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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

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

                 For the fiscal year ended December 31, 2003

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

                       For the Transition period from       to

                         Commission File Number 0-29788

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

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

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

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

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

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

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

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

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

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

      The aggregate market value of the voting stock held by  non-affiliates  of
the  Registrant as of June 30, 2003 was  $553,007,079.  As of February 23, 2004,
Registrant had 35,350,745 ordinary shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Certain  information  required by Items 10, 11, 12, 13 and 14 of Form 10-K
is  incorporated by reference into Part III hereof from the  registrant's  proxy
statement for its 2004 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,  2003.
==============================================================================


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                               TABLE OF CONTENTS

                                                                            Page


PART I........................................................................1

Item 1:  BUSINESS.............................................................1
Item 2:  PROPERTIES..........................................................29
Item 3:  LEGAL PROCEEDINGS...................................................29
Item 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................30

PART II......................................................................31

Item 5:  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER
         MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES...................31
Item 6:  SELECTED FINANCIAL DATA.............................................32
Item 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS...............................................33

Item 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........60
Item 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................63
Item 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE................................................63
Item 9A: DISCLOSURE CONTROLS AND PROCEDURES..................................63

PART III.....................................................................64

Item 10: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT......................64
Item 11: EXECUTIVE COMPENSATION..............................................64
Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT
         AND RELATED STOCKHOLDER MATTERS.....................................64
Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................64
Item 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES..............................64

PART IV......................................................................64

Item 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
         8-K.................................................................64

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                                     PART I

Item 1:     BUSINESS

Overview

      On August 28,  2003,  we changed our name to  Scottish  Re Group  Limited,
which we call  Scottish  Re,  from  Scottish  Annuity & Life  Holdings,  Ltd. In
addition,  our  wholly  owned  subsidiaries   World-Wide  Holdings  Limited  and
World-Wide  Reassurance  Company  Limited  changed  their  names to  Scottish Re
Holdings Limited and Scottish Re Limited, respectively.

      Scottish Re 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 in the United States,  as well as in
many other countries  around the world. We refer to this portion of our business
as life  reinsurance.  To a lesser  extent,  we  directly  issue  variable  life
insurance  and  variable  annuities  and  similar  products  to high  net  worth
individuals and families for insurance, investment and estate planning purposes.
We refer to this portion of our business as wealth management.

      We have  operating  companies in Bermuda,  the Cayman  Islands,  Guernsey,
Ireland, the United Kingdom and the United States. Our flagship subsidiaries are
Scottish  Annuity & Life Insurance  Company  (Cayman) Ltd.,  Scottish Re (U.S.),
Inc. and Scottish Re Limited. Scottish Annuity & Life Insurance Company (Cayman)
Ltd.,  Scottish  Re (U.S.),  Inc.  and  Scottish  Re Limited  are each rated "A-
(excellent)"  for  financial  strength  by A.M.  Best  Company,  which is fourth
highest of sixteen rating levels,  "A (strong)" for financial  strength by Fitch
Ratings,  which is sixth highest of twenty-two rating levels,  and "A- (strong)"
for  financial  strength  by  Standard  & Poor's,  which is  seventh  highest of
twenty-two  rating levels.  Scottish  Annuity & Life Insurance  Company (Cayman)
Ltd.  and  Scottish Re (U.S.),  Inc.  are also rated "A3  (good)" for  financial
strength by Moody's, which is seventh highest of twenty-one rating levels. These
ratings  are based upon  factors of concern to  policyholders,  treaty  holders,
retrocessionaires,  agents and  intermediaries  and are not directed  toward the
protection of investors.

      On  December  22,  2003,  we  completed  the  acquisition  of  95%  of the
outstanding capital stock of ERC Life Reinsurance Corporation, which we call ERC
Life, for $151.0 million in cash,  subject to certain post closing  adjustments.
ERC  Life  was  a  subsidiary  of  General  Electric's   Employers   Reinsurance
Corporation, which we call GE ERC, and was one of the companies through which GE
ERC conducted life reinsurance business in the United States. Upon completion of
the acquisition,  ERC Life's business  consisted  primarily of a closed block of
traditional life reinsurance with a face amount of approximately $155.6 billion.
At the date of  acquisition,  ERC Life had $1.4 billion in total assets.  GE ERC
has agreed to administer the business of ERC Life for a fixed monthly fee for up
to nine months from the date of acquisition and to assist with the transition of
the business to Scottish  Re's  systems.  No GE ERC  employees  will transfer to
Scottish Re. The  transaction  has  increased  the number of lives  reinsured in
North America from  approximately  2.1 million to approximately  6.2 million and
has increased  our gross face amount of in-force  business in North America from
approximately  $119.4 billion to approximately $275.0 billion. ERC Life is rated
"A-  (excellent)"  for financial  strength by A.M.  Best  Company,  which is the
fourth highest of sixteen rating levels.

      We have grown to be one of the 10 largest life reinsurers serving the U.S.
market (based on the amount of new life  reinsurance  business  assumed in 2002)
since our  formation in 1998.  On December  31,  2001,  we expanded our business
outside of North  America by  acquiring  Scottish  Re  Holdings  Limited and its
subsidiary,  Scottish Re Limited from Pacific Life Insurance  Company,  which we
call  Pacific  Life.  Scottish  Re  Limited,  formed  in 1964,  is a  U.K.-based
reinsurer of group life insurance, individual life insurance and aircrew loss of
license  insurance in Asia,  Europe,  Latin  America,  the Middle East and North
Africa.

      As of December 31, 2003, we had consolidated assets of $6.1 billion and
consolidated shareholders' equity of $659.8 million.


<PAGE>


      Our website address is  www.scottishre.com.  Forms 10-K, Forms 10-Q, Forms
8-K and all  amendments  to those  reports are  available  free of charge on our
website. These reports are posted to the website as soon as reasonably practical
after they have been  filed with the SEC.  We will also  provide  electronic  or
paper copies of these reports on request.  Information  contained on our website
does not constitute part of this Annual Report on Form 10-K.

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:

      o     decreasing the volatility of their earnings,

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

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

      o     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  lines of business,  which we
call Traditional Solutions and Financial Solutions.

      o     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 with the ceding  company.  In the
            North  American  market,  our direct sales force  targets the top 60
            life  insurance  companies.  We  count  46 of  these  60 as  current
            customers.  These  companies are  responsible  for  originating  the
            majority of all term life insurance written in that market. Scottish
            Re Limited offers  traditional life reinsurance  products outside of
            North America,  focusing primarily on the reinsurance of short-term,
            group life policies in niche market sectors.

      o     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. 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.
            This line of business includes acquired  solutions products in which
            we provide our clients with exit strategies for discontinued  lines,
            closed  blocks,  or lines not  providing a good fit for our client's
            growth  strategies.   With  our  assuming  full  responsibility  and
            management of these contracts, our clients can focus and concentrate
            their full efforts and resources on their core strategies.


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<PAGE>

      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 $1.1 trillion in 2002,
a 23% 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 2002, a 7% compounded annual
growth rate.  Many other of the  international  markets in which we operate have
also enjoyed significant growth in recent years.

      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:

      o     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 any 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.

      o     Consolidation  in the life reinsurance  industry.  There have been a
            number  of  merger  and  acquisition  transactions  within  the life
            reinsurance  industry 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.

      o     Increased capital  sensitivity.  We believe that insurance companies
            are now more focused on capital efficiency and return on capital. 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.

      o     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.

      o     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.

      o     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



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<PAGE>

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.

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:

      o     Expanding the size and depth of our reinsurance client base. We will
            continue to expand our core North American business by attempting to
            gain a larger share of the North  American 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.

      o     Growing our international business. We will continue to leverage the
            specialized  knowledge and established  relationships of Scottish Re
            Limited  to gain a  larger  share of the  life  reinsurance  markets
            outside  of North  America.  We will  explore  opportunities  in new
            markets as well as seeking to add new  clients  and expand  business
            relationships  with  existing  clients.  In addition,  we may pursue
            selected   strategic   acquisitions   of  other   life   reinsurance
            businesses.

      o     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 agencies. 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,
            capital.

      o     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.

      o     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.

Products Offered

Life Reinsurance North America

      In our Life Reinsurance North America segment 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 and fixed deferred 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.  We do  not  accept  mortality  or  longevity
guarantees associated with variable annuity products.

      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


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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:

      o     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

      o     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  enterprise  wide retained  exposure under life policies to no more
than  $500,000  per life for life  reinsurance  written  in our  North  American
operations.

      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:

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

      o     Ceding companies generally must recapture the same amount of risk on
            each policy  reinsured  under a treaty once a retention  increase is
            made after the treaty  stated  non-recapture  period  expires  and a
            recapture program is undertaken.

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

International Life Reinsurance

      Through our subsidiary,  Scottish Re Limited, we reinsure life reinsurance
and aircrew loss of license products.  Life insurance  products that we reinsure
include short-term group and individual life and, to a lesser extent, disability
and critical illness. Aircrew loss of license products that we reinsure are on a
short-term group basis.  While our  international  business does include a small
amount of automatic treaty business written in a very similar way to that in our
Life Reinsurance North America segment,  the bulk of our risks are written on a
facultative basis. A facultative approach provides for a ceding company to offer
risks for which we may either quote terms or, alternatively,  decline.  They, in
turn, are not obliged to cede any risk to us.

      Our principal  international market is the Middle East, where we have been
active  since  the  early  1990s.   For  the  year  ended   December  31,  2003,
approximately  20% of  total  written  premiums  in the  international  business
originated from Bahrain,  Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and
the United Arab Emirates.

      In Latin  America,  we do business  primarily in  Argentina,  Columbia and
Peru,  and to a lesser  extent in Chile and Ecuador.  In Asia,  our 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.


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<PAGE>

      We also  reinsure  aircrew  loss of license  coverage,  which  entails the
payment of lump sum  benefits if aircrew  cannot  perform  their job for medical
reasons,  as well as temporary  benefits for the period of time during which the
aircrew is grounded and waiting for the results of the medical examination.

      We  attempt  to  diversify   mortality   risk  in  our  Life   Reinsurance
International  segment by limiting our  consolidated  enterprise  wide  retained
exposure  under  life  policies  to no  more  than  $250,000  per  life  for our
international life reinsurance business.


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.

      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.

Marketing

Life Reinsurance

      In our life  reinsurance  business,  we market to life  insurance and life
reinsurance companies. We also target institutions,  such as pension 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.

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 $10.0 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.  Our  wealth  management  subsidiaries  are not  licensed  to  conduct
insurance  business in any  jurisdiction  in the United  States,  and  therefore
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  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.


                                       6
<PAGE>

Risk Management

Life Reinsurance

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

      o     mortality risk,

      o     investment risk,

      o     persistency risk,

      o     expense risk, and

      o     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. In North America, 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  for  life  reinsurance  written  in our Life
Reinsurance North America segment and  approximately  $250,000 per life for life
reinsurance written by our Life Reinsurance  International segment. In addition,
we maintain catastrophe cover on our entire retained life reinsurance  business,
which  provides  reinsurance  for losses of $19.3 million in excess of $750,000.
This catastrophe cover includes protection for nuclear,  biological and chemical
risks.

      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 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  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.


                                       7
<PAGE>

      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   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:

      o     mortality risk,

      o     counter-party risk,

      o     persistency risk, and

      o     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.

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. Third party investment
managers manage 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


                                       8
<PAGE>

context, which could adversely affect our ability to support our businesses, our
results of operations and our financial condition.

Investment Oversight

      Our Finance and Investment  Committee reviews our investment portfolio and
the  performance  of our  investment  managers.  In  addition,  our  Finance and
Investment  Committee  approves  changes in the  investment  policy  proposed by
management and oversees  compliance with the investment  policy. Our Finance and
Investment  Committee  can  approve  exceptions  to our  investment  policy  and
periodically  reviews  our  investment  policy  in  light of  prevailing  market
conditions.  The investment  managers 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:

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

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

      o     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;

      o     reducing the risks caused by mismatches by opportunistically  buying
            matching new investments.

      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,  2003,  we utilized  four asset  managers to manage the
portion of our  investment  portfolio  that we control.  General  Re-New England
Asset  Management,  which we refer to as NEAM,  managed 63%;  Principal  Capital
Management,  managed  22%;  Asset  Allocation  and  Management,  managed 14% and
Stephens Capital  Management,  managed 1%. We may engage other asset managers to
manage some or all of our controlled  investment portfolio in the future. In the
instances where we enter modified coinsurance transactions we


                                       9
<PAGE>

do not  directly  control the  underlying  investment  portfolio.  Instead,  the
investments  are held and  managed  by the  ceding  company  for our  account in
accordance with contractually agreed upon standards.

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.  Scottish  Annuity & Life
Insurance  Company  (Cayman)  Ltd.,  Scottish Re (U.S.),  Inc.,  and Scottish Re
Limited are each rated "A-  (excellent)"  for  financial  strength by A.M.  Best
Company,  which is fourth  highest of sixteen  rating  levels,  "A (strong)" for
financial strength by Fitch Ratings, which is sixth highest of twenty-two rating
levels, and "A- (strong)" for financial strength by Standard & Poor's,  which is
seventh highest of twenty-two  rating levels.  Scottish Annuity & Life Insurance
Company (Cayman) Ltd. and Scottish Re (U.S.), Inc. are also rated "A3 (good)" by
Moody's, which is seventh highest of twenty-one rating levels. ERC Life is rated
"A-  (excellent)"  for financial  strength by A.M.  Best  Company,  which is the
fourth highest of sixteen rating levels. These ratings are based upon factors of
concern  to  policyholders,  treaty  holders,   retrocessionaires,   agents  and
intermediaries and are not directed toward the protection of investors. ERC Life
is rated "A- (excellent)" for financial strength by A.M. Best Company,  which is
the fourth highest of sixteen rating levels.

      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 sixth  highest of Fitch's  twenty-two  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 seventh highest designation of Moody's twenty-one 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 twenty-two rating levels.

Employees

      As  of  February  23,  2004,  we  employed  approximately  142  full  time
employees.


                                       10
<PAGE>

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 49 states and the
District  of  Columbia.  ERC Life is a  Missouri-domiciled  reinsurer,  which is
licensed,  accredited,  approved  or  authorized  to conduct  reinsurance  in 50
states, the District of Columbia, Guam and the Federated States of Micronesia.

Insurance Holding Company Regulation

      Scottish  Re,  Scottish  Re  (U.S.),  Inc.  and ERC  Life are  subject  to
regulation  under the insurance  holding  company laws of Delaware and Missouri.
Scottish Re (U.S.),  Inc. was also subject to the insurance holding company laws
of California, but as of July 23, 2003, Pacific Life ceased to own a 10% or more
interest in Scottish Re, and thus neither Scottish Re nor ERC Life are currently
subject to regulation under the California  insurance  holding company laws. 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/or ERC Life and their  affiliates must be
fair and, if material,  require prior notice and approval or  non-disapproval by
the  Delaware  and/or  Missouri  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.
Missouri, the jurisdiction in which ERC Life is domiciled, provides that, unless
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 and Missouri provide that
no person, including a corporation,  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 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
Commission and/or the Missouri Director of Insurance 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.  and ERC  Life or any of  their  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. and ERC Life are 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.


                                       11
<PAGE>

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 49 states and the  District of  Columbia.  ERC Life is
licensed,  accredited,  approved and  authorized to write  reinsurance in all 50
states, the District of Columbia,  Guam, and the Federated States of Micronesia.
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-U.S.
reinsurance  subsidiaries  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 primary U.S.
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 which sell wealth management products
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 they 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
advisors,   investment   managers,   private   bankers,   attorneys   and  other
intermediaries in 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 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 subsidiaries
are not  currently  subject  to  increased  regulatory  scrutiny  based on these
ratios.

Risk-Based Capital

      The Risk-Based  Capital (RBC) for Insurers Model Act, or the Model Act, as
it applies to insurers and reinsurers, was adopted by the NAIC in 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.


                                       12
<PAGE>

      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.

      o     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.

      o     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.

      o     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.

      o     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, 2003, the Total Adjusted Capital of Scottish Re (U.S.),
Inc. and ERC Life exceeded applicable minimum RBC levels.

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.


                                       13
<PAGE>

Possible Initiatives Relating to the September 11th Events

      The  terrorist  attacks in the United  States on  September  11, 2001 have
resulted in significant losses for the insurance and reinsurance industries.  In
response to the attacks and a resulting decline in the availability of terrorism
insurance,  Congress  enacted the Terrorism Risk Insurance Act of 2002. The Act,
commonly referred to as TRIA,  provides U.S. Federal  reinsurance of "commercial
property and casualty"  coverage  written to protect against losses which result
from a specified category of foreign terrorist acts. At present, the protections
of TRIA  are  available  only to  defined  "commercial  property  and  casualty"
insurers. However, should the Secretary of the Treasury determine that "adequate
and  affordable  catastrophe  reinsurance"  is not  currently  available to life
insurers that issue group life  insurance,  TRIA  instructs the Secretary of the
Treasury to extend U.S. Federal reinsurance  protection to group life insurance.
In order to make this  determination,  the  Secretary of the Treasury  solicited
public  comment  through  January 10,  2003.  The  Secretary  of the Treasury is
expected to make a determination  regarding the extension of TRIA protections to
group life insurance at any time.

      By its own  terms,  all  reinsurance  is  specifically  excluded  from the
protections available through TRIA. Therefore,  absent the possible extension of
TRIA  protections to group life  insurance,  TRIA is not expected to provide any
protection  for  providers  of  life  reinsurance.   To  the  extent  that  TRIA
protections  are  extended to group life  insurance,  the  availability  of U.S.
Federal  reinsurance  for  terrorism  losses would  relieve some of the economic
pressure  to  reinsure  terrorism  losses  that life  reinsurers  may  currently
experience.  We have no information  regarding other proposed or enacted federal
or state  legislation that would restrict  insurers' ability to exclude or limit
coverage for terrorism risks.

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.

      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  Bermuda  Insurance  Act and our
private acts, the terms of the private acts control subject,  however,  to later
amendments  of the  Bermuda  Insurance  Act or other  relevant  laws.  Under our
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


                                       14
<PAGE>

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 our Bermuda 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.

Guernsey

      Scottish Re PCC Limited is a protected cell company incorporated under the
laws of the  Island of  Guernsey  that is  licensed  by the  Guernsey  Financial
Services Commission ("GFSC") to carry on international  insurance business under
the Insurance  Business  (Bailiwick of Guernsey)  Law,  2002.  The activities of
Scottish Re PCC Limited are  supervised  by the GFSC.  Insurers in Guernsey  are
required to maintain a minimum  margin of solvency  and to ensure that they have
funds  available  sufficient  to meet a total annual  aggregate  risk  retention
together  with any  forecasted  annual  expenses.  Insurance  companies are also
required  to  report  annually  to the  GFSC  and must  also  retain  a  general
representative.  The GFSC also has powers to  investigate  and  intervene in the
affairs of insurance companies in Guernsey.


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

      Scottish  Re  Limited  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.  Scottish Re Limited is  authorized  to carry on long-term
business and certain classes of general business.  An 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
funds may not be made directly or indirectly for any purpose other than those of
the insurer's  long-term  business.  An exception exists wherein payments may be
made from a surplus in the long-term business fund. In such instance the insurer
must  disclose  the surplus on an actuarial  valuation  and have the  valuation
certified by its appointed actuary in order to distribute the surplus.


                                       15
<PAGE>

New Jurisdictions

      If Scottish Re or any of our  subsidiaries  were to become  subject to the
laws of a new jurisdiction where Scottish Re 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 and Hybrid Capital Units 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 make us
less competitive.

      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.  Scottish  Annuity & Life
Insurance  Company  (Cayman)  Ltd.,  Scottish Re (U.S.),  Inc.,  and Scottish Re
Limited are each rated "A-  (excellent)"  for financial  strength by A.M.  Best,
which is fourth  highest of sixteen  rating  levels,  "A (strong)" for financial
strength by Fitch Ratings,  which is sixth highest of twenty-two  rating levels,
and "A- (strong)" for financial strength by Standard & Poor's,  which is seventh
highest of twenty-two  rating levels.  Scottish Annuity & Life Insurance Company
(Cayman)  Ltd.  and  Scottish  Re (U.S.),  Inc.  are also rated "A3  (good)" for
financial  strength by Moody's,  which is seventh  highest of twenty-one  rating
levels.  ERC Life is rated "A- (excellent)" for financial  strength by A.M. Best
Company,  which is the fourth highest of sixteen rating levels. The objective of
ratings  organizations  is to  provide  an  opinion  of an  insurer's  financial
strength and ability to meet ongoing  obligations  to its  policyholders.  These
ratings are subject to periodic  review by the relevant rating agency and may be
revised  downward or withdrawn at the sole  discretion of the rating agency.  In
addition,  these  ratings are not an  evaluation  directed to  investors  in our
ordinary  shares and Hybrid  Capital Units and are not  recommendations  to buy,
sell or hold our ordinary  shares and Hybrid Capital  Units.  Although since our
formation in 1998, none of our operating  subsidiaries  has been  downgraded,  a
downgrade in or  withdrawal  of one or more ratings of any one of our  insurance
subsidiaries  could  adversely  affect  its  ability  to sell  products,  retain
existing business (through recapture provisions and non-renewal) and compete for
attractive acquisition opportunities.

Inadequate risk analysis and  underwriting  may result in a decline in our
profits.

      Our  success  depends on our ability to assess  accurately  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.  For  example,  we
incurred  a charge to net income of $10.4  million in the third  quarter of 2003
when  we  discovered  that  one  of  our  ceding  insurers  had   systematically
underreported  death claims to us over a three-year  period. We are also 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


                                       16
<PAGE>

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.

      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 interest 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
and could at times exceed our  reserves.  If our losses and benefits  exceed our
reserves, our earnings may significantly decline.

Our life reinsurance contracts and variable life insurance policies expose us to
mortality risk.

      Adverse  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,  which provide a death benefit,  are
purchased by a relatively  small group of high net worth  individuals.  Our risk
exposure is greater  with a narrow  risk pool having a small  number of high net
worth  individuals  because  this group is a subset of the  general  population.
Additionally,  our risk exposure is higher because we retain an average coverage
per life of $130,000 on these  policies,  as opposed to an average  coverage per
life in our life reinsurance contracts of $29,000.

      Additionally,  we are a relatively new company and many of our competitors
for reinsurance contracts and variable life insurance policies are significantly
larger,  have  larger  operating  histories  and  a  broader  risk  pool.  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 a
competitor 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:

      o     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;

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

      o     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.

      We attempt to address  such risks in product  pricing and in  establishing
policy reserves. If our assets do not properly match our anticipated liabilities
or our investments do not provide sufficient returns to enable us to satisfy our
guaranteed fixed benefit  obligations  then our profits and financial  condition
would deteriorate.  Also,  declines in the


                                       17
<PAGE>

value of our investments that provide collateral for reinsurance contracts would
require us to post additional collateral.

      In addition, our investment portfolio includes mortgage-backed securities,
known as MBSs, and  collateralized  mortgage  obligations,  known as CMOs. As of
December 31, 2003, MBSs and CMOs constituted  approximately  14% 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.  Structuring  these  derivatives  and hedges so as to
effectively  manage  these  risks is an  inherently  uncertain  process.  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.

      General economic conditions 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  changes in
general  economic  conditions  could create  volatility or  illiquidity in these
markets in which we hold positions and harm our investment return.

In certain  reinsurance  contracts  we do not  maintain  control of the invested
assets,  which may limit our ability to control investment risks on these assets
and may expose us to credit risk of the ceding company.

      As part of our business we enter into reinsurance agreements on a modified
coinsurance and funds withheld  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, 2003,  $1.5 billion of assets
were held by ceding  companies  under such  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.  In certain other  reinsurance  arrangements,  we may place assets in a
trust in order to provide the ceding company with credit for  reinsurance on its
financial  statements.  Although  we  generally  have the  right to  direct  the
investment  of assets in these  trusts,  in the event of the  insolvency  of the
ceding company, its receiver may attempt to take control of those assets.

Interest rate fluctuations  could lower 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 offset the decline in investment  earnings with lower  crediting  rates on
our contracts that reinsure life insurance policies or annuities with cash value
components. A majority of our annuity and certain other products have multi-year
guarantees and guaranteed floors on their crediting rates.

      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,


                                       18
<PAGE>

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,  significant  changes in interest  rates  caused by
factors beyond our control such as changes in  governmental  monetary  policy or
political conditions may negatively 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.

A  prolonged  economic  downturn  could  reduce the demand for  annuity and life
insurance products, which could substantially reduce our revenues.

      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 lower the demand 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 demand for
annuities or life insurance decreased.

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 and
investment experience. To the extent surrender, withdrawal or recapture activity
is greater than we assumed, or investment experience is worse than we assumed we
may incur a non-cash charge to write down the deferred  acquisition  cost asset.
Any such charge 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. In December 2002, another of our
customers  exercised a right of recapture  requiring us to pay $49.3  million to
the  customer.  In that case, we did not have to dispose of assets at a loss and
we recovered all of our unamortized  deferred  acquisition costs relating to the
transaction.   However,   because   recapture   rights  can  be   triggered   by
circumstances,   which  may  be  unforeseeable,  such  as  rating  decreases  or
production  shortfalls,  we may not be able to anticipate  future recaptures and
make adequate preparations to reduce their impact on us. If recaptures occur and
we do not make adequate preparations, our earnings and financial condition could
decline.

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


                                       19
<PAGE>

pay ceding companies for risks that we reinsure. Failure of retrocessionaires to
pay us could  materially harm our business,  results of operations and financial
condition.

Terrorist  attacks and related  events may  adversely  affect our  business  and
results of operations.

      The  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 reinsure and the impact on
the U.S. and global  economies and the demand for our products.  Our reinsurance
programs,   including  our  catastrophe  coverage  limited  our  net  losses  in
individual life claims  relating to the September 11, 2001 terrorist  attacks to
approximately  $750,000. We continue to utilize reinsurance programs,  including
catastrophe  coverage,  to limit any future losses  relating to such events.  We
cannot assure you,  however,  that if there are future  terrorist  attacks,  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 as well as armed conflict 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.

Any future acquisitions may expose us to operational risks.

      We have made, and may in the future make, strategic  acquisitions,  either
of other companies or selected blocks of business.  Any future  acquisitions may
expose us to operational challenges and risks, including:

      o     integrating financial and operational reporting systems;

      o     establishing satisfactory budgetary and other financial controls;

      o     funding increased capital needs and overhead expenses;

      o     obtaining management personnel required for expanded operations;

      o     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;
            and

      o     the value of  assets  acquired  may be lower  than  expected  or may
            diminish  due to credit  defaults or changes in  interest  rates and
            liabilities assumed may be greater than expected.

      Our failure to manage successfully these operational  challenges and risks
may impact our results of operations.

The loss of any of our key  employees  or our  inability  to retain  them  could
negatively impact our business.

      Our success  substantially  depends upon our ability to attract and retain
qualified  employees and upon the ability of our senior management and other key
employees  to  implement  our  business  strategy.  We believe  there are only a
limited number of available qualified  executives in the business lines in which
we compete.  We rely  substantially  upon the services of Michael C. French, our
Chief Executive Officer,  Scott E. Willkomm,  our President,  David Huntley, our
Chief Executive Officer of Scottish Re Limited,  Elizabeth A. Murphy,  our Chief
Financial Officer, Oscar R. Scofield, the Chief Executive Officer of Scottish Re
(U.S.), Inc., Thomas A. McAvity,  Jr., our Chief Investment Officer and Clifford
J. Wagner, our Chief Actuary. Each of the foregoing members of senior management
have  employment  agreements  and we maintain  $5,000,000 key man life insurance
policies for each of Mr.  French and Mr.  Scofield and  $2,500,000  key man life
insurance policies for each of Mr. Willkomm,  Ms. Murphy, and Mr. Wagner.


                                       20
<PAGE>

The loss of the services of members of our senior  management,  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 which could harm our financial performance.

We are exposed to foreign currency risk.

      Our  functional  currency is the United States dollar.  However,  our U.K.
subsidiaries,  Scottish Re Holdings Limited and Scottish Re Limited,  maintain a
part of their  investment  portfolio and operating  expense  accounts in British
pounds and receive other  currencies in payment of premiums.  All of Scottish Re
Limited's  original  U.S.  business  is settled in United  States  dollars,  all
Canadian,  Latin American 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.  Scottish Re Limited 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 lower our results of operations and harm our financial condition.

Our insurance subsidiaries are highly regulated, and changes in these
regulations could harm 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:

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

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

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

      o     require assessments to pay claims of insolvent insurance companies.

      The National  Association  of Insurance  Commissioners,  which we call 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 Re or any of our  subsidiaries  were to become  subject to the
laws of a new jurisdiction where Scottish Re 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 harm our financial results
and operations.

Life reinsurance is a highly competitive industry, 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.  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.  We consider our major  competitors  to include Swiss Re,  Reinsurance


                                       21
<PAGE>

Group of America Inc., Munich American  Reassurance Company, ING Reinsurance and
Transamerica Reinsurance.

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 and Hybrid Capital Units 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. If insurance  regulators at
any time  determine  that  payment  of a  dividend  or any other  payment  to an
affiliate  would be detrimental to an insurance  subsidiary's  policyholders  or
creditors,  because of the financial  condition of the  insurance  subsidiary or
otherwise,  the regulators  may block  dividends or other payments to affiliates
that would otherwise be permitted without prior approval.

Our ordinary shares are subject to voting and transfer limitations.

      Under  our  articles  of  association,  our  board  of  directors  (or its
designee) is required,  except for transfers of ordinary  shares executed on any
recognized securities exchange or inter-dealer  quotation system,  including the
NYSE, to decline to register any transfer of 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 (as
defined in our  articles of  association),  is  permitted  to transfer  ordinary
shares to other Pacific Life entities,  so long as the number of ordinary shares
beneficially  owned  directly or  indirectly by the Pacific Life entities in the
aggregate  does not exceed  24.9% of a class of our  shares.  With  respect to a
transfer of ordinary  shares executed on any recognized  securities  exchange or
inter-dealer  quotation  system,  including the NYSE, 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,  the  directors  may demand that such person
surrender the ordinary shares to an agent designated by the directors,  who will
sell the ordinary shares on any recognized  securities  exchange or inter-dealer
quotation  system,  including the NYSE.  After applying the proceeds of the sale
toward  reimbursing  the transferee for the price paid for the ordinary  shares,
the agent will pay the remaining  proceeds to certain  charitable  organizations
designated by the directors.  The proceeds of such sale may be used to reimburse
the  agent  for  its  duties.   Similar  restrictions  apply  to  issuances  and
repurchases  of ordinary  shares by us. Our directors (or their  designee)  also
may,  in their  absolute  discretion,  decline to register  the  transfer of any
ordinary  shares,  except for  transfers  of  ordinary  shares  executed  on any
recognized securities exchange or inter-dealer  quotation system,  including the
NYSE,  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 U.S.
securities laws or under the laws of any other jurisdiction is required and such
registration has not been duly effected.  With respect to a transfer of ordinary
shares executed on any recognized securities exchange or inter-dealer  quotation
system,  including the NYSE,  if our  directors  have any 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,  the directors may demand that
such  person  surrender  the  ordinary  shares  to an  agent  designated  by the
directors,  who will  sell the  ordinary  shares  on any  recognized  securities
exchange or inter-dealer  quotation  system,  including the NYSE. After applying
the proceeds of the sale toward  reimbursing  the  transferee for the price paid
for the ordinary  shares,  the agent will pay the remaining  proceeds to certain
charitable  organizations designated by the directors. The proceeds of such sale
may be used to  reimburse  the agent for its duties.  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.

      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


                                       22
<PAGE>

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 make it difficult to replace directors and to effect
a change of control.

      Our articles of association  contain certain  provisions that make it more
difficult for the  shareholders  to replace  directors even if the  shareholders
consider it beneficial  to do so. In addition,  these  provisions  may make more
difficult the  acquisition of control of Scottish Re 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 and may prevent a shareholder  from  receiving the
benefit from any premium over the market price of our ordinary shares offered by
a bidder in a potential takeover.

      Examples of provisions in our articles of association that could have such
an effect include:

      o     election of our directors is staggered,  meaning that the members of
            only one of three classes of our directors are elected each year;

      o     the total voting power of any shareholder  owning 10% or more of the
            total voting rights  attached to our ordinary shares will be reduced
            to  approximately  9.9% of the total  voting  rights of our ordinary
            shares;

      o     our  directors  must  decline to register  the  transfer of ordinary
            shares on our share  register  that would result in a person  owning
            10% or more of any  class of our  shares  and may  declined  certain
            transfers  that they  believe  may have  adverse  tax or  regulatory
            consequences;

      o     shareholders do not have the right to act by written consent; and

      o     our  directors  have the  ability to change the size of the board of
            directors.

      Even in the  absence of an attempt to effect a change in  management  or a
takeover  attempt,  these provisions may adversely affect the prevailing  market
price of our  ordinary  shares if they are  viewed as  discouraging  changes  in
management and takeover attempts in the future.


                                       23
<PAGE>


      Pacific Life owns approximately  8.5% 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  persons for  election to our board of  directors  might
provide Pacific Life with significant influence over potential change in control
transactions.

Applicable insurance laws make it difficult to affect a change of control.

      Under applicable  Delaware  insurance laws and regulations,  no person may
acquire  control of  Scottish  Re 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.

      Under applicable  Missouri  insurance laws and regulations,  no person may
acquire  control of ERC Life,  our Missouri  insurance  subsidiary,  unless that
person has filed a statement containing specified  information with the Missouri
Director of  Insurance  and  approval for such  acquisition  is obtained.  Under
applicable laws and regulations,  any person who, directly or indirectly,  owns,
controls,  holds with the power to vote or holds  proxies  representing,  10% or
more of the  voting  stock of any other  person  is  presumed  to have  acquired
control of such person, and a person who acquires such control without obtaining
the approval of the  Missouri  Insurance  Commissioner  would be in violation of
Missouri's  insurance  holding  company  act and would be subject to  injunctive
action,  as  well  as  other  action  determined  by the  Missouri  Director  of
Insurance.

      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. and ERC Life may require prior notification in
the states that have pre-acquisition notification laws.

      Any change in control of  Scottish Re Limited  would need the  approval of
the UK  Financial  Services  Authority,  which is the body  responsible  for the
regulation and supervision of the UK insurance and reinsurance industry.

The market price of our ordinary shares could decrease due to the significant
number of shares eligible for future sale.

      As of February 23, 2004, we had 35,350,745  ordinary  shares  outstanding,
3,007,380  of which were held by  Pacific  Life.  In  addition,  we had  options
outstanding  to purchase an  aggregate  of 2,966,317  ordinary  shares,  Class A
warrants  to purchase an  aggregate  of  2,650,000  ordinary  shares,  5,297,098
ordinary  shares issuable upon  conversion of the Senior  Convertible  Notes and
7,440,500 ordinary shares (at the current market price) issuable upon conversion
of the Hybrid  Capital  Units.  The ordinary  shares held by Pacific  Life,  the
ordinary  shares  issuable  upon the  exercise  of the Class A warrants  and the
ordinary shares issuable upon conversion of our 4.50% Senior  Convertible  Notes
have been registered pursuant to a registration  statement that became effective
on April 4, 2003,  and they may be sold at any time and from time to time by the
holders  thereof  in open  market  or  privately  negotiated  transactions.  The
ordinary  shares  issuable  upon  settlement  of the purchase  contracts and the
convertible  preferred  shares  underlying  the Hybrid  Capital  Units have been
registered  pursuant to the  registration  statement  which became  effective on
April 24,  2003 and may be sold at any time and from time to time by the holders
thereof in open market or privately  negotiated  transactions  after the date of
issuance.

      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


                                       24
<PAGE>

substantial  amounts of  ordinary  shares in the  public  market  following  the
offering,  or the perception that such sales could occur, could lower the market
price of our 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,  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,
or if the  convertible  holders were able to convert to our ordinary  shares and
then sell those ordinary shares,  such sales could cause a decline in the market
price for the ordinary shares.

Investors may have difficulties in suing or enforcing judgments against us in
the United States.

      Scottish Re is a holding  company  organized  under the laws of the Cayman
Islands with its principal executive office in Bermuda. Certain of our directors
and officers 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

      If Scottish Re or any of its non-U.S.  subsidiaries  is  determined  to be
conducting  business  in  the  United  States  or if  Scottish  Re or any of its
subsidiaries is treated as a personal  holding  company,  we could be liable for
U.S. federal income taxes.

      Scottish Re is a holding  company  organized  under the laws of the Cayman
Islands  with its  principal  executive  office in Bermuda.  Scottish Re and its
non-U.S.  subsidiaries  believe  they  have  operated  and  intend  to  continue
operating  in a manner such that  neither  Scottish  Re nor any of its  non-U.S.
subsidiaries  should be treated as engaging in a trade or business in the United
States and thus  should not be subject to U.S.  federal  income  taxation on net
income.  Because  there are no  definitive  standards  provided by the  Internal
Revenue Code of 1986, as amended (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, the United States Internal Revenue Service (which we refer to
as the  IRS)  could  contend  that  Scottish  Re or one or more of its  non-U.S.
subsidiaries,  is 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 unless the
"branch profits" tax is reduced by an applicable income tax treaty.

      Scottish Re or one of its non-U.S.  subsidiaries  might be subject to U.S.
tax on a  portion  of its U.S.  income  if  Scottish  Re or one of its  non-U.S.
subsidiaries is considered a personal  holding company ("PHC") for U.S.  federal
income tax  purposes.  This  status  will  depend on whether  50% or more of our
shares could be deemed to be owned (pursuant to certain  constructive  ownership
rules) by five or fewer  individuals  and whether  60% or more of Scottish  Re's
income, or the income of any of its subsidiaries, as determined for U.S. federal
income tax purposes,  consists of "personal  holding company income." We believe
based  upon  the  information  made  available  to  us  regarding  our  existing
shareholder base that neither  Scottish Re nor any of its non-U.S.  subsidiaries
should be  considered a PHC for U.S.  federal  income tax  purposes  immediately
following  the  offering.  Additionally,  we intend to manage  our  business  to
minimize  the  possibility  that we will meet the 60% income  threshold  so that
neither  Scottish Re nor any of its  subsidiaries  should be  considered  a PHC.
However,   because  of  the  legal  and  factual  uncertainties   regarding  the
application of the  constructive  ownership rules, the makeup of our shareholder
base,  our gross  income  and other  circumstances,  we cannot be  certain  that
Scottish Re and/or any of its subsidiaries  will not be considered a PHC or that
the amount of U.S.  tax that would be imposed if this were not the case would be
immaterial.

If Scottish Re or any of its  non-U.S.  subsidiaries  is treated as a controlled
foreign  corporation,  a passive foreign  investment company or foreign personal
holding company or if any of our non-U.S.  insurance


                                       25
<PAGE>

subsidiaries generate more than a permissible amount of related person insurance
income, U.S. persons who own our convertible preferred shares or ordinary shares
may be subject to U.S. federal income taxation on our undistributed earnings and
may recognize  ordinary  income upon  disposition of our  convertible  preferred
shares or ordinary shares.

      We believe that we were not a controlled  foreign  corporation,  a passive
foreign  investment  company or a foreign personal holding company,  nor have we
generated an  impermissible  amount of related person  insurance  income for the
year ended December 31, 2002.  Although no assurances  can be given,  based upon
(i) our current  beliefs with respect to the  dispersion of our share  ownership
and (ii) our financial  information for the period ending September 30, 2003, we
do not expect to be a controlled foreign corporation, passive foreign investment
company, foreign personal holding company or to generate an impermissible amount
of related person  insurance  income for the current year or in the future.  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 controlled  foreign  corporation,  a passive  foreign  investment  company,  a
foreign personal holding company 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 convertible  preferred  shares or ordinary shares may be
treated as ordinary income.

      Controlled  Foreign  Corporation.  Each U.S.  10%  holder 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%  holder"
includes only persons who, directly or indirectly through non-U.S.  entities (or
through the  application of certain  "constructive"  ownership  rules,  which we
refer to as constructively),  own 10% or more of the total combined voting power
of all  classes of stock of the  foreign  corporation.  In  general,  a non-U.S.
company is treated as a controlled foreign  corporation if such U.S. 10% holders
collectively  own more than 50% of the total  combined  voting power or value of
the company's  stock for an  uninterrupted  period of 30 days or more during any
year and a  non-U.S.  insurance  company  is  treated  as a  controlled  foreign
corporation if such U.S. 10% holders collectively own more than 25% of the total
combined  voting  power or value of the  company's  stock  for an  uninterrupted
period of 30 days or more during any year.

      We believe we  currently  have no U.S.  10%  holders.  In order to prevent
Scottish  Re 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,  in the
case of 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,  that would exceed 24.9%)
of any class of the  issued and  outstanding  Scottish  Re shares and  provide a
"voting cutback" that would, in certain  circumstances,  reduce the voting power
with  respect to  Scottish  Re shares to the  extent  necessary  to prevent  the
Pacific  Life  entities  from  owning  more than  24.9% of the  voting  power of
Scottish Re, and any other  person  owning more than 9.9% of the voting power of
Scottish Re. We believe,  based upon  information made available to us regarding
our existing shareholder base, that the dispersion of our share ownership (other
than with  respect to the  Pacific  Life  entities)  and the  provisions  of our
articles of association  restricting the transfer,  issuance and voting power of
our shares should prevent any person (other than the Pacific Life entities) from
becoming a U.S. 10% holder of Scottish  Re;  however,  some of these  provisions
have not been directly passed on by the IRS, or by any court, in this context.

      If, however, one or more U.S. persons owning (directly, indirectly through
non-U.S.  entities or  constructively)  10% or more of our voting  stock were to
acquire  separately or in the aggregate 25% of the vote or value of the stock of
Scottish Re, our non-U.S.  insurance subsidiaries would be treated as controlled
foreign  corporations.  In addition,  Scottish Re and its other  (non-insurance)
non-U.S.  subsidiaries would be characterized as controlled foreign corporations
if such U.S.  persons  were to acquire more than 50% of the vote or value of the
stock of Scottish Re. In either case,  any such U.S.  10%  shareholder  would be
required to include in gross income its  allocable  share of subpart F income of
Scottish Re and/or its non-U.S. subsidiaries.

      Related  Person  Insurance  Income.  If (i) any of our non-U.S.  insurance
subsidiaries'  related person insurance income,  referred to as RPII, determined
on a gross  basis were to equal or exceed 20% of its gross


                                       26
<PAGE>

insurance  income in any taxable  year,  (ii) direct or  indirect  insureds  and
persons  related to such insureds were to own directly or indirectly 20% or more
of the  voting  power or value of  Scottish  Re's  stock or any of our  non-U.S.
insurance subsidiaries' stock, and (iii) U.S. persons (without regard to whether
any U.S. person is a U.S. 10% holder) directly, indirectly or constructively own
collectively  by  voting  power or  value  25% or more of our  aggregate  shares
(taking into account the relative  vote and value of our  convertible  preferred
shares and ordinary  shares),  such U.S.  persons who directly or indirectly own
our  convertible  preferred  shares  or  ordinary  shares on the last day of the
taxable year would be required to include the U.S.  person's  pro-rata  share of
our non-U.S.  insurance  subsidiaries'  related person  insurance income for the
taxable  year  in its  gross  income  for  U.S.  federal  income  tax  purposes,
determined  as  if  such  related  person   insurance  income  were  distributed
proportionately   to  U.S.  persons  at  that  date,  taking  into  account  any
differences  existing with respect to the distribution  rights applicable to the
convertible preferred shares and ordinary shares.

      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. holders.  At present we believe that our
non-U.S.  insurance subsidiaries should satisfy the 20% RPII ownership exception
described  herein  because  the direct or  indirect  ownership  of the shares of
Scottish Re or any of its non-U.S.  insurance  subsidiaries by any  shareholders
that are direct or indirect insureds of any of Scottish Re's non-U.S.  insurance
subsidiaries (or any person related to such insureds) should be less than 20% of
the  voting  power or  value of  Scottish  Re or any of its  non-U.S.  insurance
subsidiaries.  Even if the 20% RPII ownership  exception  described above is not
met,  although no assurances can be given,  we do not believe that the 20% gross
insurance  income  threshold has been met and we do not expect such threshold to
be met in the future. If this is not, or will not continue to be, the case, such
U.S. persons who directly or indirectly own our convertible  preferred shares or
ordinary  shares  on the last day of such  taxable  year  would be  required  to
include the U.S.  person's  pro-rata  share of the relevant  non-U.S.  insurance
subsidiaries'  related person insurance income for the taxable year in its 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,  taking into  account any  differences  existing  with respect to the
distribution rights applicable to the convertible  preferred shares and ordinary
shares.

      Dispositions of Our Convertible Preferred Shares or Ordinary Shares. If we
are considered to be a controlled foreign corporation, any gain from the sale or
exchange by a U.S. 10% holder of our  convertible  preferred  shares or 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  (without  regard  to  whether  any U.S.  person is a U.S.  10%  holder)
collectively  own  directly,  indirectly  or  constructively  25% or more of the
voting power or value of our aggregate  shares (taking into account the relative
vote and value of our convertible  preferred  shares and ordinary  shares),  any
gain from the disposition by a U.S. holder of our convertible  preferred  shares
or ordinary shares will generally be treated as ordinary income to the extent of
such U.S. holder's portion of our  undistributed  earnings and profits that were
accumulated  during  the period  that the U.S.  holder  owned the  shares  (with
certain adjustments).  In addition,  such U.S. holder will be required to comply
with certain  reporting  requirements,  regardless of the amount of shares owned
directly or  indirectly.  However,  because  Scottish Re 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 Re shares  should be subject to these  rules.  The
IRS,  however,  could  interpret  the  proposed  regulations,  or  the  proposed
regulations  could be  promulgated  in final form,  in a manner that would cause
these rules to apply to  dispositions  of our  convertible  preferred  shares or
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 convertible preferred shares or 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


                                       27
<PAGE>

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 Re 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,  the IRS or
a court  could  concur that we are a passive  foreign  investment  company  with
respect to any given year.

      Foreign Personal  Holding Company.  If we were considered an FPHC it could
have  material  adverse  tax  consequences  for you if you are  subject  to U.S.
federal income taxation,  including  potentially  subjecting any dividend income
inclusions to a greater tax liability than might  otherwise apply and subjecting
you to tax on  amounts in advance of when tax would  otherwise  be  imposed.  In
addition,  if we were considered an FPHC, upon the death of any U.S.  individual
owning  shares,  such  individual's  heirs or estate  would not be entitled to a
"step-up" in the basis of the ordinary shares which might otherwise be available
under U.S.  federal  income  tax laws.  Scottish  Re and/or any of its  non-U.S.
subsidiaries  could be  considered  to be an FPHC for U.S.  federal  income  tax
purposes  if more than 50% of our shares  could be deemed to be owned by five or
fewer individuals who are citizens or residents of the United States, and 60% or
more of Scottish Re's income, or that of its non-U.S. subsidiaries,  consists of
"foreign personal holding company income," as determined for U.S. federal income
tax purposes. We believe,  based upon information made available to us regarding
our existing  shareholder base, that neither Scottish Re nor any of its non-U.S.
subsidiaries  should be considered an FPHC  immediately  following the offering.
Additionally,  we intend to manage our business to minimize the possibility that
we will meet the 60% income threshold so that neither Scottish Re nor any of its
non-U.S.  subsidiaries  should be  considered an FPHC.  However,  because of the
legal and factual  uncertainties  regarding the application of the  constructive
ownership rules, the makeup of our shareholder  base, our gross income and other
circumstances,  we cannot be certain that Scottish Re and/or any of its non-U.S.
subsidiaries will not be considered an FPHC.

      If we are a  controlled  foreign  corporation  or if  any of our  non-U.S.
insurance subsidiaries generate related person insurance income, U.S. tax-exempt
organizations  that own our convertible  preferred shares or 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%  holder or there is related  person  insurance  income  and  certain
exceptions do not apply. Although we do not believe that any U.S. persons should
be allocated subpart F insurance income, potential U.S. tax-exempt investors are
advised to consult their own tax advisors.

Changes in U.S.  federal  income tax law could  materially  adversely  affect an
investment in our convertible preferred shares or ordinary shares.

      Legislation has been introduced in the U.S. Congress intended to eliminate
certain perceived tax advantages of companies  (including  insurance  companies)
that have legal  domiciles  outside  the United  States  but have  certain  U.S.
connections.  In this regard,  legislation  has been  introduced that includes a
provision that permits the IRS to reallocate or recharacterize  items of income,
deduction or certain  other items  related to a  reinsurance  agreement  between
related parties to reflect the proper source, character and amount for each item
(in contrast to current law, which only refers to source and  character).  While
there are no currently pending  legislative  proposals which, if enacted,  would
have a material  adverse effect on us or our  shareholders,  it is possible that
broader-based  legislative  proposals could emerge in the future that could have
an adverse impact on us, or our shareholders.

      Additionally,  the  U.S.  federal  income  tax  laws  and  interpretations
regarding  whether a company is engaged in a trade or business within the United
States,  or is a passive foreign  investment  company,  or whether U.S.  persons
would be required  to include in their gross  income the subpart F income or the
related person insurance income of a controlled foreign  corporation 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
insurance  companies and the  regulations  regarding  related  person  insurance
income are still in proposed form. New regulations or


                                       28
<PAGE>

pronouncements  interpreting  or clarifying  such rules may be  forthcoming.  We
cannot be certain if, when or in what form such  regulations  or  pronouncements
may be provided and whether such guidance will have a retroactive effect.

If we do not receive further undertakings from the Cayman Islands, we may become
subject to taxes in the Cayman Islands in the future.

      Scottish Re and our Cayman Islands  subsidiaries,  Scottish Annuity & Life
Insurance  Company (Cayman) Ltd. and The Scottish Annuity Company (Cayman) Ltd.,
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  Re 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  Cayman  Islands  law  imposing  any tax on  profits,  income,  gains or
appreciation shall apply to Scottish Re 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 Re
and its Cayman Islands subsidiaries. We could be subject to Cayman Islands taxes
after the applicable dates.

If Bermuda law changes, 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 Scottish Re or any
of our  Bermuda  subsidiaries  until March 28,  2016.  Scottish Re or any of our
Bermuda subsidiaries could be subject to Bermuda taxes after that date.

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 may impact us.

      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 April 18, 2002, Bermuda and the Cayman Islands were not
listed as uncooperative tax haven jurisdictions because each had previously
committed itself to eliminate harmful tax practices 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 subject us
to additional taxes.

Item 2:     PROPERTIES

      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, Dallas, Texas and Windsor, England. Our life reinsurance business
operates out of the Bermuda, Grand Cayman, Charlotte and Windsor offices while
our wealth management business operates out of the Grand Cayman office. The
Bermuda and Dallas leases expire in 2005, the Grand Cayman lease expires in
2006, the Charlotte lease expires in 2012 and the Windsor lease expires in 2023.

      We plan to  increase  our leased  office  space in  Charlotte  to meet our
growth  needs  arising  from the  acquisition  of ERC Life.  We believe that the
leases  for our  remaining  operations  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.


                                       29
<PAGE>

Item 4:     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      Scottish Re did not submit any matter to the vote of shareholders during
the fourth quarter of 2003.


                                       30
<PAGE>

PART II

Item 5:     MARKET  FOR  REGISTRANT'S   COMMON  EQUITY,   RELATED  SHAREHOLDER
            MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for the Ordinary Shares

      The ordinary  shares,  par value $0.01 per share, of Scottish Re 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. This table shows for the indicated periods the high and
low closing sales prices per share for our ordinary  shares,  as reported in The
Wall Street Journal, and dividend declared per share.

<TABLE>
<CAPTION>

                                                                       Per
                                                                      Share
                                                    High      Low    Dividend
                                                    ----      ---    --------
<S>                                               <C>      <C>       <C>
Year ended December 31, 2001
First Quarter..................................   $ 16.500 $ 11.125  $  0.05
Second Quarter.................................     17.600   13.000     0.05
Third Quarter .................................     18.900   13.900     0.05
Fourth Quarter.................................     19.350   15.000     0.05
Year  ended December 31, 2002
First Quarter..................................   $ 19.000 $ 15.890  $  0.05
Second Quarter.................................     21.630   18.530     0.05
Third Quarter .................................     19.000   13.900     0.05
Fourth Quarter.................................     19.050   16.500     0.05
Year  ended December 31, 2003
First Quarter..................................   $ 18.060 $ 16.550  $  0.05
Second Quarter.................................     20.520   17.180     0.05
Third Quarter .................................     24.150   20.000     0.05
Fourth Quarter.................................     24.500   19.300     0.05
Period Ended February 23, 2004
January 1, 2004 to February 23, 2004              $ 23.710 $ 20.300  $    -

</TABLE>

      As of December 31, 2003, Scottish Re had 29 record holders of its ordinary
      shares.

      Scottish Re paid cash  dividends  of $0.20 per  ordinary  share in each of
      2003, 2002 and 2001.


                                       31
<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." Consolidated balance sheet data as of December 31, 2001 reflect the
acquisition  of Scottish Re Holdings  Limited,  but  consolidated  statements of
income  data  for the  periods  ended  December  31,  2001,  2000  and  1999 and
consolidated  balance sheet data as of December 31, 1999 and 2000 do not reflect
the results of Scottish Re Holdings Limited, as the transaction was completed at
the close of business on December 31, 2001.  Consolidated  balance sheet data as
of December  31, 2003  reflect the  acquisition  of ERC Life,  but  consolidated
statement  of income data for the years ended  December 31, 1999 to December 31,
2002 and consolidated  balance sheet data as of December 31, 1999 to 2002 do not
reflect  the  acquisition  of ERC Life,  as the  transaction  was  completed  on
December  22,  2003.  Consolidated  statement  of income data for the year ended
December 31, 2003 includes net income of $1.2 million in respect of ERC Life.

<TABLE>
<CAPTION>

                                    Year         Year         Year         Year        Year
                                   Ended        Ended        Ended        Ended       Ended
                                  December     December     December     December    December
                                  31, 2003     31, 2002     31, 2001     31, 2000    31, 1999
                                  --------     --------     --------     --------    --------
                                       (dollars in thousands, except per share amounts)

<S>                               <C>          <C>          <C>          <C>         <C>
Consolidated statements of
income data:
  Total revenues ..............   $ 557,366    $ 306,212    $ 120,962    $  83,935   $  22,465
  Total benefits and expenses .     519,621      274,871      103,729       68,074      13,632
  Income before income
    taxes and minority
    interest ..................      37,745       31,341       17,233       15,861       8,833
  Income from continuing
    operations before
    cumulative effect of
    change in accounting
    principle .................      48,788       33,235       17,245       15,971       8,875
  Net income ..................      27,280       32,524       16,839       15,971       8,875
Per share data:
  Basic earnings per share:
     Income from continuing
      operations before
      cumulative effect of
      change in accounting
      principle and
      discontinued operations     $    1.59    $    1.32    $    1.10    $    1.01   $    0.50
     Cumulative effect of
      change in accounting
      principle ...............       (0.64)         --         (0.02)         --          --
     Discontinued
      operations ..............       (0.06)       (0.03)         --           --          --
                                  ---------    ---------    ---------    ---------   ---------
     Net income ...............   $    0.89    $    1.29    $    1.08    $    1.01   $    0.50
                                  =========    =========    =========    =========   =========
</TABLE>


                                       32
<PAGE>


<TABLE>
<CAPTION>

                                      Year            Year           Year            Year           Year
                                     Ended           Ended          Ended           Ended          Ended
                                    December        December       December        December       December
                                    31, 2003        31, 2002       31, 2001        31, 2000       31, 1999
                                  ------------    ------------   ------------    ------------   ------------
                                       (dollars in thousands, except per share amounts)

<S>                               <C>             <C>            <C>             <C>            <C>
  Diluted earnings per share:
     Income from continuing
      operations before
      cumulative effect of
      change in accounting
      principle and
      discontinued operations     $       1.51    $       1.25   $       1.05    $       1.00   $       0.50
     Cumulative effect of
      change in accounting
      principle ...............          (0.60)             --          (0.03)             --             --
     Discontinued operations...          (0.06)          (0.02)            --              --             --

                                  ------------    ------------   ------------    ------------   ------------
     Net income ...............   $       0.85    $       1.23   $       1.02    $       1.00   $       0.50
                                  ============    ============   ============    ============   ============

  Book value per share ........   $      18.73    $      18.24   $      16.44    $      15.34   $      13.63
  Market value per share ......   $      20.78    $      17.45   $      19.35    $      11.98   $       8.19
  Cash dividends per share ....   $       0.20    $       0.20   $       0.20    $       0.20   $       0.15
  Weighted average number of
    shares outstanding:
  Basic .......................     30,652,719      25,190,283     15,646,106      15,849,657     17,919,683
  Diluted .....................     32,228,001      26,505,611     16,485,338      15,960,542     17,919,683
Balance sheet data:
  Total fixed maturity
    investments ...............   $  2,014,719    $  1,003,946   $    583,890    $    581,020   $    546,807
  Total assets ................      6,053,517       3,291,226      2,141,566       1,168,518        856,634
  Total liabilities ...........      5,242,450       2,800,134      1,810,284         921,673        637,973
  Minority interest ...........          9,295            --             --              --             --
  Mezzanine equity ............        141,928            --             --              --             --
  Total shareholders' equity ..   $    659,844    $    491,092   $    331,282    $    239,564   $    218,661
Actual number of ordinary
shares outstanding ............     35,228,411      26,927,456     20,144,956      15,614,240     16,046,740

</TABLE>



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

Overview

      On August 28, 2003,  we changed our name to Scottish Re Group Limited from
Scottish  Annuity  &  Life  Holdings,   Ltd.  In  addition,   our  wholly  owned
subsidiaries  World-Wide  Holdings  Limited and World-Wide  Reassurance  Company
Limited  changed  their names to Scottish  Re Holdings  Limited and  Scottish Re
Limited, respectively.

      We are a holding  company  organized  under the laws of the Cayman Islands
with our  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

                                       33
<PAGE>

portion of our business as Life Reinsurance North America.  Scottish Re Holdings
Limited and its subsidiary,  Scottish Re Limited, specialize in niche markets in
developed  countries and broader life insurance markets in the developing world.
We refer to this portion of our business as Life Reinsurance International. Life
Reinsurance  North  America and Life  Reinsurance  International  together are a
reporting operating segment. 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,  which is another
reportable  operating  segment.  Other revenues and expenses not related to Life
Reinsurance or Wealth Management are reported in the "Other" segment.

      On  December  22,  2003,  we  completed  the  acquisition  of  95%  of the
outstanding capital stock of ERC Life Reinsurance Corporation, which we refer to
as ERC Life, for $151 million in cash,  subject to certain closing  adjustments.
ERC  Life  was  a  subsidiary  of  General  Electric's   Employers   Reinsurance
Corporation, which we call GE ERC, and was one of the companies through which GE
ERC  conducted  life  reinsurance  business  in the  United  States.  ERC Life's
business  consists  primarily of a closed block of traditional  life reinsurance
with a face amount of $155.6 billion.  At the date of acquisition,  ERC Life had
$1.4 billion in total assets.  GE ERC has agreed to  administer  the business of
ERC  Life  for a fixed  monthly  fee  for up to nine  months  from  the  date of
acquisition  and to assist with the  transition of the business to Scottish Re's
systems.  No GE ERC employees will transfer to Scottish Re. The  transaction has
increased the number of lives reinsured in North America from  approximately 2.1
million to approximately  6.2 million and has increased our gross face amount of
in-force  business  in  North  America  from  approximately  $119.4  billion  to
approximately  $275.0 billion.  ERC Life is rated "A-  (excellent)" by A.M. Best
Company, which is the fourth highest of sixteen rating levels.

      All amounts are reported in thousands of United States dollars, except per
share amounts.

Revenues

      We derive revenue from four principal sources:

      o     premiums from reinsurance assumed on life business;

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

      o     investment income from our investment portfolio; and

      o     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.  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. A deposit received on a funding agreement
also does not generate  premium  income but does create  income to the extent we
earn an investment return in excess of our interest payment obligations thereon.

      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.

      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

                                       34
<PAGE>

      We have five principal types of expenses:

o     claims and policy benefits under our reinsurance contracts;

o     interest credited to interest sensitive contract liabilities;

o     acquisition costs and other insurance expenses;

o     operating expenses; and

o     interest expense.

      When we issue a life  reinsurance  contract,  we  establish  reserves  for
future  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 change the  reserves  if our  experience  leads us to
believe that benefit  claims and expenses  will  ultimately  be greater than the
existing  reserve.  We report the change in 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 two 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,  within  our
investment  guidelines,  we seek  to  maximize  the  return  on our  unallocated
capital.

      The following factors affect our profitability:

      o     the volume of business we write;

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

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

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


                                       35
<PAGE>

      o     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,  changes in
regulation  or tax laws which may affect the  attractiveness  of our products or
the costs of doing business and changes in foreign currency exchange rates.

Critical Accounting Policies

      Statement of Financial Accounting Standard ("SFAS") No. 60 "Accounting and
Reporting by Insurance  Enterprises"  applies to our  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 No. 97 "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration  Contracts  and for  Realized  Gains and  Losses  from the Sale of
Investments"  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.

      Our premiums earned are recorded in accordance with  information  received
from our  ceding  companies,  or are  estimated  where this  information  is not
current  with  the  reporting  period.  These  premium  estimates  are  based on
historical   experience   as  adjusted  for  current   treaty  terms  and  other
information.  Actual  results  could  differ  from these  estimates.  Management
monitors actual experience,  and should circumstances  warrant,  will revise its
estimates of premiums earned.

      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.

      In the normal course of business,  we acquire in-force blocks of business.
The  determination  of the fair value of the assets acquired and the liabilities
assumed


                                       36
<PAGE>

require management to make estimates and assumptions regarding mortality,  lapse
rates  and  expenses.  These  estimates  are  based  on  historical  experience,
actuarial  studies  and  information  provided by the ceding  companies.  Actual
results could differ materially from these 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 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  the 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.

      Goodwill is established upon the acquisition of a subsidiary.  Goodwill is
calculated as the difference  between the price paid and the value of individual
assets and  liabilities on the date of  acquisition.  We account for goodwill in
accordance with SFAS No. 142, "Goodwill and Other Intangible  Assets".  Goodwill
deemed to have an  indefinite  life is  subject  to an annual  impairment  test.
Goodwill recognized in the consolidated balance sheet relates to our acquisition
of  Scottish Re Holdings  Limited  and has been tested for  impairment.  We have
determined that there is no impairment.

      Fixed  maturity   investments  are  evaluated  for  other  than  temporary
impairments in accordance with SFAS No. 115: "Accounting for Certain Investments
in Debt and Equity  Securities"  ("SFAS  115") and  Emerging  Issues  Task Force
99-20:  "Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interest in Securitized Assets" ("EITF 99-20") as described in Note 3
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 amortized cost, length of time the
value has been below amortized cost, credit worthiness of the issuer, forecasted
financial  performance  of the issuer,  position of the security in the issuer's
capital  structure,  the presence and  estimated  value of  collateral  or other
credit  enhancement,  length of time to maturity,  interest rates and our intent
and ability to hold the security until the market value recovers.

      Our funds  withheld at interest  arise on modified  coinsurance  and funds
withheld coinsurance  transactions.  Derivatives  Implementation Group Issue No.
B36 "Embedded  Derivatives:  Bifurcation of a Debt Instrument that  Incorporates
Both  Interest  Rate and Credit Rate Risk  Exposures  that are Unrelated or Only
Partially  Related to the  Creditworthiness  of the  Issuer of that  Instrument"
("DIG B36") indicates that these transactions contain embedded derivatives.  The
embedded  derivative  feature  in our funds  withheld  treaties  is similar to a
fixed-rate  total  return swap on the assets held by the ceding  companies.  The
swap  consists  of two parts.  The first is the market  value of the  underlying
asset portfolio and the second is a hypothetical loan to the ceding company. The
hypothetical  loan  is  based  on the  expected  cash  flows  of the  underlying
reinsurance liability.  We have developed models to systematically  estimate the
value of the total return swap.  The fair value of the  embedded  derivative  is
affected by changes in expected  cash  flows,  credit  spreads of the assets and
changes in "risk-free"  interest rates.  The change in fair value is included in
our  calculation  of estimated  gross profits and,  therefore,  also affects the
amortization  of  deferred  acquisition  costs.  In  addition to our quota share
indemnity  funds  withheld  contracts,  we have entered  into various  financial
reinsurance  treaties that, although considered funds withheld,  do not transfer
significant  insurance  risk and are recorded on a deposit method of accounting.
As a result of the experience  refund  provisions of these treaties the value of
the embedded  derivative  is  currently  considered  immaterial.  Changes in our
expectations  of future  cash  flows  could  result in  material  changes to the
financial statements.

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


                                       37
<PAGE>

Results of Operations

Consolidated results of operations

      Our  results of  operations  for the year ended  December  31, 2001 do not
include the results of  operations  of  Scottish Re Holdings  Limited,  which we
acquired  at the  close of  business  on  December  31,  2001.  Our  results  of
operations  for the years  ended  December  31, 2001 and 2002 do not include the
results of operations of ERC Life,  which we acquired on December 22, 2003.  The
results for the year ended  December 31, 2003 include net income of $1.2 million
in respect of the results of ERC Life for the period from  December  22, 2003 to
December 31, 2003.


<TABLE>
<CAPTION>

                                         Year Ended   Year Ended   Year Ended
                                          December     December     December
                                          31, 2003     31, 2002     31, 2001
                                          ---------    ---------    ---------
<S>                                      <C>          <C>          <C>
Premiums earned .......................  $ 391,976    $ 202,536    $  68,344
Investment income, net ................    148,028      107,906       51,691
Fee income ............................      7,907        6,574        4,809
Realized losses .......................     (4,448)     (10,804)      (3,882)
Change in value of embedded derivatives     13,903         --           --
                                         ---------    ---------    ---------
Total revenues ........................    557,366      306,212      120,962
                                         ---------    ---------    ---------

Claims and other policy benefits ......    275,863      142,158       51,245
Interest credited to interest
sensitive contract liabilities ........     89,180       48,140       17,578
Acquisition costs and other
insurance expenses, net ...............    116,000       60,073       24,328
Operating expenses ....................     31,021       23,086        9,173
Interest expense ......................      7,557        1,414        1,405
                                         ---------    ---------    ---------
Total benefits and expenses ...........    519,621      274,871      103,729
                                         ---------    ---------    ---------
Income before income taxes and
minority interest .....................     37,745       31,341       17,233
Income tax benefit (expense) ..........     11,105        1,894          (59)
                                         ---------    ---------    ---------
Income before minority interest .......     48,850       33,235       17,174
Minority interest .....................        (62)        --             71
                                         ---------    ---------    ---------
Income from continuing operations
before cumulative effect of change
in accounting principle ...............     48,788       33,235       17,245
Cumulative effect of change in
accounting
principle .............................    (19,537)        --           (406)
Loss from discontinued
operations ............................     (1,971)        (711)        --
                                         ---------    ---------    ---------
Net income ............................  $  27,280    $  32,524    $  16,839
                                         =========    =========    =========
</TABLE>

      During the year ended December 31, 2003,  total revenues  increased by 82%
to  $557.4  million.   Total  revenues  include  premiums  earned  in  our  Life
Reinsurance operations,  investment income on our invested assets, fee income on
our Life Reinsurance and Wealth  Management  operations,  realized losses on our
investment  portfolio and the change in the value of embedded  derivatives.  The
increase in premiums  earned is primarily  due to  continued  growth in our Life
Reinsurance  North  America and Life  Reinsurance  International  segments.  The
increase in  investment  income is due to growth in our invested  assets,  which
arises  from  business  growth,  our equity  offering  in July 2003 and our debt
offerings  in November and  December  2002.  The change in value of the embedded
derivatives arises from the application of DIGB36.

      During the year ended  December  31,  2002  revenues  increased  by $185.2
million or 153% to $306.2  million in  comparison  with the same period in 2001.
The  increase  is  primarily  due to the  acquisition  of  Scottish  Re Holdings
Limited,  the growth in our Life  Reinsurance  North America  operations  and an
increase  in  investment


                                       38
<PAGE>

income  primarily  due to the growth in our invested  assets.  The growth in our
invested  assets is due to the new  business  and the equity  offering  in April
2002.

      During the year ended  December  31,  2003,  total  benefits  and expenses
increased by 89% to $519.6  million  from 2002 to 2003.  The increase was due to
continued  growth in our Life  Reinsurance  North  America and Life  Reinsurance
International  segments, a $12.5 million charge to account for revised reporting
by a ceding  company  client in connection  with two fixed  annuity  reinsurance
contracts,  additional  operating  costs  required  to meet  the  growth  in our
business and  additional  interest  expense  arising  from the debt  issuance in
November and December  2002.  Total  benefits and expenses  increased by 165% to
$274.9  million  from 2001 to 2002.  The  increase in benefits  and  expenses is
primarily due to the acquisition of Scottish Re Holdings  Limited and the growth
in our Life Reinsurance North America operations.

      During the year ended December 31, 2003 we implemented the requirements of
DIG B36  which  addresses  whether  SFAS  No.  133  "Accounting  for  Derivative
Instruments and Hedging  Activities"  requires  bifurcation of a debt instrument
into a debt host  contract  and an embedded  derivative  if the debt  instrument
incorporates  both  interest  rate  risk  and  credit  risk  exposures  that are
unrelated or only  partially  related to the  creditworthiness  of the issuer of
that  instrument.  Under DIG B36  modified  coinsurance  and  coinsurance  funds
withheld  reinsurance  agreements where interest is determined by reference to a
pool of fixed maturity assets, are arrangements  containing embedded derivatives
requiring bifurcation. In addition, reinsurance contacts with experience refunds
are also considered to be arrangements containing embedded derivatives requiring
bifurcation.  DIG B36 was effective  for fiscal  quarters  beginning  October 1,
2003. We reviewed all contracts at October 1, 2003 and determined that the value
of this derivative,  net of related deferred  acquisition  costs, after taxation
was a loss of $19.5  million.  This is shown in the  consolidated  statements of
income as a cumulative  effect of change in  accounting  principle  for the year
ended December 31, 2003. The change in value of the  derivative,  net of related
deferred amortization costs, during the quarter ended December 31, 2003 amounted
to a gain of $13.9 million.

      During 2003, we decided to discontinue our Wealth Management operations in
Luxembourg.  We have transferred our Luxembourg  Wealth  Management  business to
third  parties,  closed  the  Luxembourg  office  and  are  in  the  process  of
liquidating  our  Luxembourg  subsidiary.  We have  reported  the results of the
Luxembourg  wealth  management  activities as  discontinued  operations.  Losses
incurred in respect of these  operations in the year ended December 31, 2003 and
2002 amounted to $2.0 million and $0.7 million, respectively.

      During the year ended December 31, 2001 we implemented the requirements of
EITF 99-20.  EITF 99-20 applies to all securities,  which  represent  beneficial
interests in securitized assets,  unless they meet certain exception criteria. 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  rates.  At
June 30, 2001 we reviewed all applicable  securities and identified a write down
of  $406,000.  This is shown  in the  consolidated  statements  of  income  as a
cumulative effect of change in accounting principle.


                                       39
<PAGE>

Earnings per ordinary share

<TABLE>
<CAPTION>

                                                           Year Ended December 31,
                                               ----------------------------------------------
                                                  2003             2002            2001
                                               ------------    ------------    --------------
                                               (dollars in thousands, except per share data)
<S>                                            <C>             <C>             <C>
Income from continuing operations before
  cumulative effect of change in accounting
  principle...................... ..........   $     48,788    $     33,235    $       17,245
Cumulative effect of change in accounting
  principle ................................        (19,537)           --                (406)
Loss from discontinued operations ..........         (1,971)           (711)             --
                                               ------------    ------------    --------------
Net income .................................   $     27,280    $     32,524    $       16,839
                                               ============    ============    ==============
Basic earnings per share:
   Income from continuing operations before               0
   cumulative effect of change in accounting
   principle and discontinued operations ...   $       1.59    $       1.32    $         1.10
   Cumulative effect of change in accounting
     principle .............................          (0.64)           --               (0.02)
   Discontinued operations .................          (0.06)          (0.03)             --
                                               ------------    ------------    --------------
   Net income ..............................   $       0.89    $       1.29    $         1.08
                                               ============    ============    ==============
Diluted earnings per share:
   Income from continuing operations before
   cumulative effect of change in accounting
   principle ...............................   $       1.51    $       1.25    $         1.05
   Cumulative effect of change in accounting
   principle and discontinued operations ...          (0.60)           --               (0.03)
   Discontinued operations .................          (0.06)          (0.02)             --
                                               ------------    ------------    --------------
   Net income ..............................   $       0.85    $       1.23    $         1.02
                                               ============    ============    ==============
Weighted average number of ordinary shares
outstanding:
  Basic ....................................     30,652,719      25,190,283        15,646,106
  Diluted ..................................     32,228,001      26,505,611        16,485,338

</TABLE>

      Income from  continuing  operations  for the year ended  December 31, 2003
increased by 47% to $48.8 million from $33.2 million in 2002.  Diluted  earnings
per ordinary share from continuing operations before cumulative effect of change
in accounting  principle  amounted to $1.51 for the year ended December 31, 2003
and $1.25 per  ordinary  share in 2002,  an increase of 21%.  The growth in both
income from continuing operations and diluted earnings per share arises from the
reasons  discussed  above.  The  growth  in  diluted  earnings  per  share  from
continuing  operations was offset by the increase in the weighted average number
of ordinary shares  outstanding due to the public offering of 9,200,000 ordinary
shares  in July  2003 as  discussed  in  Note 17 to the  Consolidated  Financial
Statements.

      Diluted  earnings per ordinary  share  amounted to $0.85 and $1.23 for the
year ended  December  31,  2003 and 2002,  respectively.  Diluted  earnings  per
ordinary  share  for  2003  decreased  due to the  adoption  of DIG  B36 and the
resultant cumulative effect of change in accounting principle.  In addition, the
number of weighted average shares outstanding increased mainly due to the public
offering of  9,200,000  ordinary  shares in July 2003 as discussed in Note 17 to
the Consolidated Financial Statements.

      Income from  continuing  operations  for the year ended  December 31, 2002
increased 93% to $33.2 million from $17.2 million in 2001.  The increase in 2002
is attributable  to the inclusion of Scottish Re Holdings  Limited for the first
time  since its  acquisition,  continued  growth in our Life  Reinsurance  North
America  operations,  and an increase in investment  income primarily due to the
increase  in average  invested  assets.  The  contribution  to net  income  from
continuing  operations by Scottish Re Holdings Limited amounted to $12.7 million
for the year ended  December  31, 2002.  The increase in income from  continuing
operations  was  offset  in part by an  increase  in  realized  losses  on fixed
maturity investments and unit-linked  securities,  and by losses incurred in our
Wealth Management and Other segments. Realized losses were $10.8 million for the
year ended December 31, 2002, compared to realized losses of

                                       40
<PAGE>

      $3.9 million in the year ended December 31, 2001. The losses in our Wealth
Management  operations  arose  principally  from increased  commission costs and
severance payments.  The losses in our Other segment arose because of reductions
in investment  income as we deployed more capital in the Life Reinsurance  North
America  segment and increased costs in the first full year of our operations in
Bermuda.  Diluted earnings per ordinary share from continuing  operations before
cumulative  effect of change in accounting  principle  amounted to $1.25 for the
year ended December 31, 2002 an increase of 19% from 2001.

      Diluted  earnings per ordinary  share for the year ended December 31, 2002
increased 21% to $1.23 from $1.02 in 2001.  Diluted earnings per share increased
as a result of the growth in net  income  described  above.  This  increase  has
occurred despite the increase in the number of ordinary shares outstanding.  The
increase  in the number of  ordinary  shares  outstanding  is a result of shares
issued in the  acquisition  of  Scottish  Re  Holdings  Limited  and the  equity
offering  in  April  2002  discussed  in Note 17 to the  Consolidated  Financial
Statements.

Premiums earned

      Premiums  earned during the year ended  December 31, 2003 increased by 94%
to $392.0  million  from  $202.5  million in 2002.  Premiums  earned in our Life
Reinsurance  North  America  segment  during the year ended  December  31,  2003
increased 88% to $230.7 million from $122.8 million in 2002. The increase is due
to increases in the amounts of life insurance  in-force on existing  traditional
solutions  treaties and on new business  written during the year. As of December
31,  2003,  premiums  earned  in our  Life  Reinsurance  North  America  segment
(excluding ERC Life) relates to the reinsurance of approximately  $117.3 billion
of life insurance in-force on 2.0 million lives and our average benefit coverage
per life of $60,000.  As of December 31, 2002, we reinsured  approximately $67.0
billion of life insurance  in-force on 1.2 million lives and our average benefit
coverage per life was $51,000.

      Premiums earned in our Life Reinsurance  International  segment during the
year ended  December 31, 2003  increased by 102% to $161.3 million in comparison
with $79.7 million in 2002. Our Life Reinsurance International segment completed
the  acquisition of an in-force  reinsurance  transaction  effective  October 1,
2002.  This  transaction has contributed $28.0 million to premiums earned during
the year compared to $4.8 million of premiums earned in 2002. Premiums earned on
other  life  reinsurance  business  increased  $48.4  million  in the year ended
December 31, 2003 in comparison  with the prior year.  The increase is due to an
increase in the number of  contracts  to 2,115 in the current year from 1,387 in
the prior year.  Of the $48.4  million,  $23.4  million  relates to revisions in
estimates of premiums  earned.  The majority of business in our Life Reinsurance
International  segment  is in  respect  of  short  duration  contracts.  We have
experienced  considerable  reporting  delays  from some of our  cedents  on this
business.  As part of the  implementation  of this segment's new  administrative
system,  improved  data has been compiled  which  allowed us to more  accurately
estimate  our  premium  earned.  Premiums  earned  on  aircrew  loss of  license
insurance  increased to $23.6 million during the current year in comparison with
$16.5 million in the prior year due principally to new business. At December 31,
2003,  there  were 252  loss of  license  contracts  in  comparison  with 186 at
December 31, 2002.

      Premiums  earned during the year ended December 31, 2002 increased 196% to
$202.5 million  compared with the same period in 2001.  Premiums  earned in 2002
increased due to the acquisition of Scottish Re Holdings  Limited and the growth
in the number of  clients  in our Life  Reinsurance  North  America  operations.
Scottish Re Holdings Limited's premiums earned during the year amounted to $79.7
million.  Premiums earned on the Life  Reinsurance  North America segment during
the year ended  December 31, 2002  increased 80% to $122.8 million from the same
period in 2001.

Fee income

      Both Life  Reinsurance  and  Wealth  Management  operations  generate  fee
income. We earn fees in Life Reinsurance on certain of our financial reinsurance
treaties  that  do  not  qualify  under  risk  transfer  rules  for  reinsurance
accounting.


                                       41
<PAGE>

      Fee income is as follows:

<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                               ----------------------------------------------
                                                    2003            2002            2001
                                               ------------    ------------    --------------
                                                           (dollars in thousands)
<S>                                            <C>             <C>             <C>
Life Reinsurance North America..............   $      4,067    $      3,148    $        1,685
Wealth Management ..........................          3,840           3,426             3,124
                                               ------------    ------------    --------------
Total ......................................   $      7,907    $      6,574    $        4,809
                                               ============    ============    ==============

</TABLE>

      Fee income in our Life Reinsurance  North America segment increased by 29%
to $4.1  million for the year ended  December  31, 2003 in  comparison  with the
prior year period.  The increases are due to continued  growth in fee generating
business in our Life Reinsurance  North America segment.  Wealth Management fees
increased by 12% to $3.8 million  during the year ended  December 31, 2003.  The
overall  growth in fees is principally  due to the growth in segregated  account
balances, which is due to improved investment performance. The number of clients
has  decreased  from 164 at  December  31,  2002 to 154 at  December  31,  2003.
Segregated  assets amount to $743.1  million and $653.6  million at December 31,
2003 and 2002, respectively. Policy face amounts totaled $1.1 billion and $936.8
million at December 31, 2003 and 2002, respectively.


      Life  reinsurance  fees  increased by 87% to $3.1 million  during the year
ended December 31, 2002 compared to the same period in 2001. The increase is due
to the growth in the number of clients.  Wealth Management fees increased by 10%
to $3.4 million  during the year ended  December 31, 2002 compared to 2001.  The
growth in fees was principally due to the growth in segregated account balances,
which was due to an increase in the number of clients offset in part by negative
investment performance. The number of clients grew from 132 at December 31, 2001
to 164 at December 31, 2002.  Segregated  assets  amounted to $653.6 million and
$602.8 million at December 31, 2002 and 2001 respectively.  Policy face amounted
totaled  $936.8  million  and $812.4  million  at  December  31,  2002 and 2001
respectively.

      The change in the segregated assets is as follows:

<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                               ----------------------------------------------
                                                    2003            2002            2001
                                               ------------    ------------    --------------
                                                           (dollars in thousands)
<S>                                            <C>             <C>             <C>
Balance at beginning of year.................   $   653,588    $    602,800     $     409,660
Deposits....................................         88,870         125,377           202,794
Withdrawals.................................        (67,562)        (54,112)          (18,985)
Investment performance......................         68,241         (20,477)            9,331
                                               ------------    ------------     -------------
Balance at end of year......................   $    743,137    $    653,588     $     602,800
                                               ============    ============     =============
</TABLE>


Investment income

      Net investment  income increased by $40.1 million or 37% to $148.0 million
for the year ended December 31, 2003 from $107.9 million for the prior year. The
increase is due to the growth in our average  invested  assets offset in part by
decreases  in  realized  yields  during  2003.  Our total  invested  assets have
increased  significantly because of growth in our Life Reinsurance North America
financial solutions business and investment of the proceeds of the HyCU offering
in  December  2003,  our  equity  offering  in July  2003 and our long-term debt
offerings in October and November  2003.  Total invested  assets,  excluding ERC
Life's invested assets, increased from $2.3 billion at December 31, 2002 to $3.4
billion at December 31, 2003.  Funds  withheld at interest  excluding ERC Life's
funds  withheld  grew from $1.1  billion at December 31, 2002 to $1.2 billion at
December 31, 2003.

      Net investment income increased by $56.2 million or 109% to $107.9 million
during the year ended  December 31, 2002  compared to $51.7  million in the same
period in 2001.  The  increase  was due to the  growth in


                                       42
<PAGE>

our average invested assets offset in part by decreases in realized yields.  Our
total  invested  assets  increased  significantly  because of growth in our Life
Reinsurance  North America  segment,  assets acquired through the acquisition of
Scottish Re Holdings Limited,  investment of the proceeds of our equity offering
in April 2002 and our  convertible  debt and  capital  securities  offerings  in
November and December 2002. Total invested assets increased from $1.3 billion at
December  31,  2001 to $2.3  billion at December  31,  2002.  Funds  withheld at
interest grew from $562.4 million to $1.1 billion during 2002.

      During the year ended  December 31,  2003,  average book yields were lower
than in 2002. On the $2.4 billion portfolio  managed by our external  investment
managers  the yields on fixed rate assets  were 5.13% and 5.84% at December  31,
2003 and 2002,  respectively.  The  reduction in yield was due  primarily to the
much lower market  yields at which new cash flows were  invested and proceeds of
maturities and sales were reinvested. Yields on floating rate assets are indexed
to LIBOR.  The yield on our floating rate assets  increased to 3.43% from 3.11%,
and the yield on our cash and cash  equivalents  decreased  to 1.01% from 1.48%.
The market value of floating  rate assets  increased  to $301.8  million in 2003
from $159.2  million in 2002 as a result of our increased  floating rate funding
agreements and our increased floating rate liabilities.

      During the year ended  December 31,  2002,  average book yields were lower
than in 2001, particularly on floating rate assets and cash. On the $1.1 billion
portfolio managed by our external  investment  managers the yields on fixed rate
assets were 5.84% and 7.09% at December  31,  2002 and 2001,  respectively.  The
reduction in yield was due  primarily  to the much lower market  yields at which
new cash  flows  were  invested  and  proceeds  of  maturities  and  sales  were
reinvested.  Yields on floating  rate assets are indexed to LIBOR.  The yield on
our floating  rate assets  decreased  to 3.11% from 4.43%,  and the yield on our
cash and cash equivalents  decreased to 1.48% from 2.20%. The volume of floating
rate assets  increased  in 2002 as a result of our  investing  the proceeds of a
$100.0 million floating rate funding agreement to earn a spread over the cost of
funds.

      The analysis of investment income by segment is as follows:

<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                               ----------------------------------------------
                                                    2003            2002            2001
                                               ------------    ------------    --------------
                                                           (dollars in thousands)
<S>                                            <C>             <C>             <C>
Life Reinsurance:
  North America..............................  $    135,731    $     97,406    $       44,151
  International..............................         7,537           6,716                --
                                               ------------    ------------    --------------
Total Life Reinsurance.......................       143,268         104,122            44,151
Wealth Management............................           205              15                67
Other .......................................         4,555           3,769             7,473
                                               ------------    ------------    --------------
Total........................................  $    148,028    $    107,906    $       51,691
                                               ============    ============    ==============
</TABLE>

Realized losses

      During the year ended December 31, 2003,  realized losses amounted to $4.4
million in comparison  with realized  losses of $10.8 million in the same period
in 2002. Realized losses recognized in the year ended December 31, 2001 amounted
to $3.9 million.

      During the year ended  December 31, 2003,  we  recognized  $1.9 million in
losses  in  respect  of  "other  than  temporary  impairments"  on  investments,
impairment  losses of $4.4  million  under EITF 99-20 and $2.9  million  (net of
related deferred  acquisition costs) of "other than temporary impairment losses"
notified by ceding  companies  on  contracts  written on a modified  coinsurance
basis.  These losses were offset by realized  exchange gains of $1.3 million and
net gains and losses on disposals of investments amounting to $3.5 million.

      At December 31, 2002, we held  unit-linked  securities  amounting to $16.5
million.  These securities comprised  investments in a unit trust denominated in
British  pounds.  These  securities  were  acquired  as part of the  purchase of
Scottish Re Holdings  Limited and were recorded at quoted market value.  Changes
in market value were recorded as net realized  gains or losses.  During 2003, we
novated our liabilities on our unit-linked contracts as


                                       43
<PAGE>

discussed in "Claims and Other Policy Benefits". The liabilities were settled by
transferring  a portion of the  unit-linked  securities  to the original  ceding
company. The remaining unit-linked securities were sold realizing a gain of $0.3
million  during the year.  During the year ended  December 31, 2003,  changes in
market value of those  securities  of $0.8 million were  recognized  as realized
losses.

      During the year ended December 31, 2002, realized losses amounted to $10.8
million net of associated amortization of deferred acquisition costs. The losses
in 2002 consist of realized  investment losses on unit linked securities held by
Scottish Re Holdings Limited of $5.6 million, impairment losses recognized under
EITF  99-20 of $6.7  million  "and other than  temporary  impairments"  on fixed
maturity investments of $3.3 million.  These losses were partially offset by net
realized gains on the sales of fixed maturity investments of $4.8 million.

      During the year ended December 31, 2001 realized losses  included  amounts
recognized as "other than temporary  impairments" on fixed maturity  investments
of $6.9 million. 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.  During 2001,  we also  recognized  in
income  unrealized  losses of $0.4 million on certain  structured  securities in
accordance with the requirements of EITF 99-20.

      Management  reviews  securities with material  unrealized losses and tests
for "other than temporary impairments" on a quarterly basis. Factors involved in
the  determination  of  impairment  include  fair value as compared to amortized
cost,  length of time the value has been below amortized cost, credit worthiness
of the issuer,  forecasted financial performance of the issuer,  position of the
security in the issuer's capital structure,  the presence and estimated value of
collateral  or other credit  enhancement,  length of time to maturity,  interest
rates and our intent and  ability to hold the  security  until the market  value
recovers.  We review all investments  with fair values less than amortized cost,
and pay particular attention to those that have traded continuously at less than
80% of amortized  cost for at least six months or 90% of  amortized  cost for at
least 12 months and other assets with  material  differences  between  amortized
cost and fair value.  Investments  meeting those criteria are analyzed in detail
for "other than temporary impairment." When a decline is considered to be "other
than  temporary" a realized  loss is incurred and the cost basis of the impaired
asset is adjusted to its fair value.

      Under EITF 99-20, a decline in fair value below  "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 flow to be received,  regardless
of the  resulting  yield,  unless the  decrease is solely a result of changes in
market interest rates.

      The following tables provide details of the sales proceeds, realized loss,
the length of time the  security  had been in an  unrealized  loss  position and
reason for sale for securities sold during 2003, 2002 and 2001.

<TABLE>
<CAPTION>

                                   Year ended December 31, 2003
            -------------------------------------------------------------------------------
             Credit Concern       Relative Value            Other                Total
            ----------------     ----------------     ----------------     ----------------
Days        Proceeds    Loss     Proceeds    Loss     Proceeds    Loss     Proceeds    Loss
----        --------    ----     --------    ----     --------    ----     --------    ----
                                       (dollars in thousands)
<C>         <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
0-90 ....   $   924   $    (5)   $15,389   $  (166)   $20,686   $  (191)   $36,999   $  (362)
91-180 ..     3,529      (295)     3,693       (35)     1,720       (15)     8,942      (345)
181-270 .     3,300      (251)       776       (29)       656        (4)     4,732      (284)
271-360 .      --        --          545       (12)       479       (55)     1,024       (67)
Greater
  than 360    6,008      (951)     1,380      (116)      --        --        7,388    (1,067)
            -------   -------    -------   -------    -------   -------    -------   -------
Total ...   $13,761   $(1,502)   $21,783   $  (358)   $23,541   $  (265)   $59,085   $(2,125)
            =======   =======    =======   =======    =======   =======    =======   =======

</TABLE>


                                       44
<PAGE>


<TABLE>
<CAPTION>

                                   Year ended December 31, 2002
            -------------------------------------------------------------------------------
             Credit Concern       Relative Value            Other                Total
            ----------------     ----------------     ----------------     ----------------
Days        Proceeds    Loss     Proceeds    Loss     Proceeds    Loss     Proceeds    Loss
----        --------    ----     --------    ----     --------    ----     --------    ----
                                       (dollars in thousands)
<C>         <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
0-90.....   $ 7,708   $  (520)   $21,488   $  (130)  $  3,377   $   (41)   $32,573   $  (691)
91-180...     4,162      (196)     2,044       (45)        --        --      6,206      (241)
181-270..     3,408      (213)        --        --         --        --      3,408      (213)
Greater
than 360.     5,284      (325)        --        --         --        --      5,284      (325)
            -------   -------    -------   -------   --------   -------    -------   -------
Total....   $20,562   $(1,254)   $23,532   $  (175)  $  3,377   $   (41)   $47,471   $(1,470)
            =======   =======    =======   =======   ========   =======    =======   =======
</TABLE>


<TABLE>
<CAPTION>

                                   Year ended December 31, 2001
            -------------------------------------------------------------------------------
             Credit Concern       Relative Value            Other                Total
            ----------------     ----------------     ----------------     ----------------
Days        Proceeds    Loss     Proceeds    Loss     Proceeds    Loss     Proceeds    Loss
----        --------    ----     --------    ----     --------    ----     --------    ----
                                       (dollars in thousands)
<C>         <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
0-90.....   $   810   $(1,214)   $14,204   $   (38)   $28,570   $  (218)   $43,584   $(1,470)
91-180...     1,409      (244)     1,521        --         --        --      2,930      (244)
Greater
than 360.     4,917      (463)     6,607       (58)    12,628      (148)    24,152      (699)
             ------   -------    -------   -------    -------   -------    -------   -------
Total....    $7,136   $(1,921)   $22,332   $   (96)   $41,198   $  (366)   $70,666   $(2,383)
             ======   =======    =======   =======    =======   =======    =======   =======

</TABLE>

Credit  Concern:  transaction  initiated  due to a  concern  based on  financial
condition of issuer or industry

Relative  Value:   transaction  initiated  to  improve  characteristics  of  the
portfolio income

Change in value of embedded derivatives

      During the year ended December 31, 2003, there were gains of $13.9 million
in  respect  of  the  valuation  of the  embedded  derivatives  in our  modified
coinsurance  and funds  withheld  coinsurance  contracts.  These gains have been
calculated  in  accordance  with DIG B36 and are stated net of related  deferred
acquisition costs.

Claims and other policy benefits

      Claims and other policy benefits increased by 94% to $275.9 million in the
year ended  December  31, 2003 from  $142.2  million in the same period of 2002.
Claims and other policy benefits in our Life  Reinsurance  North America segment
increased  by 87% to $171.7  million in the year ended  December  31,  2003 from
$91.8 million in 2002.  The increase is as a result of the  increased  number of
clients  and the  increase  in our  traditional  solutions  business  from these
clients as previously described.  Death claims are reasonably predictable over a
period of many years,  but are less  predictable  over  shorter  periods and are
subject to fluctuation from year to year.

      Claims and other  policy  benefits in our Life  Reinsurance  International
segment  increased by 107% to $104.2 million in the year ended December 31, 2003
from $50.4 million in 2002. The increase is a result of the increased  volume of
business as previously described,  the revisions of estimates of premiums earned
as previously  discussed  together with the  acquisition of an in-force block of
business  effective October 2002. Claims on the in-force block amounted to $18.8
million  and $3.5  million  for the  year  ended  December  31,  2003 and  2002,
respectively. The estimate process contributed a further $17.5 million to claims
and other policy benefits.

      During  2003,  through  our Life  Reinsurance  International  segment,  we
entered into an agreement to novate our unit-linked liabilities. The outstanding
liabilities  were  settled  by  transferring  an agreed  number  of  unit-linked
securities to the novation agreement counter-party. The settlement was less than
the liability  previously  recorded of $15.5 million and therefore resulted in a
release of liabilities of $3.4 million.


                                       45
<PAGE>


      Claims and other policy  benefits  increased by 177% to $142.2  million in
the year ended  December 31, 2002 from $51.2 million in the same period of 2001.
The increase is a result of the acquisition of Scottish Re Holdings Limited, the
increased  number of  clients  and the  increase  in our  traditional  solutions
business  from these  clients in our Life  Reinsurance  North  America  segment.
Scottish Re  Holdings  Limited's  claims and other  policy  benefits  were $50.4
million for the year ended December 31, 2002.

      Our targeted maximum  corporate  retention in our Life  Reinsurance  North
America segment on any one life is $1 million,  however,  we currently retrocede
any liability in excess of $500,000.  Our targeted maximum  corporate  retention
per life in our Life Reinsurance International segment is $250,000. In addition,
we maintain catastrophe cover on our entire retained life reinsurance  business,
which  provides  reinsurance  for losses of $19.3 million in excess of $750,000.
This catastrophe cover includes protection for nuclear,  biological and chemical
risks.

Interest credited to interest sensitive contract liabilities

      For the year  ended  December  31,  2003  interest  credited  to  interest
sensitive  contract  liabilities  increased  by  $41.1  million  or 85% to $89.2
million from $48.1  million in 2002.  Included in interest  credited to interest
sensitive contract  liabilities during the year ended December 31, 2003 is $12.5
million due to revised  reporting by a ceding company client in connection  with
two fixed annuity reinsurance contracts.  Interest credited includes interest in
respect  of funding  agreements.  The  amounts  due on  funding  agreements  are
included in interest  sensitive  contract  liabilities  on our balance sheet and
amount to $330.7 million at December 31, 2003 in comparison  with $100.0 million
at December 31, 2002.  Interest credited on these agreements was $2.4 million in
2003 in comparison  with $1.2 million in 2002. The remaining  increase is due to
interest credited on new reinsurance treaties and increases in interest credited
on existing  treaties due to increasing  average  liability  balances.  Interest
sensitive contract  liabilities amounted to $2.6 billion at December 31, 2003 in
comparison with $1.6 billion at December 31, 2002.

      For the year  ended  December  31,  2002  interest  credited  to  interest
sensitive  contract  liabilities  increased  by $30.5  million  or 174% to $48.1
million  from $17.6  million in 2001.  Interest  credited  includes  interest in
respect of a funding agreement for $100.0 million that we wrote in mid-year. The
increase was due to interest  credited on new 2002 reinsurance  treaties and the
funding agreement and increases in interest credited on treaties which commenced
in prior years due to increasing average liability balances.

Acquisition costs and other insurance expenses

      During  the year  ended  December  31,  2003  acquisition  costs and other
insurance  expenses  increased  by $55.9  million or 93% to $116.0  million from
$60.1  million in 2002.  The  increase  was a result of the  increased  life and
annuity  business  in our  Life  Reinsurance  North  America  and  International
segments.

      Acquisition  costs and other insurance  expenses for our Life  Reinsurance
North America  segment  increased to $83.6 million in 2003 from $48.4 million in
2002.  The  increase  was a result of the growth of our  business  as  described
above.  As  discussed  in  "Interest  credited  to interest  sensitive  contract
liabilities"  we  incurred  charges  of $12.5  million  this year due to revised
reporting  by a ceding  company  client in  connection  with two  fixed  annuity
reinsurance  contracts.  In light of the impact of the revised  reporting on the
estimated  gross  profits of the two treaties in  question,  we have revised the
amortization of deferred  acquisition costs on the two treaties,  along with two
other related treaties.

      Acquisition  costs and other insurance  expenses for our Life  Reinsurance
International  segment  increased to $30.1  million in 2003 from $8.3 million in
2002.  This was a result of the growth in our business as described  above,  the
revision of estimates of premiums earned  discussed above and the acquisition of
an in-force block of business  effective October 2002.  Acquisition costs on the
in-force  block  amounted to $5.7 million in 2003 and $0.3 million in 2002.  The
revision of estimates of premiums  earned  contributed a further $6.0 million to
acquisition costs and other insurance expenses.

      Acquisition  costs also includes the  amortization of the present value of
in-force  business.  As a result of the  novation  of the unit  linked  contract
liabilities  (as  described in "Claims and Other Policy  Benefits")  the present
value of the in-force on this business was fully amortized during 2003 resulting
in an additional charge of $1.9 million in the year ended December 31, 2003.



                                       46
<PAGE>

During the year ended December 31, 2002  acquisition  costs and other  insurance
expenses  increased by $35.8 million or 147% to $60.1 million from $24.3 million
in 2001.  The increase was a result of the  acquisition  of Scottish Re Holdings
Limited and the increased number of reinsurance  clients in our Life Reinsurance
North America segment.

      The components of these expenses are as follows:
<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                                      2003          2002         2001
                                                    ---------    ---------    ---------
                                                           (dollars in thousands)
<S>                                                 <C>          <C>          <C>
Commissions, excise taxes and other insurance
expenses ........................................   $ 209,493    $ 158,424    $  96,098
Deferral of expenses ............................    (172,658)    (129,306)     (83,092)
                                                    ---------    ---------    ---------
                                                       36,835       29,118       13,006
Amortization-- Present value of in-force business       4,926        2,777          206
Amortization-- Deferred acquisition costs .......      74,239       28,178       11,116
                                                    ---------    ---------    ---------
Total ...........................................   $ 116,000    $  60,073    $  24,328
                                                    =========    =========    =========
</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 the case of  interest  sensitive  contracts,  in  relation  to the
estimated gross profit in respect of the contracts.

Operating expenses

      The analysis of operating expenses between segments is as follows:

<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                                      2003         2002         2001
                                                    ---------    ---------    ---------
                                                          (dollars in thousands)
<S>                                                 <C>          <C>          <C>
Life Reinsurance:
   North America................................    $   8,646    $   7,323    $   3,191
   International................................       11,518        6,647           --
                                                    ---------    ---------    ---------
Total Life Reinsurance..........................       20,164       13,970        3,191
Wealth Management...............................          468        1,017          897
Other...........................................       10,389        8,099        5,085
                                                    ---------    ---------    ---------
Total...........................................    $  31,021    $  23,086    $   9,173
                                                    =========    =========    =========
</TABLE>


      Operating  expenses increased to $31.0 million for the year ended December
31, 2003 compared to $23.1 million in 2002.  The increase in operating  expenses
is due to  increased  personnel  and  other  costs as we  continued  to grow our
business.  During 2002 and the first  quarter of 2003,  we continued to complete
the  staffing  of our  principal  office  in  Bermuda.  Total  employees  in our
operations have grown from 120 at December 31, 2002 to 140 at December 31, 2003.
The number of employees in our Life Reinsurance  International segment has grown
from 48 at  December  31,  2002 to 58 at  December  31,  2003.  This  growth has
resulted  in  additional  costs  for  office  running  expenses.   In  2003,  we
experienced  increased  costs of our defined benefit pension plan at Scottish Re
Holdings  Limited,  increased  compensation  costs for our  board of  directors,
increased  legal  and  professional  fees  arising  as  a  result  of  corporate
governance  legislation,  and have also incurred additional costs for directors'
and officers' insurance.  Our operations are geographically diverse with offices
in Bermuda, the Cayman Islands,  Charlotte,  Dublin and Windsor. With the growth
of our business operations,  we have incurred additional travel,  technology and
communication expenses.

      Operating  expenses  increased to $23.1 million in the year ended December
31,  2002  compared  to $9.2  million in 2001.  The  increase is a result of the
acquisition of Scottish Re Holdings  Limited,  a smaller  portion of costs being
allocated  to  acquisition  expenses  and  increased  personnel  costs and other
operating costs as we


                                       47
<PAGE>

continued  to  grow  our  business.  During  2002,  we  continued  to set up our
principal  office in Bermuda.  In addition,  as a result of our  acquisition  of
Scottish Re Holdings  Limited on December 31, 2001, we have  incurred  increased
operating  expenses  and  additional  travel  costs.  As we continue to grow our
operations we have experienced increased personnel costs in all segments.  Total
employees in our operations,  excluding  Scottish Re Holdings  Limited has grown
from 66 employees  at December  31, 2001 to 72 at December  31, 2002.  Operating
expenses  in  the  year  ended  December  31,  2002  included  $1.4  million  of
non-recurring   expenses   relating  to  severance   arrangements  with  certain
employees.

Interest expense

      We  incurred  interest  expense  of $7.6  million  during  the year  ended
December 31, 2003 in comparison with $1.4 million during 2002.  Interest expense
in 2003 comprises principally  of interest on the  $115.0 million of convertible
debt issued in  November 2002 and the $17.5 million capital securities issued in
December 2002.  Interest  expense in 2002 was in respect of borrowings under our
credit  facility  and  reverse  repurchase  arrangements.  The  credit  facility
borrowings were repaid in April 2002.

      Interest expense amounted to $1.4 million in both 2002 and 2001.  Interest
expense in 2002 includes  interest on $115.0 million of convertible  debt issued
on November 22, 2002, $17.5 million of capital  securities issued on December 4,
2002  and  borrowings  under  our  credit  facilities  and  reverse   repurchase
agreement.  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 under the credit  facilities.  These  borrowings  are more fully  described
under "Liquidity and Capital Resources."

Income Taxes

      The 2003 and 2002  income  tax  benefits  are in respect of certain of our
U.S.  taxable  entities  and are  offset by income tax  expenses  arising on our
United Kingdom, Dublin and other U.S. entities.  Included in the 2003 income tax
benefit is $2.1 million in respect of state taxes.  The change in our  effective
tax rate is due primarily to the ratio of earnings on taxable  jurisdictions  to
that in non-taxable jurisdictions. Currently, we do not believe that a valuation
allowance  is  warranted  with  respect  to any  of our deferred  tax  assets as
sufficient  taxable income can be generated through tax planning  strategies and
future income to absorb the deferred tax assets in each taxable jurisdiction.

Financial Condition

Investments

      At December  31, 2003 the  portfolio  controlled  by us  consisted of $2.4
billion of fixed income  securities,  preferred  stock and cash. The majority of
these  assets are traded,  however  $175.2  million  represents  investments  in
private securities.  Of the total portfolio,  $2.1 billion represented the fixed
income  portfolio  managed by external  investment  managers and $262.7  million
represented  other cash  balances.  The  portfolio  includes  $351.1  million in
respect of assets acquired with ERC Life on December 22, 2003.

      At December  31, 2002 the  portfolio  controlled  by us  consisted of $1.1
billion of traded fixed income  securities  and cash. Of this total $1.0 billion
represented the fixed income portfolio managed by external  investment  managers
and $131.0 million represented other cash balances.

      At  December  31,  2003,  the  average  Standard  & Poor's  rating  of the
portfolio  was  "AA-," the  average  effective  duration  was 3.94 years and the
average  book yield was 4.46% as  compared  with an average  rating of "AA-," an
average  effective  duration  3.03 years and an  average  book yield of 4.93% at
December  31,  2002.  At  December  31,  2003  the  unrealized  appreciation  on
investments,  net of tax,  was $16.8  million as compared  with $8.9  million at
December 31, 2002. The unrealized appreciation on investments is included in our
consolidated balance sheet as part of shareholders' equity.


                                       48
<PAGE>

      In the table below are the total  returns  earned by our portfolio for the
year ended  December 31, 2003,  compared to the returns earned by three indices:
the Lehman Brothers Global Bond Index,  the S&P 500, and a customized index that
we developed with New England Asset Management ("NEAM"),  an external investment
manager,  to take into account our investment  guidelines.  We believe that this
customized index is a more relevant benchmark for our portfolio's performance.

<TABLE>
<CAPTION>

                                                               December 31, 2003
                                                               -----------------
<S>                                                               <C>
Portfolio performance...............................              5.02%
Customized index....................................              4.39%
Lehman Brothers Global Bond Index...................             12.51%
S&P 500.............................................             28.67%

</TABLE>

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

<TABLE>
<CAPTION>

                                          December 31, 2003   December 31, 2002
                                         ------------------  ------------------
Ratings                                    $ in                $ in
-------                                   millions     %      millions      %
                                         ---------   -----   --------    -----
<S>                                      <C>          <C>    <C>          <C>
AAA...................................   $   785.4    32.7%  $  405.7     35.8%
AA....................................       298.4    12.4      113.4     10.0
A.....................................       762.7    31.7      335.3     29.5
BBB...................................       540.8    22.5      252.4     22.2
BB or below...........................        16.6     0.7       28.1      2.5
                                         ---------   -----   --------    -----
Total.................................   $ 2,403.9   100.0%  $1,134.9    100.0%
                                         =========   =====   ========    =====
</TABLE>

      The following  table  illustrates  the fixed income  investment  portfolio
(market value) sector exposure.

<TABLE>
<CAPTION>

                                          December 31, 2003   December 31, 2002
                                         ------------------  ------------------
Sector                                     $ in                $ in
------                                    millions     %      millions      %
                                         ---------   -----   --------    -----
<S>                                      <C>          <C>    <C>          <C>
U.S. Treasury securities and U.S.
  government agency obligations.......    $   74.6     3.1%  $   13.8      1.3%
Corporate securities..................     1,119.6    46.6      549.9     48.5
Municipal bonds.......................         1.8     0.1        1.7      0.1
Mortgage and asset backed securities..       818.7    34.0      438.5     38.6
Preferred stock.........................     126.5     5.3         --       --
                                         ---------   -----   --------    -----
                                           2,141.2    89.1    1,003.9     88.5
Cash..................................       262.7    10.9      131.0     11.5
                                         ---------   -----   --------    -----
Total.................................   $ 2,403.9   100.0%  $1,134.9    100.0%
                                         =========   =====   ========    =====
</TABLE>


      The data in the tables above excludes the assets held by ceding insurers
under modified coinsurance and funds withheld coinsurance agreements.

      At December 31, 2003 our fixed income portfolio had 1,375 positions and
$14.6 million of gross unrealized losses. No single position had an unrealized
loss greater than $1.6 million. There were $37.0 million of unrealized gains on
the remainder of the portfolio. There were 34 private securities in an
unrealized loss position totaling $805,000. At December 31, 2002 our fixed
income portfolio had 930 positions and $16.1 million of gross unrealized losses.
No single position had an unrealized loss greater than $1.3 million. There were
$28.8 million of unrealized gains on the remainder of the portfolio.


                                       49
<PAGE>

      The composition by category of securities that have an unrealized loss at
December 31, 2003 and December 31, 2002 are presented in the tables below.
<TABLE>
<CAPTION>

                                                  December 31, 2003
                                       ---------------------------------------
                                       Estimated            Unrealized
                                       Fair Value     %        Loss        %
                                       --------     -----  --------      -----
                                                 Dollars in thousands
<S>                                    <C>           <C>   <C>            <C>
Corporate securities ...............   $223,555      41.4% $ (3,823)      26.2%
Other structured securities ........    154,065      28.5    (8,943)      61.3
Collateralized mortgage obligations      95,455      17.7      (863)       5.9
Governments ........................     25,838       4.8      (400)       2.7
Preferred stock ....................     21,303       3.9      (299)       2.1
Mortgage backed securities .........     19,900       3.7      (255)       1.8
                                       --------     -----  --------      -----
Total ..............................   $540,116     100.0% $(14,583)     100.0%
                                       ========     =====  ========      =====
</TABLE>


<TABLE>
<CAPTION>

                                                  December 31, 2002
                                       ---------------------------------------
                                       Estimated            Unrealized
                                       Fair Value     %        Loss        %
                                       --------     -----  --------      -----
                                                 Dollars in thousands
<S>                                    <C>           <C>   <C>            <C>
Other structured securities ........   $104,453      52.9% $(10,213)      63.3%
Corporate securities ...............     68,503      34.7    (5,323)      33.0
Collateralized mortgage obligations      22,896      11.6      (608)       3.7
Municipal bonds ....................      1,658       0.8        (1)        --
                                       --------     -----  --------      -----
Total ..............................   $197,510     100.0% $(16,145)     100.0%
                                       ========     =====  ========      =====
</TABLE>

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

<TABLE>
<CAPTION>

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


<TABLE>
<CAPTION>

                                         December 31, 2002
-------------------------------------------------------------------------------
                                        Estimated
                     Book                  Fair            Unrealized
Days                 Value        %       Value        %      Loss         %
----                --------    -----    --------    -----   --------    -----
                                        Dollars in thousands
<C>                <C>           <C>   <C>           <C>   <C>            <C>
0-90.............   $ 81,724     38.3%   $ 79,557     40.3%  $ (2,167)    13.4%
91-180...........     53,663     25.1      50,082     25.4     (3,581)    22.2
181-270..........     21,621     10.1      17,759      9.0     (3,862)    23.9
271-360..........      7,227      3.4       6,212      3.1     (1,015)     6.3
Greater than 360.     49,420     23.1      43,900     22.2     (5,520)    34.2
                    --------    -----    --------    -----   --------    -----
Total               $213,655    100.0%   $197,510    100.0%  $(16,145)   100.0%
                    ========    =====    ========    =====   ========    =====
</TABLE>


                                       50
<PAGE>


      Unrealized  losses on  securities  that have  been in an  unrealized  loss
position  for  periods  greater  than two years  amounted  to $2.0  million  and
$478,000 at December 31, 2003 and 2002, respectively.

      Unrealized  losses on  non-investment  grade  securities  amounted to $3.0
million and $3.8 million at December 31, 2003 and 2002,  respectively.  Of these
amounts  non-investment  grade securities with unrealized losses of $1.8 million
at  December  31,  2003 and $1.6  million at  December  31,  2002 had been in an
unrealized  loss  position  for a period  greater  than one year and $895,000 at
December  31, 2003 and $30,000 at  December  31, 2002 had been in an  unrealized
loss position for periods greater than two years.

      The following  tables  illustrate the industry  analysis of the unrealized
losses at December 31, 2003 and 2002.


<TABLE>
<CAPTION>

                                              December 31, 2003
                                                  Estimated
                          Amortized                 Fair                  Unrealized
                             Cost           %       Value           %        Loss            %
                           --------       -----    --------       -----    --------        -----
      Industry                                Dollars in thousands
      --------
<S>                        <C>             <C>      <C>            <C>      <C>             <C>
      Mortgage and
        asset backed
        securities ...     $279,481        50.4%   $269,420        49.9%    (10,061)        69.0%
      Banking ........       38,738         7.0      38,201         7.1        (537)         3.7
      Consumer
        non-cyclical .       23,009         4.1      22,632         4.2        (377)         2.6
      Communications .       27,401         4.9      27,055         5.0        (346)         2.4
      Financial
        companies.....       21,900         3.9      21,539         4.0        (361)         2.5
      Insurance ......       17,467         3.1      17,289         3.2        (178)         1.4
      Transportation .        7,382         1.3       6,534         1.2        (848)         5.8
      Other ..........      139,321        25.3     137,446        25.4      (1,875)        12.6
                           --------       -----    --------       -----    --------        -----
      Total ..........     $554,699       100.0%   $540,116       100.0%   $(14,583)       100.0%
                           ========       =====    ========       =====    ========        =====
</TABLE>



<TABLE>
<CAPTION>

                                              December 31, 2002
                                                  Estimated
                          Amortized                 Fair                  Unrealized
                             Cost           %       Value           %        Loss            %
                           --------       -----    --------       -----    --------        -----
      Industry                                Dollars in thousands
      --------
<S>                        <C>             <C>      <C>            <C>      <C>             <C>
      Mortgage     and
        asset   backed
        securities....     $139,830        65.4%   $129,007        65.3%   $(10,823)        67.0%
      Electric........       16,967         7.9      16,637         8.4        (330)         2.0
      Financial
        companies.....       11,591         5.4      11,354         5.7        (237)         1.5
      Transportation..        9,936         4.7       7,286         3.7      (2,650)        16.4
      Consumer
        cyclical......        7,763         3.6       7,235         3.7        (528)         3.3
      Communications..        7,130         3.3       6,767         3.4        (363)         2.2
      Other...........       20,438         9.7      19,224         9.8      (1,214)         7.6
                           --------       -----    --------       -----    --------        -----
      Total...........     $213,655       100.0%   $197,510       100.0%   $(16,145)       100.0%
                           ========       =====    ========       =====    ========        =====

</TABLE>

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

Other industries each represent less than 2% of estimated fair value


                                       51
<PAGE>

      The expected maturity dates of our fixed maturity investments that have an
unrealized loss at December 31, 2003 and 2002 are presented in the table below.

<TABLE>
<CAPTION>

                                                            December 31, 2003
                                    -----------------------------------------------------------------
                                                           Estimated
                                      Book                    Fair               Unrealized
Maturity                              Value         %         Value       %         Loss         %
--------                            ----------    -----     ---------   -----     ---------    -----
<S>                                 <C>            <C>      <C>          <C>      <C>           <C>
Due in one year or less...........  $   36,746      6.9%    $  36,648     7.1%    $    (98)      0.7%
Due in one through five years.....     220,097     41.3       214,103    41.3       (5,994)     42.0
Due in five through ten years.....     232,231     43.5       225,844    43.5       (6,387)     44.7
Due after ten years...............      44,023      8.3        42,218     8.1       (1,805)     12.6
                                    ----------    -----     ---------   -----     ---------    -----
Total.............................  $  533,097    100.0%    $ 518,813   100.0%    $(14,284)    100.0%
                                    ==========    =====     =========   =====     =========    =====
</TABLE>



<TABLE>
<CAPTION>

                                                            December 31, 2002
                                    -----------------------------------------------------------------
                                                           Estimated
                                      Book                    Fair               Unrealized
Maturity                              Value         %         Value       %         Loss         %
--------                            ----------    -----     ---------   -----     ---------    -----
<S>                                 <C>            <C>      <C>          <C>      <C>           <C>

Due in one year or less..........   $   20,532      9.6%    $  20,067    10.2%    $   (465)      2.9%
Due in one through five years....      112,591     52.7       103,679    52.5       (8,912)     55.2
Due in five through ten years....       69,330     32.5        63,753    32.3       (5,577)     34.5
Due after ten years..............       11,202      5.2        10,011     5.0       (1,191)      7.4
                                    ----------    -----     ---------   -----     --------     -----
Total............................   $  213,655    100.0%    $ 197,510   100.0%    $(16,145)    100.0%
                                    ==========    =====     =========   =====     ========     =====

</TABLE>

      At  December  31,  2003 there were 409  securities  with  unrealized  loss
positions.  There were two securities with a loss greater than $1 million. These
are  securitized  assets and are  tested for  impairment  under EITF  99-20.  At
December 31, 2003 these securities satisfied the impairment tests of EITF 99-20.
At December 31, 2002 there were 193 securities  with  unrealized loss positions.
There were two  securities  with  unrealized  losses  greater than $1.0 million.
These were also  securitized  assets and were tested for  impairment  under EITF
99-20. At December 31, 2002 these  securities  satisfied the impairment tests of
EITF 99-20.

      At December 31, 2003 there were 12 securities with fair values that traded
continuously  at less than 80% of amortized  cost for at least six months or 90%
of amortized  cost for at least 12 months.  The total  unrealized  loss on these
securities amounted to $7.2 million and the largest unrealized loss position was
$1.6 million. At December 31, 2002 there were 5 securities with fair values that
traded  continuously  at less than 80% of amortized cost for at least six months
or 90% of amortized cost for at least 12 months.  The total  unrealized  loss on
these  securities  amounted  to $1.1  million and the  largest  unrealized  loss
position was $0.5 million.

Funds withheld at interest

      Funds  withheld at interest  arise on  contracts  written  under  modified
coinsurance agreements and funds withheld coinsurance agreements.  In each case,
the business reinsured consists of fixed deferred annuities. In substance, these
agreements are identical to coinsurance  treaties except that the ceding company
retains  control of and title to the  assets.  The  deposits  paid to the ceding
company by the underlying  policyholders are held in a segregated  portfolio and
managed by the ceding company or by investment  managers appointed by the ceding
company.  These treaties transfer a quota share of the risks. The funds withheld
at interest represent our share of the ceding companies' statutory reserves. The
cash flows exchanged with each monthly settlement are netted and include,  among
other items, our quota share of investment income on our proportionate  share of
the  portfolio,  realized  losses,  realized  gains  (amortized  to reflect  the
statutory rules relating to interest maintenance reserve), interest credited and
expense allowances.

      At December 31, 2003,  funds  withheld at interest  were in respect of six
fixed annuity reinsurance contracts with three ceding companies. At December 31,
2002, we had four modified coinsurance fixed annuity reinsurance  contracts with
two ceding companies.  The new contracts for 2003 relate to contracts assumed on
the  acquisition  of


                                       52
<PAGE>

ERC Life.  At December 31, 2003 we had three  contracts  with  Lincoln  National
Insurance  Company  that account for $1.3  billion  (86%) of the funds  withheld
balances.  The other  contracts are with Illinois Mutual  Insurance  Company and
American Founders Life Insurance Company. Lincoln National Insurance Company has
financial strength ratings of "A+" from A.M. Best, "AA-" from Standard & Poor's,
"Aa3" from Moody's and "AA" from Fitch. In the event of insolvency of the ceding
companies  on these  arrangements  we would  need to exert a claim on the assets
supporting the contract  liabilities.  However, the risk of loss is mitigated by
our ability to offset amounts owed to the ceding company,  which are included in
interest  sensitive  contract  liabilities,  with the amounts  owed to us by the
ceding company.  Interest sensitive contract liabilities relating to these fixed
annuity  reinsurance  contracts  amounted to $1.7  billion  and $1.1  billion at
December 31, 2003 and 2002, respectively.

      At December 31, 2003, funds withheld at interest totaled $1.5 billion with
an average  rating of "A-", an average  effective  duration of 5.06 years and an
average  book  yield of 6.32% as  compared  with an  average  rating of "A",  an
average  effective  duration of 5.4 years and an average  book yield of 6.49% at
December 31, 2002.  These are fixed income  investments  and include  marketable
securities, commercial mortgages, private placements and cash. Funds withheld at
interest at December 31, 2003 includes $204.3 million arising on the acquisition
of ERC Life. The market value of the funds withheld  amounted to $1.6 billion at
December 31, 2003.

      The  investment  objectives  for these  arrangements  are  included in the
agreements. The primary objective is to maximize current income, consistent with
the  long-term  preservation  of  capital.  The overall  investment  strategy is
executed  within  the  context  of  prudent  asset/liability   management.   The
investment  guidelines  permit  investments  in fixed maturity  securities,  and
include  marketable  securities,  commercial  mortgages,  private placements and
cash. The maximum  percentage of below  investment  grade  securities is 10% and
other guidelines limit risk, ensure issuer and industry  diversification as well
as maintain liquidity and overall portfolio credit quality.

      According to data provided by our ceding  companies,  the following  table
reflects  the market  value of assets  backing  the funds  withheld  at interest
portfolio using the lowest rating assigned by the three major rating agencies.

<TABLE>
<CAPTION>

                                        December 31, 2003    December 31, 2002
                                        -----------------    -----------------
Ratings                                    $ in                $ in
-------                                  millions     %      millions     %
                                        ---------   -----    --------   -----
<S>                                      <C>         <C>     <C>          <C>
AAA...................................   $  216.6    13.9%   $  114.0     9.8%
AA....................................       76.9     4.9        52.7     4.5
A ....................................      528.6    34.0       418.7    35.8
BBB...................................      537.6    34.6       425.9    36.5
BB or below...........................       66.0     4.3        44.7     3.8
                                        ---------   -----    --------   -----
                                          1,425.7    91.7     1,056.0    90.4
Commercial mortgage loans.............      129.4     8.3       112.3     9.6
                                        ---------   -----    --------   -----
Total.................................  $ 1,555.1   100.0%   $1,168.3   100.0%
                                        =========   =====    ========   =====
</TABLE>

==============================================================================
      According to data provided by our ceding companies, the following table
reflects the market value of assets backing the funds withheld at interest
portfolio by sector.
<TABLE>
<CAPTION>

                                        December 31, 2003    December 31, 2002
                                        -----------------    -----------------
Sector                                    $ in                $ in
------                                   millions     %      millions     %
                                        ---------   -----    --------   -----
<S>                                     <C>         <C>      <C>        <C>
U.S. Treasury securities and U.S.
  government agency obligations.......   $   32.0     2.1%   $   10.6     0.9%
Corporate securities..................    1,041.2    67.0       822.2    70.4
Municipal bonds.......................       23.1     1.5         0.5     0.1
Mortgage and asset backed securities..      329.4    21.1       213.1    18.2
Commercial mortgage loans.............      129.4     8.3       112.3     9.6
Cash..................................         --      --         9.6     0.8
                                        ---------   -----    --------   -----
Total                                   $ 1,555.1   100.0%   $1,168.3   100.0%
                                        =========   =====    ========   =====
</TABLE>


                                       53
<PAGE>
Liquidity and Capital Resources

Cash flow

      Cash provided by operating activities amounted to $88.5 million in 2003 in
comparison with cash flow of $9.2 million used in operating  activities in 2002.
Operating  cash flow includes cash inflows from  premiums,  fees and  investment
income,  and cash outflows for benefits and expenses  paid. In periods of growth
of new  business  our  operating  cash  flow  may  decrease  due to  first  year
commissions  paid on new business  generated.  For income  recognition  purposes
these commissions are deferred and amortized over the life of the business.

      The  increase  in  operating  cash flow from  2002 was $97.7  million.  It
related  primarily to increases in premiums,  fees, and investment  income being
greater than increases in benefits,  reserve  movements and expenses paid.  Cash
from  premiums and fees  increased  by $116.3  million due to growth in our Life
Reinsurance business. Cash from investment income increased by $68.7 million due
to the growth in our invested  asset base.  The increase was offset by declining
yields.  Cash used to settle  benefits  increased  by $66.9  million  due to the
growth  in our Life  Reinsurance  business.  This use of cash was  offset  by an
increase in related reserves of $64.1 millions. Cash used to pay acquisition and
other expenses , including commissions and interest, increased by $84.5 million.
This  increase  related   principally  to  new  business  written  in  our  Life
Reinsurance North America segment,  increased  operating  expenses and increased
debt.  Acquisition  costs  include  commissions  on first year business that are
deferred when paid and therefore do not impact net income until later years.

      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.

      We used  operating  cash flow of $9.2 million in 2002 in  comparison  with
operating  cash  flow  generated  of $31.3  million  in 2001.  The  decrease  in
operating cash flow from 2001 to 2002 was primarily due to increases in benefits
and expenses  paid greater than  increases  in premiums,  fees,  and  investment
income.  In addition there was a decrease in the cash flows from the acquisition
of blocks  of  reinsurance.  Cash from  premiums  and fees  increased  by $136.0
million due to the acquisition of Scottish Re Holdings  Limited and the increase
in the number of clients in our Life  Reinsurance  North America  segment.  Cash
from  investment  income  increased  by $56.2  million  due to the growth in our
invested asset base. The acquisition of blocks of reinsurance business generated
$81.3  million  less in cash flows in 2002  compared  to 2001.  Cash used to pay
benefits  net  of  related  reserves  increased  by  $171.1  million  due to the
acquisition  of Scottish Re Holdings  Limited and the  increase in the number of
clients  in our  Life  Reinsurance  North  America  segment.  Cash  used  to pay
acquisition and other costs, including commissions,  increased by $35.7 million.
This  increase  related   principally  to  new  business  written  in  our  Life
Reinsurance North America segment. These costs include commissions on first year
business  that are  deferred  when paid and  therefore  do not impact net income
until later years.

Capital and collateral

      At December 31, 2003, total  capitalization was $964.3 million compared to
$623.6  million at  December  31,  2002.  Total  capitalization  is  analyzed as
follows:

<TABLE>
<CAPTION>

                    December 31,   December 31,    December 31,
                        2003           2002            2001
                   ------------   ------------    ------------
                             (dollars in thousands)
<S>                <C>            <C>             <C>
Shareholders'
equity..........   $    659,844   $    491,092    $    331,282
Mezzanine equity        141,928              -               -
Long-term debt..        162,500        132,500               -
                   ------------   ------------    ------------
                   $    964,272   $    623,592    $    331,282
                   ============   ============    ============
</TABLE>

      The $340.7 million increase in  capitalization is due primarily to the net
proceeds of our 2003 equity offering of $180.1 million,  the net proceeds of the
offering of Hybrid  Capital  Units which are  included  in  mezzanine  equity of
$138.2 million,  the trust preferred  securities offerings of $30.0 million, net
income  for the year of  $27.3  million  and  increases  in other  comprehensive
income.  These  increases  have been offset by dividends  paid of $6.2  million.
Other   comprehensive   income  consists  of  the  unrealized   appreciation  on
investment, the


                                       54
<PAGE>

cumulative  translation  adjustment  arising from the translation of Scottish Re
Holdings Limited's balance sheet at exchange rates as of December 31, 2003 and a
minimum pension liability adjustment at December 31, 2002 only.

      At December 31, 2002, total  capitalization was $623.6 million compared to
$331.3  million in 2001. The $292.3 million  increase in  capitalization  is due
primarily to the net proceeds of our 2002 equity offering of $114.3 million, the
net proceeds of the convertible debt and capital securities offerings of $ 127.8
million and net income for the year of $32.5 million less dividends paid of $5.0
million and increases in comprehensive income.

      On April 4, 2002 we  completed  a public  offering of  6,750,000  ordinary
shares (which included the over-allotment  option of 750,000 ordinary shares) in
which we  raised  aggregate  net  proceeds  of $114.3  million.  We used the net
proceeds of the offering to repay short-term borrowings of $40.0 million,  which
we had  borrowed  under a credit  facility  with a U.S.  bank,  and for  general
corporate purposes.

      On November 22, 2002 we completed the private  offering of $115.0  million
of 4.5% Senior  Convertible  Notes due 2022 (which  included the over  allotment
option of $15.0  million) in which we raised  aggregate  net  proceeds of $110.9
million. We used the net proceeds of the offering to repay short term borrowings
of $23.5 million, under reverse repurchase agreements, and for general corporate
purposes.

      On  December  4,  2002  we  privately  placed  $17.5  million  of  capital
securities which were issued by a trust  subsidiary  holding a thirty year $18.0
million aggregate principal amount subordinated note of Scottish Holdings,  Inc.
which is guaranteed by Scottish  Annuity & Life Insurance  Company (Cayman) Ltd.
Net  proceeds  were $16.9  million.  Scottish  Holdings,  Inc.  provided a $15.0
million capital infusion to its direct subsidiary,  Scottish Re (U.S.), Inc. and
used the remainder of the net proceeds for general corporate purposes.

      In  April  2003,  we  filed  and had  declared  effective  a  registration
statement  with the  Securities  and  Exchange  Commission  utilizing  a "shelf"
registration  process relating to a number of different types of debt and equity
securities.   This  shelf  enables  us  to  sell  securities  described  in  the
registration statement up to a total of $500.0 million. Subsequent to the equity
and  Hybrid  Capital  Units  offerings  described  below we have  $21.6  million
remaining on the shelf capacity.

      On July 23,  2003,  we completed a public  offering of 9,200,000  ordinary
shares (which included an over-allotment option of 1,200,000 ordinary shares) at
an offering price of $20.75 per share in which we raised  aggregate net proceeds
of $180.1 million.  The gross proceeds of this offering were $190.9 million.  We
used $30.0 million of these  proceeds to repurchase  1,525,000  ordinary  shares
from Pacific Life at a purchase price of $19.66 per share.

      On August 20, 2003, the 200,000 Class B warrants originally issued as part
of our initial public offering with a strike price of $15.00 were repurchased at
a price of $8.00 per warrant or $1.6 million in aggregate.

      On October  29,  2003 and  November  14, 2003 we  privately  placed  $30.0
million of trust preferred  securities  which were issued by trust  subsidiaries
holding thirty year $30.9 million aggregate  principal amount subordinated notes
of Scottish  Holdings,  Inc.  which is  guaranteed  by  Scottish  Annuity & Life
Insurance  Company  (Cayman)  Ltd. Net  proceeds  were $29.0  million.  Scottish
Holdings,  Inc.  provided  a  $21.0  million  capital  infusion  to  its  direct
subsidiary  Scottish Re (U.S.),  Inc. and used the remainder of the net proceeds
for general corporate purposes.

      On December 17 and December 22,  2003,  we completed a public  offering of
5,750,000  (which included an over allotment  option of 750,000) HyCUs.  The net
proceeds of the offering were $138.2  million.  Each HyCU consists of a purchase
contract issued by us and a convertible  preferred  share  redeemable on May 21,
2007. The purchase  contract  obligates the holder to purchase from us, no later
than  February 15, 2007,  for a price of $25 in cash,  the  following  number of
shares, subject to anti dilution adjustments:

      o     if the average  closing  price of our ordinary  shares over a 20 day
            trading period ending on the fourth trading day before  February 15,
            2007 exceeds $19.32,  a number of ordinary  shares,  based on the 20
            day average closing price, equal to $25.00; and


                                       55
<PAGE>

      o     if the  average  closing  price  during  that period is less than or
            equal to $19.32, 1.294 ordinary shares.

      The proceeds of the sale of these  ordinary  shares will be used to redeem
the  convertible  preferred  shares on May 21, 2007. The  convertible  preferred
shares will be convertible  into 1.0607 ordinary  shares per $25.00  liquidation
preference  only on May 21, 2007.  Upon  conversion we will deliver an amount of
cash equal to the $25.00  liquidation  preference of the  convertible  preferred
share and ordinary shares for the value of the excess, if any, of the conversion
value minus the liquidation preference.  We will deliver ordinary shares only if
the average closing price is greater than $23.57.

      In February  2004, we filed a  registration  statement with the Securities
and Exchange Commission  utilizing a "shelf"  registration process relating to a
number  of  different  types  of  debt  and  equity  securities.  When  declared
effective,  this  shelf  will  enable  us to sell  securities  described  in the
registration statement up to a total of $750.0 million. This shelf will increase
our registration statement capacity from our previous shelf registration.

      During 2003 we paid quarterly dividends totaling $6.2 million or $0.20 per
share.  During 2002, we paid quarterly  dividends totaling $5.0 million or $0.20
per share.

      During 2003, we renewed our credit facilities, which currently consist of:

            a)    a credit  facility  totaling  $50.0  million,  of which  $25.0
                  million is available on an unsecured  basis and $25.0  million
                  is  available  on  a  secured  basis.  The  facility  provides
                  capacity for  borrowings  and letters of credit.  The interest
                  rates on amounts  borrowed under the secured facility is LIBOR
                  plus 50 basis points and under the unsecured facility is LIBOR
                  plus 75 basis points.  This  facility  expires in October 2004
                  but it is renewable upon the agreement of both parties.

            b)    a  secured  credit  facility  totaling  $50.0  million.   This
                  facility  provides a combination  of borrowings and letters of
                  credit. Interest rates on amounts borrowed under this facility
                  is LIBOR  plus 45  basis  points.  This  facility  expires  in
                  September  2004 but is  renewable  upon the  agreement of both
                  parties.

      One of the  facilities  requires  that Scottish  Annuity & Life  Insurance
Company (Cayman) Ltd. maintain  shareholder's equity of at least $340.0 million.
At December 31, 2003,  Scottish Annuity & Life Insurance Company (Cayman) Ltd.'s
shareholder's  equity was  $779.7  million.  The other  facility  requires  that
Scottish Re maintain consolidated net worth of $520.0 million, a maximum debt to
total capitalization  ratio of 30% and uncollateralised  assets of 1.2 times any
unsecured  borrowings.  At December 31, 2003, Scottish Re's net worth was $659.8
million and the ratio of debt to total  capitalization was 16.9%. Our failure to
comply with the requirements of the credit  facilities  would,  subject to grace
periods,  result in an event of  default,  and we could be required to repay any
outstanding borrowings. At December 31, 2003, there were no borrowings under the
facilities.  Outstanding  letters of credit under these  facilities  amounted to
$31.2 million.

      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:

      o     when  Scottish  Annuity  & Life  Insurance  Company  (Cayman)  Ltd.,
            Scottish  Re (Dublin)  Limited or Scottish Re Limited  enters into a
            reinsurance treaty with a U.S.  customer,  we must contribute assets
            into a reserve  credit  trust with a U.S.  bank or issue a letter of
            credit in order that the ceding  company may obtain  reserve  credit
            for the reinsurance transaction;

      o     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 Re or an  affiliate  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 contributing assets in a reserve credit trust or a
            letter of credit;


                                       56
<PAGE>

      o     Scottish  Re (U.S.),  Inc.  is  licensed,  accredited,  approved  or
            authorized  to write  reinsurance  in 47 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;

      o     ERC Life is licensed,  accredited,  approved or  authorized to write
            reinsurance  in 50 states,  the District of  Columbia,  Guam and the
            Federated  States  of  Micronesia.  When  ERC  Life  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

      o     even when Scottish Re (U.S.), Inc. is licensed, accredited, approved
            or authorized to write  reinsurance in a 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.

      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 Re have agreed with  Scottish Re Limited that in the event  Scottish Re
Limited 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  Re)  will  assume  all of  Scottish  Re  Limited's
obligations under such agreements.

      Scottish Re and Scottish  Annuity & Life Insurance  Company  (Cayman) Ltd.
have executed similar  agreements for Scottish Re (Dublin) Limited and may, from
time to time, execute additional agreements  guaranteeing the performance and/or
obligations of their subsidiaries.

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


                                       57
<PAGE>

      Contractual Obligations and Commitments

      The following  table shows our  contractual  obligations  and  commitments
including our payments due by period:


<TABLE>
<CAPTION>

                             Less                          More
                            Than 1                4-5      Than 5
                             Year    1-3 Years   Years     Years     Total
                           --------- --------- --------- --------- ---------
                                        (dollars in thousands)
<S>                        <C>       <C>       <C>        <C>      <C>
Long-term debt.........    $       - $ 115,000 $  47,500  $      - $ 162,500
Mezzanine equity.......            -         -   143,750         -   143,750
Operating leases.......       1,905      3,409     3,056     6,746    15,116
Funding agreements.....            -    50,000   260,000    20,000   330,000

ERC Life acquisition post
closing adjustment ....       20,000         -         -         -    20,000
ERC Life transition
services agreement.....        2,400         -         -         -     2,400
                           --------- --------- --------- --------- ---------
                           $  24,305 $ 168,409 $ 454,306 $  26,746 $ 673,766
                           ========= ========= ========= ========= =========
</TABLE>



      Our long-term debt is described in Note 15 to the  Consolidated  Financial
Statements. Long term debt includes $115.0 million 4.5% senior convertible notes
which are due December 1, 2022.  The notes are subject to  repurchase by us at a
holder's  option at various  dates,  the  earliest of which is December 6, 2006.
Long term debt also includes  capital  securities  with various  maturities from
2032  onwards.  They are however,  redeemable at earlier  dates.  They have been
included in the above table at the earliest redemption date.

      Our mezzanine equity is described in Note 16 to the Consolidated Financial
Statements  and consists of  5,750,000  HyCUs.  On February  15, 2007,  we shall
receive  proceeds  from the sale of our  ordinary  shares of $143.8  million  as
required by the purchase  contract  forming part of each HyCU. The proceeds from
this offering will be used by us to repay the  convertible  preferred  shares of
$143.8 million on May 21, 2007.

      We lease office space in the  countries in which we operate.  These leases
expire at various dates through 2023.

      Amounts due under funding  agreements  are included in interest  sensitive
contract liabilities. These are agreements in which we earn a spread over LIBOR.
The contractual repayment terms are detailed in the table above.

      On December 22, 2003, we completed the  acquisition of ERC Life for $151.0
million in cash,  subject to certain post closing  adjustments.  The adjustments
are dependant on the completion of the audit of the 2003 financial statements of
ERC Life prepared in accordance with U.S. statutory accounting principles. These
financial  statements  are due to be delivered to us on March 31, 2004.  We have
estimated  the post closing  adjustment  at  approximately  $20.0 million on the
basis of information  currently  available.  GE ERC has agreed to administer the
business of ERC Life for up to nine months  from the date of  acquisition  for a
fee of $2.4 million.

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.


                                       58
<PAGE>

Changes in Accounting Standards

      In December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS  No.148,   "Accounting  for  Stock-Based   Compensation  -  Transition  and
Disclosure,  an Amendment of FASB Statement No. 123". In prior years, we applied
the intrinsic  value-based  expense  provisions set forth in ABP Opinion No. 25,
"Accounting for Stock Issued to Employees".  Effective  January 1, 2003, we have
prospectively  adopted the fair value-based  stock option expense  provisions of
SFAS No. 123 as amended by SFAS No. 148. This has resulted in a charge to income
of $207,000 for the year ended December 31, 2003.

      In May 2003, FASB issued SFAS No. 150  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equities".  This SFAS
establishes   standards  for   classification  of  financial   instruments  with
characteristics  of both liabilities and equity.  We have adopted the provisions
of SFAS 150.  There  were no  changes to our  financial  position  or results of
operations.

      In  July  2003,  the  Accounting   Standards  Executive  Committee  issued
Statement of Position  03-01  ("SOP"),  "Accounting  and  Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Insurance Contracts and for
Separate  Accounts".  This SOP provides  guidance on accounting and reporting by
insurance enterprises for certain nontraditional long-duration contracts and for
separate  accounts and is effective  for financial  statements  for fiscal years
beginning  after  December 15, 2003. At the date of initial  application of this
SOP, we are required to make various  determinations,  such as qualification for
separate  account  treatment,  classification  of securities in separate account
arrangements,  significance  of mortality and  morbidity  risk,  adjustments  to
contract  holder  liabilities,  and  adjustments  to estimated  gross profits as
defined in SFAS No. 97,  "Accounting and Reporting by Insurance  Enterprises for
Certain Long-Duration  Contracts and for Realized Gains and Losses from the Sale
of Investments".  We do not believe the  implementation  of this SOP will have a
material effect on our financial statements.

      The  Derivative  Implementation  Group has released DIG B36 that addresses
whether  SFAS  No.  133  "Accounting  for  Derivative  Instruments  and  Hedging
Activities"  requires bifurcation of a debt instrument into a debt host contract
and an embedded  derivative if the debt  instrument  incorporates  both interest
rate risk and credit risk exposures that are unrelated or only partially related
to the creditworthiness of the issuer of that instrument. Under DIG B36 modified
coinsurance and funds withheld coinsurance reinsurance agreements where interest
is determined by reference to a pool of fixed maturity  assets are  arrangements
containing embedded  derivatives  requiring  bifurcation.  Our funds withheld at
interest,  which arise under modified coinsurance and coinsurance funds withheld
agreements are therefore  considered to contain embedded  derivatives  requiring
bifurcation.  The market value of funds withheld at interest was $1.6 billion at
December 31, 2003 and its carrying value was $1.5 billion.

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

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 of 1995. Forward looking statements include  information with respect
to our 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:


                                       59
<PAGE>

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

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

      o     exposure to mortality experience which differs from our assumptions;

      o     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;

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

      o     developments  in global  financial  markets  that  could  affect our
            investment portfolio and fee income;

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

      o     the risk that our  retrocessionaires may not honor their obligations
            to us;

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

      o     political and economic risks in developing countries;

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

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

      o     losses due to foreign currency exchange rate fluctuations;

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

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

      o     changes in accounting principles.

      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, other than as may be
required  under the  Federal  securities  laws,  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


                                       60
<PAGE>

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 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:

      o     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;

      o     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

      o     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.


                                       61
<PAGE>

Foreign Currency Risk

      Our  functional  currency is the United States dollar.  However,  our U.K.
subsidiaries,  Scottish Re Holdings Limited and Scottish Re Limited,  maintain a
part of their  investment  portfolio and operating  expense  accounts in British
pounds and receive other  currencies in payment of premiums.  All of Scottish Re
Limited's  original  U.S.  business  is settled in United  States  dollars,  all
Canadian,  Latin American 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.  Scottish  Re  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.

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, 2003 about the
interest rate sensitivity of the portion of our investment  portfolio managed by
external  managers.  The tables do not  include  other cash  balances  of $262.7
million,  or modified  coinsurance  assets of $1.5 billion.  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, 2003 market interest rates were used as discounting rates in
the estimation of fair value.


                                       62
<PAGE>

<TABLE>
<CAPTION>

                                                 Expected Maturity Date
                      ----------------------------------------------------------------------------
                                                                                           Total
                                                                                           Fair
Total                  2004    2005     2006     2007     2008   Thereafter    Total*      Value*
-----                 ------  ------   ------   ------   ------   --------   ---------    --------
                                               (dollars in millions)
<S>                   <C>     <C>      <C>      <C>      <C>      <C>        <C>          <C>
Principal amount      $115.6  $184.0   $163.1   $247.7   $251.6   $1,351.6   $ 2,576.3    $2,403.9
Book value .....       240.4   194.7    172.2    259.8    263.2      988.5     2,381.5
Weighted average
book yield .....         5.3%    4.4%     3.6%     4.9%     4.7%       5.2%        4.4%

------------------
</TABLE>

*  Includes $262.7 million of cash and cash equivalents with a book yield of
   1.01%.


<TABLE>
<CAPTION>

                                                 Expected Maturity Date
                      ----------------------------------------------------------------------------
                                                                                           Total
                                                                                           Fair
Fixed Rate Only        2004    2005     2006     2007     2008   Thereafter    Total*      Value*
---------------       ------  ------   ------   ------   ------   --------   ---------    --------
                                               (dollars in millions)
<S>                   <C>     <C>      <C>      <C>      <C>      <C>        <C>          <C>
Principal amount...    $81.3  $120.0   $119.3   $200.1   $226.9   $1,235.6    $2,245.9    $2,102.1
Book value.........    205.2   131.2    128.4    212.1    238.8      898.4     2,076.8
Weighted average
book yield.........      5.6%    5.1%     4.1%     5.3%     4.9%       5.2%        4.6%

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

*  Includes $262.7 million of cash and cash equivalents with a book yield of
   1.01%.

</TABLE>


<TABLE>
<CAPTION>

                                                 Expected Maturity Date
                      ----------------------------------------------------------------------------
                                                                                           Total
                                                                                           Fair
Floating Rate Only     2004    2005     2006     2007     2008   Thereafter    Total*      Value*
------------------    ------  ------   ------   ------   ------   --------   ---------    --------
                                               (dollars in millions)
<S>                   <C>     <C>      <C>      <C>      <C>      <C>        <C>          <C>
Principal amount...    $34.3   $64.0    $43.8    $47.6    $24.7     $116.0      $330.4      $301.8
Book value.........     35.2    63.5     43.8     47.7     24.4       90.1       304.7
Weighted average
book yield.........      3.4%    3.0%     2.3%     3.4%     3.1%       4.4%        3.4%

</TABLE>

Item 8:     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The  information  called  for by  this  item is set  forth  in  "Item  15:
Exhibits, Financial Statement Schedules 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, 2003.

Item 9A:    DISCLOSURE CONTROLS AND PROCEDURES

      Evaluation  of  disclosure   controls  and  procedures.   Based  on  their
evaluation  as of December  31,  2003,  our  principal  executive  officers  and
principal  financial  officer  have  concluded  that  Scottish  Re's  disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  and  Exchange  Act of 1934 (the  "Exchange  Act")) are  effective to
ensure that  information  required to be disclosed by Scottish Re's reports that
it files or submits  under the Exchange Act is recorded,  processed,  summarized
and  reported  within the time  periods  specified  in  Securities  and Exchange
Commission rules and forms.

      Changes in  internal  controls.  There  have been no  changes in  internal
control over financial  reporting  that occurred  during the year ended December
31, 2003 that have materially  affected,  or are reasonably likely to materially
affect, Scottish Re's internal control over financial reporting.

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 2004 Annual Meeting of Shareholders  (the "2003 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 2004
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,  MANAGEMENT AND
            RELATED STOCKHOLDER MATTERS

      The  information  required  by this  Item 12 will be set forth in the 2004
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 2004
Proxy Statement  under the caption  "Certain  Transactions"  and is incorporated
herein by reference.

Item 14:    PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The  information  required  by this  Item 14 will be set forth in the 2004
Proxy  Statement  under the caption "Fees Billed to the Company by Ernst & Young
LLP" and is incorporated herein by reference.

PART IV

Item 15:    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:

Exhibit Number Description of Document
-------------- -----------------------
3.1            Memorandum  of  Association  of  Scottish  Re, as  amended  as of
               December 14, 2001  (incorporated  herein by reference to Scottish
               Re's Current Report on Form 8-K/A).(6)

3.2            Articles  of  Association  of  Scottish  Re,  as  amended  as  of
               December 14, 2001  (incorporated  herein by reference to Scottish
               Re's Current Report on Form 8-K/A).(6)

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


                                       64
<PAGE>

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

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

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

4.8            Purchase Contract Agreement, dated December 17, 2003, by and
               among the Company and JPMorgan Chase Bank, as purchase contract
               agent and collateral agent (incorporated herein by reference to
               the Company's Current Report on form 8-K). (10)

4.9            Pledge Agreement, dated as of December 17, 2003, by and among the
               Company and JPMorgan Chase Bank, as collateral agent and
               custodial Agent, purchase contract agent, and securities
               intermediary (incorporated herein by reference to the Company's
               Current Report on form 8-K). (10)

4.10           Remarketing  Agreement,  dated as of December  17,  2003,  by and
               among the Company and Bear,  Stearns & Co. Inc.,  as  remarketing
               agent (incorporated  herein by reference to the Company's Current
               Report on form 8-K). (10)

4.11           Certificate of  Designations of Convertible  Preferred  Shares of
               the Company  (incorporated  herein by reference to the  Company's
               Current Report on form 8-K). (10)

10.1           Employment  Agreement dated June 18, 1998 between Scottish Re and
               Michael C. French  (incorporated  herein by  reference to Exhibit
               10.1 to Scottish Re's Registration Statement on Form S-1).(1)(12)

10.2           Second  Amended and  Restated  1998 Stock  Option Plan  effective
               October 22, 1998  (incorporated  herein by  reference  to Exhibit
               10.3 to Scottish Re's Registration Statement on Form S-1).(1)(12)

10.3           Form of Stock  Option  Agreement  in  connection  with 1998 Stock
               Option Plan (incorporated  herein by reference to Exhibit 10.4 to
               Scottish Re's Registration Statement on Form S-1).(1)(12)

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

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

10.6           1999 Stock  Option  Plan  (incorporated  herein by  reference  to
               Exhibit  10.14  to  Scottish  Re's  1999  Annual  Report  on Form
               10-K).(2)(12)

10.7           Form of Stock  Options  Agreement in  connection  with 1999 Stock
               Option Plan  (incorporated  herein by reference to Exhibit  10.15
               to Scottish Re's 1999 Annual Report on Form 10-


                                       65
<PAGE>

               K).(2)(12)

10.8           Employment  Agreement dated  September 18, 2000 between  Scottish
               Re and Oscar R.  Scofield  (incorporated  herein by  reference to
               Exhibit  10.16  to  Scottish  Re's  2000  Annual  Report  on Form
               10-K).(3)(12)

10.9           Share Purchase  Agreement by and between  Scottish Re and Pacific
               Life dated August 6, 2001  (incorporated by reference to Scottish
               Re's Current Report on Form 8-K).(7)

10.10          Amendment No. 1, dated November 8, 2001, to Share Purchase
               Agreement dated August 6, 2001 by and between Scottish Re and
               Pacific Life (incorporated by reference to the Company's Current
               Report on Form 8-K).(5)

10.11          2001 Stock Option Plan (incorporated herein by reference to
               Exhibit 10.17 to Scottish Re's 2001 Annual Report on Form 10-K).
               (4)(12)

10.12          Form of  Nonqualified  Stock Option  Agreement in connection with
               2001 Stock  Option  Plan.  (incorporated  herein by  reference to
               Exhibit  10.17 to Scottish Re's 2001 Annual Report on Form 10-K).
               (4)(12)

10.13          Service  Agreement  dated  December 31, 2001 between  Scottish Re
               Holdings, Paul Andrew Bispham and Scottish Re (4)(12)

10.14          Registration  Rights  Agreement  dated  December 31, 2001 between
               Scottish  Re and  Pacific  Life  (incorporated  by  reference  to
               Scottish Re's Current Report on Form 8-K).(5)

10.15          Stockholder  Agreement  dated December 31, 2001 between  Scottish
               Re and Pacific Life  (incorporated  by reference to Scottish Re's
               Current Report on Form 8-K).(5)

10.16          Tax Deed of Covenant dated December 31, 2001 between  Scottish Re
               and Pacific Life  (incorporated  by  reference  to Scottish  Re's
               Current Report on Form 8-K).(5)

10.17          Letter Agreement dated December 28, 2001 between Scottish Re and
               Pacific Life (incorporated by reference to Scottish Re's Current
               Report on Form 8-K).(5)

10.18          Form of Indemnification Agreement between Scottish Re and each of
               its directors and officers (incorporated by reference to Scottish
               Re's Amended Quarterly Report on Form 10-Q/A for the period ended
               June 30, 2002).(8)(12)

10.19          Employment  Agreement dated July 1, 2002 between Scottish Annuity
               & Life  Insurance  Company  (Cayman)  Ltd. and Thomas A. McAvity,
               Jr.   (incorporated   by  reference  to  Scottish   Re's  Amended
               Quarterly  Report on Form  10-Q/A for the  period  ended June 30,
               2002).(8)(12)

10.20          Employment Agreement dated June 1, 2002 between Scottish Re and
               Elizabeth Murphy (incorporated by reference to Scottish Re's
               Amended Quarterly Report on Form 10-Q/A for the period ended June
               30, 2002).(8)(12)

10.21          Employment Agreement dated June 1, 2002 between Scottish Re and
               Clifford J. Wagner (incorporated by reference to Scottish Re's
               Amended Quarterly Report on Form 10-Q/A for the period ended June
               30, 2002).(8)(12)

10.22          Employment Agreement dated July 8, 2002 between Scottish Re and
               Scott E. Willkomm (incorporated by reference to Scottish Re's
               Amended Quarterly Report on Form 10-Q/A for the


                                       66
<PAGE>

               period ended June 30, 2002).(8)(12)

10.23          Employment  Agreement dated February 10, 2003 between Scottish Re
               and Michael C. French. (12)

10.24          Employment  Agreement dated February 10, 2003 between Scottish Re
               and Oscar R. Scofield. (12)

10.25          Amended  Employment  Agreement  dated  February  10, 2003 between
               Scottish Re and Thomas A. McAvity. (12)

10.26          Indenture,  dated November 22, 2002,  between Scottish Re and The
               Bank of New York  (incorporated  herein by  reference to Scottish
               Re's Registration Statement on Form S-3). (9)

10.27          Registration  Rights Agreement,  dated November 22, 2002, between
               Scottish Re and Bear Stearns & Co. and Putnam  Lovell  Securities
               Inc.   (incorporated   herein  by  reference  to  Scottish   Re's
               Registration Statement on Form S-3). (9)

10.28          Employment  Agreement  dated  May 1,  2003  between  Scottish  Re
               Holdings Ltd. and David Huntley. (12)

10.39          Share Purchase Agreement dated July 3, 2003 by and between
               Scottish Re Group Limited and Pacific Life Insurance Company
               (incorporated herein by reference to Scottish Re Group Limited's
               Current Report on Form 8-K filed with the SEC on July 8, 2003).

10.30          Stock  Purchase  Agreement,  dated as of October 24, 2003, by and
               among Scottish Re, Scottish Holdings,  Inc. and ERC (incorporated
               herein  by  reference  to the  Company's  Current  Report on form
               8-K). (11)

10.31          Tax  Matters  Agreement,  dated as of January  22,  2003,  by and
               among Scottish Re, Scottish Holdings,  Inc. and ERC (incorporated
               herein  by  reference  to the  Company's  Current  Report on form
               8-K). (11)

10.32          Transition Services  Agreement,  dated as of January 22, 2003, by
               and among Scottish  Holdings,  Inc. and ERC (incorporated  herein
               by reference to the Company's Current Report on form 8-K). (11)

23.1           Consent of Ernst & Young LLP.

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

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

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


                                       67
<PAGE>

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

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

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

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

(1)            Scottish Re's  Registration  Statement on Form S-1 was filed with
               the SEC on June 19, 1998, as amended.
(2)            Scottish  Re's 1999 Annual Report on Form 10-K was filed with the
               SEC on April 3, 2000.
(3)            Scottish  Re's 2000 Annual Report on Form 10-K was filed with the
               SEC on March 30, 2001.
(4)            Scottish  Re's 2001  Annual  Report  on Form 10-K was filed  with
               the SEC on March 5, 2002.
(5)            Scottish  Re's Current  Report on Form 8-K was filed with the SEC
               on December 31, 2001.
(6)            Scottish  Re's  Current  Report on Form  8-K/A was filed with the
               SEC on January 11, 2002.
(7)            Scottish  Re's Current  Report on Form 8-K was filed with the SEC
               on August 9, 2001.
(8)            Scottish Re's Amended  Quarterly  Report on Form 10-Q/A was filed
               with the SEC on August 8, 2002.
(9)            Scottish Re's  Registration  Statement on Form S-3 was filed with
               the SEC on January 31, 2003, as amended.
(10)           Scottish  Re's Current  Report on Form 8-K was filed with the SEC
               on December 17, 2003.
(11)           Scottish  Re's Current  Report on Form 8-K was filed with the SEC
               on January 6, 2004.
(12)           This exhibit is a  management  contract or  compensatory  plan or
               arrangement.


B.    FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Report of Independent Auditors.............................................  69
Consolidated Balance Sheets................................................  70
Consolidated Statements of Income..........................................  71
Consolidated Statements of Comprehensive Income............................  72
Consolidated Statements of Shareholders' Equity............................  73
Consolidated Statements of Cash Flows......................................  74
Notes to Consolidated Financial Statements.................................  75

      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 reports on Form 8-K were filed with the SEC during the three
months ended December 31, 2003:

      Current  Report on Form 8-K filed on October 27, 2003 to report under Item
5 (Other Events and Required FD Disclosure)  that Scottish Re had issued a press
release  announcing  that it had entered into a Stock  Purchase  Agreement  with
Employers  Reinsurance  Corporation  to acquire 95% of the capital  stock of ERC
Life Reinsurance  Corporation.  A copy of the press release was filed as Exhibit
99.1 thereto.

      Current  Report on Form 8-K filed on December  17, 2003  pursuant to which
Scottish Re filed (i) the  Underwriting  Agreement  relating to its  issuance of
5.875% Hybrid  Capital  Units (the  "HyCUs") and (ii) the  operative  agreements
governing the terms of the HyCUs.


                                       68
<PAGE>


                         Report of Independent Auditors

To the Shareholders and Board of Directors
Scottish Re Group Limited

      We have audited the accompanying  consolidated  balance sheets of Scottish
Re Group  Limited and  subsidiaries  as of December  31, 2003 and 2002,  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, 2003.  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 Re Group Limited and  subsidiaries  at December 31, 2003 and 2002,  and
the  consolidated  results of their  operations and their cash flows for each of
the three years in the period  ended  December  31,  2003,  in  conformity  with
accounting principles generally accepted in the United States of America.

      As discussed in Note 3 to the  financial  statements,  in 2003 the Company
changed its accounting related to its funds withheld at interest and in 2002 the
Company changed its accounting for goodwill.

                                                /s/ ERNST & YOUNG

Philadelphia, Pennsylvania
February 10, 2004



                                       69
<PAGE>


                            SCOTTISH RE GROUP LIMITED

                           CONSOLIDATED BALANCE SHEETS

              (Expressed in Thousands of United States Dollars)
<TABLE>
<CAPTION>

                                                         December    December
ASSETS                                                   31, 2003     31, 2002
                                                        ----------  ----------

<S>                                                     <C>         <C>
Fixed maturity investments, available for sale, at
  fair value
  (Amortized cost $1,993,247; 2002 - $991,304).......   $2,014,719  $1,003,946
Preferred stock (Cost $125,460)......................      126,449           -
Investment in unit-linked securities.................            -      16,497
Cash and cash equivalents............................      298,149     149,666
Other investments....................................       17,678       5,631
Funds withheld at interest...........................    1,469,425   1,101,836
                                                        ----------  ----------
  Total investments..................................    3,926,420   2,277,576
Accrued interest receivable..........................       22,789      11,910
Reinsurance balances and risk fees receivable........      196,192      39,805
Deferred acquisition costs...........................      308,591     213,516
Amounts recoverable from reinsurers..................      737,429      22,608
Present value of in-force business...................       13,479      18,181
Goodwill.............................................       35,847      35,847
Fixed assets.........................................       11,800       6,493
Other assets.........................................       45,209      11,702
Deferred tax benefit.................................       12,624           -
Segregated assets....................................      743,137     653,588
                                                        ----------  ----------
  Total assets.......................................   $6,053,517  $3,291,226
                                                        ==========  ==========
LIABILITIES
Reserves for future policy benefits..................   $1,502,415  $  386,807
Interest sensitive contract liabilities..............    2,633,346   1,567,176
Unit-linked contract liabilities.....................            -      17,069
Accounts payable and accrued expenses................       31,673      15,053
Reinsurance balances payable.........................      125,756      16,348
Other liabilities....................................       30,546         649
Current income tax payable...........................       13,077       1,873
Deferred tax liability...............................            -       9,071
Long term debt.......................................      162,500     132,500
Segregated liabilities...............................      743,137     653,588
                                                        ----------  ----------
  Total liabilities..................................    5,242,450   2,800,134
                                                        ----------  ----------
MINORITY INTEREST                                            9,295           -
MEZZANINE EQUITY                                           141,928           -
SHAREHOLDERS' EQUITY
Share capital, par value $0.01 per share:
  Issued and fully paid: 35,228,411 ordinary shares
    (2002-26,927,456)................................          352         269
Additional paid-in capital...........................      548,750     416,712
Accumulated other comprehensive income...............       29,034      13,467
Retained earnings....................................       81,708      60,644
                                                        ----------  ----------
  Total shareholders' equity.........................      659,844     491,092
                                                        ----------  ----------
Total liabilities and shareholders' equity...........   $6,053,517  $3,291,226
                                                        ==========  ==========
</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


                                       70
<PAGE>


                            SCOTTISH RE GROUP LIMITED

                        CONSOLIDATED STATEMENTS OF INCOME

    (Expressed in Thousands of United States Dollars, except per share data)

<TABLE>
<CAPTION>

                                          Year Ended   Year Ended   Year Ended
                                           December     December     December
                                           31, 2003     31, 2002     31, 2001
                                         ----------   ----------   ----------
<S>                                       <C>          <C>          <C>
Revenues
Premiums earned.........................  $ 391,976    $ 202,536    $  68,344
Investment income, net..................    148,028      107,906       51,691
Fee income..............................      7,907        6,574        4,809
Realized losses.........................     (4,448)     (10,804)      (3,882)
Change in value of embedded derivatives.     13,903            -            -
                                         ----------   ----------   ----------
  Total revenues........................    557,366      306,212      120,962
                                         ----------   ----------   ----------
Benefits and expenses
Claims and other policy benefits........    275,863      142,158       51,245
Interest credited to interest sensitive
  contract liabilities..................     89,180       48,140       17,578
Acquisition costs and other insurance
  expenses, net.........................    116,000       60,073       24,328
Operating expenses......................     31,021       23,086        9,173
Interest expense........................      7,557        1,414        1,405
                                         ----------   ----------   ----------
   Total benefits and expenses..........    519,621      274,871      103,729
                                         ----------   ----------   ----------
Income before income taxes and minority
  interest..............................     37,745       31,341       17,233
Income tax benefit (expense)............     11,105        1,894          (59)
                                         ----------   ----------   ----------
    Income before minority interest.....     48,850       33,235       17,174
Minority interest.......................        (62)           -           71
                                         ----------   ----------   ----------
Income from continuing  operations before
cumulative effect of change in
accounting principle....................     48,788       33,235       17,245
Cumulative effect of change in
accounting  principle (net of taxation of
$3,415) ................................    (19,537)           -         (406)
Loss from discontinued operations.......     (1,971)        (711)           -
                                         ----------   ----------   ----------
Net income..............................  $  27,280    $  32,524    $  16,839
                                         ==========   ==========   ==========
Basic earnings per share:
    Income from continuing operations
    before cumulative effect of change
    in accounting principle.............  $    1.59    $    1.32    $    1.10
    Cumulative effect of change in
    accounting principle................      (0.64)           -        (0.02)
    Discontinued operations.............      (0.06)       (0.03)           -
                                         ----------   ----------   ----------
    Net income..........................  $    0.89    $    1.29    $    1.08
                                         ==========   ==========   ==========
Diluted earnings per share:
    Income from continuing operations
    before cumulative effect of change
    in accounting principle.............  $    1.51    $    1.25    $    1.05
    Cumulative effect of change in
    accounting principle................      (0.60)           -        (0.03)
    Discontinued operations.............      (0.06)       (0.02)           -
                                         ----------   ----------   ----------
    Net income..........................  $    0.85    $    1.23    $    1.02
                                         ==========   ==========   ==========
Weighted average number of ordinary
shares outstanding
    Basic..............................  30,652,719   25,190,283   15,646,106
                                         ==========   ==========   ==========
    Diluted............................  32,228,001   26,505,611   16,485,338
                                         ==========   ==========   ==========

</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


                                       71
<PAGE>


                            SCOTTISH RE GROUP LIMITED

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

              (Expressed in Thousands of United States Dollars)

<TABLE>
<CAPTION>

                                          Year Ended   Year Ended   Year Ended
                                           December     December   December 31,
                                           31, 2003     31, 2002       2001
                                          ---------    ---------    ---------
<S>                                       <C>          <C>          <C>
Net income.............................   $  27,280    $  32,524    $  16,839
                                          ---------    ---------    ---------
Other comprehensive income (loss), net
  of tax:
Unrealized appreciation (depreciation)
  on investments.......................      10,270       18,049       (3,000)
Add: reclassification adjustment for
  investment gains (losses) included in
  net income...........................      (2,352)      (5,493)       3,196
                                          ---------    ---------    ---------
Net unrealized appreciation  on
  investments, net of income taxes
  of $2,222, $3,853 and $(1,376)              7,918       12,556          196
Cumulative translation adjustment .....       6,277        5,908           --
Minimum pension liability adjustment,
  net of income taxes of $588 and
  ($588).............................         1,371       (1,371)          --
                                          ---------    ---------    ---------
Other comprehensive income.............      15,566       17,093          196
                                          ---------    ---------    ---------
Comprehensive income...................   $  42,846    $  49,617    $  17,035
                                          =========    =========    =========
</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


                                       72
<PAGE>

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

<TABLE>
<CAPTION>

                                             Year Ended       Year Ended       Year Ended
                                            December 31,     December 31,     December 31,
                                                2003            2002             2001
                                            ------------    ------------    ------------
<S>                                           <C>             <C>             <C>
Ordinary shares:
  Beginning of year .....................     26,927,456      20,144,956      15,614,240
  Ordinary shares issued ................      9,200,000       6,750,000       4,532,380
  Ordinary shares repurchased ...........     (1,525,000)           --          (100,000)
  Issuance  to  employees  on exercise of
  options ...............................        425,955          32,500          98,336
  Issuance on exercise of warrants ......        200,000            --              --
                                            ------------    ------------    ------------
  End of year ...........................     35,228,411      26,927,456      20,144,956
                                            ============    ============    ============
Share capital:
  Beginning of year .....................   $        269    $        201    $        156
  Ordinary shares issued ................             92              68              45
  Ordinary shares repurchased ...........            (15)           --                (1)
  Issuance  to  employees  on exercise of
  options ...............................              4            --                 1
  Issuance on exercise of warrants ......              2            --              --
                                            ------------    ------------    ------------
  End of year ...........................            352             269             201
                                            ------------    ------------    ------------
Additional paid in capital:
  Beginning of year .....................        416,712         301,542         223,771
  Ordinary shares issued ................        179,995         114,252          77,955
  Ordinary shares repurchased ...........        (29,966)           --            (1,483)
  Stock option expense ..................            207             639            --
  Issuance  to  employees  on exercise of
  options ...............................          4,575             279           1,299
  Issuance on exercise of warrants ......          2,998            --              --
  Issuance of Hybrid Capital Units ......        (24,171)           --              --
  Warrants repurchased ..................         (1,600)           --              --
                                            ------------    ------------    ------------
  End of year ...........................        548,750         416,712         301,542
                                            ------------    ------------    ------------
Accumulated other comprehensive income
  (loss):
  Unrealized appreciation on investments
    Beginning of year ...................          8,930          (3,626)         (3,822)
    Change in period (net of tax) .......          7,918          12,556             196
                                            ------------    ------------    ------------
  End of year ...........................         16,848           8,930          (3,626)
                                            ------------    ------------    ------------
  Cumulative translation adjustment
    Beginning of year ...................          5,908            --              --
    Change in period (net of tax) .......          6,278           5,908            --
                                            ------------    ------------    ------------
    End of year .........................         12,186           5,908            --
                                            ------------    ------------    ------------
  Minimum pension liability adjustment ..
    Beginning of year ...................         (1,371)           --              --
    Change in period (net of tax) .......          1,371          (1,371)           --
                                            ------------    ------------    ------------
    End of year .........................           --            (1,371)           --
                                            ------------    ------------    ------------
Total accumulated other comprehensive
  income (loss) .........................         29,034          13,467          (3,626)
                                            ------------    ------------    ------------
Retained earnings:
  Beginning of year .....................         60,644          33,165          19,459
  Net income ............................         27,280          32,524          16,839
  Dividends paid ........................         (6,216)         (5,045)         (3,133)
                                            ------------    ------------    ------------
  End of year ...........................         81,708          60,644          33,165
                                            ------------    ------------    ------------
Total shareholders' equity ..............   $    659,844    $    491,092    $    331,282
                                            ============    ============    ============
</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


                                       73
<PAGE>

                            SCOTTISH RE GROUP LIMITED

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              (Expressed in Thousands of United States Dollars)

<TABLE>
<CAPTION>

                                              Year Ended    Year Ended   Year Ended
                                               December      December     December
                                               31, 2003      31, 2002     31, 2001
                                             -----------    ---------    ---------
<S>                                          <C>            <C>          <C>
Operating activities
Income before cumulative effect
of change in accounting principle..........  $    46,817    $  32,524    $  17,245
Items not affecting cash:
   Net realized losses ...................         4,448       10,803        3,882
   Changes in value of embedded
      derivatives ........................        13,903         ----         ----
   Amortization of investments ...........         5,619          667       (1,484)
   Amortization of deferred acquisition
      costs ..............................        74,239       28,179       11,117
   Amortization of present value of
      in-force business ..................         4,926        2,777          206
   Changes in assets and liabilities:
      Accrued interest ...................        (6,731)      (2,575)         (19)
      Reinsurance balances and risk fees
         receivable ......................       (54,689)      29,019      (28,063)
      Deferred acquisition costs .........      (167,281)    (127,797)     (94,092)
      Deferred tax liability .............       (17,350)         863       (1,293)
      Other assets and liabilities .......       (25,561)        (804)      (8,218)
      Current income tax receivable and
         payable .........................        (1,459)       1,514        1,351
      Reserves for future policy benefits        159,242       (1,377)     131,627
      Interest sensitive contract
         liabilities, net of funds
         withheld at interest ............        25,546       16,260        9,485
      Unit linked contract liabilities ...          --        (11,280)        --
      Accounts payable and accrued
         expenses ........................        11,989        9,504       (9,388)
      Other ..............................        14,846        2,539       (1,076)
                                             -----------    ---------    ---------

   Net cash provided by (used in)
      operating activities ...............        88,504       (9,184)      31,280
                                             -----------    ---------    ---------

Investing Activities

Purchase of fixed maturity investments ...    (1,254,226)    (710,791)    (309,373)
Proceeds from sales of fixed maturity
   investments ...........................       288,611      183,588      297,337
Proceeds from maturity of fixed maturity
   investments ...........................       216,617      122,000       86,135

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

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

Proceeds from maturity of preferred stock          5,137         --           --
Sale (purchase) of  other investments ....          --          5,291      (10,108)
Cost of acquisition of subsidiary net of
   cash acquired .........................      (140,228)      (2,270)      13,786
Purchase of fixed assets .................        (4,984)      (1,034)      (3,870)
                                             -----------    ---------    ---------

   Net cash provided by (used in)
      investing activities ...............      (953,260)    (403,216)      73,907
                                             -----------    ---------    ---------
Financing activities
Deposits to interest sensitive contract
   liabilities ...........................       736,884      320,338       83,137
Withdrawals from interest sensitive
   contract liabilities ..................       (40,783)     (27,627)    (200,751)
Borrowings ...............................          --        (65,145)      65,145
Issuance of ordinary shares ..............       187,666      114,599        1,299
Repurchase of ordinary shares ............       (29,981)        --         (1,483)

Repurchase of warrants ...................        (1,600)        --           --
Issuance of long term debt ...............        29,047      127,782         --
Net funds received on issuance of Hybrid
   Capital Units .........................       138,223         --           --
Dividends paid ...........................        (6,217)      (5,045)      (3,133)
                                             -----------    ---------    ---------
Net cash provided by (used in) financing
   activities ............................     1,013,239      464,902      (55,786)
                                             -----------    ---------    ---------
Net change in cash and cash equivalents ..       148,483       52,502       49,401
Cash and cash  equivalents,  beginning  of
   year ..................................       149,666       97,164       47,763
                                             -----------    ---------    ---------
Cash and cash equivalents, end of year ...   $   298,149    $ 149,666    $  97,164
                                             ===========    =========    =========

Supplemental cash flow information:
Interest paid ............................   $     6,195    $     738    $   1,311
                                             ===========    =========    =========

</TABLE>

         See Accompanying Notes to Consolidated Financial Statements



                                       74
<PAGE>


                            SCOTTISH RE GROUP LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2003

1.    Change of Name

      On  September  2, 2003,  we changed our name to Scottish Re Group  Limited
from  Scottish  Annuity  & Life  Holdings,  Ltd.  At the same  time,  World-Wide
Holdings Limited and World-Wide  Reassurance Company Limited changed their names
to Scottish Re Holdings Limited and Scottish Re Limited, respectively.

2.    Organization, business and basis of presentation

Organization

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

Business

Life Reinsurance

      In our Life  Reinsurance  North America segment,  we provide  solutions to
insurance  companies  seeking  reinsurance  of  life  insurance,  annuities  and
annuity-type  products.  We reinsure  lines of  business  that may be subject to
significant reserve or capital requirements by regulatory and rating agencies.

      We assume  risks  associated  with  primary  life  insurance  policies and
annuities,  both in force and new business.  We reinsure:  (i)  mortality,  (ii)
investment,  (iii) persistency, and (iv) expense risks. Scottish Re (U.S.), Inc.
originates  reinsurance  business  predominantly  by marketing  its products and
services  directly to U.S. life insurance and  reinsurance  companies.  Scottish
Annuity & Life Insurance Company (Cayman) Ltd. originates  reinsurance  business
predominantly  through  reinsurance  brokers  and  intermediaries.  In our  Life
Reinsurance  International segment, we reinsure life and aircrew loss of license
products. Life products that we reinsure include short term group and individual
life and, to a lesser  extent,  disability  and  critical  illness.  In our Life
Reinsurance  International  business we primarily target customers in developing
markets as well as selected  developed  markets.  The developing markets include
Asia,  Latin  America,  the Middle  East,  North Africa and Southern and Eastern
Europe.  In the more  developed  markets,  we target "niche" market sectors that
require a high degree of knowledge and  experience.  Scottish Re Limited markets
its products through international brokers and its own marketing staff.

Wealth Management

      In our  Wealth  Management  business,  we  directly  issue  variable  life
insurance  and  variable  annuities  and  similar  products  to high  net  worth
individuals  and  families,  for  insurance,   investment  and  estate  planning
purposes. For us, high net worth generally means individuals and families with a
liquid net worth in excess of $10 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.


                                       75
<PAGE>

                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

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

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).  Certain items in the prior year financial
statements have been reclassified to conform with the current year presentation.

      Consolidation--We  consolidate  the results of all our  subsidiaries.  All
significant  intercompany  transactions  and balances  have been  eliminated  on
consolidation.  Prior  year  amounts  have been  reclassified  to conform to the
current year presentation.

      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.

3. Summary of significant accounting policies

      The following are our significant accounting policies:

      A. Fixed maturity investments

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

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

Realized   gains   (losses)  on   securities   are   determined  on  a  specific
identification  method. We track the cost of each security  purchased so that we
are able to identify and record a gain or loss when it is subsequently  sold. In
addition,  declines in fair value that are determined to be other than temporary
are  included  in realized  gains  (losses) in the  consolidated  statements  of
income.  Realized gains and losses are stated net of associated  amortization of
deferred  acquisition  costs.  EITF Issue No.  99-20,  "Recognition  of Interest
Income  and  Impairment  on  Purchased  and  Retained  Beneficial  Interests  in
Securitized  Financial  Assets,"  ("EITF  99-20")  applies  to  all  securities,
purchased or  retained,  which  represent  beneficial  interests in  securitized
assets,  unless they meet certain exception  criteria.  Such securities  include
many  collateralized  mortgage,  bond, debt and loan obligations (CMO, CBO, CDO,
and CLO),  mortgage-backed  securities and asset-backed  securities.  Under EITF
99-20, a decline in fair value below the "amortized cost" basis is considered to
be an other than temporary impairment whenever there is an adverse change in the
amount or timing  of cash  flows to be  received,  regardless  of the  resulting
yield,  unless the  decrease  is solely a result of  changes in market  interest
rates. Interest income is based on prospective estimates of future cash flows.


                                       76
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

3. Summary of significant accounting policies (continued)

      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.

      Management  reviews  securities with material  unrealized losses and tests
for other than temporary  impairments on a quarterly basis.  Factors involved in
the  determination  of  potential  impairment  include fair value as compared to
cost,  length of time the value has been below cost,  credit  worthiness  of the
issuer, forecasted financial performance of the issuer, position of the security
in  the  issuer's  capital  structure,  the  presence  and  estimated  value  of
collateral  or other credit  enhancement,  length of time to maturity,  interest
rates and our intent and  ability to hold the  security  until the market  value
recovers.

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

      B. Investment in unit-linked securities

      Unit-linked  securities  were  comprised  of  investments  in a unit trust
denominated in British pounds.  These  investments  were acquired as part of the
purchase of Scottish Re Holdings  Limited on December 31, 2001 and were recorded
at quoted market value.  Changes in market value were recorded as realized gains
or losses in total  revenue.  Investment  income was  recorded as  revenue.  The
investment results of the unit-linked securities were generally passed on to the
policyholder.  During  2003,  we sold the  unit-linked  securities  as part of a
novation of our unit-linked liabilities. (See Note 3L).

      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. Funds withheld at interest

      Funds  withheld  at  interest  are funds  held by ceding  companies  under
modified  coinsurance  and  coinsurance  funds  withheld  agreements  whereby we
receive  the  interest  income  earned on the funds.  The  balance of funds held
represents the statutory reserves of the ceding companies.  These agreements are
considered to include embedded derivatives as further discussed in Note 3S.

      E. Revenue recognition

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




                                       77
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

3. Summary of significant accounting policies (continued)

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

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

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

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

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

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

      F. 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.

      G. 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


                                       78
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

3. Summary of significant accounting policies (continued)

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.

      H.   Goodwill

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

      During  2002 we  finalized  the  goodwill  arising on the  acquisition  of
Scottish Re Holdings  Limited.  Goodwill arising on this acquisition  amounts to
$35.5  million in  comparison  with $30.6  million at  December  31,  2001.  The
increase arose from additional  legal,  professional and other costs relating to
the  acquisition and  finalization  of the deferred tax balance  existing at the
date of the acquisition.

      I. Fixed assets and leasehold improvements

      Fixed assets include  leasehold  improvements,  furniture and fittings and
computer  equipment.  They are recorded at cost and are  depreciated  over their
estimated  useful lives ranging between 1 and 5 years on a straight-line  basis.
Accumulated  depreciation at December 31, 2003 and 2002 amounted to $5.4 million
and $2.9 million, respectively.

      J. 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.

      K. 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.


                                       79
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

3. Summary of significant accounting policies (continued)

      L. Unit-linked contract liabilities

      Unit-linked  contract  liabilities  assumed by  Scottish  Re Limited  were
recorded  at  account  value and  represent  contracts  in which the  investment
results  attained  were  generally  passed  through  to  the  policyholder.  The
investment  results  are  capital  gains and losses,  net of tax.  Amounts  were
credited to these  products based on the  underlying  investment  results of the
unit-linked securities.  During 2003, our Life Reinsurance International segment
entered into an agreement to novate our unit-linked liabilities. (see Note 3B).

      M.   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.

      N. Stock-based compensation

      Effective  January  1,  2003,  we  have  prospectively  adopted  the  fair
value-based stock option expense provisions of Statement of Financial Accounting
Standards  ("SFAS")  No.  148.   "Accounting  for  Stock-Based   Compensation  -
Transition  and  Disclosure,  an Amendment to FASB  Statement No. 123". In prior
years,  we  applied  the  intrinsic  value  method  as  detailed  in  Accounting
Principles  Board  ("APB")  Opinion  No.  25  and  related   interpretations  in
accounting  for stock  option  plans.  We did not  recognize  compensation  cost
because our options were issued with an exercise price equal to the market price
of the stock on the date of issue.  Note 18  contains a summary of the pro forma
effects to reported net income and  earnings  per share for 2003,  2002 and 2001
had we elected to recognize  compensation cost for all options based on the fair
value of the options granted at grant date as prescribed by SFAS No. 123.

      O. Earnings per share

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

      P. Segregated assets

      Separate account  investments are in respect of wealth management  clients
and include the net asset values of the underlying  funds plus separate cash and
cash equivalent  balances less separate account fees payable to us. The funds in
the separate accounts are not part of our general funds and are not available to
meet our general  obligations.  The assets and liabilities of these transactions
move in tandem.  The client  bears the  investment  risk on the  account  and we
receive an  asset-based  fee for providing  this service that is recorded as fee
income.  Included in these accounts is a total return swap transaction  totaling
approximately $29.5 million on behalf of a wealth management client.


                                       80
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

3. Summary of significant accounting policies (continued)

      Q. Segregated liabilities

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

      These liabilities also include an amount in respect of a total return swap
transaction totaling approximately $29.5 million.

      R. 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.

      S. Derivatives

      Our funds  withheld at interest  arise on modified  coinsurance  and funds
withheld coinsurance  transactions.  Derivatives  Implementation Group Issue No.
B36 "Embedded  Derivatives:  Bifurcation of a Debt Instrument that  Incorporates
Both  Interest  Rate and Credit Rate Risk  Exposures  that are Unrelated or Only
Partially  Related to the  Creditworthiness  of the  Issuer of that  Instrument"
indicates that these  transactions  contain embedded  derivatives.  The embedded
derivative  feature in our funds  withheld  treaties is similar to a  fixed-rate
total return swap on the assets held by the ceding companies.  The swap consists
of two parts.  The first is the market value of the underlying  asset  portfolio
and the second is a hypothetical  loan to the ceding company.  The  hypothetical
loan  is  based  on  the  expected  cash  flows  of the  underlying  reinsurance
liability.  We have developed models to systematically estimate the value of the
total return  swap.  The fair value of the  embedded  derivative  is affected by
changes in  expected  cash  flows,  credit  spreads of the assets and changes in
"risk-free"  interest  rates.  The  change  in fair  value  is  included  in our
calculation  of  estimated  gross  profits  and,  therefore,  also  affects  the
amortization  of  deferred  acquisition  costs.  In  addition to our quota share
indemnity  funds  withheld  contracts,  we have entered  into various  financial
reinsurance  treaties that, although considered funds withheld,  do not transfer
significant  insurance  risk and are recorded on a deposit method of accounting.
As a result of the experience  refund  provisions of these treaties the value of
the embedded derivative is currently considered immaterial.

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


                                       81
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003
4.  Business acquisitions

      On December  22, 2003,  we  completed  the purchase of 95% of ERC Life for
$151.0  million  in cash  subject  to  certain  post  closing  adjustments.  The
adjustments  are dependant on the  completion of the audit of the 2003 financial
statements  of ERC Life prepared in accordance  with U.S.  statutory  accounting
principles.  These  financial  statements are due to be delivered to us on March
31, 2004. We have estimated the post closing  adjustment at approximately  $20.0
million on the basis of information  currently available.  There was no goodwill
arising  on the  acquisition.  The  balance  sheet  of ERC  Life at the  date of
acquisition is as follows:

<TABLE>
<CAPTION>

                                                          December
                                                          22, 2003
                                                  ----------------------

<S>                                               <C>
                    Fixed maturity investments    $     263,301
                    Funds withheld at interest          204,256
                    Cash and other investments          106,656
                                                  ----------------------
                    Total investments                   574,213

                    Reinsurance balances receivable     105,242
                    Amounts recoverable from
                    reinsurers                          713,248
                    Other assets                         45,370
                                                  ----------------------
                    Total assets                  $   1,438,073
                                                  ======================

                    Reserves for future policy
                    benefits                      $     951,899
                    Interest sensitive contract
                    liabilities                         177,485
                    Reinsurance balances payable        108,894
                    Other liabilities                    15,141
                                                  ----------------------
                    Total liabilities             $   1,253,419
                                                  ======================
</TABLE>


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

<TABLE>
<CAPTION>

                                                    Year        Year
                                                   Ended       Ended
                                                  December    December
                                                  31, 2003     31, 2002
                                                  --------     --------
<S>                                               <C>         <C>
                  Revenue......................   $768,223    $473,032
                  Net income...................   $ 67,663    $ 29,127
                  Earnings per ordinary share -
                  Basic.........................  $   2.21    $   1.16
                  Earnings per ordinary share -
                  Diluted......................   $   2.10    $   1.10
</TABLE>

      On December  31, 2001,  we completed  the purchase of Scottish Re Holdings
Limited and its wholly owned subsidiary Scottish Re Limited. 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 Scottish Re Holdings Limited. The excess of the
purchase price over net assets acquired was $35.5 million,  which is recorded as
goodwill on the  balance  sheet at December 31, 2003 and 2002.


                                       82
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

4.  Business acquisitions  (Continued)

      The following pro forma information related to our acquisition of Scottish
Re Holdings Limited for the year ended December 31, 2001 illustrates the effects
of  the  acquisition  as if it  had  occurred  at the  beginning  of the  period
presented.  Scottish  Re  Holdings  Limited's  results  are for the  year  ended
September 30, 2001.

<TABLE>
<CAPTION>

                                                         Year Ended
                                                          December
                                                          31, 2001
                                                  ----------------------

<S>                                               <C>
                    Revenue....................   $    157,661
                    Net income.................   $     18,904
                    Earnings per ordinary share
                    - Basic ...................   $       0.94
                    Earnings per ordinary share
                    - Diluted ................    $       0.90
</TABLE>

      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 this acquisition prior to the closing date.

5.    Discontinued operations

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



                                       83
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

6.    Business segments

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

<TABLE>
<CAPTION>

                                              Year Ended December 31, 2003
                            -----------------------------------------------------------------
                               Life
                            Reinsurance    Life
                               North    Reinsurance      Wealth
                              America   International   Management       Other       Total
                            ---------    ---------      ---------      ---------    ---------
<S>                         <C>          <C>            <C>            <C>          <C>
Premiums earned .........   $ 230,708    $ 161,268      $    --        $    --      $ 391,976
Investment income, net ..     135,731        7,537            205          4,555      148,028
Realized gains (losses) .      (6,124)         548             35          1,093       (4,448)
Change in value of
embedded derivative .....      13,903         --             --             --         13,903
Fee income ..............       4,067         --            3,840           --          7,907
                            ---------    ---------      ---------      ---------    ---------
   Total revenues .......     378,285      169,353          4,080          5,648      557,366
                            ---------    ---------      ---------      ---------    ---------
Claims and other policy
benefits ................     171,711      104,152           --             --        275,863
Interest credited to
interest sensitive
contract liabilities ....      89,156           24           --             --         89,180
Acquisition costs and
other insurance expenses,
net .....................      83,594       30,143          2,263           --        116,000
Operating expenses ......       8,646       11,518            468         10,389       31,021
Interest expense ........       1,109         --             --            6,448        7,557
                            ---------    ---------      ---------      ---------    ---------
   Total benefits and
   expenses .............     354,216      145,837          2,731         16,837      519,621
                            ---------    ---------      ---------      ---------    ---------

Income (loss) before
income taxes and minority
interest ................   $  24,069    $  23,516      $   1,349      $ (11,189)   $  37,745
                            =========    =========      =========      =========    =========

</TABLE>


<TABLE>
<CAPTION>

                                              Year Ended December 31, 2002
                            -----------------------------------------------------------------
                               Life
                            Reinsurance    Life
                               North    Reinsurance      Wealth
                              America   International   Management       Other       Total
                            ---------    ---------      ---------      ---------    ---------
<S>                         <C>          <C>            <C>            <C>          <C>
Premiums earned .........   $ 122,794    $  79,742      $    --        $    --      $ 202,536
Investment income, net ..      97,406        6,716             15          3,769      107,906
Realized gains (losses) .      (4,833)      (5,942)          (208)           179      (10,804)
Fee income ..............       3,148         --            3,426           --          6,574
                            ---------    ---------      ---------      ---------    ---------
   Total revenues .......     218,515       80,516          3,233          3,948      306,212
                            ---------    ---------      ---------      ---------    ---------

Claims and other policy
benefits ................      91,774       50,384           --             --        142,158
Interest credited to
interest sensitive
contract liabilities ....      48,140         --             --             --         48,140
Acquisition costs and
other insurance expenses,
net .....................      48,401        8,281          3,391           --         60,073
Operating expenses ......       7,323        6,647          1,017          8,099       23,086
Interest expense ........        --           --             --            1,414        1,414
                            ---------    ---------      ---------      ---------    ---------
   Total benefits and
   expenses .............     195,638       65,312          4,408          9,513      274,871
                            ---------    ---------      ---------      ---------    ---------

Income (loss) before
income taxes and minority
interest ................   $  22,877    $  15,204      $  (1,175)     $  (5,565)   $  31,341
                            =========    =========      =========      =========    =========
</TABLE>


                                       84
<PAGE>

                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

6.   Business segments (continued)


<TABLE>
<CAPTION>

                                              Year Ended December 31, 2001
                            -----------------------------------------------------------------
                               Life
                            Reinsurance    Life
                               North    Reinsurance      Wealth
                              America   International   Management       Other       Total
                            ---------    ---------      ---------      ---------    ---------
<S>                         <C>          <C>            <C>            <C>          <C>
Premiums earned ............$  68,344    $     --       $    --        $    --      $  68,344
Investment income, net .....   44,151          --              68          7,472       51,691
Realized gains (losses) ....   (4,500)         --            --              618       (3,882)
Fee income .................    1,686          --           3,123           --          4,809
                            ---------    ------         ---------      ---------    ---------
   Total revenues ..........  109,681          --           3,191          8,090      120,962
                            ---------    ------         ---------      ---------    ---------
Claims and other policy
benefits ...................   51,245          --            --             --         51,245
Interest credited to
interest sensitive
contract liabilities .......   17,578          --            --             --         17,578
Acquisition costs and
other insurance expenses,
net ........................   23,411          --             917           --         24,328
Operating expenses .........    3,191          --             897          5,085        9,173
Interest expense ...........     --            --            --            1,405        1,405
                            ---------    ------         ---------      ---------    ---------
   Total benefits and
   expenses ................   95,425          --           1,814          6,490      103,729
                            ---------    ------         ---------      ---------    ---------
Income before income
taxes and minority interest $  14,256    $     --       $   1,377      $   1,600    $  17,233
                            =========    ======         =========      =========    =========
</TABLE>


<TABLE>
<CAPTION>

                                     December 31,   December 31,
Assets                                   2003           2002
                                    -------------- --------------
<S>                                 <C>            <C>

Life Reinsurance:
      North America..............   $    4,882,222 $    2,236,089
      International..............          308,459        265,658
                                    -------------- --------------
Total Life Reinsurance...........        5,190,681      2,501,747
Wealth Management................          789,543        681,534
Other............................           73,293        107,945
                                    -------------- --------------
Total............................   $    6,053,517 $    3,291,226
                                    ============== ==============
</TABLE>



                                       85
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

7. Foreign sales and operations

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

      Financial information relating to geographic areas:


<TABLE>
<CAPTION>

                                          Year Ended   Year Ended   Year Ended
                                           December     December   December 31,
                                           31, 2003     31, 2002       2001
                                         ------------ ------------ ------------
<S>                                      <C>          <C>          <C>
Revenues
U.S. business.........................   $    405,197 $    218,515 $    109,680
Non--U.S. business.....................       152,169       87,697       11,282
                                         ------------ ------------ ------------
Total.................................   $    557,366 $    306,212 $    120,962
                                         ============ ============ ============

</TABLE>


8. Earnings per ordinary share

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

<TABLE>
<CAPTION>

                                          Year Ended        Year Ended        Year Ended
                                         December 31,      December 31,      December 31,
                                            2003              2002              2001
                                       --------------    --------------    --------------
<S>                                    <C>               <C>               <C>
Numerator:
Net income .........................   $       27,280    $       32,524    $       16,839
                                       ==============    ==============    ==============
Denominator:
Denominator for basic earnings
  per ordinary share
Weighted average number of
  ordinary shares ..................       30,652,719        25,190,283        15,646,106
Effect of dilutive securities
  - Stock options ..................          885,552           839,387           660,387
  - Warrants .......................          689,730           475,942           178,845
                                       --------------    --------------    --------------
Denominator for dilutive earnings
  per ordinary share ...............       32,228,001        26,505,612        16,485,338
                                       ==============    ==============    ==============
Basic earnings per share:
   Income from continuing operations   $         1.59    $         1.32    $        1.10
   Cumulative effect of change in
   accounting principle ............            (0.64)              --              (0.02)
   Discontinued operations .........            (0.06)            (0.03)              --
                                       --------------    --------------    --------------
   Net income ......................   $         0.89    $         1.29    $         1.08
                                       ==============    ==============    ==============
Diluted earnings per share:
   Income from continuing operations   $         1.51    $         1.25    $         1.05
   Cumulative effect of change in
   accounting principle ............            (0.60)              --              (0.03)
   Discontinued operations .........            (0.06)            (0.02)              --
                                       --------------    --------------    --------------
   Net income ......................   $         0.85    $         1.23    $         1.02
                                       ==============    ==============    ==============

</TABLE>

                                       86
<PAGE>




                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

9.    Investments

      The amortized cost,  gross  unrealized  appreciation  and depreciation and
estimated fair values of our fixed maturity  investments  and preferred stock at
December 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>

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


<TABLE>
<CAPTION>

                                                       December 31, 2002
                                       --------------------------------------------------
                                                      Gross         Gross      Estimated
                                       Amortized    Unrealized   Unrealized      Fair
                                          Cost     Appreciation Depreciation     Value
                                       ----------   ----------   ----------    ----------
<S>                                    <C>          <C>          <C>           <C>
U.S. Treasury securities and U.S. ..
   government agency obligations ...   $   12,943   $      865   $     --      $   13,808
Corporate securities ...............      537,601       17,657       (5,322)      549,936
Municipal bonds ....................        1,659         --             (1)        1,658
Mortgage and asset backed securities      439,101       10,265      (10,822)      438,544
                                       ----------   ----------   ----------    ----------
Total ..............................   $  991,304   $   28,787   $  (16,145)   $1,003,946
                                       ==========   ==========   ==========    ==========
</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, 2003
                                                     ------------------------------
                                                        Amortized        Estimated
                                                          Cost          Fair Value
                                                     -------------    -------------
<S>                                                  <C>              <C>
Due in one year or less...........................   $      51,076    $      51,537
Due in one year through five years................         409,451          419,879
Due in five years through ten years...............         596,079          604,697
Due after ten years...............................         118,153          119,888
                                                     -------------    -------------
                                                         1,174,759        1,196,001
Mortgage and asset backed securities..............         818,488          818,718
                                                     -------------    -------------
Total.............................................   $   1,993,247    $   2,014,719
                                                     =============    =============
</TABLE>



                                       87
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

9.    Investments (continued)



      Gross realized gains and losses are as follows:

<TABLE>
<CAPTION>

                                           Year Ended     Year Ended     Year Ended
                                            December       December       December
                                            31, 2003       31, 2002       31, 2001
                                          ------------   ------------   ------------
<S>                                       <C>            <C>            <C>
Proceeds from sale of investments......   $    307,141   $    183,588   $    297,337
                                          ============   ============   ============

Gross realized gains...................   $      7,796   $      7,968   $      5,160
Gross realized losses (1)..............        (13,506)       (18,595)        (9,064)
                                          ------------   ------------   ------------
Net realized losses....................         (5,710)       (10,627)        (3,904)
Other gains and losses.................          1,262           (177)            22
                                          ------------   ------------   ------------
Realized losses........................   $     (4,648)  $    (10,804)  $     (3,882)
                                          ============   ============   ============
</TABLE>

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

(1)   Includes $ 6.3 million,  $10.0 million and $4.0 million in 2003,  2002 and
      2001,  respectively in respect of fixed maturity  investments written down
      to estimated  realizable  values and $2.9  million,  $2.5 million and $2.9
      million  in 2003,  2002 and  2001  respectively  in  respect  of  modified
      coinsurance receivables written down to estimated realizable values.

      At December 31, 2003 and 2002, we did not have a material concentration of
investments  in  fixed  income  securities  in  a  single  issuer,  industry  or
geographic location.

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

<TABLE>
<CAPTION>

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




<TABLE>
<CAPTION>

                                         December 31, 2002
                  ----------------------------------------------------------------------
                                            Estimated
                                             Fair                  Unrealized
Days              Book Value     %           Value         %          Loss           %
----              ----------    -----       --------     -----       --------      -----
                                        Dollars in thousands
<C>                <C>           <C>        <C>           <C>        <C>            <C>
0-90 ............  $ 81,724      38.3%      $ 79,557      40.3%      $ (2,167)      13.4%
91-180 ..........    53,663      25.1         50,082      25.4         (3,581)      22.2
181-270 .........    21,621      10.1         17,759       9.0         (3,862)      23.9
271-360 .........     7,227       3.4          6,212       3.1         (1,015)       6.3
Greater than 360     49,420      23.1         43,900      22.2         (5,520)      34.2
                   --------     -----       --------     -----       --------      -----
Total ...........  $213,655     100.0%      $197,510     100.0%      $(16,145)     100.0%
                   ========     =====       ========     =====       ========      =====

</TABLE>

                                       88
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003


10. Funds withheld at interest

      At December 31, 2003,  funds  withheld at interest  were in respect of six
fixed annuity reinsurance contracts with three ceding companies. At December 31,
2002 we had four fixed annuity reinsurance  contracts with two ceding companies.
We had three contracts with Lincoln  National  Insurance  Company that accounted
for $1.3  billion at December  31, 2003 and $1.1  billion at December  31, 2002,
which  represented  86%  and  98% of the  funds  withheld  balances.  The  other
contracts were with Illinois Mutual Insurance Company and American Founders Life
Insurance  Company.  Lincoln National  Insurance Company has financial  strength
ratings of "A+" from A.M. Best, "AA-" from Standard & Poor's, "Aa3" from Moody's
and "AA" from Fitch. In the event of insolvency of the ceding companies on these
arrangements  we  would  need to  exert a claim  on the  assets  supporting  the
contract  liabilities.  However, the risk of loss is mitigated by our ability to
offset  amounts  owed to the ceding  company  with the amounts owed to us by the
ceding company.

      According to data provided by our ceding  companies,  the amortized  cost,
gross  unrealized  appreciation  and  depreciation  and estimated fair values of
assets,  excluding cash,  backing our funds withheld at interest at December 31,
2003 and 2002 are as follows:


<TABLE>
<CAPTION>

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


<TABLE>
<CAPTION>

                                                   December 31, 2002
                                        -------------------------------------------------------
                                                       Gross         Gross         Estimated
                                        Amortized    Unrealized     Unrealized       Fair
                                           Cost     Appreciation   Depreciation      Value
                                       -----------   -----------    -----------    -----------
<S>                                    <C>           <C>            <C>            <C>
U.S. Treasury securities and U.S. ..
  government agency obligations ....   $    10,230   $       343    $      --      $    10,573
Corporate securities ...............       778,251        56,377        (12,468)       822,160
Municipal bonds ....................           501             8           --              509
Mortgage and asset backed securities       201,887        11,364           (101)       213,150
                                       -----------   -----------    -----------    -----------
                                           990,869        68,092        (12,569)     1,046,392
Commercial mortgage loans ..........       101,360        10,908           --          112,268
                                       -----------   -----------    -----------    -----------
Total ..............................   $ 1,092,229   $    79,000    $   (12,569)   $ 1,158,660
                                       ===========   ===========    ===========    ===========
</TABLE>



                                       89
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

10. Funds withheld at interest (continued)

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

<TABLE>
<CAPTION>

                                                       December 31, 2003
                                               -------------------------------
                                                                Estimated Fair
                                               Amortized Cost        Value
                                               -------------   --------------
<S>                                            <C>             <C>
Due in one year or less.....................   $      10,582   $       10,938
Due in one year through five years..........         268,943          288,941
Due in five years through ten years.........         665,959          720,158
Due after ten years.........................          78,731           81,039
                                               -------------   --------------
                                                   1,024,215        1,101,076
Mortgage and asset backed securities........         318,151          328,923
                                               -------------   --------------
Total .....................................    $   1,342,366   $    1,429,999
                                               =============   ==============
</TABLE>





11.   Reinsurance ceded

      Premiums earned are analyzed as follows

<TABLE>
<CAPTION>

                                  Year ended      Year ended       Year ended
                                 December 31,    December 31,     December 31,
                                     2003            2002             2001
                                -------------   --------------  --------------
<S>                             <C>             <C>             <C>
Premiums assumed............    $     415,653   $      210,166  $       68,581
Premiums ceded...............         (23,677)          (7,630)           (237)
                                -------------   --------------  --------------
Premiums earned..............   $     391,976   $      202,536  $       68,344
                                =============   ==============  ==============
</TABLE>

      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.  Claims and other  policy
benefits are net of  reinsurance  recoveries  of $21.4  million and $8.5 million
during the years ended December 31, 2003 and 2002.


                                       90
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

12. Present value of in-force business

      A reconciliation of the present value of in-force business is as follows:
<TABLE>
<CAPTION>

                                               December   December   December
                                               31, 2003   31, 2002   31, 2001
                                               --------   --------   --------
<S>                                            <C>        <C>        <C>
Balance at beginning of year................   $ 18,181   $ 20,383   $ 10,433
Acquisition of Scottish Re Holdings Limited.         --         --     10,156
Amortization................................     (4,926)    (2,777)      (206)
Other.......................................        224        575         --
                                               --------   --------   --------
Balance at end of year......................   $ 13,479   $ 18,181   $ 20,383
                                               ========   ========   ========
</TABLE>

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

            Year ending December 31
            -----------------------
            2004 ..................   2,418
            2005 ..................   1,899
            2006 ..................   2,057
            2007 ..................   1,987
            2008 ..................   2,284
            Thereafter ............   2,834


13.   Reinsurance transactions

      The following table  summarizes the  acquisitions of in-force  reinsurance
transactions completed by us during 2002 and 2001. There were no acquisitions of
in-force reinsurance  transactions in 2003. 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    December
                                          31, 2002    31, 2001
                                          --------   --------
<S>                                       <C>        <C>
      Fair value of assets acquired ...   $ 26,032   $107,353
      Deferred acquisition costs ......      6,571     11,000
                                          --------   --------
      Total assets acquired ...........   $ 32,603   $118,353
                                          ========   ========
      Fair value of liabilities assumed   $ 32,603   $118,353
                                          ========   ========
</TABLE>



                                       91
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003


14.   Deferred acquisition costs

      The change in deferred acquisition costs is as follows:

<TABLE>
<CAPTION>

                                             December    December     December
                                             31, 2003    31, 2002     31, 2001
                                            ---------    ---------    ---------
<S>                                         <C>          <C>          <C>
Balance beginning of period .............   $ 213,516    $ 113,898    $  30,922
Expenses deferred .......................     167,185      129,306       83,092
Amortization expense ....................     (74,239)     (28,178)     (11,116)
Deferred  acquisition  costs on  in-force
  reinsurance transactions purchased ....        --          6,571       11,000
Deferred acquisition costs on realized
  losses ................................       2,129       (8,081)        --
                                            ---------    ---------    ---------
Balance at end of year ..................   $ 308,591    $ 213,516    $ 113,898
                                            =========    =========    =========
</TABLE>


15.   Long-term debt

      Long-term debt consists of:

<TABLE>
<CAPTION>

                                                         December    December
                                                         31, 2003    31, 2002
                                                        ---------   ---------
<C>                                                     <C>         <C>
4.5% senior convertible notes due 2022...............   $ 115,000   $ 115,000
Capital securities due 2032..........................      17,500      17,500
Preferred trust securities due 2033..................      20,000           -
Trust preferred securities due 2033..................      10,000           -
                                                        ---------   ---------
                                                        $ 162,500   $ 132,500
                                                        =========   =========
</TABLE>

4.5% Senior convertible notes

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

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


                                       92
<PAGE>

                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003



15.   Long-term debt(continued)

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

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

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

      o     if we have called those notes for redemption; or

      o     upon the occurrence of the certain specified corporate transactions.

      Under  a  registration  rights  agreement,  we  agreed  to file  with  the
Securities and Exchange Commission,  a shelf registration statement,  for resale
of the notes and our ordinary shares issuable upon conversion of the notes. This
registration  statement  has been  filed and  later  declared  effective  by the
Securities and Exchange Commission on April 4, 2003.

Capital securities

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

      The capital  securities mature on December 4, 2032. They are redeemable in
whole or in part at any  time  after  December  4,  2007.  Interest  is  payable
quarterly  at a rate  equivalent  to 3 month LIBOR plus 4%. At December 31, 2003
and December 31, 2002,  the interest  rates were 5.15% and 5.38%,  respectively.
Prior to December 4, 2007,  interest  cannot exceed  12.5%.  Capital Trust I may
defer payment of the interest for up to 20 consecutive quarterly periods, but no
later than  December  4, 2032.  Any  deferred  payments  would  accrue  interest
quarterly on a compounded  basis if Scottish  Holdings,  Inc. defers interest on
the Debentures due December 4, 2032 (as described below).

      The sole  assets of  Capital  Trust I consist of $18.0  million  principal
amount of  Floating  Rate  Debentures  (the  "Debentures")  issued  by  Scottish
Holdings, Inc. The Debentures mature on December 4, 2032 and interest is payable
quarterly  at a rate  equivalent  to 3 month LIBOR plus 4%. At December 31, 2003
and December 31, 2002,  the interest  rates were 5.15% and 5.38%,  respectively.
Prior to December 4, 2007, interest cannot exceed 12.5%. Scottish Holdings, Inc.
may defer payment of the interest for up to 20  consecutive  quarterly  periods,
but no later than December 4, 2032. Any deferred  payments would accrue interest
quarterly  on a  compounded  basis.  Scottish  Holdings,  Inc.  may  redeem  the
Debentures  at any time  after  December  4,  2007 and in the  event of  certain
changes in tax or investment company law.

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


                                       93
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

15.   Long-term debt(continued)

Preferred trust securities

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

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

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

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

      Trust Preferred Securities

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

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

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

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


                                       94
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

16.   Mezzanine equity

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

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

      o     A convertible preferred share with a liquidation  preference of $25,
            convertible into ordinary  shares,  which we will settle in cash and
            ordinary shares on May 21, 2007.

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

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

      o     If the  Applicable  Market Value is greater  than $19.32,  then each
            purchase contract will be settled for a number of ordinary shares by
            dividing $25 by the Applicable Market Value.

      The convertible shares will be initially  convertible into 1.0607 ordinary
shares per $25 liquidation  preference  (referred to as the "conversion  rate"),
subject to anti-dilution adjustments.  This reflects an initial conversion price
of $23.57.  Upon  conversion  we will deliver cash equal to the $25  liquidation
preference  and  ordinary  shares for the value of the  excess,  if any,  of the
conversion   obligation  minus  the  liquidation   preference.   The  conversion
obligation is the  conversion  rate at the time of conversion  multiplied by the
average  trading price of our ordinary shares for a specified  period  following
the redemption date.

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

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

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

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

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

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

      We have  accounted  for the  HyCUs  in  accordance  with  SFAS  No.  150 "
Accounting for Certain  Instruments  with  Characteristics  of Debt and Equity".
Accordingly, the HyCUs have been recorded as mezzanine equity of $141.9 million,
which is net of issuance costs related to the convertible  preferred shares. The
present  value of the


                                       95
<PAGE>

                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

16.   Mezzanine equity (continued)

contract  adjustment  payments  (discounted at a rate of 4.75%) of $20.5 million
has been included in other  liabilities and resulted in a decrease in additional
paid-in  capital at the date of  issuance.  Issue costs on the forward  contract
have also been  included in  additional  paid-in  capital.  The dividends on the
convertible preferred shares are included in interest expense.


17.   Shareholders' equity

Ordinary shares

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

      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  Scottish Re Holdings  Limited,  resulting in
20,144,956 outstanding ordinary shares.

      On April 4, 2002,  we completed a public  offering of  6,750,000  ordinary
shares (which included the over-allotment  option of 750,000 ordinary shares) in
which we raised  aggregate net proceeds of $114.3 million.  We used the proceeds
of the equity  offering to repay  short-term  borrowings  of $40 million and the
remainder for general corporate  purposes.  During 2002, we issued 32,500 shares
to employees upon the exercise of stock options.

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

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

      At December 31, 2003, there were 35,228,411 outstanding ordinary shares.

Preferred shares

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

      On  December  17 and  December  22,  2003,  in  connection  with  our HyCU
offering,  we issued 5,750,000  convertible  preferred shares having a per share
liquidation  preference of $25 and an initial  conversion rate of 1.067 ordinary
shares per $25 liquidation preference, subject to anti-dilution adjustments. The
convertible  preferred  shares  have a 1%  annual  dividend  rate  and  will  be
mandatorily  redeemed  by us on  May  21,  2007.  See  Note  16  for  additional
description of the terms of the convertible preferred shares.


                                       96
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

17.  Shareholders' equity (continued)

Warrants

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

      In connection with our initial capitalization,  we issued Class A warrants
to 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.


18.   Employee benefit plans

Pension plan

      We provide retirement benefits to the majority of employees, under defined
contribution  plans.  Defined  contribution  plan expenses totaled $1.1 million,
$878,000  and $414,000  for the years ended  December  31, 2003,  2002 and 2001,
respectively.  In 2002 pension  benefits  were  provided to Scottish Re Holdings
Limited  employees  under a  defined  benefit  pension  plan.  During  2003,  we
established a defined  contribution plan for Scottish Re Holdings  Limited.  New
employees  in 2003 joined this plan and a number of employees  transferred  from
the defined benefit scheme to the defined contribution scheme. A small number of
employees  remain  in the  defined  benefit  plan and,  additionally,  there are
preserved  benefits for some  transferees  and some  ex-employees in the defined
benefit plan.


                                       97
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

18. Employee benefit plans (continued)

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

<TABLE>
<CAPTION>

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


<TABLE>
<CAPTION>

                                                 December   December
                                                 31, 2003   31, 2002
                                                 -------    -------
<S>                                              <C>        <C>
Change in benefit obligation
 Benefit obligation at beginning of year         $ 6,120    $ 4,155
 Foreign currency translation adjustment             738       --
 Service cost ..........................             508        314
 Interest cost .........................             363        243
 Actuarial loss ........................             524      1,666
 Benefits paid .........................             (72)      (258)
                                                 -------    -------
Benefits obligation at end of year .....         $ 8,181    $ 6,120
                                                 =======    =======
Funded status ..........................         $    62    $(1,725)
Unrecognized net loss ..................           2,747      2,475
                                                 -------    -------
Prepaid benefit cost ...................         $ 2,809    $   750
                                                 =======    =======


      Amounts recognized in the statement of financial position consist of:



Prepaid benefit cost .........................   $   2,809    $     750
Accumulated other comprehensive income .......        --         (1,959)
                                                 =========    =========
Net amount recognized ........................   $   2,809    $  (1,209)
                                                 =========    =========
Weighted  average  assumptions  as of December
31, 2003 and 2002
  Weighted average discount rate .............        5.50%        5.50%
  Expected return on plan assets .............        6.50%        6.50%
  Rate of salary increases ...................        4.25%        4.25%
  Rate of inflation ..........................        2.5%         2.25%

</TABLE>

                                       98
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

18. Employee benefit plans (continued)

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


      The components of net defined benefit pension costs are as follows:
<TABLE>
<CAPTION>

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


      As a result of the accumulated  benefit obligation being in excess of plan
assets at December 31, 2002 a minimum pension liability adjustment,  net of tax,
of $1.4 million net was recorded in other accumulated  comprehensive  income. At
December  31,  2003,  plan  assets  were in  excess of the  accumulated  benefit
obligation resulting in a change in other comprehensive income of $1.4 million.

401(k) plan

      We sponsor a 401(k) plan in the U.S. in which employee  contributions on a
pre-tax basis are supplemented by matching  contributions.  These  contributions
are  invested,  at the  election  of the  employee,  in one or  more  investment
portfolios.  Expenses for the plan amounted to $482,000,  $390,000 and $269,000,
respectively, in the years ended December 31, 2003, 2002 and 2001.

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 granted options issued prior to
December  31,  2001  become  exercisable  in three  equal  annual  installments.
Commencing  January 1, 2002, all granted options 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.

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

      In December 2002,  the Financial  Accounting  Standards  Board issued SFAS
No.148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an
Amendment of FASB Statement No. 123".  Effective


                                       99
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

18. Employee benefit plans (continued)

January 1, 2003, we adopted the modified  prospective method of fair value-based
stock  option  expense  provisions  of SFAS No. 123 as amended by SFAS No.  148.
Compensation  expense has been  recognized  for all stock options  granted since
January 1, 2003. This has resulted in a charge to income of $207,000 in the year
ended December 31, 2003.

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

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

      Option activity under all Plans is as follows:

<TABLE>
<CAPTION>

                                  Year Ended    Year Ended    Year Ended
                                 December 31,  December 31,  December 31,
                                    2003          2002          2001
                                 ----------    ----------    ----------
<S>                               <C>           <C>           <C>
Outstanding, beginning of year    3,398,103     2,750,601     2,325,436
Granted ......................      180,000       861,500       601,000
Exercised ....................     (425,955)      (32,500)      (98,336)
Cancelled ....................      (64,831)     (181,498)      (77,499)
                                 ----------    ----------    ----------
Outstanding and exercisable,
end of year ..................    3,087,317     3,398,103     2,750,601
                                 ==========    ==========    ==========
Weighted average exercise
price per share:
Granted ......................   $  18.2515    $  18.0262    $  14.4486
Exercised ....................   $  10.7494    $   8.5982    $  13.2154
Cancelled ....................   $  18.2761    $  14.2490    $  10.6780
Outstanding and exercisable,
end of year ..................   $  13.3634    $  12.8706    $  11.2963
</TABLE>


                                      100
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

18. Employee benefit plans (continued)

      Summary of options outstanding at December 31, 2003:

<TABLE>
<CAPTION>

                                                    Weighted                         Weighted
                                          Weighted   Average    Number    Weighted    Average
Year    Number                             Average  Remaining     of       Average  Remaining
of      of          Range of              Exercise Contractual  Shares     Exercise Contractual
Grant   Shares      Exercise Prices        Price       Life     Vested       Price      Life
       ---------    ------------------   -----------   ----   ---------   -----------   ----
<C>      <C>       <C>                   <C>           <C>      <C>       <C>           <C>
1998     536,669   $           15.0000   $     15.00   4.92     536,669   $     15.00   4.92
1999     566,850    $8.0625 - $15.0000   $      9.57   4.01     566,850   $      9.75   4.01
2000     679,333    $7.7500 - $ 9.7500   $      8.22   5.87     679,333   $      8.22   5.87
2001     396,165    $7.0000 - $18.7600   $     14.52   6.39     259,018   $     14.51   6.39
2002     728,300   $15.5000 - $21.5100   $     18.05   8.15     176,300   $     18.34   8.14
2003     180,000   $20.7600 - $17.1300   $     18.25   9.43      14,000   $     17.70   9.34
       ---------    ------------------   -----------   ----   ---------   -----------   ----
       3,087,317    $7.0000 - $21.5100   $     13.36   6.17   2,232,170   $     11.78   5.43
       =========    ==================   ===========   ====   =========   ===========   ====

</TABLE>


<TABLE>
<CAPTION>

                                    Option     Option
                                    Plans      Plans not
                                 Approved by  Approved by  Total Option
                                 Shareholders Shareholders   Plans
                                  ---------   ---------   ---------
<S>                               <C>         <C>         <C>
Outstanding ...................   1,955,069   1,132,248   3,087,317
Weighted average exercise price   $ 11.9778   $ 14.1659   $ 13.3634
Available for future issuance .      54,995      50,897     105,892
</TABLE>


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

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

      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        Year       Year
                                                    Ended       Ended      Ended
                                                   December    December   December
                                                   31, 2003    31, 2002    31, 2001
                                                   --------    --------    --------
<S>                                                <C>         <C>         <C>
Net income-- as reported .......................   $ 27,280    $ 32,524    $ 16,839
Stock-based employee compensation cost, net of
  related tax effects, included in the
  determination of net income as reported ......        207         639        --
Stock-based employee compensation cost, net of
  related tax effects, that would have been
  included in the determination of net
  income if the fair value based method had been
  applied to all awards ........................     (2,384)     (3,432)     (2,993)
                                                   --------    --------    --------
Net income-- pro forma .........................   $ 25,103    $ 29,731    $ 13,846
                                                   ========    ========    ========
</TABLE>


                                      101
<PAGE>




                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

18. Employee benefit plans (continued)


<TABLE>
<CAPTION>

                                                 Year       Year       Year
                                                 Ended      Ended      Ended
                                                December   December   December
                                                31, 2003   31, 2002  31, 2001
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
Basic net income per share-- as reported......  $   0.89   $   1.29   $   1.08
Basic net income per share-- pro forma........  $   0.82   $   1.17   $   0.88
Diluted net income per share-- as reported....  $   0.85   $   1.23   $   1.02
Diluted net income per share-- pro forma......  $   0.78   $   1.11   $   0.84

</TABLE>


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

<TABLE>
<CAPTION>

                                              Year Ended  Year Ended  Year Ended
                                               December    December    December
                                               31, 2003    31, 2002    31, 2001
                                              ---------   ---------   ---------
<S>                                           <C>         <C>         <C>
Discounted exercise price..................         --          --          --
Market price exercise price................   $  6.8170   $  6.5239   $  6.7825
Premium exercise price.....................         --          --          --

</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>

                                                     2003          2002          2001
                                                -------------  ------------   -------------
<S>                                             <C>                <C>            <C>
Expected dividend yield....................     1.00% - 0.816%     1.00%          1.00%
Risk free interest rate....................     1.06% - 4.44%  1.09% - 4.14%  4.16% - 5.20%
Expected life of options...................        7 years       7 years         7 years
Expected volatility........................          0.4           0.3             0.4
</TABLE>



      As of December 31, 2003,  60,501  options were  outstanding  in respect of
non-employees  (2002 - 89,001;  2001- Nil).  In 2002 we  modified  the awards of
certain  employees on their  termination of employment.  The expense recorded in
respect of this  modification  was  $639,000.  We apply the fair value method of
SFAS No.  123 in  accounting  for stock  options  granted to  non-employees  who
provide services to us.



<PAGE>

19.  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 Re and  Scottish  Annuity & Life
Insurance Company (Cayman) Ltd. have been granted exemptions until 2018; and The
Scottish Annuity Company  (Cayman) Ltd. has been granted  exemptions until 2014.
These  companies  operate in a manner such that they will owe no U.S.  tax other
than premium excise taxes and withholding taxes on certain investment income.

      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 5% rate.

      At  December  31,  2003,  we  had  net  operating  loss  carryforwards  of
approximately  $168.4 million (2002-$83.8  million) for income tax purposes that
expire in years 2012 through 2018. These  carryforwards  resulted


                                      102
<PAGE>



                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

19.   Taxation (continued)

primarily from our 1999 acquisition of Scottish Re (U.S.), Inc. and from current
operations of Scottish Re (U.S.), Inc.

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

<TABLE>
<CAPTION>

                                                 December 31,    December 31,
                                                     2003            2002
                                               ------------     ------------
<S>                                            <C>              <C>
Deferred tax assets:
  Net operating losses.......................  $     61,077     $     28,968
  Reserves for future policy benefits........        13,656               --
  Unrealized depreciation on investments.....           483               --
  Pension liability..........................            --              363
  Negative proxy deferred acquisition costs..         1,816              389
  Other......................................         3,121            1,898
                                               ------------     ------------
Total deferred tax assets....................        80,153           31,618
                                               ------------     ------------
Deferred tax liabilities:....................
  Unrealized appreciation on investments.....        (8,387)          (5,147)
  Undistributed earnings of U.K.  subsidiaries       (6,315)          (5,796)
  Deferred acquisition costs.................       (21,893)         (13,649)
  Pension liability..........................          (859)              --
  Reserves for future policy benefits........       (27,086)         (13,415)
  Other......................................        (2,989)          (2,682)
                                               ------------     ------------
Total deferred tax liabilities...............       (67,529)         (40,689)
                                               ------------     ------------
Net deferred tax asset (liability)...........  $     12,624     $     (9,071)
                                               ============     ============

</TABLE>


      For the years ended December 31, 2003, 2002 and 2001 we have income tax
expense (benefit) from operations as follows:

<TABLE>
<CAPTION>

                                           Year Ended  Year Ended   Year Ended
                                            December    December     December
                                            31, 2003    31, 2002     31, 2001
                                          ---------    ---------   ---------
<S>                                       <C>          <C>         <C>
Current tax payable....................   $   1,075    $   1,421   $   1,351
Deferred tax benefit...................     (12,180)      (3,315)     (1,292)
                                          ---------    ---------   ---------
Total tax expense
 (benefit).............................   $ (11,105)   $  (1,894)  $      59
                                          =========    =========   =========
</TABLE>


      The income tax benefit in 2001 included  $0.6 million  related to a change
in valuation allowance on capital loss carryforwards  related to the purchase of
Scottish  Re (U.S.),  Inc.  that was due to  management's  ability to  implement
certain tax planning strategies to preserve the tax benefit of the losses.


                                      103
<PAGE>




                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

19.   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   Year Ended
                                          December     December     December
                                          31, 2003     31, 2002     31, 2001
                                          ---------    ---------   ---------
<S>                                       <C>          <C>         <C>
Pretax GAAP income at 34%..............   $  12,833    $  10,310   $   5,859
Income not subject to tax at 34%.......     (24,229)     (16,819)     (6,615)
Foreign taxes..........................       3,109        3,997       1,265
Negative DAC...........................      (1,427)         695          61
Change in valuation allowance..........          --           --        (552)
Other state taxes......................      (1,391)         (77)         41
                                          ---------    ---------   ---------
Total tax (benefit) expense............   $ (11,105)   $  (1,894)  $      59
                                          =========    =========   =========
</TABLE>


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

      The maximum  amount of  dividends  that can be paid by Scottish Re (U.S.),
Inc. (a Delaware  domiciled  insurance  company)  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, 2003 was $52.0 million (2002-$52.1 million). The maximum dividend that could
be paid in 2003  without  prior  approval is $5.2 million  (2002-$5.2  million).
Scottish Re (U.S.),  Inc.'s net assets,  which are  restricted  by the above are
$172.4 million (2002-$119.2 million).

      The maximum  amount of dividends  that can be paid by ERC Life (a Missouri
domiciled insurance company) without prior approval of the Director of Insurance
in any twelve  month  period 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 policyholders  surplus as of December 31 of the
preceding year,  provided  however,  that dividends may be paid only from earned
surplus,  although the Director of Insurance may permit the payment of dividends
from other than earned  surplus.  The statutory  surplus of ERC Life at December
31, 2003 was $143.8 million. As a result of previously paid dividends,  however,
ERC Life had negative unassigned surplus at December 31, 2003. Thus, the



                                      104
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

20. Statutory requirements and dividend restrictions (continued)


permission  of the  Director  must be sought for the payment of any  dividend in
2004.  ERC Life intends to seek the  Director's  approval to restate  unassigned
surplus to zero  pursuant to the certain  reorganization  provisions.

      The NAIC  prescribes  risk-based  capital  ("RBC")  requirements  for U.S.
domiciled life and health insurance companies. As of December 31, 2003 and 2002,
Scottish Re (U.S.),  Inc. and ERC Life exceeded all minimum RBC  requirements.

      In connection with the Insurance Companies Act 1982 of the United Kingdom,
Scottish Re Limited is required  to  maintain  statutory  minimum net capital of
approximately  $34.0  million at December 31, 2003  (September  30, 2002 - $22.4
million).  Scottish  Re Limited had  statutory  capital of  approximately  $58.0
million at December 31, 2003 (September 30, 2002 - $34.9 million).


21.   Commitments and contingencies

Credit facilities

      During 2003, we renewed our credit facilities, which currently consist of:

            a)    a credit  facility  totaling  $50.0  million,  of which  $25.0
                  million is available on an unsecured  basis and $25.0  million
                  is  available  on  a  secured  basis.  The  facility  provides
                  capacity for  borrowings  and letters of credit.  The interest
                  rates on amounts  borrowed under the secured facility is LIBOR
                  plus 50 basis points and under the unsecured facility is LIBOR
                  plus 75 basis points.  This  facility  expires in October 2004
                  but it is renewable upon the agreement of both parties.

            b)    a  secured  credit  facility  totaling  $50.0  million.   This
                  facility  provides a combination  of borrowings and letters of
                  credit. Interest rates on amounts borrowed under this facility
                  is LIBOR  plus 45  basis  points.  This  facility  expires  in
                  September  2004 but is  renewable  upon the  agreement of both
                  parties.

      One of the  facilities  requires  that Scottish  Annuity & Life  Insurance
Company (Cayman) Ltd. maintains shareholder's equity of at least $340.0 million.
At December 31, 2003,  Scottish Annuity & Life Insurance  Company (Cayman) Ltd's
shareholder's  equity was  $779.7  million.  The other  facility  requires  that
Scottish Re maintain consolidated net worth of $520.0 million, a maximum debt to
total capitalization  ratio of 30% and uncollateralised  assets of 1.2 times any
unsecured  borrowings.  At December 31, 2003, Scottish Re's net worth was $659.8
million and the ratio of debt to total  capitalization was 16.9%. Our failure to
comply with the requirements of the credit  facilities  would,  subject to grace
periods,  result in an event of  default,  and we could be required to repay any
outstanding borrowings. At December 31, 2003, there were no borrowings under the
facilities.  Outstanding  letters of credit under these  facilities  amounted to
$31.2 million (2002 - $9.1 million).

      We also have a reverse  repurchase  agreement with a major  broker/dealer.
Under  this  agreement,  we have the  ability  to sell  agency  mortgage  backed
securities with the agreement to repurchase them at a fixed price, providing the
dealer  with a spread  that  equates to an  effective  borrowing  cost linked to
one-month  LIBOR.  This agreement is renewable  monthly at the discretion of the
broker/dealer.  At  December  31,  2003 and  December  31,  2002,  there were no
borrowings under this agreement.


                                      105
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

21. Commitments and contingencies (continued)

Lease commitments

      Scottish Re and its  subsidiaries  lease office space in the  countries in
which they conduct  business under operating leases that expire at various dates
through 2023.  Total rent expense with respect to these operating leases for the
years ended December 31, 2003, 2002 and 2001, were  approximately  $1.7 million,
$939,000 and $743,000, respectively

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

            Year ending December 31
            ------------------------------   -------
            2004 .........................   $ 1,905
            2005 .........................     1,799
            2006 .........................     1,610
            2007 .........................     1,610
            2008 .........................     1,446
            Later years ..................     6,746
                                             -------
            Total future lease commitments   $15,116
                                             =======


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.


22.   Quarterly financial data (Unaudited)

      Quarterly  financial  data  for the year  ended  December  31,  2003 is as
follows:
<TABLE>
<CAPTION>

                                                      Quarter Ended
                                       ------------------------------------------------
                                       December 31  September 30   June 30     March 31
                                        ---------   ---------    ---------   ---------
<S>                                     <C>         <C>          <C>         <C>
Total revenue .......................   $ 196,464   $ 134,550    $ 129,539   $  96,813
Income (loss) from continuing
   operations before income taxes and
   minority interest ................      27,222      (6,383)       9,233       7,673
Income from continuing operations ...      30,266       1,782        9,317       7,423
Net income ..........................      10,540       1,625        7,872       7,243
Basic earnings per ordinary share ...   $    0.30   $    0.05    $    0.29    $   0.27
Diluted earnings per ordinary share .   $    0.29   $    0.05    $    0.28    $   0.26
</TABLE>


                                      106
<PAGE>


                             SCOTTISH RE GROUP LTD.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                December 31, 2003

22. Quarterly financial data (Unaudited) (continued)

      Quarterly financial data for the year ended December 31, 2002 is as
follows:

<TABLE>
<CAPTION>

                                                      Quarter Ended
                                        December 31  September 30  June 30   March 31
                                        -----------  ------------  -------   ---------
<S>                                     <C>          <C>          <C>        <C>
Total revenue .......................   $109,196     $ 79,197     $ 64,359   $ 53,460
Income from continuing operations
   before income taxes and minority
   interest .........................     11,068        6,907        8,061      5,305
Income from continuing operations ...     13,191        7,107        7,939      4,998
Net income ..........................     12,698        6,979        7,849      4,998
Basic earnings per ordinary share ...   $   0.47     $   0.26     $   0.29    $  0.25
Diluted earnings per ordinary share .   $   0.45     $   0.25     $   0.28    $  0.23
</TABLE>


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

                                      107
<PAGE>



                                   SIGNATURES


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


         Signature                            Title                    Date
         ---------                            -----                    ----
   /s/ MICHAEL C. FRENCH        Chief Executive Officer and        March 2, 2004
                                Director

-----------------------------
     Michael C. French          (Principal Executive  Officer)     March 2, 2004
   /s/ SCOTT E. WILLKOMM

-----------------------------
     Scott E. Willkomm          President
             *

-----------------------------
       Michael Austin           Director
             *

-----------------------------
G. William Caulfeild-Browne     Director
             *

-----------------------------
      Robert M. Chmely          Director
             *

-----------------------------
     Lord Norman Lamont         Director
             *

-----------------------------
      Hazel R. O'Leary          Director
             *

-----------------------------
      Glenn S. Schafer          Director
             *

-----------------------------
       Khanh T. Tran            Director

*     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.

/s/ MICHAEL C. FRENCH
---------------------------
Michael C. French
Attorney-in-Fact


                                      108
<PAGE>


                                                                    Exhibit 31.1


                                  CERTIFICATION

I, Michael C. French,  Chief  Executive  Officer of Scottish Re Group  Limited
certify that:

      1. I have  reviewed  this annual  report on Form 10-K of Scottish Re Group
Limited ("the registrant");

      2. Based on my  knowledge,  this annual report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4. The registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and  15(d)-15(f))  for the
registrant and have:

            a)    designed such disclosure  controls and  procedures,  or caused
                  such  disclosure  controls and procedures to be designed under
                  our supervision,  to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during  the  period  in  which  this  annual  report  is being
                  prepared;

            b)    evaluated the  effectiveness  of the  registrant's  disclosure
                  controls  and  procedures  and  presented  in this  report our
                  conclusions about the effectiveness of the disclosure controls
                  and  procedures,  as of the end of the period  covered by this
                  report based on such evaluation; and

            c)    disclosed  in  this  report  any  change  in the  registrant's
                  internal control over financial reporting that occurred during
                  the   registrant's   most  recent  fiscal  quarter)  that  has
                  materially  affected,  or is  reasonably  likely to materially
                  affect,  the  registrant's  internal  control  over  financial
                  reporting; and

      5. The registrant's other certifying officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  to
the registrant's  auditors and the audit committee of the registrant's  board of
directors (or persons performing the equivalent functions):

            a)    all  significant  deficiencies  in the design or  operation of
                  internal   controls  over   financial   reporting   which  are
                  reasonable likely to adversely affect the registrant's ability
                  to   record,   process,   summarize   and   report   financial
                  information; and

            b)    any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's  internal  control over financial  reporting.

Date: March 2, 2004

/s/ Michael C. French

   Michael C. French
   Chief Executive Officer


                                      109
<PAGE>

                                                                    Exhibit 31.2

                                  CERTIFICATION

      I, Scott E. Willkomm, President of Scottish Re Group Limited certify that:

      1. I have  reviewed  this annual  report on Form 10-K of Scottish Re Group
Limited (the "registrant");

      2. Based on my  knowledge,  this annual report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4. The registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and  15(d)-15(f))  for the
registrant and have:

                  a)    designed such  disclosure  controls and  procedures,  or
                        caused such  disclosure  controls and  procedures  to be
                        designed under our supervision,  to ensure that material
                        information  relating to the  registrant,  including its
                        consolidated subsidiaries, is made known to us by others
                        within those entities, particularly during the period in
                        which this annual report is being prepared;

                  b)    evaluated   the   effectiveness   of  the   registrant's
                        disclosure controls and procedures and presented in this
                        report our conclusions  about the  effectiveness  of the
                        disclosure controls and procedures, as of the end of the
                        period covered by this report based on such  evaluation;
                        and

                  c)    disclosed in this report any change in the  registrant's
                        internal control over financial  reporting that occurred
                        during the registrant's most recent fiscal quarter) that
                        has  materially  affected,  or is  reasonably  likely to
                        materially  affect,  the  registrant's  internal control
                        over financial reporting; and

      5. The registrant's other certifying officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  to
the registrant's  auditors and the audit committee of the registrant's  board of
directors (or persons performing the equivalent functions):

                  a)    all significant  deficiencies in the design or operation
                        of internal controls over financial  reporting which are
                        reasonable  likely to adversely  affect the registrant's
                        ability  to  record,   process,   summarize  and  report
                        financial information; and

                  b)    any  fraud,  whether  or  not  material,  that  involves
                        management  or other  employees  who have a  significant
                        role in the registrant's internal control over financial
                        reporting.



Date: March 2, 2004

/s/ Scott E. Willkomm

   Scott E. Willkomm
   President

                                      110
<PAGE>

                                                                    Exhibit 31.3

                                  CERTIFICATION

      I,  Elizabeth  A.  Murphy,  Chief  Financial  Officer of Scottish Re Group
Limited certify that:

      1. I have  reviewed  this annual  report on Form 10-K of Scottish Re Group
Limited (the `registrant");

      2. Based on my  knowledge,  this annual report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4. The registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and  15(d)-15(f))  for the
registrant and have:

                  a)    designed such  disclosure  controls and  procedures,  or
                        caused such  disclosure  controls and  procedures  to be
                        designed under our supervision,  to ensure that material
                        information  relating to the  registrant,  including its
                        consolidated subsidiaries, is made known to us by others
                        within those entities, particularly during the period in
                        which this annual report is being prepared;

                  b)    evaluated   the   effectiveness   of  the   registrant's
                        disclosure controls and procedures and presented in this
                        report our conclusions  about the  effectiveness  of the
                        disclosure controls and procedures, as of the end of the
                        period covered by this report based on such  evaluation;
                        and

                  c)    disclosed in this report any change in the  registrant's
                        internal control over financial  reporting that occurred
                        during the registrant's most recent fiscal quarter) that
                        has  materially  affected,  or is  reasonably  likely to
                        materially  affect,  the  registrant's  internal control
                        over financial reporting; and

      5. The registrant's other certifying officers and I have disclosed,  based
on our most recent evaluation of internal control over financial  reporting,  to
the registrant's  auditors and the audit committee of the registrant's  board of
directors (or persons performing the equivalent functions):

                  a)    all significant  deficiencies in the design or operation
                        of internal controls over financial  reporting which are
                        reasonable  likely to adversely  affect the registrant's
                        ability  to  record,   process,   summarize  and  report
                        financial information; and

                  b)    any  fraud,  whether  or  not  material,  that  involves
                        management  or other  employees  who have a  significant
                        role in the registrant's internal control over financial
                        reporting.



Date: March 2, 2004

/s/ Elizabeth A. Murphy

   Elizabeth A. Murphy
   Chief Financial Officer

                                      111
<PAGE>

                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the  Quarterly  Report of  Scottish Re Group  Limited  (the
"Company") on Form 10-K for the annual  period ended  December 31, 2003 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, Michael C. French, Chief Executive Officer of the Company,  certify, pursuant
to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the  Sarbanes-Oxley Act
of 2002, that:

(1)   The Report fully complies with the  requirements of Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and

(2)   The information  contained in the Report fairly presents,  in all material
      respects, the financial condition and result of operations of the Company.

/s/ Michael C. French

Michael C. French

Chief Executive Officer

March 2, 2004

      A signed  original of this written  statement  required by Section 906 has
been  provided to Scottish Re Group  Limited and will be retained by Scottish Re
Group Limited and  furnished to the  Securities  and Exchange  Commission or its
staff upon request.



                                      112
<PAGE>




                                                                    Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the  Quarterly  Report of  Scottish Re Group  Limited  (the
"Company") on Form 10-K for the annual  period ended  December 31, 2003 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, Scott E. Willkomm,  President of the Company,  certify, pursuant to 18 U.S.C.
ss.  1350,  as adopted  pursuant to ss. 906 of the  Sarbanes-Oxley  Act of 2002,
that:

(1)   The Report fully complies with the  requirements of Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and

(2)   The information  contained in the Report fairly presents,  in all material
      respects, the financial condition and result of operations of the Company.

/s/ Scott E. Willkomm

Scott E. Willkomm

President

March 2, 2004

      A signed  original of this written  statement  required by Section 906 has
been  provided to Scottish Re Group  Limited and will be retained by Scottish Re
Group Limited and  furnished to the  Securities  and Exchange  Commission or its
staff upon request.



                                      113
<PAGE>

                                                                    Exhibit 32.3



                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the  Quarterly  Report of  Scottish Re Group  Limited  (the
"Company") on Form 10-K for the annual  period ended  December 31, 2003 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I,  Elizabeth  A.  Murphy,  Chief  Financial  Officer of the  Company,  certify,
pursuant  to 18  U.S.C.  ss.  1350,  as  adopted  pursuant  to  ss.  906  of the
Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the  requirements of Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and

(2)   The information  contained in the Report fairly presents,  in all material
      respects, the financial condition and result of operations of the Company.

/s/ Elizabeth A. Murphy

Elizabeth A. Murphy

Chief Financial Officer

March 2, 2004

      A signed  original of this written  statement  required by Section 906 has
been  provided to Scottish Re Group  Limited and will be retained by Scottish Re
Group Limited and  furnished to the  Securities  and Exchange  Commission or its
staff upon request.




                                      114
<PAGE>

                                                                    Exhibit 21.1

                              List of Subsidiaries

ERC Life Reinsurance Corporation

Scottish Annuity & Life Holdings (Bermuda) Limited

Scottish Annuity & Life Insurance Company (Bermuda) Limited

Scottish Annuity & Life Insurance Company (Cayman) Ltd.

Scottish Annuity & Life International Insurance Company (Bermuda) Ltd.

Scottish Holdings (Barbados), Limited

Scottish Holdings, Inc.

Scottish Re (Dublin) Limited

Scottish Re (U.S.), Inc.

Scottish Re Holdings Limited

Scottish Re Intermediaries (Canada) Limited

Scottish Re Limited

Scottish Solutions, LLC

Tartan Holdings (UK) Limited

Tartan Financial (UK)

Tartan Wealth Management, Inc.

The Scottish Annuity Company (Cayman) Ltd.

World-Wide Insurance PCC Limited


                                      115
<PAGE>


                                                                    Exhibit 24.1

                                POWER OF ATTORNEY

      KNOW ALL MEN BY  THESE  PRESENTS,  that  the  undersigned,  on  behalf  of
Scottish Re Group Limited,  a Cayman  Islands  company (the  "Company"),  hereby
constitutes  and appoints  Michael C. French and Scott E. Willkomm,  and each of
them, the true and lawful attorney or attorneys-in-fact,  with the full power of
substitution  and  resubstitution,  for the  Company,  to sign on  behalf of the
Company and on behalf of the  undersigned  in his or her  capacity as an officer
and/or a director of the Company,  the Company's  Annual Report on Form 10-K for
the year ended December 31, 2003, and to sign any or all amendments  thereto, to
or with the  Securities  and  Exchange  Commission  pursuant  to the  Securities
Exchange Act of 1934, as amended,  and the regulations  promulgated  thereunder,
granting  unto  said  attorney  or  attorneys-in-fact,  and each of them with or
without the others,  full power and  authority  to do and perform each and every
act and thing  requisite  and  necessary to be done in and about the premises in
order  to  effectuate  the  same as fully to all  intents  and  purposes  as the
undersigned  might or could in person,  hereby ratifying and confirming all that
said attorney or  attorneys-in-fact,  or any of them or their  substitutes,  may
lawfully do or cause to be done by virtue hereof.

      IN WITNESS WHEREOF,  I have executed this Power of Attorney as of March 2,
2004.



   /s/ MICHAEL C. FRENCH        /s/ MICHAEL AUSTIN       /s/ SCOTT E. WILLKOMM
     Michael C. French            Michael Austin           Scott E. Willkomm

       /S/ G. WILLIAM          /S/ ROBERT M. CHMELY      /S/ HAZEL R. O'LEARY
      CAULFEILD-BROWNE
   G.William Caulfeild-Browne     Robert M. Chmely         Hazel R. O'Leary

     /S/ KHANH T. TRAN         /S/ LORD NORMAN LAMONT    /S/ GLENN S. SCHAFER
       Khanh T. Tran            Lord Norman Lamont         Glenn S. Schafer



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