================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                   FORM 10-K/A

                                 Amendment No. 1

                   For Annual and Transition Reports Pursuant
         to Sections 13 or 15(d) of the Securities Exchange Act of 1934

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                   For the fiscal year ended December 31, 2004

[ ]  Transition  Report  Pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934

                    For the Transition period from        to

                         Commission File Number 0-29788

                                   ----------

                            SCOTTISH RE GROUP LIMITED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            Cayman Islands                               98-0362785
    (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
    Incorporation or Organization)
       Crown House, Third Floor
          4 Par-la-Ville Road
        Hamilton HM12, Bermuda                         Not Applicable
(Address of Principal Executive Office)                  (Zip Code)

       Registrant's telephone number, including area code: (441) 295-4451

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                  Name of Each Exchange on Which
       Title of Each Class                                  Registered
Ordinary Shares, par value $0.01 per share            New York Stock Exchange
       Hybrid Capital Units                           New York Stock Exchange

           Securities Registered Pursuant to Section 12(g) of the Act:
                                      None

     Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

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

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of June 30, 2004 was $556,063,065. As of February 28, 2005,
Registrant had 39,991,745 ordinary shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain information required by Items 10, 11, 12, 13 and 14 of Form 10-K is
incorporated by reference into Part III hereof from the registrant's proxy
statement for its 2005 Annual Meeting of Shareholders, which is expected to be
filed with the Securities and Exchange Commission (the "SEC") within 120 days of
the close of the registrant's fiscal year ended December 31, 2004.
================================================================================


<PAGE>

                                EXPLANATORY NOTE

     Scottish Re Group Limited (the "Company") is filing this Amendment No. 1 on
Form 10-K/A to its Annual Report on Form 10-K for the year ended December 31,
2004 (the "Form 10-K") to replace the audit report of its independent registered
public accounting firm with an updated audit report. The original audit report
did not include the fifth paragraph referencing the independent registered
public accounting firm's opinion on management's assessment of the effectiveness
of internal controls over financial reporting. In addition, certain revisions
have been made to the language of the second paragraph of the audit report to
make reference to the Public Company Accounting Oversight Board. A revised audit
report referencing the independent registered public accounting firm's opinion
on management's assessment of the effectiveness of internal controls over
financial reporting is included as part of this amendment. Specifically, the
amendment includes the following required language as the fifth paragraph of the
audit report, which was inadvertently omitted from the audit report:

     "We also have audited, in accordance with the Standards of the Public
     Company Accounting Oversight Board (United States), the effectiveness of
     Scottish Re Group Limited's internal control over financial reporting as of
     December 31, 2004, based on criteria established in Internal
     Control--Integrated Framework issued by the Committee of Sponsoring
     Organizations of the Treadway Commission and our report dated March 11,
     2005, expressed an unqualified opinion on management's assessment and an
     adverse opinion on the effectiveness of internal control over financial
     reporting."

     Except as noted above, no other amendments to the audit report or any other
part of the Form 10-K (including the financial statements and the notes thereto)
are being made.


                                        2
<PAGE>

Item 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBITS

23.1 Consent of Ernst & Young LLP.

31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002.


                                        3
<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Scottish Re Group Limited

We have audited the accompanying consolidated balance sheets of Scottish Re
Group Limited and subsidiaries as of December 31, 2004 and 2003, and the related
consolidated statements of income, comprehensive income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
2004. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards required that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Scottish Re Group Limited and subsidiaries at December 31, 2004 and 2003, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles.

As discussed in Note 2 to the financial statements, in 2003 the Company changed
its accounting related to its funds withheld at interest and stock options.

We also have audited, in accordance with the Standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Scottish Re
Group Limited's internal control over financial reporting as of December 31,
2004, based on criteria established in Internal Control--Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 11, 2005, expressed an unqualified opinion on
management's assessment and an adverse opinion on the effectiveness of internal
control over financial reporting.


/s/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania
March 11, 2005

                                        4
<PAGE>

                            SCOTTISH RE GROUP LIMITED
                           CONSOLIDATED BALANCE SHEETS
                (Expressed in Thousands of United States Dollars)

<TABLE>
<CAPTION>
                                                                    December 31,   December 31,
ASSETS                                                                  2004           2003
                                                                   -------------  ------------
<S>                                                                <C>            <C>
Fixed maturity investments, available for sale, at fair value
  (Amortized cost $3,362,929; 2003 - $1,993,247)...............     $  3,392,463  $  2,014,719
Preferred stock (Cost $124,629; 2003 - $125,460)...............          125,204       126,449
Cash and cash equivalents......................................          794,639       298,149
Other investments..............................................           16,250        17,678
Funds withheld at interest.....................................        2,056,280     1,469,425
                                                                   -------------  ------------
  Total investments............................................        6,384,836     3,926,420
Accrued interest receivable....................................           32,092        22,789
Reinsurance balances and risk fees receivable..................          470,817       196,192
Deferred acquisition costs.....................................          417,306       308,591
Amounts recoverable from reinsurers............................          774,503       737,429
Present value of in-force business.............................           62,164        44,985
Goodwill.......................................................           34,125        35,847
Fixed assets...................................................           17,177        11,800
Other assets...................................................           21,749        13,703
Current income tax receivable..................................            7,712             -
Deferred tax benefit...........................................           15,030        12,624
Segregated assets..............................................          783,573       743,137
                                                                   -------------  ------------
  Total assets.................................................     $  9,021,084  $  6,053,517
                                                                   =============  ============
LIABILITIES
Reserves for future policy benefits............................     $  3,370,562  $  1,502,415
Interest sensitive contract liabilities........................        3,181,447     2,633,346
Collateral finance facility liability..........................          200,000             -
Accounts payable and accrued expenses..........................           23,337        31,673
Reinsurance balances payable...................................          116,589       125,756
Other liabilities..............................................           44,974        30,546
Current income tax payable.....................................                -        13,077
7.00% Convertible Junior Subordinated Notes....................           41,282             -
Long term debt.................................................          244,500       162,500
Segregated liabilities.........................................          783,573       743,137
                                                                   -------------  ------------
  Total liabilities............................................        8,006,264     5,242,450
                                                                   -------------  ------------
MINORITY INTEREST                                                          9,697         9,295
MEZZANINE EQUITY                                                         142,449       141,928
SHAREHOLDERS' EQUITY
Share capital, par value $0.01 per share:
  Issued and fully paid: 39,931,145 ordinary shares
    (2003-35,228,411)..........................................              399           352
Additional paid-in capital.....................................          684,719       548,750
Accumulated other comprehensive income.........................           31,604        29,034
Retained earnings..............................................          145,952        81,708
                                                                   -------------  ------------
  Total shareholders' equity...................................          862,674       659,844
                                                                   -------------  ------------
Total liabilities and shareholders' equity.....................     $  9,021,084  $  6,053,517
                                                                   =============  ============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements


                                        5
<PAGE>

                            SCOTTISH RE GROUP LIMITED
                        CONSOLIDATED STATEMENTS OF INCOME
    (Expressed in Thousands of United States Dollars, except per share data)


<TABLE>
<CAPTION>
                                                     Year Ended      Year Ended     Year Ended
                                                    December 31,    December 31,   December 31,
                                                        2004            2003           2002
                                                    ------------    ------------   ------------
<S>                                                 <C>             <C>            <C>
Revenues
Premiums earned................................     $   586,875     $   391,976    $   202,536
Investment income, net.........................         217,138         148,028        107,906
Fee income.....................................          11,547           7,907          6,574
Realized losses................................          (8,304)         (4,448)       (10,804)
Change in value of embedded derivatives, net...           4,561          13,904              -
                                                    ------------    ------------   ------------
  Total revenues...............................         811,817         557,367        306,212
                                                    ------------    ------------   ------------
Benefits and expenses
Claims and other policy benefits...............         425,965         275,887        142,158
Interest credited to interest sensitive
  contract liabilities.........................         106,525          89,156         48,140
Acquisition costs and other insurance expenses,
  net..........................................         151,559         116,000         60,073
Operating expenses.............................          54,658          31,021         23,086
Due diligence costs............................           4,643               -              -
Interest expense...............................          13,016           7,557          1,414
                                                    ------------    ------------   ------------
  Total benefits and expenses..................         756,366         519,621        274,871
                                                    ------------    ------------   ------------
Income before income taxes and minority interest         55,451          37,746         31,341
Income tax benefit.............................          16,679          11,105          1,894
                                                    ------------    ------------   ------------
Income before minority interest................          72,130          48,851         33,235
Minority interest..............................            (531)            (62)             -
                                                    ------------    ------------   ------------
Income from continuing operations before
  cumulative effect of change in accounting
  principle and discontinued operations........          71,599          48,789         33,235
Cumulative effect of change in accounting
  principle (net of taxation of $3,415) .......               -         (19,537)             -
Loss from discontinued operations..............            (208)         (1,971)          (711)
                                                    ------------    ------------   ------------
Net income.....................................     $    71,391     $    27,281    $    32,524
                                                    ============    ============   ============
Basic earnings per share:
    Income from continuing operations before
    cumulative effect of change in accounting
    principle..................................    $       2.00     $      1.59    $      1.32
    Cumulative effect of change in accounting
    principle..................................               -           (0.64)             -
    Discontinued operations....................           (0.01)          (0.06)         (0.03)
                                                    ------------    ------------   ------------
    Net income.................................     $      1.99     $      0.89    $      1.29
                                                    ============    ============   ============
Diluted earnings per share:
    Income from continuing operations before
    cumulative effect of change in accounting
    principle.................................      $      1.91     $     1.51     $      1.25
    Cumulative effect of change in accounting
    principle..................................               -          (0.60)              -
    Discontinued operations....................           (0.01)         (0.06)          (0.02)
                                                    ------------    ------------   ------------
    Net income.................................     $      1.90     $     0.85     $      1.23
                                                    ============    ============   ============
Weighted average number of ordinary shares
outstanding
    Basic......................................      35,732,522     30,652,719      25,190,283
                                                    ============    ============   ============
    Diluted....................................      37,508,292     32,228,001      26,505,612
                                                    ============    ============   ============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements


                                        6
<PAGE>

                            SCOTTISH RE GROUP LIMITED
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                (Expressed in Thousands of United States Dollars)


<TABLE>
<CAPTION>
                                                     Year Ended      Year Ended     Year Ended
                                                    December 31,    December 31,   December 31,
                                                        2004            2003           2002
                                                    ------------    ------------   ------------
<S>                                                 <C>            <C>             <C>
Net income.....................................     $   71,391     $    27,281     $    32,524
                                                    ------------    ------------   ------------
Other comprehensive income, net of tax:
Unrealized appreciation on investments.........          3,644          10,270          18,049
Add: reclassification adjustment for investment
  losses included in net income................         (6,831)         (2,352)         (5,493)
                                                    ------------    ------------   ------------
Net unrealized appreciation  on investments,
  net of income taxes and deferred acquisition
  costs of $ 1,699, $2,222 and $3,853..........         (3,187)          7,918          12,556
Cumulative translation adjustment .............          5,757           6,278           5,908
Minimum pension liability adjustment, net of
  income taxes of $(588) and $588..............              -           1,371          (1,371)
                                                    ------------    ------------   ------------
Other comprehensive income.....................          2,570          15,567          17,093
                                                    ------------    ------------   ------------
Comprehensive income...........................     $   73,961      $   42,848     $    49,617
                                                    ============    ============   ============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements


                                        7
<PAGE>

                            SCOTTISH RE GROUP LIMITED
                       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 (Expressed in Thousands of United States Dollars, except for number of shares)

<TABLE>
<CAPTION>
                                                     Year Ended      Year Ended     Year Ended
                                                    December 31,    December 31,   December 31,
                                                        2004            2003           2002
                                                    ------------    ------------   ------------
<S>                                                 <C>             <C>             <C>
Ordinary shares:
   Beginning of year ..........................     35,228,411      26,927,456      20,144,956
   Ordinary shares issued .....................      3,953,183       9,200,000       6,750,000
   Ordinary shares repurchased ................             --      (1,525,000)             --
   Issuance to employees on exercise of options        749,551         425,955          32,500
   Issuance on exercise of warrants ...........             --         200,000              --
                                                    ------------    ------------   ------------
   End of year ................................     39,931,145      35,228,411      26,927,456
                                                    ============    ============   ============
Share capital:
   Beginning of year ..........................   $        352    $        269    $        201
   Ordinary shares issued .....................             40              92              68
   Ordinary shares repurchased ................             --             (15)             --
   Issuance to employees on exercise of options              7               4              --
   Issuance on exercise of warrants ...........             --               2              --
                                                    ------------    ------------   ------------
   End of year ................................            399             352             269
                                                    ------------    ------------   ------------
Additional paid in capital:
   Beginning of year ..........................        548,750         416,712         301,542
   Ordinary shares issued .....................         64,824         179,995         114,252
   Ordinary shares repurchased ................             --         (29,966)             --
   Issuance to employees on exercise of options          8,339           4,575             279
   Issuance on exercise of warrants ...........             --           2,998              --
   Issuance of HyCUs ..........................             --         (24,171)             --
   Warrants issued ............................         62,125              --              --
   Warrants repurchased .......................             --          (1,600)             --
   Other ......................................            681             207             639
                                                    ------------    ------------   ------------
   End of year ................................        684,719         548,750         416,712
                                                    ------------    ------------   ------------
Accumulated other comprehensive income:
   Unrealized appreciation on investments
     Beginning of year ........................         16,848           8,930          (3,626)
     Change in period (net of tax) ............         (3,187)          7,918          12,556
                                                    ------------    ------------   ------------
   End of year ................................         13,661          16,848           8,930
                                                    ------------    ------------   ------------
   Cumulative translation adjustment
     Beginning of year ........................         12,186           5,908              --
     Change in period (net of tax) ............          5,757           6,278           5,908
                                                    ------------    ------------   ------------
     End of year ..............................         17,943          12,186           5,908
                                                    ------------    ------------   ------------
   Minimum pension liability adjustment
     Beginning of year ........................             --          (1,371)             --
     Change in period (net of tax) ............             --           1,371          (1,371)
                                                    ------------    ------------   ------------
     End of year ..............................             --              --          (1,371)
                                                    ------------    ------------   ------------
Total accumulated other comprehensive income ..         31,604          29,034          13,467
                                                    ------------    ------------   ------------
Retained earnings:
   Beginning of year ..........................         81,708          60,644          33,165
   Net income .................................         71,391          27,281          32,524
   Dividends paid .............................         (7,147)         (6,217)         (5,045)
                                                    ------------    ------------   ------------
   End of year ................................        145,952          81,708          60,644
                                                    ------------    ------------   ------------
Total shareholders' equity ....................     $  862,674      $  659,844     $   491,092
                                                    ============    ============   ============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements


                                        8
<PAGE>

                            SCOTTISH RE GROUP LIMITED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                (Expressed in Thousands of United States Dollars)

<TABLE>
<CAPTION>
                                                     Year Ended      Year Ended     Year Ended
                                                    December 31,    December 31,   December 31,
                                                        2004            2003           2002
                                                    ------------    ------------   ------------
<S>                                                <C>             <C>            <C>
Operating activities
Income before cumulative effect of change in
    accounting principle ........................   $    71,391    $    46,818    $    32,524
Items not affecting cash:

    Realized losses .............................         8,306          4,448         10,803
    Changes in value of embedded derivatives ....        (4,561)        13,904              -
    Amortization of investments .................        11,140          5,619            667
    Amortization of deferred acquisition costs ..        80,235         74,239         28,179
    Amortization of present value of in-force
        business ................................         7,689          4,926          2,777
    Changes in assets and liabilities:
        Accrued interest ........................          (894)        (6,731)        (2,575)
        Reinsurance balances and risk fees
           receivable ...........................      (112,092)       (54,689)        29,019
        Deferred acquisition costs ..............      (180,908)      (167,281)      (127,797)
        Deferred tax liability ..................        68,807        (17,350)           863
        Other assets and liabilities ............       (24,807)       (25,561)          (804)
        Current income tax receivable and payable       (95,631)        (1,459)         1,514
        Reserves for future policy benefits .....       187,201        159,242         (1,377)
        Interest sensitive contract liabilities,
           net of funds withheld at interest ....        34,550         25,546         16,260
        Unit linked contract liabilities ........             -              -        (11,280)
        Accounts payable and accrued expenses ...        (5,443)        11,989          9,504
        Other ...................................        (6,131)        14,844          2,539
                                                    ------------    ------------   ------------
    Net cash provided by (used in) operating
        activities ..............................        38,852         88,504         (9,184)
                                                    ------------    ------------   ------------
Investing activities
Purchase of fixed maturity investments ..........    (1,832,494)    (1,254,226)      (710,791)
Proceeds from sales of fixed maturity investments       595,059        288,611        183,588
Proceeds from maturity of fixed maturity
    investments .................................       345,778        216,617        122,000

Purchase of preferred stock .....................       (26,186)       (82,717)             -

Proceeds from sale of preferred stock ...........        19,620         18,530              -

Proceeds from maturity of preferred stock .......         6,257          5,137              -
Other ...........................................        (1,898)             -          5,291
Cash received on ING acquisition ................       414,008              -              -
Acquisition of subsidiary net of cash acquired ..             -       (140,228)        (2,270)
Purchase of fixed assets ........................             -         (4,984)        (1,034)
                                                    ------------    ------------   ------------
    Net cash used in investing activities .......      (479,856)      (953,260)      (403,216)
                                                    ------------    ------------   ------------
Financing activities
Proceeds from collateral facility liability .....       200,000              -              -
Deposits to interest sensitive contract
    liabilities .................................       571,843        736,884        320,338
Withdrawals from interest sensitive contract
    liabilities .................................       (83,319)       (40,783)       (27,627)
Borrowings ......................................             -              -        (65,145)
Issuance of ordinary shares .....................        73,210        187,666        114,599
Issuance of warrants ............................        62,125              -              -
Repurchase of ordinary shares ...................             -        (29,981)             -
Repurchase of warrants ..........................             -         (1,600)             -
Issuance of long term debt ......................        79,500         29,047        127,782
Issuance of notes payable to buy Cypress Entities        41,282              -              -
Net funds received on issuance of HyCUs .........             -        138,223              -
Dividends paid ..................................        (7,147)        (6,217)        (5,045)
                                                    ------------    ------------   ------------
Net cash provided by financing activities .......       937,494      1,013,239        464,902
                                                    ------------    ------------   ------------
Net change in cash and cash equivalents .........       496,490        148,483         52,502
Cash and cash equivalents, beginning of year ....       298,149        149,666         97,164
                                                    ------------    ------------   ------------
Cash and cash equivalents, end of year ..........   $   794,639     $  298,149     $  149,666
                                                    ============    ============   ============
Supplemental cash flow information:
Interest paid ...................................   $    16,418     $    6,195     $      738
                                                    ============    ============   ============
Taxes paid (refunded) ...........................   $    28,726     $    1,156     $     (124)
                                                    ============    ============   ============
</TABLE>


                 See Accompanying Notes to Consolidated Financial Statements


                                        9
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004


1.  Organization, business and basis of presentation

Organization

     Scottish Re is a holding company organized under the laws of the Cayman
Islands with its principal executive office in Bermuda. We are a reinsurer of
life insurance, annuities and annuity-type products. These products are written
by life insurance companies and other financial institutions located principally
in the United States, as well as around the world. We refer to this portion of
our business as Life Reinsurance. To a lesser extent, we directly issue variable
life insurance and variable annuities and similar products to high net worth
individuals and families for insurance, investment and estate planning purposes.
We refer to this portion of our business as Wealth Management. We have operating
companies in Bermuda, the Cayman Islands, Guernsey, Ireland, the United Kingdom
and the United States.

Business

Life Reinsurance

     In our Life Reinsurance North America Segment, we provide solutions to
insurance companies seeking reinsurance of life insurance, annuities and
annuity-type products. We reinsure lines of business that may be subject to
significant reserve or capital requirements by regulatory and rating agencies.
We assume risks associated with primary life insurance policies and annuities,
both in force and new business. We reinsure: (i) mortality, (ii) investment,
(iii) persistency, and (iv) expense risks. Scottish Re (U.S.), Inc. originates
reinsurance business predominantly by marketing its products and services
directly to U.S. life insurance and reinsurance companies. Scottish Annuity &
Life Insurance Company (Cayman) Ltd. originates reinsurance business
predominantly through reinsurance brokers and intermediaries.

     In our Life Reinsurance International Segment, we reinsure life and aircrew
loss of license products. Life products that we reinsure include short term
group and individual life, and, to a lesser extent, disability and critical
illness. In our Life Reinsurance International Segment, we primarily target
customers in developing markets as well as selected developed markets. The
developing markets include Asia, Latin America, the Middle East, North Africa
and Southern and Eastern Europe. In the more developed markets, we target
"niche" market sectors that require a high degree of knowledge and experience.
Scottish Re Limited markets its products through international brokers and its
own marketing staff.

Wealth Management

     In our Wealth Management business, we directly issue variable life
insurance and variable annuities and similar products to high net worth
individuals and families, for insurance, investment and estate planning
purposes. For us, high net worth generally means individuals and families with a
liquid net worth in excess of $10.0 million. Variable life insurance and
variable annuities have a cash value component that is placed in a separate
account and invested by us on behalf of the policyholder with a money manager.

Basis of presentation

     Accounting Principles--Our consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the United States
of America ("GAAP") and all amounts are reported in thousands


                                       10
<PAGE>

                            SCOTTISH RE GROUP LIMITED
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

1. Organization, business and basis of presentation (continued)

of United States dollars (except per share amounts). Certain items in the prior
year financial statements have been reclassified to conform with the current
year presentation.

     Consolidation--We consolidate the results of all our subsidiaries. All
significant intercompany transactions and balances have been eliminated on
consolidation.

     Estimates, Risks and Uncertainties--The preparation of consolidated
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported on the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. Our most significant assumptions are for assumed reinsurance
liabilities and deferred acquisition costs. We review and revise these estimates
as appropriate. Any adjustments made to these estimates are reflected in the
period the estimates are revised.

2.  Summary of significant accounting policies

     The following are our significant accounting policies:

     A. Fixed maturity investments

     Fixed maturities are classified as available for sale, and accordingly, we
carry these investments at fair values on our consolidated balance sheets. The
fair value of fixed maturities is calculated using quoted market prices provided
by independent pricing services. The cost of fixed maturities is adjusted for
prepayments and the amortization of premiums and discounts. The unrealized
appreciation (depreciation) is the difference between fair value and amortized
cost and is recorded directly to equity with no impact to net income. The change
in unrealized appreciation (depreciation) is included in accumulated other
comprehensive income (loss) in shareholders' equity after deductions for
adjustments for deferred acquisition costs. Investment transactions are recorded
on the trade date with balances pending settlement reflected in the balance
sheet as a component of other assets or other liabilities. Interest is recorded
on the accrual basis.

     Short-term investments are carried at cost, which approximates fair value.

     Realized gains (losses) on securities are determined on a specific
identification method. We track the cost of each security purchased so that we
are able to identify and record a gain or loss when it is subsequently sold. In
addition, declines in fair value that are determined to be other than temporary
are included in realized gains (losses) in the consolidated statements of
income. Realized gains and losses are stated net of associated amortization of
deferred acquisition costs.

     EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets,"
("EITF 99-20") applies to all securities, purchased or retained, which represent
beneficial interests in securitized assets, unless they meet certain exception
criteria. Such securities include many collateralized mortgage, bond, debt and
loan obligations (CMO, CBO, CDO, and CLO), mortgage-backed securities and
asset-backed securities. Under EITF 99-20, a decline in fair value below the
"amortized cost" basis is considered to be an other than temporary impairment
whenever there is an adverse change in the amount or timing of cash flows to be
received, regardless of the resulting yield, unless the decrease is solely a
result of changes in market interest rates. Interest income is based on
prospective estimates of future cash flows.

     Management reviews securities with material unrealized losses and tests for
other than temporary impairments on a quarterly basis. Factors involved in the
determination of potential impairment include fair value


                                       11
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

2. Summary of significant accounting policies (continued)

as compared to cost, length of time the value has been below cost, credit
worthiness of the issuer, forecasted financial performance of the issuer,
position of the security in the issuer's capital structure, the presence and
estimated value of collateral or other credit enhancement, length of time to
maturity, interest rates and our intent and ability to hold the security until
the market value recovers.

     When a decline is considered to be "other than temporary" a realized loss
is incurred and the cost basis of the impaired asset is adjusted to its fair
value.

     B. Cash and cash equivalents

     Cash and cash equivalents include fixed deposits with an original maturity,
when purchased, of three months or less. Cash and cash equivalents are recorded
at face value, which approximates fair value.

     C. Funds withheld at interest

     Funds withheld at interest are funds held by ceding companies under
modified coinsurance and coinsurance funds withheld agreements whereby we
receive the interest income earned on the funds. The balance of funds held
represents the statutory reserves of the ceding companies. These agreements are
considered to include embedded derivatives as further discussed in Note 2Q.

     D. Revenue recognition

     (i) Reinsurance premiums from traditional life policies and annuity
policies with life contingencies are generally recognized as revenue when due
from policyholders. Traditional life policies include those contracts with fixed
and guaranteed premiums and benefits, and consist principally of whole life and
term insurance policies. Our premiums earned are recorded in accordance with
information received from our ceding companies, or are estimated where this
information is not current with the reporting period. These premium estimates
are based on historical experience as adjusted for current treaty terms and
other information. Actual results could differ from these estimates. Management
monitors actual experience, and should circumstances warrant, will revise its
estimates of premiums earned.

     Benefits and expenses are matched with such income so as to result in the
recognition of profits over the life of the contracts. This is achieved by means
of the provision for liabilities for future policy benefits and deferral and
subsequent amortization of policy acquisition costs.

     From time to time we acquire blocks of in-force business and account for
these transactions as purchases. Results of operations only include the revenues
and expenses from the respective dates of acquisition of these blocks of
in-force business. The initial transfer of assets and liabilities is recorded on
the balance sheet.

     Reinsurance assumed on annuity business does not generate premium insurance
but generates investment income over time on the assets we receive from ceding
companies.

     (ii) Fee income is recorded on an accrual basis:

     (iii) Investment income is reported on an accrual basis after deducting the
related investment manager's fees.


                                       12
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

2. Summary of significant accounting policies (continued)

     (iv) Realized capital gains and losses include gains and losses on the sale
of investments available for sale and amounts recognized for other than
temporary impairments on fixed maturities. Realized capital gains and losses are
stated net of associated amortization of deferred acquisition costs.

     E. Deferred acquisition costs

     Costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable from future premiums or gross profits. Such costs
include commissions and allowances as well as certain costs of policy issuance
and underwriting. We perform periodic tests to determine that the cost of
business acquired remains recoverable, and the cumulative amortization is
re-estimated and adjusted by a cumulative charge or credit to current
operations.

     Deferred acquisition costs related to traditional life insurance contracts,
substantially all of which relate to long-duration contracts, are amortized over
the premium-paying period of the related policies in proportion to the ratio of
individual period premium revenues to total anticipated premium revenues over
the life of the policy. Such anticipated premium revenues are estimated using
the same assumptions used for computing liabilities for future policy benefits.

     Deferred acquisition costs related to interest-sensitive life and
investment-type policies are amortized over the lives of the policies, in
relation to the present value of estimated gross profits from mortality,
investment income, and expense margins.

     The development of and amortization of deferred acquisition costs for our
products requires management to make estimates and assumptions. Actual results
could differ materially from those estimates. Management monitors actual
experience, and should circumstances warrant, will revise its assumptions and
the related estimates.

     F. Present value of in-force business

     The present value of the in-force business is established upon the
acquisition of a book of business and will be amortized over the expected life
of the business as determined at acquisition. The amortization each year will be
a function of the gross profits or revenues each year in relation to the total
gross profits or revenues expected over the life of the business, discounted at
the assumed net credit rate.

     G. Goodwill

     Goodwill is established upon the acquisition of a subsidiary. Goodwill is
calculated as the difference between the price paid and the value of individual
assets and liabilities on the date of acquisition. Goodwill and intangible
assets deemed to have indefinite lives are subject to annual impairment tests.
Goodwill was tested for impairment in 2002, 2003 and 2004. There was no
impairment.

     H. Fixed assets and leasehold improvements

     Fixed assets include leasehold improvements, furniture and fittings and
computer equipment. They are recorded at cost and are depreciated over their
estimated useful lives ranging between 1 and 5 years on a straight-line basis.
Accumulated depreciation at December 31, 2004 and 2003 amounted to $8.1 million
and $5.4 million, respectively.


                                       13
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

2. Summary of significant accounting policies (continued)

     I. Reserves for future policy benefits

     The development of policy reserves for our products requires management to
make estimates and assumptions regarding mortality, lapse, expense and
investment experience. Interest rate assumptions for individual life reinsurance
reserves range from 2.5 to 7.0%. The interest assumptions for immediate and
deferred annuities range from 4.0 to 6.5%.

     These estimates are based primarily on historical experience and
information provided by ceding companies. Actual results could differ materially
from those estimates. Management monitors actual experience, and where
circumstances warrant, revises the assumptions and the related reserve
estimates.

     For traditional life policies, future benefits are estimated using a net
level premium method on the basis of actuarial assumptions as to mortality,
persistency and interest established at policy issue. Assumptions established at
policy issue as to mortality and persistency are based on anticipated
experience, which, together with interest and expense assumptions, provide a
margin for adverse deviation. If the liabilities for future policy benefits plus
the present value of expected future gross premiums for a product are
insufficient to provide for expected future benefits and expenses for that
product, deferred acquisition costs will be written off and thereafter, if
required, a premium deficiency reserve will be established by a charge to
income.

     J. Interest sensitive contract liabilities

     The liabilities for interest sensitive contract liabilities equal the
accumulated account values of the policies or contracts as of the valuation date
and include funds received plus interest credited less funds withdrawn and
interest paid. Benefit liabilities for fixed annuities during the accumulation
period equal their account values; after annuitization, they equal the
discounted present value of expected future payments.

     K. Income taxes

     Income tax liability and deferred tax assets are recorded in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109. In accordance
with this statement we record deferred income taxes that reflect the net tax
effect of the temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. A valuation allowance is applied to deferred tax assets if it is more
likely than not that all, or some portion, of the benefits related to deferred
tax assets will not be realized.

     L. Stock-based compensation

     Effective January 1, 2003, we have prospectively adopted the fair
value-based stock option expense provisions of Statement of Financial Accounting
Standards ("SFAS") No. 148. "Accounting for Stock-Based Compensation -
Transition and Disclosure, an Amendment to FASB Statement No. 123". In prior
years, we applied the intrinsic value method as detailed in Accounting
Principles Board ("APB") Opinion No. 25 and related interpretations in
accounting for stock option plans. We did not recognize compensation cost
because our options were issued with an exercise price equal to the market price
of the stock on the date of issue. Note 21 contains a summary of the pro forma
effects to reported net income and earnings per share for 2004, 2003 and 2002
had we elected to recognize compensation cost for all options based on the fair
value of the options granted at grant date as prescribed by SFAS No. 123.


                                       14
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

2. Summary of significant accounting policies (continued)

     M. Earnings per share

     In accordance with SFAS No. 128, "Earnings per Share" basic earnings per
share is calculated based on weighted average ordinary shares outstanding and
excludes any dilutive effects of options and warrants. Diluted earnings per
share assume the exercise of all dilutive stock options, warrants, convertible
debt instruments, and the HyCUs using the treasury stock method.

     N. Segregated assets

     Separate account investments are in respect of wealth management clients
and include the net asset values of the underlying funds plus separate cash and
cash equivalent balances less separate account fees payable to us. The funds in
the separate accounts are not part of our general funds and are not available to
meet our general obligations. The assets and liabilities of these transactions
move in tandem. The client bears the investment risk on the account and we
receive an asset-based fee for providing this service that is recorded as fee
income. Included in these accounts is a total return swap transaction totaling
approximately $32.0 million on behalf of a wealth management client.

     O. Segregated liabilities

     Separate account liabilities include amounts set aside to pay the deferred
variable annuities and the cash values associated with life insurance policies.
These balances consist of the initial premiums paid after consideration of the
net investment gains/losses attributable to each separate account, less fees and
withdrawals.

     These liabilities also include an amount in respect of a total return swap
transaction totaling approximately $32.0 million.

     P. Fair value of financial instruments

     The fair value of assets and liabilities included on the consolidated
balance sheets, which qualify as financial instruments under SFAS No. 107,
"Disclosure About Fair Value of Financial Instruments," approximate the carrying
amount presented in the consolidated financial statements.

     Q. Derivatives

     All derivative instruments are recognized as either assets or liabilities
in the consolidated balance sheet at fair value as required by SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The
accounting for changes in the fair value of derivatives that have not been
designated as a hedge are included in realized gains and losses in the
consolidated statement of income. The gain or loss on derivatives designated as
a hedge of our interest expense on floating rate securities is included in
interest expense.

     Our funds withheld at interest arise on modified coinsurance and fund
withheld coinsurance transactions. Derivatives Implementation Group Issue No.
B36 "Embedded Derivatives: Bifurcation of a Debt Instrument that Incorporates
Both Interest Rate and Credit Rate Risk Exposures that are Unrelated or Only
Partially Related to the Creditworthiness of the Issuer of that Instrument"
indicates that these transactions contain embedded derivatives. The embedded
derivative feature in our funds withheld treaties is similar to a fixed-rate
total return swap on the assets held by the ceding companies. The swap consists
of two parts. The first is the market value of the underlying asset portfolio
and the second is a hypothetical loan to the ceding company. The hypothetical
loan is based on the


                                       15
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

2. Summary of significant accounting policies (continued)

expected cash flows of the underlying reinsurance liability. We have developed
models to systematically estimate the value of the total return swap. The fair
value of the embedded derivative is affected by changes in expected cash flows,
credit spreads of the assets and changes in "risk-free" interest rates. The
change in fair value is included in our calculation of estimated gross profits
and, therefore, also affects the amortization of deferred acquisition costs. In
addition to our quota share indemnity funds withheld contracts, we have entered
into various financial reinsurance treaties that, although considered funds
withheld, do not transfer significant insurance risk and are recorded on a
deposit method of accounting. As a result of the experience refund provisions of
these treaties the value of the embedded derivative is currently considered
immaterial.

     We adopted DIG B36 on October 1, 2003. The initial adoption has resulted in
a loss, after tax and after related amortization of deferred acquisition costs
of $19.5 million. This was recorded as a cumulative effect of change in
accounting principle in our consolidated statement of income for the year ended
December 31, 2003. The change in fair value of the derivative between October 1,
2003 and December 31, 2003 was a gain of $13.9 million, net of related
amortization of deferred acquisition costs. The change in fair value of the
derivative for the year ended December 31, 2004 was a gain of $4.6 million net
of related deferred acquisition costs. The fair value of the derivative of $5.2
million and $9.3 million at December 31, 2004 and 2003, respectively, is
included in other liabilities and other assets.


3.  Business acquisitions

     On December 31, 2004, we completed the acquisition of ING's individual life
reinsurance business. The acquisition was accounted for in accordance with SFAS
No. 141 "Business Combinations". We received approximately $1.9 billion in
assets from ING. This settlement is subject to certain post closing adjustments.
The balance sheet of this business at December 31, 2004 consisted of:


                                                      December 31,
                                                          2004
                                                -----------------------
                                                 (dollars in millions)

            Total investments                   $         1,494.4
            Reinsurance balances receivable                 219.6
            Amounts recoverable from
            reinsurers                                       93.5
            Other assets                                     86.0
                                                -----------------------
            Total assets                        $         1,893.5
                                                =======================
            Reserves for future policy
            benefits                            $         1,764.7
            Other liabilities                   $           128.8
                                                -----------------------
            Total liabilities                   $         1,893.5
                                                =======================


     The following pro-forma information related to our acquisition of the ING
individual life reinsurance business for the years ended December 31, 2004 and
2003 illustrates the effects of the acquisition as if it had occurred at the
beginning of the periods presented. The pro-forma information is not intended to
be indicative of the consolidated results of operations that would have been
reported if the acquisition had occurred at January 1, 2004 and 2003 nor does it
purport to be indicative of combined results of operations which may be reported
in the future.


                                       16
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

3. Business acquisitions (continued)


<TABLE>
<CAPTION>
                                                     Year Ended              Year Ended
                                                    December 31,            December 31,
                                                         2004                   2003
                                                  ---------------------  --------------------
                                                  (dollars in millions)  (dollars in millions)
<S>                                                  <C>                     <C>
           Revenue............................       $  2,115.6              $  1,547.5
           Net income.........................       $    132.0              $     73.3
           Earnings per ordinary share - Basic       $     3.08              $     1.81
           Earnings per ordinary share - Diluted     $     2.96              $     1.75
</TABLE>


     On December 22, 2003, we completed the purchase of 95% of Scottish Re Life
Corporation for $169.9 million in cash. During the year ended December 31, 2004,
we have completed the analysis of purchase accounting for this acquisition.
There was no goodwill arising on the acquisition. The present value of the
in-force of the business acquired was $56.3 million. On February 19, 2004, ERC
Life Reinsurance Corporation's name was changed to Scottish Re Life Corporation.
The balance sheet of ERC Life Reinsurance Corporation at the date of
acquisition, as finalized in 2004, was as follows:


                                                      December 22,
                                                          2003
                                                -----------------------
                                                 (dollars in millions)

          Total investments.................... $        573.5
          Reinsurance balances receivable......           51.5
          Amounts recoverable from reinsurers..          730.0
          Other assets.........................           60.6
                                                ---------------------
          Total assets......................... $      1,415.6
                                                =====================
          Reserves for future policy benefits.. $        933.1
          Interest sensitive contract
            liabilities........................          177.5
          Reinsurance balances payable.........          109.0
          Other liabilities....................           14.6
                                                ---------------------
          Total liabilities.................... $      1,234.2
                                                =====================


     The following pro forma information related to our acquisition of Scottish
Re Life Corporation for the years ended December 31, 2003 and 2002 illustrates
the effects of the acquisition as if it had occurred at the beginning of the
periods presented.


                                       17
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

3. Business acquisitions (continued)


<TABLE>
<CAPTION>
                                                           Year Ended         Year Ended
                                                         December 31,        December 31,
                                                              2003                2002
                                                       ------------------  -----------------
                                                         (dollars in          (dollars in
                                                           millions)            millions)
<S>                                                       <C>               <C>

                 Revenue............................      $    768.2         $   473.0
                 Net income.........................      $     67.7         $    29.1
                 Earnings per ordinary share - Basic      $     2.21         $    1.16
                 Earnings per ordinary share - Diluted    $     2.10         $    1.10
</TABLE>

     The pro-forma information is not intended to be indicative of the
consolidated results of operations that would have been reported if the
acquisition had occurred at January 1, 2003 and 2002 nor does it purport to be
indicative of combined results of operations which may be reported in the
future.

     The acquisitions described above were accounted for by the purchase method
of accounting. In accordance with SFAS141 the accompanying consolidated
statements of income do not include any revenues or expenses related to these
acquisitions prior to the closing dates.


4. Discontinued operations

     During 2003, we decided to discontinue our Wealth Management operations in
Luxembourg. We have transferred our Luxembourg Wealth Management business to
third parties, closed the office and are in the process of liquidating our
Luxembourg subsidiary. We have reported the results of the Luxembourg Wealth
Management activities as discontinued operations. During the year ended December
31, 2004 losses from these operations amounted to $0.2 million, in comparison
with $2.0 million in 2003 and $0.7 million in 2002.


                                       18
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004

5. Business Segments

     We report segments in accordance with SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". Our main lines of business
are Life Reinsurance North America, Life Reinsurance International and Other.
The segment reporting for the lines of business is as follows:


<TABLE>
<CAPTION>
                                                Year Ended December 31, 2004
                                ----------------------------------------------------------
                                 Life Reinsurance   Life Reinsurance
                                   North America      International     Other       Total
                                   -------------      -------------     -----       -----
<S>                                <C>                <C>              <C>         <C>
Premiums earned...............     $    464,719       $    122,156            -    $ 586,875
Investment income, net........          206,009             10,023        1,106      217,138
Realized gains (losses) ......           (7,974)             1,685       (2,015)      (8,304)
Change in value of embedded
derivative....................            4,561                  -            -        4,561
Fee income....................            7,867                  -        3,680       11,547
                                   -------------      -------------    ---------   ----------
    Total revenues............          675,182            133,864        2,771      811,817
                                   -------------      -------------    ---------   ----------
Claims and other policy benefits        344,319             81,646            -      425,965
Interest credited to interest
sensitive contract liabilities          106,525                  -            -      106,525
Acquisition costs and other
insurance expenses, net.......          132,174             17,272        2,113      151,559
Operating expenses............           18,408             18,798       17,452       54,658
Due diligence costs                           -                  -        4,643        4,643
Interest expense..............            4,605                  -        8,411       13,016
                                   -------------      -------------    ---------   ----------
    Total benefits and expenses         606,031            117,716       32,619      756,366
                                   -------------      -------------    ---------   ----------
Income (loss) before income
taxes and minority interest...     $     69,151       $     16,148     $(29,848)   $  55,451
                                   =============      =============    =========   ==========
</TABLE>


<TABLE>
<CAPTION>
                                                Year Ended December 31, 2003
                                ----------------------------------------------------------
                                 Life Reinsurance   Life Reinsurance
                                   North America      International     Other       Total
                                   -------------      -------------     -----       -----
<S>                                <C>                <C>              <C>       <C>
Premiums earned...............     $    230,708       $    161,268     $     -   $   391,976
Investment income, net........          135,731              7,537       4,760       148,028
Realized gains (losses) ......           (6,124)               548       1,128        (4,448)
Change in value of embedded
derivative....................           13,904                  -           -        13,904
Fee income....................            4,067                  -       3,840         7,907
                                   -------------      -------------    ---------   ----------
    Total revenues............          378,286            169,353       9,728       557,367
                                   -------------      -------------    ---------   ----------
Claims and other policy benefits        171,711            104,176           -       275,887
Interest credited to interest
sensitive contract liabilities           89,156                  -           -        89,156
Acquisition costs and other
insurance expenses, net.......           83,594             30,143       2,263       116,000
Operating expenses............            8,646             11,518      10,857        31,021
Interest expense..............            1,109                  -       6,448         7,557
                                   -------------      -------------    ---------   ----------


                                       19
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

5.   Business segments (continued)

                                                Year Ended December 31, 2003
                                ----------------------------------------------------------
                                 Life Reinsurance   Life Reinsurance
                                   North America      International      Other       Total
                                   -------------      -------------    ---------   ----------
    Total benefits and expenses         354,216            145,837        19,568     519,621
                                   -------------      -------------    ---------   ----------
Income (loss) before income
taxes and minority interest...     $     24,070       $     23,516     $  (9,840)  $  37,746
                                   =============      =============    =========   ==========
</TABLE>


<TABLE>
<CAPTION>
                                                     Year Ended December 31, 2002
                                     ----------------------------------------------------------
                                      Life Reinsurance   Life Reinsurance
                                        North America      International     Other       Total
                                        -------------      -------------     -----       -----
<S>                                   <C>                 <C>            <C>          <C>
Premiums earned ...................   $    122,794        $     79,742   $     -      $  202,536
Investment income, net ............         97,406               6,716       3,784       107,906
Realized gains (losses) ...........         (4,833)             (5,942)        (29)      (10,804)
Fee income ........................          3,148                   -       3,426         6,574
                                      -------------       -------------  ---------    ----------
    Total revenues ................        218,515              80,516       7,181       306,212
                                      -------------       -------------  ---------    ----------
Claims and other policy benefits ..         91,774              50,384           -       142,158
Interest credited to interest
sensitive contract liabilities ....         48,140                   -           -        48,140
Acquisition costs and other
insurance expenses, net ...........         48,401               8,281       3,391        60,073
Operating expenses ................          7,323               6,647       9,116        23,086
Interest expense ..................              -                   -       1,414         1,414
                                      -------------       -------------  ---------    ----------
    Total benefits and expenses ...        195,638              65,312      13,921       274,871
                                      -------------       -------------  ---------    ----------
Income (loss) before income
taxes and minority interest .......   $     22,877        $     15,204   $  (6,740)   $   31,341
                                      =============       ============   =========    ==========
</TABLE>


<TABLE>
<CAPTION>

Assets                                     December 31, 2004    December 31, 2003
                                           ------------------   -----------------
<S>                                         <C>                   <C>
Life Reinsurance:
        North America..................     $      7,629,784      $    4,882,222
        International..................              396,219             308,459
                                            ----------------      --------------
Total Life Reinsurance.................            8,026,003           5,190,681
Other..................................              995,081             862,836
                                            ----------------      --------------
Total..................................     $      9,021,084      $    6,053,517
                                            ================      ==============
</TABLE>


                                       20
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004

6. Foreign sales and operations

     Our operations include Bermuda, the Cayman Islands, Guernsey, Ireland, the
United Kingdom and the United States.

     Revenues relating to geographic areas:


<TABLE>
<CAPTION>
                                                    Year Ended      Year Ended      Year Ended
                                                   December 31,    December 31,    December 31,
                                                       2004            2003            2002
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
Revenues
U.S. business..................................    $    695,498    $    405,198    $    218,515
Non--U.S. business.............................         116,319         152,169          87,697
                                                   ------------    ------------    ------------
Total..........................................    $    811,817    $    557,367    $    306,212
                                                   ============    ============    ============
</TABLE>



                                       21
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004

7. Earnings per ordinary share

     The following table sets forth the computation of basic and diluted
earnings per ordinary share:


<TABLE>
<CAPTION>
                                           Year Ended      Year Ended       Year Ended
                                          December 31,    December 31,     December 31,
                                               2004           2003            2002
                                         -------------   --------------   --------------
<S>                                      <C>             <C>              <C>
Numerator:
Net income.........................      $      71,391   $      27,281    $      32,524
                                         ==============  ==============   ==============
Denominator:
Denominator for basic earnings per
  ordinary share
Weighted average number of
  ordinary shares..................         35,732,522      30,652,719       25,190,283
Effect of dilutive securities
  - Stock options..................            634,562         885,552          839,387
  - Warrants.......................            885,363         689,730          475,942
  - Convertible debt and HyCUs.....            255,845               -                -
                                         --------------  --------------   --------------
Denominator  for dilutive  earnings
  per ordinary share...............         37,508,292      32,228,001       26,505,612
                                         ==============  ==============   ==============
Basic earnings per share:
    Income from continuing operations..  $        2.00   $        1.59    $        1.32
    Cumulative effect of change in
    accounting principle...............              -           (0.64)               -
    Discontinued operations............          (0.01)          (0.06)           (0.03)
                                         --------------  --------------   --------------
    Net income.........................  $        1.99   $        0.89    $        1.29
                                         ==============  ==============   ==============
Diluted earnings per share:
    Income from continuing operations..  $        1.91   $        1.51    $        1.25
    Cumulative effect of change in
    accounting principle...............              -           (0.60)                -
    Discontinued operations............          (0.01)          (0.06)           (0.02)
                                         --------------  --------------   --------------
    Net income.........................  $        1.90   $        0.85    $        1.23
                                         ==============  ==============   ==============
</TABLE>


8.  Derivatives

     During 2004, we entered into an interest rate swap contract in the amount
of $100.0 million in relation to certain of our investment assets not supporting
reinsurance liabilities. This contract is accounted for in accordance with SFAS
133, which requires that all derivatives be recognized as either assets or
liabilities on the balance sheet and be measured at fair value. This derivative
has not been designated as a hedge. The fair value of the swap at December 31,
2004 was a negative $2.2 million. This loss of $2.2 million has been included in
realized gains (losses) in the consolidated statement of income.


                                       22
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004


     During 2004, we entered into interest rate swaps with varying notional
amounts and maturities, which have been designated as hedges of the variable
interest cash flows of four of the trust preferred debt issuances described in
Note 18. These interest rate swaps require us to pay fixed rate interest in
exchange for variable rate interest, based on a fixed notional, until the
maturity of the contract, and have been used to eliminate interest rate risk
from the hedged portions of our long term debt. The notional amounts, reset
periods, variable interest rates and maturities of the interest rate swaps match
the terms of the cash flows of the debt they have been designated to hedge and
therefore the interest rate swaps are considered to be fully effective as
required by SFAS 133. The loss on the interest rate swaps for the year of $0.2
million has been included in interest expense for 2004.

9. Investments

     The amortized cost, gross unrealized appreciation and depreciation and
estimated fair values of our fixed maturity investments and preferred stock at
December 31, 2004 and 2003 are as follows:


<TABLE>
<CAPTION>
                                                                   December 31, 2004
                                                -------------------------------------------------------
                                                                  Gross           Gross
                                                Amortized      Unrealized     Unrealized      Estimated
                                                Cost/Costs    Appreciation    Depreciation   Fair Value
                                               ------------  --------------  -------------  ------------
<S>                                              <C>           <C>            <C>            <C>
U.S. Treasury securities and U.S. government     $   89,418    $     200      $    (139)     $   89,479
    agency obligations......................
Corporate securities........................      1,719,502       27,542         (3,474)      1,743,570
Municipal bonds.............................         20,712          261           (158)         20,815
Mortgage and asset backed securities........      1,657,926       14,154         (8,277)      1,663,803
                                               ------------  --------------  -------------  ------------
Total.......................................     $3,487,558    $  42,157      $ (12,048)     $3,517,667
                                               ============= ==============  =============  ============
</TABLE>

<TABLE>
<CAPTION>
                                                                   December 31, 2003
                                                --------------------------------------------------------
                                                                  Gross           Gross
                                                Amortized      Unrealized      Unrealized     Estimated
                                                Cost/Costs    Appreciation    Depreciation   Fair Value
                                               ------------  --------------  -------------  ------------
<S>                                             <C>           <C>             <C>            <C>
U.S. Treasury securities and U.S. government
    agency obligations......................    $    74,548   $       408     $      (400)   $     74,556
Corporate securities........................      1,223,871        26,339          (4,122)      1,246,088
Municipal bonds.............................          1,800             5              --           1,805
Mortgage and asset backed securities........        818,488        10,292         (10,061)        818,719
                                                ------------  --------------  -------------  -------------
Total.......................................    $ 2,118,707   $    37,044     $   (14,583)   $  2,141,168
                                                ============  ==============  =============  =============
</TABLE>


                                       23
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

9. Investments (continued)

     The contractual maturities of the fixed maturities and preferred stock are
as follows (actual maturities may differ as a result of calls and prepayments):


<TABLE>
<CAPTION>
                                                                           December 31, 2004
                                                                    ------------------------------
                                                                      Amortized      Estimated Fair
                                                                        Cost             Value
                                                                    --------------   --------------
<S>                                                                <C>              <C>
Due in one year or less.....................................       $     101,111    $     101,335
Due in one year through five years..........................             414,156          419,921
Due in five years through ten years.........................             649,402          662,971
Due after ten years.........................................             664,963          669,637
                                                                   -------------    -------------
                                                                       1,829,632        1,853,864
Mortgage and asset backed securities........................           1,657,926        1,663,803
                                                                   -------------    -------------
Total.......................................................       $   3,487,558    $   3,517,667
                                                                   =============    =============
</TABLE>

     Gross realized gains and losses are as follows:


<TABLE>
<CAPTION>
                                                     Year Ended      Year Ended     Year Ended
                                                    December 31,    December 31,   December 31,
                                                        2004            2003           2002
                                                    ------------    ------------   -------------
<S>                                                 <C>             <C>            <C>
Proceeds from sale of investments..............     $   665,012     $   307,141    $    183,588
                                                    ===========     ===========    ============
Gross realized gains on sale of investments....     $    10,251     $     7,796    $      7,968
Gross realized losses on sale of investments...         (16,161)        (13,506)        (18,595)
                                                    -----------     -----------    ------------
Net realized losses on sale of investments.....          (5,910)         (5,710)        (10,627)
Other gains and losses.........................          (2,394)          1,262            (177)
                                                    -----------     -----------    ------------
Realized losses................................     $    (8,304)    $    (4,448)   $    (10,804)
                                                    ===========     ===========    ============
</TABLE>
______________________

(1) Includes $9.9 million, $6.3 million and $10.0 million in 2004, 2003 and
    2002, respectively in respect of fixed maturity investments written down to
    market values and $0.3 million, $2.9 million and $2.5 million in 2004, 2003
    and 2002 respectively in respect of modified coinsurance receivables written
    down to market values.

     At December 31, 2004 and 2003, we did not have a material concentration of
investments in fixed income securities in a single issuer, industry or
geographic location.


                                       24
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

9. Investments (continued)

     The following tables provide information on the length of time securities
have been continuously in an unrealized loss position:


<TABLE>
<CAPTION>
                                                    December 31, 2004
                        ---------------------------------------------------------------------
                                                  Estimated                Unrealized
Days                     Book Value       %       Fair Value       %          Loss         %
----                     ----------      ---      ----------      ---      ----------     ---
                                                  Dollars in thousands
<S>                      <C>           <C>       <C>             <C>         <C>        <C>
0-90.................    $  471,909      45.8%   $  468,923       46.0%       (2,986)    24.8%
91-180...............       154,062      14.9       153,237       15.0          (825)     6.9
181-270..............       231,798      22.5       229,026       22.5        (2,772)    23.0
271-360..............        86,468       8.4        84,142        8.3        (2,326)    19.3
Greater than 360 ....        86,246       8.4        83,107        8.2        (3,139)    26.0
                        -----------    ------   -----------     ------    ----------   ------
Total................    $1,030,483     100.0%   $1,018,435      100.0%      (12,048)   100.0%
                        ===========    ======   ===========     ======    ==========   ======
</TABLE>



<TABLE>
<CAPTION>
                                                    December 31, 2003
                        ---------------------------------------------------------------------
                                                  Estimated               Unrealized
Days                     Book Value      %       Fair Value       %          Loss         %
----                     ----------     ---      ----------      ---      -----------    ---
                                                  Dollars in thousands
<S>                      <C>           <C>       <C>             <C>      <C>           <C>
0-90.................    $  308,267     55.6%    $ 304,511        56.4%   $   (3,756)    25.8%
91-180...............       115,702     20.9       113,405        21.0        (2,297)    15.8
181-270..............        56,362     10.1        55,243        10.2        (1,119)     7.7
271-360..............        13,486      2.4        13,064         2.4          (422)     2.9
Greater than 360.....        60,882     11.0        53,893        10.0        (6,989)    47.8
                         ----------    ------    ----------      ------   -----------   ------
Total................    $  554,699    100.0%    $ 540,116       100.0%   $  (14,583)   100.0%
                         ==========    ======    ==========      ======   ===========   ======
</TABLE>

10. Funds withheld at interest

     At December 31, 2004, funds withheld at interest were in respect of seven
contracts with four ceding companies. At December 31, 2003, funds withheld at
interest were in respect of six contracts with three ceding companies. At both
December 31, 2004, we had three contracts with Lincoln National Insurance
Company that accounted for $1.3 billion or 63% of the funds withheld balances.
Additionally, we had two contracts with Security Life of Denver International
that accounted for $0.5 billion or 27% of the funds withheld balances. The
remaining contracts were with Illinois Mutual Insurance Company and American
Founders Life Insurance Company. Lincoln National Insurance Company, the largest
exposure, has financial strength ratings of "A+" from A.M. Best, "AA-" from
Standard & Poor's, "Aa3" from Moody's and "AA" from Fitch. In the event of
insolvency of the ceding companies on these arrangements we would need to exert
a claim on the assets supporting the contract liabilities. However, the risk of
loss is mitigated by our ability to offset amounts owed to the ceding company
with the amounts owed to us by the ceding company. Reserves for future policy
benefits and interest sensitive contract liabilities relating to these contracts
amounted to $2.0 billion and $1.7 billion at December 31, 2004 and December 31,
2003, respectively.


                                       25
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

10. Funds withheld at interest (continued)

     According to data provided by our ceding companies, the amortized cost,
gross unrealized appreciation and depreciation and estimated fair values of
invested assets, excluding cash of $472.4 million, backing our funds withheld at
interest at December 31, 2004 and 2003 are as follows:


<TABLE>
<CAPTION>
                                                    December 31, 2004
                                                    -----------------
                                                    Gross         Gross
                                      Amortized  Unrealized    Unrealized      Estimated
                                        Cost     Appreciation  Depreciation   Fair Value
                                        ----     ------------  ------------   ----------
<S>                                   <C>           <C>        <C>            <C>
U.S. Treasury securities and U.S.
  government agency obligations....   $   39,423    $    458   $    (143)     $   39,738
Corporate securities...............    1,027,809      70,336      (1,896)      1,096,249
Municipal bonds....................       24,728         738        (228)         25,238
Mortgage and asset backed
  securities.......................      303,833      11,969      (1,088)        314,714
                                      ----------    --------   ---------      ----------
                                       1,395,793      83,501      (3,355)      1,475,939
Commercial mortgage loans..........      121,468       9,212        (832)        129,848
                                      ----------    --------   ---------      ----------
Total..............................   $1,517,261    $ 92,713   $  (4,187)     $1,605,787
                                      ==========    ========   =========      ==========


                                                    December 31, 2003
                                                    -----------------
                                                    Gross         Gross
                                      Amortized  Unrealized    Unrealized     Estimated
                                        Cost     Appreciation  Depreciation  Fair Value
                                        ----     ------------  ------------  ----------
U.S. Treasury securities and U.S.
  government agency obligations.....  $   31,577    $    526   $    (144)     $   31,959
Corporate securities................     970,157      77,966      (2,074)      1,046,049
Municipal bonds.....................      22,481         835        (248)         23,068
Mortgage and asset backed
  securities........................     318,151      12,254      (1,482)        328,923
                                      ----------    --------   ---------      ----------
                                       1,342,366      91,581      (3,948)      1,429,999
Commercial mortgage loans...........     120,178       9,694        (496)        129,376
                                      ----------    --------   ---------      ----------
Total                                 $1,462,544   $ 101,275   $  (4,444)     $1,559,375
                                      ==========    ========   =========      ==========
</TABLE>


                                       26
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

10. Funds withheld at interest (continued)

     According to data provided by our ceding companies, the contractual
maturities (excluding cash) of the assets backing our funds withheld fixed
maturities are as follows (actual maturities may differ as a result of calls and
prepayments):

<TABLE>
<CAPTION>
                                                       December 31, 2004
                                                       -----------------
                                                Amortized Cost   Estimated Fair Value
                                                --------------   --------------------
<S>                                             <C>               <C>
Due in one year or less.....................    $     47,483      $     48,341
Due in one year through five years..........         301,394           317,380
Due in five years through ten years.........         617,727           665,272
Due after ten years.........................         125,356           130,231
                                                ------------      ------------
                                                   1,091,960         1,161,224
Mortgage and asset backed securities........         303,833           314,715
Commercial mortgage loans...................         121,468           129,848
                                                ------------      ------------
Total .....................................     $  1,517,261      $  1,605,787
                                                ============      ============
</TABLE>


11. Reinsurance ceded

     Premiums earned are analyzed as follows:


<TABLE>
<CAPTION>
                               Year ended          Year ended           Year ended
                           December 31, 2004    December 31, 2003    December 31, 2002
                           -----------------    -----------------    -----------------
<S>                           <C>                  <C>                  <C>
Premiums assumed .........    $ 804,420            $ 415,653            $ 210,166
Premiums ceded ...........     (217,545)             (23,677)              (7,630)
                              ---------            ---------            ---------
Premiums earned ..........    $ 586,875            $ 391,976            $ 202,536
                              =========            =========            =========
</TABLE>

     Reinsurance contracts do not relieve us from our obligations to our
cedents. Failure of reinsurers to honor their obligations could result in losses
to us. We evaluate the financial condition of our reinsurers to minimize our
exposure to losses from reinsurer insolvencies. Claims and other policy benefits
are net of reinsurance recoveries of $144.5 million, $21.4 million and $8.5
million during the years ended December 31, 2004, 2003 and 2002.

     12. Goodwill

     During 2004, we received a payment of $1.7 million in respect of a
settlement of the purchase price of Scottish Re Holdings Limited (formerly
World-Wide Holdings Limited). This settlement arose on the finalization of
income taxes due for periods prior to the acquisition and has resulted in a
decrease in the goodwill arising on the acquisition.


                                       27
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004

13. Present value of in-force business

     A reconciliation of the present value of in-force business is as follows:


                                                December   December   December
                                                31, 2004   31, 2003   31, 2002
                                                --------   --------   --------
Balance at beginning of year................   $ 44,985   $ 18,181   $ 20,383
Acquisition of Scottish Re Life Corporation.     24,766     31,506         --
Amortization................................     (7,689)    (4,926)    (2,777)
Other.......................................        102        224        575
                                               ---------  ---------  ---------
Balance at end of year......................   $ 62,164   $ 44,985   $ 18,181
                                               =========  =========  =========


     Future estimated amortization of the present value of in-force business is
as follows:

                 Year ending December 31
                 -----------------------
                 2005 ................................   $ 6,284
                 2006 ................................     6,277
                 2007 ................................     5,617
                 2008 ................................     5,707
                 2009 ................................     5,916
                 Thereafter ..........................   $32,363

14. Reinsurance transactions

     The following table summarizes the acquisitions of in-force reinsurance
transactions completed by us during 2002. These transactions are accounted for
as purchases. Our results of operations include the effects of these purchases
only from the respective acquisition date.

                                                        December 31,
                                                            2002
                                                        ------------
  Fair value of assets acquired .......................   $26,032
                                                        ------------
  Deferred acquisition costs ..........................     6,571
                                                        ------------
  Total assets acquired ...............................   $32,603
                                                        ============
  Fair value of liabilities assumed ...................   $32,603
                                                        ============


                                       28
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004

15.     Deferred acquisition costs

        The change in deferred acquisition costs is as follows:

<TABLE>
<CAPTION>
                                                    December 31,   December 31,   December 31,
                                                        2004           2003           2002
                                                    ------------   ------------   ------------
<S>                                                 <C>            <C>            <C>
Balance beginning of period.......................  $   308,591    $   213,516    $   113,898

Expenses deferred.................................      199,768        167,185        129,306
Amortization expense..............................      (80,235)       (74,239)       (28,178)
Deferred   acquisition   costs   on   in-force
  reinsurance transactions purchased..............            -              -          6,571
Deferred   acquisition   costs  on  unrealized          (10,166)             -              -
  gains and losses................................
Deferred acquisition costs on realized losses.....         (652)         2,129         (8,081)
                                                    -----------    -----------    -----------
Balance at end of year............................  $   417,306    $   308,591    $   213,516
                                                    ===========    ===========    ===========
</TABLE>

16. Collateral finance facility liability

     On June 25, 2004, we closed a structured finance facility with HSBC Bank
USA, N.A. This facility provides $200.0 million that can be used to
collateralize reinsurance obligations under intercompany reinsurance agreements.
Simultaneously we entered into a total return swap with HSBC Bank USA, N.A.
under which we are entitled to the total return of the investment portfolio of
the trust established for this facility. In accordance with FIN 46 we are
considered to hold a beneficial interest in the trust, which is in turn
considered to be a variable interest entity. As a result, the trust has been
consolidated in these financial statements.

     The assets of the variable interest entity have been recorded as fixed
maturity investments. Our consolidated income statements show the investment
return of the variable interest entity as investment income and the cost of the
facility in acquisition costs and other insurance expenses.

     The creditors of the variable interest entity have no recourse against our
general assets.

17. 7.00% Convertible Junior Subordinated Notes

     In order to provide additional capital to support the individual in-force
life reinsurance business acquired from ING we signed a Securities Purchase
Agreement on October 17, 2004 with the Cypress Entities. Pursuant to the
Securities Purchase Agreement, we issued to the Cypress Entities on December 31,
2004, $41,282,479 aggregate principal amount of 7.00% Convertible Junior
Subordinated Notes with a maturity date 30 years from issuance (the "7.00%
Convertible Junior Subordinated Notes").

     Holders of the 7.00% Convertible Junior Subordinated Notes do not have
voting rights. The 7.00% Convertible Junior Subordinated Notes are unsecured
obligations, subordinated to all indebtedness that does not by its terms rank
pari passu or junior to the 7.00% Convertible Junior Subordinated Notes,
including any guarantees issued by us in respect of senior or senior
subordinated indebtedness. The accrued but unpaid interest on the 7.00%
Convertible Junior Subordinated Notes is payable in kind on December 1 and June
1 of each year, beginning June 1, 2005, by the issuance of additional 7.00%
Convertible Junior Subordinated Notes of the same series, having the same terms
and conditions as the 7.00% Convertible Junior Subordinated Notes and having a
principal amount equal to the amount of such accrued and unpaid interest.
However, (i) during the period from December 31, 2007 to December 31, 2014, we
may at our option pay any of such accrued but unpaid interest in cash in lieu of
in kind, and


                                       29
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

17. 7.00% Convertible Junior Subordinated Notes (continued)

(ii) after December 31, 2014, the Cypress Entities may at their option receive
any of such accrued but unpaid interest in cash in lieu of in kind.

     Upon the approval of our shareholders and the receipt of all requisite
regulatory approvals, the 7.00% Convertible Junior Subordinated Notes will
automatically be converted into our ordinary shares at an initial conversion
price of $19.375 per ordinary share, subject to customary anti-dilution
adjustments. If upon approval, the requisite regulatory approvals have not been
obtained, the 7.00% Convertible Junior Subordinated Notes will automatically be
exchanged for additional Class C Warrants to purchase the number of ordinary
shares into which the 7.00% Convertible Junior Subordinated Notes (including any
accrued and unpaid interest through the date of conversion) were convertible. If
we have sought shareholder approval unsuccessfully at least twice, after
December 31, 2005, we may redeem all (but not less than all) of the
then-outstanding 7.00% Convertible Junior Subordinated Notes for cash at a
redemption price per share equal to the greater of (i) an amount equal to, (A)
if prior to December 31, 2007, the initial Purchase Price paid by the Cypress
Entities for the 7.00% Convertible Junior Subordinated Notes, plus an amount
calculated based on an annual, compounded internal rate of return equal to the
Penalty Rate (described below) on such investment for the period from December
31, 2004 through December 31, 2007 (applying the 19% Penalty Rate to such
period), or (B) if after December 31, 2007, the principal amount thereof plus
accrued and unpaid interest thereon through the date of repurchase, and (ii) the
market value at the time of such redemption of the number of ordinary shares
into which the 7.00% Convertible Junior Subordinated Notes are then convertible.
In the event of a change of control of Scottish Re, we will be required to
repurchase the 7.00% Convertible Junior Subordinated Notes pursuant to the terms
specified in the 7.00% Convertible Junior Subordinated Notes.

     In the event of a Failed Condition (as defined in Note 20), the 7.00%
Convertible Junior Subordinated Notes will bear interest at the Penalty Rate
applied retroactively from the Closing Date until the earliest to occur of a
cure of such condition, early redemption of the 7.00% Convertible Junior
Subordinated Notes or the maturity thereof. The "Penalty Rate" means a rate per
annum equal to, (i) if a Failed Condition occurs in 2005, 15% applicable through
December 31, 2005, (ii) if a Failed Condition occurs or continues in 2006, 17%
through December 31, 2006 and (iii) 19% thereafter.

18. Long-term debt

     Long-term debt consists of:

                                                   December 31,   December 31,
                                                      2004           2003
                                                   ------------   ------------
4.5% senior convertible notes due 2022..........   $  115,000       $ 115,000
Capital securities due 2032.....................       17,500          17,500
Preferred trust securities due 2033.............       20,000          20,000
Trust preferred securities due 2033.............       10,000          10,000
Trust preferred securities due 2034.............       32,000               -
Trust preferred securities due 2034.............       50,000               -
                                                   ----------       ---------
                                                   $  244,500       $ 162,500
                                                   ==========       =========


                                       30
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

18. Long-term debt (continued)

4.5% Senior convertible notes

     On November 22, 2002 and November 27, 2002 we issued $115.0 million (which
includes an over allotment option of $15.0 million) of 4.5% senior convertible
notes, which are due December 1, 2022, to qualified institutional buyers. The
notes are general unsecured obligations, ranking on parity in right of payment
with all our existing and future unsecured senior indebtedness, and senior in
right of payment with all our future subordinated indebtedness. Interest on the
notes is payable on June 1 and December 1 of each year. The notes are rated Baa2
by Moody's and BBB- by Standard & Poor's.

     The notes are convertible into our ordinary shares initially at a
conversion rate of 46.0617 ordinary shares per $1,000 principal amount of notes
(equivalent to an initial conversion price of $21.71 per ordinary share). On
conversion, we shall settle the principal amount of $115.0 million in cash. The
notes are redeemable at our option in whole or in part beginning on December 6,
2006, at a redemption price equal to 100% of the principal amount of the notes
plus accrued and unpaid interest. The notes are subject to repurchase by us upon
a change of control of Scottish Re or at a holder's option on December 6, 2006,
December 1, 2010, December 1, 2012 and December 1, 2017, at a repurchase price
equal to 100% of the principal amount of the notes plus accrued and unpaid
interest. The notes are due on December 1, 2022 unless earlier converted,
redeemed by us at our option or repurchased by us at a holder's option.

     A holder may surrender notes for conversion prior to the stated maturity
only under the following circumstances:

     o    during any conversion period if the sale price of our ordinary shares
          for at least 20 trading days in the period of 30 consecutive trading
          days ending on the first day of the conversion period exceeds 120% of
          the conversion price in effect on that 30th trading day;

     o    during any period in which the notes are rated by either Moody's
          Investors Service, Inc. or Standard & Poor's Rating Group and the
          credit rating assigned to the notes by either rating agency is
          downgraded by two levels or more, suspended or withdrawn;

     o    if we have called those notes for redemption; or

     o    upon the occurrence of the certain specified corporate transactions.

     Under a registration rights agreement, we filed with the Securities and
Exchange Commission, a shelf registration statement, for resale of the notes and
our ordinary shares issuable upon conversion of the notes.

Capital securities due 2032

     On December 4, 2002, Scottish Holdings Statutory Trust I, a Connecticut
statutory business trust ("Capital Trust") issued and sold in a private offering
an aggregate of $17.5 million Floating Rate Capital Securities (the "Capital
Securities"). All of the common shares of the Capital Trust are owned by
Scottish Holdings, Inc., our wholly owned subsidiary.

     The Capital Securities mature on December 4, 2032. They are redeemable in
whole or in part at any time after December 4, 2007. Interest is payable
quarterly at a rate equivalent to 3 month LIBOR plus 4%. At December 31, 2004
and December 31, 2003, the interest rates were 6.44% and 5.15%, respectively.
Prior to December 4,


                                       31
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

18. Long-term debt (continued)

2007, interest cannot exceed 12.5%. The Capital Trust may defer payment of the
interest for up to 20 consecutive quarterly periods, but no later than December
4, 2032. Any deferred payments would accrue interest quarterly on a compounded
basis if Scottish Holdings, Inc. defers interest on the Debentures due December
4, 2032 (as defined below).

     The sole assets of the Capital Trust consist of $18.0 million principal
amount of Floating Rate Debentures (the "Debentures") issued by Scottish
Holdings, Inc. The Debentures mature on December 4, 2032 and interest is payable
quarterly at a rate equivalent to 3 month LIBOR plus 4%. At December 31, 2004
and December 31, 2003, the interest rates were 6.44% and 5.15%, respectively.
Prior to December 4, 2007, interest cannot exceed 12.5%. Scottish Holdings, Inc.
may defer payment of the interest for up to 20 consecutive quarterly periods,
but no later than December 4, 2032. Any deferred payments would accrue interest
quarterly on a compounded basis. Scottish Holdings, Inc. may redeem the
Debentures at any time after December 4, 2007 in the event of certain changes in
tax or investment company law.

     Scottish Annuity & Life Insurance Company (Cayman) Ltd. has guaranteed
Scottish Holdings, Inc.'s obligations under the Debentures and distributions and
other payments due on the Capital Securities.

Trust preferred securities due 2033

     On October 29, 2003, Scottish Holdings, Inc. Statutory Trust II, a
Connecticut statutory business trust ("Capital Trust II") issued and sold in a
private offering an aggregate of $20.0 million Preferred Trust Securities (the
"Trust Preferred Securities"). All of the common shares of Capital Trust II are
owned by Scottish Holdings, Inc.

     The Trust Preferred Securities mature on October 29, 2033. They are
redeemable in whole or in part at any time after October 29, 2008. Interest is
payable quarterly at a rate equivalent to 3 month LIBOR plus 3.95%. At December
31, 2004 and December 31, 2003, the interest rates were 6.08% and 5.10%,
respectively. Prior to October 29, 2008, interest cannot exceed 12.45%. Capital
Trust II may defer payment of the interest for up to 20 consecutive quarterly
periods, but no later than October 29, 2033. Any deferred payments would accrue
interest quarterly on a compounded basis if Scottish Holdings, Inc. defers
interest on the Floating Rate Debentures due October 29, 2033 (as described
below).

     The sole assets of Capital Trust II consist of $20.6 million principal
amount of Floating Rate Debentures (the "2033 Floating Rate Debentures") issued
by Scottish Holdings, Inc. The 2033 Floating Rate Debentures mature on October
29, 2033 and interest is payable quarterly at 3 month LIBOR plus 3.95%. At
December 31, 2004 and December 31, 2003, the interest rates were 6.08% and
5.10%, respectively. Prior to October 29, 2008, interest cannot exceed 12.45%.
Scottish Holdings, Inc. may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than October 29, 2033. Any deferred
payments would accrue interest quarterly on a compounded basis. Scottish
Holdings, Inc. may redeem the 2033 Floating Rate Debentures at any time after
October 29, 2008 and in the event of certain changes in tax or investment
company law.

     Scottish Annuity & Life Insurance Company (Cayman) Ltd. has guaranteed
Scottish Holdings, Inc.'s obligations under the 2033 Floating Rate Debentures
and distributions and other payments due on the Trust Preferred Securities.


                                       32
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

18. Long-term debt (continued)

Trust preferred securities due 2033

     On November 14, 2003, GPIC Holdings Inc. Statutory Trust, a Delaware
statutory business trust ("GPIC Trust") issued and sold in a private offering an
aggregate of $10.0 million Trust Preferred Securities (the "2033 Trust Preferred
Securities"). All of the common shares of GPIC Trust are owned by Scottish
Holdings, Inc.

     The 2033 Trust Preferred Securities mature on September 30, 2033. They are
redeemable in whole or in part at any time after September 30, 2008. Interest is
payable quarterly at a rate equivalent to 3 month LIBOR plus 3.90%. At December
31, 2004 and December 31, 2003, the interest rates were 6.46% and 5.05%,
respectively. GPIC Trust may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than September 30, 2033. Any
deferred payments would accrue interest quarterly on a compounded basis if
Scottish Holdings, Inc. defers interest on the Junior Subordinated Notes due
September 30, 2033 (as described below).

     The sole assets of GPIC Trust consist of $10.3 million principal amount of
Junior Subordinated Notes (the "Junior Subordinated Notes") issued by Scottish
Holdings, Inc. The Junior Subordinated Notes mature on September 30, 2033 and
interest is payable quarterly at 3 month LIBOR plus 3.90%. At December 31, 2004
and December 31, 2003, the interest rates were 6.46% and 5.05%, respectively.
Scottish Holdings, Inc. may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than September 30, 2033. Any
deferred payments would accrue interest quarterly on a compounded basis.
Scottish Holdings, Inc. may redeem the Junior Subordinated Notes at any time
after September 30, 2008 and in the event of certain changes in tax or
investment company law.

     Scottish Annuity & Life Insurance Company (Cayman) Ltd. has guaranteed
Scottish Holdings, Inc.'s obligations under the Junior Subordinated Notes and
distributions and other payments due on the trust preferred securities.

Trust preferred securities due 2034

     On May 12, 2004, Scottish Holdings, Inc. Statutory Trust III, a Connecticut
statutory business trust ("Capital Trust III") issued and sold in a private
offering an aggregate of $32.0 million Trust Preferred Securities (the "2034
Trust Preferred Securities"). All of the common shares of Capital Trust III are
owned by Scottish Holdings, Inc.

     The 2034 Trust Preferred Securities mature on June 17, 2034. They are
redeemable in whole or in part at any time after June 17, 2009. Interest is
payable quarterly at a rate equivalent to 3 month LIBOR plus 3.80%. At December
31, 2004, the interest rate was 6.30125%. Prior to June 17, 2009, interest
cannot exceed 12.50%. Capital Trust III may defer payment of the interest for up
to 20 consecutive quarterly periods, but no later than June 17, 2034. Any
deferred payments would accrue interest quarterly on a compounded basis if
Scottish Holdings, Inc. defers interest on the 2034 Floating Rate Debentures due
June 17, 2034 (as described below).

     The sole assets of Capital Trust III consist of $33.0 million principal
amount of Floating Rate Debentures (the "2034 Floating Rate Debentures") issued
by Scottish Holdings, Inc. The 2034 Floating Rate Debentures mature on June 17,
2034 and interest is payable quarterly at 3 month LIBOR plus 3.80%. At December
31, 2004 the interest rate was 6.30125%. Prior to June 17, 2009, interest cannot
exceed 12.50%. Scottish Holdings, Inc. may defer payment of the interest for up
to 20 consecutive quarterly periods, but no later than June 17, 2034. Any
deferred payments would accrue interest quarterly on a compounded basis.
Scottish Holdings, Inc. may redeem the


                                       33
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

18. Long-term debt (continued)

2034 Floating Rate Debentures at any time after June 17, 2009 and in the event
of certain changes in tax or investment company law.

     Scottish Annuity & Life Insurance Company (Cayman) Ltd. has guaranteed
Scottish Holdings, Inc.'s obligations under the 2034 Floating Rate Debentures
and distributions and other payments due on the 2034 Trust Preferred Securities.

Trust preferred securities due 2034

     On December 18, 2004, SFL Statutory Trust I, a Delaware statutory business
trust ("SFL Trust I") issued and sold in a private offering an aggregate of
$50.0 million Trust Preferred Securities (the "December 2034 Trust Preferred
Securities"). All of the common shares of SFL Trust I are owned by Scottish
Financial (Luxembourg) S.a.r.l.

     The December 2034 Trust Preferred Securities mature on December 15, 2034.
They are redeemable in whole or in part at any time after December 15, 2009.
Interest is payable quarterly at a rate equivalent to 3 month LIBOR plus 3.50%.
At December 31, 2004, the interest rate was 5.95%. Prior to December 15, 2009,
interest cannot exceed 12.50%. SFL Trust I may defer payment of the interest for
up to 20 consecutive quarterly periods, but no later than December 15, 2034. Any
deferred payments would accrue interest quarterly on a compounded basis.

     The sole assets of SFL Trust I consist of $51.5 million principal amount of
Floating Rate Debentures (the "December 2034 Floating Rate Debentures") issued
by Scottish Financial (Luxembourg) S.a.r.l. The December 2034 Floating Rate
Debentures mature on December 15, 2034 and interest is payable quarterly at 3
month LIBOR plus 3.50%. At December 31, 2004 the interest rate was 5.95%. Prior
to December 15, 2009, interest cannot exceed 12.50%. Scottish Financial
(Luxembourg) S.a.r.l. may defer payment of the interest for up to 20 consecutive
quarterly periods, but no later than December 15, 2034. Any deferred payments
would accrue interest quarterly on a compounded basis. Scottish Financial
(Luxemburg) S.a.r.l. may redeem the December 2034 Floating Rate Debentures at
any time after December 15, 2009 and in the event of certain changes in tax or
investment company law.

     Scottish Annuity & Life Insurance Company (Cayman) Ltd. has guaranteed
Scottish Financial (Luxembourg) S.a.r.l.'s obligations under the December 2034
Floating Rate Debentures and distributions and other payments due on the
December 2034 Trust Preferred Securities.

19. Mezzanine equity

     On December 17, and December 22, 2003, we issued in a public offering
5,750,000 HyCUs. The aggregate net proceeds were $141.9 million. Each HyCU
consists of:

     o    A purchase contract under which the holder agrees to purchase an
          agreed upon number of ordinary shares on February 15, 2007 at a
          purchase price of $25.00; and

     o    A convertible preferred share with a liquidation preference of $25.00,
          convertible into ordinary shares, which we will settle in cash and
          ordinary shares on May 21, 2007.


                                       34
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

19.   Mezzanine equity (continued)

The agreed upon number of shares that a purchase contract will be settled for is
called the "settlement rate". The settlement rate on each purchase contract is
as follows:

     o    If the average closing price per ordinary share on each of the 20
          consecutive trading days ending on the fourth trading day preceding
          February 15, 2007 (the "Applicable Market Value"), is less than or
          equal to $19.32, then each purchase contract will be settled for 1.294
          ordinary shares.

     o    If the Applicable Market Value is greater than $19.32, then each
          purchase contract will be settled for a number of ordinary shares by
          dividing $25.00 by the Applicable Market Value.

     The convertible shares will be initially convertible into 1.0607 ordinary
shares per $25.00 liquidation preference (referred to as the "conversion rate"),
subject to anti-dilution adjustments. This reflects an initial conversion price
of $23.57. Upon conversion we will deliver cash equal to the $25.00 liquidation
preference and ordinary shares for the value of the excess, if any, of the
conversion obligation minus the liquidation preference. The conversion
obligation is the conversion rate at the time of conversion multiplied by the
average trading price of our ordinary shares for a specified period following
the redemption date.

     Amounts will accumulate under the HyCUs at a rate of 5.875% per year,
payable quarterly beginning February 14, 2004. These amounts will consist of:

     o    Quarterly contract adjustment payments at a rate of 4.875% per year;
          and

     o    Dividends at a rate of 1.00% per year on the convertible preferred
          shares, payable quarterly when declared by our board of directors.

     We may defer contract adjustment payments until no later than the purchase
contract settlement date.

     Each convertible preferred share is pledged to us to secure the holder's
obligation under the purchase contract. A holder of the HyCU can obtain the
release of the pledged convertible share by substituting zero-coupon treasury
securities as security for the obligation under the purchase contract. The
resulting unit is then known as a Treasury Unit. Holders of Treasury Units can
recreate HyCUs by re-substituting the convertible preferred shares and
withdrawing the treasury securities.

     The convertible preferred shares will be mandatorily redeemed on May 21,
2007.

     We have accounted for the HyCUs in accordance with SFAS No. 150 "Accounting
for Certain Instruments with Characteristics of Debt and Equity". Accordingly,
the HyCUs have been recorded as mezzanine equity of $142.4 million, which is net
of issuance costs related to the convertible preferred shares. The present value
of the contract adjustment payments (discounted at a rate of 4.75%) is included
in other liabilities and resulted in a decrease in additional paid-in capital at
the date of issuance. Issue costs on the forward contract have also been
included in additional paid-in capital. The dividends on the convertible
preferred shares are included in interest expense.


                                       35
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

20. Shareholders' equity

Ordinary shares

     We are authorized to issue 100,000,000 ordinary shares of par value $0.01
each.

     On April 4, 2002, we completed a public offering of 6,750,000 ordinary
shares (which included the over-allotment option of 750,000 ordinary shares) in
which we raised aggregate net proceeds of $114.3 million. We used the proceeds
of the equity offering to repay short-term borrowings of $40.0 million and the
remainder for general corporate purposes. During 2002, we issued 32,500 shares
to employees upon the exercise of stock options.

     On July 23, 2003, we completed a public offering of 9,200,000 ordinary
shares (which included an over-allotment option of 1,200,000 ordinary shares) in
which we raised aggregate net proceeds of $180.1 million. We used $30.0 million
of these proceeds to repurchase 1,525,000 ordinary shares from Pacific Life at a
purchase price of $19.66 per share.

     During the year ended December 31, 2004 and 2003 we issued 750,000 and
180,000 ordinary shares, respectively, to employees upon the exercise of stock
options. During the year ended December 31, 2003 we issued 200,000 ordinary
shares upon the exercise of Class A Warrants and we repurchased 200,000 Class B
Warrants for $3.0 million.

     In order to provide additional capital to support the individual life
reinsurance business acquired from ING we signed a Securities Purchase Agreement
on October 17, 2004 with the "Cypress Entities". Pursuant to the Securities
Purchase Agreement, we issued to the Cypress Entities on December 31, 2004:

        (i)    3,953,183 ordinary shares, par value $0.01 per share (equal to
               9.9% of the aggregate number of ordinary shares issued and
               outstanding on December 31, 2004, taking into account such
               issuance);

        (ii)   Class C Warrants to purchase 3,206,431 ordinary shares (equal to
               the difference between (A) 19.9% of the ordinary shares issued
               and outstanding on December 31, 2004 (without taking into account
               the issuance of ordinary shares pursuant to (i) above) and (B)
               the number of ordinary shares issued to the Cypress Entities as
               provided in (i) above); and

        (iii)  The 7.00% Convertible Junior Subordinated Notes discussed in Note
               17.

     The proceeds from the Cypress Entities net of a commitment fee and other
expenses amounted to $126.9 million.

     The Class C Warrants are exercisable at an exercise price equal to $0.01
per share. The number of ordinary shares for which the Class C Warrants are
exercisable will be subject to customary anti-dilution adjustments. The Class C
Warrants do not have voting rights and are not exercisable until (i) our
shareholders approve (A) certain amendments to our articles of association to
allow the Cypress Entities to hold more than 9.9% of our issued and outstanding
ordinary shares, and (B) the issuance of more than 20% of our ordinary shares to
the Cypress Entities, as required by New York Stock Exchange rules (the
"Shareholder Proposals"), and (ii) requisite regulatory approvals have been
obtained from insurance regulators in Delaware and the United Kingdom.
Notwithstanding the foregoing, the Class C Warrants will become exercisable (i)
immediately upon their transfer to an unaffiliated third party provided that
such transfer complies with the ownership limitations contained in our articles
of association or (ii) to the extent the exercise thereof would not cause the
Cypress Entities to own in the aggregate greater than 9.9%


                                       36
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

20. Shareholders' equity (continued)

of the ordinary shares then outstanding. Upon shareholder approval and the
receipt of all requisite regulatory approvals, the Class C Warrants will
automatically be exercised for the applicable number of ordinary shares. In the
event that a change of control of Scottish Re occurs and the Class C Warrants
cannot be exercised in full for ordinary shares by the terms of the our articles
of association or by applicable law, the holders of Class C Warrants may require
us to repurchase the unexercised Class C Warrants pursuant to the terms
specified in the Class C Warrants.

     If shareholder approval is not obtained by June 30, 2005 (a "Failed
Condition"), we will make additional payments on the Class C Warrants by paying
cash equal to, on a per annum basis, 5% of the product of (i) the number of
ordinary shares underlying the Class C Warrants then held by the Cypress
Entities and (ii) the Purchase Price, or, Scottish Re's option in lieu of cash,
by issuing additional 7.00% Convertible Junior Subordinated Notes with an
equivalent aggregate principal amount, such payment or issuance to be made on
the business day immediately following the date of occurrence of the Failed
Condition, and on each six-month anniversary thereafter, until shareholder
approval has been obtained. In addition, until shareholder approval has been
obtained, we will make an additional payment on the Class C Warrants equal to
the dividend then currently payable on ordinary shares, which will be assumed to
be no less than $0.20 per share per annum.

     At December 31, 2004, there were 39,931,145 outstanding ordinary shares.

Preferred shares

     We are authorized to issue 50,000,000 preferred shares of par value $0.01
each.

     On December 17 and December 22, 2003, in connection with our HyCU offering,
we issued 5,750,000 convertible preferred shares having a per share liquidation
preference of $25 and an initial conversion rate of 1.067 ordinary shares per
$25 liquidation preference, subject to anti-dilution adjustments. The
convertible preferred shares have a 1% annual dividend rate and will be
mandatorily redeemed by us on May 21, 2007. See Note 19 for additional
description of the terms of the convertible preferred shares.

Warrants

     At December 31, 2002 there were 2,850,000 Class A Warrants and 200,000
Class B Warrants outstanding, each class with an exercise price of $15.00.
During the year ended December 31, 2003 we issued 200,000 ordinary shares upon
the exercise of Class A Warrants and we repurchased 200,000 Class B Warrants for
$3.0 million. As at December 31, 2003 there are 2,650,000 Class A Warrants
outstanding.

     In connection with our initial capitalization, we issued Class A Warrants
to related parties to purchase an aggregate of 1,550,000 ordinary shares. The
aggregate consideration of $0.1 million paid for these Warrants is reflected as
additional paid-in capital. In connection with our initial public offering, we
issued an aggregate of 1,300,000 Class A Warrants. All Class A Warrants are
exercisable at $15.00 per ordinary share, in equal amounts over a three-year
period commencing November 1999 and expire in November 2008.

     On December 31, 2004, we issued Class C Warrants to the Cypress Entities as
discussed above.


                                       37
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

21. Employee benefit plans

Pension plan

     We provide retirement benefits to the majority of employees, under defined
contribution plans. Defined contribution plan expenses totaled $1.4 million and
$1.1 million, and $0.9 million for the years ended December 31, 2004, 2003 and
2002, respectively. In 2002 pension benefits were provided to Scottish Re
Holdings Limited employees under a defined benefit pension plan. During 2003, we
established a defined contribution plan for Scottish Re Holdings Limited. New
employees in 2003 joined this plan and a number of employees transferred from
the defined benefit scheme to the defined contribution scheme. A small number of
employees remain in the defined benefit plan and, additionally, there are
preserved benefits for some transferees and some ex-employees in the defined
benefit plan.



                                       38
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

21. Employee benefit plans (continued)

     The defined benefit plan asset activity and movement on the defined benefit
plan obligation is as follows:



<TABLE>
<CAPTION>
                                                         December 31,    December 31,   December 31,
                                                             2004           2003           2002
                                                         ------------    ------------   ------------
<S>                                                      <C>            <C>            <C>
Change in plan assets
Fair value of plan assets at beginning of year.......    $   8,243      $   4,395      $   3,838
Foreign currency translation adjustment..............          726            712              -
Actual return on plan assets.........................          598            721           (515)
Contributions........................................          925          2,487          1,330
Benefits paid........................................         (147)           (72)          (258)
                                                         ----------     ----------     ----------
Fair value of plan assets at end of year.............    $  10,345      $   8,243      $   4,395
                                                         ==========     ==========     ==========

                                                         December 31,    December 31,   December 31,
                                                             2004           2003           2002
                                                         ------------    ------------   ------------
Change in benefit obligation.........................
Benefit obligation at beginning of year..............     $  8,181      $   6,120      $   4,155
Foreign currency translation adjustment..............          719            738              -
Service cost.........................................          331            508            314
Interest cost........................................          478            363            243
Actuarial loss.......................................          675            524          1,666
Benefits paid........................................         (147)           (72)          (258)
                                                         ----------     ----------     ----------
Benefits obligation at end of year...................    $  10,237      $   8,181      $   6,120
                                                         ==========     ==========     ==========
Funded status........................................    $     108      $      62      $  (1,725)
Unrecognized net loss................................        3,452          2,747          2,475
                                                         ----------     ----------     ----------
Prepaid benefit cost.................................    $   3,560      $   2,809      $     750
                                                         ==========     ==========     ==========
</TABLE>

        Amounts recognized in the statement of financial position consist of:

<TABLE>
<CAPTION>
<S>                                                      <C>            <C>           <C>
Prepaid benefit cost.................................    $    3,560     $    2,809    $      750
Accumulated other comprehensive income...............             -              -        (1,959)
                                                         ----------     ----------     ----------
Net amount recognized................................    $    3,560     $    2,809    $   (1,209)
                                                         ==========     ==========     ==========

Weighted  average  assumptions  as of December 31,
2004 and 2003
  Weighted average discount rate.....................          5.50%          5.50%         5.50%
  Expected return on plan assets.....................          6.00%          6.50%         6.50%
  Rate of salary increases...........................          2.80%          4.25%         4.25%
  Rate of inflation..................................          2.80%          2.50%         2.25%
</TABLE>


                                       39
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

21. Employee benefit plans (continued)

     Plan assets are invested in third party investment funds that are managed
externally. The assets consist of equities, fixed maturities and cash.

     The components of net defined benefit pension costs are as follows:

<TABLE>
<CAPTION>
                                                          Year Ended    Year Ended    Year Ended
                                                         December 31,   December 31,  December 31,
                                                             2004          2003          2002
                                                         ------------   ------------  ------------
<S>                                                      <C>           <C>            <C>
  Service cost.......................................    $     331     $     553      $     314
  Interest cost......................................          478           395            243
  Expected return on plan assets.....................         (514)         (346)          (295)
  Loss amortization..................................          128           115              -
                                                         ----------    ----------     ----------
  Net periodic pension cost..........................    $     423     $     717      $     262
                                                         ==========    ==========     ==========
</TABLE>

     As a result of the accumulated benefit obligation being in excess of plan
assets at December 31, 2002 a minimum pension liability adjustment, net of tax,
of $1.4 million was recorded in other accumulated comprehensive income. At
December 31, 2003, plan assets were in excess of the accumulated benefit
obligation resulting in a change in other comprehensive income of $1.4 million.
At December 31, 2004, plan assets were in excess of the accumulated benefit
obligation, resulting in no change in the comprehensive income during the year.

401(k) plan

     We sponsor a 401(k) plan in the U.S. in which employee contributions on a
pre-tax basis are supplemented by matching contributions. These contributions
are invested, at the election of the employee, in one or more investment
portfolios. Expenses for the plan amounted to $697,000, $482,000, and $390,000,
respectively, in the years ended December 31, 2004, 2003 and 2002.

Stock option plans

     We have four stock option plans (the "1998 Plan", the "1999 Plan", the
"Harbourton Plan" and the "2001 Plan", collectively the "Plans") and an equity
incentive compensation plan ("the 2004 ECP"). The Plans allow us to grant
non-statutory options, subject to certain restrictions, to certain eligible
employees, non-employee directors, advisors and consultants. The minimum
exercise price of the options will be equal to the fair market value, as defined
in the Plans, of our ordinary shares at the date of grant. The term of the
options is between seven and ten years from the date of grant. Unless otherwise
provided in each option agreement, all granted options issued prior to December
31, 2001 become exercisable in three equal annual installments. All options
granted between January 1, 2002 and May 4, 2004, will become exercisable in five
equal installments commencing on the first anniversary of the grant date, except
for annual grants of 2,000 to each director, which are fully exercisable on the
date of grant. All options issued after May 5, 2004, become exercisable in three
equal annual installments commencing on the first anniversary of the grant date.
Total options authorized under the Plans are 3,750,000.

     At our Annual General Meeting held on May 5, 2004, our shareholders
approved the 2004 ECP. This plan allows us to grant non-statutory options and
restricted stock, subject to certain restrictions, to certain eligible
employees, non-employee directors, advisors and consultants. For the first year
of the 2004 ECP or the first 250,000 options issued, the minimum exercise price
of the options will be equal to 110% of fair market value. At the


                                       40
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

21. Employee benefit plans (continued)

discretion of our Compensation Committee, option grants after the first year of
the 2004 ECP or in excess of 250,000 options may have a minimum exercise price
equal to the fair market value of our ordinary shares at the date of grant. The
term of the options shall not be more than ten years from the date of grant.
Options will become exercisable in three equal installments commencing on the
first anniversary of the grant date. Total options authorized under the 2004 ECP
are 750,000. In addition, 1,000,000 restricted shares have been authorized under
the 2004 ECP of which at least 750,000 will vest based on achievement of certain
performance goals. The remaining 250,000 restricted shares may be issued without
performance goals. During the year we issued 90,000 units under the terms of the
2004 ECP. The issuance of these units resulted in a charge to income of $271,000
in 2004.

     In prior years, we adopted the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for employee stock options. Since the exercise price of the stock
options equals or exceeds the market price of the underlying stock on the date
of grant, no compensation expense was recognized.

     In December 2002, the Financial Accounting Standards Board issued SFAS
No.148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an
Amendment of FASB Statement No. 123". Effective January 1, 2003, we adopted the
modified prospective method of fair value-based stock option expense provisions
of SFAS No. 123 as amended by SFAS No. 148. Compensation expense has been
recognized for all stock options granted since January 1, 2003. This has
resulted in a charge to income of $844,000, $207,000 and $422,000 in the years
ended December 31, 2004, 2003, and 2002 respectively.

     Pro forma information regarding net income and earnings per share for all
outstanding stock options is required by SFAS No. 148 and has been determined as
if we accounted for all employee stock options under the fair value method of
that Statement.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period using the
Black-Scholes model. The Black-Scholes and Binomial option-pricing models were
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the expected
price volatility. Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of our employee stock options.


                                       41
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

21. Employee benefit plans (continued)

     Option activity under all Plans is as follows:

<TABLE>
<CAPTION>
                                          Year Ended         Year Ended          Year Ended
                                      December 31, 2004  December 31, 2003  December 31, 2002
                                      -----------------  -----------------  -----------------

<S>                                    <C>                <C>                <C>
Outstanding, beginning of year....           3,086,651          3,398,103          2,750,601
Granted...........................             253,000            180,000            861,500
Exercised.........................            (749,551)          (425,955)           (32,500)
Cancelled.........................             (98,864)           (65,497)          (181,498)
                                             ----------         ----------         ----------
Outstanding and  exercisable,
end of year.......................           2,491,236          3,086,651          3,398,103
                                             ==========         ==========         ==========
Weighted average exercise price
per share:........................
Granted...........................     $       23.5164    $       18.2515    $       18.0262
Exercised.........................     $       11.1209    $       10.7494    $        8.5982
Cancelled.........................     $       17.9752    $       18.2339    $       14.2490
Outstanding and  exercisable,
end of year.......................     $       14.8860    $       13.3634    $       12.8706
</TABLE>

        Summary of options outstanding at December 31, 2004:

<TABLE>
<CAPTION>
                                                               Weighted                               Weighted
                                                 Weighted      Average                  Weighted     Average
                                                 Average      Remaining     Number of    Average     Remaining
Year of      Number of         Range of          Exercise     Contractual     Shares     Exercise   Contractual
 Grant       Shares       Exercise Prices         Price         Life         Vested       Price        Life
 -----       ------       ---------------         -----         ----         ------       -----        ----
<S>         <C>           <C>                     <C>           <C>        <C>          <C>             <C>
   1998       403,336                $15.0000     $15.0000      3.92         403,336    $15.0000        3.92
   1999       222,100      $8.0625 - $15.0000     $11.2936      3.12         222,100    $11.2936        3.12
   2000       555,000      $7.7500 -  $9.0000      $8.1896      4.90         555,000     $8.1896        4.90
   2001       311,500      $7.0000 - $18.7600     $14.6627      5.32         311,500    $14.6627        5.32
   2002       572,300     $15.5000 - $21.5100     $17.9842      7.17         239,000    $18.1194        7.17
   2003       174,000     $16.6000 - $21.5100     $18.2276      8.43          46,000    $18.0991        8.41
   2004       253,000     $21.7000 - $23.8700     $23.5164      9.34          22,000    $22.0864        9.57
            ---------     -------------------     --------      ----       ---------    --------    ---------
            2,491,236      $7.0000 - $23.8700     $14.8860      6.17       1,798,936    $11.7862        5.43
            =========     ===================     ========      ====       =========    ========    =========
</TABLE>

<TABLE>
<CAPTION>
                                                                       Option Plans
                                                       Option Plans    not Approved
                                                       Approved by          by         Total Option
                                                       Shareholders    Shareholders       Plans
                                                       ------------    ------------       -----
<S>                                                     <C>             <C>             <C>
Outstanding.......................................      1,813,736         677,500       2,491,236
Weighted average exercise price...................      $ 13.8338       $ 15.2791       $ 13.3634
Available for future issuance.....................         63,225       1,639,197       1,702,422
</TABLE>

     Pro forma information regarding net income and earnings per share is
required by SFAS No. 148, and has been determined as if we accounted for all the
employee stock options under the fair value method of that Statement.

     The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, it requires the input of highly subjective
assumptions including the expected price volatility. Because our employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of our
employee stock options.


                                       42
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

21. Employee benefit plans (continued)

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period using the
Black-Scholes model. Our pro forma information is as follows:

<TABLE>
<CAPTION>
                                                           Year Ended    Year Ended    Year Ended
                                                            December      December      December
                                                            31, 2004      31, 2003      31, 2002
                                                           ----------    ----------    ----------
<S>                                                          <C>          <C>          <C>
Net income -- as reported...............................     $ 71,391     $ 27,281     $ 32,524
Stock-based employee compensation cost, net of related
   tax effects, included in the determination of net
   income as reported...................................          844          207          639
Stock-based employee compensation cost, net of related
   tax effects, that would have been included in the
   determination of net income if the fair value based
   method had been applied to all awards...............        (1,448)      (2,384)      (3,432)
                                                             ---------    ---------    ---------
Net income -- pro forma.................................     $ 70,787     $ 25,104     $ 29,731
                                                             =========    =========    =========

                                                           Year Ended    Year Ended    Year Ended
                                                            December      December      December
                                                            31, 2004      31, 2003      31, 2002
                                                           ----------    ----------    ----------
Basic net income per share -- as reported...............    $    1.99    $    0.89      $   1.29
Basic net income per share -- pro forma.................    $    1.98    $    0.82      $   1.17
Diluted net income per share -- as reported.............    $    1.90    $    0.85      $   1.23
Diluted net income per share -- pro forma...............    $    1.89    $    0.78      $   1.11

     The weighted average fair value of options granted in each year is as
follows:

                                                           Year Ended    Year Ended    Year Ended
                                                            December      December      December
                                                            31, 2004      31, 2003      31, 2002
                                                           ----------    ----------    ----------
Discounted exercise price...........................              --            --            --
Market price exercise price.........................       $  7.6581     $  6.8170     $  6.5239
Premium exercise price..............................              --            --            --

     The fair value for the options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

                                                             2004            2003           2002
                                                             ----            ----           ----
Expected dividend yield.............................    0.77% - 0.82%   1.00% - 0.82%       1.00%
Risk free interest rate.............................    1.06% - 4.77%   1.06% - 4.44%    1.09%-4.14%
Expected life of options............................       7 years         7 years         7 years
Expected volatility.................................         0.4             0.4             0.3
</TABLE>

     As of December 31, 2004, 133,334 options were outstanding in respect of
non-employees (2003 - 160,501; 2002 - 89,001). In 2002 we modified the awards of
certain employees on their termination of employment. The expense recorded in
respect of this modification was $639,000. We apply the fair value method of
SFAS No. 123 in accounting for stock options granted to non-employees who
provide services to us.


                                       43
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2004

22. Taxation

     There is presently no taxation imposed on income or capital gains by the
Governments of Bermuda and the Cayman Islands. Our Bermuda companies have been
granted an exemption from income, withholding or capital gain taxation in
Bermuda until 2016. If any taxation on income or capital gains enacted in the
Cayman Islands, Scottish Re and Scottish Annuity & Life Insurance Company
(Cayman) Ltd. have been granted an exemption until 2018; and The Scottish
Annuity Company (Cayman) Ltd. has been granted exemptions until 2014. These
companies operate in a manner such that they will owe no U.S. tax other than
premium excise taxes and withholding taxes on certain investment income.
Additionally, we have operations in various jurisdictions around the world
including, but not limited to, the U.S., U.K., Ireland and Luxembourg that are
subject to relevant taxes in those jurisdictions.

     Undistributed earnings of our subsidiaries are considered indefinitely
reinvested and, accordingly, no provision for U.S. federal withholding taxes has
been provided thereon. Our U.S. subsidiaries are subject to federal, state and
local corporate income taxes and other taxes applicable to U.S. corporations.
Upon distribution of current or accumulated earnings and profits in the form of
dividends or otherwise from our U.S. subsidiaries to us, we would be subject to
U.S. withholding taxes at a 5% rate.

     At December 31, 2004, we had net operating loss carry-forwards of
approximately $129.2 million, (2003-$168.4 million) for income tax purposes that
expire in years 2012 through 2024. These net operating loss carry-forwards
resulted primarily from our 1999 acquisition of Scottish Re (U.S.), Inc. and
from current operations of Scottish Re (U.S.), Inc. and Scottish Re Life
Corporation.

     Significant components of our deferred tax assets and liabilities as of
December 31, 2004 and 2003 were as follows:

                                                    December 31,    December 31,
                                                       2004             2003
                                                    ------------    ------------
Deferred tax asset:
   Net operating losses........................... $    46,268     $    61,077
   Reserves for future policy benefits............      29,029          13,656
   Unrealized depreciation on investments.........         793             483
   Intangible assets..............................       8,933              --
   Negative proxy deferred acquisition costs......      14,025           1,816
   Alternative minimum tax credit.................       2,318              --
   Other..........................................       6,783           3,121
                                                   ------------    ------------
Total deferred tax asset..........................     108,149          80,153
                                                   ------------    ------------
Deferred tax liability:...........................
   Unrealized appreciation on investments.........      (7,478)         (8,387)
   Undistributed earnings of U.K. subsidiaries....      (4,959)         (6,315)
   Deferred acquisition costs.....................      (9,415)        (21,893)
   Pension liability..............................      (1,068)           (859)
   Reserves for future policy benefits............     (24,433)        (27,086)
   Present value of in-force......................     (18,153)             --
   Other..........................................      (5,465)         (2,989)
                                                   ------------    ------------
Total deferred tax liability......................     (70,971)        (67,529)
                                                   ------------    ------------
Net deferred tax asset (liability)................ $    37,178     $    12,624
                                                   ------------    ------------
Valuation allowance                                    (22,148)             --
                                                   ------------    ------------


                                       44
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

22. Taxation (continued)

Net deferred tax asset                             $    15,030     $    12,624
                                                   ============    ============

     At December 31, 2004, we believe that it is more likely than not that all
gross deferred tax assets will reduce taxes payable in future years except for a
valuation allowance of $22.1 million established in 2004. This valuation
allowance is in respect of negative proxy deferred acquisition costs and
deferred acquisition costs arising in respect of the acquisition of the ING
individual life reinsurance business. This was established as a result of the
purchase accounting for the acquisition and therefore has not been included in
the determination of net income. We have also established reserves when we
believe that certain tax positions are likely to be challenged and we may not
fully prevail in overcoming these challenges.

     For the years ended December 31, 2004, 2003 and 2002 we have income tax
expense (benefit) from operations as follows:

<TABLE>
<CAPTION>
                                                     Year Ended     Year Ended     Year Ended
                                                    December 31,   December 31,   December 31,
                                                        2004           2003           2002
                                                    ------------   ------------   ------------
<S>                                                <C>             <C>            <C>
Current tax expense (benefit)..................    $    8,526      $    1,075     $    1,421
Deferred tax benefit...........................       (25,205)        (12,180)        (3,315)
                                                   -----------     -----------    -----------
Total tax benefit..............................    $  (16,679)     $  (11,105)    $   (1,894)
                                                   ===========     ===========    ===========
</TABLE>

     The acquisition of the ING individual life reinsurance business is
reflected under U.S. generally accepted accounting principles in accordance with
purchase accounting requirements but for taxation is a currently taxable
transaction. As a result, approximately $84.0 million of current tax expense and
a corresponding $84.0 million of deferred tax benefit are netted in the income
statement and are not reflected in the table above.

     Income tax expense (benefit) attributable to continuing operations differ
from the amount of income tax expense (benefit) that would result from applying
the federal statutory rates to pretax income from operating due to the
following:

<TABLE>
<CAPTION>
                                                    Year Ended     Year Ended     Year Ended
                                                   December 31,   December 31,   December 31,
                                                       2004           2003           2002
                                                   ------------   ------------   ------------
<S>                                                <C>            <C>            <C>
Pretax GAAP income at 34%......................    $    18,853    $    12,833    $    10,310
Income not subject to tax at 34%...............        (28,588)       (24,229)       (16,819)
Foreign taxes..................................         (8,578)         3,109          3,997
Negative deferred acquisition costs............           (934)        (1,427)           695
Other and state taxes..........................          2,568         (1,391)           (77)
                                                   ------------   ------------   ------------
Total tax benefit .............................    $   (16,679)   $   (11,105)   $    (1,894)
                                                   ============   ============   ============
</TABLE>

23. Statutory requirements and dividend restrictions

     Our Bermuda insurance companies are required to maintain a minimum capital
of $0.25 million. Under The Insurance Law of the Cayman Islands, Scottish
Annuity & Life Insurance Company (Cayman) Ltd. and The Scottish Annuity Company
(Cayman) Ltd. must each maintain a minimum net capital worth of $0.24 million.


                                       45
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

23. Statutory requirements and dividend restrictions (continued)

     Our ability to pay dividends depends significantly on the ability of
Scottish Annuity & Life Insurance Company (Cayman) Ltd., The Scottish Annuity
Company (Cayman) Ltd. and Scottish Re Holdings Limited to pay dividends to
Scottish Re. While we are not subject to any significant legal prohibitions on
the payment of dividends, Scottish Annuity & Life Insurance Company (Cayman)
Ltd. and The Scottish Annuity Company (Cayman) Ltd. are subject to the Cayman
Islands regulatory constraints, which affect their ability to pay dividends.
Scottish Annuity & Life Insurance Company (Cayman) Ltd. and The Scottish Annuity
Company (Cayman) Ltd. are prohibited from declaring or paying a dividend if such
payment would reduce their net capital worth below $0.24 million.

     The maximum amount of dividends that can be paid by Scottish Re (U.S.),
Inc. (a Delaware domiciled insurance company) and Scottish Re Life Corporation
(a Delaware domiciled insurance company) without prior approval of the Insurance
Commissioner is subject to restrictions relating to statutory surplus and
operating earnings. The maximum dividend payment that may be made without prior
approval is limited to the greater of the net gain from operations for the
preceding year or 10% of statutory surplus as of December 31 of the preceding
year not exceeding earned surplus. The statutory earned surplus of Scottish Re
(U.S.), Inc. and Scottish Re Life Corporation at December 31, 2004 were $(227.8)
million (2003 - $(212.5) million) and $(68.3) million (2003- $(2.1) billion),
respectively, accordingly no dividends can be paid from either company in 2005
without the prior approval of the Insurance Commissioner. Scottish Re (U.S.),
Inc.'s net assets, which are restricted by the above are $253.7 million (2003 -
$51.9 million) and Scottish Re Life Corporation's net assets, which are
restricted are $75.5 million (2003- $143.8 million).

     The NAIC prescribes risk-based capital ("RBC") requirements for U.S.
domiciled life and health insurance companies. As of December 31, 2004 and 2003,
Scottish Re (U.S.), Inc. and Scottish Re Life Corporation exceeded all minimum
RBC requirements.

     In connection with the Insurance Companies Act 1982 of the United Kingdom,
Scottish Re Limited is required to maintain statutory minimum net capital of
approximately $65.4 million at December 31, 2004 (December 31,2003 - $34.0
million). Scottish Re Limited had statutory capital of approximately $78.7
million at December 31, 2004 (December 31, 2003 - $58.0 million).

24. Commitments and contingencies

Credit facilities

     On December 29, 2004, we, Scottish Re (Dublin) Limited, Scottish Re (U.S.),
Inc., and Scottish Re Limited closed a $175.0 million, 364-day revolving credit
facility with a syndicate of banks led by Bank of America, N.A. The facility
provides capacity for borrowing and for extending letters of credit. The
proceeds from the facility will be used for working capital, capital
expenditures and general corporate purposes. The facility is a direct financial
obligation of each of the borrowers; however, we have guaranteed the payment of
obligations of Scottish Re (Dublin) Limited, Scottish Re (U.S.), Inc., and
Scottish Re Limited.

     The facility may be increased to an aggregate principal amount of $200.0
million. The interest rate on each loan made under the facility, as determined
by the nature of the loan, will be at (i) the Federal Funds Rate plus 0.50%,
(ii) the prime rate as announced by Bank of America, N.A., or (iii) the British
Bankers Association LIBOR Rate plus an applicable margin.

     The facility requires that Scottish Annuity & Life Insurance Company
(Cayman) Ltd. maintain a minimum amount of shareholder's equity, a debt to
capitalization ratio of less than 20% and uncollateralized assets of 1.2


                                       46
<PAGE>


                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

24. Commitments and contingencies (continued)

times borrowings. In addition, the facility requires that Scottish Re Group
Limited maintain a minimum amount of shareholders' equity, and a debt to
capitalization ratio of less than 30%. The facility also requires that Scottish
Re (U.S.), Inc. maintain minimum capital and surplus equal to the greater of (i)
$20 million or (ii) the amount necessary to prevent a company action level event
from occurring under the risk based capital laws of Delaware. Our failure to
comply with the requirements of the credit facility would, subject to grace
periods, result in an event of default, and we could be required to repay any
outstanding borrowings. At December 31, 2004, there were no borrowings under the
facilities. Outstanding letters of credit under these facilities amounted to
$35.8 million as at December 31, 2004.

     We also have a reverse repurchase agreement with a major broker/dealer.
Under this agreement, we have the ability to sell agency mortgage backed
securities with the agreement to repurchase them at a fixed price, providing the
dealer with a spread that equates to an effective borrowing cost linked to
one-month LIBOR. This agreement is renewable monthly at the discretion of the
broker/dealer. At December 31, 2004, there were no borrowings under this
agreement.


                                       47
<PAGE>

                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

24. Commitments and contingencies (continued)

Lease commitments

     Scottish Re and its subsidiaries lease office space in the countries in
which they conduct business under operating leases that expire at various dates
through 2023. Total rent expense with respect to these operating leases for the
years ended December 31, 2004, 2003 and 2002, were approximately $1.9 million,
$1.7 million and $0.9 million respectively.

     Future minimum lease payments under the leases are expected to be:

             Year ending December 31
             ----------------------------------------------  --------
             2005..........................................  $  2,656
             2006..........................................     2,681
             2007..........................................     2,668
             2008..........................................     2,699
             2009..........................................     2,731
             Later years...................................    20,158
                                                             --------
             Total future lease commitments................  $ 33,593
                                                             ========

Legal proceedings

     In the normal course of our business, we and our subsidiaries are
occasionally involved in litigation. The ultimate disposition of such litigation
is not expected to have a material adverse effect on our financial condition,
liquidity or results of operations.


25. Subsequent Events

     On January 12, 2005 we closed an offering of $325.0 million Collateral
Facility Securities by Stingray Pass-Through Trust issued under Rule 144A. This
facility allows Scottish Annuity & Life Insurance Company (Cayman) Ltd. to issue
funding agreements at a pre-determined price, without any condition and at any
time, in exchange for a portfolio of highly rated 30-day commercial paper. The
facility matures on January 12, 2015.

     On February 11, 2005 we closed an offering of $850.0 million 30 year
maturity securities from a newly formed, wholly owned subsidiary Orkney
Holdings, LLC. Proceeds from this offering will fund the XXX reserve
requirements for level premium term life insurance policies reinsured by
Scottish Re (U.S.), Inc. between January 1, 2000 and December 31, 2003. The
securities are guaranteed by MBIA Insurance Corporation, and are rated "AAA" by
Standard & Poor's and Aaa by Moody's.


                                       48
<PAGE>


                            SCOTTISH RE GROUP LIMITED

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2004

26. Quarterly financial data (Unaudited)

     Quarterly financial data for the year ended December 31, 2004 is as
follows:

<TABLE>
<CAPTION>
                                                                                    Quarter Ended
                                                              ----------------------------------------------------
                                                              December 31    September 30     June 30     March 31
                                                              -----------    ------------     -------     --------
<S>                                                            <C>            <C>           <C>          <C>
Total revenue..........................................        $ 210,645      $ 195,085     $ 226,909    $ 179,178
Income (loss) from continuing operations before                   10,970          6,194        26,970       11,317
   income taxes and minority interest..................
Income from continuing operations......................           21,257         11,578        28,671       10,093
Net income.............................................           21,049         11,578        28,671       10,093
Basic earnings per ordinary share......................        $    0.58      $    0.32     $    0.80    $    0.29
Diluted earnings per ordinary share....................        $    0.56      $    0.31     $    0.77    $    0.27

     Quarterly financial data for the year ended December 31, 2003 is as
follows:

                                                                                    Quarter Ended
                                                              ----------------------------------------------------
                                                              December 31    September 30     June 30     March 31
                                                              -----------    ------------     -------     --------
Total revenue..........................................        $ 196,465      $ 134,550     $ 129,539    $  96,813
Income from continuing operations before income
   taxes and minority interest.........................           27,224         (6,383)        9,233        7,672
Income from continuing operations......................           30,268          1,782         9,317        7,422
Net income.............................................           10,542          1,625         7,872        7,242
Basic earnings per ordinary share......................        $    0.30      $    0.05     $    0.29    $    0.27
Diluted earnings per ordinary share....................        $    0.29      $    0.05     $    0.28    $    0.26
</TABLE>

     Computations of results per share for each quarter are made independently
of results per share for the year. Due to rounding and transactions affecting
the weighted average number of shares outstanding in each quarter, the sum of
quarterly results per share does not equal results per share for the year.


                                       49
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant, in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
               Signature                                  Title                      Date

<S>                                            <C>                                <C>
                   *
-----------------------------------------
           Michael C. French                   Chairman and Director              April 11, 2005


                   *
-----------------------------------------
             Michael Austin                    Director                           April 11, 2005


                   *
-----------------------------------------
      G. William Caulfeild-Browne              Director                           April 11, 2005


                   *
-----------------------------------------
            Robert M. Chmely                   Director                           April 11, 2005


                   *
-----------------------------------------
          Jean Claude Damerval                 Director                           April 11, 2005


                   *
-----------------------------------------
           Lord Norman Lamont                  Director                           April 11, 2005


                   *
-----------------------------------------
             Hazel O'Leary                     Director                           April 11, 2005


                   *
-----------------------------------------
            William Spiegel                    Director                           April 11, 2005


                   *
-----------------------------------------
           Scott E. Willkomm                   CEO, President and Director        April 11, 2005
</TABLE>


*    The undersigned, by signing his name hereto, does hereby sign this
     Amendment No. 1 to the Annual Report on Form 10-K/A pursuant to the Powers
     of Attorney executed on behalf of the above named officers and directors of
     the Registrant and previously filed with the Securities and Exchange
     Commission.


/s/ Paul Goldean
----------------------------------------
Paul Goldean
Attorney-in-Fact