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

                            ------------------------

                                   FORM 10-K

                   FOR ANNUAL AND TRANSITION REPORTS PURSUANT
         TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

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<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934

              FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
   / /     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
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                            ------------------------

                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             (Exact Name of Registrant as Specified in Its Charter)

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<S>                                             <C>
             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)
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       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (441) 295-4451

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

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<Caption>
            TITLE OF EACH CLASS               NAME OF EACH EXCHANGE ON WHICH REGISTERED
            -------------------               -----------------------------------------
<S>                                          <C>
ORDINARY SHARES, PAR VALUE $0.01 PER SHARE             NEW YORK STOCK EXCHANGE
</Table>

          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. /X/

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 28, 2002 was $246,663,887.

    As of February 28, 2002, Registrant had 20,144,956 ordinary shares
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Certain information required by Items 10, 11, 12 and 13 of Form 10-K is
incorporated by reference into Part III hereof from the registrant's proxy
statement for its 2002 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, 2001.

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                               TABLE OF CONTENTS

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<S>          <C>                                                           <C>
PART I                                                                         1

Item 1:      BUSINESS....................................................      1

Item 2:      PROPERTY....................................................     28

Item 3:      LEGAL PROCEEDINGS...........................................     28

Item 4:      SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.......     29

PART II                                                                       30

Item 5:      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
               SHAREHOLDER MATTERS.......................................     30

Item 6:      SELECTED FINANCIAL DATA.....................................     31

Item 7:      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS.................................     32

Item 7A:     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
               RISK......................................................     45

Item 8:      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................     48

Item 9:      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE..................................     48

PART III                                                                      48

Item 10:     DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT..............     48

Item 11:     EXECUTIVE COMPENSATION......................................     48

Item 12:     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT................................................     48

Item 13:     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............     48

PART IV                                                                       49

Item 14:     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
               FORM 8-K..................................................     49

SIGNATURES...............................................................     79
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                                     PART I

ITEM 1: BUSINESS

OVERVIEW

    Scottish Annuity & Life Holdings, Ltd., which we call Scottish Holdings, is
a holding company organized under the laws of the Cayman Islands with its
principal executive office in Bermuda. Through our operating subsidiaries, we
are engaged in the reinsurance 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, Ireland, the
United Kingdom and the United States. Our flagship subsidiaries, Scottish
Annuity & Life Insurance Company (Cayman) Ltd. and Scottish Re (U.S.), Inc. are
each rated "A- (excellent)" for financial strength by A.M. Best Company, "A
(strong)" for financial strength by Fitch Ratings, "A3 (good)" for financial
strength by Moody's and "A- (strong)" for financial strength by Standard &
Poor's. These ratings are based upon factors of concern to policyholders, agents
and intermediaries and are not directed toward the protection of investors.

    We have grown to be one of the 20 largest life reinsurers serving the U.S.
market (based on the amount of new life reinsurance business assumed in 2000)
since our formation in 1998. In addition, on December 31, 2001, we expanded our
business outside of North America by acquiring World-Wide Holdings Limited,
which we call World-Wide Holdings, and its subsidiary, World-Wide Reassurance
Company Limited, which we call World-Wide Reassurance, from Pacific Life
Insurance Company in exchange for 4,532,380 (approximately 22.5%) of our
ordinary shares.

    World-Wide Reassurance, formed in 1964, is a U.K.-based reinsurer of group
life insurance, individual life insurance, airline pilot "loss of license"
insurance and certain dread disease indemnity insurance business in Asia,
Europe, Latin America, the Middle East and North Africa. World-Wide Reassurance
is rated "A- (excellent)" for financial strength by A.M. Best, "A- (strong)" for
financial strength by Fitch and "A- (strong)" for financial strength by
Standard & Poor's.

    As of December 31, 2001, including World-Wide Holdings, we had consolidated
assets of $2.2 billion and consolidated shareholders' equity of $331.3 million.
As of December 31, 2001, World-Wide Holdings had assets of $164.5 million and
shareholders' equity of $51.0 million.

OUR BUSINESS

LIFE REINSURANCE

    Reinsurance is an arrangement under which an insurance company known as the
reinsurer agrees in a contract called a treaty to assume specified risks of
another insurance company known as the ceding company. The reinsurer may assume
all or a portion of the insurance underwritten by the ceding company. In
exchange for assuming the risks of the ceding company, the reinsurer receives
some or all of the premium and, in certain cases, investment income derived from
the assets supporting the reserves of the reinsured policies. Reinsurance
permits primary insurers to diversify their risks over larger pools of risks,
and to write insurance policies in amounts larger than they are willing or able
to retain. Also, reinsurers have the ability to structure treaties that allow
the ceding companies to achieve other business and financial objectives such as:

    - decreasing the volatility of their earnings,

    - improving their capital position by reducing the financial strain
      associated with new business production or by increasing their risk-based
      capital ratio,

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    - entering new lines of business and offering new products, and

    - exiting discontinued lines of business.

    In addition, reinsurers may also purchase reinsurance, or "retrocession"
coverage, to limit their own risk exposure.

    We have two categories of life reinsurance products, which we call
Traditional Solutions and Financial Solutions.

    - TRADITIONAL SOLUTIONS. In our Traditional Solutions business, we reinsure
      the mortality risk on life insurance policies written by primary insurers.
      This business is often referred to as traditional life reinsurance. We
      write our Traditional Solutions business predominantly on an automatic
      basis with respect to newly written life insurance policies. This means
      that we automatically reinsure all policies written by a ceding company
      that meet the underwriting criteria specified in the treaty. In the North
      American market, our direct sales force targets the top 60 life insurance
      companies. These companies are responsible for originating over 80% of all
      term life insurance written in that market. World-Wide Reassurance offers
      traditional life reinsurance products outside of North America, focusing
      primarily on the reinsurance of short-term, group life policies in niche
      market sectors and accepts retrocessions from reinsurers in North America.

    - FINANCIAL SOLUTIONS. In our Financial Solutions business, we offer
      reinsurance solutions that improve the financial position of our clients
      by increasing their capital availability and statutory surplus. This
      business is often referred to as financial reinsurance. These solutions
      include contracts under which we assume the investment and persistency
      risks of existing, as well as newly written, blocks of business. The
      products reinsured include annuities and annuity-type products, cash value
      life insurance and, to a lesser extent, disability products that are in a
      pay-out phase.

    The traditional life reinsurance industry has experienced significant growth
over the past several years. According to an industry survey, the face amount of
traditional life reinsurance assumed in the United States has grown from
approximately $261 billion in 1995 to approximately $985 billion in 2000, a 30%
compounded annual growth rate. During the same period, the face amount of life
insurance written in the United States has grown from approximately
$1.1 trillion in 1995 to approximately $1.8 trillion in 2000, a 10% compounded
annual growth rate.

    According to the same survey, the face amount of U.S. financial reinsurance
assumed has also grown significantly, increasing from approximately $68 billion
in 1995 to approximately $157 billion in 2000, a compounded annual growth rate
of 18%.

    We believe that the following trends have contributed and will continue to
contribute to the increasing demand for life reinsurance and increased business
opportunities for us:

    - CONSOLIDATION IN THE LIFE INSURANCE INDUSTRY. Consolidation in the life
      insurance industry may create opportunities for life reinsurers. Life
      reinsurers provide financial reinsurance to help acquirors finance the
      cash portion of an acquisition, and we expect that additional
      consolidation in the life insurance business may result in incremental
      opportunities for life reinsurers. In addition, in the context of an
      acquisition, an acquiror may focus on the most promising lines of business
      and divest non-core lines of business through reinsurance.

    - CONSOLIDATION IN THE LIFE REINSURANCE INDUSTRY. The number of merger and
      acquisition transactions within the U.S. life reinsurance industry has
      increased in recent years. The consolidation of the life reinsurance
      industry has reduced the amount of life reinsurance capacity available and
      caused primary insurers to be exposed to concentrated counter-party risk
      with the larger consolidating reinsurers. We believe that consolidation
      will continue and ceding companies will reinsure a portion of their
      business with smaller reinsurers like us in order to reduce their
      counter-party risk.

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    - INCREASED CAPITAL SENSITIVITY. We believe that insurance companies are now
      more focused on capital efficiency and return on capital than in the past.
      As a result, primary insurers are increasingly utilizing the outside
      capital provided by reinsurance to help finance growth and to free up
      capital to pursue new businesses. We believe that the demutualization of
      life insurance companies contributes to this trend as these newly publicly
      traded companies are motivated to improve their operating performance for
      their investor base.

    - FLIGHT TO QUALITY. Particularly in the wake of the terrorist attacks in
      the United States on September 11, 2001, we believe that ceding companies
      are increasingly focused on the financial strength ratings of their
      reinsurers, as well as the aggregate amount of capital maintained by their
      reinsurers.

    - EXPANDING OVERSEAS MARKETS. We believe that the trends described above in
      the North American market are also influencing the reinsurance industry
      throughout the world. In addition, we believe there are increasing
      opportunities in markets such as Asia, Europe, Latin America, the Middle
      East, and North Africa, where the life reinsurance industry is either
      developing or expanding.

    - CHANGING DEMOGRAPHICS. We expect that the increasing number of "baby
      boomers" reaching middle and late middle age will increase the demand for
      products which address retirement planning, estate planning and
      survivorship issues. In addition, we believe that longer life expectancies
      and the reduction in government and employer sponsored benefit programs
      will increase the demand for life insurance and annuities. We expect this
      increased demand for insurance to increase demand for reinsurance
      products.

WEALTH MANAGEMENT

    Our variable life insurance and variable annuity products offer high net
worth clients the benefits of investment-oriented insurance products for use in
tax and estate planning. Offering our products from companies based in Bermuda
and the Cayman Islands provides us greater flexibility in structuring these
products. We receive fee income based on the assets associated with our
products. Our products are targeted towards high net worth individuals and
families who generally have a liquid net worth of more than $10 million. The
wealth management business requires relatively little capital and we believe
that it generates a stable source of fee income. We expect that the market for
products aimed at high net worth individuals and families will expand as the
number of high net worth individuals needing tax and estate planning services
and expertise grows.

OUR STRATEGY

    Our strategy is to use our experience and structural advantages to focus on
life reinsurance and insurance products where we can deliver specialized advice
and products to our customers. We plan to increase the value of our franchise by
focusing on the following:

    - EXPANDING THE SIZE AND DEPTH OF OUR REINSURANCE CLIENT BASE. We will
      continue to expand our core U.S. business by attempting to gain a larger
      share of the U.S. life reinsurance market both by adding new clients and
      expanding the business relationships with existing clients. In addition,
      we may pursue selected strategic acquisitions of other life reinsurance
      businesses.

    - BUILDING OUR WEALTH MANAGEMENT BUSINESS. We will continue to increase our
      separate account assets by increasing the number of wealth management
      clients and expanding our business into select European markets.

    - INCREASING OUR FEE INCOME. We will continue to increase our fee income
      from both life reinsurance transactions and our wealth management
      business.

    - ENHANCING OUR FINANCIAL STRENGTH. We will continue to enhance our capital
      position and financial strength to meet the security needs of our
      customers and the capital requirements of rating

                                       3
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      agencies. Also, by enhancing our financial strength and capital resources,
      we would expect to have opportunities to participate in reinsurance
      transactions in which we might not be currently eligible to participate.
      We also expect that enhancing our financial position will allow us to
      reduce our cost of, and improve our access to, captial.

    - CAPITALIZING ON OUR REINSURANCE EXPERIENCE. We will continue to focus our
      marketing efforts on products that allow us to capitalize on the extensive
      experience of our management and key employees.

    - LEVERAGING EFFICIENT OPERATING STRUCTURE AND ORGANIZATIONAL FLEXIBILITY.
      We will continue to leverage our ability to conduct business in multiple
      jurisdictions, which provides us with a flexible and efficient operating
      platform. Moreover, as we grow our businesses and leverage the
      capabilities of our corporate infrastructure, we expect to improve our
      operating margins.

    - GROWING OUR OVERSEAS BUSINESS. We will leverage the specialized knowledge
      and established relationships of World-Wide Reassurance to continue our
      growth in the less competitive markets outside of North America.

PRODUCTS OFFERED

LIFE REINSURANCE

    We reinsure a broad range of life insurance and annuity products. Life
insurance products that we reinsure include yearly renewable term, term with
multi-year guarantees, ordinary life and variable life. Retail annuity products
that we reinsure include fixed immediate annuities, fixed deferred annuities and
variable annuities. In addition, we reinsure and may issue directly
institutional annuity-type products such as funding agreements, guaranteed
investment contracts, and pension termination and structured settlement
annuities.

    For these products, we write reinsurance generally in the form of yearly
renewable term, coinsurance or modified coinsurance. Under yearly renewable
term, we share only in the mortality risk for which we receive a premium. In a
coinsurance or modified coinsurance arrangement, we generally share
proportionately in all material risks inherent in the underlying policies
including mortality, lapses and fluctuations in investments. Under such
agreements, we agree to indemnify the primary insurer for all or a portion of
the risks associated with the underlying insurance policy in exchange for a
proportionate share of premiums. Coinsurance differs from modified coinsurance
with respect to ownership of the assets supporting the reserves. Under our
coinsurance arrangements, ownership of these assets is transferred to us,
whereas, in modified coinsurance arrangements, the ceding company retains
ownership of these assets, but we share in the investment income and risk
associated with the assets.

    Our reinsurance treaties are written predominantly on an automatic basis. An
automatic treaty provides for a ceding company to cede contractually agreed-upon
risks on specific blocks of business to us. The reinsurance may be solicited
directly by us or through reinsurance intermediaries and may be written on
either:

    - a proportional basis under which a specified percentage of each risk in
      the reinsured class of risk is assumed by us from the ceding company,
      along with our portion of the underlying premiums in proportion to such
      assumed risk; or

    - an excess of loss basis under which we indemnify the ceding company, up to
      a contractually-specified amount, for a portion of claims exceeding a
      specified retention amount, in consideration of non-proportional premiums
      being paid.

    In order to diversify our mortality exposure, we seek to limit our
consolidated retained exposure under life policies to no more than $500,000 per
life.

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    Our reinsurance treaties may provide for recapture rights, permitting the
ceding company to reassume all or a portion of the risk ceded to us after an
agreed-upon period of time (generally 10 years), subject to certain other
conditions. Some of our reinsurance treaties allow the ceding company to
recapture the ceded risk if we fail to maintain a specified rating or if other
financial conditions relating to us are not satisfied. Recapture of business
previously ceded does not affect premiums ceded prior to the recapture of such
business and typically involves the payment of a recapture fee to us.
Nevertheless, we may need to liquidate substantial assets in order to return the
assets supporting the reserves to the ceding company, and we may also have to
accelerate the amortization of unamortized deferred acquisition costs associated
with the recaptured business, which would reduce our earnings.

    The potential adverse effects of recapture rights are mitigated by the
following factors:

    - By recapturing reinsurance, ceding companies increase the amount of risk
      they retain.

    - Ceding companies generally must recapture all of the policies reinsured
      under a treaty once a recapture is undertaken.

    - We price our treaties with the goal of achieving our target return before
      the recapture date.

WEALTH MANAGEMENT

    Our wealth management business consists of the issuance of variable life
insurance policies and variable annuities and similar products to high net worth
individuals and families. Variable insurance products are often used in
connection with estate and investment planning strategies. Premiums, net of
expenses, paid by the policyholder with respect to our variable products are
placed in a separate account for the benefit of the policyholder. We invest
premiums in each separate account with one or more investment managers, some of
whom the policyholder may recommend and all of whom are appointed by us in our
sole discretion. The policyholder retains the benefits of favorable investment
performance, as well as the risk of adverse investment results. Assets held in
the separate accounts are generally not subject to the claims of our general
creditors. We do not provide any investment management or advisory services
directly to any individual variable life or variable annuity policyholder.

    Variable life insurance policies provide tax-deferred appreciation of the
assets in the separate account. These policies also provide a death benefit and,
if properly structured, may also permit loans against the value of the policy's
assets. Death benefit payments are generally not subject to U.S. income tax. Our
minimum initial premium for a variable life insurance policy is $2 million.

    Variable annuities provide tax-deferred appreciation of the assets in the
separate account until funds are withdrawn or annuity payments begin. There is
no additional death benefit provided by a variable annuity. Our minimum initial
premium deposit for a variable annuity is $1 million and additional premium
deposits may be made.

    Our revenues earned from these policies consist of insurance and
administrative fees assessed against the assets in each separate account.

    Our variable products do not guarantee investment returns.

WORLD-WIDE REASSURANCE

    World-Wide Reassurance specializes in the reinsurance of risks such as group
life insurance, individual life insurance, airline pilot "loss of license"
insurance, and to a lesser extent certain dread disease indemnity insurance.
Group life reinsurance represents the majority of World-Wide Reassurance's
portfolio of business. Most of the business underwritten by World-Wide
Reassurance is short-term business.

    World-Wide Reassurance's strategy is to target customers in developing
markets as well as selected developed markets. These developing markets include
Asia, Latin America, the Middle East, North Africa and Southern and Eastern
Europe. In more developed markets, World-Wide Reassurance targets "niche"

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market sectors that require a high degree of knowledge and experience.
World-Wide Reassurance's customers typically do not have the ability to analyze
and price the risk assumed and, therefore, rely on World-Wide Reassurance's
reinsurance experience. World-Wide Reassurance also accepts retrocessions of
life reinsurance from ceding reinsurers in the United States. We believe that
the strategies of World-Wide Reassurance allow it to obtain reinsurance business
on more favorable terms than are available in the large, mature markets of North
America and Western Europe.

    World-Wide Reassurance's core market is the Middle East, where it has been
active since the early 1990s. For the year ended September 30, 2001,
approximately 23% of World-Wide Reassurance's total premiums earned originated
from Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and the United
Arab Emirates. World-Wide Reassurance writes a majority of its business in the
Middle East on a facultative basis, meaning that it reinsures specifically
identified risks or pools of risks as opposed to all risks of a specified type.
This business, on average, is renewable every year, although contracts with
World-Wide Reassurance's largest account in the Middle East region cover a
period of three years. In addition, World-Wide Reassurance has developed a
database of the mortality and morbidity experience in the Middle East.

    In Latin America, World-Wide Reassurance does business primarily in
Argentina, Columbia and Peru, and to a lesser extent in Chile and Ecuador. In
Asia, World-Wide Reassurance's target niche market is in Japan, which is
experiencing the development of small affinity group mutual organizations known
as KYOSAI, as a parallel sector to large insurance companies.

    World-Wide Reassurance has also developed a niche business in the United
Kingdom. World-Wide Reassurance reinsures airline pilot "loss of license"
coverage, which entails the payment of lump sum benefits if a pilot loses his
license for medical reasons, as well as temporary benefits for the period of
time during which the pilot is grounded and waiting for the results of the
medical examination. World-Wide Reassurance is also one of the largest
reinsurers of life insurance coverage for police forces in the United Kingdom.

MARKETING

LIFE REINSURANCE

    In our life reinsurance business, we market to North American life insurance
and life reinsurance companies. We also target institutions, such as pensions
plans, that have life insurance-related risks and that we believe would benefit
from our reinsurance products based on our analysis of publicly available
information and other industry data. Where permitted by law, we actively market
our reinsurance products primarily on a direct basis. We also seek to capitalize
on the relationships developed by our executive officers and marketing staff
with members of the actuarial profession and senior insurance company
executives, at both primary insurers and other reinsurers. Finally, we work with
reinsurance intermediaries, brokers and consultants who are engaged in obtaining
reinsurance on behalf of their clients.

    World-Wide Reassurance markets its products through international brokers
and its own marketing staff to international life insurance and life reinsurance
companies. Although most of its business is transacted through brokers,
World-Wide Reassurance's marketing staff maintains relationships with
reinsurance clients through regular visits to clients throughout its
territories.

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WEALTH MANAGEMENT

    In our wealth management business, we seek to write variable life insurance
and variable annuity products for high net worth individuals and families with
at least $10 million of liquid net worth. Because we offer variable products
that we believe comply with U.S. Internal Revenue Code requirements for
insurance products, we typically insure U.S. persons, individuals with U.S.
beneficiaries or non-U.S. persons with a U.S. tax presence. Because our non-U.S.
insurance subsidiaries are not licensed to conduct insurance business in any
jurisdiction in the United States, we cannot utilize traditional life insurance
marketing channels such as agents, nor can we use mail-order or other
direct-marketing channels to conduct business with persons in the United States
or certain other jurisdictions. Accordingly, we rely primarily on referrals by
financial advisors, investment managers, private bankers, attorneys and other
intermediaries in Europe and the United States to generate wealth management
business. None of these intermediaries represents us as agent or in any other
capacity, nor do they receive any commissions or other remuneration from us for
activities undertaken on our behalf in the United States.

RISK MANAGEMENT

LIFE REINSURANCE

    We bear five principal classes of risk in our life reinsurance products:

    - mortality risk,

    - investment risk,

    - persistency risk,

    - expense risk, and

    - counter-party risk.

    Mortality risk is the risk that death claims exceed what we expect. A
greater frequency or higher average size of death benefits than we expected can
cause us to pay greater death benefits, adversely affecting our profitability.
Even if the total death benefits paid over the life of our contracts do not
exceed the expected amount, sporadic timing of deaths can cause us to pay more
death benefits in a given time period than expected, adversely impacting our
profitability in that period. We address these risks through selection,
diversification and retrocession. We analyze each block of business based on an
evaluation of the ceding company's history, management, target market, products
and underwriting criteria relative to the industry. We target primarily first
dollar quota share pools of top producing direct writing companies so that we
participate proportionately with other reinsurers on all of the ceded risks. In
addition, we diversify our risks by participating in annuity and disability
products in the payout stage where the mortality risk is the risk of later,
rather than earlier, deaths than expected. A mix of these products with life
products can help offset general trends in population mortality. We mitigate our
risk of exposure to any one block of business or any one individual life by
limiting our share to generally 20-25% in any one pool. We further address the
risk of any one large claim by utilizing retrocession above our retention of
$500,000 per life.

    Our investments, which primarily consist of fixed income securities, are
subject to market value, reinvestment and liquidity risk. Our invested assets
are funded not only by capital but also by the proceeds of reinsurance
transactions, some of which entail substantial deposits of funds or assets. The
policies that we reinsure contain provisions that tend to increase benefits to
customers depending on movements in interest rates.

    We analyze the potential results of a transaction, including the cash flows
of the liabilities and of the related assets and any risk mitigation measures,
and we price transactions to cover our costs, including estimated credit losses,
and earn a desirable risk-adjusted return under various scenarios. Although we

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have not done so in the past, we may use interest rate swaps and other hedging
instruments as tools to mitigate these risks. We may also retrocede some risks
to other reinsurers.

    Persistency risk is the risk that policyholders maintain their policies for
either longer or shorter periods than expected. Persistency can be affected by
surrenders and policy lapses. Surrenders are the voluntary termination of a
policy by the policyholder and lapses are the termination of the policy due to
non-payment of the premium. Surrenders usually involve the return of the
policy's cash surrender value to the policyholder. The risk is that actual
persistency is significantly different from the persistency we assumed in
pricing. Persistency significantly higher than priced for can cause us to pay
greater than expected death benefits in future years, adversely impacting our
profitability. Persistency significantly lower than priced for can cause our
deferred acquisition costs to be unrecoverable, possibly causing a loss
recognition that would adversely impact our profitability. For policies with
cash surrender benefits, surrenders significantly greater from expected will
also cause increased liquidity risk. We address these risks through
diversification and surrender charges.

    Expense risk is the risk that actual expenses will be higher than those
covered in pricing. The risk is that expenses per policy reinsured are higher as
a result of a lower number of policies than anticipated, or that our operations
are less efficient than anticipated. We address this risk through the use of
automation, bulk reporting and management of general expenses.

    Counter-party risk is the risk that retrocessionaires will be unable to pay
claims as they become due. We limit and diversify our counter-party risk by
spreading our retrocession over a pool comprised of six highly rated
retrocessionaires. Our underwriting guidelines provide that any retrocessionaire
to whom we cede business must have a financial strength rating of at least "A-"
or higher from A.M. Best or an equivalent rating by another major rating agency.
However, even if a retrocessionaire does not pay a claim submitted by us, we are
still responsible for paying that claim to the ceding company.

WEALTH MANAGEMENT

    The four principal risks associated with our wealth management business are:

    - mortality risk,

    - counter-party risk,

    - persistency risk, and

    - expense risk.

    Since we do not have the direct investment risks associated with our wealth
management products, the principal risk in our variable life insurance business
is mortality risk. The death benefits provided by our variable life insurance
policies vary based on the investment return of the underlying separate account
assets invested by the investment managers. The difference between the value of
the assets in the underlying separate account and the policy's stated death
benefit, known as the "net amount at risk," represents a general liability of
the insurance subsidiary. Mortality risk tends to be more stable when spread
across large numbers of insureds. We expect that our variable life insurance
policies will have relatively large face amounts and will be held by a
relatively small number of policyholders. Consequently, our associated mortality
risk exposure will be greater in the aggregate, and our probability of loss less
predictable, than an insurer with a broader risk pool. Therefore, pursuant to
our underwriting guidelines, we reinsure substantially all of the mortality risk
associated with our variable life insurance business with highly rated
reinsurers and accordingly rely upon our reinsurers' obligation and ability to
pay death claims. The counter-party risk is that one or more of our reinsurers
may fail to pay a reinsured death claim under a variable life insurance policy.

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INVESTMENT PORTFOLIO

GENERAL

    Our general account investment portfolio consists of investments and cash
and cash equivalents, which we control, and funds withheld at interest, which
are associated with modified coinsurance agreements. In modified coinsurance
transactions, the ceding insurance company retains the assets supporting the
ceded business and manages them for our account. Although the ceding company
must adhere to general standards agreed to by us for the management of these
assets, we do not control the selection of the specific investments or the
timing of the purchase or sale of investments made by the ceding company.

    The portfolio that we control consists primarily of investment-grade fixed
income securities and cash. We seek to generate attractive levels of investment
income while limiting exposure to risks of changing interest rates, excess
default experience and adverse changes in asset values. A third party investment
manager manages the portfolio. Although we retain control over asset-liability
management, investment policy and strategy, compliance and evaluation of
results, we may not be able to effectively manage investment results and risks
in an asset-liability context, which could adversely affect our ability to
support our businesses, our results of operations and our financial condition.

INVESTMENT OVERSIGHT

    Our Board of Directors and its Finance and Investments Committee review our
investment portfolio and the performance of our investment manager. In addition,
our Board of Directors approves changes in the investment policy proposed by
management and oversee compliance with the investment policy. Our Board of
Directors can approve exceptions to our investment policy and periodically
reviews our investment policy in light of prevailing market conditions. The
investment manager and our investment policy may be changed from time to time as
a result of such reviews.

INVESTMENT POLICY

    Our investment policy includes limits requiring diversification by asset
class, fixed income sector and single issuers and limits exposure to lower-rated
securities. It also limits reinvestment risk and requires effective
asset-liability management processes including the maintenance of adequate
liquidity to meet potential cash outflows.

    We are exposed to three primary sources of investment risk on fixed income
investments: market value, reinvestment and liquidity risk. Market value risk is
the risk that our invested assets will decrease in value due to a change in the
yields realized on our assets, a change in the prevailing market yields for
similar assets, an unfavorable change in the liquidity of the investment or an
unfavorable change in the financial prospects or a downgrade in the credit
rating of the issuer of the investment. Reinvestment risk is the risk that
interest rates will decline and funds reinvested will earn less than expected.
Liquidity risk is the risk that liabilities are surrendered or mature sooner
than anticipated, requiring us to sell assets at an undesirable time to provide
for policyholder surrenders or withdrawals.

    We manage these risks through industry and issuer diversification, overall
limits on the amounts of credit risk taken and asset-liability management, which
we refer to as ALM. Our primary ALM practices include:

    - modeling the cash flows necessary to service each existing and newly
      written reinsurance liability by considering various interest rate
      scenarios;

    - targeting new investments with cash flows suitable for new and existing
      liabilities;

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    - evaluating and quantifying the risks to earnings and the economic value of
      shareholders' equity created by gaps between the projected cash flows from
      existing assets and those required by in-force liabilities;

    - reducing the risks caused by mismatches by opportunistically buying
      matching new investments; and

    - using interest rate swaps, futures, and other financial instruments to
      hedge significant risks that occur during the investment origination
      process and that may remain in our in-force asset-liability configuration.

    We may use foreign denominated securities to manage currency risk if the
related reinsurance transaction has a foreign currency component. We do not
currently invest in any derivative securities, but we may enter into interest
rate swaps, futures, forwards and other hedging transactions to manage our
risks. We will use derivatives only to manage interest rate risk rather than as
a speculative investment.

INVESTMENT MANAGERS

    As of December 31, 2001, General Re-New England Asset Management, Inc.,
which we refer to as NEAM, managed the portion of our investment portfolio that
we control. We may engage other managers to manage some or the entire portfolio
in the future. When we enter into modified coinsurance transactions, the assets
are held and managed by the ceding company for our account in accordance with
contractually agreed upon standards. Historically, World-Wide Holdings has
managed its investment portfolio internally.

COMPETITION AND RATINGS

    Competition in the life reinsurance industry is based on price, financial
strength ratings, reputation, experience, relationships and service. Because we
currently rely on a small but growing number of clients in both our life
reinsurance and wealth management businesses and expect to continue to do so for
the near future, we are more susceptible to the adverse effects of competition
than life reinsurers with larger client bases.

    Our wealth management products primarily compete with those issued by U.S.
life insurance companies. We believe that the most important competitive factor
affecting the marketability of our products is the degree to which these
products meet customer expectations, in terms of low expenses, returns (after
fees and expenses), flexibility and customer service. Many companies offering
these products are significantly larger, have longer operating histories, have
more extensive distribution capability and have access to greater financial and
other resources than we do.

    Insurance ratings are used by prospective purchasers of insurance policies,
insurers and reinsurance intermediaries in assessing the financial strength and
quality of insurers and reinsurers. Rating organizations periodically review the
financial performance and condition of insurers, including our insurance
subsidiaries. Rating organizations assign ratings based upon several factors.
While most of the factors considered relate to the rated company, some of the
factors take into account general economic conditions and circumstances outside
the rated company's control. Our flagship subsidiaries Scottish Annuity & Life
Insurance Company (Cayman) Ltd. and Scottish Re (U.S.), Inc. are rated "A-
(excellent)" for financial strength by A.M. Best, "A (strong)" for financial
strength by Fitch, "A3 (good)" for financial strength by Moody's and "A-
(strong)" for financial strength by Standard & Poor's. World-Wide Reassurance is
rated "A- (excellent)" for financial strength by A.M. Best, "A- (strong)" for
financial strength by Fitch and "A- (strong)" for financial strength by
Standard & Poor's. Our Bermuda insurance companies are unrated. A downgrade in
the ratings of our insurance subsidiaries could adversely affect their ability
to sell products, retain existing business, and compete for attractive
acquisition opportunities. Ratings for an insurance company are based on its
ability to pay policyholder obligations and are not directed toward the
protection of investors.

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    A.M. Best assigns an "A- (excellent)" rating to companies that have, in its
opinion, on balance, excellent balance sheet strength, operating performance and
business profile, as well as a strong ability to meet their ongoing obligations
to policyholders.  A.M. Best maintains a letter scale rating system ranging from
"A++ (superior)" to "F (in liquidation)." "A- (excellent)" is the fourth highest
designation of A.M. Best's 16 rating levels. Fitch assigns an "A (strong)" or
"A- (strong)" rating to companies that it characterizes as having, in its
opinion, strong capacity to meet policyholder and contract obligations and
moderate risk factors and where the impact of any adverse business and economic
factors is expected to be small. Fitch's insurer financial strength ratings
range from "AAA (exceptionally strong)" to "D (distressed)." "A (strong)" is the
third highest and "A- (strong)" is the fourth highest of Fitch's 12 rating
levels. Moody's assigns an "A3 (good)" rating to companies that offer, in its
opinion, good financial security, but possess elements that suggest a
susceptibility to impairment sometime in the future. Moody's long term insurance
financial strength ratings range from "Aaa (exceptional)" to "C (lowest)." "A3
(good)" is the ninth highest designation of Moody's 27 rating levels.
Standard & Poor's assigns an "A- (strong)" rating to companies that have, in its
opinion, a strong capacity to meet financial commitments, but are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than insurers with higher ratings. Standard & Poor's insurer
financial strength ratings range from "AAA (extremely strong)" to "R (under
regulatory supervision)." "A- (strong)" is the seventh highest designation of
Standard & Poor's 23 rating levels.

EMPLOYEES

    As of February 28, 2002, we employed approximately 100 full time employees.

REGULATION

GENERAL U.S. STATE SUPERVISION

    Various state insurance departments enforce insurance and reinsurance
regulation. The extent and nature of regulation varies from state to state.
Scottish Re (U.S.), Inc. is a Delaware-domiciled reinsurer, which is licensed,
accredited, approved or authorized to write reinsurance in 46 states and the
District of Columbia.

INSURANCE HOLDING COMPANY REGULATION

    Scottish Holdings and Scottish Re (U.S.), Inc. are subject to regulation
under the insurance holding company laws of Delaware and, as a result of Pacific
Life's share ownership, California. The insurance holding company laws and
regulations vary from state to state, but generally require insurers and
reinsurers that are subsidiaries of insurance holding companies to register and
file with state regulatory authorities certain reports including information
concerning their capital structure, ownership, financial condition and general
business operations. Generally, all transactions between Scottish Re
(U.S.), Inc. and its affiliates must be fair and, if material, require prior
notice and approval or non-disapproval by the Delaware and/or California state
insurance departments. Further, state insurance holding company laws typically
place limitations on the amounts of dividends or other distributions payable by
insurers and reinsurers. Delaware, the jurisdiction in which Scottish Re
(U.S.), Inc. is domiciled, provides that, unless the prior approval of the state
insurance commissioner has been obtained, dividends may be paid only from earned
surplus and the maximum annual amount payable is limited to the greater of 10%
of policyholder surplus at the end of the prior year or 100% of statutory net
gain from operations for the prior year.

    State insurance holding company laws also require prior notice or state
insurance department approval of changes in control of an insurer or reinsurer
or its holding company. The insurance laws of Delaware provide that no
corporation or other person may acquire control of a domestic insurance or
reinsurance company unless it has given notice to such company and obtained
prior written approval of the

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state insurance commissioner. Any purchaser of 10% or more of the outstanding
voting securities of an insurance or reinsurance company or its holding company
is presumed to have acquired control, unless this presumption is rebutted.
Therefore, an investor who intends to acquire 10% or more of our outstanding
voting securities may need to comply with these laws and would be required to
file notices and reports with the Delaware insurance commissioner prior to such
acquisition.

    In addition, many state insurance laws require prior notification to the
state insurance department of a change in control of a non-domiciliary insurance
company licensed to transact insurance business in that state. While these
pre-notification statutes do not authorize the state insurance departments to
disapprove the change in control, they authorize regulatory action in the
affected state if particular conditions exist such as undue market
concentration. Any future transactions that would constitute a change in control
of Scottish Re (U.S.), Inc. or any of its U.S. insurance subsidiaries may
require prior notification in the states that have adopted pre-acquisition
notification laws.

U.S. REINSURANCE REGULATION

    Scottish Re (U.S.), Inc. is subject to insurance regulation and supervision
that in many respects is similar to the regulation of licensed primary insurers.
Generally, state regulatory authorities monitor compliance with, and
periodically conduct examinations regarding, state mandated standards of
solvency, licensing requirements, investment limitations, restrictions on the
size of risks which may be reinsured, deposits of securities for the benefit of
reinsureds, methods of accounting, and reserves for unearned premiums, losses
and other purposes. However, in contrast with primary insurance policies, which
are regulated as to rate, form, and content, the terms and conditions of
reinsurance agreements are generally not subject to regulation by state
insurance regulators.

    Scottish Re (U.S.), Inc. is licensed, accredited, approved or authorized to
write reinsurance in 46 states and the District of Columbia. The ability of any
primary insurer to take credit for the reinsurance placed with reinsurers is a
significant component of reinsurance regulation. Typically, a primary insurer
will only enter into a reinsurance agreement if it can obtain credit on its
statutory financial statements for the reinsurance ceded to the reinsurer.
Credit is usually granted when the reinsurer is licensed, accredited, approved
or authorized to write reinsurance in the state where the primary insurer is
domiciled. In addition, many states allow credit for reinsurance ceded to a
reinsurer if the reinsurer is licensed in another jurisdiction and meets certain
financial requirements, or if the primary insurer is provided with collateral in
the form of letters of credit, trusts, "funds withheld" or modified coinsurance
contracts, to secure the reinsurer's obligations.

U.S. REINSURANCE REGULATION OF OUR NON-U.S. REINSURANCE SUBSIDIARIES

    Our non-U.S. reinsurance subsidiaries also assume reinsurance from primary
U.S. insurers. In order for primary U.S. insurers to obtain financial statement
credit for the reinsurance obligations of our non-U.S. reinsurers, our
non-domestic reinsurers must satisfy reinsurance requirements. Non-U.S.
reinsurers that are not licensed in a state generally may become accredited by
filing certain financial information with the relevant state commissioner and
maintaining a U.S. trust fund for the payment of valid reinsurance claims. In
addition, unlicensed and unaccredited reinsurers may secure the U.S. primary
insurer with funds equal to its reinsurance obligations in the form of cash,
securities, letters of credit or reinsurance trusts.

U.S. INSURANCE REGULATION OF OUR NON-U.S. INSURANCE SUBSIDIARIES

    Our non-U.S. insurance subsidiaries are not licensed to conduct insurance
business in any jurisdiction in the United States. Therefore, they cannot
utilize traditional life insurance marketing channels such as agents, nor can we
use mail-order or other direct marketing channels to conduct business with
persons in the United States or certain other jurisdictions. Accordingly, they
rely primarily on referrals by financial

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advisors, investment managers, private bankers, attorneys and other
intermediaries in the United States and Europe to generate wealth management
business. None of these intermediaries represents us as agent or in any other
capacity, nor do they receive any commissions or other remuneration from us for
activities undertaken in the United States. In addition, policy solicitation,
issuance and servicing must occur outside of the United States.

NAIC RATIOS

    The National Association of Insurance Commissioners, which we refer to as
the NAIC, has developed a set of financial relationships or tests known as the
NAIC Insurance Regulatory Information System to assist state regulators in
monitoring the financial condition of insurance companies and identifying
companies that require special attention or action by insurance regulatory
authorities. A second set of confidential ratios, called Financial Analysis
Solvency Tracking System, "FAST," are also used for monitoring. Insurance
companies generally submit data quarterly to the NAIC, which in turn analyzes
the data using prescribed financial data ratios, each with defined "usual
ranges." If an insurance company's results vary significantly from expected
ranges, regulators may make further inquiries. Regulators have the authority to
impose remedies ranging from increased monitoring to certain business
limitations to various degrees of supervision. Our U.S. reinsurance subsidiary
is not currently subject to increased regulatory scrutiny based on these ratios.

RISK-BASED CAPITAL

    The Risk-Based Capital for Insurers Model Act, or the Model Act, as it
applies to non-life insurers and reinsurers, was adopted by the NAIC on
December 5, 1993. The main purpose of the Model Act is to provide a tool for
insurance regulators to evaluate the capital of insurers relative to the risks
assumed by them and determine whether there is a need for possible corrective
action. U.S. insurers and reinsurers are required to report the results of their
risk-based capital calculations as part of the statutory annual statements filed
with state insurance regulatory authorities.

    The Model Act provides for four different levels of regulatory actions based
on annual statements, each of which may be triggered if an insurer's Total
Adjusted Capital, as defined in the Model Act, is less than a corresponding
level of risk-based capital, which we call RBC.

    - The Company Action Level is triggered if an insurer's Total Adjusted
      Capital is less than 200% of its Authorized Control Level RBC, as defined
      in the Model Act. At the Company Action Level, the insurer must submit a
      plan to the regulatory authority that discusses proposed corrective
      actions to improve its capital position.

    - The Regulatory Action Level is triggered if an insurer's Total Adjusted
      Capital is less than 150% of its Authorized Control Level RBC. At the
      Regulatory Action Level, the regulatory authority will perform a special
      examination of the insurer and issue an order specifying corrective
      actions that must be followed.

    - The Authorized Control Level is triggered if an insurer's Total Adjusted
      Capital is less than 100% of its Authorized Control Level RBC, and at that
      level the regulatory authority is authorized (although not mandated) to
      take regulatory control of the insurer.

    - The Mandatory Control Level is triggered if an insurer's Total Adjusted
      Capital is less than 70% of its Authorized Control Level RBC, and at that
      level the regulatory authority must take regulatory control of the
      insurer. Regulatory control may lead to rehabilitation or liquidation of
      an insurer.

    As of December 31, 2001, the Total Adjusted Capital of Scottish Re
(U.S.), Inc. exceeded applicable minimum RBC levels.

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THE GRAMM-LEACH-BLILEY ACT

    In November 1999, the Gramm-Leach-Bliley Act of 1999, or the GLBA, was
enacted, implementing fundamental changes in the regulation of the financial
services industry in the United States. The GLBA permits the transformation of
the already converging banking, insurance and securities industries by
permitting mergers that combine commercial banks, insurers and securities firms
under one holding company, a "financial holding company." Bank holding companies
and other entities that qualify and elect to be treated as financial holding
companies may engage in activities, and acquire companies engaged in activities,
that are "financial" in nature or "incidental" or "complementary" to such
financial activities. Such financial activities include acting as principal,
agent or broker in the underwriting and sale of life, property, casualty and
other forms of insurance and annuities. However, although a bank cannot act as
an insurer nor can it own an insurer as a subsidiary in most circumstances, a
financial holding company can own any kind of insurer, insurance broker or
agent. Under the GLBA, national banks retain their existing ability to sell
insurance products in some circumstances.

    Under state law, the financial holding company must apply to the insurance
commissioner in the insurer's state of domicile for prior approval of the
acquisition of the insurer. Under the GLBA, no state may prevent or restrict
affiliations between banks and insurers, insurance agents or brokers. Further,
states cannot prevent or significantly interfere with bank or bank subsidiary
sales activities. Finally, both bank and bank affiliates can obtain licenses as
producers.

    Until the passage of the GLBA, the Glass-Steagall Act had limited the
ability of banks to engage in securities-related businesses, and the Bank
Holding Company Act had restricted banks from being affiliated with insurers.
With the passage of the GLBA, among other things, bank holding companies may
acquire insurers, and insurance holding companies may acquire banks. The ability
of banks to affiliate with insurers may materially affect our U.S. reinsurance
subsidiary's product lines by substantially increasing the number, size and
financial strength of potential competitors.

POSSIBLE INITIATIVES RELATING TO THE SEPTEMBER 11TH EVENTS

    The terrorist attacks in the United States on September 11, 2001 are
expected to result in significant losses for the insurance and reinsurance
industries. Congressional committees have held hearings concerning the effects
of these losses on the industry. Various state insurance commissioners have also
met to discuss these issues. U.S. insurance associations, congressional leaders
and administration officials have been working on proposals for U.S. federal
programs to provide insurance or reinsurance coverage for terrorism and/or war
risks. In addition, state legislators in several states have stated they intend
to introduce legislation that would restrict insurers' ability to exclude or
limit coverage for war or terrorism risks.

    We cannot predict what other proposals may be made in connection with or as
a result of the September 11th terrorist attacks, what legislation, if any, may
be introduced or enacted or what effect any such legislation may have on us.

BERMUDA

    Our Bermuda subsidiaries are subject to regulation under the Bermuda
Companies Act of 1981, and our Bermuda insurance subsidiaries are subject to
regulation under the Bermuda Insurance Act of 1978, as amended by the Insurance
Amendment Act 1995 (which we refer to as the Bermuda Insurance Act), and the
regulations promulgated thereunder. They are required, among other things, to
meet and maintain certain standards of solvency, to file periodic reports in
accordance with Bermuda statutory accounting rules, to produce annual audited
financial statements and to maintain a minimum level of statutory capital and
surplus. In general, the regulation of insurers in Bermuda relies heavily upon
the auditors, directors and managers of the Bermuda insurer, each of which must
certify that the insurer meets the solvency and capital requirements of the
Bermuda Insurance Act of 1978.

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    Under the Bermuda Insurance Act, a Bermuda insurance company carrying on
long-term business (which includes the writing of annuity contracts and life
insurance policies with respect to human life) must hold all receipts in respect
of its long-term business and earnings thereon in a separate long-term business
fund. Payments from such long-term business fund may not be made directly or
indirectly for any purpose other than those of the insurer's long-term business,
except in so far as such payment is made out of surplus certified by the
insurer's approved actuary to be available for distribution other than to
policyholders. In addition, our Bermuda subsidiaries are authorized by private
acts of the Bermuda Legislature (the Scottish Annuity & Life International
Insurance Company (Bermuda) Ltd. Consolidation and Amendment Act 2001 and the
Scottish Annuity & Life Insurance Company (Bermuda) Limited Consolidation and
Amendment Act 2001, which we refer to as the private acts) to establish separate
accounts in respect of one or more life insurance policies or annuity contracts.
In the event of an inconsistency between the Insurance Act and the private acts,
the terms of the private acts control subject, however, to later amendments of
the Insurance Act or other relevant laws. Under the private acts, each insurance
subsidiary is permitted to credit to relevant separate accounts such portion of
the premiums and other receipts from the related policy or contract, and any
property of the insurance subsidiary derived from or purchased with such
premiums, as the related policies or contracts stipulate. To the extent provided
in the relevant policies or contracts, income, interest or other gains earned
from, and any property acquired by, the investing or dealing in the assets of
the separate account are credited to the separate account, and all expenses,
fees or losses relating to the separate account are charged against the separate
account. The assets and property held in the separate account are to be used for
the sole purpose of paying any and all claims arising from or under the related
policies or contracts, and no other person has any right or interest in such
assets. Upon the termination of policies or contracts related to a separate
account, and the discharge of obligations under the policies or contracts, the
insurance subsidiary may terminate the separate account, and credit any
remaining assets or property to its general account. In the event of insolvency
of one of our Bermuda subsidiaries, the liquidator is bound to recognize the
separate nature of each separate account, and is not empowered to apply property
identified as the property of any one separate account to pay the claims of
creditors of the insurance company or policyholders other than the policyholder
to whom the separate account relates. The private acts also permit the insurance
subsidiaries to issue certain securities based on separate accounts that are
subject to similar provisions.

CAYMAN ISLANDS

    Our Cayman Islands subsidiaries are subject to regulation as licensed
insurance companies under Cayman Islands law. These subsidiaries hold
unrestricted Class B insurance licenses under Cayman Islands Insurance Law and
may therefore carry on an insurance business from the Cayman Islands, but may
not engage in any Cayman Islands domestic insurance business. Unless
specifically exempted, a Cayman Islands insurance company must engage a licensed
insurance manager operating in the Cayman Islands to provide insurance expertise
and oversight. Our subsidiaries are exempt from this requirement.

    In addition, under the Cayman Islands Insurance Law, a Cayman Islands
insurance company carrying on long-term business (which includes the writing of
life insurance policies) must hold all receipts in respect of its long-term
business and earnings thereon in a separate long-term business fund. Payments
from such long-term business fund may not be made directly or indirectly for any
purpose other than those of the insurer's long-term business. Except in so far
as such payments can be made out of any surplus disclosed on an actuarial
valuation and certified by an actuary to be distributable otherwise than to
policyholders. Every Cayman Islands insurance company carrying on long-term
business may establish any number of separate accounts in respect of premiums
paid to it to provide (i) annuities on human life and (ii) contracts of
insurance on human life, and such respective premiums shall be kept segregated
one from the other and independent of all other funds of the Cayman Islands
insurer, and, notwithstanding the provisions of any other written law to the
contrary, are not chargeable with any liability arising from any other business
of the insurer. The scope and the validity of the Cayman Islands law regarding
separate accounts has not been tested in the courts of the Cayman Islands.

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IRELAND

    Scottish Re (Dublin) Limited has been entitled to carry on insurance
business in Ireland since December 2000 and is subject to regulation under the
Insurance Act 2000 of Ireland, which requires companies registered in Ireland,
other than authorized Insurance companies, to obtain official authorization
before they can engage in reinsurance business. Reinsurance companies are not at
present subject to a formal solvency supervision; however, the Department of
Enterprise, Trade and Employment has the power to order a reinsurance company to
cease writing business if it is not satisfied with the manner in which it is
conducting its business.

    The principal legislation and regulations governing the insurance activities
of Irish insurance companies are the Insurance Acts 1909 to 1990 and a
comprehensive network of regulations and statutory provisions empowering the
making of regulations.

UNITED KINGDOM

    World-Wide Reassurance is a U.K. insurance company incorporated and
registered in England and Wales and subject to regulation and supervision in the
United Kingdom under English domestic and European Community law. The Insurance
Companies Act of 1982 of the United Kingdom, as amended, imposes solvency and
liquidity standards and auditing and reporting requirements on insurance and
reinsurance companies organized under English law, and on companies that own
such insurance companies, and further grants to the U.K. Financial Services
Authority powers to supervise, investigate and intervene in the affairs of
insurance companies.

NEW JURISDICTIONS

    If Scottish Holdings or any of our subsidiaries were to become subject to
the laws of a new jurisdiction where Scottish Holdings or that subsidiary is not
presently admitted, they may not be in compliance with the laws of the new
jurisdiction. Any failure to comply with applicable laws could result in the
imposition of significant restrictions on our ability to do business, and could
also result in fines and other sanctions, any or all of which could adversely
affect our financial results and operations.

                                  RISK FACTORS

    Investing in our ordinary shares involves a high degree of risk. Potential
investors should consider carefully the following risk factors, in addition to
the other information set forth in this Form 10-K, prior to investing in our
ordinary shares.

                         RISKS RELATED TO OUR BUSINESS

A DOWNGRADE IN THE FINANCIAL RATINGS OF OUR INSURANCE SUBSIDIARIES COULD
ADVERSELY AFFECT OUR ABILITY TO COMPETE.

    Ratings are an important factor in attracting business in both our life
reinsurance and wealth management businesses. Rating organizations periodically
review the financial performance and condition of insurers, including our
insurance subsidiaries. Rating organizations assign ratings based upon several
factors. Although most of the factors considered relate to the rated company,
some of the factors take into account general economic conditions and
circumstances outside the rated company's control. Our flagship subsidiaries
Scottish Annuity & Life Insurance Company (Cayman) Ltd. and Scottish Re
(U.S.), Inc. are rated "A- (excellent)" for financial strength by A.M. Best, "A
(strong)" for financial strength by Fitch, "A3 (good)" for financial strength by
Moody's and "A- (strong)" for financial strength by Standard & Poor's.
World-Wide Reassurance is rated "A- (excellent)" for financial strength by A.M.
Best, "A- (strong)" for financial strength by Fitch and "A- (strong)" for
financial strength by Standard & Poor's. A downgrade in the ratings of any one
of our insurance subsidiaries could adversely affect its ability to sell
products, retain existing business, and compete for attractive acquisition
opportunities. Ratings for an insurance company

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are based on its ability to pay policyholder obligations and are not directed
toward the protection of investors.

INADEQUATE RISK ANALYSIS AND UNDERWRITING MAY HAVE AN ADVERSE EFFECT ON OUR
FINANCIAL RESULTS.

    Our success depends on our ability to accurately assess and manage the risks
associated with the business that we reinsure. We have developed risk analysis
and underwriting guidelines, policies, and procedures with the objective of
controlling the quality of the business as well as the pricing of the risk we
are assuming. Among other things, these processes rely heavily on our
underwriting, our analysis of mortality trends and lapse rates, and our
understanding of medical improvements and their impact on mortality. If these
processes are inadequate or are based on inadequate information, we may not
establish appropriate premium rates and our reserves may not be adequate to
cover our losses. In addition, we are dependent on the original underwriting
decisions made by, and information provided to us by, ceding companies. We are
subject to the risk that the ceding clients may not have adequately evaluated
the risks to be reinsured and that the premiums ceded may not adequately
compensate us for the risks we assume. To the extent actual claims exceed our
underlying assumptions, we will be required to increase our liabilities, which
will reduce our profits in the period in which we identify the deficiency. We
are also subject to similar risks relating to World-Wide Reassurance's business
because information provided to World-Wide Reassurance by ceding companies in
certain non-U.S. jurisdictions is often less comprehensive than information
provided by ceding companies in the United States.

    Reserves are estimates based on actuarial and statistical projections at a
given point in time of what we ultimately expect to pay out on claims and
benefits, based on facts and circumstances then known, predictions of future
events, estimates of future trends in mortality, morbidity and other variable
factors such as persistency, inflation and interests rates. Because of the many
assumptions and estimates involved in establishing reserves, the reserving
process is inherently uncertain.

    Our estimation of reserves may be less reliable than the reserve estimations
of a reinsurer with a greater volume of business and more established loss
history. Actual losses and benefits may deviate, perhaps substantially, from
estimates of reserves contained in our financial statements. We cannot assure
you that our losses and benefits will not exceed our reserves. If our losses and
benefits exceed our reserves, our earnings may be significantly and negatively
affected.

OUR LIFE REINSURANCE CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES EXPOSE US TO
MORTALITY RISK.

    Mortality risk is the risk that death claims may differ from the amount we
assumed in pricing our reinsurance contracts and our variable life insurance
policies. Mortality experience that is less favorable than the mortality rates
that we assumed will negatively affect our net income. Our variable life
insurance policies are placed with a relatively small number of high net worth
policyholders and provide substantial death benefits. As a consequence, our
associated mortality risk exposure is likely to be greater in the aggregate, and
its probability of loss less predictable, than that of an insurer with a broader
risk pool. Furthermore, with mortality exposure, even if the total benefits paid
over the life of the contract do not exceed the expected amount, sporadic timing
of deaths can cause us to pay more benefits in a given accounting period than
expected, adversely impacting short-term profitability in any particular quarter
or year.

IF OUR INVESTMENT STRATEGY IS NOT SUCCESSFUL, WE COULD SUFFER UNEXPECTED LOSSES.

    The success of our investment strategy is crucial to the success of our
business. Specifically, we are subject to:

    - market value risk, which is the risk that our invested assets will
      decrease in value. This decrease in value may be due to a change in the
      yields realized on our assets and prevailing market yields for similar
      assets, an unfavorable change in the liquidity of the investment or an
      unfavorable change in the financial prospects or a downgrade in the credit
      rating of the issuer of the investment;

                                       17
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    - reinvestment risk, which is the risk that interest rates will decline and
      funds reinvested will earn less than expected; and

    - liquidity risk, which is the risk that liabilities are surrendered or
      mature sooner than anticipated and that we may have to sell assets at an
      undesirable time to provide for policyholder surrenders or withdrawals.

Although we attempt to address such risks in product pricing and in establishing
policy reserves, we cannot assure you that assets will be properly matched to
meet anticipated liabilities or that our investments will provide sufficient
returns to enable us to satisfy our guaranteed fixed benefit obligations.

    In addition, our investment portfolio includes mortgage-backed securities,
known as MBSs, and collateralized mortgage obligations, known as CMOs. As of
December 31, 2001, MBSs and CMOs constituted approximately 21% of our invested
assets. As with other fixed income investments, the fair value of these
securities fluctuates depending on market and other general economic conditions
and the interest rate environment. Changes in interest rates can expose us to
prepayment risks on these investments. In periods of declining interest rates,
mortgage prepayments generally increase and MBSs and CMOs are prepaid more
quickly, requiring us to reinvest the proceeds at the then current market rates.

    Although we have not done so in the past, we may also enter into foreign
currency, interest rate and credit derivatives and other hedging transactions in
an effort to manage risks. We cannot assure you that we will successfully
structure those derivatives and hedges so as to effectively manage these risks.
If our calculations are incorrect, or if we do not properly structure our
derivatives or hedges, we may have unexpected losses and our assets may not be
adequate to meet our needed reserves, which could adversely affect our business,
earnings and financial condition.

    The success of any investment activity is affected by general economic
conditions, which may adversely affect the markets for interest-rate-sensitive
securities, including the level and volatility of interest rates and the extent
and timing of investor participation in such markets. Unexpected volatility or
illiquidity in the markets in which we hold positions could adversely affect us.

IN CERTAIN REINSURANCE CONTRACTS WE DO NOT MAINTAIN CONTROL OF THE INVESTED
ASSETS.

    As part of our business we enter into reinsurance agreements on a modified
coinsurance basis. In these transactions, the ceding insurance company retains
the assets supporting the ceded business and manages them for our account. As of
December 31, 2001, approximately $562.4 million of assets were held by ceding
companies under modified coinsurance agreements and were recorded under "funds
withheld at interest" on our balance sheet. Although the ceding company must
adhere to general standards agreed to by us for the management of these assets,
we do not control the selection of the specific investments or the timing of the
purchase or sale of investments made by the ceding company. Accordingly, we may
be at risk if the ceding company selects investments that deviate from our
agreed standards or if the ceding company performs poorly in the purchase, sale
and management of those assets. In addition, these assets are not segregated
from the ceding company's other assets, and we may not be able to recover all of
these assets in the event of the insolvency of the ceding insurer.

INTEREST RATE FLUCTUATIONS COULD NEGATIVELY AFFECT THE INCOME WE DERIVE FROM THE
DIFFERENCE BETWEEN THE INTEREST RATES WE EARN ON OUR INVESTMENTS AND INTEREST WE
PAY UNDER OUR REINSURANCE CONTRACTS.

    Significant changes in interest rates expose us to the risk of not earning
income or experiencing losses based on the difference between the interest rates
earned on investments and the credited interest rates paid on outstanding
reinsurance contracts.

    Both rising and declining interest rates can negatively affect the income we
derive from these interest rate spreads. During periods of falling interest
rates, our investment earnings will be lower because new investments in fixed
maturity securities will likely bear lower interest rates. We may not be able to
fully

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offset the decline in investment earnings with lower crediting rates on our
contracts that reinsure life insurance policies or annuities with cash value
components. During periods of rising interest rates, we may be contractually
obligated to increase the crediting rates on our contracts that reinsure life
insurance policies or annuities with cash value components. We may not, however,
have the ability to immediately acquire investments with interest rates
sufficient to offset the increased crediting rates under our reinsurance
contracts. Although we develop and maintain asset/liability management programs
and procedures designed to reduce the volatility of our income when interest
rates are rising or falling, we cannot assure you that changes in interest rates
will not affect our interest rate spreads.

    Changes in interest rates may also affect our business in other ways. Lower
interest rates may result in lower sales of certain insurance and investment
products of our customers, which would reduce the demand for our reinsurance of
these products.

THE FEE INCOME WE EARN FROM OUR VARIABLE LIFE INSURANCE AND VARIABLE ANNUITY
BUSINESS CAN BE REDUCED BY DECREASES IN THE LEVEL OF ASSETS MAINTAINED IN
SEPARATE ACCOUNTS.

    In our variable life insurance and variable annuity business, we generate
revenues from fees that are charged as a percentage of the assets in the
separate accounts supporting these policies. The level of assets in the separate
accounts depends, in part, on the performance of the underlying investments,
early withdrawals and death claims. If the asset values in these accounts
decline, our fee income from this business will be reduced.

A PROLONGED ECONOMIC DOWNTURN COULD REDUCE THE DEMAND FOR SOME INSURANCE
PRODUCTS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

    A prolonged general economic downturn or poor performance of the equity and
other capital markets, such as the U.S. economy has recently experienced, or
similar conditions in the future, could adversely affect the market for many
annuity and life insurance products. Because we obtain substantially all of our
revenues through reinsurance arrangements that cover a portfolio of life
insurance products, as well as annuities, our business would be harmed if the
market for annuities or life insurance were adversely affected.

POLICYHOLDER WITHDRAWALS OR RECAPTURES OF REINSURANCE TREATIES COULD FORCE US TO
SELL INVESTMENTS AT A LOSS AND TAKE A LARGER THAN ANTICIPATED CHARGE FOR
AMORTIZATION OF DEFERRED ACQUISITION COSTS.

    Some of the products offered by our insurance subsidiaries and some of the
products offered by primary insurance companies that we reinsure allow
policyholders and contract holders to withdraw their funds under defined
circumstances. In addition, our reinsurance agreements may provide for recapture
rights on the part of our insurance company customers. Recapture rights permit
these customers to reassume all or a portion of the risk formerly ceded to us
after an agreed upon time, usually 10 years, subject to various conditions or
upon a downgrade of any of our financial strength ratings or our failure to
satisfy other financial conditions. Recapture of business previously ceded does
not affect premiums ceded prior to the recapture, but may result in immediate
payments to our insurance company customers.

    In addition, when we issue a new insurance policy or annuity contract or
write a reinsurance contract, we defer a portion of the related acquisition
costs by establishing a deferred acquisition cost asset on the balance sheet.
This asset is amortized over the expected term of the acquired business based on
certain assumptions about the performance and persistency of that business. To
the extent surrender, withdrawal or recapture activity is greater than we
assumed, we may incur a non-cash charge to write down the deferred acquisition
cost asset, which may be partially offset by recapture and surrender fees.

    One of our customers exercised a right of recapture in April 2001, requiring
us to pay $185.7 million to the customer. Because we had expected the recapture,
we did not have to dispose of assets at a loss and we had already fully
amortized the deferred acquisition costs. We cannot assure you that we will be
able to anticipate future recaptures and make adequate preparations to reduce
their impact on us. If recaptures

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occur and we do not make adequate preparations, our earnings and financial
condition could be adversely affected.

WE TAKE COUNTER-PARTY RISK WITH RESPECT TO OUR RETROCESSIONAIRES.

    We cede some of the business that we reinsure to other reinsurance
companies, known as retrocessionaires. We assume the risk that the
retrocessionaire will be unable to pay amounts due to us because of its own
financial difficulties. The failure of our retrocessionaires to pay amounts due
to us will not absolve us of our responsibility to pay ceding companies for
risks that we reinsure. Failure of retrocessionaires to pay us could have a
material adverse effect on our business, results of operations and financial
condition.

OUR RESULTS OF OPERATIONS MAY FLUCTUATE FROM PERIOD TO PERIOD AND MAY NOT BE
INDICATIVE OF OUR LONG-TERM PROSPECTS.

    Our operating results may fluctuate significantly from period to period.
Fluctuations may result from a variety of factors, including the volume and mix
of the business we reinsure, the loss experience on our reinsurance liabilities
and the performance of our investment portfolio. Significant volumes of new life
reinsurance business can, for example, reduce short-term profitability since the
emergence of earnings on these contracts tends to be weighted toward the later
years of these contracts. We seek to underwrite products and make investments to
achieve long-term results. Accordingly, our short-term results of operations may
not be indicative of our long-term prospects.

RECENT TERRORIST ATTACKS AND RELATED EVENTS MAY ADVERSELY AFFECT OUR BUSINESS
AND RESULTS OF OPERATIONS.

    The recent terrorist attacks on the United States and ensuing events, or any
future attacks, may have a negative impact on our business and results of
operations due to the loss of lives that we insure or re-insure and the impact
on the U.S. and global economies and the demand for our products. We believe
that our reinsurance programs, including our catastrophe coverage, will limit
our net losses in individual life claims relating to the September 11, 2001
terrorist attacks to approximately $750,000. We cannot assure you, however, as
to the extent of claims development or recoverability of any such claims,
particularly in light of the magnitude and unprecedented nature of the terrorist
attacks of September 11, 2001. If there are any future terrorist attacks, we
cannot assure you that our business, financial condition or results of
operations will not be adversely affected.

ECONOMIC AND POLITICAL INSTABILITY IN DEVELOPING COUNTRIES COULD HARM OUR
BUSINESS PROSPECTS.

    We conduct our business in various developing countries within Asia, Latin
America, the Middle East, North Africa and Southern and Eastern Europe. We plan
to continue to expand our business in these locations. Political and economic
instability in these countries could adversely impact our ability to write new
business originating in these countries. Such adverse impact, if significant,
could reduce our earned premiums and, accordingly, could reduce our net income.

IF OUR ACQUISITION STRATEGY IS NOT SUCCESSFUL, WE MAY NOT ACHIEVE OUR GROWTH AND
PROFIT OBJECTIVES.

    We have recently completed the acquisition of World-Wide Holdings and we may
make additional strategic acquisitions, either of other companies or selected
blocks of business. While we will evaluate business opportunities on a regular
basis, we may not be successful in identifying any attractive acquisitions. We
may not have, or be able to raise on acceptable terms, sufficient financial
resources to make acquisitions. In addition, the World-Wide Holdings acquisition
and any other acquisitions we make will be subject to all of the risks inherent
in an acquisition strategy, including:

    - integrating financial and operational reporting systems;

    - establishing satisfactory budgetary and other financial controls;

    - funding increased capital needs and overhead expenses;

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<Page>
    - obtaining management personnel required for expanded operations; and

    - funding cash flow shortages that may occur if anticipated sales and
      revenues are not realized or are delayed, whether by general economic or
      market conditions or unforeseen internal difficulties.

WE ARE DEPENDENT ON KEY EMPLOYEES.

    The loss of the services of members of our executive management group could
adversely impact our business prospects and operations. The loss of the services
of these individuals, or our inability to hire and retain other talented
personnel from the very limited pool of qualified insurance professionals, could
delay or prevent us from fully implementing our business strategy or could
otherwise adversely affect us.

WE ARE EXPOSED TO FOREIGN CURRENCY RISK.

    Our functional currency is the United States dollar. However, our U.K.
subsidiaries, World-Wide Holdings and World-Wide Reassurance, maintain a part of
their investment portfolio and operating expense accounts in British pounds and
receive other currencies in payment of premiums. All of World-Wide Reassurance's
original U.S. business is settled in United States dollars, all Canadian and
certain Asia and Middle East business is converted and settled in United States
dollars, and all other currencies are converted and settled in British pounds.
The results of the business in British pounds are then translated to United
States dollars. World-Wide Reassurance attempts to limit substantial exposures
to foreign currency risk, but does not actively manage currency risks. To the
extent our foreign currency exposure is not properly managed or otherwise
hedged, we may experience exchange losses, which in turn would adversely affect
our results of operations and financial condition.

OUR INSURANCE SUBSIDIARIES ARE HIGHLY REGULATED, AND CHANGES IN THESE
REGULATIONS COULD NEGATIVELY AFFECT OUR BUSINESS.

    Our insurance and reinsurance subsidiaries are subject to government
regulation in each of the jurisdictions in which they are licensed or authorized
to do business. Governmental agencies have broad administrative power to
regulate many aspects of the insurance business, which may include trade and
claim practices, accounting methods, premium rates, marketing practices,
advertising, policy forms, and capital adequacy. These agencies are concerned
primarily with the protection of policyholders rather than shareholders.
Moreover, insurance laws and regulations, among other things:

    - establish solvency requirements, including minimum reserves and capital
      and surplus requirements;

    - limit the amount of dividends, tax distributions, intercompany loans and
      other payments our insurance subsidiaries can make without prior
      regulatory approval;

    - impose restrictions on the amount and type of investments we may hold; and

    - require assessments to pay claims of insolvent insurance companies.

    The NAIC continuously examines existing laws and regulations. We cannot
predict the effect that any NAIC recommendations or proposed or future
legislation or rule making in the United States or elsewhere may have on our
financial condition or operations.

    If Scottish Holdings or any of our subsidiaries were to become subject to
the laws of a new jurisdiction where Scottish Holdings or that subsidiary is not
presently admitted, they may not be in compliance with the laws of the new
jurisdiction. Any failure to comply with applicable laws could result in the
imposition of significant restrictions on our ability to do business, and could
also result in fines and other sanctions, any or all of which could adversely
affect our financial results and operations.

LIFE REINSURANCE AND WEALTH MANAGEMENT ARE HIGHLY COMPETITIVE INDUSTRIES, WHICH
COULD LIMIT OUR ABILITY TO GAIN OR MAINTAIN OUR COMPETITIVE POSITION.

    The life reinsurance industry is highly competitive, and we encounter
significant competition from other reinsurance companies, as well as competition
from other providers of financial services.

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Competition in the reinsurance business is based on price, financial strength
ratings, reputation, experience, relationships and service. Many of our
competitors are significantly larger, have greater financial resources and have
longer operating histories than we do. Competition from other reinsurers could
adversely affect our competitive position.

    The wealth management business is also highly competitive. Our wealth
management products primarily compete with those issued by U.S. insurance
companies. To the extent that our products provide for management of the
underlying separate accounts by independent investment managers, our products
compete with mutual funds and other investment or savings vehicles. Many
companies offering these products are significantly larger, have longer
operating histories, have more extensive distribution capability and have access
to greater financial and other resources than we do.

OUR ABILITY TO PAY DIVIDENDS IS LIMITED.

    We are a holding company, with our principal assets consisting of the stock
of our insurance company subsidiaries. Our ability to pay dividends on the
ordinary shares depends significantly on the ability of our insurance company
subsidiaries, our principal sources of cash flow, to declare and distribute
dividends or to advance money to us in the form of intercompany loans. Our
insurance company subsidiaries are subject to various state and foreign
government statutory and regulatory restrictions, applicable to insurance
companies generally, that limit the amount of cash dividends, loans and advances
that those subsidiaries may pay to us.

CONSOLIDATION IN THE INSURANCE INDUSTRY COULD LEAD TO LOWER MARGINS FOR US AND
LESS DEMAND FOR LIFE AND ANNUITY REINSURANCE PRODUCTS.

    Many insurance industry participants are consolidating to enhance their
market power. These entities, particularly ceding life insurance companies, may
try to use their market power to negotiate price reductions for our products and
services. If competitive pressures compel us to reduce our prices, our operating
margins may decrease. As the insurance industry consolidates, competition for
customers may become more intense and the importance of acquiring and properly
servicing each customer may become greater.

OUR SHARES ARE SUBJECT TO VOTING AND TRANSFER LIMITATIONS.

    Under our Articles of Association, our Board of Directors (or its designee)
is required to decline to register any transfer of shares, including ordinary
shares, if our directors have any reason to believe that such transfer would
result in a person (or any group of which such person is a member) beneficially
owning, directly or indirectly, 10% or more of any class of our shares, except
that Pacific Life, Pacific Mutual Holding Company, Pacific LifeCorp and/or any
direct or indirect wholly-owned subsidiary of Pacific Mutual Holding Company,
each of which we call a Pacific Life Entity, are permitted to transfer ordinary
shares to other Pacific Life Entities, so long as the number of shares
beneficially owned directly or indirectly by the Pacific Life Entities in the
aggregate does not exceed 24.9% of the ordinary shares. Similar restrictions
apply to issuances and repurchases of shares by us. Our directors (or their
designee) also may, in their absolute discretion, decline to register the
transfer of any shares if they have reason to believe that such transfer may
expose us, our subsidiaries or shareholders or any person insured or reinsured
or proposing to be insured or reinsured by us to adverse tax or regulatory
treatment in any jurisdiction or if they have reason to believe that
registration of such transfer under the Securities Act, under any state "blue
sky" or other United States securities laws or under the laws of any other
jurisdiction is required and such registration has not been duly effected. A
transferor of ordinary shares will be deemed to own such shares for dividend,
voting and reporting purposes until a transfer of such ordinary shares has been
registered on our Register of Members. We are authorized to request information
from any holder or prospective acquiror of ordinary shares as necessary to
effect registration of any such transaction, and may decline to register any
such transaction if complete and accurate information is not received as
requested.

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    In addition, our Articles of Association generally provide that any person
(or any group of which such person is a member) other than the Pacific Life
Entities, holding directly, or by attribution, or otherwise beneficially owning
our voting shares carrying 10% or more of the total voting rights attached to
all of our outstanding voting shares, will have the voting rights attached to
its voting shares reduced so that it may not exercise more than approximately
9.9% of such total voting rights. In addition, in the event the Pacific Life
Entities hold directly or by attribution or otherwise beneficially own voting
shares with more than 24.9% of the total voting rights of our voting shares, the
voting rights of the Pacific Life Entities will be reduced so that they may not
exercise in the aggregate more than approximately 24.9% of the total voting
rights of our voting shares at any given time. Because of the attribution
provisions of the Code and the rules of the SEC regarding determination of
beneficial ownership, this requirement may have the effect of reducing the
voting rights of a shareholder whether or not such shareholder directly holds of
record 10% or more of our voting shares. Further, our Board of Directors (or its
designee) has the authority to request from any shareholder certain information
for the purpose of determining whether such shareholder's voting rights are to
be reduced. Failure to respond to such a notice, or submitting incomplete or
inaccurate information, gives our Board of Directors (or its designee)
discretion to disregard all votes attached to such shareholder's ordinary
shares.

OUR ARTICLES OF ASSOCIATION AND APPLICABLE INSURANCE LAWS MAKE IT DIFFICULT TO
EFFECT A CHANGE OF CONTROL; A LARGE SHAREHOLDER MAY HAVE SIGNIFICANT INFLUENCE
OVER POTENTIAL CHANGE IN CONTROL TRANSACTIONS.

    Our Articles of Association contain certain provisions that make more
difficult the acquisition of control of Scottish Holdings by means of a tender
offer, open market purchase, a proxy fight or otherwise, including by reason of
the limitation on transfers of ordinary shares and voting rights described
above. While these provisions are designed to encourage persons seeking to
acquire control to negotiate with our Board of Directors, they could have the
effect of discouraging a prospective purchaser from making a tender offer or
otherwise attempting to obtain control.

    Under applicable Delaware insurance laws and regulations, no person may
acquire control of Scottish Holdings or Scottish Re (U.S.), Inc., our Delaware
insurance subsidiary, unless that person has filed a statement containing
specified information with the Delaware Insurance Commissioner and approval for
such acquisition is obtained. Under applicable laws and regulations, any person
acquiring, directly by stock ownership or indirectly (by revocable proxy or
otherwise), 10% or more of the voting stock of any other person is presumed to
have acquired control of such person, and a person who beneficially acquires 10%
or more of our ordinary shares without obtaining the approval of the Delaware
Insurance Commissioner would be in violation of Delaware's insurance holding
company act and would be subject to injunctive action requiring disposition or
seizure of the shares and prohibiting the voting of such shares, as well as
other action determined by the Delaware Insurance Commissioner.

    In addition, many state insurance laws require prior notification to the
state insurance department of a change in control of a non-domiciliary insurance
company licensed to transact insurance in that state. While these
pre-notification statutes do not authorize the state insurance departments to
disapprove the change in control, they authorize regulatory action in the
affected state if particular conditions exist such as undue market
concentration. Any future transactions that would constitute a change in control
of us or Scottish Re (U.S.), Inc. may require prior notification in the states
that have pre-acquisition notification laws.

    Other provisions in the Articles of Association that make it difficult to
effect a change in control include staggered terms for members of our Board of
Directors, no opportunity for shareholder action by written consent, and the
ability of the Board of Directors to change the total number of directors.

    Pacific Life owns approximately 22.5% of our outstanding ordinary shares. In
addition, pursuant to a Stockholder Agreement, Pacific Life has the right to
nominate two persons for election to our Board of Directors so long as Pacific
Life and its affiliates own at least 15% of our outstanding ordinary shares and
one such person so long as they own at least 10%. Pacific Life's share ownership
and ability to nominate

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persons for election to our Board of Directors might provide Pacific Life with
significant influence over potential change in control transactions.

WE HAVE A SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE.

    As of February 28, 2002, we had outstanding Class A warrants to purchase an
aggregate of 2,850,000 ordinary shares, Class B warrants to purchase an
aggregate of 200,000 ordinary shares and options to purchase an aggregate of
3,333,601 ordinary shares. Pacific Life owns 4,532,380 ordinary shares. Both
Pacific Life and the holders of our Class A and Class B warrants have the right
to demand registration of their ordinary shares for sale under the Securities
Act of 1933, which we refer to as the Securities Act, and to piggyback onto any
registration initiated by us or another holder.

    We cannot predict the effect, if any, that future sales of our ordinary
shares, or the availability of ordinary shares for future sale, will have on the
market price of the ordinary shares prevailing from time to time. Sales of
substantial amounts of ordinary shares in the public market following the
offering, or the perception that such sales could occur, could adversely affect
the market price of the ordinary shares and may make it more difficult for us to
sell our equity securities in the future at a time and at a price which we deem
appropriate. If the persons holding the Class A warrants, Class B warrants or
options cause a large number of the ordinary shares underlying such securities
to be sold in the market, or if Pacific Life were to sell a large number of
their ordinary shares, such sales could have an adverse effect on the market
price for the ordinary shares.

INVESTORS MAY HAVE DIFFICULTIES IN SUING OR ENFORCING JUDGMENTS AGAINST US IN
THE UNITED STATES.

    Scottish Holdings is a holding company organized under the laws of the
Cayman Islands with its principal executive office in Bermuda. Certain of our
officers and directors are residents of various jurisdictions outside the United
States. All or a substantial portion of our assets and those of such directors
and officers, at any one time, are or may be located in jurisdictions outside
the United States. Although we have irrevocably agreed that we may be served
with process in New York, New York with respect to actions arising out of or in
connection with violations of United States federal securities laws relating to
offers and sales of ordinary shares made hereby, it could be difficult for
investors to effect service of process within the United States on our directors
and officers who reside outside the United States or to recover against us or
such directors and officers on judgments of United States courts predicated upon
the civil liability provisions of the United States federal securities laws.

                           RISKS RELATED TO TAXATION

CERTAIN TAX RISKS MAY AFFECT OUR BUSINESS.

    The market for many annuity and variable life insurance products for persons
subject to U.S. federal income tax is based in large part on the favorable tax
treatment these products receive relative to certain other financial products.
Any material change in such tax treatment, such as the imposition of a "flat
tax" or a national sales tax in lieu of the current U.S. federal income tax
structure, the repeal of the estate tax, or the taxation of the "inside
build-up" of life insurance or annuity contracts, could have an adverse effect
on the market for our annuity, life insurance, and reinsurance products. In late
2000, Congress enacted a technical correction of legislation enacted in 1984. As
a result of this legislation, certain annuity contracts issued by certain
non-U.S. insurance companies may be treated as "debt instruments" that are
subject to the "original issue discount" rules of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"). If the holder of an annuity contract is
subject to tax under the original issue discount rules, the holder will not
benefit from the tax deferral normally afforded the inside build-up of annuity
contracts. In connection with this legislation, in January 2001, the IRS
proposed regulations, which, if adopted, would clarify that certain annuities
(other than those subject to a substantial life contingency) issued by foreign
insurance companies that are not subject to U.S. corporate income tax on their
insurance income are subject to the original issue discount rules. The
regulations would apply only to annuities issued on or after January 12, 2001.

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    Our non-U.S. subsidiaries (other than Scottish Annuity & Life International
Insurance Company (Bermuda), Ltd., which we refer to as Scottish Annuity & Life
International) are not subject to U.S. tax on their corporate income.
Accordingly, certain annuities issued by those companies may be subject to the
original issue discount rules. Because our subsidiaries issue only variable
deferred annuities, the impact of the recent legislation and proposed
regulations is not clear. Existing regulations provide that the original issue
discount rules apply only to instruments that are debt instruments under general
principles of federal tax law. Whether and in what circumstances a variable
deferred annuity would be treated as a debt instrument under general principles
of U.S. federal tax law is not addressed by the regulations. It is possible,
however, that the legislation and proposed regulations, if made final, will
adversely affect the sales of deferred variable annuities by our non-U.S.
subsidiaries to U.S. persons. Any reference to the non-U.S. subsidiaries of
Scottish Holdings contained herein does not refer to Scottish Annuity & Life
International unless noted otherwise.

    We intend to address this risk by issuing annuities to U.S. persons through
Scottish Annuity & Life International, one of our Bermuda-licensed insurance
companies, which has made an election under section 953(d) of the Code to be
taxed as a U.S. corporation. Although such election will cause Scottish
Annuity & Life International to be subject to U.S. federal income tax, annuities
issued by it will not be characterized as debt instruments subject to the
original issue discount rules. In addition, premiums received by Scottish
Annuity & Life International will not be subject to the U.S. federal excise tax
on insurance premiums.

WE MAY BE SUBJECT TO U.S. FEDERAL INCOME TAXATION.

    Scottish Holdings is a holding company organized under the laws of the
Cayman Islands with its principal executive office in Bermuda. Scottish Holdings
and its non-U.S. subsidiaries believe they have operated and intend to continue
operating in a manner such that neither Scottish Holdings nor any of its
non-U.S. subsidiaries will be treated as engaging in a trade or business in the
United States and thus will not be subject to U.S. federal income taxation on
net income. Because there are no definitive standards provided by the Code,
regulations or court decisions as to which activities constitute being engaged
in the conduct of a trade or business within the United States and as the
determination is essentially factual in nature, we cannot assure you that the
IRS could not contend successfully that Scottish Holdings or one or more of its
non-U.S. subsidiaries, are engaged in a trade or business in the United States
for U.S. federal income tax purposes, and thus may be subject to U.S. federal
income tax and "branch profits" tax on net income. The highest marginal federal
income tax rates currently are 35% for a corporation's income that is
effectively connected with a U.S. trade or business and 30% for the "branch
profits" tax.

U.S. PERSONS WHO OWN OUR ORDINARY SHARES MAY BE SUBJECT TO U.S. FEDERAL INCOME
TAXATION ON OUR UNDISTRIBUTED EARNINGS AND MAY RECOGNIZE ORDINARY INCOME UPON
DISPOSITION OF OUR ORDINARY SHARES.

    Our shareholders who are U.S. persons may be required to include in gross
income for U.S. federal income tax purposes our undistributed earnings if we are
treated as a passive foreign investment company, a controlled foreign
corporation, or if we have generated more than a permissible amount of related
person insurance income. In addition, in certain cases gain on the disposition
of our ordinary shares may be treated as ordinary income.

    CONTROLLED FOREIGN CORPORATION.  Each U.S. 10% shareholder of a controlled
foreign corporation on the last day of the controlled foreign corporation's
taxable year generally must include in gross income for U.S. federal income tax
purposes such shareholder's pro-rata share of the controlled foreign
corporation's subpart F income, even if the subpart F income has not been
distributed. For purposes of this discussion, the term "U.S. 10% shareholder"
includes only persons who, directly or indirectly (or through the application of
certain "constructive" ownership rules), own 10% or more of the total combined
voting power of all class of stock of the foreign corporation. In general, a
non-U.S. insurance company is treated as a controlled foreign corporation only
if such U.S. 10% shareholders collectively own more than 25% of the total
combined voting power or total value of the company's capital stock for an
uninterrupted period

                                       25
<Page>
of 30 days or more during any year. At the present time, Pacific Life and its
affiliates own approximately 22.5% (and are permitted to own up to 24.9%) of our
ordinary shares and, as such, are U.S. 10% shareholders. If any other U.S.
person acquires 10% or more of our ordinary shares, Scottish Holdings would be
treated as a controlled foreign corporation. In order to prevent Scottish
Holdings or any of its non-U.S. subsidiaries from being treated as a controlled
foreign corporation, our Articles of Association prohibit the ownership by any
person of shares that would equal or exceed 10% (or that would exceed 24.9% in
the case of Pacific Life) of any class of the issued and outstanding Scottish
Holdings shares and provide a "voting cutback" that would, in certain
circumstances, reduce the voting power with respect to Scottish Holdings shares
to the extent necessary to prevent Pacific Life from owning more than 24.9% of
the voting power of Scottish Holdings, and any other shareholder owning more
than 9.9% of the voting power of Scottish Holdings. We believe that the
dispersion of our share ownership (other than with respect to Pacific Life) and
the provisions of our Articles of Association restricting the transfer, issuance
and voting power of our ordinary shares should prevent any person (other than
Pacific Life) from becoming a U.S. 10% shareholder of Scottish Holdings and/or
its non-U.S. subsidiaries, however, some of these provisions have not been
directly passed on by the IRS, or by any court, in this context. We cannot
assure you that if, in addition to Pacific Life, a U.S. person were to become a
U.S. 10% shareholder of Scottish Holdings and/or its non-U.S. subsidiaries in
the future that the share ownership of such person together with that of Pacific
Life would not cause Scottish Holdings and/or its non-U.S. subsidiaries to be
treated as controlled foreign corporations and that such U.S. 10% shareholder
would be required to include in gross income its allocable share of Subpart F
income of Scottish Holdings and/or its non-U.S. insurance subsidiaries.

    RELATED PERSON INSURANCE INCOME.  If Scottish Holdings' related person
insurance income determined on a gross basis were to equal or exceed 20% of its
gross insurance income in any taxable year, direct or indirect insureds and
persons related to such insureds were directly or indirectly to own 20% or more
of the voting power or value of Scottish Holdings' capital stock, and U.S.
persons directly or indirectly own collectively 25% or more of our ordinary
shares (without regard to whether any U.S. person is a U.S. 10% shareholder),
such U.S. persons who own our ordinary shares on the last day of the taxable
year would be required to include the U.S. person's pro-rata share of Scottish
Holdings' related person insurance income for the taxable year in his or her
gross income for U.S. federal income tax purposes, determined as if such related
person insurance income were distributed proportionately to such U.S. person at
that date. Related person insurance income is generally underwriting premium and
related investment income attributable to insurance or reinsurance policies when
the direct or indirect insureds are direct or indirect U.S. shareholders or are
related to such direct or indirect U.S. shareholders. Although Pacific Life is
currently a U.S. person that is considered to own indirectly more than 20% of
the voting power and value of one of two companies that provide it with
reinsurance, World-Wide Reassurance, a wholly owned indirect subsidiary of
Scottish Holdings, we do not believe that the 20% gross insurance income
threshold has been met. We cannot assure you, however, that this is, or will
continue to be, the case. Consequently, we cannot assure you that a person who
is a direct or indirect U.S. shareholder will not be required to include amounts
in its income in respect of related person insurance income in any taxable year.

    DISPOSITIONS OF OUR ORDINARY SHARES.  If we are considered to be a
controlled foreign corporation, any gain from the sale or exchange by a U.S. 10%
shareholder of our ordinary shares may be treated as ordinary income to the
extent of our earnings and profits during the period that such shareholder held
our shares (with certain adjustments).

    If we are considered to have related person insurance income and U.S.
persons in the aggregate (without regard to whether any such shareholder is a
U.S. 10% shareholder) own 25% or more of the voting power or value of our
ordinary shares, any gain from the disposition by a U.S. shareholder of our
ordinary shares will generally be treated as ordinary income to the extent of
such U.S. shareholder's portion of the corporation's undistributed earnings and
profits that were accumulated during the period that the U.S. shareholder owned
the shares. In addition, such U.S. shareholder will be required to comply with
certain reporting requirements, regardless of the amount of shares owned
directly or indirectly.

                                       26
<Page>
However, because Scottish Holdings is not itself directly engaged in the
insurance business and because proposed U.S. Treasury regulations applicable to
this situation appear to apply only to sales of shares of corporations that are
directly engaged in the insurance business, we do not believe that sale of
Scottish Holdings shares will be subject to these rules. We cannot assure you,
however, that the IRS will interpret the proposed regulations in this manner or
that the proposed regulations will not be promulgated in final form in a manner
that would cause these rules to apply to dispositions of our ordinary shares.

    PASSIVE FOREIGN INVESTMENT COMPANY.  In order to avoid significant potential
adverse U.S. federal income tax consequences for any U.S. person who owns our
ordinary shares, we must not be subject to treatment as a passive foreign
investment company, referred to as a PFIC, in any year in which such U.S. person
is a shareholder. In general, a non-U.S. corporation is a PFIC for a taxable
year if 75% or more of its income constitutes passive income or 50% or more of
its assets produce passive income. Passive income generally includes interest,
dividends and other investment income. Passive income does not, however, include
income derived in the active conduct of an insurance business by a corporation
that is predominantly engaged in an insurance business. This exception is
intended to ensure that income derived by a bona fide insurance company is not
treated as passive income, except to the extent such income is attributable to
financial reserves in excess of the reasonable needs of the insurance business.
Although we believe that Scottish Holdings and its non-U.S. subsidiaries, taken
as a whole, are engaged predominantly in insurance and reinsurance activities
that involve significant risk transfer and that are otherwise activities of a
type normally undertaken by insurance or reinsurance companies, and do not
expect to have financial reserves in excess of the reasonable needs of their
insurance businesses, it is possible that the IRS could take the position that
we are a PFIC. Although we do not believe that we are or will be a passive
foreign investment company, we cannot assure you that the IRS or a court will
concur that we are not a passive foreign investment company with respect to any
given year.

U.S. TAX-EXEMPT ORGANIZATIONS WHO OWN OUR ORDINARY SHARES MAY RECOGNIZE
UNRELATED BUSINESS TAXABLE INCOME.

    A U.S. tax-exempt organization may recognize unrelated business taxable
income if a portion of our insurance income is allocated to the organization. In
general, insurance income will be allocated to a U.S. tax-exempt organization if
either we are a controlled foreign corporation and the tax-exempt shareholder is
a U.S. 10% shareholder or there is related person insurance income and certain
exceptions do not apply. Although we do not believe that any U.S. persons will
be allocated subpart F insurance income, we cannot assure you that this will be
the case. Potential U.S. tax-exempt investors are advised to consult their own
tax advisors.

CHANGE IN U.S. TAX LAWS MAY BE RETROACTIVE AND COULD SUBJECT US AND/OR U.S.
PERSONS WHO OWN OUR ORDINARY SHARES TO U.S. INCOME TAXATION ON OUR UNDISTRIBUTED
EARNINGS.

    The tax laws and interpretations regarding whether a company is engaged in a
U.S. trade or business, is a controlled foreign corporation, has related party
insurance income or is a passive foreign investment company are subject to
change, possibly on a retroactive basis. There are currently no regulations
regarding the application of the passive foreign investment company rules to an
insurance company and the regulations regarding related party insurance income
are still in proposed form. New regulations or pronouncements interpreting or
clarifying such rules will likely be forthcoming from the IRS. We are not able
to predict if, when or in what form such guidance will be provided and whether
such guidance will have a retroactive effect.

WE MAY BECOME SUBJECT TO TAXES IN THE CAYMAN ISLANDS IN THE FUTURE.

    Scottish Holdings and our Cayman Islands subsidiaries have received
undertakings from the Governor-in-Council of the Cayman Islands pursuant to the
provisions of the Tax Concessions Law, as amended (1999 Revision), that until
the year 2018 with respect to Scottish Holdings and Scottish Annuity & Life
Insurance Company (Cayman) Ltd., and until the year 2014 with respect to The
Scottish Annuity Company (Cayman) Ltd., (1) no subsequently enacted law imposing
any tax on profits, income,

                                       27
<Page>
gains or appreciation shall apply to Scottish Holdings and its Cayman Islands
subsidiaries and (2) no such tax and no tax in the nature of an estate duty or
an inheritance tax shall be payable on any shares, debentures or other
obligations of Scottish Holdings and its Cayman Islands subsidiaries. We cannot
assure you that we will not be subject to any Cayman Islands tax after the
applicable dates.

WE MAY BECOME SUBJECT TO TAXES IN BERMUDA IN THE FUTURE.

    Bermuda currently imposes no income tax on corporations. The Bermuda
Minister of Finance, under The Exempted Undertakings Tax Protection Act 1966 of
Bermuda, has assured us that if any legislation is enacted in Bermuda that would
impose tax computed on profits or income, or computed on any capital asset, gain
or appreciation, or any tax in the nature of estate duty or inheritance tax,
then the imposition of any such tax will not be applicable to our Bermuda
subsidiaries until March 28, 2016. We cannot assure you that our Bermuda
subsidiaries will not be subject to any Bermuda tax after that date.

    Scottish Holdings recently moved its principal place of business to Bermuda.
In connection with this move, Scottish Holdings intends to apply for an
assurance from the Bermuda Minister of Finance similar to that described above
with respect to our Bermuda subsidiaries. We cannot assure you, however, that we
will obtain such an assurance and that we will not be subject to Bermuda tax in
the future.

THE IMPACT OF LETTERS OF COMMITMENT FROM BERMUDA AND THE CAYMAN ISLANDS TO THE
ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT TO ELIMINATE HARMFUL TAX
PRACTICES IS UNCERTAIN.

    The Organization for Economic Cooperation and Development, which is commonly
referred to as the OECD, has published reports and launched a global dialogue
among member and non-member countries on measures to limit harmful tax
competition. These measures are largely directed at counteracting the effects of
tax havens and preferential tax regimes in countries around the world. In the
OECD's report dated June 26, 2000, Bermuda and the Cayman Islands were not
listed as tax haven jurisdictions because they had previously signed a letter
committing themselves to eliminate harmful tax practices by the end of 2005 and
to embrace international tax standards for transparency, exchange of information
and the elimination of any aspects of the regimes for financial and other
services that attract business with no substantial domestic activity. We are not
able to predict what changes will arise from the commitment or whether such
changes will have an adverse effect on us.

ITEM 2: PROPERTY

    We currently lease office space in Hamilton, Bermuda where our executive and
principal offices are located and in Charlotte, North Carolina, George Town,
Grand Cayman and Dallas, Texas. Our life reinsurance business operates out of
the Charlotte and Bermuda offices while our wealth management business operates
out of the Grand Cayman and Dallas offices. The Grand Cayman lease expires in
2006 and the Bermuda, Charlotte and Dallas leases expire in 2005.

    World-Wide Holdings maintains premises in Windsor, England. The Windsor
lease expired in October 2001 and is currently being renegotiated.

    We believe that these properties are adequate to meet our needs for the
foreseeable future.

ITEM 3: 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.

                                       28
<Page>
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

    Scottish Holdings held an Extraordinary General Meeting of Shareholders on
December 14, 2001 the purpose of which was to consider and vote on: (1) the
Share Purchase Agreement and related transactions by which Scottish Holdings
would acquire World-Wide Holdings and World-Wide Reassurance from Pacific Life
in exchange for Scottish Holdings ordinary shares valued at approximately
$78 million; (2) amendments to the Memorandum of Association permitting Scottish
Holdings to own insurance companies incorporated or formed outside of the Cayman
Islands; (3) amendments to the Articles of Association to allow Pacific Life and
its related entities (but no other shareholder) to own up to 24.9% of Scottish
Holdings ordinary shares and exercise voting rights attached to those ordinary
shares; and (4) approval of the 2001 Stock Option Plan.

    1)  Approval of the Share Purchase Agreement and Related Transactions

           The Shareholders approved this proposal as follows:

<Table>
<Caption>
Total Vote            Total Vote            Total Vote
   For                 Against               Withheld
----------            ----------            ----------
<S>                   <C>                   <C>
13,185,265               43,231                9,390
</Table>

    2)  Amendments to the Memorandum of Association

           The Shareholders approved this proposal as follows:

<Table>
<Caption>
Total Vote            Total Vote            Total Vote
   For                 Against               Withheld
----------            ----------            ----------
<S>                   <C>                   <C>
13,067,390              160,981                9,515
</Table>

    3)  Amendments to the Articles of Association

           The Shareholders approved this proposal as follows:

<Table>
<Caption>
Total Vote            Total Vote            Total Vote
   For                 Against               Withheld
----------            ----------            ----------
<S>                   <C>                   <C>
12,372,653              840,318               24,915
</Table>

    4)  Approval of the 2001 Stock Option Plan

           The Shareholders approved this proposal as follows:

<Table>
<Caption>
Total Vote            Total Vote            Total Vote
   For                 Against               Withheld
----------            ----------            ----------
<S>                   <C>                   <C>
 8,441,288            4,473,655              322,943
</Table>

                                       29
<Page>
                                    PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

MARKET FOR THE ORDINARY SHARES

    The ordinary shares, par value $0.01 per share, of Scottish Holdings have
been traded on the New York Stock Exchange under the symbol "SCT" since
January 23, 2002. Prior to our listing on the New York Stock Exchange our
ordinary shares were listed and traded on the Nasdaq National Market under the
symbol "SCOT" since November 24, 1998. The high and low closing prices for the
ordinary shares are shown below:

<Table>
<Caption>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
YEAR ENDED DECEMBER 31, 2000
First Quarter...............................................  $ 9.000    $ 7.563
Second Quarter..............................................    9.125      6.781
Third Quarter...............................................    9.875      8.375
Fourth Quarter..............................................   12.063      8.000

YEAR ENDED DECEMBER 31, 2001
First Quarter...............................................  $16.500    $11.125
Second Quarter..............................................   17.600     13.000
Third Quarter...............................................   18.900     13.900
Fourth Quarter..............................................   19.350     15.000

PERIOD ENDED FEBRUARY 28, 2002
January 1, 2002 to February 28, 2002........................  $19.000    $15.900
</Table>

    As of December 31, 2001, Scottish Holdings had thirty-one record holders of
its ordinary shares.

    Scottish Holdings paid cash dividends of $0.20 per ordinary share in each of
2001 and 2000.

    On December 31, 2001, Scottish Holdings completed the acquisition of all of
the issued and outstanding shares of World-Wide Holdings from Pacific Life. As a
result of the acquisition, World-Wide Holdings became a wholly owned subsidiary
of Scottish Holdings, and Pacific Life received 4,532,380 ordinary shares of
Scottish Holdings. These shares were not registered under the Securities Act and
were issued in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act.

                                       30
<Page>
ITEM 6: SELECTED FINANCIAL DATA

    The following selected financial data should be read in conjunction with the
Consolidated Financial Statements, including the related Notes, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Balance sheet data reflect the acquisition of World-Wide Holdings
on December 31, 2001, but consolidated statements of income data do not reflect
the results of World-Wide Holdings as the transaction was completed at the close
of business on the last day of the year.

<Table>
<Caption>
                                             YEAR ENDED     YEAR ENDED     YEAR ENDED    PERIOD ENDED
                                            DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                2001           2000           1999          1998*
                                            ------------   ------------   ------------   ------------
                                                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                         <C>            <C>            <C>            <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
  Total revenues..........................  $   119,469    $    83,934    $    22,465    $     1,338
  Total benefits and expenses.............      102,236         68,073         13,632            902
  Net income before income taxes and
    minority interest.....................       17,233         15,861          8,883            436
  Income before cumulative effect of
    change in accounting principle........       17,245         15,971          8,875            436
  Cumulative effect of change in
    accounting principle..................         (406)            --             --             --
  Net income..............................       16,839         15,971          8,875            436
PER SHARE DATA:
  Basic earnings per share:
  Income before cumulative effect of
    change in accounting principle........  $      1.10    $      1.01    $      0.50    $      0.12
  Cumulative effect of change in
    accounting principle..................        (0.02)            --             --             --
                                            -----------    -----------    -----------    -----------
  Net income..............................  $      1.08    $      1.01    $      0.50    $      0.12
                                            ===========    ===========    ===========    ===========
  Diluted earnings per share:
  Income before cumulative effect of
    change in accounting principle........  $      1.04    $      1.00    $      0.50    $      0.12
  Cumulative effect of change in
    accounting principle..................        (0.02)            --             --             --
                                            -----------    -----------    -----------    -----------
  Net income..............................  $      1.02    $      1.00    $      0.50    $      0.12
                                            ===========    ===========    ===========    ===========

  Book value per share....................  $     16.44    $     15.34    $     13.63    $     13.57
  Market value per share..................  $     19.35    $     11.98    $      8.19    $     13.75
  Cash dividends per share................  $      0.20    $      0.20    $      0.15             --
Weighted average number of shares
  outstanding:
  Basic...................................   15,646,106     15,849,657     17,919,683      3,586,788
  Diluted.................................   16,485,338     15,960,542     17,919,683      3,586,788
</Table>

<Table>
<Caption>
                                            DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                2001           2000           1999           1998
                                            ------------   ------------   ------------   ------------
                                                             (DOLLARS IN THOUSANDS)
<S>                                         <C>            <C>            <C>            <C>
BALANCE SHEET DATA:
  Total fixed maturity investments........  $   583,890    $   581,020    $   546,807    $   178,521
  Total assets............................    2,150,354      1,168,518        856,634        254,346
  Total liabilities.......................    1,819,072        926,134        637,973          2,286
  Minority interest.......................           --          2,820             --             --
  Total shareholders' equity..............      331,282        239,564        218,661        252,060
Actual number of ordinary shares
  outstanding.............................   20,144,956     15,614,240     16,046,740     18,568,440
</Table>

------------------------

*   The period from May 12, 1998 (date of incorporation) to December 31, 1998.

                                       31
<Page>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

    Scottish Holdings 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.

REVENUES

    We derive revenue from four principal sources:

    - premiums from reinsurance assumed on life business;

    - fee income from our variable life insurance and variable annuity products
      and from financial reinsurance transactions;

    - investment income from our investment portfolio; and

    - realized gains and losses from our investment portfolio.

    Premiums from reinsurance assumed on life business are included in revenues
over the premium paying period of the underlying policies. When we acquire
blocks of in-force business, we account for these transactions as purchases, and
our results of operations include the net income from these blocks as of their
respective dates of acquisition. Reinsurance assumed on annuity business does
not generate premium income but generates investment income over time on the
assets we receive from the ceding company.

    In our wealth management business, when we sell a variable life insurance
policy or a variable annuity contract, we charge mortality, expense and
distribution risk fees that are based on total assets in each policyholder's
separate account. In the case of variable life insurance policies, we also
charge a cost of insurance fee based on the amount necessary to cover the death
benefit under the policy. We also earn fees in our financial reinsurance
transactions with U.S. insurance company clients. Because some of these
transactions do not satisfy the risk transfer rules for reinsurance accounting,
the premiums and benefits are not reported in the consolidated statements of
income.

    Our investment income includes interest earned on our fixed income
investments and income from funds withheld at interest under modified
coinsurance agreements. Under GAAP, because our fixed income investments are
held as available for sale, these securities are carried at fair value, and
unrealized appreciation and depreciation on these securities is not included in
investment income on our statements of income, but is included in comprehensive
income as a separate component of shareholders' equity.

    Realized gains and losses include gains and losses on investment securities
that we sell during a period and write downs of securities deemed to be other
than temporarily impaired.

EXPENSES

    We have five principal types of expenses:

    - claims and policy benefits under our reinsurance contracts;

    - interest credited to interest sensitive contract liabilities;

    - acquisition costs and other insurance expenses;

    - operating expenses; and

    - interest expense.

                                       32
<Page>
    When we issue a life reinsurance contract, we establish reserves for
benefits. These reserves are our estimates of what we expect to pay in claims
and policy benefits and related expenses under the contract or policy. From time
to time we may also add to reserves if our experience leads us to believe that
benefit claims and expenses will ultimately be greater than the existing
reserve. We report the provision for these reserves as an expense during the
period when the reserve or additional reserve is established.

    In connection with reinsurance of annuity and annuity-type products, we
record a liability for interest sensitive contract liabilities, which represents
the amount ultimately due to the policyholder. We credit interest to these
contracts each period at the rates determined in the underlying contract, and
the amount is reported as interest credited to interest sensitive contract
liabilities on our consolidated statements of income.

    A portion of the costs of acquiring new business, such as commissions,
certain internal expenses related to our policy issuance and underwriting
departments and some variable selling expenses are capitalized. The resulting
deferred acquisition costs asset is amortized over future periods based on our
expectations as to the emergence of future gross profits from the underlying
contracts. These costs are dependent on the structure, size and type of business
written. For certain products, we may retrospectively adjust our amortization
when we revise our estimate of current or future gross profits to be realized.
The effects of this adjustment are reflected in earnings in the period in which
we revise our estimate.

    Operating expenses consist of salary and salary related expenses, legal and
professional fees, rent and office expenses, travel and entertainment,
directors' expenses, insurance and other similar expenses, except to the extent
capitalized in deferred acquisition costs.

    Interest expense consists of interest charges on our borrowings.

FACTORS AFFECTING PROFITABILITY

    We seek to generate profits from three principal sources. First, in our life
reinsurance business, we seek to receive reinsurance premiums and financial
reinsurance fees that, together with income from the assets in which those
premiums are invested, exceed the amounts we ultimately pay as claims and policy
benefits, acquisition costs and ceding commissions. Second, in our wealth
management business, we seek to generate fee income that will exceed the
expenses of maintaining and administering our variable life insurance and
variable annuity products. Third, within our investment guidelines, we seek to
maximize the return on our unallocated capital.

    The following factors affect our profitability:

    - the volume of business we write;

    - our ability to assess and price adequately for the risks we assume;

    - the mix of different types of business that we reinsure, because profits
      on some kinds of business emerge later than on other types;

    - our ability to manage our assets and liabilities to manage investment and
      liquidity risk;

    - the level of fees that we charge on our wealth management contracts; and

    - our ability to control expenses.

    In addition, our profits can be affected by a number of factors that are not
within our control. For example, movements in interest rates can affect the
volume of business that we write, the income earned from our investments, the
interest we credit on interest sensitive contracts, the level of surrender
activity on contracts that we reinsure and the rate at which we amortize
deferred acquisition costs. Other external factors that can affect profitability
include mortality experience that varies from our assumed mortality and changes
in regulation or tax laws which may affect the attractiveness of our products or
the costs of doing business.

                                       33
<Page>
RESULTS OF OPERATIONS

    Our results of operations for each of the years ended December 31, 2001,
2000 and 1999 do not include the results of operations of World-Wide Holdings,
which we acquired at the close of business on December 31, 2001.

EARNINGS PER SHARE

<Table>
<Caption>
                                                                   YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------------
                                                            2001            2000            1999
                                                        -------------   -------------   -------------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>             <C>             <C>
Net income............................................   $    16,839     $    15,971     $     8,875
                                                         ===========     ===========     ===========

Basic EPS.............................................   $      1.08     $      1.01     $      0.50
                                                         ===========     ===========     ===========
Diluted EPS...........................................   $      1.02     $      1.00     $      0.50
                                                         ===========     ===========     ===========
Weighted average number of shares outstanding:
  Basic...............................................    15,646,106      15,849,657      17,919,683
  Diluted.............................................    16,485,338      15,960,542      17,919,683
</Table>

    Our net income for the year ended December 31, 2001 increased 5% to
$16.8 million from $16.0 million in 2000, which was an increase of 80% from
$8.9 million in 1999. The increases in earnings in 2001 and 2000 are primarily
due to increased income from life reinsurance and wealth management operations
and an increase in investment income due to the increase in average invested
assets, offset in part in 2001 by an increase in realized losses on fixed
maturity investments.

    Earnings per share for the year ended December 31, 2001 increased 2% on a
diluted basis to $1.02 from $1.00 in 2000, and increased 100% in 2000 from $0.50
in 1999. The increase in earnings per share was due to the increased earnings
plus the repurchase of 2,529,700 shares in 1999, 432,500 shares in 2000 and
100,000 shares in 2001, offset in part by the increase in the dilutive effect of
options and warrants.

<Table>
<Caption>
                                                                    YEAR ENDED DECEMBER 31,
                                                        ------------------------------------------------
                                                             2001             2000             1999
                                                        --------------   --------------   --------------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                     <C>              <C>              <C>
GAAP net income.......................................   $    16,839      $    15,971      $     8,875
Realized losses (gains) net of deferred acquisition
  costs--non taxable companies........................         4,790              236            2,488
Realized losses (gains) net of deferred acquisition
  costs--taxable companies............................          (866)             (45)             150
Provision for taxes--taxable companies................           449               16               --
Cumulative effect of change in accounting principle...           406               --               --
                                                         -----------      -----------      -----------
Net operating earnings................................   $    21,618      $    16,178      $    11,513
                                                         ===========      ===========      ===========
Basic net operating EPS...............................   $      1.38      $      1.02      $      0.64
                                                         ===========      ===========      ===========
Diluted net operating EPS.............................   $      1.31      $      1.01      $      0.64
                                                         ===========      ===========      ===========
Weighted average number of shares outstanding:
  Basic...............................................    15,646,106       15,849,657       17,919,683
  Diluted.............................................    16,485,338       15,960,542       17,919,683
</Table>

                                       34
<Page>
    Net operating earnings excludes the effect of net realized capital gains and
losses, net of deferred acquisitions costs, and non-recurring events and
transactions. We determine net operating earnings by adjusting GAAP net income
for net realized capital gains and losses, as adjusted for the related effects
upon the amortization of deferred acquisition costs, and non-recurring items
that we believe are not indicative of overall operating trends. While these
items may be significant components in understanding and assessing our
consolidated financial performance, we believe the presentation of net operating
earnings enhances the understanding of our results of operations by highlighting
earnings attributable to the normal, recurring operations of our business.
However, net operating earnings are not a substitute for net income determined
in accordance with GAAP.

    Net operating earnings increased 34% to $21.6 million in 2001 from
$16.2 million in 2000, which was a 41% increase from $11.5 million in 1999.

REVENUES

    Revenues increased by $35.5 million or 42% to $119.5 million in 2001 and by
$61.5 million or 274% to $83.9 million in 2000 from $22.5 million in 1999. The
increases are primarily due to growth in our life reinsurance operations and an
increase in investment income due to the increase in our invested assets
resulting from new business.

    Revenue consists of the following:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Premiums earned.......................................  $    68,344   $    37,086   $        21
Fee income............................................        4,809         2,246         1,014
Investment income, net................................       51,692        44,793        24,068
Realized losses.......................................       (5,376)         (191)       (2,638)
                                                        -----------   -----------   -----------
Total revenues........................................  $   119,469   $    83,934   $    22,465
                                                        ===========   ===========   ===========
</Table>

PREMIUMS EARNED

    Premiums earned in 2001 increased 84% to $68.3 million and were from
38 life reinsurance clients. Premiums earned in 2000 of $37.1 million were from
12 life reinsurance clients. Premiums earned in 1999 are in relation to the
accident & health business in existence when we acquired Scottish Re
(U.S.), Inc. Premiums earned have increased due to the increase in the number of
clients and the increase in business from those clients.

    As of December 31, 2001, we reinsured approximately $34.9 billion of life
coverage on 993,000 lives. The average benefit coverage per life is $35,000 and
our targeted maximum corporate retention on any one life is $500,000. As of
December 31, 2000, we reinsured approximately $11.4 billion of life coverage on
248,000 lives. The average benefit coverage per life was $45,800.

FEE INCOME

    We earn life reinsurance fees on our financial reinsurance treaties that do
not qualify under risk transfer rules for reinsurance accounting.

    Wealth management fees increased in 2001 by 43% to $3.1 million from
$2.2 million in 2000 which was a 115% increase from $1.0 million in 1999. The
growth has been primarily due to increases in variable account balances on which
we earn fees and the increase in the number of clients.

                                       35
<Page>
    Fees earned are as follows:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Life reinsurance......................................  $     1,685   $        66   $        --
Wealth management.....................................        3,124         2,180         1,014
                                                        -----------   -----------   -----------
Total.................................................  $     4,809   $     2,246   $     1,014
                                                        ===========   ===========   ===========
</Table>

    Wealth management fees are earned from both life and annuity clients. The
following table summarizes our client base with the associated segregated assets
and policy face amounts.

<Table>
<Caption>
                                                                          DECEMBER 31,
                                                        ------------------------------------------------
                                                             2001             2000             1999
                                                        --------------   --------------   --------------
                                                        (DOLLARS IN THOUSANDS, EXCEPT NUMBER OF CLIENTS)
<S>                                                     <C>              <C>              <C>
Number of clients
  --Life..............................................            42               11                2
  --Annuity...........................................            90               81               79
                                                         -----------      -----------      -----------
                                                                 132               92               81
                                                         ===========      ===========      ===========
Segregated assets
  --Life..............................................   $   134,800      $    47,155      $       300
  --Annuity...........................................       468,000          362,505          256,246
                                                         -----------      -----------      -----------
                                                         $   602,800      $   409,660      $   256,546
                                                         ===========      ===========      ===========
Policy face amounts
  --Life..............................................   $   812,380      $   241,907      $    15,000
                                                         ===========      ===========      ===========
</Table>

    The change in the segregated assets is as follows:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Balance at beginning of period........................  $   409,660   $   256,546   $        --
Deposits..............................................      202,794       128,039       213,505
Withdrawals...........................................      (18,985)      (15,938)       (1,345)
Investment performance(1).............................        9,331        41,013        44,386
                                                        -----------   -----------   -----------
Balance at December 31................................  $   602,800   $   409,660   $   256,546
                                                        ===========   ===========   ===========
</Table>

------------------------

(1) Investment performance for the period is determined using actual asset
    valuations where available and estimates where actual data is not available.

INVESTMENT INCOME

    Net investment income increased by $6.9 million or 15% to $51.7 million in
2001 from $44.8 million in 2000 primarily as a result of an increase in average
invested assets. Funds withheld at interest grew from $46.3 million to
$562.4 million; since most of this growth occurred in the second half of the
year, its contribution to income was for only part of the year. Excluding funds
withheld at interest and the World-Wide Holdings portfolio, which was added at
year end, our general account portfolio declined during the year. This decline
was the net result of the recapture by a ceding company of $185.7 million of
assets on April 30, 2001, offset in part by the addition of investments funded
by new transactions and borrowings. During 2001, as compared to 2000, average
book yields were lower, particularly on floating rate assets and cash. Yields on
floating rate assets generally move with LIBOR, which decreased

                                       36
<Page>
significantly during 2001. On the $581.1 million portfolio managed by NEAM, the
yields on fixed rate assets were 7.09% and 7.12% at December 31, 2001 and 2000,
respectively. Between those dates, however, LIBOR decreased to 1.88% from 6.40%,
causing the yield on floating-rate assets to decrease to 4.43% from 7.82% and
the yield on cash and cash equivalents to decrease to 2.20% from 5.70%. Since
the floating-rate assets were funded by floating-rate liabilities, the decrease
in yield on floating-rate assets had no material effect on earned margins.

    Net investment income increased by $20.7 million or 86% from $24.1 million
in 1999 to $44.8 million in 2000 as a result of growth in invested assets plus
an increase in our average book yield from 6.75% in 1999 to 7.24% in 2000.

    The split of investment income by segment is as follows:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Life reinsurance......................................  $    44,151   $    35,121   $    10,930
Wealth management.....................................           68            15            --
Other(1)..............................................        7,473         9,657        13,138
                                                        -----------   -----------   -----------
Total.................................................  $    51,692   $    44,793   $    24,068
                                                        ===========   ===========   ===========
</Table>

------------------------

(1) Other includes investment income on unallocated capital.

REALIZED LOSSES

    For the year ended December 31, 2001, realized losses on investments were
$5.4 million as compared to $0.2 million in 2000 and $2.6 million in 1999. The
realization of losses in 2001 was due to the sale and write down of carrying
values of securities, predominately securities issued by Enron and its
affiliate, Osprey. These losses were offset in part by gains realized primarily
for tax purposes on bonds in the portfolio of Scottish Re (U.S.), Inc. and gains
of $529,000 on assets sold to fund part of the recapture of a block of business
by one client on April 30, 2001.

BENEFITS AND EXPENSES

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Claims and other policy benefits......................  $    51,245   $    23,606   $     1,651
Interest credited to interest sensitive contract
  liabilities.........................................       17,578        17,390         5,549
Acquisition costs and other insurance expenses........       22,752        17,152         1,979
Operating expenses....................................        9,256         9,925         4,453
Interest expense......................................        1,405            --            --
                                                        -----------   -----------   -----------
Total benefits & expenses.............................  $   102,236   $    68,073   $    13,632
                                                        ===========   ===========   ===========
</Table>

CLAIMS AND OTHER POLICY BENEFITS

    Claims and other policy benefits increased by 117% to $51.2 million in 2001
from $23.6 million in 2000 and from $1.7 million in 1999 as a result of the
increased number of clients and the increase in business from these clients,
together with active management of existing treaties. In 2001, we recorded net
claims totaling $750,000 in relation to the World Trade Center and Pentagon
attacks on September 11, 2001. Gross claims in relation to these attacks were
$816,000 of which $66,000 is recoverable under our catastrophe insurance
coverage.

                                       37
<Page>
INTEREST CREDITED TO INTEREST SENSITIVE CONTRACT LIABILITIES

    Interest credited to interest sensitive contract liabilities increased by
$0.2 million or 1% to $17.6 million in 2001 from $17.4 million in 2000, which
was an increase of $11.8 million from $5.5 million in 1999. The movement in 2001
was the net effect of interest credited on new 2001 reinsurance treaties and
increases in interest credited to treaties which commenced in 2000 and 1999 due
to increasing average liability balances, which was offset by the $8.5 million
effect of the recapture of a block of business by one client on April 30, 2001.
The increase from 1999 to 2000 was due to increases in the number of treaties
and the increase in average liability balances.

ACQUISITION COSTS AND OTHER INSURANCE EXPENSES

    Acquisition costs and other insurance expenses increased by $5.6 million or
33% to $22.8 million in 2001 from $17.2 million in 2000, which was an increase
of $15.2 million from $2.0 million in 1999. The increases from 1999 were the
result of the increased number of reinsurance clients in our life reinsurance
business and the increase in premiums earned over the last two years.

    The components of these expenses are as follows:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Commissions, excise taxes and other insurance
  expenses............................................  $    94,522   $    35,838   $     2,359
Deferral of expenses..................................      (83,092)      (29,625)         (546)
                                                        -----------   -----------   -----------
                                                             11,430         6,213         1,813

Amortization -- Present value of in-force business....          206            67            --
Amortization -- Deferred acquisition costs............       11,116        10,872           166
                                                        -----------   -----------   -----------
Total.................................................  $    22,752   $    17,152   $     1,979
                                                        ===========   ===========   ===========
</Table>

    Commissions and excise taxes vary with premiums earned. Other insurance
expenses include direct and indirect expenses of those departments involved in
the marketing, underwriting and issuing of reinsurance treaties. Of these total
expenses a portion is deferred and amortized over the life of the reinsurance
treaty or in relation to the estimated gross profit in respect of our interest
sensitive contracts.

    The split of these expenses between segments is as follows:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Life reinsurance......................................  $    21,835   $    16,833   $     1,501
Wealth management.....................................          917           319           478
                                                        -----------   -----------   -----------
Total.................................................  $    22,752   $    17,152   $     1,979
                                                        ===========   ===========   ===========
</Table>

OPERATING EXPENSES

    Operating expenses decreased to $9.3 million in 2001 from $9.9 million in
2000 due to the inclusion in 2000 of $0.9 million of non-recurring employee
expenses relating to four employees including severance, recruiting and
relocation expenses, and more costs being allocated in 2001 to acquisition
expenses as they relate to marketing, underwriting and policy and treaty
issuance. Expenses increased to $9.9 million in 2000 from $4.5 million in 1999
as a result of increased reinsurance activity including the acquisition of
Scottish Re (U.S.), Inc.

                                       38
<Page>
    The split of these expenses between segments is as follows:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>
Life reinsurance......................................  $     3,274   $     6,193   $     2,206
Wealth management.....................................          967         1,281           412
Other.................................................        5,015         2,451         1,835
                                                        -----------   -----------   -----------
Total.................................................  $     9,256   $     9,925   $     4,453
                                                        ===========   ===========   ===========
</Table>

    Other operating expenses include executive salaries, head office expenses,
legal and professional fees and other expenses not related to either our life
reinsurance or wealth management lines of business. Other operating expenses
increased significantly in 2001 due to the cost of setting up our principal
executive office in Bermuda, an increase in the number of executive staff
including a full year of the salaries of those staff who joined us in 2000 and
increases in legal and professional expenses.

INTEREST EXPENSE

    We incurred interest expense for the first time in the year ended
December 31, 2001 amounting to $1.4 million, reflecting the use of borrowings in
2001 as described in Note 2 to the consolidated financial statements.

INCOME TAXES

    The 2001 income tax expense includes taxes on the earnings of Scottish Re
(U.S.), Inc., Scottish Annuity & Life International Insurance Company
(Bermuda) Ltd. and Scottish Re (Dublin) Limited, which are offset by a release
of capital loss carry-forwards. The tax benefits in 2000 and 1999 are related to
the earnings of Scottish Re (U.S.), Inc. only, offset by a release of valuation
allowances related to capital loss carry-forwards. An analysis of income taxes
and movements in deferred taxes appears in Note 14 to the consolidated financial
statements.

MINORITY INTEREST

    We now own 100% of Scottish Annuity & Life Holdings (Bermuda) Limited
(formerly Scottish Crown Group (Bermuda) Ltd.). In July 2001, we acquired the
remaining 49.99% of Scottish Annuity & Life Holdings (Bermuda) Limited that we
did not own, and thereby eliminated the minority interest position and certain
intangible assets. Prior to July 2001, our ownership in Scottish Annuity & Life
Holdings (Bermuda) Limited was 50.01%. Minority interest income represents the
minority owner's share of the loss recorded by Scottish Annuity & Life Holdings
(Bermuda) Limited prior to July 2001.

CRITICAL ACCOUNTING POLICIES

    Financial Reporting Release No. 60, which was recently released by the SEC,
requires all companies to include a discussion of critical accounting policies
or methods used in the preparation of financial statements. Note 2 to the
consolidated financial statements includes a summary of the significant
accounting policies and methods used in the preparation of our consolidated
financial statements.

                                       39
<Page>
    There are two Statements of Financial Accounting Standards ("SFAS") that
apply to our insurance business and the related reserves and deferred
acquisition costs:

    SFAS 60 applies to traditional life policies with continuing premiums. For
these 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.
Acquisition costs are deferred and recognized as expense in a constant
percentage of the gross premiums using these assumptions established at issue.
Should the liabilities for future policy benefits plus the present value of
expected future gross premiums for a product be 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. Changes in the assumptions
for mortality, persistency and interest could result in material changes to the
financial statements.

    SFAS 97 applies to investment contracts, limited premium contracts, and
universal life-type contracts. For investment and universal life-type contracts,
future benefit liabilities are held using the retrospective deposit method,
increased for amounts representing unearned revenue or refundable policy
charges. Acquisition costs are deferred and recognized as expense as a constant
percentage of gross margins using assumptions as to mortality, persistency, and
expense established at policy issue without provision for adverse deviation and
are revised periodically to reflect emerging actual experience and any material
changes in expected future experience. Liabilities and the deferral of
acquisition costs are established for limited premium policies under the same
practices as used for traditional life policies with the exception that any
gross premium in excess of the net premium is deferred and recognized into
income as a constant percentage of insurance in force. Should the liabilities
for future policy benefits plus the present value of expected future gross
premiums for a product be 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. Changes in the assumptions for mortality, persistency,
maintenance expense and interest could result in material changes to the
financial statements.

    The development of policy reserves and amortization of deferred acquisition
costs for our products requires management to make estimates and assumptions
regarding mortality, lapse, expense and investment experience. Such estimates
are primarily based on historical experience and information provided by ceding
companies. Actual results could differ materially from those estimates.
Management monitors actual experience, and should circumstances warrant, will
revise its assumptions and the related reserve estimates.

    Present value of in-force business is established upon the acquisition of a
subsidiary and is amortized over the expected life of the business at the time
of 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. The determination of the initial value and the subsequent amortization
require management to make estimates and assumptions regarding future business
results that could differ materially from actual results. Estimates and
assumptions involved in the present value of in-force business and subsequent
amortization are similar to those necessary in the establishment of reserves and
amortization of deferred acquisition costs.

    Intangible assets consist of goodwill that 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 has been amortized on a straight line basis over its
estimated useful life and is reviewed periodically for impairment. In
June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under

                                       40
<Page>
the new rules, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. We will apply the new rules on accounting for
goodwill and other intangible assets beginning in the first quarter of fiscal
2002. During fiscal 2002, we will perform the first of the required impairment
tests of goodwill and have not yet determined what the effect of these tests
will be on our earnings and financial position.

    Fixed maturity investments are evaluated for other than temporary
impairments in accordance with SFAS 115 and EITF 99-20 as described in Note 2 to
the consolidated financial statements. Under these pronouncements, realized
losses are recognized on securities if the securities are determined to be other
than temporarily impaired. Factors involved in the determination of potential
impairment include fair value as compared to cost, length of time to maturity,
length of time the value has been below cost, creditworthiness of the issuer,
forecasted financial performance of the issuer, and interest rates. Changes in
these factors could result in additional writedowns being necessary. At
December 31, 2001 investments were written down by $4.0 million to their
estimated realizable values.

    Our accounting policies addressing reserves, deferred acquisition costs,
value of business acquired, goodwill and investment impairment involve
significant assumptions, judgments and estimates. Changes in these assumptions,
judgments and estimates could create material changes in our consolidated
financial statements.

FINANCIAL CONDITION

INVESTMENTS

    At December 31, 2001, the portfolio controlled by us consisted of
$678.5 million of fixed income securities and cash. Of this total,
$581.1 million represented the fixed income portfolio managed by NEAM,
$93.4 million represented investments of World-Wide Holdings, which have
historically been managed internally and $4.0 million represented other cash
balances. At December 31, 2001, the portion of the portfolio managed by NEAM had
an average Standard & Poor's rating of "A+," an average duration of 3.5 years,
and an average book yield of 6.14%, as compared with an average rating of "AA-,"
an average duration of 2.6 years and an average book yield of 7.24% at
December 31, 2000 and an average rating of "AA," an average duration of
2.9 years and an average book yield of 6.75% at December 31, 1999. At
December 31, 2001, the portion of the investment portfolio managed by World-Wide
Holdings had an average rating of "AA-," an average duration of 1.9 years and an
average book yield of 5.22%. At December 31, 2001, the unrealized depreciation
on investments, net of tax was $3.6 million as compared to $3.8 million at
December 31, 2000 and $15.7 million at December 31, 1999. These amounts are
included on our consolidated balance sheets as part of shareholders' equity.

    At December 31, 2001, funds withheld at interest totaled $562.4 million with
an average rating of "A-," an average duration of 6.0 years and an average book
yield of 6.8%. These are fixed income investments associated with modified
coinsurance transactions and include traded securities, marketable securities,
commercial mortgages and private placements.

    The below table illustrates the fixed income investment portfolio (market
value) credit exposure by category as assigned by Standard & Poor's.

<Table>
<Caption>
                                                            DECEMBER 31, 2001          DECEMBER 31, 2000
                                                         ------------------------   ------------------------
RATINGS                                                  $ IN MILLIONS      %       $ IN MILLIONS      %
-------                                                  -------------   --------   -------------   --------
<S>                                                      <C>             <C>        <C>             <C>
AAA....................................................      $249.2        36.7%        $298.4        47.4%
AA.....................................................        82.1        12.1           62.3         9.9
A......................................................       183.6        27.1          151.4        24.1
BBB....................................................       144.0        21.2           99.8        15.9
BB or Below............................................        19.6         2.9           16.9         2.7
                                                             ------       -----         ------       -----
Total..................................................      $678.5       100.0%        $628.8       100.0%
                                                             ======       =====         ======       =====
</Table>

                                       41
<Page>
    The below table illustrates the fixed income investment portfolio (market
value) sector exposure.

<Table>
<Caption>
                                                            DECEMBER 31, 2001          DECEMBER 31, 2000
                                                         ------------------------   ------------------------
SECTOR                                                   $ IN MILLIONS      %       $ IN MILLIONS      %
------                                                   -------------   --------   -------------   --------
<S>                                                      <C>             <C>        <C>             <C>
U.S. Treasury securities and U.S. government agency
  obligations..........................................      $ 10.0         1.5%        $ 15.9         2.5%
Corporate securities...................................       305.9        45.1          210.4        33.5
Municipal bonds........................................         1.0         0.1             --          --
Mortgage and asset backed securities...................       263.1        38.8          354.7        56.4
Debt securities issued by foreign governments..........         3.9         0.6             --          --
                                                             ------       -----         ------       -----
                                                              583.9        86.1          581.0        92.4
Cash...................................................        94.6        13.9           47.8         7.6
                                                             ------       -----         ------       -----
Total..................................................      $678.5       100.0%        $628.8       100.0%
                                                             ======       =====         ======       =====
</Table>

    The December 31, 2001 data in the tables above includes the World-Wide
Holdings investment portfolio and excludes unit-linked securities, which are
discussed more fully in Note 2 to the consolidated financial statements. All the
data excludes the assets held by ceding insurers under modified coinsurance
agreements.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW

    We generated operating cash flow of $44.3 million in 2001, compared to
$77.0 million in 2000 and $108.7 million in 1999. Operating cash flow includes
$107.4 million, $79.5 million and $106.4 million of funds received in connection
with the acquisition of blocks of reinsurance during 2001, 2000 and 1999, which
are not reflected in the consolidated statements of income. These acquisitions
are explained in more detail in Note 9 to the consolidated financial statements.
The decrease in operating cash flow from 2000 to 2001 is primarily due to an
increase in benefits and expenses paid of $99.8 million, offset in part by an
increase in reinsurance premiums and fees received of $31.0 million, an increase
in investment income received of $7.2 million and an increase of $27.7 million
in the amount received on acquisition of blocks of reinsurance. The decrease in
operating cash flow from 1999 to 2000 is primarily due to the decrease of
$26.9 million in the amount received on acquisition of blocks of reinsurance and
an increase in benefits and expenses paid of $43.0 million, offset in part by an
increase in reinsurance premiums and fees received of $19.0 million and an
increase in investment income received of $21.0 million. Our cash flow from
operations may be positive or negative in any period depending on the amount of
new life reinsurance business written, the level of ceding commissions paid in
connection with writing that business and the level of renewal premiums earned
in the period.

CAPITAL AND COLLATERAL

    At December 31, 2001, total capitalization was $331.3 million
($239.6 million in 2000 and $218.7 million in 1999). The increase in
capitalization at December 31, 2001 is a result of earnings for the year, less
dividends paid, plus the issuance of 4,532,380 ordinary shares with a value of
$78.0 million in respect of the acquisition of World-Wide Holdings on
December 31, 2001, less the repurchase of 100,000 ordinary shares for a total of
$1.5 million during the year.

    Pursuant to stock repurchase programs approved by our Board of Directors, we
repurchased 2,529,700 ordinary shares for $25.0 million in 1999, 432,500
ordinary shares for $3.8 million in 2000 and 100,000 ordinary shares for
$1.5 million in 2001. Since our initial public offering in November 1998, we
have repurchased a total of 3,062,200 ordinary shares at a cost of
$30.3 million.

                                       42
<Page>
    During 2001, we paid quarterly dividends totaling $3.1 million or $0.20 per
share ($3.2 million or $0.20 per share in 2000 and $2.7 million or $0.15 per
share in 1999).

    We have in place a credit facility with a U.S. bank that provides up to
$70 million in the form of borrowings or outstanding letters of credit. Under
the agreement, we may borrow at a predetermined spread of 40 basis points over
LIBOR. The agreement expires in April 2002, at which time the borrowings become
due. At December 31, 2001 we have $40 million of borrowings under this agreement
and no letters of credit outstanding. The agreement requires that we pledge
assets as collateral with a market value not less than 111% of the sum of
outstanding borrowings and letters of credit.

    We also have borrowed $25.1 million under a reverse repurchase agreement
with a major broker/ dealer. Under this agreement, we have sold 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.

    We must have sufficient assets available for use as collateral to support
borrowings, letters of credit, and certain reinsurance transactions. With these
reinsurance transactions, the need for collateral or letters of credit arises in
four ways:

    - when Scottish Annuity & Life Insurance Company (Cayman) Ltd. enters into a
      reinsurance treaty with a U.S. customer, it must pledge assets into a
      reserve credit trust with a U.S. bank in order that the ceding company may
      obtain reserve credit for the reinsurance transaction; in some cases, a
      letter of credit may be substituted for all or a portion of a reserve
      credit trust;

    - when Scottish Re (U.S.), Inc. enters into a reinsurance transaction, it
      typically incurs a need for additional statutory capital; this need can be
      met by its own capital surplus, an infusion of cash or assets from
      Scottish Annuity & Life Insurance Company (Cayman) Ltd. or by ceding a
      portion of the transaction to another company within the group or an
      unrelated reinsurance company, in which case that reinsurer must provide
      reserve credit by pledging assets in a reserve credit trust or pledging
      assets to a bank to support a letter of credit;

    - Scottish Re (U.S.), Inc. is licensed, accredited, approved or authorized
      to write reinsurance in 46 states and the District of Columbia. When
      Scottish Re (U.S.), Inc. enters into a reinsurance transaction with a
      customer domiciled in a state in which it is not a licensed, accredited,
      authorized or approved reinsurer, it likewise must provide a reserve
      credit trust or letter of credit; and

    - even when Scottish Re (U.S.), Inc. is licensed, accredited, approved or
      authorized to write reinsurance in the state, it may agree with a customer
      to provide a reserve credit trust or letter of credit voluntarily to
      mitigate the counter-party risk from the customer's perspective, thereby
      doing transactions that would be otherwise unavailable or would be
      available only on significantly less attractive terms; such a requirement
      most often arises in connection with interest-sensitive liabilities.

    Scottish Annuity & Life Insurance Company (Cayman) Ltd. has agreed with
Scottish Re (U.S.), Inc. that it will (1) cause Scottish Re (U.S.), Inc. to
maintain capital and surplus equal to the greater of $20.0 million or such
amount necessary to prevent the occurrence of a Company Action Level Event under
the risk-based capital laws of the state of Delaware and (2) provide Scottish Re
(U.S.), Inc. with enough liquidity to meet its obligations in a timely manner.

    In addition, Scottish Annuity & Life Insurance Company (Cayman) Ltd. and
Scottish Holdings have agreed with World-Wide Reassurance that in the event
World-Wide Reassurance is unable to meet its obligations under its insurance or
reinsurance agreements, Scottish Annuity & Life Insurance Company (Cayman) Ltd.
(or if Scottish Annuity & Life Insurance Company (Cayman) Ltd. cannot fulfill
such obligations, then Scottish Holdings) will assume all of World-Wide
Reassurance's obligations under such agreements.

                                       43
<Page>
    Scottish Holdings and Scottish Annuity & Life Insurance Company (Cayman)
Ltd. may, from time to time, execute additional agreements guaranteeing the
performance and/or obligations of their subsidiaries.

    While we believe that we have sufficient assets available in the short term
to support our letter of credit needs, we may need to raise additional capital
and/or find alternative assets or unsecured letters of credit to continue to
grow.

    We expect that our cash and investments, together with cash generated from
our businesses, will provide sufficient sources of liquidity to meet our current
needs. However, if our business continues to grow significantly, we will need to
raise additional capital.

OFF BALANCE SHEET ARRANGEMENTS

    We have no obligations, assets or liabilities other than those disclosed in
the financial statements forming part of this Form 10-K; no trading activities
involving non-exchange traded contracts accounted for at fair value; and no
relationships and transactions with persons or entities that derive benefits
from their non-independent relationship with us or our related parties.

CHANGES IN ACCOUNTING STANDARDS

    In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," and No. 142,
"Goodwill and Other Intangible Assets," effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.

    We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of fiscal 2002. Application of the
non-amortization provisions of the Statement is expected to result in an
increase in net income of approximately $45,000 for fiscal 2002. During fiscal
2002, we will perform the first of the required impairment tests of goodwill and
have not yet determined what the effect of these tests will be on our earnings
and financial position.

FORWARD-LOOKING STATEMENTS

    Some of the statements contained in this report are not historical facts and
are forward-looking within the meaning of the Private Securities Litigation
Reform Act. Forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results to differ
materially from the forward-looking statements. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will,"
"continue," "project" and similar expressions, as well as statements in the
future tense, identify forward-looking statements.

    These forward-looking statements are not guarantees of our future
performance and are subject to risks and uncertainties that could cause actual
results to differ materially from the results contemplated by the
forward-looking statements. These risks and uncertainties include:

    - uncertainties relating to the ratings accorded to our insurance
      subsidiaries;

    - uncertainties relating to government and regulatory policies (such as
      subjecting us to insurance regulation or taxation in additional
      jurisdictions);

    - exposure to mortality experience which differs from our assumptions;

    - uncertainties arising from control of our invested assets by third
      parties;

    - the risk that our risk analysis and underwriting may be inadequate;

    - risks arising from our investment strategy, including risks related to the
      market value of our investments, fluctuations in interest rates and our
      need for liquidity;

                                       44
<Page>
    - the risk that our retrocessionaires may not honor their obligations to us;

    - changes in capital needs;

    - the impact of acquisitions, including the ability to successfully
      integrate acquired businesses, the competing demands for our capital and
      the risk of undisclosed liabilities;

    - loss of the services of any of our key employees;

    - changes in accounting principles;

    - terrorist attacks on the United States and the impact of such attacks on
      the economy in general and on our business in particular;

    - political and economic risks in developing countries;

    - losses due to foreign currency exchange rate fluctuations;

    - changes in the rate of policyholder withdrawals or recapture of
      reinsurance treaties;

    - the competitive environment in which we operate and associated pricing
      pressures; and

    - developments in global financial markets that could affect our investment
      portfolio and fee income.

    The effects of these factors are difficult to predict. New factors emerge
from time to time and we cannot assess the potential impact of any such factor
on the business or the extent to which any factor, or combination of factors,
may cause results to differ materially from those contained in any
forward-looking statement. Any forward-looking statement speaks only as of the
date of this report and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
such statement or to reflect the occurrence of unanticipated events.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We measure and manage market risks and other risks as part of an
enterprise-wide risk management process. The market risks described in this
section relate to financial instruments, primarily in our investment portfolio,
that are sensitive to changes in interest rates, credit risk premiums or
spreads, foreign exchange rates and equity prices.

    Our investments, which are primarily fixed income securities, are subject to
market value, reinvestment, and liquidity risk. Our invested assets are funded
not only by capital but also by the proceeds of reinsurance transactions, some
of which entail substantial deposits of funds or assets. The cash flows required
to pay future benefits are subject to actuarial uncertainties and, in some
cases, the policies that we reinsure contain provisions that tend to increase
benefits to customers depending on movements in interest rates. We analyze the
potential results of a transaction, including the cash flows of the liabilities
and of the related assets, and any risk mitigation measures, and we price
transactions to cover our costs, including estimated credit losses, and earn a
desirable risk-adjusted return under various scenarios. Although we have not
done so in the past, we may use interest rate swaps and other hedging
instruments as tools to mitigate these risks. We may also retrocede some risks
to other reinsurers.

INTEREST RATE RISK

    Interest rate risk consists of two components: (1) in a falling rate
scenario, we have reinvestment risk, which is the risk that interest rates will
decline and funds reinvested will earn less than is necessary to match
anticipated liabilities; and (2) in a rising rate scenario, we have the risk
that cash outflows will have to be funded by selling assets, which will then be
trading at depreciated values. With some annuity liabilities, these risks are
compounded by variability in liability cash flows arising from adverse
experience in withdrawals, surrenders, mortality, and election of early
retirement.

    We mitigate both components of risk through asset-liability management,
including the technique of simulating future results under a variety of interest
rate scenarios and modifying the investment and hedging strategy to mitigate
downside risk to earnings. Our investment portfolio is composed of fixed-
maturity bond investments, of which the majority are at fixed interest rates.
For fixed-rate investments

                                       45
<Page>
backing reinsurance liabilities, the maturity structure has been designed to
have approximately the same exposure to changes in interest rates as the related
liabilities. Floating-rate liabilities, including borrowings, are backed
primarily by floating-rate assets. In the capital account, however, we own
investments that are also sensitive to interest rate changes and this
sensitivity is not offset by liabilities. Our overall objective is to limit
interest rate exposure.

CREDIT RISK

    Credit risk relates to the uncertainty associated with the continued ability
of a given obligor to make timely payments of principal and interest. We measure
and manage credit risk not only of bond issuers but also of counter-parties in
reinsurance, retrocession and hedging transactions.

    In our investment portfolio, credit risk is manifested in three ways:

       - actual and anticipated deterioration in the creditworthiness of an
         issue, as may be reflected in downgrades in its ratings, tend to reduce
         its market value;

       - our managers might react to the actual or expected deterioration and/or
         downgrade of an issuer by selling some or all of our positions,
         realizing a loss (or a profit smaller than would have been realized if
         the deterioration or downgrade had not occurred); and

       - the issuer may go into default, ultimately causing us to realize a
         loss.

One of our key objectives in managing credit risk is to keep actual credit
losses below both the amounts that we have assumed and allowed for in pricing
reinsurance transactions and the amounts we would have lost, given the general
level of experience for comparably rated securities of the same type in the
general market. We seek to prevent credit risk, in the aggregate, from becoming
the dominant source of risk in our overall book of retained risks as a
reinsurer.

    We mitigate credit risk by adopting an investment policy, approved by our
Board of Directors, which limits overall exposure to credit risk and requires
diversification by limiting exposure to any single issuer. We also use outside
professional money management firms and monitor their capabilities, performance
and compliance with our investment and risk management policies.

EQUITY RISK

    World-Wide Reassurance assumed an interest in a unit investment trust that
is classified as a trading security and is recorded at fair value. The equity
risk in connection with this security is substantially passed on to the holders
of the investment type products, because the value of policyholder benefits is
determined based on the value of the investment. World-Wide Reassurance retains
the investment income on the investment in the unit investment trust, and bears
the risk that investment income derived from this security will be less than
anticipated.

FOREIGN CURRENCY RISK

    Our functional currency is the United States dollar. However, our U.K.
subsidiaries, World-Wide Holdings and World-Wide Reassurance, maintain a part of
their investment portfolio and operating expense accounts in British pounds and
receive other currencies in payment of premiums. All of World-Wide Reassurance's
original U.S. business is settled in United States dollars, all Canadian and
certain Asia and Middle East business is converted and settled in United States
dollars, and all other currencies are converted and settled in British pounds.
The results of the business in British pounds are then translated to United
States dollars. World-Wide Reassurance attempts to limit substantial exposures
to foreign currency risk, but does not actively manage currency risks. To the
extent our foreign currency exposure is not properly managed or otherwise
hedged, we may experience exchange losses, which in turn would adversely affect
our results of operations and financial condition.

    We may enter into investment, insurance and reinsurance transactions in the
future in currencies other than United States dollars. Our objective is to avoid
substantial exposures to foreign currency risk. We will manage these risks using
policy limits, asset-liability management techniques and hedging transactions.

                                       46
<Page>
SENSITIVITY ANALYSIS--CHANGE IN INTEREST RATES

    We regularly conduct analyses to gauge the financial impact of changes in
interest rates on our financial condition. Techniques include, but are not
limited to, comparison of option-adjusted duration of assets and liabilities and
simulation of future asset and liability cash flows under multiple interest rate
scenarios. Financial simulations are also used to evaluate exposure to credit
spreads and will be used as we consider investments and liabilities denominated
in foreign currencies. On a monthly basis, we measure the gap between the
effective duration of the investments and the target duration. For assets
supporting liabilities, we set the target duration to minimize interest rate
risk for each liability transaction. Our investment policy limits the duration
gap to 0.75 years. For floating-rate borrowings and liabilities, we target
floating-rate assets, which have a duration near zero. For capital account
assets, we target a duration of 3.0 years.

QUANTITATIVE DISCLOSURE OF INTEREST RATE RISK

    The following tables provide information as of December 31, 2001 about the
interest rate sensitivity of the portion of our investment portfolio managed by
NEAM. The tables do not include other cash balances of $4.0 million, assets of
World-Wide Holdings of $79.6 million, cash of World-Wide Holdings of
$13.8 million or modified coinsurance assets of $562.4 million. The tables show
the aggregate amount, by book value and fair value, of the securities that are
expected to mature in each of the next five years and thereafter, as well as the
weighted average book yield of those securities. The expected maturity is the
weighted average life of a security and takes into consideration par
amortization (for mortgage-backed securities), call features and sinking fund
features.

    December 31, 2001 market interest rates were used as discounting rates in
the estimation of fair value.

<Table>
<Caption>
                                                              EXPECTED MATURITY DATE
                                         -----------------------------------------------------------------               TOTAL
                                                                                                                          FAIR
TOTAL                                      2002       2003       2004       2005       2006     THEREAFTER    TOTAL*     VALUE*
-----                                    --------   --------   --------   --------   --------   ----------   --------   --------
                                                                          (DOLLARS IN MILLIONS)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>          <C>        <C>
Principal amount.......................   $108.4     $ 42.3     $ 51.4     $ 54.2     $ 37.5      $297.8      $591.6     $581.1
Book value.............................    108.6       38.1       51.2       53.8       37.6       296.4       585.7      581.1
Weighted average book yield............    3.74%      6.37%      5.92%      7.95%      5.62%       6.76%       6.14%      8.49%
</Table>

------------------------------

*   Includes $76.7 million of cash and cash equivalents with a book yield of
    2.20%.

<Table>
<Caption>
                                                              EXPECTED MATURITY DATE
                                         -----------------------------------------------------------------               TOTAL
                                                                                                                          FAIR
FIXED RATE ONLY                            2002       2003       2004       2005       2006     THEREAFTER    TOTAL*     VALUE*
---------------                          --------   --------   --------   --------   --------   ----------   --------   --------
                                                                          (DOLLARS IN MILLIONS)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>          <C>        <C>
Principal amount.......................   $107.1     $ 35.7     $ 38.9     $ 37.7     $ 27.3      $276.8      $523.5     $514.0
Book value.............................    107.2       31.6       38.8       37.4       27.4       275.5       517.9      514.0
Weighted average book yield............    3.57%      6.90%      6.73%      8.97%      6.43%       6.97%       6.36%      9.03%
</Table>

------------------------------

*   Includes $76.7 million of cash and cash equivalents with a book yield of
    2.20%.

<Table>
<Caption>
                                                              EXPECTED MATURITY DATE
                                         -----------------------------------------------------------------               TOTAL
                                                                                                                          FAIR
FLOATING RATE ONLY                         2002       2003       2004       2005       2006     THEREAFTER    TOTAL      VALUE
------------------                       --------   --------   --------   --------   --------   ----------   --------   --------
                                                                          (DOLLARS IN MILLIONS)
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>          <C>        <C>
Principal amount.......................   $  1.3     $  6.6     $ 12.5     $ 16.5     $ 10.2      $ 21.0      $ 68.1     $ 67.1
Book value.............................      1.4        6.5       12.4       16.4       10.2        20.9        67.8       67.1
Weighted average book yield............    3.93%      3.79%      3.37%      5.63%      3.47%       4.00%       4.18%      4.32%
</Table>

                                       47
<Page>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The information called for by this item is set forth in "Item 14: Exhibits,
Financial Statements and Reports on Form 8-K".

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    There are no changes in or disagreements with accountants on accounting and
financial disclosure for the fiscal year ended December 31, 2001.

                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

    The information required by this Item 10 will be set forth in our Proxy
Statement for 2002 Annual Meeting of Shareholders (the "2002 Proxy Statement")
under the captions "Proposal for Election of Directors", "Principal Shareholders
and Management Ownership" and "Section 16(a) Beneficial Ownership Reporting
Compliance" and is incorporated herein by reference.

ITEM 11: EXECUTIVE COMPENSATION

    The information required by this Item 11 will be set forth in the 2002 Proxy
Statement under the captions "Management Compensation" and "Report on Executive
Compensation" and is incorporated herein by reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item 12 will be set forth in the 2002 Proxy
Statement under the caption "Principal Shareholders and Management Ownership"
and is incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item 13 will be set forth in the 2002 Proxy
Statement under the caption "Certain Transactions" and is incorporated herein by
reference.

                                       48
<Page>
                                    PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A. EXHIBITS

    Except as otherwise indicated, the following Exhibits are filed herewith and
made a part hereof:

<Table>
<Caption>
EXHIBIT
NUMBER                                    DESCRIPTION OF DOCUMENT
-------                 ------------------------------------------------------------
<C>                     <S>
         3.1            Memorandum of Association of Scottish Holdings, as amended
                        as of December 14, 2001 (incorporated herein by reference to
                        Scottish Holdings' Current Report on Form 8-K/A)(5)

         3.2            Articles of Association of Scottish Holdings, as amended as
                        of December 14, 2001 (incorporated herein by reference to
                        Scottish Holdings' Current Report on Form 8-K/A)(5)

         4.1            Specimen Ordinary Share Certificate (incorporated herein by
                        reference to Exhibit 4.1 to Scottish Holdings' Registration
                        Statement on Form S-1).(1)

         4.2            Form of Amended and Restated Class A Warrant (incorporated
                        herein by reference to Exhibit 4.2 to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

         4.3            Form of Amended and Restated Class B Warrant (incorporated
                        herein by reference to Exhibit 4.3 to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

         4.4            Form of Securities Purchase Agreement for the Class A
                        Warrants (incorporated herein by reference to Exhibit 4.4 to
                        Scottish Holdings' Registration Statement on Form S-1).(1)

         4.5            Form of Warrant Purchase Agreement for the Class B Warrants
                        (incorporated herein by reference to Exhibit 4.5 to Scottish
                        Holdings' Registration Statement on Form S-1).(1)

         4.6            Form of Securities Purchase Agreement between Scottish
                        Holdings and the Shareholder Investors (incorporated herein
                        by reference to Exhibit 4.10 to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

         4.7            Form of Securities Purchase Agreement between Scottish
                        Holdings and the Non-Shareholder Investors (incorporated
                        herein by reference to Exhibit to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

        10.1            Employment Agreement dated June 18, 1998 between Scottish
                        Holdings and Michael C. French (incorporated herein by
                        reference to Exhibit 10.1 to Scottish Holdings' Registration
                        Statement on Form S-1).(1)(6)

        10.2            Second Amended and Restated 1998 Stock Option Plan effective
                        October 22, 1998 (incorporated herein by reference to
                        Exhibit 10.3 to Scottish Holdings' Registration Statement on
                        Form S-1).(1)(6)

        10.3            Form of Stock Option Agreement in connection with 1998 Stock
                        Option Plan (incorporated herein by reference to Exhibit
                        10.4 to Scottish Holdings' Registration Statement on Form
                        S-1).(1)(6)

        10.4            Agreement dated June 30, 1998 between Scottish Holdings and
                        International Risk Management (Cayman) Ltd. (incorporated
                        herein by reference to Exhibit 10.8 to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

        10.5            Amended and Restated Insurance Administration, Services and
                        Referral Agreement dated as of October 1, 1998 between
                        Scottish Holdings and The Scottish Annuity Company (Cayman)
                        Ltd. (incorporated herein by reference to Exhibit 10.9 to
                        Scottish Holdings' Registration Statement on Form S-1).(1)
</Table>

                                       49
<Page>

<Table>
<Caption>
EXHIBIT
NUMBER                                    DESCRIPTION OF DOCUMENT
-------                 ------------------------------------------------------------
<C>                     <S>
        10.6            Form of Indemnification Agreement between Scottish Holdings
                        and each of its directors and officers (incorporated herein
                        by reference to Exhibit 10.12 to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

        10.7            Investment Management Agreement dated October 22, 1998
                        between Scottish Holdings and General Re-New England Asset
                        Management, Inc. (incorporated herein by reference to
                        Exhibit 10.14 to Scottish Holdings' Registration Statement
                        on Form S-1).(1)

        10.8            Form of Omnibus Registration Rights Agreement (incorporated
                        herein by reference to Exhibit 10.17 to Scottish Holdings'
                        Registration Statement on Form S-1).(1)

        10.9            1999 Stock Option Plan (incorporated herein by reference to
                        Exhibit 10.14 to Scottish Holdings' 1999 Annual Report on
                        Form 10-K).(2)(6)

        10.10           Form of Stock Options Agreement in connection with 1999
                        Stock Option Plan (incorporated herein by reference to
                        Exhibit 10.15 to Scottish Holdings' 1999 Annual Report on
                        Form 10-K).(2)(6)

        10.11           Employment Agreement dated March 08, 2000 between Scottish
                        Holdings and Scott E. Willkomm (incorporated herein by
                        reference to Exhibit 10.16 to Scottish Holdings' 1999 Annual
                        Report on Form 10-K).(2)(6)

        10.12           Employment Agreement dated August 1, 2000 between Scottish
                        Holdings and Larry N. Stern (incorporated herein by
                        reference to Exhibit 10.14 to Scottish Holdings' 2000 Annual
                        Report on Form 10-K).(3)(6)

        10.13           Employment Agreement dated August 18, 2000 between Scottish
                        Holdings and Thomas A. McAvity, Jr. (incorporated herein by
                        reference to Exhibit 10.15 to Scottish Holdings' 2000 Annual
                        Report on Form 10-K).(3)(6)

        10.14           Employment Agreement dated September 18, 2000 between
                        Scottish Holdings and Oscar R. Scofield (incorporated herein
                        by reference to Exhibit 10.16 to Scottish Holdings' 2000
                        Annual Report on Form 10-K).(3)(6)

        10.15           Share Purchase Agreement by and between Scottish Holdings
                        and Pacific Life dated August 6, 2001 (incorporated by
                        reference to Scottish Holdings' Current Report on Form 8-K
                        filed with the SEC on August 9, 2001).

        10.16           Amendment No. 1, dated November 8, 2001, to Share Purchase
                        Agreement dated August 6, 2001 by and between Scottish
                        Holdings and Pacific Life (incorporated by reference to
                        Scottish Holdings' Current Report on Form 8-K).(4)

        10.17           2001 Stock Option Plan.(6)

        10.18           Form of Nonqualified Stock Option Agreement in connection
                        with 2001 Stock Option Plan.(6)

        10.19           Service Agreement dated December 31, 2001 between World-Wide
                        Holdings, Paul Andrew Bispham and Scottish Holdings.(6)

        10.20           Registration Rights Agreement dated December 31, 2001
                        between Scottish Holdings and Pacific Life (incorporated by
                        reference to Scottish Holdings Current Report on Form
                        8-K).(4)
        10.21           Stockholder Agreement dated December 31, 2001 between
                        Scottish Holdings and Pacific Life (incorporated by
                        reference to Scottish Holdings' Current Report on Form
                        8-K).(4)
        10.22           Tax Deed of Covenant dated December 31, 2001 between
                        Scottish Holdings and Pacific Life (incorporated by
                        reference to Scottish Holdings' Current Report on Form
                        8-K).(4)
        10.23           Letter Agreement dated December 28, 2001 between Scottish
                        Holdings and Pacific Life (incorporated by reference to
                        Scottish Holdings' Current Report on Form 8-K).(4)
        21.1            Subsidiaries of Registrant.
</Table>

                                       50
<Page>

<Table>
<Caption>
EXHIBIT
NUMBER                                    DESCRIPTION OF DOCUMENT
-------                 ------------------------------------------------------------
<C>                     <S>
        23.1            Consent of Ernst & Young LLP.
        24.1            Power of Attorney.
</Table>

------------------------

(1) Scottish Holdings' Registration Statement on Form S-1 was filed with the SEC
    on June 19, 1998, as amended.

(2) Scottish Holdings' 1999 Annual Report on Form 10-K was filed with the SEC on
    April 3, 2000.

(3) Scottish Holdings' 2000 Annual Report on Form 10-K was filed with the SEC on
    March 30, 2001.

(4) Scottish Holdings' Current Report on Form 8-K was filed with the SEC on
    December 31, 2001.

(5) Scottish Holdings' Current Report on Form 8-K/A was filed with the SEC on
    January 11, 2002.

(6) This exhibit is a management contract or compensatory plan or arrangement.

B. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<Table>
<S>                                                           <C>
Report of Independent Auditors..............................     52
Consolidated Balance Sheets.................................     53
Consolidated Statements of Income...........................     54
Consolidated Statements of Comprehensive Income.............     55
Consolidated Statements of Shareholders' Equity.............     56
Consolidated Statements of Cash Flows.......................     57
Notes to Consolidated Financial Statements..................     58
</Table>

    All other schedules are omitted because they are either not applicable or
the required information is included in the Management's Discussion and Analysis
of Financial Condition and Results of Operations, Financial Statements or Notes
thereto appearing elsewhere in this Form 10-K.

C. REPORTS ON FORM 8-K

    The following report on Form 8-K was filed with the SEC during the three
months ended December 31, 2001:

       Scottish Holdings filed a report on Form 8-K on December 31, 2001
       to report under Item 2 (Acquisition or Disposal of Assets) that it
       had completed its acquisition of all of the shares of World-Wide
       Holdings and its wholly owned subsidiary World-Wide Reassurance
       from Pacific Life. As a result of the acquisition, World-Wide
       Holdings became a wholly owned subsidiary of Scottish Holdings and
       Pacific Life received 4,532,380 ordinary shares of Scottish
       Holdings.

                                       51
<Page>
                         REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
Scottish Annuity & Life Holdings, Ltd.

    We have audited the accompanying consolidated balance sheets of Scottish
Annuity & Life Holdings, Ltd. and subsidiaries as of December 31, 2001 and 2000,
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, 2001. 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 auditing standards generally
accepted in the United States of America. Those standards require 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 Annuity & Life Holdings, Ltd. and subsidiaries at December 31, 2001 and
2000, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.

    As discussed in Note 2 to the financial statements, in 2001 the Company
changed its accounting for certain investments.

/s/ ERNST & YOUNG

Philadelphia, Pennsylvania
February 12, 2002

                                       52
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                          CONSOLIDATED BALANCE SHEETS

               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2001           2000
                                                              ------------   ------------
<S>                                                           <C>            <C>
ASSETS
Fixed maturity investments, available for sale, at fair
  value (Amortized cost $588,542; 2000 -- $584,493).........   $  583,890     $  581,020
Investment in unit-linked securities........................       20,705             --
Cash and cash equivalents...................................       94,581         47,763
Policy loans................................................          801            441
Other investments...........................................       10,120             --
Funds withheld at interest..................................      562,446         46,256
                                                               ----------     ----------
  Total investments.........................................    1,272,543        675,480
Receivables:
  Accrued interest..........................................        9,335          6,709
  Risk fees.................................................        1,436            961
  Reinsurance premiums......................................       59,221         20,618
Deferred acquisition costs..................................      113,898         30,922
Amounts recoverable from reinsurers.........................       19,212             --
Present value of in-force business..........................       20,383         10,433
Other intangible assets.....................................       30,970          2,910
Deferred tax benefit........................................           --          2,192
Fixed assets................................................        5,459          2,482
Due from related party......................................        1,892            218
Other assets................................................        8,764          5,846
Current income tax receivable...............................        4,441             87
Segregated assets...........................................      602,800        409,660
                                                               ----------     ----------
  Total assets..............................................   $2,150,354     $1,168,518
                                                               ==========     ==========
LIABILITIES
Reserves for future policy benefits.........................   $  379,618     $  182,391
Interest sensitive contract liabilities.....................      718,815        310,755
Unit-linked contract liabilities............................       25,503             --
Borrowings..................................................       65,145             --
Accounts payable and accrued expenses.......................       17,332         18,867
Reinsurance payables........................................        4,258             --
Deferred tax liability......................................        5,601             --
Other liabilities...........................................           --          4,461
Segregated liabilities......................................      602,800        409,660
                                                               ----------     ----------
  Total liabilities.........................................    1,819,072        926,134
                                                               ----------     ----------
MINORITY INTEREST...........................................           --          2,820
                                                               ----------     ----------
SHAREHOLDERS' EQUITY
Share capital, par value $0.01 per share:
  Issued and fully paid: 20,144,956 ordinary shares
    (2000--15,614,240)
  (Excludes 3,062,200 shares held in Treasury;
    2000--2,962,200)........................................          201            156
Additional paid-in capital..................................      301,542        223,771
Accumulated other comprehensive loss --
  Unrealized depreciation on investments, net of tax........       (3,626)        (3,822)
Retained earnings...........................................       33,165         19,459
                                                               ----------     ----------
  Total shareholders' equity................................      331,282        239,564
                                                               ----------     ----------
  Total liabilities and shareholders' equity................   $2,150,354     $1,168,518
                                                               ==========     ==========
</Table>

          See Accompanying Notes to Consolidated Financial Statements

                                       53
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                       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, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                                    -----------------   -----------------   -----------------
<S>                                                 <C>                 <C>                 <C>
REVENUES
Premiums earned...................................      $   68,344          $   37,086          $       21
Fee income........................................           4,809               2,246               1,014
Investment income, net............................          51,692              44,793              24,068
Realized losses...................................          (5,376)               (191)             (2,638)
                                                        ----------          ----------          ----------
  Total revenues..................................         119,469              83,934              22,465
                                                        ----------          ----------          ----------
BENEFITS AND EXPENSES
Claims and other policy benefits..................          51,245              23,606               1,651
Interest credited to interest sensitive contract
  liabilities.....................................          17,578              17,390               5,549
Acquisition costs and other insurance expenses,
  net.............................................          22,752              17,152               1,979
Operating expenses................................           9,256               9,925               4,453
Interest expense..................................           1,405                  --                  --
                                                        ----------          ----------          ----------
  Total benefits and expenses.....................         102,236              68,073              13,632
                                                        ----------          ----------          ----------
Net income before income taxes and minority
  interest........................................          17,233              15,861               8,833
Income tax expense (benefit)......................              59                 (49)                (42)
                                                        ----------          ----------          ----------
Net income before minority interest...............          17,174              15,910               8,875
Minority interest.................................             (71)                (61)                 --
                                                        ----------          ----------          ----------
Income before cumulative effect of change in
  accounting principle............................          17,245              15,971               8,875
Cumulative effect of change in accounting
  principle.......................................            (406)                 --                  --
                                                        ----------          ----------          ----------
NET INCOME........................................      $   16,839          $   15,971          $    8,875
                                                        ==========          ==========          ==========
EARNINGS PER SHARE--BASIC
Income before cumulative effect of change in
  accounting principle............................      $     1.10          $     1.01          $     0.50
Cumulative effect of change in accounting
  principle.......................................           (0.02)                 --                  --
                                                        ----------          ----------          ----------
NET INCOME........................................      $     1.08          $     1.01          $     0.50
                                                        ==========          ==========          ==========
EARNINGS PER SHARE--DILUTED
Income before cumulative effect of change in
  accounting principle............................      $     1.04          $     1.00          $     0.50
Cumulative effect of change in accounting
  principle.......................................           (0.02)                 --                  --
                                                        ----------          ----------          ----------
NET INCOME........................................      $     1.02          $     1.00          $     0.50
                                                        ==========          ==========          ==========
Dividends per share...............................      $     0.20          $     0.20          $     0.15
                                                        ==========          ==========          ==========
Weighted average number of shares outstanding:
  Basic...........................................      15,646,106          15,849,657          17,919,683
                                                        ==========          ==========          ==========
  Diluted.........................................      16,485,338          15,960,542          17,919,683
                                                        ==========          ==========          ==========
</Table>

          See Accompanying Notes to Consolidated Financial Statements

                                       54
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                  YEAR ENDED          YEAR ENDED          YEAR ENDED
                                               DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
Net income...................................       $16,839             $15,971             $ 8,875
                                                    -------             -------             -------

Other comprehensive income (loss), net of tax
  Unrealized appreciation (depreciation) on
    investments..............................        (3,000)             11,674             (17,470)
Add: reclassification adjustment for losses
  included in net income.....................         3,196                 189               2,638
                                                    -------             -------             -------
Net unrealized appreciation (depreciation) on
  investments, net of income tax expense
  (benefit) of $(1,376), $349 and $nil.......           196              11,863             (14,832)
                                                    -------             -------             -------

Comprehensive income (loss)..................       $17,035             $27,834             $(5,957)
                                                    =======             =======             =======
</Table>

          See Accompanying Notes to Consolidated Financial Statements

                                       55
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                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, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
Ordinary shares:
  Beginning of period........................     15,614,240          16,046,740          18,568,440
  Repurchase of shares.......................       (100,000)           (432,500)         (2,529,700)
  Issuance to executive officers.............             --                  --               8,000
  Issuance to Pacific Life Insurance
    Company..................................      4,532,380                  --                  --
  Issuance to employees on exercise of
    options..................................         98,336                  --                  --
                                                  ----------          ----------          ----------
  End of period..............................     20,144,956          15,614,240          16,046,740
                                                  ==========          ==========          ==========
Share capital:
  Beginning of period........................     $      156          $      160          $      185
  Repurchase of shares.......................             (1)                 (4)                (25)
  Issuance to executive officers.............             --                  --                  --
  Issuance to Pacific Life Insurance
    Company..................................             45                  --                  --
  Issuance to employees on exercise of
    options..................................              1                  --                  --
                                                  ----------          ----------          ----------
  End of period..............................            201                 156                 160
                                                  ----------          ----------          ----------
Additional paid in capital:
  Beginning of period........................        223,771             227,535             252,292
  Repurchase of shares.......................         (1,483)             (3,793)            (24,974)
  Issuance to executive officers.............             --                  --                  88
  Issuance to Pacific Life Insurance
    Company..................................         77,955                  --                  --
  Issuance to employees on exercise of
    options..................................          1,299                  --                  --
  Issuance of equity options.................             --                  29                 129
                                                  ----------          ----------          ----------
  End of period..............................        301,542             223,771             227,535
                                                  ----------          ----------          ----------
Accumulated other comprehensive loss:
  Beginning of period........................         (3,822)            (15,685)               (853)
  Unrealized appreciation (depreciation) on
    investments..............................            196              11,863             (14,832)
                                                  ----------          ----------          ----------
  End of period..............................         (3,626)             (3,822)            (15,685)
                                                  ----------          ----------          ----------
Retained earnings:
  Beginning of period........................         19,459               6,651                 436
  Net income.................................         16,839              15,971               8,875
  Dividends paid.............................         (3,133)             (3,163)             (2,660)
                                                  ----------          ----------          ----------
  End of period..............................         33,165              19,459               6,651
                                                  ----------          ----------          ----------
Total shareholders' equity...................     $  331,282          $  239,564          $  218,661
                                                  ==========          ==========          ==========
</Table>

          See Accompanying Notes to Consolidated Financial Statements

                                       56
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

               (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

<Table>
<Caption>
                                                             YEAR ENDED          YEAR ENDED          YEAR ENDED
                                                          DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                                          -----------------   -----------------   -----------------
<S>                                                       <C>                 <C>                 <C>
OPERATING ACTIVITIES
Income before cumulative effect of change in accounting
  principle.............................................      $ 17,245            $ 15,971            $  8,875
Items not affecting cash:
  Net realized losses...................................         5,376                 191               2,638
  Net realized losses on modified coinsurance
    accounts............................................        (2,905)                 --                  --
  Amortization of investments...........................        (1,484)               (604)                626
  Non cash salaries and professional fees...............            --                  29                 129
  Minority interest.....................................           (71)                (61)                 --
  Depreciation..........................................           858                 456                  95
  Amortization of deferred acquisition costs............        11,117              10,873                 165
  Amortization of present value of in-force business....           206                  67                  --
  Amortization of other intangible assets...............            23                 184                  --
  Interest credited to interest sensitive contract
    liabilities.........................................        17,578              17,390               5,549
  Changes in assets and liabilities:
    Accrued interest....................................           (19)             (1,156)             (2,671)
    Risk fees...........................................          (475)               (100)               (861)
    Reinsurance.........................................       (27,806)            (20,319)               (298)
    Deferred acquisition costs..........................       (94,092)            (39,875)             (2,085)
    Deferred tax benefit................................        (1,293)               (324)             (2,218)
    Due from related party..............................           218                (257)               (327)
    Other assets........................................        (3,757)             (5,106)               (468)
    Current income tax receivable.......................         1,351                 110                (197)
    Reserve for future policy benefits..................       131,627              85,038              97,353
    Accounts payable and accrued expenses...............        (9,388)             14,520               2,388
                                                              --------            --------            --------
  Net cash provided by operating activities.............        44,309              77,027             108,693
                                                              --------            --------            --------
INVESTING ACTIVITIES
Purchase of securities..................................      (309,373)           (148,384)           (768,058)
Proceeds from sales of investments......................       297,337              69,172             347,383
Proceeds from maturity of investments...................        86,135              57,702              34,292
Purchase of other investments...........................       (10,108)                 --                  --
Other assets & liabilities..............................        (7,045)              4,572               2,951
Funds withheld at interest..............................      (516,190)            (46,256)                 --
Policy loans............................................          (360)                 95                (536)
Purchase of present value of in-force business..........            --                 120             (10,620)
Purchase of intangible assets...........................         2,518              (2,895)               (200)
Minority interest on purchase of subsidiary.............        (2,749)              2,881                  --
Cash acquired on purchase of subsidiary.................        13,786                  --                  --
Due to related party on purchase of subsidiary..........            --             (11,562)             11,601
Proceeds from sales of fixed assets.....................           117                  --                  --
Purchase of fixed assets................................        (3,870)             (1,988)             (1,121)
                                                              --------            --------            --------
  Net cash used in investing activities.................      (449,802)            (76,543)           (384,308)
                                                              --------            --------            --------
FINANCING ACTIVITIES
Deposits to interest sensitive contract liabilities.....       603,114              57,991             283,304
Withdrawals from interest sensitive contract
  liabilities...........................................      (212,631)            (32,752)            (20,727)
Borrowings..............................................        65,145                  --                  --
Issuance of ordinary shares.............................         1,299                  --                  88
Net cost of repurchase of ordinary shares...............        (1,483)             (3,797)            (25,000)
Dividends paid..........................................        (3,133)             (3,163)             (2,660)
                                                              --------            --------            --------
  Net cash provided by financing activities.............       452,311              18,279             235,005
                                                              --------            --------            --------
Net change in cash and cash equivalents.................        46,818              18,763             (40,610)
Cash and cash equivalents, beginning of period..........        47,763              29,000              69,610
                                                              --------            --------            --------
Cash and cash equivalents, end of period................      $ 94,581            $ 47,763            $ 29,000
                                                              ========            ========            ========
</Table>

          See Accompanying Notes to Consolidated Financial Statements

                                       57
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 2001

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION

ORGANIZATION

    Scottish Annuity & Life Holdings, Ltd. 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, Ireland, the United Kingdom and the United States.

BUSINESS

LIFE REINSURANCE

    In our life reinsurance business, 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.

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 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. Through our Bermuda and Cayman
Islands insurance companies, we have the flexibility to offer products that
permit the use of private independent money managers to manage the separate
accounts. The money managers can utilize investment strategies not typically
available in variable insurance products issued to the general public.

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 of United States
dollars (except per share amounts).

    CONSOLIDATION--We consolidate the results of all our subsidiaries. All
significant intercompany transactions and balances have been eliminated on
consolidation. Prior period amounts have been reclassified to conform to the
current year presentation. The acquisition of World-Wide Holdings is reflected
in our consolidated balance sheet at December 31, 2001. No impact from the
World-Wide Holdings acquisition has been reflected in our consolidated
statements of income as the transaction was completed at the close of business
on the last day of the year.

                                       58
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
    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 the significant accounting policies adopted by the
Company:

    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. 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 loss--unrealized
depreciation on investments in shareholders' equity. 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.

    EITF Issue No. 99-20 ("EITF 99-20"), "RECOGNITION OF INTEREST INCOME AND
IMPAIRMENT ON PURCHASED AND RETAINED BENEFICIAL INTERESTS IN SECURITIZED
FINANCIAL ASSETS," 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. EITF 99-20 significantly changes the method of
assessing "other than temporary impairments" and for recognizing interest
income. 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.
EITF 99-20 is effective for fiscal quarters beginning after March 15, 2001. We
reviewed all applicable securities held at June 30, 2001 and identified a
required write down in the amount of $406,000. This is shown in the consolidated
statements of income as a cumulative effect of change in accounting principle.

    B. Investment in unit-linked securities

    Unit-linked securities are comprised of investments in a unit trust
denominated in British pounds. These investments were acquired as part of the
purchase of World-Wide Holdings on December 31, 2001 and are recorded at quoted
market value. Future investment income and changes in market value will be
recorded as revenue. The investment results of the unit-linked securities are
generally passed on to the policyholder (See Note 2N).

                                       59
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    C. 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.

    D. Other investments

    Other investments are made up of an investment in a fund of funds that is
carried at fair value of $5.1 million and a surplus note purchased from a U.S.
life insurance company in connection with a reinsurance transaction that we
entered into in the second quarter of 2001. The surplus note pays interest to us
at an annual rate of 11%, matures on May 16, 2016 and is carried at cost of
$5.0 million.

    E. Funds withheld at interest

    Funds withheld at interest are funds held by ceding companies under modified
coinsurance agreements whereby we receive the interest income earned on the
funds. The balance of funds held represents the statutory reserves of the ceding
companies.

    F. 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. 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 earned as follows:

       a)  Wealth management, separate account transactions: A one-time set-up
           fee is charged upon receipt of the initial payment, a fixed annual
           administration fee is collected quarterly and mortality, expense and
           distribution risk fees are charged quarterly based on total assets in
           each contract holder's separate account. When a variable life
           insurance policy is issued, a cost of insurance fee is charged
           quarterly based on the amount necessary to cover the death benefit.
           In addition, a contract holder may be charged a fee upon a partial or
           total surrender of the policy.

       b)  Reinsurance: Revenue received on financial reinsurance treaties that
           do not qualify under risk transfer rules for reinsurance accounting.

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

    (iv) Realized capital gains and losses include gains and losses on the sale
         of investments available for sale and fixed assets.

                                       60
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    G. 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.

    H. Amounts recoverable from reinsurers

    Reinsurance contracts do not relieve us from our obligations to
policyholders. 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. At December 31, 2001,
benefits recoverable of $19.2 million were ceded to reinsurers by World-Wide
Reassurance.

    I. Present value of in-force business

    The present value of the in-force business is established upon the
acquisition of a company 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.

    J. Amortization of intangible assets

    Intangible assets consist of goodwill that 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 is amortized on a straight-line basis over its estimated
useful life and is reviewed periodically for impairment. Estimated useful lives
were considered for 2001 to be approximately 10 years. As of January 1, 2002, we
are not required to amortize intangible assets but instead perform a regular,
periodic review for impairment.

    K. Fixed assets and leasehold improvements

    Fixed assets and leasehold improvements 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, 2001 including
amounts acquired from World-Wide Holdings of $0.4 million amounted to
$1.8 million (2000--$0.5 million).

                                       61
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    L. 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.

    M. 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.

    N. Unit-linked contract liabilities

    Unit-linked contract liabilities assumed by World-Wide Reassurance are
recorded at account value and represent contracts in which the investment
results attained are generally passed through to the policyholder. The
investment results are capital gains and losses, net of tax. Amounts are
credited to these products based on the underlying investment results of the
unit-linked securities in Note 2B.

    O. Borrowings

    We have in place a credit facility with a U.S. bank that provides a
combination of borrowings and letters of credit totaling $70 million. Under the
agreement, we may borrow at a rate of 40 basis points over LIBOR. The agreement
expires April 30, 2002, but is renewable with the agreement of both parties. At
December 31, 2001 borrowings totaled $40 million under this credit facility. We
also have borrowings of $25.1 million in connection with a reverse repurchase
agreement with a major broker/dealer. Under this reverse repurchase agreement,
we sold 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. The interest rates on these
borrowings float with LIBOR. Both arrangements are renewed monthly at the
current LIBOR rate. At December 31, 2001 the one-month LIBOR applicable to
borrowings was 1.87%.

                                       62
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    P. 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 where the
recoverability is uncertain.

    Q. Stock-based compensation

    We apply Accounting Principles Board ("APB") Opinion No. 25 and related
interpretations in accounting for stock option plans. We do not recognize
compensation cost because our options are issued with an exercise price equal to
the market price of the stock on the date of issue. Note 13 contains a summary
of the pro forma effects to reported net income and earnings per share for 2001,
2000 and 1999 had we elected to recognize compensation cost based on the fair
value of the options granted at grant date as prescribed by SFAS No. 123.

    R. Earnings per share

    In accordance with SFAS No. 128, 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 and warrants using the treasury stock method.

    S. 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 are three total return swap transactions
totaling approximately $99.7 million on behalf of wealth management clients.

    T. 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 amounts in respect of three total
return swap transactions totaling approximately $99.7 million.

    U. 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.

    V. Accounting pronouncements

    In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and No. 142, "Goodwill and Other Intangible Assets,"
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over
their useful lives.

                                       63
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of fiscal 2002. Application of the
non-amortization provisions is expected to result in an increase in net income
of approximately $45,000 for fiscal 2002. During fiscal 2002, we will perform
the first of the required impairment tests of goodwill and have not yet
determined what the effect of these tests will be on our earnings and financial
position.

3. BUSINESS ACQUISITIONS

    On December 31, 2001, we completed the purchase of World-Wide Holdings and
its wholly owned subsidiary World-Wide Reassurance. We issued 4,532,380 ordinary
shares with a value of $78.0 million to Pacific Life in exchange for all of the
outstanding shares of World-Wide Holdings. The excess of the purchase price over
net assets acquired was $30.6 million, which is recorded as goodwill and
included in other intangible assets on the balance sheet at December 31, 2001.

                                       64
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

3. BUSINESS ACQUISITIONS (CONTINUED)

    Pro forma information related to our acquisition of World-Wide Holdings is
prepared for the years ended 2001 and 2000, and illustrates the effects of the
acquisition as if it had occurred at the beginning of the periods presented.

<Table>
<Caption>
                                        YEAR ENDED DECEMBER 31, 2001                   YEAR ENDED DECEMBER 31, 2000
                                --------------------------------------------   --------------------------------------------
                                SCOTTISH ANNUITY &    WORLD-WIDE    COMBINED   SCOTTISH ANNUITY &    WORLD-WIDE    COMBINED
                                LIFE HOLDINGS, LTD.   HOLDINGS(1)     (2)      LIFE HOLDINGS, LTD.   HOLDINGS(1)     (2)
                                -------------------   -----------   --------   -------------------   -----------   --------
<S>                             <C>                   <C>           <C>        <C>                   <C>           <C>
Revenues......................       $119,469           $36,699     $155,258         $83,934           $37,674     $120,698
                                     ========           =======     ========         =======           =======     ========
Income before cumulative
  effect of change in
  accounting principle........       $ 17,245           $ 2,702     $19,310          $15,971           $ 4,503     $ 19,837
Cumulative effect of change in
  accounting principle........           (406)               --        (406)              --                --           --
                                     --------           -------     --------         -------           -------     --------
Net income....................       $ 16,839           $ 2,702     $18,904          $15,971           $ 4,503     $ 19,837
                                     ========           =======     ========         =======           =======     ========
Earnings per share(3)
Basic
  Income before cumulative
    effect of change in
    accounting principle......       $   1.10                       $  0.96          $  1.01                       $   0.97
  Cumulative effect of change
    in accounting principle...          (0.02)                        (0.02)              --                             --
                                     --------                       --------         -------                       --------
  Net income..................       $   1.08                       $  0.94          $  1.01                       $   0.97
                                     ========                       ========         =======                       ========
Diluted
  Income before cumulative
    effect of change in
    accounting principle......       $   1.04                       $  0.92          $  1.00                       $   0.97
  Cumulative effect of change
    in accounting principle...          (0.02)                        (0.02)              --                             --
                                     --------                       --------         -------                       --------
  Net income..................       $   1.02                       $  0.90          $  1.00                       $   0.97
                                     ========                       ========         =======                       ========
</Table>

--------------------------

(1) World-Wide Holdings results are for the year ended September 30, 2001 and
    2000.

(2) Combined amounts include pro forma adjustments.

(3) Combined amounts are calculated using historical weighted average number of
    shares plus 4,532,380 ordinary shares issued to acquire World-Wide Holdings.

    We now have a 100% holding in Scottish Annuity & Life Holdings (Bermuda)
Limited (formerly Scottish Crown Group (Bermuda) Ltd.). In July 2001, we
acquired the remaining 49.99% of Scottish Annuity & Life Holdings (Bermuda)
Limited that we did not own for nominal consideration. Prior to July 2001, our
holding in Scottish Annuity & Life Holdings (Bermuda) Limited was 50.01%.

    On December 31, 1999, we entered into an agreement with Scottish
Holdings, Ltd. to purchase all the outstanding shares of The Scottish Annuity
Company (Cayman) Ltd. for $11.6 million. The Scottish Annuity Company (Cayman)
Ltd. operates as a life insurance company and engages in writing deferred

                                       65
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

3. BUSINESS ACQUISITIONS (CONTINUED)
variable annuities with a fixed annuity option with persons who are not resident
in the Cayman Islands. It does not provide any investment management or advisory
services.

    Scottish Holdings (U.S.), Inc., a wholly owned subsidiary, was formed on
August 18, 1999 for the sole purpose of the purchase of Scottish Re
(U.S.), Inc. (formerly Harbourton Reassurance, Inc.) for a purchase price of
$25.2 million. This transaction was effective on September 30, 1999 and provides
us with a United States platform to write reinsurance business. Scottish Re
(U.S.), Inc. is licensed, accredited, approved or authorized to write
reinsurance in 46 states and the District of Columbia.

    The acquisitions described above were accounted for by the purchase method
of accounting. In accordance with APB Opinion No. 16, "Business Combinations,"
the accompanying consolidated statements of income do not include any revenues
or expenses related to these acquisitions prior to the respective closing dates.

4. 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 and wealth management.

    The segment reporting for the lines of business is as follows:

<Table>
<Caption>
                                                  YEAR ENDED          YEAR ENDED          YEAR ENDED
                                               DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
REVENUES
Life reinsurance.............................     $  108,187          $   72,274           $ 10,951
Wealth management............................          3,191               2,195              1,014
Other........................................          8,091               9,465             10,500
                                                  ----------          ----------           --------
Total........................................     $  119,469          $   83,934           $ 22,465
                                                  ==========          ==========           ========
NET INCOME BEFORE INCOME TAXES AND MINORITY
  INTEREST
Life reinsurance.............................     $   14,256          $    8,252           $     44
Wealth management............................          1,306                 594                124
Other........................................          1,671               7,015              8,665
                                                  ----------          ----------           --------
Total........................................     $   17,233          $   15,861           $  8,833
                                                  ==========          ==========           ========
</Table>

<Table>
<Caption>
                                               DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
ASSETS                                         -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
Life reinsurance(1)..........................     $1,439,156          $  626,404           $428,112
Wealth management............................        632,835             431,670            268,165
Other........................................         78,363             110,444            160,357
                                                  ----------          ----------           --------
Total........................................     $2,150,354          $1,168,518           $856,634
                                                  ==========          ==========           ========
</Table>

------------------------

(1) Includes $185.6 million due to the acquisition of World-Wide Holdings on
    December 31, 2001.

                                       66
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

5. FOREIGN SALES AND OPERATIONS

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

    Financial information relating to geographic areas:

<Table>
<Caption>
                                                  YEAR ENDED          YEAR ENDED          YEAR ENDED
                                               DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
REVENUES
U.S. business................................     $   91,020          $   44,590           $  1,448
Non-U.S. business............................         28,449              39,344             21,017
                                                  ----------          ----------           --------
Total........................................     $  119,469          $   83,934           $ 22,465
                                                  ==========          ==========           ========
</Table>

6. 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, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
Numerator:
Net income...................................     $   16,839          $   15,971          $    8,875
                                                  ----------          ----------          ----------
Denominator:
Denominator for basic earnings per share--
  Weighted average number of shares
  outstanding................................     15,646,106          15,849,657          17,919,683
Effect of dilutive securities:
Stock options................................        660,387             110,885                  --
Warrants.....................................        178,845                  --                  --
                                                  ----------          ----------          ----------
Denominator for diluted earnings per share...     16,485,338          15,960,542          17,919,683
                                                  ----------          ----------          ----------
Basic earnings per ordinary share............     $     1.08          $     1.01          $     0.50
Diluted earnings per ordinary share..........     $     1.02          $     1.00          $     0.50
</Table>

                                       67
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

7. INVESTMENTS

    The amortized cost, gross unrealized appreciation and depreciation and
estimated fair values of our fixed maturity investments are as follows:

<Table>
<Caption>
                                                                    DECEMBER 31, 2001
                                                   ----------------------------------------------------
                                                                  GROSS          GROSS
                                                   AMORTIZED    UNREALIZED     UNREALIZED    ESTIMATED
EXCLUDING WORLD-WIDE HOLDINGS                        COST      APPRECIATION   DEPRECIATION   FAIR VALUE
-----------------------------                      ---------   ------------   ------------   ----------
<S>                                                <C>         <C>            <C>            <C>
U.S. Treasury securities and U.S. government
  agency obligations.............................  $ 10,459       $   15        $   (446)     $ 10,028
Corporate securities.............................   230,391        4,171          (4,377)      230,185
Municipal bonds..................................     1,000           --             (28)          972
Mortgage and asset backed securities.............   267,127        2,151          (6,138)      263,140
Debt securities issued by foreign governments....        --           --              --            --
                                                   --------       ------        --------      --------
                                                   $508,977       $6,337        $(10,989)     $504,325
                                                   ========       ======        ========      ========
</Table>

    On December 31, 2001 we acquired all of the assets and liabilities of
World-Wide Holdings, which included the following fixed maturity investments:

<Table>
<Caption>
                                                                     DECEMBER 31, 2001
                                                    ----------------------------------------------------
                                                                   GROSS          GROSS
                                                    AMORTIZED    UNREALIZED     UNREALIZED    ESTIMATED
WORLD-WIDE HOLDINGS                                   COST      APPRECIATION   DEPRECIATION   FAIR VALUE
-------------------                                 ---------   ------------   ------------   ----------
<S>                                                 <C>         <C>            <C>            <C>
U.S. Treasury securities and U.S. government
  agency obligations..............................   $    --        $ --           $ --        $    --
Corporate securities..............................    75,706          --             --         75,706
Municipal bonds...................................        --          --             --             --
Mortgage and asset backed securities..............        --          --             --             --
Debt securities issued by foreign governments.....     3,859          --             --          3,859
                                                     -------        ----           ----        -------
                                                     $79,565        $ --           $ --        $79,565
                                                     =======        ====           ====        =======
</Table>

    Total fixed maturity investments at December 31, 2001 and 2000 are comprised
of:

<Table>
<Caption>
                                                                    DECEMBER 31, 2001
                                                   ----------------------------------------------------
                                                                  GROSS          GROSS
                                                   AMORTIZED    UNREALIZED     UNREALIZED    ESTIMATED
INCLUDING WORLD-WIDE HOLDINGS                        COST      APPRECIATION   DEPRECIATION   FAIR VALUE
-----------------------------                      ---------   ------------   ------------   ----------
<S>                                                <C>         <C>            <C>            <C>
U.S. Treasury securities and U.S. government
  agency obligations.............................  $ 10,459       $   15        $   (446)     $ 10,028
Corporate securities.............................   306,097        4,171          (4,377)      305,891
Municipal bonds..................................     1,000           --             (28)          972
Mortgage and asset backed securities.............   267,127        2,151          (6,138)      263,140
Debt securities issued by foreign governments....     3,859           --              --         3,859
                                                   --------       ------        --------      --------
                                                   $588,542       $6,337        $(10,989)     $583,890
                                                   ========       ======        ========      ========
</Table>

                                       68
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

7. INVESTMENTS (CONTINUED)

<Table>
<Caption>
                                                                    DECEMBER 31, 2000
                                                   ----------------------------------------------------
                                                                  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.............................  $ 15,997       $  182         $  (267)     $ 15,912
Corporate securities.............................   214,464        1,619          (5,723)      210,360
Mortgage and asset backed securities.............   354,032        2,397          (1,681)      354,748
                                                   --------       ------         -------      --------
                                                   $584,493       $4,198         $(7,671)     $581,020
                                                   ========       ======         =======      ========
</Table>

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

<Table>
<Caption>
                                                                         DECEMBER 31, 2001
                                                              ---------------------------------------
EXCLUDING WORLD-WIDE HOLDINGS                                 AMORTIZED COST    ESTIMATED FAIR VALUE
-----------------------------                                 ---------------   ---------------------
<S>                                                           <C>               <C>
Due in one year or less.....................................      $ 14,940             $ 14,929
Due in one year through five years..........................        72,658               73,330
Due in five years through ten years.........................       116,190              115,910
Due after ten years.........................................        38,062               37,016
                                                                  --------             --------
                                                                   241,850              241,185
Mortgage and asset backed securities........................       267,127              263,140
                                                                  --------             --------
                                                                  $508,977             $504,325
                                                                  ========             ========
</Table>

<Table>
<Caption>
                                                                         DECEMBER 31, 2001
                                                              ---------------------------------------
WORLD-WIDE HOLDINGS                                           AMORTIZED COST    ESTIMATED FAIR VALUE
-------------------                                           ---------------   ---------------------
<S>                                                           <C>               <C>
Due in one year or less.....................................      $ 8,749              $ 8,749
Due in one year through five years..........................       49,605               49,605
Due in five years through ten years.........................       21,211               21,211
Due after ten years.........................................           --                   --
                                                                  -------              -------
                                                                   79,565               79,565
Mortgage and asset backed securities........................           --                   --
                                                                  -------              -------
                                                                  $79,565              $79,565
                                                                  =======              =======
</Table>

                                       69
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

7. INVESTMENTS (CONTINUED)

<Table>
<Caption>
                                                                         DECEMBER 31, 2001
                                                              ---------------------------------------
INCLUDING WORLD-WIDE HOLDINGS                                 AMORTIZED COST    ESTIMATED FAIR VALUE
-----------------------------                                 ---------------   ---------------------
<S>                                                           <C>               <C>
Due in one year or less.....................................      $ 23,689             $ 23,678
Due in one year through five years..........................       122,263              122,935
Due in five years through ten years.........................       137,401              137,121
Due after ten years.........................................        38,062               37,016
                                                                  --------             --------
                                                                   321,415              320,750
Mortgage and asset backed securities........................       267,127              263,140
                                                                  --------             --------
                                                                  $588,542             $583,890
                                                                  ========             ========
</Table>

    Gross realized gains and losses are as follows:

<Table>
<Caption>
                                                  YEAR ENDED          YEAR ENDED          YEAR ENDED
                                               DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
Proceeds from sale of investments............      $297,337             $69,172            $347,383
                                                   ========             =======            ========
Gross realized gains.........................      $  5,160             $   404            $    765
Gross realized losses (1)....................       (10,558)               (608)             (3,403)
                                                   --------             -------            --------
Net realized losses..........................        (5,398)               (204)             (2,638)
Other gains and losses.......................            22                  13                  --
                                                   --------             -------            --------
Realized losses..............................      $ (5,376)            $  (191)           $ (2,638)
                                                   ========             =======            ========
</Table>

------------------------

(1) Includes $4.0 million in respect of fixed maturity investments written down
    to estimated realizable values and $2.9 million in respect of modified
    coinsurance receivables written down due to estimated realizable values.

    At December 31, 2001 and 2000, the Company did not have a material
concentration of investments in fixed income securities in a single issuer,
industry or geographic location.

8. PRESENT VALUE OF IN-FORCE BUSINESS

    Total amortization of the present value of in-force business was
$0.2 million for the year ended December 31, 2001, $0.1 million for the year
ended December 31, 2000 and $nil for the period ended December 31, 1999. Based
on the amortization method and expected gross profits or revenues, the following
table provides the percentage of the present value of in-force business we
expect to amortize in each year for the next 5 years:

<Table>
<Caption>
                                                              PERCENT TO BE AMORTIZED
YEAR                                                                IN THE YEAR
----                                                          -----------------------
<S>                                                           <C>
2002........................................................            3.41%
2003........................................................            5.13%
2004........................................................            7.18%
2005........................................................           11.75%
2006........................................................           17.26%
</Table>

                                       70
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

8. PRESENT VALUE OF IN-FORCE BUSINESS (CONTINUED)
    Upon the acquisition of World-Wide Holdings on December 31, 2001 present
value of in-force business was established in the amount of $10.2 million. Based
on the amortization method and expected gross profits or revenues, the following
table provides the percentage of the present value of in-force business that we
expect to amortize in each year for the next 5 years:

<Table>
<Caption>
                                                              PERCENT TO BE AMORTIZED
YEAR                                                                IN THE YEAR
----                                                          -----------------------
<S>                                                           <C>
2002........................................................             22%
2003........................................................             11%
2004........................................................              9%
2005........................................................              8%
2006........................................................              7%
</Table>

9. REINSURANCE TRANSACTIONS

    The following table summarizes the acquisitions of in-force reinsurance
transactions completed by us during 2001 and 2000. These transactions are
accounted for as purchases. Our results of operations include the effects of
these purchases only from the respective acquisition dates.

<Table>
<Caption>
                                                              DECEMBER 31, 2001   DECEMBER 31, 2000
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
Fair value of assets acquired...............................      $107,353             $79,496
Deferred acquisition costs..................................        11,000              10,250
                                                                  --------             -------
Total assets acquired.......................................      $118,353             $89,746
                                                                  ========             =======
Fair value of liabilities assumed...........................      $118,353             $89,746
                                                                  ========             =======
</Table>

10. DEFERRED ACQUISITION COSTS

Movement in deferred acquisition costs is as follows:

<Table>
<Caption>
                                                              DECEMBER 31, 2001   DECEMBER 31, 2000
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
Balance at beginning of year................................      $ 30,922             $ 1,920
Deferred acquisition costs on in-force reinsurance
  transactions purchased....................................        11,000              10,250
Expenses deferred...........................................        83,092              29,625
Amortization expense........................................       (11,116)            (10,873)
                                                                  --------             -------
Balance at end of year......................................      $113,898             $30,922
                                                                  ========             =======
</Table>

11. DUE FROM RELATED PARTIES

    The amount due from related parties represents premiums less expense
allowances and benefits due from Pacific Life to World-Wide Reassurance as of
December 31, 2001.

                                       71
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

12. SHAREHOLDERS' EQUITY

ORDINARY SHARES

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

    Immediately after the initial public offering there were 18,568,440 ordinary
shares in issue. In January 1999, we issued 8,000 shares as non-monetary
compensation to an executive officer. On September 1, 1999, our Board of
Directors authorized a share repurchase plan to repurchase up to $25.0 million
of our outstanding ordinary shares. By November 2, 1999, 2,529,700 ordinary
shares were repurchased for $25.0 million. As at December 31, 1999, 16,046,740
ordinary shares were outstanding.

    On April 6, 2000 our Board of Directors approved an additional plan to
repurchase up to $20.0 million of outstanding ordinary shares. During the period
May 31, 2000 to November 30, 2000 a total of 432,500 ordinary shares were
repurchased for $3.8 million. As at December 31, 2000, 15,614,240 ordinary
shares were outstanding.

    During 2001 we issued 98,336 ordinary shares to employees upon the exercise
of stock options. In September 2001, 100,000 ordinary shares were repurchased
for $1.5 million. On December 31, 2001 we issued 4,532,380 ordinary shares to
Pacific Life to acquire World-Wide Holdings (See Note 3), resulting in
20,144,956 outstanding ordinary shares.

PREFERRED SHARES

    We are authorized to issue 50,000,000 preferred shares of par value $0.01
each. At the balance sheet dates there were no preferred shares issued or
outstanding.

WARRANTS

    As at December 31, 2001 there are 2,850,000 Class A warrants and 200,000
Class B warrants outstanding, each class with an exercise price of $15.00. As at
December 31, 2001 no Class A or Class B warrants have been exercised.

                                       72
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

12. SHAREHOLDERS' EQUITY (CONTINUED)

    In connection with our initial capitalization, we issued Class A warrants to
purchase an aggregate of 1,550,000 ordinary shares to related parties. 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.

    In connection with our initial public offering, we issued an aggregate of
200,000 Class B warrants for an aggregate purchase price of $0.3 million that is
reflected as additional paid-in capital. Class B 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.

13. 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") which 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 options issued prior to
December 31, 2001 become exercisable in three equal annual installments.
Commencing January 1, 2002 all options granted 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. Total options authorized under the Plans are 3,750,000.

    Option activity under all Plans is as follows:

<Table>
<Caption>
                                                  YEAR ENDED          YEAR ENDED          YEAR ENDED
                                               DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999
                                               -----------------   -----------------   -----------------
<S>                                            <C>                 <C>                 <C>
Outstanding, beginning of year...............      2,320,436           2,287,434           1,070,000
Granted......................................        606,000             960,500           1,454,100
Exercised....................................        (98,336)                 --                  --
Cancelled....................................        (77,499)           (927,498)           (236,666)
                                                  ----------          ----------          ----------
Outstanding and exercisable, end of year.....      2,750,601           2,320,436           2,287,434
                                                  ----------          ----------          ----------
Weighted average exercise price per share:
Granted......................................     $  14.4459          $   8.2774          $  10.6766
Exercised....................................     $  13.2154                  --                  --
Cancelled....................................     $  10.6780          $  12.3939          $  15.0000
Outstanding and exercisable, end of year.....     $  11.3092          $  10.5498          $  12.2517
</Table>

                                       73
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

13. STOCK OPTION PLANS (CONTINUED)
    Summary of options outstanding at December 31, 2001:
<Table>
<Caption>

       YEAR OF          NUMBER OF           RANGE OF            WEIGHTED AVERAGE     NUMBER OF     WEIGHTED AVERAGE
        GRANT            SHARES          EXERCISE PRICES         EXERCISE PRICE    SHARES VESTED    EXERCISE PRICE
---------------------   ---------   -------------------------   ----------------   -------------   ----------------
<S>                     <C>         <C>                         <C>                <C>             <C>
    1998                  536,669                    $15.0000       $15.0000           536,669        $  15.0000
    1999                  790,266   $      8.0625 -- $15.0000       $9.74480           554,107        $  10.0088
    2000                  846,166   $      7.0000 -- $10.7500       $8.27730           284,504        $   8.2825
    2001                  577,500   $      13.500 -- $18.7600       $14.4626            18,000        $  14.5219
                        ---------   -------------------------       --------        ----------        ----------
                        2,750,601   $      7.0000 -- $18.7600       $11.3092         1,393,280        $  11.6371
                        ---------   -------------------------       --------        ----------        ----------

<Caption>
                       WEIGHTED AVERAGE
       YEAR OF            REMAINING
        GRANT          CONTRACTUAL LIFE
---------------------  ----------------
<S>                    <C>
    1998                  6.92 years
    1999                  6.20 years
    2000                  7.80 years
    2001                  8.49 years
                          ----------
                          7.31 years
                          ----------
</Table>

<Table>
<Caption>
                                                    OPTION PLANS   OPTION PLANS NOT
                                                    APPROVED BY      APPROVED BY      TOTAL OPTION
                                                    SHAREHOLDERS     SHAREHOLDERS         PLANS
                                                    ------------   ----------------   -------------
<S>                                                 <C>            <C>                <C>
Outstanding.......................................    1,413,269        1,337,332        2,750,601
Weighted average exercise price...................   $  11.7778       $  10.8141       $  11.3092
Available for future issuance(1)..................      763,397          137,666          901,063
</Table>

------------------------

(1) Of this amount, 325,500 options were granted on January 1, 2002 to new
    directors and employees in respect of the acquisition of World-Wide
    Holdings.

    We have adopted the disclosure 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 is recognized.

    Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if we accounted for the
employee stock options under the fair value method of that Statement.

    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.

    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 31,   DECEMBER 31,    DECEMBER 31,
                                                        2001           2000            1999
                                                    ------------   -------------   -------------
<S>                                                 <C>            <C>             <C>
Net income -- as reported.........................      $16,839        $15,971         $ 8,875
Net income -- pro forma...........................      $13,846        $14,398         $ 6,702
Basic net income per share -- as reported.........      $  1.08        $  1.01         $  0.50
Basic net income per share -- pro forma...........      $  0.88        $  0.91         $  0.37
Diluted net income per share -- as reported.......      $  1.02        $  1.00         $  0.50
Diluted net income per share -- pro forma.........      $  0.84        $  0.90         $  0.37
</Table>

                                       74
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

13. STOCK OPTION PLANS (CONTINUED)
    The weighted average fair value of options granted in each year is as
follows:

<Table>
<Caption>
                                                      YEAR ENDED               YEAR ENDED            YEAR ENDED
                                                  DECEMBER 31, 2001        DECEMBER 31, 2000      DECEMBER 31, 1999
                                                ----------------------   ----------------------   -----------------
<S>                                             <C>                      <C>                      <C>
Discounted exercise price.....................                      --                       --             --
Market price exercise price...................                 $6.7825                  $3.8874        $4.5754
Premium exercise price........................                      --                       --        $5.5735
</Table>

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

<Table>
<Caption>
                                                                2001                     2000                 1999
                                                       ----------------------   ----------------------   ---------------
<S>                                                    <C>                      <C>                      <C>
Expected dividend yield..............................          1.00%                    1.33%               2.44%
Risk free interest rate..............................       4.16%-5.20%              5.17%-6.46%            6.44%
Expected life of options.............................         7 years                  7 years             7 years
Expected volatility..................................           0.4                      0.4                 0.7
</Table>

    As of December 31, 2001, no options were outstanding in respect of
non-employees (2000 - 66,667; 1999 - 66,667). We apply the fair value method of
SFAS No. 123 in accounting for stock options granted to non-employees who
provide services to us. The expenses recorded are $nil in 2001, $29,720 in 2000
and $128,984 in 1999.

14. 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 taxation in Bermuda until 2016. If any taxation were
to be enacted in the Cayman Islands, Scottish Annuity & Life Holdings, Ltd. and
Scottish Annuity & Life Insurance Company (Cayman) Ltd. have been granted
exemptions therefrom until 2018; and The Scottish Annuity Company (Cayman) Ltd.
has been granted exemptions therefrom until 2014. These companies operate in a
manner such that they will owe no United States tax other than premium excise
taxes and withholding taxes on certain investment income.

    Undistributed earnings of our foreign subsidiaries are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal
withholding taxes has been provided thereon. Upon distribution of current or
accumulated earnings and profits in the form of dividends or otherwise, we would
be subject to U.S. withholding taxes at a 30% rate.

    At December 31, 2001, we had net operating loss carryforwards of
approximately $27.6 million (2000-$15.8 million) for income tax purposes that
expire in years 2012 through 2014. We also have capital loss carryforwards of
approximately $1.0 million (2000-$3.8 million) for income tax purposes that
expire in years 2002 through 2004. These carryforwards resulted primarily from
our 1999 acquisition of Scottish Re (U.S.), Inc. and from current operations of
Scottish Re (U.S.), Inc.

    The valuation allowance at December 31, 2000 is related to the tax benefit
of the realized capital loss carryforwards in Scottish Re (U.S.), Inc.

    The change in valuation allowance on capital loss carryforwards related to
the purchase of Scottish Re (U.S.), Inc. is due to management's ability to
implement certain tax planning strategies to preserve the tax benefit of the
losses. A portion is recorded as part of the income tax benefit ($0.6 million in
2001; $0.4 million in 2000) and a portion is recorded as a reduction in
intangibles on the balance sheet ($0.3 million in 2000).

                                       75
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

14. TAXATION (CONTINUED)

    Significant components of our deferred tax assets and liabilities are as
follows:

<Table>
<Caption>
                                                              DECEMBER 31, 2001   DECEMBER 31, 2000
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
Deferred tax assets:
  Net operating losses......................................      $  9,395             $ 5,373
  Capital losses............................................           355               1,283
  Alternative minimum tax credits...........................            20                  20
  Unrealized depreciation on investments....................         1,026                  --
  Reserves for future policy benefits.......................            --                 366
  Pension liability.........................................            86                  --
  Foreign currency adjustments..............................           621                  --
  Negative proxy deferred acquisition costs.................         1,084               1,145
  Other.....................................................         2,826                  --
                                                                  --------             -------
Total deferred tax assets...................................        15,413               8,187
Valuation allowance.........................................            --                (552)
                                                                  --------             -------
Deferred tax assets net of valuation allowance..............        15,413               7,635
                                                                  --------             -------
Deferred tax liabilities:
  Unrealized appreciation on investments....................            --                (350)
  Undistributed earnings of U.K. subsidiaries...............        (4,045)                 --
  Deferred acquisition costs................................        (7,018)             (4,980)
  Accrued market discount...................................            --                 (77)
  Reserves for future policy benefits.......................        (9,805)                 --
  Other.....................................................          (146)                (36)
                                                                  --------             -------
Total deferred tax liabilities..............................       (21,014)             (5,443)
                                                                  --------             -------
Net deferred tax (liability) asset..........................      $ (5,601)            $ 2,192
                                                                  ========             =======
</Table>

    For the years ended December 31, 2001 and 2000 we have income tax expense
(benefit) from operations as follows:

<Table>
<Caption>
                                                                 YEAR ENDED          YEAR ENDED
                                                              DECEMBER 31, 2001   DECEMBER 31, 2000
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
Current tax benefit.........................................       $ 1,351              $ --
Deferred tax benefit........................................        (1,292)              (49)
                                                                   -------              ----
Total tax expense (benefit).................................       $    59              $(49)
                                                                   =======              ====
</Table>

                                       76
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

14. TAXATION (CONTINUED)
    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
                                                              DECEMBER 31, 2001    DECEMBER 31, 2000
                                                              ------------------   ------------------
<S>                                                           <C>                  <C>
Pretax GAAP income at 34%...................................        $ 5,859              $ 5,393
Income not subject to tax at 34%............................         (6,615)              (4,872)
Foreign taxes...............................................          1,265                   --
Negative DAC................................................             61                 (150)
Change in valuation allowance...............................           (552)                (432)
Other.......................................................             41                   12
                                                                    -------              -------
Tax benefit.................................................        $    59              $   (49)
                                                                    =======              =======
</Table>

15. 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.

    Our ability to pay dividends depends significantly on the ability of
Scottish Annuity & Life Insurance Company (Cayman) Ltd. and The Scottish Annuity
Company (Cayman) Ltd. to pay dividends to Scottish Holdings. 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) 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 capital and surplus as of
December 31 of the preceding year. The statutory surplus of Scottish Re
(U.S.), Inc. at December 31, 2001 was $35.8 million (2000-$33.7 million). The
maximum dividend that could be paid in 2002 without prior approval is
$3.6 million (2001-$3.4 million). Scottish Re (U.S.), Inc.'s net assets which
are restricted by the above are $81.1 million (2000-$55.7 million).

    The NAIC prescribes risk-based capital ("RBC") requirements for U.S.
domiciled life and health insurance companies. As of December 31, 2001 and 2000,
Scottish Re (U.S.), Inc. exceeded all minimum RBC requirements.

                                       77
<Page>
                     SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 2001

15. STATUTORY REQUIREMENTS AND DIVIDEND RESTRICTIONS (CONTINUED)
    In connection with the Insurance Companies Act 1982 of the United Kingdom,
World-Wide Reassurance is required to maintain statutory minimum net capital of
$14.9 million at September 30, 2001. World-Wide Reassurance had statutory
capital of $44.2 million at September 30, 2001.

16. CONTINGENCIES

    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.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

    Quarterly financial data for the year ended December 31, 2001 is as follows:

<Table>
<Caption>
                                                                     QUARTER ENDED
                                                    ------------------------------------------------
                                                    DECEMBER 31   SEPTEMBER 30   JUNE 30    MARCH 31
                                                    -----------   ------------   --------   --------
    <S>                                             <C>           <C>            <C>        <C>
    Total revenue.................................    $41,798        $32,503     $23,164    $22,004
    Income before income taxes and minority
      interest....................................      2,995          6,358       4,177      3,704
    Cumulative effect of change in accounting
      principle...................................         --             --        (406)        --
    Net income....................................      3,703          5,534       3,888      3,714
    Basic EPS.....................................    $  0.24        $  0.35     $  0.25    $  0.24
    Diluted EPS...................................    $  0.22        $  0.33     $  0.24    $  0.23
</Table>

    Quarterly financial data for the year ended December 31, 2000 is as follows:

<Table>
<Caption>
                                                                     QUARTER ENDED
                                                    ------------------------------------------------
                                                    DECEMBER 31   SEPTEMBER 30   JUNE 30    MARCH 31
                                                    -----------   ------------   --------   --------
    <S>                                             <C>           <C>            <C>        <C>
    Total revenue.................................    $39,694        $18,680     $15,441    $10,119
    Income before income taxes and minority
      interest....................................      7,380          4,440       1,951      2,090
    Net income....................................      7,033          4,527       2,380      2,031
    Basic EPS.....................................    $  0.45        $  0.29     $  0.15    $  0.13
    Diluted EPS...................................    $  0.44        $  0.28     $  0.15    $  0.13
</Table>

                                       78
<Page>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<Table>
<S>                                                    <C>  <C>
                                                       SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

                                                       By:            /s/ MICHAEL C. FRENCH
                                                            -----------------------------------------
                                                                        Michael C. French
                                                                     CHIEF EXECUTIVE OFFICER
</Table>

Date: March 4, 2002

    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
                      ---------                                    -----                    ----
<C>                                                    <S>                             <C>
                /s/ MICHAEL C. FRENCH                  Chief Executive Officer and
     -------------------------------------------         Director (Principal           March 4, 2002
                  Michael C. French                      Executive Officer)

                                                       President and Chief Financial
                /s/ SCOTT E. WILLKOMM                    Officer (Principal Financial
     -------------------------------------------         Officer and Principal         March 4, 2002
                  Scott E. Willkomm                      Accounting Officer)

                          *
     -------------------------------------------       Director                        March 4, 2002
                   Michael Austin

                          *
     -------------------------------------------       Director                        March 4, 2002
             G. William Caulfeild-Browne

                          *
     -------------------------------------------       Director                        March 4, 2002
                  Robert M. Chmely

     -------------------------------------------       Director                        March 4, 2002
                 Lord Norman Lamont

                          *
     -------------------------------------------       Director                        March 4, 2002
                  Hazel R. O'Leary
</Table>

                                       79
<Page>

<Table>
<Caption>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                             <C>
                          *
     -------------------------------------------       Director                        March 4, 2002
                  Glenn S. Schafer

                          *
     -------------------------------------------       Director                        March 4, 2002
                    Khanh T. Tran
</Table>

    *The undersigned, by signing his name hereto, does hereby sign this Annual
Report on Form 10-K pursuant to the Powers of Attorney executed on behalf of the
above named officers and directors of the Registrant and contemporaneously filed
herewith with the Securities and Exchange Commission.

<Table>
<S>                                                    <C>                             <C>
/s/ MICHAEL C. FRENCH
-------------------------------------------
Michael C. French
Attorney in Fact
</Table>

                                       80