| •  | changes in rating agencypolicies or practices; |

15

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|              |                                                |
|--------------|------------------------------------------------|
| •  | changes inaccounting policies or practices;and |

|              |                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------|
| •  | changes in general economicconditions, including inflation, foreign currency exchange rates,interest rates and other factors. |

This list of factors is notexhaustive and should be read with the other cautionary statements thatare included in this report and under "RiskFactors" in the Registration Statement.

If one ormore of these or other risks or uncertainties materialize, or if ourunderlying assumptions prove to be incorrect, our actual results mayvary materially from our projections. Any forward-looking statementsyou read in this report reflect our current views with respect tofuture events and are subject to these and other risks, uncertaintiesand assumptions relating to, among other things, our operations,results of operations, growth strategy and liquidity. All subsequentwritten and oral forward-looking statements attributable to us orindividuals acting on our behalf are expressly qualified in theirentirety by this paragraph. You are cautioned not to place unduereliance on these forward-looking statements, which speak only as oftheir dates. We undertake no obligation to publicly update or reviewany forward-looking statement, whether as a result of new information,future events or otherwise.

Overview

General

Quanta Holdings was incorporated on May23, 2003 as a Bermuda holding company formed to provide specialty linesinsurance, reinsurance, risk assessment and risk consulting services ona global basis through its affiliated companies. Through our operatingsubsidiaries in Bermuda, Ireland and the U.S. and our U.K. branch, wefocus on writing coverage for specialized classes of property andcasualty insurance and reinsurance risks through a team of experiencedand technically qualified underwriters. We define specialty insuranceand reinsurance as those lines of business that are often unusual ordifficult to place and do not fit the underwriting criteria of standardcommercial product providers. Specialty lines of business requireextensive technical underwriting skills and risk assessment resourcesin order to be profitably underwritten. We believe that a fullydeveloped and well constructed portfolio of these specialty lines willproduce superior returns on our capital. We are using our Bermudaoperations primarily to insure U.S. risks from Bermuda on anon-admitted basis. We are also writing insurance and reinsurance inthe United States on an admitted basis through Quanta IndemnityCompany, which is a U.S. licensed insurer with licenses inapproximately 41 states. Further, we write insurance from the UnitedStates on an excess and surplus lines basis and U.S. reinsurance on anon-admitted basis through Quanta Specialty Lines Insurance Company. Weexpect to receive our European insurance license this summer and expectthat our European operations will begin to contribute to our results inthe latter half of 2004.

ESC is our predecessor company foraccounting and financial reporting purposes. ESC provides diversifiedenvironmental risk management services to assist customers inenvironmental remediation, regulatory analyses, technical support forenvironmental claims, merger and acquisition due diligence,environmental audits and risk assessments, and engineering andinformation management services. ESC is our platform for establishingour technical talent in the area of environmental insurance and otherspecialty insurance lines and provides risk evaluation services to ourunderwriters and to third parties on a fee for services basis.

We commenced substantive operations on September 3, 2003 and wrote asmall number of insurance and reinsurance contracts during the fourthquarter of 2003. During the period from January 1, 2004 to March 31,2004 we continued to grow and diversify our specialty lines ofbusiness, and we experienced a significant increase in the number ofinsurance and reinsurance contracts underwritten as we positionedourselves to take advantage of the first quarter renewal season in thereinsurance industry.

We generated approximately $112.5 millionof net premiums written, net of premiums ceded on reinsurance treatiespurchased, during the three months ended March 31, 2004 and recognized

16

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approximately $27.2 million of net premiumsearned. In addition to our net premiums written of $112.5 million, weexpect to generate an estimated $48.6 million of additional netpremiums written in future periods from reinsurance contracts enteredinto during the three months ended March 31, 2004.

During thefirst quarter of 2004, we capitalized on opportunities during the 2004renewal season in the reinsurance market as our insurance product linescontinued to ramp-up. During the remainder of 2004, we expect ourinsurance product lines will become an increasingly significantcontributor to our overall business. Because we only began to writeinsurance and reinsurance business during the fourth quarter of 2003,we believe that our net written premiums written and net premiumsearned will increase as we continue to develop and implement ourbusiness strategy and enter into more insurance and reinsurancecontracts. In addition, because we only recently started writinginsurance and reinsurance business, we believe that our portfolio isnot widely diversified either among classes of risks or source oforigination. We expect, but cannot assure you, that our portfolio willdiversify as it grows throughout the year. We expect to fully deployour available capital by the end of 2004.

In general, we believethat the market conditions in the insurance and reinsurance marketplacewere favorable during 2003. These market conditions included theability to charge higher premium rates than the market would bear in2001 and 2002 and a continuing demand for insurance and reinsuranceproducts from our target market that cannot be fully met by otherinsurers and reinsurers. While we believe that premium rate increasesare beginning to slow as compared to 2003 and that we are beginning tosee a weakening in premium pricing in excess property and casualtylines, we believe that favorable market conditions will generallycontinue in 2004. We will also continue to seek opportunities toprovide insurance and reinsurance in areas that require both capacityand highly technical underwriting expertise.

SegmentInformation

Our business is comprised of the followingthree segments:

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Insurance.    Our insurancesegment primarily offers corporate clients specialty insurance lines,which provide tailored solutions that respond to distinctivecharacteristics. In our insurance segment, we write professionalliability, marine, technical risk and aviation, environmentalliability, structured insurance, fidelity and crime, surety andtechnical risk property. These solutions may be offered to clients on atraditional or structured basis, or a combination of both. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Reinsurance.    Our reinsurancesegment primarily offers reinsurance products to insurance andreinsurance clients that provide solutions primarily on a treaty, butalso to a lesser extent on a facultative, quota share, per risk excess,clash or aggregate excess of loss basis. In our reinsurance segment, wewrite casualty and professional, property, marine, technical risk andaviation and structured reinsurance. These product lines may be writtenon a traditional or structured basis, or a combination of both. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Consulting.    Our consultingsegment provides diversified environmental investigation, remediationand engineering services, assessment services, other technical andinformation management services. We plan to expand the scope of ourconsulting services to provide risk assessment and evaluation servicesin other specialty insurance and claims areas. These consultingservices are currently provided to clients primarily in private sectorbusinesses in the United States. |

The determination of thesesegments was based on our methodology for monitoring the performance ofour insurance and reinsurance operations, which we collectively referto as our underwriting segments, and our risk consulting and managementoperations, which we refer to as our consulting segment. We evaluateeach segment based on its underwriting or consulting results, asapplicable, including items of revenue and expense that are associatedwith, and directly related to, each segment. We do not manage ourassets by segment and, as a result, net investment income is notevaluated at the segment level. We have not developed a methodology toallocate non-direct items of expense within our underwriting segments.Accordingly, general and administrative expenses, depreciation andamortization expense are not evaluated at the segment level.

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Results of Operations

Thefollowing is a discussion of our consolidated results of operations forthe three months ended March 31, 2004. Because we were incorporated onMay 23, 2003 and commenced substantive operations on September 3, 2003,comparisons to prior periods, including those of our predecessor, arenot meaningful except for a comparison of the results of operations ofour consulting segment. ESC is our predecessor for accounting purposesand its business is wholly attributable to the consulting segment.Accordingly, we compare the results of operations of ESC for the threemonths ended March 31, 2004 to the same period of the preceding yearwithin the discussion of our consulting segment under"Results by Operating Segments."

Three months ended March 31, 2004

Results ofoperations for the three months ended March 31, 2004 were asfollows:

|                                            |  |                |         |         |  |  |
|--------------------------------------------|--|----------------|---------|---------|--|--|
|                                       |  | ($inthousands) |
| **Revenues**                               |  |           |    |    |
| Grosspremiums written                      |  | $              | 118,729 |    |
| Netpremiumswritten                         |  | $              | 112,455 |    |
| Netpremiums earned                         |  | $              | 27,235  |    |
| Consultingrevenues                         |  |           | 6,507   |    |
| Net investmentincome                       |  |           | 3,235   |    |
| Net realized gains on sale ofinvestments   |  |           | 1,195   |    |
| Net foreign exchangegains                  |  |           | 224     |    |
| Otherincome                                |  |           | 191     |    |
| Totalrevenues                              |  |           | 38,587  |    |
| **Expenses**                               |  |           |    |    |
| Netlosses and loss expenses                |  |           | 15,895  |    |
| Acquisitionexpenses, net                   |  |           | 6,617   |    |
| Direct consultingcosts                     |  |           | 4,384   |    |
| General and administrativeexpenses         |  |           | 15,829  |    |
| Depreciation andamortization ofintangibles |  |           | 387     |    |
| Totalexpenses                              |  |           | 43,112  |    |
| Incometaxes                                |  |           | — |    |
| Netloss                                    |  | $              | (4,525  | )  |
| Comprehensiveloss                          |  | $              | (1,771  | )  |
|                                            |

Totalrevenues.    Total revenues of $38.6 million were comprised ofnet premiums earned of $27.2 million, consulting revenues of $6.5million, total investment income of $4.6 million, including netrealized gains on sale of investments of $1.2 million, and other incomeof $0.2 million. Consulting revenues were derived from the operationsof ESC. Substantially all other revenues were generated by ourunderwriting subsidiaries in the U.S and Bermuda.

Premiums.    We commenced writing insurance and reinsurancebusiness during the fourth quarter of 2003 and we were well positionedto fully commence underwriting operations by the beginning of 2004.Gross premiums written and premiums ceded were $118.7 million and $6.3million for the three months ended March 31, 2004. Our reinsurancesegment capitalized on the reinsurance opportunities during the 2004renewal season and generated $80.7 million of our gross and netpremiums written. Our insurance segment generated $38.0 and $31.7million of gross and net premiums written due in part to solid growthin U.S. insurance business. We expect that our reinsurance andinsurance gross and net premiums written will grow as we furtherexecute our business strategies.

During the three months endedMarch 31, 2004, we entered into reinsurance treaties for each of ourinsurance product lines in order to limit our net loss exposures to ourplanned net limits and to 

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control our aggregate exposures to particularclasses of risk. These reinsurance treaties provide us with reinsuranceprotection on either a quota share, excess of loss treaty orfacultative basis for policies written in our insurance product linesof business. We ceded $6.3 million of premium under these treatiesduring the three months ended March 31, 2004.

Net premiumsearned in the three months ended March 31, 2004 were $27.2 millionreflecting the earning of premiums on contracts written during thethree months ended March 31, 2004 and during the fourth quarter of2003. We expect that our net premiums earned will increase in futureperiods as we enter into more insurance and reinsurance contracts. Ournet premiums written are typically earned over the risk periods of theunderlying insurance policies which are generally twelve months.Because we do not have twelve months of operating history, we believethat our net premiums earned are not yet representative of a fullydeveloped portfolio of insurance and reinsurance contracts.

Consulting revenues.    For the three months ended March31, 2004, consulting revenues were $6.5 million and consisted of $3.3million from direct labor and $3.2 million from subcontractor relatedactivities.

Net investment income and net realizedgains.    Net investment income and net realized gains totaled$4.4 million for the three months ended March 31, 2004. Net investmentincome was $3.2 million and was derived primarily from interest earnedon fixed maturity investments and short term investments, partiallyoffset by investment management fees. Our average annualized effectiveyield (calculated by dividing net investment income by the averageamortized cost of invested assets, net of amounts payable or receivablefor investments purchased or sold) was approximately 2.7% forthe period from January 1, 2004 to March 31, 2004. Net realized gainsof $1.2 million were generated primarily from the sale of fixedmaturity securities as we sought to enhance our total investmentreturns and manage the duration of our investment portfolios.

Asof March 31, 2004, the average duration of our investment portfolio wasapproximately 2.5 years with an average credit rating of approximately"AA".

Totalexpenses.    Total expenses were $43.1 million for the threemonths ended March 31, 2004 and were comprised of net losses and lossexpenses incurred of $15.9 million, net acquisition expenses of $6.6million, direct consulting costs of $4.4 million, general andadministrative expenses of $15.8 million and depreciation andamortization of $0.4 million.

Net losses and lossexpenses.    Net losses and loss expenses incurred were $15.9million for the three months ended March 31, 2004, and were a functionof our net premiums earned and expected ultimate losses and lossexpenses contracts of insurance and reinsurance underwritten. As ofMarch 31, 2004 we had not been notified of any specific significantincurred losses. However, we participate in lines of business whereclaims may not be reported for some period of time after those claimsare incurred. Therefore, we have continued to use expected loss ratiosestablished by our actuaries as our primary loss reserving methodology.Our total net loss ratio (calculated by dividing net losses and lossexpenses incurred by net premiums earned) was 58.4% for thethree months ended March 31, 2004.

Acquisitionexpenses.    Net acquisition expenses for the three months endedMarch 31, 2004, were $6.6 million and were a function of the number ofinsurance and reinsurance contracts we entered into and the associatednet premiums earned. Our total net acquisition cost ratio (calculatedby dividing net acquisition costs by net premiums earned) for the threemonths ended March 31, 2004 was 24.3%. Deferred acquisitioncosts include, as of March 31, 2004, $23.5 million of acquisitionexpenses on written contracts of insurance and reinsurance that will byamortized in future periods as the premiums written to which theyrelate are earned.

Direct consulting costs.    Directconsulting costs totaled $4.4 million and were comprised ofsubcontractor and direct labor expenses at ESC. Direct consultingcosts, as a percentage of consulting revenues was approximately68% for the period and was consistent with direct consultingcosts as a percentage of consulting revenues realized by ESC in priorperiods.

General and administrativeexpenses.    General and administrative expenses were $15.8million for the three months ended March 31, 2004 and were comprised of$11.1 million of personnel related 

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expenses and $4.7 million of other generaland administrative expenses. General and administrative expensesinclude $13.5 million related to our underwriting activities and $2.3million of expenses related to our consulting activities. Our generaland administrative expense ratio (calculated by dividing underwritingrelated general and administrative expense by net premiums written) was12% for the three months ended March 31, 2004. We expect thatthis ratio will decrease during the remainder of 2004 as we continue toexpand our lines of business and increase our net premiums written andwe expect that it will stabilize as we grow our business.

Depreciation and amortization ofintangibles.    Depreciation and amortization of intangibles was$0.4 million for the three months ended March 31, 2004 and consisted ofamortization of intangible assets related to the acquisition of ESC anddepreciation of fixed assets.

Net loss.    Net loss was$4.5 million for the three months ended March 31, 2004 and was due tothe start up nature of our business and our recent entry into thespecialty insurance and reinsurance marketplaces. We have not recordedany net deferred income tax benefits or assets relating to taxoperating losses generated by our U.S. subsidiaries since our resultsof operations include a 100% valuation allowance against netdeferred tax assets. For the three months ended March 31, 2004, the netvaluation allowance charged to earnings was approximately $3.1million.

Comprehensive loss.    Comprehensive loss was$1.8 million for the three months ended March 31, 2004 and was largelycomprised of the net loss of $4.5 million described above and anincrease in net unrealized gains on investments of $2.7 million.

Results by Operating Segments

    Underwriting

Three months ended March 31, 2004

We principallyprovide insurance and reinsurance protection for risks that are oftenunusual or difficult to place, that do not fit the underwritingcriteria of standard commercial product carriers and that requireextensive technical underwriting and assessment resources in order tobe profitably underwritten. Our underwriting objective is to deploycapital to what we believe are the most attractive lines of business atthe most opportune times in order to maximize our risk-adjusted returnson capital. We measure the performance of our insurance and reinsurancebusiness units on the basis of net underwriting income and a number offinancial ratios. Net underwriting income is the sum of net premiumsearned less net losses and loss expenses incurred, acquisition expensesand allocated general and administrative expenses. The financial ratioswe use include the net loss and loss expense ratio, the acquisitionexpense ratio and the general and administrative expense ratio. Our netloss and loss expense ratio is calculated as losses and loss expensesincurred divided by net premiums earned. Our acquisition expense ratiois calculated by dividing net acquisition expenses by net premiumsearned and our general and administrative expense ratio is calculatedby dividing underwriting related general and administrative expenses bynet premiums written. Our combined ratio is the aggregate of our lossand loss expense, acquisition expense and general and administrativeexpense ratios and measures our overall underwriting profitability. Acombined ratio of less than 100% indicates an underwritingprofit and over 100%, an underwriting loss. As a newly formedcompany, our combined ratio may be subject to significant volatilityand may not be indicative of future profitability.

We have notdeveloped a methodology to allocate indirect general and administrativeexpenses between each of our underwriting segments, accordingly generaland administrative expenses and the general and administrative expenseratio are presented for our underwriting segments in theaggregate.

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The following table summarizes our netunderwriting results and profitability measures for our insurance andreinsurance business units for the three months ended March 31,2004:

|                                        |  |                 |        |             |  |                   |         |         |  |        |         |         |  |  |
|----------------------------------------|--|-----------------|--------|-------------|--|-------------------|---------|---------|--|--------|---------|---------|--|--|
|                                   |  | Insurance       |        | Reinsurance |  | Totalunderwriting |
|                                   |  | ($ inthousands) |
| Gross premiumswritten                  |  | $               | 38,032 |        |  | $                 | 80,697  |    |  | $      | 118,729 |    |
| Premiumsceded                          |  |            | (6,274 | )      |  |              | — |    |  |   | (6,274  | )  |
| Netpremiumswritten                     |  | $               | 31,758 |        |  | $                 | 80,697  |    |  | $      | 112,455 |    |
| Netpremiumsearned                      |  | $               | 4,009  |        |  | $                 | 23,226  |    |  | $      | 27,235  |    |
| Lossesand loss expenseincurred         |  |            | (2,175 | )      |  |              | (13,720 | )  |  |   | (15,895 | )  |
| Acquisitionexpenses                    |  |            | (822   | )      |  |              | (5,795  | )  |  |   | (6,617  | )  |
| Generaland administrativeexpenses      |  |            |   |        |  |              |    |    |  |   | (13,489 | )  |
| Netunderwriting income(loss)           |  | $               | 1,012  |        |  | $                 | 3,711   |    |  | $      | (8,766  | )  |
| Ratios:                                |  |            |   |        |  |              |    |    |  |   |    |    |
| Lossand loss expenseratio              |  |            | 54.3   | %      |  |              | 59.1    | %  |  |   | 58.4    | %  |
| Acquisitionexpenseratio                |  |            | 20.5   | %      |  |              | 25.0    | %  |  |   | 24.3    | %  |
| Generaland administrative expenseratio |  |            |   |        |  |              |    |    |  |   | 12.0    | %  |
| Combinedratio                          |  |            |   |        |  |              |    |    |  |   | 94.7    | %  |
|                                        |

Insurance

Our insurance segment includes the following product lines:professional liability, marine, technical risk and aviation,environmental liability, structured insurance, fidelity and crime,surety and technical risk property. For the three months ended March31, 2004 we did not write any surety, structured or technical riskproperty insurance business.

Premiums.    Gross writtenpremiums were $38.0 million for the three months ended March 31, 2004.The table below shows gross written premiums by productline:

|                                    |  |                |        |        |  |  |
|------------------------------------|--|----------------|--------|--------|--|--|
|                               |  | ($inthousands) |
|                               |  |           |   |   |
| Environmentalliability             |  | $              | 10,196 |   |
| Professionalliability              |  |           | 4,205  |   |
| Marine, technical risk andaviation |  |           | 22,040 |   |
| Fidelity andcrime                  |  |           | 1,591  |   |
| Total                              |  | $              | 38,032 |   |
|                                    |

Weceded $6.3 million premiums under the reinsurance treaties we purchasedfor each of our insurance product lines. Gross premiums written andceded premiums are earned over the period of each insured risk. Theterms of our insurance contracts range from between one and ten years.Net premiums earned of $4.0 million represent the earning of premiumswritten in 2003 and the earning and amortization of premiums writtenand ceded during the three months ended March 31, 2004.

Losses and loss expenses.    Net losses and loss expensesincurred of $2.2 million reflect a loss ratio of 54.3%. For thethree months ended March 31, 2004, we adopted an expected loss and lossexpense ratio methodology to estimate our ultimate cost of losses. Thismethod multiplied premiums earned by an expected loss and loss expenseratio that was derived, for each line of business, from pricing data,industry data and from information provided by brokers and insureds. Asof March 31, 2004, we had not received any notifications of significantincurred losses in our insurance segment.

Acquisitionexpenses.    Acquisition expenses were $0.8 million or20.5% of net premiums earned for the three months ended March31, 2004. These acquisition expenses primarily represented brokeragefees, commission fees and premium tax expenses. Our acquisition expenseratio in the 

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insurance business segment was higher thanexpected because we wrote several marine, technical risk and aviationcontracts on a structured basis that required us to pay commission feesin excess of 20%. We expect commission expenses associated withthis structure will reduce during the third quarter of 2004.

Reinsurance

Our reinsurance segment includes thefollowing product lines: casualty, property, marine, technical risk andaviation and structured reinsurance. For the three months ended March31, 2004 we did not write any structured reinsurance business.

Premiums.    Gross and net written premiums written in ourreinsurance segment were $80.7 million for the three months ended March31, 2004. The table below shows gross written premiums by line ofbusiness:

|                                   |  |                |        |        |  |  |
|-----------------------------------|--|----------------|--------|--------|--|--|
|                              |  | ($inthousands) |
|                              |  |           |   |   |
| Casualty                          |  | $              | 20,325 |   |
| Property                          |  |           | 44,966 |   |
| Marine,technical risk andaviation |  |           | 15,406 |   |
| Total                             |  | $              | 80,697 |   |
|                                   |

Grossand net written premiums of $80.7 million reflect our increasingparticipation in the reinsurance marketplace and new accountsunderwritten during the 2004 renewal season for a number of key classesof business, particularly the crop and hail classes which accounted forapproximately 62% of our gross property reinsurance premiumswritten. We expect that this concentration will decrease as we grow anddiversify our reinsurance business during the remainder of 2004. Grossreinsurance premiums written are being earned over the periods ofreinsured or underlying insured risks which are typically one year. Netpremiums earned of $23.2 million reflect the earning of premiums oncontracts written during the three months ended March 31, 2004 andduring the fourth quarter of 2003.

Losses and lossexpenses.    Net losses and loss expenses incurred were $13.7million for the three months ended March 31, 2004 and reflect a lossratio of 59.1%. For the three months ended March 31, 2004, weadopted an expected loss and loss expense ratio methodology to estimateour ultimate cost of reinsurance losses. This method multipliedpremiums earned by an expected loss and loss expense ratio that wasderived, for each underlying reinsurance contract, from pricing dataand information provided by brokers and ceding companies. As of March31, 2004, we had not received any significant notifications of incurredlosses on our reinsurance product lines.

Acquisitionexpenses.    Acquisition expenses were $5.8 million or25.0% of net premiums earned for the three months ended March31, 2004. These acquisition expenses primarily represented brokerageand ceding commissions.

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Consulting

Three monthsended March 31, 2004 and March 31, 2003

The followingtable summarizes and compares our net consulting results for the threemonths ended March 31, 2004 and March 31, 2003. These results weregenerated primarily by the operations of our predecessor,ESC.

|                                   |  |                   |       |               |  |        |         |        |  |  |
|-----------------------------------|--|-------------------|-------|---------------|--|--------|---------|--------|--|--|
|                              |  | ThreeMonths Ended |
|                              |  | March31, 2004     |       | March 31,2003 |
|                              |  | ($ inthousands)   |
| Consultingrevenues                |  | $                 | 7,185 |          |  | $      | 6,271   |   |
| Otherincome                       |  |              | 159   |          |  |   | — |   |
| Direct consultingcosts            |  |              | 4,384 |          |  |   | 3,673   |   |
| General andadministrativeexpenses |  |              | 2,340 |          |  |   | 2,129   |   |
| Netconsultingincome               |  | $                 | 620   |          |  | $      | 469     |   |
|                                   |

Consultingrevenues.    Consulting revenues increased $0.9 million, or15%, to $7.2 million for the period ended March 31, 2004compared to $6.3 million for the three months ended March 31, 2003. Theincrease in total revenues consists of a $0.3 million increase indirect labor revenue and a $0.6 million increase in subcontractorrevenue. Increased client spending on environmental projects that weredelayed or postponed in prior periods contributed to the increasedconsulting revenues during the first quarter of 2004. The majority ofthe $0.6 million increase in subcontractor revenue during the threemonths ended March 31, 2004 was the result of increased subcontractorremediation activity.

Other income.    Other incometotaled $0.2 million for the three months ended March 31, 2004 and wasprimarily generated from our liability assumption programs under whichwe assume specified environmental liabilities. This income representsfees earned relating to the remediation services performed. ESC had notengaged in environmental liability transfer activity during the threemonths ended March 31, 2003.

Direct consultingcosts.    Direct consulting costs increased $0.7 million, or19%, to $4.4 million for the period ended March 31, 2004compared to $3.7 million for the three months ended March 31, 2003. Theincrease in direct consulting costs was primarily attributable toincreased subcontractor expenses. The increase in subcontractor costsresulted from an increase in the number and change in the nature ofremediation projects undertaken during the period ended March 31, 2004.Direct consulting costs, as a percentage of revenue was 61% forthe period ended March 31, 2004, as compared to 59% for theperiod ended March 31, 2003. This increase in direct consulting costsas a percentage of revenues was primarily due to the increasedsubcontractor activity during this period.

General andadministrative expenses.    General and administrative expensesincreased by $0.2 million, or 10%, to $2.3 million during theperiod ended March 31, 2004 compared to $2.1 million for the threemonths ended March 31, 2003. The increase is primarily attributable toadditional remediation expenses associated with the environmentalliability assumption program, as discussed above.

Liquidity andCapital Resources

Quanta Holdings is organized as a Bermudaholding company, and as such, has no direct operations of its own. Ourassets consist of investments in our subsidiaries through which weconduct substantially all of our insurance, reinsurance and consultingoperations. As of March 31, 2004, we had subsidiary operations inBermuda, the United States and representative offices in Ireland andthe United Kingdom.

As a holding company, we will havecontinuing funding needs for general corporate expenses, the payment ofprincipal and interest on future borrowings, if any, taxes, and thepayment of other obligations. Funds to meet these obligations will comeprimarily from dividends, interest and other 

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statutorily permissible payments from ouroperating subsidiaries. The ability of our operating subsidiaries tomake these payments is limited by the applicable laws and regulationsof the domiciles in which the subsidiaries operate. These laws andregulations subject our subsidiaries to significant restrictions andrequire, among other things, that some of our subsidiaries maintainminimum solvency requirements and limit the amount of dividends thatthese subsidiaries can pay to us. These restrictions on the payment ofdividends to us by our insurance subsidiaries are described in moredetail in the Registration Statement.

Liquidityrequirements

Our principal cash requirements are expectedto be investments in our operating subsidiaries in other businesses andoperating subsidiaries, expenses to develop and implement our businessstrategy, capital expenditures, premiums ceded, losses and lossadjustment expenses and other policy holder benefits, brokerage andcommissions, the servicing of future borrowing arrangements, taxes andother operating expenses. The potential for a large claim under one ofour insurance or reinsurance contracts means that we may need to makesubstantial and unpredictable payments within relatively short periodsof time. While our board of directors currently does not intend todeclare dividends or make any other distributions to the shareholdersof Quanta Holdings, our board plans to periodically reevaluate ourdividend policy. Our cash requirements will also include the payment ofany future dividends to our shareholders if and when our board ofdirectors determines to change our dividend policy.

We expect tohire additional employees during the remainder of 2004. As a result, weanticipate that our cash requirements for the payment of annualsalaries and benefits for these employees will increase in futureperiods as compared to the three months ended March 31, 2004.

Asof March 31, 2004, our capital expenditures have not been material andrelated primarily to the purchase of information technology assets.During the remainder of 2004, we expect capital expendituresprincipally relating to information systems, furniture and fixtures andleasehold improvements to increase significantly.

In addition tothese liquidity requirements, under the purchase agreement with ESC, wewill be required to pay ESC's former shareholders an earn-outpayment if ESC achieves specified EBITDA targets. EBITDA generally isdefined to mean earnings before interest, taxes, depreciation andamortization. Under the earn-out arrangements, if EBITDA for thetwo-year period ending December  31, 2005 is $7.5 million orgreater, we will be required to pay an earn-out payment of $5.0million. If EBITDA is greater than $7.0 million and less than $7.5million, then we will be required to pay a pro rata portion of the $5.0million.

We operate a treasury function responsible for managingour investments, banking relationships, capital raising activitiesincluding equity and debt issues, our overall cash and liquiditypositions and the payment of dividends from subsidiaries. Oursubsidiaries are responsible for managing local cash and liquiditypositions.

Sources of cash

Our sources of cashconsist primarily of premiums written, proceeds from sales andredemptions of investment assets, investment income, reinsurancerecoveries, and, to a lesser extent, collections of receivables forconsulting services rendered to third parties. We or one or more of oursubsidiaries may also enter into a revolving bank credit facility witha syndicate of lenders, which also may be guaranteed by one or more ofour subsidiaries. We expect to use any revolving credit facility forgeneral corporate purposes and working capital requirements. We believethat any credit facility will require compliance with financialcovenants, such as a leverage ratio, consolidated tangible net worthand maintenance of ratings. Any credit facility will likely alsocontain covenants that require us to maintain our insurance ratings andrestrict activities of our subsidiaries, such as the incurrence ofadditional indebtedness, liens and dividends and other payments toQuanta Holdings. We currently have no commitment from any lender withrespect to a credit facility.

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We generated net operating cash flow ofapproximately $8.0 million during the three months ended March 31,2004, primarily related to premiums and investment income received andoffset by general and administrative expenses paid. During the sameperiod, we invested net cash of $12.0 million in our investment assetsand as of March 31, 2004 had net cash and cash equivalent balances of$42.3 million. Included in our cash and cash equivalents is $2.3million that is pledged as collateral for a letter of credit and $2.6million that is on deposit with U.S. state insurance departments. Ourcash flows from operations for the three months ended March 31, 2004provided us with sufficient liquidity to meet operating cashrequirements during that period.

Commitments

We did not make any significant capital expenditures during thequarter ended March 31, 2004. We currently expect our capitalexpenditures for 2004 to be less than $10 million.

The followingtable provides an analysis of our future annual contractual commitmentsunder operating lease agreements as of March 31,2004:

|                      |  |                 |        |        |  |  |
|----------------------|--|-----------------|--------|--------|--|--|
| Yearending March 31, |  | ($ inthousands) |
| 2005                 |  | $               | 3,869  |   |
| 2006                 |  |            | 3,857  |   |
| 2007                 |  |            | 3,826  |   |
| 2008                 |  |            | 3,561  |   |
| 2009                 |  |            | 2,519  |   |
| 2010andthereafter    |  |            | 26,704 |   |
| Total                |  | $               | 44,336 |   |
|                      |

Off-balancesheet arrangements

We have no off-balance sheet arrangementswith unconsolidated, special purposes entities.

Adequacy ofCapital

While insurance regulation differs by location, eachjurisdiction requires that minimum levels of capital be maintained inorder to write new insurance business. Factors that affect capitalrequirements generally include premium volume, the extent and nature ofloss and loss expense reserves, the type and form of insurance andreinsurance business underwritten and the availability of reinsuranceprotection from adequately rated retrocessionaires on terms that areacceptable to us.

In Bermuda and the United States, insurers andreinsurers are required to maintain certain minimum levels of capitaland risk-based capital, the calculation of which includes numerousfactors as specified by the respective insurance regulatory authoritiesand the related insurance regulations. We will capitalize our insuranceoperations in excess of the minimum regulatory requirements so that wemay maintain adequate financial ratings. Generally, a higher financialrating creates a higher demand for insurance products. A higherfinancial rating will enable us both to write more business and to bemore selective in the business we underwrite. Accordingly, allocationof capital sufficient to achieve business objectives is a criticalaspect of any insurance organization, particularly a start-up insuranceoperation such as ours.

We currently have sufficient capital andsurplus to meet regulatory and rating agency requirements at ourcurrent rating levels. Substantially all of our capital has beendistributed among our rated operating subsidiaries based on ourassessment of the levels of capital that we believe are prudent tosupport our expected levels of business, the applicable regulatoryrequirements, and the recommendations of the insurance regulatoryauthorities and rating agencies.

We may need to raise additionalfunds to further expand our business strategy, enter new business linesand manage our expected growth. The amount and timing of these capitalrequirements will 

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depend on many factors, including ourability to write new business successfully and to establish premiumrates and reserves at levels sufficient to cover losses. At this time,we are not able to quantify the amount of additional capital we willrequire in the future or predict the timing of our future capitalneeds. As described above, we or one or more of our subsidiaries mayenter into a secured bank revolving credit facility with a syndicate oflenders. Any future equity or debt financing, if available at all, maybe on terms that are not favorable to us. If we raise capital throughequity financings, your interest in our company will be diluted, andthe securities we issue may have rights, preferences and privilegesthat are senior to those of the shares that are currently issued andoutstanding. If we cannot maintain or obtain adequate capital to manageour business strategy and expected growth targets, our business,results of operations and financial condition may be adverselyaffected.

ESC generally is required to fund implementation ofprojects for its customers prior to receipt of related fee revenues.Historically, ESC's positive cash flows generated from operationsand its available credit facility have provided adequate liquidity tofund its operations.

Posting of Security by Our Non-U.S.Operating Subsidiaries

Our Bermuda, United Kingdom, and Irishoperating subsidiaries are not licensed, accredited or otherwiseapproved as reinsurers anywhere in the United States. Many U.S.jurisdictions do not permit insurance companies to take credit on theirU.S. statutory financial statements for reinsurance to cover unpaidliabilities, such as loss and loss adjustment expense and unearnedpremium reserves, obtained from unlicensed or non-admitted insurerswithout appropriate security acceptable to U.S. insurancecommissioners. Typically, this type of security will take the form of aletter of credit issued by an acceptable bank, the establishment of atrust, funds withheld or a combination of these elements.

As ofMarch 31, 2004, we had $18.7 million of secured letters of creditoutstanding under facility agreements entered into with commercialbanks. We are negotiating a secured bank letter of credit facility witha syndicate of lenders. However, we currently have no commitment fromany lender with respect to a credit facility and we cannot assure youthat we will be able to maintain existing or obtain additional creditfacilities at terms acceptable to us. If we fail to maintain adequateletter of credit facilities, and are unable to otherwise provide thenecessary security, U.S. insurance companies may be less willing topurchase our reinsurance products, which could have a material adverseeffect on our results of operations. We believe that any letter ofcredit facility will require compliance with financial covenants, suchas a leverage ratio and consolidated tangible net worth. Any creditfacility will likely also contain covenants that require us to maintainour insurance ratings and restrict the activities of our subsidiaries,such as the incurrence of additional indebtedness, liens and dividendsand other payments to Quanta Holdings.

Ratings

Ratingsby independent agencies are an important factor in establishing thecompetitive position of insurance and reinsurance companies and areimportant to our ability to market and sell our products. Ratingorganizations continually review the financial positions of insurers.S&P maintains a letter scale rating system ranging from"AAA" (Extremely Strong) to"R" (under regulatory supervision). A.M. Bestmaintains a letter scale rating system ranging from"A++" (Superior) to"F" (in liquidation). The objective ofS&P and A.M. Best's ratings systems is to provide an opinionof an insurer's or reinsurer's financial strength andability to meet ongoing obligations to its policyholders. These ratingsreflect our ability to pay policyholder claims and are not applicableto our securities, nor are they a recommendation to buy, sell or holdour shares. These ratings are subject to periodic review by, and may berevised or revoked at the sole discretion of, S&P and A.M.Best.

We have received a rating of"A–" (excellent) from A.M. Best, whichis the fourth highest of fifteen rating levels and indicates A.M.Best's opinion of our financial strength and ability to meetongoing obligations to our future policyholders. We cannot assure youthat we will be able to maintain this rating. A significant ratingsdowngrade would result in a substantial loss of business and business

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opportunities as insureds and cedingcompanies purchase insurance from companies with higher claims-payingand financial strength ratings instead of from us.

CriticalAccounting Policies and Estimates

Our management makes certainjudgments, estimates and assumptions in the application of accountingpolicies used to determine inherently subjective amounts reported inour condensed consolidated financial statements. If management usesdifferent assumptions and estimates than it currently does, it couldproduce materially different estimates of the reported amounts. For adetailed discussion of our critical accounting policies, judgments,estimates and assumptions management uses please refer to theRegistration Statement. Other than as described below under"Derivative contracts", there were nosignificant changes in the application of our critical accountingpolicies and estimates subsequent to December 31, 2003.

Derivative contracts

During the three months endedMarch 31, 2004, we engaged in certain derivative related activities andadopted Statement of Financial Accounting Standards("SFAS") No. 133, "Accountingfor Derivative Instruments and Hedging Activities"("SFAS 133") and SFAS 149,"Amendment of Statement No. 133 on Derivative Instrumentsand Hedging Activities".

We primarily enter intoinvestment related derivative transactions, as permitted by ourinvestment guidelines, and typically for the purposes of managinginvestment duration, interest rate and foreign currency exposure, andenhancing total investment returns. We may also, as part of ourbusiness, enter into derivative transactions for the purpose ofreplicating approved investment, insurance or reinsurance transactionsthat meet our investment our underwriting guidelines. As of March 31,2004, we hold in our available-for-sale fixed maturity portfolio amortality-risk-linked security for which the repayment of principal isdependent on the performance of a specified mortality index. Thecomponent of the bond that is linked to the mortality index has beendetermined, under SFAS 133, to be an embedded derivative that is notclearly and closely related to its host contract (a debt security) andis therefore bifurcated and accounted for as a derivative underSFAS133. We have not designated any of our derivative instruments ashedging instruments.

We recognize all standalone derivativeinstruments as either other assets or liabilities and embeddedderivatives as part of their host instruments in our consolidatedbalance sheet and we measure all derivative instruments at their fairvalue. The fair values of derivative instruments are based on marketprices and data provided by independent third parties. When market datais not readily available, we use analytical models to estimate the fairvalues of these instruments based on their structure, terms andconditions and prevailing market conditions. We recognize changes inthe fair value of derivative instruments in our consolidated statementof operations in other income. Given the nature of derivativeinstruments and estimates used in estimating their fair value, changesin the fair value of derivatives and realized gains and losses onsettled derivative instruments may create significant volatility in ourresults of operations in futureperiods.

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ITEM3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk can be described as the risk of change in fair value ofa financial instrument due to changes in interest rates,creditworthiness, foreign exchange rates or other factors. We areexposed to potential loss from these factors. Our most significantfinancial instruments are our investment assets which consist primarilyof fixed maturity securities and cash equivalents that are denominatedin both U.S. and foreign currencies. External investment professionalsmanage our investment portfolios in accordance with our investmentguidelines. Our investment guidelines also permit our investmentmanagers to use derivative instruments in very limited circumstances.We will seek to mitigate market risks by a number of actions, asdescribed below.

Derivative Valuation Risk

Ourderivative policy permits the use of derivatives to manage ourportfolio's duration, yield curve, currency exposure, creditexposure; exposure to volatility and to take advantage ofinefficiencies in derivatives markets. We may also enter intoderivative transactions (i) to hedge capital market risks that may bepresent in our contracts of insurance or reinsurance and (ii) asreplication transactions which we define as a set of derivative,insurance and/or securities transactions that, when combined, producethe equivalent economic result of an investment security or insuranceor reinsurance contract that meets our investment or underwritingguidelines.

We utilize derivative instruments only when theterms and structure of the contracts are thoroughly understood and itstotal return profile and risk characteristics can be fully analyzed.Also, any single derivative or group of derivatives in the aggregatecannot create risk characteristics that are inconsistent with ouroverall risk profile and investment portfolio guidelines.

Foreign Currency Risk and Functional Currency

Ourfunctional currency is the U.S. dollar. Although we have notexperienced any significant net exposures to foreign currency risk, weexpect that in the future our exposure to market risk for changes inforeign exchange rates will be concentrated in our investment assets,premiums receivable and insurance reserves arising from known orprobable losses that are denominated in foreign currencies. We manageour foreign currency risk by maintaining assets denominated in the samecurrency or by entering into foreign currency forward derivativecontracts in an effort to hedge against movements in the value offoreign currencies against the U.S. dollar. A foreign currency forwardcontract results in an obligation to purchase or sell a specifiedcurrency at future date and price specified at the time of thecontract. Foreign currency forward contracts will not eliminatefluctuations in the value of our assets and liabilities denominated inforeign currencies but rather allow us to establish a rate of exchangefor a future point in time. We have not and do not expect to enter intosuch contracts with respect to a material amount of our assets orliabilities.

Our investment guidelines limit the amount of ourinvestment portfolio that may be denominated in foreign currencies to20% (as measured by market value). Furthermore, our guidelineslimit the amount of foreign currency denominated investments that canbe held without a corresponding hedge against the foreign currencyexposure to 5% (as measured by market value). As of March 31,2004, our investment portfolio included $15.5 million, or 3.2%of our total net invested assets, of securities that were denominatedin foreign currencies. These securities were rated AAA, weresubstantially hedged into U.S. dollars according to our investmentguidelines, and were purchased by our investment managers for thepurpose of improving overall portfolio yield.

Interest RateRisk

Our exposure to market risk for changes in interest ratesis concentrated in our investment portfolio. Our investment portfolioprimarily consists of fixed income securities. Accordingly, our primarymarket risk exposure is to changes in interest rates. Fluctuations ininterest rates have a direct impact on the market valuation of fixedincome securities. As interest rates rise, the market value of ourfixed-income portfolio falls, and the converse is also true.

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Our strategy for managing interest raterisk includes maintaining a high quality investment portfolio that isactively managed by our managers in accordance with our investmentguidelines in order to balance our exposure to interest rates with therequirement to tailor the duration, yield, currency and liquiditycharacteristics to the anticipated cash outflow characteristics ofclaim reserve liabilities. As of March 31, 2004, assuming parallelshifts in interest rates, the impact of an immediate 100 basis pointincrease in market interest rates on our net invested assets ofapproximately $466 million, excluding cash on hand, would have been anestimated decrease in market value of approximately $11.9 million, or2.6%, and the impact on our invested assets, excluding cash onhand, of an immediate 100 basis point decrease in market interest rateswould have been an estimated increase in market value of approximately$11.4 million, or 2.4%.

As of March 31, 2004, ourinvestment portfolio included AAA rated mortgage-backed securities witha market value of $71 million, or 14.5%, of net invested assets.As with other fixed income investments, the fair market value of thesesecurities fluctuates depending on market and other general economicconditions and the interest rate environment. Changes in interest ratescan also expose us to prepayment and extension risks on theseinvestments. In periods of declining interest rates, the frequency ofmortgage prepayments generally increase as mortgagees seek to refinanceat a lower interest rate cost. Mortgage prepayments result in the earlyrepayment of the underlying principal of mortgage-backed securitiesrequiring us to reinvest the proceeds at the then current market rates.When interest rates increase, these assets are exposed to extensionrisk, which occurs when holders of underlying mortgages reduce thefrequency on which they prepay the outstanding principal before thematurity date and delay any refinancing of the outstandingprincipal.

Credit Risk

We have exposure to credit riskprimarily as a holder of fixed income securities. This risk is definedas the default or the potential loss in market value resulting fromadverse changes in the borrower's ability to repay the debt. Ourrisk management strategy and investment policy is to invest in debtinstruments of high credit quality issuers and to limit the amount ofcredit exposure with respect to particular ratings categories and toany one issuer. We attempt to limit our overall credit exposure bypurchasing fixed income securities that are generally rated investmentgrade by Moody's Investors Service, Inc. and/or S&P. Ourinvestment guidelines require that the average credit quality of ourportfolio will typically be Aa3/AA– and that no more than5% of our investment portfolio's market value shall beinvested in securities rated below BBB–/Baa3. We also limitour exposure to any single issuer to 5% or less of ourportfolio's market value at the time of purchase, with theexception of U.S. government and agency securities. As of March 31,2004, the average credit quality of our investment portfolio was AA,and all fixed income securities held were investment grade. Inaddition, we held as part our investment portfolio $20.0 million in parvalue of variable rate mortality linked securities issued by a singleissuer which mature on January 1, 2007. We are subject to loss ofprincipal and interest in the event of the occurrence of certainchanges in a predefined mortality index. As of March 31, 2004, the fairvalue of the security was $20.1 million and represented approximately4% of our net invested assets.

We are also exposed to thecredit risk of our insurance and reinsurance brokers to whom we makeclaims payments for insureds and our reinsureds, as well as to thecredit risk of our reinsurers and retrocessionaires who assume businessfrom us. To mitigate the risk of nonpayment of amounts due under thesearrangements, we have established business and financial standards forreinsurer and broker approval, incorporating ratings by major ratingagencies and considering the financial condition of the counterpartyand the current market information.

Effects of Inflation

We do not believe that inflation has had a material affect on ourconsolidated results of operations. The effects of inflation couldcause the severity of claims to increase in the future. Our estimatesfor losses and loss expenses include assumptions, including thoserelating to inflation, about future payments for settlement of claimsand claims handling expenses. To the extent inflation causes

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these costs to increase above our estimatedreserves that are established for these claims, we will be required toincrease reserves for losses and loss expenses with a correspondingreduction in our earnings in the period in which the deficiency isidentified. The actual effects of inflation on our results cannot beaccurately determined until claims are ultimately settled.

ITEM4.    CONTROLS AND PROCEDURES

As of the end of the periodcovered by this report, our management, with the participation of ourChief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of the design and operation of our disclosure controlsand procedures as defined in Rule 13a-15 under the Securities ExchangeAct of 1934. Based upon that evaluation, our Chief Executive Officerand Chief Financial Officer concluded that our disclosure controls andprocedures are effective in allowing information required to bedisclosed in reports filed under the Securities and Exchange Acts of1934 to be recorded, processed, summarized and reported within timeperiods specified in the rules and forms of the Securities and ExchangeCommission.

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PARTII.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are not a party to any pending or threatened material litigationand are not currently aware of any pending or threatened materiallitigation other than routine legal proceedings that we believe are, inthe aggregate, not material to our financial condition and results ofoperations. In the normal course of business we may become involved invarious claims and legal proceedings.

|              |                                                                                 |
|--------------|---------------------------------------------------------------------------------|
| ITEM2.  | CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUERPURCHASES OF EQUITY SECURITIES |

During the quarter ended March31, 2004, the Company issued 26,000 options to purchase common stock tocertain employees. The Company believes that each transaction, ifdeemed to be a sale of a security, was exempt from the registrationrequirements of the U.S. Securities Act of 1933.

Thesetransactions were completed without registration of the relevantsecurity under the Securities Act of 1933, as amended, in reliance uponthe exemptions provided by Section 4(2) for transactions not involvinga public offering.

ITEM 6.    EXHIBITS AND REPORT ON FORM8-K

|           |          |
|-----------|----------|
| (a)  | Exhibits |

|            |                                                                                                                                                   |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1  | Certificationof the Chief Executive Officer required by Rule 13a-14(a) or Rule15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of2002. |

|            |                                                                                                                                                   |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2  | Certification of the Chief FinancialOfficer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant toSection 302 of the Sarbanes-Oxley Act of2002. |

|            |                                                                                                                                                     |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.1  | Certification of the Chief ExecutiveOfficer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002. |

|            |                                                                                                                                                    |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.2  | Certification of the Chief FinancialOfficer pursuant to 18 U.S.C Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002. |

|           |                     |
|-----------|---------------------|
| (b)  | Reports on Form 8-K |

The Company became a registrant on May 5, 2004. Accordingly, theCompany did not file any reports on Form 8-K during the three monthsended March 31, 2004.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

|                              |  |                                |  |  |  |  |
|------------------------------|--|--------------------------------|--|--|--|--|
|                         |  | **QuantaCapital HoldingsLtd.** |
| Date:May 14,2004             |  | /s/ TobeyJ. Russ               |
| Tobey J. Russ                |  |
| (PrincipalExecutiveOfficer)  |  |
|                         |  |                           |
|                         |  |                           |
| Date:May 14, 2004            |  | /s/ John S. Brittain,Jr.       |
| John S. Brittain,Jr.         |  |
| (Principal FinancialOfficer) |  |
|                              |

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INDEX TOEXHIBITS

|            |                                                                                                                                                   |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1  | Certification ofthe Chief Executive Officer required by Rule 13a-14(a) or Rule15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of2002. |

|            |                                                                                                                                                   |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2  | Certification of the ChiefFinancial Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuantto Section 302 of the Sarbanes-Oxley Act of2002. |

|            |                                                                                                                                                      |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.1  | Certification of the ChiefExecutive Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

|            |                                                                                                                                                    |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.2  | Certification of the Chief FinancialOfficer pursuant to 18 U.S.C Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002. |

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