UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                               __________________

                                   FORM 10-Q/A

                                 Amendment No. 1

           [X] Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                  For the quarterly period ended June 30, 2004

     [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
                  For the Transition period from ____ to ______

                        Commission File Number 001-16855

                            SCOTTISH RE GROUP LIMITED

             (Exact Name of Registrant as Specified in Its Charter)


          Cayman Islands                                     98-0362785
 (State or Other Jurisdiction of                          (I.R.S. Employer
  Incorporation or Organization)                         Identification No.)

                                P.O. Box HM 2939
                            Crown House, Third Floor
                               4 Par-la-Ville Road
                                  Hamilton HM08
                                     Bermuda
                                                                  Not Applicable
                    (Address of Principal Executive Offices)       (Zip Code)

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


              (Former name, former address and former fiscal year,
                         if changed since last report)

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

As of July 29, 2004, Registrant had 35,845,962 ordinary shares outstanding.


<PAGE>

                            Scottish Re Group Limited
                         Quarterly Report on Form 10-Q/A

                                Explanatory Note


     This amendment on Form 10-Q/A amends the Company's Quarterly Report on Form
10-Q for the three and six month periods ended June, 30, 2004 as initially filed
with the Securities and Exchange Commission (the "SEC") on August 9, 2004 and is
being filed to reflect the restatement of the Company's consolidated financial
statements for the three and six month periods ended June 30, 2004, as
discussed in Note 15 to the Company's consolidated financial statements.


During the fourth quarter of 2004, Scottish Re Group Limited (the "Company")
determined that its International Segment had incorrectly reported premiums
earned, claims and other policy benefits, acquisition costs and other insurance
expenses and related income tax benefits in the quarter and six months ended
June 30, 2004. The effect of these errors was to understate net income by $1.1
million, or $0.03 per diluted share, in the three and six months ended June 30,
2004 and to understate shareholder's equity by $1.1 million at June 30, 2004.

The errors were made in the process of compiling income statement information on
the accrual of premiums and resulted from incorrect references within the
spreadsheets used to calculate these accruals. As a result, incorrect
information was referenced to prepare the journal entries used in updating the
general ledger for the International Segment. The errors were detected by
management as part of their ongoing documentation and testing of internal
controls over financial reporting for Sarbanes Oxley Section 404 reporting.

Management has taken a series of steps in its ongoing review of internal
controls over financial reporting to improve control processes, including those
involving the compilation of information used in reporting premium accruals, and
to avoid similar errors going forward. Management has also taken steps to
improve controls around segregation of responsibilities and review of manually
prepared information and has strengthened procedures for the reconciliation of
all material general ledger balances.

     On December 30, 2004, the Company's Audit Committee determined it was
appropriate to amend the previously filed consolidated financial statements
contained in the Company's second quarter 2004 Form 10-Q to reflect changes that
correct these errors.

     This report on Form 10-Q/A for the quarter ended June 30, 2004 reflects
restatements of the following financial statements:

     (a) Unaudited consolidated balance sheet at June 30, 2004

     (b) Unaudited consolidated statements of income for the three and six
months ended June 30, 2004

     (c) Unaudited consolidated statements of comprehensive income for the three
and six months ended June 30, 2004

     (d) Unaudited consolidated statement of shareholders' equity for the six
months ended June 30, 2004


                                       i
<PAGE>

     (e) Unaudited consolidated statement of cash flows for the six months ended
June 30, 2003

For a more detailed description of the restatements see Note 15 "Restatement of
Unaudited Consolidated Financial Statements" to the accompanying notes to the
unaudited consolidated financial statements.

     This report on Form 10-Q/A restates certain financial information, for the
applicable periods set forth in the notes to the consolidated financial
statements, in Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Item 4 "Controls and Procedures".

     Other items included in this report of Form 10-Q/A are not affected by the
restatements.



                                       ii
<PAGE>

                                Table of Contents


PART I.   FINANCIAL INFORMATION..............................................4


Item 1.   Financial Statements...............................................4

      Consolidated Balance Sheets - June 30, 2004 (Unaudited) and
      December 31, 2003......................................................4

      Unaudited Consolidated Statements of Income - Three and Six
      months ended June 30, 2004 and 2003....................................5

      Unaudited Consolidated Statements of Comprehensive Income - Three
      and Six months ended June 30, 2004 and 2003............................6

      Unaudited Consolidated Statements of Shareholders' Equity - Three
      and Six months ended June 30, 2004 and 2003............................7

      Unaudited Consolidated Statements of Cash Flows - Six months
      ended June 30, 2004 and 2003...........................................8

      Notes to Unaudited Consolidated Financial Statements...................9

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations.........................................27

Item 3.   Quantitative and Qualitative Disclosures About Market Risk........55

Item 4.   Controls and Procedures...........................................55

PART II.  OTHER INFORMATION.................................................56

Item 1.   Legal Proceedings.................................................56

Item 2.   Changes in Securities and Use of Proceeds.........................56

Item 3.   Defaults Upon Senior Securities...................................56

Item 4.   Submission of Matters to a Vote of Securities Holders.............57

Item 5.   Other Information.................................................58

Item 6.   Exhibits and Reports on Form 8-K..................................58


                                      iii
<PAGE>

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

                            Scottish Re Group Limited
             Consolidated Balance Sheets - June 30, 2004 (Unaudited)
                              and December 31, 2003
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                           JUNE 30, 2004        DECEMBER 31,
                                                                            (unaudited)             2003
                                                                           -------------        ------------
<S>                                                                     <C>                 <C>
ASSETS
Fixed maturity investments, available for sale, at fair value
(Amortized cost $2,565,516; 2003 - $1,993,247).....................     $       2,548,635    $      2,014,719
Preferred stock, available for sale, at fair value (Cost $139,686;
2003 -$125,460)....................................................               134,139             126,449
Cash and cash equivalents..........................................               270,503             298,149
Other investments..................................................                16,755              17,678
Funds withheld at interest.........................................             1,474,287           1,469,425
                                                                        -----------------    ----------------
     Total investments.............................................             4,444,319           3,926,420

Accrued interest receivable........................................                26,408              22,789
Reinsurance balances and risk fees receivable......................               324,723             196,192
Deferred acquisition costs.........................................               390,661             308,591
Amount recoverable from reinsurers.................................               746,161             737,429
Present value of in-force business.................................                11,922              13,479
Goodwill...........................................................                35,847              35,847
Fixed assets.......................................................                12,615              11,800
Other assets.......................................................                56,095              45,209
Deferred tax benefit...............................................                31,870              12,624
Segregated assets..................................................               794,020             743,137
                                                                        -----------------    ----------------
     Total assets..................................................     $       6,874,641    $      6,053,517
                                                                        =================    ================
LIABILITIES
Reserves for future policy benefits................................     $       1,684,603    $      1,502,415
Interest sensitive contract liabilities............................             3,220,301           2,633,346
Accounts payable and accrued expenses..............................                25,836              31,673
Reinsurance balances payable.......................................               105,452             125,756
Other liabilities..................................................                23,025              30,546
Current income tax payable.........................................                 5,991              13,077
Long term debt.....................................................               194,500             162,500
Segregated liabilities.............................................               794,020             743,137
                                                                        -----------------    ----------------
     Total liabilities.............................................             6,053,728           5,242,450
                                                                        -----------------    ----------------
MINORITY INTEREST                                                                   9,188               9,295
MEZZANINE EQUITY                                                                  142,145             141,928
SHAREHOLDERS' EQUITY
Share capital, par value $0.01 per ordinary share:
    Issued and fully paid: 35,828,462 ordinary shares (2003 -
    35,228,411)....................................................                   358                 352
Additional paid-in capital.........................................               555,445             548,750
Accumulated other comprehensive (loss) income......................                (3,139)             29,034
Retained earnings..................................................               116,916              81,708
                                                                        -----------------    ----------------
     Total shareholders' equity....................................               669,580             659,844
                                                                        -----------------    ----------------
     Total liabilities and shareholders' equity....................     $       6,874,641    $      6,053,517
                                                                        =================    ================
</TABLE>

      See Accompanying Notes to Unaudited Consolidated Financial Statements


                                       4
<PAGE>

                            Scottish Re Group Limited
               Unaudited Consolidated Statements of Income -
                Three and Six months ended June 30, 2004 and 2003
                  (Dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                       ------------------                   ----------------
                                                JUNE 30, 2004     JUNE 30, 2003     JUNE 30, 2004     JUNE 30, 2003
                                                -------------     -------------     -------------     -------------
<S>                                            <C>               <C>               <C>               <C>
REVENUES
Premiums earned..............................  $      155,980    $        94,737   $      289,327    $       159,556
Investment income, net.......................          54,817             35,814          104,919             68,138
Fee income...................................           3,189              2,380            6,141              4,371
Realized losses..............................          (1,687)            (3,392)            (266)            (5,713)
Change in value of embedded derivatives......          14,610                  -            5,964                  -
                                               --------------    ---------------   --------------    ---------------
     Total revenues..........................         226,909            129,539          406,085            226,352
                                               --------------    ---------------   --------------    ---------------

BENEFITS AND EXPENSES
Claims and other policy benefits.............         122,988             65,549          218,155            108,463
Interest credited to interest sensitive
contract liabilities.........................          25,465             16,874           49,658             32,767
Acquisition costs and other insurance
expenses, net................................          37,589             27,884           70,458             48,539
Operating expenses...........................          10,901              8,148           23,755             16,013
Interest expense.............................           2,996              1,851            5,773              3,664
                                               --------------    ---------------   --------------    ---------------
     Total benefits and expenses.............         199,939            120,306         367,799             209,446
                                               --------------    ---------------   --------------    ---------------
Income before income taxes and minority
interest....................................           26,970              9,233           38,286             16,906

Income tax benefit (expense).................           1,690                 84              816               (166)
                                               --------------    ---------------   --------------    ---------------
Income before minority interest..............          28,660              9,317           39,102             16,740
Minority interest............................              11                  -             (338)                 -
                                               --------------    ---------------   --------------    ---------------
income from continuing operations............          28,671              9,317           38,764             16,740
Loss from discontinued operations............               -             (1,445)               -             (1,625)
                                               --------------    ---------------   --------------    ---------------
NET INCOME                                     $       28,671    $         7,872   $       38,764    $        15,115
                                               ==============    ===============   ==============    ===============
Earnings per ordinary share from continuing
Operations - Basic...........................  $         0.80    $          0.34   $         1.09    $          0.62
                                               ==============    ===============   ==============    ===============
Earnings per ordinary share from continuing
Operations - Diluted.........................  $         0.77    $          0.33   $         1.04    $          0.59
                                               ==============    ===============   ==============    ===============
Earnings per ordinary share - Basic..........  $         0.80    $          0.29   $         1.09    $          0.56
                                               ==============    ===============   ==============    ===============
Earnings per ordinary share - Diluted........  $         0.77    $          0.28   $         1.04    $          0.53
                                               ==============    ===============   ==============    ===============
Dividends per ordinary share.................  $         0.05    $          0.05   $         0.10    $          0.10
                                               ==============    ===============   ==============    ===============

Weighted average number of ordinary shares
outstanding..................................
Basic........................................      35,747,254         27,101,357       35,537,458         27,038,103
                                               ==============    ===============   ==============    ===============
Diluted......................................      37,328,448         28,536,448       37,279,282         28,333,554
                                               ==============    ===============   ==============    ===============
</TABLE>

      See Accompanying Notes to Unaudited Consolidated Financial Statements


                                       5
<PAGE>

                            Scottish Re Group Limited
           Unaudited Consolidated Statements of Comprehensive Income -
                Three and Six months ended June 30, 2004 and 2003
                             (Dollars in thousands)



<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                       SIX MONTHS ENDED
                                                        ------------------                       ----------------
                                                 JUNE 30, 2004     JUNE 30, 2003       JUNE 30, 2004     JUNE 30, 2003
                                                 -------------     -------------       -------------     -------------

<S>                                           <C>                <C>                <C>                 <C>
Net income.............................       $         28,671   $      7,872       $       38,764      $     15,115
                                              -----------------  -------------      ---------------     -------------
Other comprehensive income, net
of tax:
     Unrealized (depreciation)
     appreciation on investments:......                (56,832)        20,409              (32,174)           25,476
     Add: reclassification adjustment
     for investment (losses) gains
     included in net income............                 (3,627)        (4,629)                  65            (6,035)
                                              -----------------  -------------      ---------------     -------------
Unrealized (depreciation) appreciation
on investments net of income tax
(benefit) expense of $(18,223),
$4,533, $(10,004) and $6,831...........                (60,459)        15,780              (32,109)           19,441
Cumulative translation adjustment......                 (3,236)         2,747                  (64)            2,020
Minimum pension liability adjustment...                      -            (61)                   -               (39)
                                              -----------------  -------------      ---------------     -------------
Other comprehensive (loss) income......                (63,695)        18,466              (32,173)           21,422
                                              -----------------  -------------      ---------------     -------------
Comprehensive (loss) income............       $        (35,024)  $     26,338       $        6,591      $     36,537
                                              =================  =============      ===============     =============
</TABLE>


      See Accompanying Notes to Unaudited Consolidated Financial Statements



                                       6
<PAGE>

                            Scottish Re Group Limited
           Unaudited Consolidated Statements of Shareholders' Equity -
                     Six months ended June 30, 2004 and 2003
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                    SIX MONTHS ENDED
                                                                    ----------------
                                                              JUNE 30, 2004    JUNE 30, 2003
                                                              -------------    -------------
<S>                                                           <C>                <C>
ORDINARY SHARES:
    Beginning of period...................................       35,228,411       26,927,456
    Issuance to employees on exercise of options..........          600,051          235,586
    Issuance on exercise of warrants......................               -           200,000
                                                              --------------    -------------
    End of period.........................................       35,828,462       27,363,042
                                                              ==============    =============

SHARE CAPITAL:
    Beginning of period...................................    $         352    $         269
    Issuance to employees on exercise of options..........                6                3
    Issuance on exercise of warrants......................                -                2
                                                              --------------    -------------
    End of period.........................................              358              274
                                                              --------------    -------------

ADDITIONAL PAID-IN CAPITAL:
    Beginning of period...................................          548,750          416,712
    Issuance to employees on exercise of options..........            6,641            2,244
    Issuance on exercise of warrants......................                -            2,998
    Other.................................................               54                -
                                                              --------------    -------------
    End of period.........................................          555,445          421,954
                                                              --------------    -------------

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
Unrealized (depreciation) appreciation on investments
    Beginning of period...................................           16,848            8,930
    Change in period (net of tax).........................          (32,109)          19,441
                                                              --------------    -------------
    End of period.........................................          (15,261)          28,371
                                                              --------------    -------------
Cumulative translation adjustment
    Beginning of period...................................           12,186            5,908
    Change in period......................................              (64)           2,020
                                                              --------------    -------------
    End of period.........................................           12,122            7,928
                                                              --------------    -------------
Minimum pension liability adjustment
    Beginning of period...................................                -           (1,371)
    Change in period......................................                -              (39)
                                                              --------------    -------------
    End of period.........................................                -           (1,410)
                                                              --------------    -------------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME ........               (3,139)          34,889
                                                              --------------    -------------

RETAINED EARNINGS:
    Beginning of period...................................           81,708           60,644
    Net income............................................           38,764           15,115
    Dividends paid........................................           (3,556)          (2,705)
                                                              --------------    -------------
    End of period.........................................          116,916           73,054
                                                              --------------    -------------
TOTAL SHAREHOLDERS' EQUITY............................        $     669,580      $   530,171
                                                              ==============    =============
</TABLE>

      See Accompanying Notes to Unaudited Consolidated Financial Statements


                                       7
<PAGE>


                            Scottish Re Group Limited
                Unaudited Consolidated Statements of Cash Flows -
                     Six months ended June 30, 2004 and 2003
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                          SIX MONTHS ENDED
                                                                          ----------------
                                                                   JUNE 30, 2004   JUNE 30, 2003
                                                                   -------------   -------------
<S>                                                                <C>             <C>
OPERATING ACTIVITIES
Net income......................................................   $     38,764    $     15,115
Items not affecting cash:.......................................
    Realized losses.............................................            266           5,713
    Change in value of embedded derivatives.....................         (5,964)              -
    Amortization of investments.................................          5,376           1,964
    Amortization of deferred acquisition costs..................         41,990          21,587
    Amortization of present value of in-force business..........          3,863           1,694
    Changes in assets and liabilities:..........................
        Accrued interest........................................         (3,205)         (2,778)
        Reinsurance balances and risk fees receivable...........       (147,696)        (36,904)
        Deferred acquisition costs..............................       (124,366)        (67,929)
        Deferred tax liability..................................         (9,329)           (391)
        Other assets............................................         (7,288)            869
        Current income tax receivable and payable...............        (19,503)           (445)
        Reserves for future policy benefits.....................        175,769          92,431
        Interest sensitive contract liabilities, net of funds
        withheld at interest....................................         24,338           8,928
        Accounts payable and accrued expenses...................         (5,200)         (3,181)
        Other...................................................          4,594          (1,125)
                                                                   -------------   -------------
Net cash (used in) provided by operating activities.............        (27,591)         35,548
                                                                   -------------   -------------

INVESTING ACTIVITIES
Purchase of fixed maturity investments..........................     (1,111,305)       (430,902)
Proceeds from sales of fixed maturity investments...............        370,865          60,369
Proceeds from maturity of investments...........................        162,219         104,615
Purchase of preferred stock.....................................        (22,388)        (49,726)
Proceeds from sales of preferred stock..........................          5,358             363
Proceeds from maturity of preferred stock.......................          2,720             587
Other...........................................................             91          (2,774)
                                                                   -------------   -------------
Net cash used in investing activities...........................       (592,440)       (634,936)
                                                                   -------------   -------------

FINANCING ACTIVITIES
Issuance of long term debt......................................         32,000               -
Deposits to interest sensitive contract liabilities.............        596,299         278,687
Withdrawals from interest sensitive contract liabilities........        (39,005)        (17,653)
Issuance of ordinary shares.....................................          6,647           5,247
Dividends paid..................................................         (3,556)         (2,705)
                                                                   -------------   -------------
Net cash provided by financing activities.......................        592,385         527,152
                                                                   -------------   -------------
Net change in cash and cash equivalents.........................        (27,646)         17,204
Cash and cash equivalents, beginning of period..................        298,149         149,666
                                                                   -------------   -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                           $    270,503    $    280,988
                                                                   =============   =============
</TABLE>

      See Accompanying Notes to Unaudited Consolidated Financial Statements


                                       8
<PAGE>

                            Scottish Re Group Limited
              Notes to Unaudited Consolidated Financial Statements
                                  June 30, 2004

1. BASIS OF PRESENTATION

     Accounting Principles - The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States of America ("GAAP") and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results for the period are not necessarily indicative of the
results to be expected for the entire year.

     Consolidation - We consolidate the results of all our subsidiaries and all
variable interest entities for which we are the primary beneficiary. All
significant intercompany transactions and balances have been eliminated on
consolidation.

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

     For further information, refer to the consolidated financial statements and
footnotes included in our Annual Report on Form 10-K for the period ended
December 31, 2003.

     All tabular amounts are reported in thousands of United States dollars
(except per share amounts).

     Certain prior period amounts have been reclassified to conform to the
current year presentation.

2. NEW ACCOUNTING PRONOUNCEMENTS

     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. In implementing the SOP we have made 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 Statement of Financial
Accounting Standards ("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". Implementation of this SOP has not had a
material effect on our financial statements.

     Effective December 31, 2003, we adopted Emerging Issues Task Force 03-1
("EITF 03-1") "The Meaning of Other-Than-Temporary Impairments and Its
Application to Certain Investments". This EITF provides guidance on disclosures
for other than temporary impairments of debt and marketable equity investments
that have been accounted for under SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". Implementation did not have a
material effect on our financial statements.


                                       9
<PAGE>

                            Scottish Re Group Limited
              Notes to Unaudited Consolidated Financial Statements
                                  June 30, 2004

     In January 2003, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51" ("FIN 46"). FIN 46 provides a framework for
identifying variable interest entities and determining when a company should
include its assets, liabilities, non-controlling interests and results of
activities in the consolidated financial statements. A variable interest entity
is a legal structure used to conduct activities or hold assets that either (1)
has an insufficient amount of equity to carry out its principal activities
without additional subordinated financial support, (2) has a group of equity
owners that are unable to make significant decisions about its activities, or
(3) has a group of equity owners that do not have the obligation to absorb
losses or the right to receive returns generated by its operations.

     FIN 46 requires a variable interest entity to be consolidated if a party
with an ownership, contractual or other financial interest in the variable
interest entity is obligated to absorb a majority of the risk of loss from the
variable interest entity's activities, is entitled to receive a majority of the
variable interest entity's residual returns, or both. A variable interest holder
that consolidates the variable interest entity is called the primary
beneficiary. We have adopted FIN 46 in respect of the structured finance
facility discussed in note 13.

     We hold no interests in unconsolidated variable interest entities.

3. BUSINESS ACQUISITION

     On December 22, 2003, we completed the acquisition of 95% of the
outstanding capital stock of ERC Life Reinsurance Corporation for $151.0 million
in cash, subject to certain post closing adjustments. On February 19, 2004, ERC
Life Reinsurance Corporation's name was changed to Scottish Re Life Corporation.
The post-closing adjustments are dependent on the completion of the audit and
review of the 2003 financial statements of Scottish Re Life Corporation prepared
in accordance with U.S. statutory accounting principles. We have estimated the
post closing adjustment as an increase in the purchase price of approximately
$17.8 million on the basis of information currently available. From this
evaluation of the initial purchase price allocation, we have determined that no
goodwill arises on the acquisition.

4. DISCONTINUED OPERATIONS

     During 2003, we decided to discontinue our Wealth Management operations in
Luxembourg. We have transferred our Luxembourg Wealth Management business to
third parties, closed the 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. During the
quarter ended June 30, 2003 losses from these operations amounted to $1.4
million and for the six month period ended June 30, 2003, losses incurred were
$1.6 million. There has been no impact for 2004.

5. BUSINESS SEGMENTS

     We report segments in accordance with SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". Our main lines of business
are Life Reinsurance North America and Life Reinsurance International, which we
identify as separate segments.


                                       10
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

5. BUSINESS SEGMENTS (CONTINUED)

     In prior years, we reported our Wealth Management business as a separate
segment. As this business is no longer a major contributor to our results, we
have combined the reporting of this segment with our Other Segment for all
periods presented. The segment reporting for the lines of business is as
follows:


                                      THREE MONTHS ENDED JUNE 30, 2004
                                      --------------------------------
                                 LIFE REINSURANCE
                                 ----------------
                              NORTH
                             AMERICA    INTERNATIONAL     OTHER        TOTAL
                             -------    -------------     -----        -----
Premiums earned..........  $  127,272    $   28,708    $        -    $  155,980
Investment income, net...      50,979         3,574           264        54,817
Fee income...............       2,248             -           941         3,189
Realized (losses) gains..      (1,552)         (189)           54        (1,687)
Change in value of
  embedded derivatives...      14,610             -             -        14,610
                           ----------    ----------    -----------   ----------
Total revenues...........     193,557        32,093         1,259       226,909
                           ----------    ----------    -----------   ----------

Claims and other policy
  benefits...............     102,485        20,503             -       122,988
Interest credited to
  interest sensitive
  contract liabilities...      25,465             -             -        25,465
Acquisition costs and
  other insurance
  expenses, net..........      35,701         1,334           554        37,589
Operating expenses.......       4,142         3,757         3,002        10,901
Interest expense.........         939             -         2,057         2,996
                           ----------    ----------    -----------   ----------
Total benefits and
  expenses...............     168,732        25,594         5,613       199,939
                           ----------    ----------    -----------   ----------
Income (loss) before
  income taxes and
  minority interest......  $   24,825    $    6,499    $   (4,354)   $   26,970
                           ==========    ==========    ===========   ==========



                                       11
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

5. BUSINESS SEGMENTS (CONTINUED)

                                      THREE MONTHS ENDED JUNE 30, 2003
                                      --------------------------------
                                 LIFE REINSURANCE
                                 ----------------
                              NORTH
                             AMERICA    INTERNATIONAL     OTHER        TOTAL
                             -------    -------------     -----        -----
Premiums earned ............   $  56,565    $  38,172    $       -    $  94,737
Investment income, net .....      32,680        1,998        1,136       35,814
Fee income .................       1,337         --          1,043        2,380
Realized (losses) gains ....      (3,294)        (264)         166       (3,392)
                               ----------   ----------   ----------   ----------
Total revenues .............      87,288       39,906        2,345      129,539
                               ----------   ----------   ----------   ----------

Claims and other policy
  benefits .................      42,821       22,728            -       65,549
Interest credited to
  interest sensitive
  contract liabilities .....      16,874            -            -       16,874
Acquisition costs and
  other insurance
  expenses, net ............      19,815        7,690          379       27,884
Operating expenses .........       2,372        3,293        2,483        8,148
Interest expense ...........         240            -        1,611        1,851
                               ----------   ----------   ----------   ----------
Total benefits and
  expenses .................      82,122       33,711        4,473      120,306
                               ----------   ----------   ----------   ----------
Income (loss) before
  income taxes and
  minority interest ........   $   5,166    $   6,195    $  (2,128)   $   9,233
                               ==========   ==========   ==========   ==========


                                       12
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

5. BUSINESS SEGMENTS (CONTINUED)

                                           SIX MONTHS ENDED JUNE 30, 2004
                                           ------------------------------
                                    LIFE REINSURANCE
                                    ----------------
                                  NORTH
                                 AMERICA  INTERNATIONAL      OTHER         TOTAL
                                 -------  -------------      -----         -----
Premiums earned .............   $ 232,874   $  56,453 $          -    $ 289,327
Investment income, net ......      98,386       5,722          811      104,919
Fee income ..................       4,350           -        1,791        6,141
Realized gains (losses) .....         140        (340)         (66)        (266)
Change in value of
  embedded derivatives ......       5,964           -            -        5,964
                                ----------  ----------   ----------   ----------
Total revenues ..............     341,714      61,835        2,536      406,085
                                ----------  ----------   ----------   ----------

Claims and other policy
  benefits ..................     178,078      40,077            -      218,155
Interest credited to
  interest sensitive
  contract liabilities ......      49,658           -            -       49,658
Acquisition costs and
  other insurance
  expenses, net .............      65,236       3,983        1,239       70,458
Operating expenses ..........       9,105       8,166        6,484       23,755
Interest expense ............       1,625           -        4,148        5,773
                                ----------  ----------   ----------   ----------
Total benefits and
  expenses ..................     303,702      52,226       11,871      367,799
                                ----------  ----------   ----------   ----------
Income (loss) before
  income taxes and
  minority interest .........   $  38,012   $   9,609    $  (9,335)   $  38,286
                                ==========  ==========   ==========   ==========


                                       13
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

5. BUSINESS SEGMENTS (CONTINUED)

                                           SIX MONTHS ENDED JUNE 30, 2003
                                           ------------------------------
                                    LIFE REINSURANCE
                                    ----------------
                                  NORTH
                                 AMERICA  INTERNATIONAL      OTHER         TOTAL
                                 -------  -------------      -----         -----
Premiums earned ............   $  96,025    $  63,531    $       -    $ 159,556
Investment income, net .....      62,280        3,744        2,114       68,138
Fee income .................       2,396          -          1,975        4,371
Realized (losses) gains ....      (5,051)        (873)         211       (5,713)
                               ----------   ----------   ----------   ----------
Total revenues .............     155,650       66,402        4,300      226,352
                               ----------   ----------   ----------   ----------
Claims and other policy
  benefits .................      72,226       36,237          -        108,463
Interest credited to
  interest sensitive
  contract liabilities .....      32,767          -            -         32,767
Acquisition costs and
  other insurance
  expenses, net ............      34,267       13,221        1,051       48,539
Operating expenses .........       4,415        5,840        5,758       16,013
Interest expense ...........         477          -          3,187        3,664
                               ----------   ----------   ----------   ----------
Total benefits and
  expenses .................     144,152       55,298        9,996      209,446
                               ----------   ----------   ----------   ----------
Income (loss) before
  income taxes and
  minority interest ........   $  11,498    $  11,104    $  (5,696)   $  16,906
                               ==========   ==========   ==========   ==========




        ASSETS                                JUNE 30, 2004    DECEMBER 31, 2003
                                              -------------    -----------------
        Life Reinsurance
           North America..................  $      5,647,948   $      4,882,222
           International..................           367,854            308,459
                                            ----------------   ----------------
        Total Life Reinsurance............         6,015,802          5,190,681
        Other.............................           858,839            862,836
                                            ----------------   ----------------
        Total.............................  $      6,874,641   $      6,053,517
                                            ================   ================


                                       14
<PAGE>


                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004


6. EARNINGS PER ORDINARY SHARE

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

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           SIX MONTHS ENDED
                                                 ------------------           ----------------
                                               JUNE 30,       JUNE 30,       JUNE 30,     JUNE 30,
                                                2004           2003           2004          2003
                                                ----           ----           ----          ----
<S>                                         <C>            <C>            <C>           <C>
 Numerator:
 Net income..........................       $     28,671   $      7,872   $    38,764   $    15,115
                                            ============   ============   ===========    ===========
 DENOMINATOR:
 Denominator for basic earnings per
   ordinary share - Weighted
   average number of ordinary shares.         35,747,254     27,101,357    35,537,458    27,038,103
 Effect of dilutive securities
   - Stock options...................            701,125        831,268       800,756       780,910
   - Warrants........................            880,069        603,823       892,662       514,541
   - Hybrid Capital Units............                  -              -        48,406             -
                                            ------------   ------------   -----------   -----------
 Denominator for dilutive earnings
   per ordinary share................         37,328,448     28,536,448    37,279,282    28,333,554
                                            ============   ============   ===========   ===========
 Earnings per ordinary share from
   continuing operations - Basic.....              $0.80       $   0.34         $1.09      $   0.62
                                            ============   ============   ===========   ===========
 Earnings per ordinary share from
   continuing operations - Diluted...              $0.77       $   0.33         $1.04     $    0.59
                                            ============   ============   ===========   ===========
 Basic earnings per ordinary share...              $0.80       $   0.29         $1.09     $    0.56
                                            ============   ============   ===========   ===========
 Diluted earnings per ordinary share.              $0.77       $   0.28         $1.04     $    0.53
                                            ============   ============   ===========   ===========
</TABLE>


7. DEFERRED ACQUISITION COSTS

     The change in deferred acquisition costs is as follows:

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           SIX MONTHS ENDED
                                                 ------------------           ----------------
                                               JUNE 30,       JUNE 30,       JUNE 30,     JUNE 30,
                                                2004           2003           2004          2003
                                                ----           ----           ----          ----
<S>                                        <C>            <C>           <C>           <C>
 Balance beginning of period.........      $   328,149    $  231,414    $  308,591    $  213,516
 Expenses deferred...................           85,787        41,325       124,387        67,929
 Amortization expense................          (23,763)      (12,454)      (41,990)      (21,587)
 Deferred acquisition costs on
  realized losses....................              488         1,730          (327)        2,157
                                           ------------   -----------   -----------   -----------
    Balance end of period............      $   390,661    $  262,015    $  390,661    $  262,015
                                           ============   ===========   ===========   ===========
</TABLE>


8.      OTHER ASSETS

     Included in other assets as of June 30, 2004 is an amount of $3.9 million
in respect of professional fees and other costs incurred for due diligence
activities of potential acquisition targets. At June 30, 2004 the timing and
certainty of completion of the proposed acquisitions cannot be determined.


                                       15
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

8. OTHER ASSETS (CONTINUED)

In the event that we determine that some of these transactions will not be
completed we shall recognize a charge to income.

9. LONG-TERM DEBT

     Long-term debt consists of:

<TABLE>
<CAPTION>
                                                          JUNE 30, 2004        DECEMBER 31, 2003
                                                          -------------        -----------------
<S>                                                  <C>                      <C>
4.5% senior convertible notes due 2022.............  $            115,000     $          115,000
Capital securities due 2032........................                17,500                 17,500
Trust preferred securities due 2033................                20,000                 20,000
Trust preferred securities due 2033................                10,000                 10,000
Trust preferred securities due 2034................                32,000                      -
                                                     --------------------     ------------------
Total                                                $            194,500     $          162,500
                                                     ====================     ==================
</TABLE>

4.5% senior convertible notes

     On November 22, 2002 and November 27, 2002, we issued an aggregate of
$115.0 million (which included 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 a
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, beginning on June 1, 2003. The notes are rated Baa2 by Moody's Investors
Service ("Moody's") and BBB- by Standard & Poor's Ratings Group ("Standard &
Poor's").

     The notes are convertible into our ordinary shares at an initial 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.

     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;


                                       16
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

9. LONG-TERM DEBT (CONTINUED)

     o    during any period in which the notes are rated by either Moody's or
          Standard & Poor's 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 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 was filed and later declared effective by the Securities
and Exchange Commission on April 4, 2003.

Capital securities due 2032

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

     The Capital Securities mature on December 4, 2032. They are redeemable in
whole or in part at any time after December 4, 2007. Interest is payable
quarterly at a rate equivalent to 3 month LIBOR plus 4%. At June 30, 2004 and
December 31, 2003, the interest rates were 5.61% and 5.15%, respectively. Prior
to December 4, 2007, interest cannot exceed 12.5%. The Capital Trust may defer
payment of the interest for up to 20 consecutive quarterly periods, but no later
than December 4, 2032. Any deferred payments would accrue interest quarterly on
a compounded basis if Scottish Holdings, Inc. defers interest on the Debentures
due December 4, 2032 (as defined below).

     The sole assets of the Capital Trust consist of $18.0 million principal
amount of Floating Rate Debentures (the "Debentures") issued by Scottish
Holdings, Inc. The Debentures mature on December 4, 2032 and interest is payable
quarterly at a rate equivalent to 3 month LIBOR plus 4%. At June 30, 2004 and
December 31, 2003, the interest rates were 5.61% and 5.15%, respectively. Prior
to December 4, 2007, interest cannot exceed 12.5%. Scottish Holdings, Inc. may
defer payment of the interest for up to 20 consecutive quarterly periods, but no
later than December 4, 2032. Any deferred payments would accrue interest
quarterly on a compounded basis. Scottish Holdings, Inc. may redeem the
Debentures at any time after December 4, 2007 in the event of certain changes in
tax or investment company law.

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

Trust preferred securities due 2033

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


                                       17
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

9. LONG-TERM DEBT (CONTINUED)

     The Trust Preferred 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 June 30,
2004 and December 31, 2003, the interest rates were 5.56% and 5.10%,
respectively. Prior to October 29, 2008, interest cannot exceed 12.45%. Capital
Trust II may defer payment of the interest for up to 20 consecutive quarterly
periods, but no later than October 29, 2033. Any deferred payments would accrue
interest quarterly on a compounded basis if Scottish Holdings, Inc. defers
interest on the Floating Rate Debentures due October 29, 2033 (as described
below).

     The sole assets of Capital Trust II consist of $20.6 million principal
amount of Floating Rate Debentures (the "2033 Floating Rate Debentures") issued
by Scottish Holdings, Inc. The 2033 Floating Rate Debentures mature on October
29, 2033 and interest is payable quarterly at 3 month LIBOR plus 3.95%. At June
30, 2004 and December 31, 2003, the interest rates were 5.56% and 5.10%,
respectively. Prior to October 29, 2008, interest cannot exceed 12.45%. Scottish
Holdings, Inc. may defer payment of the interest for up to 20 consecutive
quarterly periods, but no later than October 29, 2033. Any deferred payments
would accrue interest quarterly on a compounded basis. Scottish Holdings, Inc.
may redeem the 2033 Floating Rate Debentures at any time after October 29, 2008
and in the event of certain changes in tax or investment company law.

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

Trust preferred securities due 2033

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

     The 2033 Trust Preferred Securities mature on September 30, 2033. They are
redeemable in whole or in part at any time after September 30, 2008. Interest is
payable quarterly at a rate equivalent to 3 month LIBOR plus 3.90%. At June 30,
2004 and December 31, 2003, the interest rates were 5.50% and 5.05%,
respectively. GPIC Trust may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than September 30, 2033. Any
deferred payments would accrue interest quarterly on a compounded basis if
Scottish Holdings, Inc. defers interest on the Junior Subordinated Notes due
September 30, 2033 (as described below).

     The sole assets of GPIC Trust consist of $10.3 million principal amount of
Junior Subordinated Notes (the "Junior Subordinated Notes") issued by Scottish
Holdings, Inc. The Junior Subordinated Notes mature on September 30, 2033 and
interest is payable quarterly at 3 month LIBOR plus 3.90%. At June 30, 2004 and
December 31, 2003, the interest rates were 5.50% and 5.05%, respectively.
Scottish Holdings, Inc. may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than September 30, 2033. Any
deferred payments would accrue interest quarterly on a compounded basis.
Scottish Holdings, Inc. may redeem the Junior Subordinated Notes at any time
after September 30, 2008 and in the event of certain changes in tax or
investment company law.

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


                                       18
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

9. LONG-TERM DEBT (CONTINUED)

Trust preferred securities due 2034

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

     The 2034 Trust Preferred Securities mature on June 17, 2034. They are
redeemable in whole or in part at any time after June 17, 2009. Interest is
payable quarterly at a rate equivalent to 3 month LIBOR plus 3.80%. At June 30,
2004, the interest rate was 5.10%. Prior to June 17, 2009, interest cannot
exceed 12.50%. Capital Trust III may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than June 17, 2034. Any deferred
payments would accrue interest quarterly on a compounded basis if Scottish
Holdings, Inc. defers interest on the 2034 Floating Rate Debentures due June 17,
2034 (as described below).

     The sole assets of Capital Trust III consist of $33.0 million principal
amount of Floating Rate Debentures (the "2034 Floating Rate Debentures") issued
by Scottish Holdings, Inc. The 2034 Floating Rate Debentures mature on June 17,
2034 and interest is payable quarterly at 3 month LIBOR plus 3.80%. At June 30,
2004 the interest rate was 5.10%. Prior to June 17, 2009, interest cannot exceed
12.50%. Scottish Holdings, Inc. may defer payment of the interest for up to 20
consecutive quarterly periods, but no later than June 17, 2034. Any deferred
payments would accrue interest quarterly on a compounded basis. Scottish
Holdings, Inc. may redeem the 2034 Floating Rate Debentures at any time after
June 17, 2009 and in the event of certain changes in tax or investment company
law.

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

10. MEZZANINE EQUITY

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

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

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

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.


                                       19
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

10.  MEZZANINE EQUITY (CONTINUED)

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

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

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

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

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

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

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

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

     We have accounted for the HyCUs in accordance with SFAS No. 150 "
Accounting for Certain Instruments with Characteristics of Debt and Equity".

11. SHAREHOLDERS' EQUITY

     During the quarter ended June 30, 2004 and 2003, respectively, we issued
217,434 and 218,752 ordinary shares to employees upon the exercise of stock
options. During the six months ended June 30, 2004 and 2003, respectively, we
issued 600,051 and 235,586 ordinary shares to employees upon the exercise of
stock options.

12. STOCK OPTION PLANS

     At June 30, 2004, we had four stock option plans (the "1998 Plan", the
"1999 Plan", the "Harbourton Plan" and the "2001 Plan", collectively the
"Plans") and an equity incentive compensation plan ("the 2004 ECP").

     The Plans allow us to grant non-statutory options, subject to certain
restrictions, to certain eligible employees, non-employee directors, advisors
and consultants. The minimum exercise price of the options


                                       20
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

12. STOCK OPTION PLANS (CONTINUED)

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 became 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.

     At our Annual General Meeting held on May 5, 2004, our shareholders
approved the 2004 ECP. This plan allows us to grant non-statutory options and
restricted stock, subject to certain restrictions, to certain eligible
employees, non-employee directors, advisors and consultants. For the first year
of the 2004 ECP or the first 250,000 options issued, the minimum exercise price
of the options will be equal to 110% of fair market value. At the discretion of
our Compensation Committee, option grants after the first year of the 2004 ECP
or in excess of 250,000 options may have a minimum exercise price equal to the
fair market value of our ordinary shares at the date of grant. The term of the
options shall not be more than ten years from the date of grant. Options will
become exercisable in three equal installments commencing on the first
anniversary of the grant date. Total options authorized under the 2004 ECP is
750,000. In addition, 1,000,000 restricted shares have been authorized under the
2004 ECP of which at least 750,000 will vest based on achievement of certain
performance goals. The remaining 250,000 restricted shares may be issued without
performance goals.

     Pro forma information regarding net income and earnings per share for all
outstanding stock options is required by SFAS No. 148 "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123" 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 was 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.


                                       21
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

12. STOCK OPTION PLANS (CONTINUED)

     Our pro forma information is as follows:

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           SIX MONTHS ENDED
                                                 ------------------           ----------------
                                               JUNE 30,       JUNE 30,      JUNE 30,     JUNE 30,
                                                2004           2003          2004           2003
                                                ----           ----          ----           ----
<S>                                         <C>             <C>           <C>           <C>
 Net income -- as reported............      $    28,671     $    7,872    $  38,764     $  15,115
 Stock-based employee compensation
    cost, net of related tax
    effects, included in the
    determination of net income as
    reported.........................               149             81          213            81
 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.......................              (343)          (649)        (723)       (1,319)
                                            -----------     ----------    ---------     ---------
 Net income -- pro forma..............      $    28,477     $    7,304    $  38,254     $  13,877
                                            ===========     ==========    =========     =========

 Basic earnings per ordinary share --
    as reported......................       $      0.80     $     0.29    $    1.09     $    0.56
                                            ===========     ==========    =========     =========
 Basic earnings per ordinary share --
    pro forma........................       $      0.80     $     0.27    $    1.08     $    0.52
                                            ===========     ==========    =========     =========
 Diluted earnings per ordinary share
    -- as reported....................      $      0.77     $     0.28    $    1.04     $    0.53
                                            ===========     ==========    =========     =========
 Diluted earnings per ordinary share
    -- pro forma......................      $      0.76     $     0.26    $    1.03     $    0.49
                                            ===========     ==========    =========     =========
</TABLE>

13. CREDIT AND COLLATERAL FACILITIES

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

     The assets of the variable interest entity have been recorded as fixed
maturity investments. The liabilities of the variable interest entity have been
recorded as interest sensitive contract liabilities. Our consolidated income
statements show the investment return of the variable interest entity as
investment income and interest paid on the total return swap agreement as
interest credited to interest sensitive contract liabilities.

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

     During 2003, we renewed our credit facilities, which as of June 30, 2004
consist of:


                                       22
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

13. CREDIT AND COLLATERAL FACILITIES  (CONTINUED)

     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 June 30, 2004, Scottish Annuity & Life Insurance Company (Cayman) Ltd.'s
shareholder's equity was $767.9 million. The other facility requires that we
maintain consolidated net worth of $520.0 million, a maximum debt to total
capitalization ratio of 30% and uncollateralized assets of 1.2 times any
unsecured borrowings. At June 30, 2004, our net worth was $669.6 million and the
ratio of debt to total capitalization was 19.4%. 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 June 30, 2004, there were no borrowings under the facilities.
Outstanding letters of credit under these facilities amounted to $33.8 million
as at June 30, 2004 and $31.2 million at December 31, 2003.

     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 June 30, 2004 and December 31, 2003, there were no borrowings
under this agreement.

14. DERIVATIVES

     Subsequent to June 30, 2004, we entered into an interest rate swap contract
in the amount of $100 million in relation to certain of our investment assets
not supporting reinsurance liabilities. This contract will be accounted for in
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires that all derivatives be recognized as either
assets or liabilities on the balance sheet and be measured at fair value. This
derivative has not been designated as a hedge.

15. RESTATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

     During the fourth quarter of 2004, we determined that our International
Segment had incorrectly reported premiums earned, claims and other policy
benefits, acquisition costs and other insurance expenses and related income tax
benefits in the quarter and six months ended June 30, 2004. The effect of these
errors was to understate net income by $1.1 million, or $0.03 per diluted share,
in the three and six months ended June 30, 2004 and to understate shareholders'
equity by $1.1 million at June 30, 2004.


                                       23
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

15. RESTATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The errors were made in the process of compiling income statement
information on the accrual of premiums and resulted from incorrect references
within the spreadsheets used to calculate these accruals. As a result, incorrect
information was referenced to prepare the journal entries used in updating the
general ledger for the International Segment. The errors were detected by
management as part of their ongoing documentation and testing of internal
controls over financial reporting for Sarbanes Oxley Section 404 reporting.

     Management has taken a series of steps in its ongoing review of internal
controls over financial reporting to improve control processes, including those
involving the compilation of information used in reporting premium accruals, and
to avoid similar errors going forward. Management has also taken steps to
improve controls around segregation of responsibilities and review of manually
prepared information and has strengthened procedures for the reconciliation of
all material general ledger balances.

     A summary of the effects of corrections of these amounts for the three and
six months ended June 30, 2004 is as follows:




UNAUDITED CONSOLIDATED BALANCE SHEET                          JUNE 30, 2004
                                                   AS PREVIOUSLY
                                                      REPORTED         RESTATED
Reinsurance balances and risk fees receivable      $   321,824      $   324,723
Deferred acquisition costs                             391,049          390,661
Deferred tax benefit                                    32,348           31,870
Total assets                                         6,872,608        6,874,641
Reserves for future policy benefits                  1,683,686        1,684,603
Total liabilities                                    6,052,871        6,053,728
Retained earnings                                      115,800          116,916
Total shareholders' equity                             668,464          669,580
Total liabilities and shareholders' equity         $ 6,872,608      $ 6,874,641

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED          SIX MONTHS ENDED
                                                             JUNE 30, 2004               JUNE 30, 2004
                                                    AS PREVIOUSLY                AS PREVIOUSLY
UNAUDITED CONSOLIDATED STATEMENT OF INCOME               REPORTED      RESTATED     REPORTED      RESTATED
<S>                                                <C>              <C>           <C>            <C>
Premiums earned                                    $   157,884      $   155,980   $   291,231    $   289,327
Total revenues                                         228,813          226,909       407,989        406,085
Claims and other policy benefits                       123,975          122,988       219,142        218,155
Acquisition costs and other insurance expenses, net     40,100           37,589        72,969         70,458
Total benefits and expenses                            203,437          199,939       371,297        367,799
Income before income taxes and minority interest        25,376           26,970        36,692         38,286
Income tax benefit                                       2,168            1,690         1,294            816
Income before minority interest                         27,544           28,660        37,986         39,102
Net income                                         $    27,555      $    28,671   $    37,648    $    38,764


                                       24
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

15. RESTATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Earnings per ordinary share from continuing
 operations - Basic                                $      0.77      $      0.80   $      1.06    $      1.09
Earnings per ordinary share from continuing
 operations - Diluted                              $      0.74      $      0.77   $      1.01    $      1.04
Earnings Per Ordinary Share - Basic                $      0.77      $      0.80   $      1.06    $      1.09
Earnings Per Ordinary Share - Diluted              $      0.74      $      0.77   $      1.01    $      1.04

Unaudited Consolidated Statement of Comprehensive
Income
Net income                                         $    27,555      $    28,671    $   37,648    $    38,764
Comprehensive income (loss)                        $   (36,141)         (35,024)   $    5,475          6,591

Unaudited Consolidated Statement of Shareholders'
Equity
Net income                                                                         $   37,648    $    38,764
Retained earnings - end of period                                                     115,800        116,916
Total shareholders' equity                                                         $  668,464    $   669,580

Unaudited Consolidated Statement of Cash Flows

Net income                                                                         $   37,648    $    38,764
Change in assets and liabilities:
   Reinsurance balances and risk fees receivable                                     (144,797)      (147,696)
   Deferred acquisition costs                                                        (124,754)      (124,366)
   Deferred tax benefit                                                                (9,807)        (9,329)
   Reserves for future policy benefits                                             $  174,852    $   175,769

Note 5 Business Segments

Restatements were in respect of the International Business Segment as follows:

Premiums earned                                    $    30,612      $    28,708    $   58,357    $    56,453
Total revenues                                          33,997           32,093        63,739         61,835
Claims and other policy benefits                        21,490           20,503        41,064         40,077
Acquisition costs and other insurance expenses, net      3,845            1,334         6,494          3,983
Total benefits and expenses                             29,092           25,594        55,724         52,226
Income before income taxes and minority interest   $     4,905      $     6,499    $    8,015    $     9,609

Note 6 Earnings per ordinary share

Net income                                         $    27,555      $    28,671    $   37,648     $   38,764
Earnings per ordinary share from continuing
 operations - Basic                                $      0.77      $      0.80    $     1.06     $     1.09
Earnings per ordinary share from continuing
 operations - Diluted                              $      0.74      $      0.77    $     1.01     $     1.04
Earnings per ordinary share - Basic                $      0.77      $      0.80    $     1.06     $     1.09
Earnings per ordinary share - Diluted              $      0.74      $      0.77    $     1.01     $     1.04

Note 8 Deferred acquisition costs

Expenses deferred                                  $    86,175      $    85,787    $  124,775     $  124,387


                                       25
<PAGE>

                            Scottish Re Group Limited
        Notes to Unaudited Consolidated Financial Statements (continued)
                                  June 30, 2004

15. RESTATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Balance - end of period                            $    391,049     $   390,661    $  391,049     $  390,661

Note 12 Stock option plans

Net income - as reported                           $     27,555     $    28,671    $   37,648     $   38,764
Net income - pro forma                             $     27,361     $    28,477    $   37,138     $   38,254
Basic earnings per ordinary share - as reported    $      0.77      $      0.80    $     1.06     $     1.09
Basic earnings per ordinary share - pro forma      $      0.77      $      0.80    $     1.05     $     1.08
Diluted earnings per ordinary share - as reported  $      0.74      $      0.77    $     1.01     $     1.04
Diluted earnings per ordinary share - pro forma    $      0.73      $      0.76    $     1.00     $     1.03
</TABLE>


                                       26
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)

GENERAL

     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 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. 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. In prior years, we referred to this
portion of our business as Wealth Management, which was another reportable
operating segment. As this business is no longer a major contributor to our
results, we have combined reporting of this segment with our Other Segment for
all periods presented. Other revenues and expenses not related to Life
Reinsurance 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 for $151.0 million
in cash, subject to certain closing adjustments. On February 19, 2004, ERC Life
Reinsurance Corporation's name was changed to Scottish Re Life Corporation.
Scottish Re Life Corporation 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.
Scottish Re Life Corporation's business consists primarily of a closed block of
traditional life reinsurance. GE ERC has agreed to administer the business of
Scottish Re Life Corporation 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 our
systems. No GE ERC employees were transferred. Scottish Re Life Corporation is
rated "A- (excellent)" by A.M. Best Company.

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

REVENUES

     We derive revenue from three principal sources:

     o    premiums from reinsurance assumed on life business;

     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.


                                       27
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations (continued)

     Our investment income includes interest earned on our fixed income
investments and income from funds withheld at interest under modified
coinsurance agreements. Under generally accepted accounting principles, because
our fixed income investments are held as available for sale, these securities
are carried at fair value, and unrealized appreciation and depreciation on these
securities is not included in investment income on our statements of income, but
is included in comprehensive income as a separate component of shareholders'
equity. Realized gains and losses include gains and losses on investment
securities that we sell during a period and write downs of securities deemed to
be other than temporarily impaired.

EXPENSES

     We have five principal types of expenses:

     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
benefits. These reserves are our estimates of what we expect to pay in claims
and policy benefits and related expenses under the contract or policy. From time
to time, we may also add to reserves if our experience leads us to believe that
benefit claims and expenses will ultimately be greater than the existing
reserve. We report the 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.


                                       28
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

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

     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 Standards ("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,


                                       29
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

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 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", Emerging Issues Task Force 99-20: ("EITF 99-20")
"Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interest in Securitized Assets" and Emerging Issues Task Force 03-1
("EITF 03-

                                       30
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

1") "The Meaning of Other-Than-Temporary Impairments and Its Application to
Certain Investments". 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.


                                       31
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                               ------------------           ----------------
                                             JUNE 30,       JUNE 30,      JUNE 30,     JUNE 30,
                                              2004           2003          2004          2003
                                              ----           ----          ----          ----
<S>                                        <C>            <C>           <C>           <C>
 Premiums earned........................   $   155,980    $   94,737    $  289,327    $  159,556
 Investment income, net.................        54,817        35,814       104,919        68,138
 Fee income.............................         3,189         2,380         6,141         4,371
 Realized losses........................       (1,687)        (3,392)         (266)       (5,713)
 Change in value of embedded derivatives        14,610             -         5,964             -
                                             ---------    -----------   ----------    ----------
 Total revenues.........................       226,909       129,539       406,085       226,352
                                             ---------    -----------   ----------    ----------

 Claims and other policy benefits.......       122,988        65,549       218,155       108,463
 Interest credited to interest
 sensitive contract liabilities.........        25,465        16,874        49,658        32,767
 Acquisition costs and other insurance
 expenses, net..........................        37,589        27,884        70,458        48,539
 Operating expenses.....................        10,901         8,148        23,755        16,013
 Interest expense.......................         2,996         1,851         5,773         3,664
                                             ---------    -----------   ----------    ----------
 Total benefits and expenses............       199,939       120,306       367,799       209,446
                                             ---------    -----------   ----------    ----------
 Income before income taxes and
 minority interest......................        26,970         9,233        38,286        16,906
 Income tax benefit (expense)...........         1,690            84           816          (166)
                                             ---------    -----------   ----------    ----------
 Income before minority interest........        28,660         9,317        39,102        16,740
 Minority interest......................            11             -          (338)            -
                                             ---------    -----------   ----------    ----------
 Income from continuing operations......        28,671         9,317        38,764        16,740
 Loss from discontinued operations......             -        (1,445)            -        (1,625)
                                             ---------    -----------   ----------    ----------
 Net income.............................     $  28,671    $    7,872    $   38,764    $   15,115
                                             =========    ===========   ==========    ==========
</TABLE>

     Total revenues increased by 75% to $226.9 million in the quarter ended June
30, 2004 from $129.5 million in the same period of 2003. Total revenues include
premiums earned in our Life Reinsurance Segments, investment income on our
invested assets, fee income, realized gains and losses on our investment
portfolio and the change in the value of embedded derivatives. The increase in
premiums earned is primarily due to the acquisition of Scottish Re Life
Corporation and growth in the traditional solutions line of business in our Life
Reinsurance North America Segment. The increase in investment income is due to
growth in our invested assets, which arises from business growth, our equity
offering in July 2003, our HyCU offering and trust preferred debt offerings in
the fourth quarter of 2003. The change in value of the embedded derivatives
arises from the implementation of DIG B36.

     Total benefits and expenses increased by 66% to $199.9 million in the
quarter ended June 30, 2004 from $120.3 million in the same period in 2003. The
increase was due to the acquisition of Scottish Re Life Corporation, continued
growth in our Life Reinsurance North America Segment, additional operating costs
required to meet the growth in our business and additional interest expense
arising from the HyCU offering and trust preferred debt offerings in the fourth
quarter of 2003.

     Total revenues increased by 79% to $406.1 million in the six months ended
June 30, 2004 from $226.4 million in the same period of 2003. The increase in
premiums earned is primarily due to the acquisition of Scottish Re Life
Corporation and growth in the traditional solutions line of business in our Life
Reinsurance North America Segment. The increase in investment income is due to
growth in our invested assets, which arises from business growth, our equity
offering in July 2003, our HyCU offering


                                       32
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

and trust preferred debt offerings in the fourth quarter of 2003. The change in
value of the embedded derivatives arises from the implementation of DIG B36.

     Total benefits and expenses increased by 76% to $367.8 million in the six
months ended June 30, 2004 from $209.4 million in the same period in 2003. The
increase was due to the acquisition of Scottish Re Life Corporation, continued
growth in our Life Reinsurance North America Segment, additional operating costs
required to meet the growth in our business and additional interest expense
arising from the HyCU offering and trust preferred debt offerings in the fourth
quarter of 2003.

     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. During the
quarter ended June 30, 2003 losses from these operations amounted to $1.4
million and for the six month period ended June 30, 2003, losses were $1.6
million. No losses were reported in 2004.

     EARNINGS PER ORDINARY SHARE

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED           SIX MONTHS ENDED
                                                 ------------------           ----------------
                                             JUNE 30,       JUNE 30,       JUNE 30,      JUNE 30,
                                               2004          2003           2004           2003
                                               ----          ----           ----           ----
<S>                                        <C>             <C>            <C>           <C>
 Income from continuing operations......   $    28,671     $    9,317     $   38,764    $   16,740
                                            ==========     ==========     ==========    ==========
 Net income.............................   $    28,671     $    7,872     $   38,764    $   15,115
                                            ==========     ==========     ==========    ==========
 Earnings per ordinary share from
 continuing operations - Basic..........   $      0.80     $     0.34     $     1.09    $     0.62
                                            ==========     ==========     ==========    ==========
 Earnings per ordinary share from
 continuing operations - Diluted........   $      0.77     $     0.33     $     1.04    $     0.59
                                            ==========     ==========     ==========    ==========
 Basic earnings per ordinary share......   $      0.80     $     0.29     $     1.09    $     0.56
                                            ==========     ==========     ==========    ==========
 Diluted earnings per ordinary share....   $      0.77     $     0.28     $     1.04    $     0.53
                                            ==========     ==========     ==========    ==========

 Weighted average number of ordinary
 shares outstanding:
 Basic..................................    35,747,254     27,101,357     35,537,458    27,038,103
                                            ==========     ==========     ==========    ==========
 Diluted................................    37,328,448     28,536,448     37,279,282    28,333,554
                                            ==========     ==========     ==========    ==========
</TABLE>

     Income from continuing operations for the quarter ended June 30, 2004
increased 208% to $28.7 million from $9.3 million in the same period in 2003.
The increase is attributable to the acquisition of Scottish Re Life Corporation,
continued growth in our Life Reinsurance North America Segment, an increase in
investment income primarily due to the increase in average invested assets and
the change in value of embedded derivatives. These increases were offset in part
by increased operating costs and interest expense.

     Diluted earnings per ordinary share amounted to $0.77 for the quarter ended
June 30, 2004 and $0.28 in the same period in 2003, an increase of 175%. Diluted
earnings per ordinary share increased as a result of the growth in net income
discussed above. The weighted average number of ordinary shares


                                       33
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

outstanding has increased from 28,536,448 at June 30, 2003 to 37,328,448 at June
30, 2004 principally as a result of the offering of 9,200,000 million shares in
July 2003.

     Income from continuing operations for the six months ended June 30, 2004
increased 132% to $38.8 million from $16.7 million in the same period in 2003.
The increase is attributable to the acquisition of Scottish Re Life Corporation,
continued growth in our Life Reinsurance North America Segment, an increase in
investment income primarily due to the increase in average invested assets and
the change in value of embedded derivative. These increases were offset in part
by increased operating costs and interest expense.

     Diluted earnings per ordinary share amounted to $1.04 for the six months
ended June 30, 2004 and $0.53 in the same period in 2003, an increase of 96%.
Diluted earnings per ordinary share increased as a result of the growth in net
income discussed above.

SEGMENT OPERATING RESULTS

LIFE REINSURANCE NORTH AMERICA

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED         SIX MONTHS ENDED
                                                        ------------------         ----------------
                                                       JUNE 30,      JUNE 30,     JUNE 30,     JUNE 30,
                                                        2004           2003        2004          2003
                                                        ----           ----        ----          ----
<S>                                                   <C>          <C>          <C>          <C>
          Premiums earned...........................  $ 127,272    $  56,565    $ 232,874    $ 96,025
          Investment income, net....................     50,979       32,680       98,386      62,280
          Fee income................................      2,248        1,337        4,350       2,396
          Realized (losses) gains...................     (1,552)      (3,294)         140      (5,051)
          Change in value of embedded derivatives...     14,610            -        5,964           -
                                                      ---------     ---------    ---------   --------
          Total revenues............................    193,557       87,288      341,714     155,650
                                                      ---------     ---------    ---------   --------

          Claims and other policy benefits..........    102,485        42,821      178,078     72,226
          Interest credited to interest
          sensitive contract liabilities............     25,465        16,874       49,658     32,767
          Acquisition costs and other insurance
          expenses, net.............................     35,701        19,815       65,236     34,267
          Operating expenses........................      4,142         2,372        9,105      4,415
          Interest expense..........................        939           240        1,625        477
                                                      ---------     ---------    ---------   --------
          Total benefits and expenses...............    168,732        82,122      303,702    144,152
                                                      ---------     ---------    ---------   --------
          Income before income taxes and
          minority interest.........................  $  24,825     $   5,166    $  38,012   $ 11,498
                                                      =========     =========    =========   ========
</TABLE>

     In our Life Reinsurance North America Segment we reinsure 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. The results of Scottish Re Life
Corporation, which we acquired on December 22, 2003, are included in the results
of this segment for the quarter and six months ended June 30, 2004.

     Premiums earned in our Life Reinsurance North America Segment during the
quarter ended June 30, 2004 increased 125% to $127.3 million in comparison with
$56.6 million in the same period in 2003. A significant portion of the increase
is due to the acquisition of Scottish Re Life Corporation, which contributed
$33.2 million in earned premiums for the quarter. The increase is also due to
increases in the


                                       34
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

amounts of life insurance in-force on existing business and on new business
written during the year. As of June 30, 2004, we had approximately $298.1
billion of life reinsurance in force covering 7.4 million lives with an average
benefit per life of $40,000 in our North American operations. As of June 30,
2003, we had approximately $90.4 billion of life reinsurance in force in our
Life Reinsurance North America Segment covering 1.8 million lives with an
average benefit per life of $50,000.

     Net investment income increased by $18.3 million or 56% to $51.0 million
for the quarter ended June 30, 2004 from $32.7 million for the same period in
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 and 2004. Our total
invested assets have increased significantly because of growth in our Life
Reinsurance North America Segment, investment of the proceeds of our equity
offering in July 2003 and our HyCU and trust preferred securities offerings in
the fourth quarter of 2003. Total invested assets in this segment have increased
from $2.7 billion at June 30, 2003 to $4.4 billion at June 30, 2004. Funds
withheld at interest grew from $1.2 billion at June 30, 2003 to $1.5 billion at
June 30, 2004.

     On the portfolio managed by our external investment managers the yields on
fixed rate assets were 5.1% and 5.4% at June 30, 2004 and 2003, respectively.
The reduction in yield was due primarily to the 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 2.5% as at June 30, 2004 from 3.2% as at June 30, 2003,
and the yield on our cash and cash equivalents decreased to 1.0% as at June 30,
2004 from 1.6% as at June 30, 2003. The volume of floating rate assets increased
during 2003 as a result of our investing the proceeds of floating rate funding
agreements to earn a spread over the cost of funds.

     On October 1 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 in which interest is determined by reference to a pool of fixed
maturity assets are arrangements containing embedded derivatives requiring
bifurcation. In addition, reinsurance contracts with experience refunds are also
considered to be arrangements containing embedded derivatives requiring
bifurcation. The change in value of the derivative, net of related deferred
amortization costs, during the quarter ended June 30, 2004 amounted to a gain of
$14.6 million. This change in value has arisen principally because of increases
in risk free interest rates.

     Claims and other policy benefits increased by 139% to $102.5 million for
the quarter ended June 30, 2004 from $42.8 million in the same quarter in 2003.
The increase is a result of the acquisition of Scottish Re Life Corporation, the
increased number of clients and the increase in our traditional solutions
business from these clients in our Life Reinsurance North America Segment as
described above. Death claims are reasonably predictable over a period of many
years, but are less predictable over shorter periods and are subject to
fluctuation from quarter to quarter.

     Our targeted maximum corporate retention in our Life Reinsurance North
America Segment on any one life is $1.0 million; however, we currently retrocede
any liability in excess of $500,000. We have also arranged catastrophe cover,
which provides reinsurance for losses of approximately $19.3 million in excess
of $750,000. This catastrophe cover provides protection for terrorism, nuclear,
biological and chemical risks.

     For the quarter ended June 30, 2004, interest credited to interest
sensitive contract liabilities increased by $8.6 million or 51% to $25.5 million
from $16.9 million in the same period in 2003. Interest


                                       35
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

credited includes interest in respect of funding agreements. The amounts
due on secured funding agreements are included in interest sensitive contract
liabilities on our balance sheet and amount to $500.4 million at June 30, 2004
in comparison with $100.0 million at June 30, 2003. Included in interest
sensitive contract liabilities is $200.0 million in respect of the structured
finance facility discussed in "Capital and collateral". 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 $3.2 billion at
June 30, 2004 in comparison with $1.9 billion at June 30, 2003.

     During the quarter ended June 30, 2004, acquisition costs and other
insurance expenses increased by $15.9 million or 80% to $35.7 million from $19.8
million in the same quarter in 2003. The increase was a result of the
acquisition of Scottish Re Life Corporation and the increased life and annuity
business in our Life Reinsurance North America Segment as discussed above.

     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 profits in respect of the contracts.

     Operating expenses have increased by 75% to $4.1 million in the quarter
ended June 30, 2004 from $2.4 million in the same quarter in 2003. The increase
is primarily the result of the acquisition of Scottish Re Life Corporation and
additional personnel costs incurred as we continue to grow our business. The
costs of Scottish Re Life Corporation include the cost of the transition
services agreement with GE ERC of $750,000. Total employees in this segment has
grown from 60 at June 30, 2003 to 82 at June 30, 2004.

     Interest expense in this segment arises on the trust preferred securities.
The increase in interest expense to $0.9 million in the quarter ended June 30,
2004 from $0.2 million for the same quarter in 2003, results from the issuance
of an additional $62.0 million of these securities in October 2003, November
2003, and May 2004.

     Premiums earned in our Life Reinsurance North America Segment during the
six months ended June 30, 2004 increased 143% to $232.9 million in comparison
with $96.0 million in the same period in 2003. A significant portion of the
increase is due to the acquisition of Scottish Re Life Corporation, which
contributed $77.8 million in earned premiums. The remaining increase is due to
the increase in the number of client ceding companies and the increase in
business from these clients in our Life Reinsurance North America Segment. As of
June 30, 2004, we had approximately $298.1 billion life reinsurance in force
covering 7.4 million lives with an average benefit per life of $40,000 in our
Life Reinsurance North America Segment. As of June 30, 2003, we had
approximately $90.4 billion of life reinsurance in force in our Life Reinsurance
North America Segment covering 1.8 million lives with an average benefit per
life of $50,000.

     Net investment income increased by $36.1 million or 58% to $98.4 million
for the six months ended June 30, 2004 from $62.3 million for the prior year
period. The increase is due to the growth in our average invested assets offset
in part by decreases in realized yields during 2003 and 2004.

     The change in value of derivatives, net of related deferred amortization
costs, during the six months ended June 30, 2004 amounted to a gain of $6.0
million. This change in value arose principally because of an increase in risk
free interest rates.


                                       36
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     Claims and other policy benefits increased by 147% to $178.1 million during
the six months ended June 30, 2004 from $72.2 million in the same period in
2003. The increase is a result of the acquisition of Scottish Re Life
Corporation, the increased number of clients and the increase in business from
these clients in our Life Reinsurance North America Segment as described above.
Death claims are reasonably predictable over a period of many years, but are
less predictable over shorter periods and are subject to fluctuation from period
to period.

     For the six months ended June 30, 2004, interest credited to interest
sensitive contract liabilities increased by $16.9 million or 52% to $49.7
million from $32.8 million in the same period in 2003. 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 $500.4 million at June 30, 2004 in comparison with
$100 million at June 30, 2003. Included in interest sensitive contract
liabilities is $200.0 million in respect of the structured finance facility
discussed in "Capital and collateral". 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 $3.2 billion at June 30, 2004 in
comparison with $1.9 billion at June 30, 2003.

     During the six months ended June 30, 2004 acquisition costs and other
insurance expenses increased by $31.0 million or 90% to $65.2 million from $34.3
million in the same period in 2003. The increase was a result of the acquisition
of Scottish Re Life Corporation and the increased life and annuity business in
our Life Reinsurance North America Segment as discussed above.

     Operating expenses increased by 106% to $9.1 million during the six months
ended June 30, 2004 from $4.4 million in the same period in 2003. The increase
is primarily the result of the acquisition of Scottish Re Life Corporation and
additional personnel costs incurred as we continue to grow our business. The
costs of Scottish Re Life Corporation include the cost of the transition
services agreement with GE ERC of $1.7 million. Total employees in this segment
has grown from 60 at June 30, 2003 to 82 at June 30, 2004.

     Interest expense in this segment arises on the trust preferred securities.
The increase in interest expense to $1.6 for the six months ended June 30, 2004
from $0.5 million in the same period in 2003, results from the issuance of an
additional $62.0 million of these securities in October 2003, November 2003, and
May 2004.


                                       37
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

 LIFE REINSURANCE INTERNATIONAL

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED        SIX MONTHS ENDED
                                                ------------------        ----------------
                                               JUNE 30,     JUNE 30,      JUNE 30,    JUNE 30,
                                                2004         2003          2004        2003
                                                ----         ----          ----        ----
<S>                                           <C>         <C>           <C>         <C>
 Premiums earned...........................   $  28,708   $  38,172     $  56,453   $  63,531
 Investment income, net....................       3,574       1,998         5,722       3,744
 Realized losses...........................        (189)       (264)         (340)       (873)
                                              ---------   ---------     ---------   ---------
 Total revenues............................      32,093      39,906        61,835      66,402
                                              ---------   ---------     ---------   ---------

 Claims and other policy benefits..........      20,503      22,728        40,077      36,237
 Acquisition costs and other insurance
 expenses, net............................        1,334       7,690         3,983      13,221

 Operating expenses........................       3,757       3,293         8,166       5,840
                                              ---------   ---------     ---------   ---------
 Total benefits and expenses...............      25,594      33,711        52,226      55,298
                                              ---------   ---------     ---------   ---------
 Income before income taxes and
 minority interest.........................   $   6,499   $   6,195     $   9,609   $  11,104
                                              =========   =========     =========   =========
</TABLE>


     Our Life Reinsurance International Segment specializes in niche markets in
developed countries and broader life insurance markets in the developing world
and focuses on the reinsurance of short term group life policies and aircrew
"loss of license" insurance.

     Premiums earned in our Life Reinsurance International Segment during the
quarter ended June 30, 2004 decreased 25% to $28.7 million in comparison with
$38.2 million in the same period in 2003. Premiums earned from a portfolio
acquired in 2002 were $1.9 million lower in the quarter ended June 30, 2004
compared to the same period in the prior year due to the run off nature of the
portfolio. Other life reinsurance reported earned premium decreased by 23% in
the quarter ended June 30, 2004 to $14.7 million in comparison with $19.2
million in the same period in 2003. Earned premium for general reinsurance
business, which consists of aircrew loss of license and related personal
accident, decreased 29% from $10.2 million to $7.2 million. 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. In prior years premiums earned in this segment
were subject to variation from quarter to quarter because of the reporting
delays. As part of the implementation of this segment's new administrative
system, improved data has been compiled which has allowed us to more accurately
estimate our premium earned. During the year to date we have decided not to
renew certain contracts which do not meet our required return thresholds.

     Investment income for the quarter ended June 30, 2004 has increased to $3.6
million compared to $2.0 million for the same period in 2003. The agreements for
the acquisition of a portfolio of business completed late in 2002 included
conditions for recapture of certain business by the ceding company. This
recapture has now been completed and has resulted in additional investment
income of $1.1 million in the current quarter. The remainder of the increase is
due to the increased level of invested assets arising principally from growth in
business.

     Claims and other policy benefits in our Life Reinsurance International
Segment decreased to $20.5 million in the quarter ended June 30, 2004 from $22.7
million in the same quarter in 2003. Claims in the current quarter, compared to
the same quarter in 2003, have been impacted by the introduction of the
estimates process described above. During the current quarter we have recognized
claims and other


                                       38
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

policy benefits of $1.8 million in respect of the recapture of business on the
portfolio acquisition described above. In addition during the quarter we
incurred $1.0 million in respect of a claim from our stop loss business. Claims
and other policy benefits in the prior year were favorably impacted by a $3.4
million release of reserves on the sale of our unit linked business in 2003.

     During the quarter ended June 30, 2004, acquisition costs and other
insurance expenses decreased by $6.4 million or 83% to $1.3 million from $7.7
million in the same period in 2003. Acquisition costs for a portfolio acquired
in late 2002 are $1.1 million lower due to the run off nature of the portfolio.
Acquisition costs have also been impacted by the estimate process described
above. Acquisition costs includes the amortization of the present value of
in-force business. This is $1.9 million lower in the second quarter of 2004
compared to the second quarter of 2003 due to the sale of the unit linked
business in the second quarter of 2003. In the current year quarter we have
recognized a commission due of $1.8 million arising from a run off book of
business.

     Operating expenses have increased by 14% for the quarter ended June 30,
2004 to $3.8 million from $3.3 million in the prior year period. The increase is
principally related to personnel costs. Additional resources have been added as
we continue to grow our business in existing and prospective markets. Operating
expenses in this segment are incurred in pounds sterling. These expenses have
increased as a result of the depreciation of the United States dollar in
comparison with pounds sterling.

     Premiums earned in our Life Reinsurance International Segment during the
six months ended June 30, 2004 decreased 11% to $56.5 million in comparison with
$63.5 million in the same period in 2003. Premiums earned from a portfolio
acquired late in 2002 were $3.0 million lower in the first six months of 2004
compared to the same period in the prior year due to the run off nature of the
portfolio. Other life reinsurance reported earned premium decreased by 10% in
the six months ended June 30, 2004 to $30.6 million in comparison with $34.2
million in 2003. Earned premium for general reinsurance business, which consists
of aircrew loss of license and related personal accident, decreased 3% from
$15.6 million to $15.1 million. 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. In prior years premiums earned in this segment were subject to
variation from quarter to quarter because of the reporting delays. As part of
the implementation of this segment's new administrative system, improved data
has been compiled which has allowed us to more accurately estimate our premium
earned.

     Investment income during the six months ended June 30, 2004 has increased
to $5.7 million compared to $3.7 million for the same period in 2003. The
agreements for the acquisition of a portfolio of business completed late in 2002
included conditions for recapture of certain business by the ceding company.
This recapture has now been completed and has resulted in additional investment
income of $1.1 million in the six month period ended June 30, 2004. The
remainder of the increase is due to the increased level of invested assets
arising principally from growth in business.

     Claims and other policy benefits in our Life Reinsurance International
Segment increased by 11% to $40.1 million in the six months ended June 30, 2004
from $36.2 million in the same period in 2003. Claims in the current six month
period, compared to the same period in 2003, have been impacted by the
introduction of the estimates process described above. During the current six
month period we have recognized claims and other policy benefits of $1.8 million
in respect of the recapture of business on the portfolio acquisition described
above. In addition during the period we incurred $1.0 million in respect of a
claim from our stop loss business. Claims and other policy benefits in the prior
year were favorably impacted by a $3.4 million release of reserves on the sale
of our unit linked business in 2003.


                                       39
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     During the six months ended June 30, 2004 acquisition costs and other
insurance expenses decreased by $9.3 million or 71% to $3.9 million from $13.2
million in the same period in 2003. Acquisition costs for a portfolio acquired
in late 2002 are $2.2 million lower due to the run off nature of the portfolio.
Acquisition costs have also been impacted by the estimate process described
above. Acquisition costs includes the amortization of the present value of
in-force business. This is $1.9 million lower in the six month period of 2004
compared to the same period of 2003 due to the sale of the unit linked business
in the second quarter of 2003. In the current year quarter we have recognized a
commission due of $1.8 million arising from a run off book of business.

     Operating expenses have increased by 40% to $8.2 million for the six months
ended June 30, 2004 from $5.8 million in the prior year period. The increase is
principally related to personnel costs. Additional resources have been added as
we continue to grow our business in existing and prospective markets. The
increased personnel costs include cost for recruitment expenses. Office costs
increased compared to 2003 due to the move to larger offices in the second
quarter of 2003. Operating expenses in this segment are incurred in pounds
sterling. These expenses have increased as a result of the depreciation of the
United States dollar in comparison with pounds sterling.

OTHER
<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED        SIX MONTHS ENDED
                                                ------------------        ----------------
                                               JUNE 30,     JUNE 30,      JUNE 30,    JUNE 30,
                                                2004         2003          2004        2003
                                                ----         ----          ----        ----
<S>                                           <C>         <C>           <C>          <C>
 Investment income, net....................   $    264    $   1,136     $     811    $   2,114
 Fee income................................        941        1,043         1,791        1,975
 Realized gains (losses)...................         54          166           (66)         211
                                              ---------   ----------    ----------   ----------
 Total revenues............................      1,259        2,345         2,536        4,300
                                              ---------   ----------    ----------   ----------

 Acquisition costs and other insurance
 expenses, net.............................        554          379         1,239        1,051

 Operating expenses........................      3,002        2,483         6,484        5,758
 Interest expense..........................      2,057        1,611         4,148        3,187
                                              ---------   ----------    ----------   ----------
 Total benefits and expenses...............      5,613        4,473        11,871        9,996
                                              ---------   ----------    ----------   ----------
 Loss before income taxes and minority
 interest..................................   $ (4,354)   $  (2,128)    $  (9,335)   $  (5,696)
                                              =========   ==========    ==========   ==========
</TABLE>

     The Other Segment comprises revenues and expenses not included elsewhere
and includes corporate overhead. As previously discussed our Wealth Management
operations, which were previously designated as a separate segment, are now
included in the Other Segment.

     Investment income arises in the Other Segment on capital not specifically
allocated to the Life Reinsurance North America or Life Reinsurance
International Segments. Investment income for the quarter has decreased by 77%
to $0.3 million due to our deployment of capital into our reinsurance business
over the past nine months.

     Fee income and acquisition expenses arise from our Wealth Management
operations. Operating expenses include the costs of running our principal office
in Bermuda, compensation costs for our board of directors and legal and
professional fees including those in respect of corporate governance
legislation. Operating expenses have increased by 21% to $3.0 million for the
quarter ended June 30, 2004 and 13% to $6.5 million for the six months ended
June 30, 2004. These increases relate primarily to increased personnel costs and
the costs of corporate governance initiatives, including the Sarbanes Oxley Act.



                                       40
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     For the quarter ended June 30, 2004, interest expense has increased to $2.1
million from $1.6 million for the same period in 2003 as a result of the HyCU
issuance in December 2003. For the six months ended June 30, 2004, interest
expense has increased to $4.1 million from $3.2 million for the same period in
2003.

REALIZED GAINS (LOSSES)

     During the quarter ended June 30, 2004, realized losses amounted to $1.7
million in comparison with $3.4 million in the same period in 2003.

     During the quarter ended June 30, 2004, we recognized losses of $0.1
million in respect of impairments on the portfolio controlled by us. The other
losses arose on the disposal of investments in the normal course of business.
The losses in the second quarter of 2003 consist of investment losses on unit
linked securities of $966,000, impairments of $1.8 million on the portfolio
controlled by us and impairment losses of $1.1 million on contracts written
under modified coinsurance agreements. These losses were partially offset by net
realized gains on the sales of fixed maturity investments.

     During the six months ended June 30, 2004, realized losses amounted to $0.3
million in comparison with realized losses of $5.7 million in the same period in
2003.

     During the six months ended June 30, 2004, we recognized losses of $2.0
million in respect of impairments on the portfolio controlled by us. These
losses were offset by net realized gains on the portfolio. The losses in the six
months ended June 30, 2003 consist of investment losses on unit linked
securities of $966,000, impairments of $1.8 million on the portfolio controlled
by us and impairment losses of $1.1 million on contracts written under modified
coinsurance agreements. These losses were partially offset by net realized gains
on the sales of fixed maturity investments.

     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, as well as 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.


                                       41
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     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 at a loss during the periods ended June 30,
2004 and 2003.

                                  THREE MONTHS ENDED JUNE 30, 2004
                                  --------------------------------
                     Credit Concern           Other                  Total
                     --------------           -----                  -----
Days               Proceeds    Loss     Proceeds     Loss     Proceeds    Loss
                   --------    ----     --------     ----     --------    ----
                                       (dollars in thousands)

0-90..............   $     -   $   -     $92,804    $(2,183)  $92,804   $(2,183)
91-180............     1,695     (89)        786        (31)    2,481      (120)
181-270...........         -       -         127         (6)      127        (6)
271-360...........         -       -       1,699        (16)    1,699       (16)
                    --------   ------   --------    --------  --------  --------
Total.............   $ 1,695   $ (89)    $95,416    $(2,236)  $97,111   $(2,325)
                    ========   ======   ========    ========  ========  ========


                                  THREE MONTHS ENDED JUNE 30, 2003
                                  --------------------------------
                     Credit Concern           Other                  Total
                     --------------           -----                  -----
Days               Proceeds    Loss     Proceeds     Loss     Proceeds    Loss
                   --------    ----     --------     ----     --------    ----
                                       (dollars in thousands)

0-90..............  $      -   $   -     $ 2,476    $    (3)  $ 2,476   $    (3)
91-180............       739     (11)          -          -       739       (11)
                    --------   ------   --------    --------  --------  --------
Total.............  $    739   $ (11)    $ 2,476    $    (3)  $ 3,215   $   (14)
                    ========   ======   ========    ========  ========  ========


                                   SIX MONTHS ENDED JUNE 30, 2004
                                  -------------------------------
                     Credit Concern           Other                  Total
                     --------------           -----                  -----
Days               Proceeds    Loss     Proceeds     Loss     Proceeds    Loss
                   --------    ----     --------     ----     --------    ----
                                       (dollars in thousands)

0-90..............  $      -   $   -    $102,849    $(2,218) $ 102,849  $(2,218)
91-180............     1,804     (90)     25,630       (255)    27,434     (345)
181-270...........     3,216    (106)        494        (15)     3,710     (121)
271-360...........         -       -       2,186        (27)     2,186      (27)
Greater than 360..     5,060    (549)          -          -      5,060     (549)
                    --------   ------   --------    --------  --------  --------
Total.............  $ 10,080   $(745)   $131,159    $(2,515) $ 141,239  $(3,260)
                    ========   ======   ========    ========  ========  ========


                                   SIX MONTHS ENDED JUNE 30, 2003
                                  -------------------------------
                     Credit Concern           Other                  Total
                     --------------           -----                  -----
Days               Proceeds    Loss     Proceeds     Loss     Proceeds    Loss
                   --------    ----     --------     ----     --------    ----
                                       (dollars in thousands)

0-90..............  $      -   $   -    $ 2,476     $    (3)  $  2,476  $    (3)
91-180............     3,429    (212)         -           -      3,429     (212)
181-270...........     1,200    (241)         -           -      1,200     (241)
Greater than 360..     1,474     (13)         -           -      1,474      (13)
                    --------   ------   -------     --------  --------  --------
Total.............  $  6,103   $(466)   $ 2,476     $    (3)  $  8,579  $  (469)
                    ========   ======   =======     ========  ========  ========


                                       42
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

FINANCIAL CONDITION

INVESTMENTS

     At June 30, 2004, the portfolio controlled by us consisted of $2.9 billion
of fixed income securities, preferred stock and cash. The majority of these
assets are traded; however, $235.5 million represent investments in private
securities. Of the total portfolio controlled by us, $2.7 billion represented
the fixed income and preferred stock portfolios managed by external investment
managers and $208.8 million represented other cash balances. 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 represented investments in private securities. Of the
total portfolio, $2.1 billion represented the fixed income and preferred stock
portfolio managed by external investment managers and $262.7 million represented
other cash balances.

     At June 30, 2004, the average Standard & Poor's rating of that portfolio
was "AA-", the average effective duration was 3.54 years and the average book
yield was 4.13% as compared with an average rating of "AA-", an average
effective duration 3.94 years and an average book yield of 4.46% at December 31,
2003. At June 30, 2004, the unrealized depreciation on investments, net of tax,
was $15.3 million as compared with unrealized appreciation on investments, net
of tax, of $16.8 million at December 31, 2003. The change in our unrealized
appreciation/ depreciation position is attributable to a rise in interest rates
during the quarter ended June 30, 2004. The rise caused a 3% drop in market
values as a percentage of book value. The unrealized appreciation on investments
is included in our consolidated balance sheet as part of shareholders' equity.

     In the table below are the total returns earned by our portfolio for the
three months ended June 30, 2004, 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 General Re 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.

                                                                JUNE 30, 2004
                                                                -------------
              Portfolio performance.......................          -2.23%
              Customized index............................          -2.50%
              Lehman Brothers Global Bond Index...........          -2.90%
              S&P 500.....................................           1.72%

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

                                           JUNE 30, 2004       DECEMBER 31, 2003
                                           -------------       -----------------
       RATINGS                            $ in                  $ in
                                         millions      %      millions      %
                                         --------      -      --------      -
       AAA..........................  $  1,062.0     36.7%  $   785.4     32.7%
       AA...........................       355.4     12.3       298.4     12.4
       A............................       881.5     30.5       762.7     31.7
       BBB..........................       566.3     19.6       540.8     22.5
       BB or below..................        26.4      0.9        16.6      0.7
                                      ----------    -----   ---------    -----
       Total........................  $  2,891.6    100.0%  $ 2,403.9    100.0%
                                      ==========    =====   =========    =====


                                       43
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

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

<TABLE>
<CAPTION>
                                                   JUNE 30, 2004       DECEMBER 31, 2003
                                                   -------------       -----------------
     SECTOR                                       $ in                  $ in
                                                 millions       %      millions       %
                                                 --------       -      --------       -

<S>                                              <C>          <C>      <C>          <C>
     U.S. Treasury securities and U.S.
        government agency obligations.......     $   54.5       1.9%   $   74.6       3.1%
     Corporate securities...................      1,062.4      36.8     1,119.6      46.6
     Municipal bonds........................         12.0       0.4         1.8       0.1
     Mortgage and asset backed securities...      1,419.8      49.1       818.7      34.0
     Preferred stock........................        134.1       4.6       126.5       5.3
                                                 --------     ------   --------     ------
                                                  2,682.8      92.8     2,141.2      89.1
     Cash...................................        208.8       7.2       262.7      10.9
                                                 --------     ------   --------     ------
     Total..................................     $2,891.6     100.0%   $2,403.9     100.0%
                                                 ========     ======   ========     ======
</TABLE>

     The data in the tables above exclude other investments and assets held by
ceding insurers under modified coinsurance agreements.

     At June 30, 2004, our fixed income portfolio had 1,624 positions and $43.9
million of gross unrealized losses. No single position had an unrealized loss
greater than $1.0 million. There were $21.5 million of unrealized gains on the
remainder of the portfolio. There were 66 private securities in an unrealized
loss position totaling $3.6 million. 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 $0.8 million.

     The composition by category of securities that have an unrealized loss at
June 30, 2004 and December 31, 2003 are presented in the tables below.


                                       44
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

<TABLE>
<CAPTION>
                                                               JUNE 30, 2004
                                                               -------------
                                                ESTIMATED                UNREALIZED
                                                FAIR VALUE       %          LOSS         %
                                                ----------       -          ----         -
                                                            dollars in thousands

<S>                                           <C>               <C>       <C>            <C>
Corporate securities........................  $    596,779       37.1%    $(16,315)       37.2%
Other structured securities.................       455,640       28.3      (13,330)       30.4
Collateralized mortgage obligations.........       273,687       17.0       (5,133)       11.7
Preferred stock.............................       128,867        8.0       (5,666)       12.9
Mortgage backed securities..................       103,126        6.4       (2,296)        5.2
Governments.................................        40,655        2.6         (746)        1.7
Municipal bonds.............................        10,038        0.6         (418)        0.9
                                              ------------      ------    ---------      ------
Total.......................................  $  1,608,792      100.0%    $(43,904)      100.0%
                                              ============      ======    =========      ======
</TABLE>

<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>


                                       45
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

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

<TABLE>
<CAPTION>
                                                      JUNE 30, 2004
                                                      -------------
                                                   ESTIMATED              UNREALIZED
       DAYS                BOOK VALUE      %       FAIR VALUE      %         LOSS         %
       ----                ----------      -       ----------      -         ----         -
                                                  dollars in thousnads

<S>                         <C>           <C>      <C>           <C>      <C>          <C>
       0-90..............   $1,365,014     82.6%   $1,335,660     83.0%   $(29,354)     66.9%
       91-180............      155,459      9.4       148,034      9.2      (7,425)     16.9
       181-270...........       26,321      1.6        25,526      1.6        (795)      1.8
       271-360...........       34,530      2.1        33,064      2.1      (1,466)      3.3
       Greater than 360..       71,372      4.3        66,508      4.1      (4,864)     11.1
                            ----------    ------   ----------    ------   ---------    ------
       Total.............   $1,652,696    100.0%   $1,608,792    100.0%   $(43,904)    100.0%
                            ==========    ======   ==========    ======   =========    ======
</TABLE>

<TABLE>
<CAPTION>
                                                     DECEMBER 31, 2003
                                                     -----------------
                                                    ESTIMATED              UNREALIZED
       DAYS                BOOK VALUE       %       FAIR VALUE      %         LOSS         %
       ----                ----------       -       ----------      -         ----         -
                                                   dollars in thousands

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

     Unrealized losses on securities that have been in an unrealized loss
position for periods greater than 2 years amounted to $2.3 million at June 30,
2004 and $2.0 million at December 31, 2003. Unrealized losses on non-investment
grade securities amounted to $3.6 million and $3.0 million at June 30, 2004 and
December 31, 2003, respectively. Of these amounts, non-investment grade
securities with unrealized losses of $2.5 million at June 30, 2004 and $1.8
million at December 31, 2003 had been in an unrealized loss position for a
period greater than one year, of which $1.1 million at June 30, 2004 and $0.9
million at December 31, 2003 had been in an unrealized loss position for periods
greater than 2 years.


                                       46
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     The following tables illustrate the industry analysis of the unrealized
losses at June 30, 2004 and December 31, 2003.

<TABLE>
<CAPTION>
                                                          JUNE 30, 2004
                                                          -------------
                                AMORTIZED               ESTIMATED             UNREALIZED
                                  COST          %       FAIR VALUE      %        LOSS         %
                                  ----          -       ----------      -        ----         -

 INDUSTRY
 --------

                                              dollars in thousands
<S>                            <C>              <C>     <C>           <C>       <C>         <C>
 Mortgage and asset
   backed securities......     $     848,226     51.5%  $   827,467    51.6%   $( 20,759)     47.3%
 Banking..................           128,289      7.8       124,381     7.8       (3,908)     8.9
 Financial other..........           106,893      6.5       103,405     6.4       (3,488)     7.9
 Communications...........            72,660      4.4        70,510     4.4       (2,150)     4.9
 Electric.................            54,168      3.3        52,746     3.3       (1,422)     3.2
 Finance Companies........            52,396      3.2        50,733     3.2       (1,663)     3.8
 Consumer Noncyclical.....            48,392      2.9        47,277     2.9       (1,115)     2.6
 Other....................           336,625     20.4       327,226    20.4       (9,399)    21.4
                               -------------    ------  -----------   ------    ---------   ------
 Total....................     $   1,647,649    100.0%  $ 1,603,745   100.0%    $(43,904)   100.0%
                               =============    ======  ===========   ======    =========   ======
</TABLE>


<TABLE>
<CAPTION>
                                                        DECEMBER 31, 2003
                                                        -----------------
                                 AMORTIZED              ESTIMATED              UNREALIZED
                                   COST          %      FAIR 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)      1.2
 Transportation...........            7,382      1.3         6,534      1.2          (848)      5.8
 Other....................          139,321     25.3       137,446     25.4        (1,875)     12.8
                               ------------    ------  -----------    ------  ------------    ------
 Total......................   $    554,699    100.0%  $   540,116    100.0%  $   (14,583)    100.0%
                               ============    ======  ===========    ======  ============    ======
</TABLE>

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

     The expected maturity dates of securities that have an unrealized loss at
June 30, 2004 and December 31, 2003 are presented in the table below.

<TABLE>
<CAPTION>
                                                           JUNE 30, 2004
                                                           -------------
                                                         ESTIMATED             UNREALIZED
MATURITY                        AMORTIZED COST    %      FAIR VALUE      %        LOSS         %
--------                        --------------    -      ----------      -        ----         -
                                                        dollars in thousands
<S>                             <C>             <C>     <C>             <C>     <C>          <C>
Due in one year or less......   $    141,290      8.6%  $    137,816      8.6%  $   (3,474)    7.9%
Due in one through five years        657,781     39.9        646,333     40.3      (11,448)   26.1
Due in five through ten years        643,046     39.0        623,180     38.9      (19,866)   45.2
Due after ten years..........        205,532     12.5        196,416     12.2       (9,116)   20.8
                                ------------    ------  ------------    ------  -----------  ------
Total........................   $  1,647,649    100.0%  $  1,603,745    100.0%  $  (43,904)  100.0%
                                ============    ======  ============    ======  ===========  ======
</TABLE>


                                       47
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

<TABLE>
<CAPTION>
                                                            DECEMBER 31, 2003
                                                            -----------------
                                                            ESTIMATED              UNREALIZED
   MATURITY                         BOOK VALUE       %      FAIR VALUE      %         LOSS        %
   --------                         ----------       -      ----------      -         ----        -
                                                           dollars in thousands
<S>                                <C>             <C>     <C>            <C>      <C>           <C>
   Due in one year or less......   $     57,518     10.4%  $    57,129     10.6%   $      (389)    2.7%
   Due in one through five years        220,835     39.8       214,836     39.8         (5,999)   41.1
   Due in five through ten years        232,231     41.9       225,844     41.8         (6,387)   43.8
   Due after ten years..........         44,115      7.9        42,307      7.8         (1,808)   12.4
                                   ------------    ------  -----------    ------   -----------   ------
   Total........................   $    554,699    100.0%  $   540,116    100.0%   $   (14,583)  100.0%
                                   ============    ======  ===========    ======   ============  ======
</TABLE>

     At June 30, 2004, there were 986 securities with unrealized loss positions
with one security having a unrealized loss greater than $1.0 million. This
security was a securitized asset was tested for impairment and satisfied the
impairment tests. At December 31, 2003, there were 409 securities with
unrealized loss positions with 2 securities having an unrealized loss greater
than $1.0 million. These were also securitized assets, were tested for
impairment and satisfied the impairment tests at December 31, 2003. The increase
in the number of securities with unrealized losses is primarily attributable to
increases in interest rates.

     At June 30, 2004, there were five 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 $2.3 million and the largest unrealized loss position was
$0.9 million. 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.

     Subsequent to June 30, 2004, we entered into an interest rate swap contract
in the amount of $100 million in relation to certain of our investment assets
not supporting reinsurance liabilities. This contract will be accounted for in
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS 133 requires that all derivatives be recognized as either
assets or liabilities on the balance sheet and be measured at fair value. This
derivative has not been designated as a hedge.

FUNDS WITHHELD AT INTEREST

     Funds withheld at interest arise on contracts written under modified
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 June 30, 2004 and December 31, 2003, funds withheld at interest were in
respect of six fixed annuity reinsurance contracts with three ceding companies.
At both June 30, 2004 and December 31, 2003, we had three contracts with Lincoln
National Insurance Company that accounted 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


                                       48
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

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 $1.8 billion and $1.7 billion at June
30, 2004 and December 31, 2003, respectively.

     At June 30, 2004, funds withheld at interest totaled $1.5 billion with an
average rating of "A-", an average effective duration of 4.95 years and an
average book yield of 6.26% as compared with an average rating of "A-", an
average effective duration of 5.06 years and an average book yield of 6.32% at
December 31, 2003. These are fixed income investments and include marketable
securities, commercial mortgages, private placements and cash. The market value
of the funds withheld amounted to $1.5 billion and $1.6 billion at June 30, 2004
and at December 31, 2003, respectively.

     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>
                                              JUNE 30, 2004         DECEMBER 31, 2003
                                              -------------         -----------------
     RATINGS                             $ in millions        %    $ in millions      %
     -------                             -------------        -    -------------      -
<S>                                      <C>             <C>        <C>       <C>
     AAA...............................  $       209.8    13.9%       $216.6   13.9%
     AA................................           74.3     4.9          76.9    4.9
     A.................................          514.6    34.1         528.6   34.0
     BBB...............................          520.0    34.5         537.6   34.6
     BB or below.......................           60.3     4.0          66.0    4.3
                                         -------------   ------     --------  ------
                                                1379.0    91.4       1,425.7   91.7
     Commercial mortgage loans.........          129.4     8.6         129.4    8.3
                                         -------------   ------     --------  ------
     Total.............................  $     1,508.4   100.0%     $1,555.1  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>
                                              JUNE 30, 2004          DECEMBER 31, 2003
                                              -------------          -----------------
     SECTOR                              $ in millions      %     $ in millions      %
     ------                              -------------      -     -------------      -
 <S>                                      <C>           <C>       <C>            <C>
    U.S. Treasury securities and
       U.S. government agency
       obligations..................     $        32.1    2.1%    $       32.0     2.1%
     Corporate securities...........           1,001.9   66.4          1,041.2    67.0
     Municipal bonds................              25.6    1.7             23.1     1.5
     Mortgage and asset backed
       securities...................             319.4   21.2            329.4    21.1
     Commercial mortgage loans......             129.4    8.6            129.4     8.3
                                         -------------  ------    ------------   ------
     Total..........................     $     1,508.4  100.0%    $    1,555.1   100.0%
                                         =============  ======    ============   ======
</TABLE>



                                       49
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW

     Cash used in operating activities amounted to $27.6 million in the first
six months of 2004 in comparison with a cash source of $35.5 million provided by
operating activities in the same period of 2003. 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 decrease in operating cash flow is
partly attributable to settlement of a tax liability of approximately $23.0
million. This liability resulted from actions taken by the former owner of
Scottish Re Life Corporation immediately prior to its acquisition in December
2003. This outflow is not expected to recur. When adjusted for this payment,
cash outflows from operations in the first six months of 2004 were $4.6 million
compared to inflows $35.5 in the same period of 2003. This decrease is
attributable to the closing of 2 contracts towards the end of the period which
resulted in an increase in reinsurance balances receivable.

     We believe cash flows from operations will be positive over time. However,
they may be positive or negative in any one 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. To address the risk that operating cash flows may not be
sufficient in any given period we maintain a high quality fixed maturity
portfolio with positive liquidity characteristics. These securities are
available for sale and can be sold to meet obligations if necessary.


CAPITAL AND COLLATERAL

     At June 30, 2004, total capitalization was $1.0 billion compared to $964.3
million at December 31, 2003. Total capitalization is analyzed as follows:

                                             JUNE 30, 2004     DECEMBER 31, 2003
                                             -------------     -----------------
                                                   (dollars in thousands)
     Shareholders' equity.................  $        669,580   $       659,844
     Mezzanine equity.....................           142,145           141,928
     Long-term debt.......................           194,500           162,500
                                            ----------------   ---------------
     Total                                  $      1,006,225   $       964,272
                                            ================   ===============

     The increase in capitalization is due to the net income for the six months
ended June 30, 2004 of $38.8 million, the issuance of trust preferred debt of
$32.0 million and the issuance of share capital to employees on the exercise of
options of $6.6 million offset by dividends paid of $3.6 million and a decrease
in other comprehensive income of $32.2 million. Other comprehensive (loss)
income consists of the unrealized appreciation on investments and the cumulative
translation adjustment arising from the translation of Scottish Re Holdings
Limited's balance sheet at exchange rates as of June 30, 2004.

     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. This shelf enables us
to sell from time to time securities described in the registration statement up
to a total of $750.0 million.


                                       50
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     During the six months ended June 30, 2004, we paid quarterly dividends
totaling $3.6 million or $0.10 per share.

     On June 25, 2004, we closed a structured finance facility with HSBC Bank
USA, N.A. This facility provides $200.0 million that can be used to
collateralize reinsurance obligations under intercompany reinsurance agreements.
Simultaneously, we entered into a total return swap with HSBC Bank USA, N.A.
under which we are entitled to the total return of the investment portfolio of
the trust established in respect of this facility. As a result, the balances and
activities of the trust have been consolidated in these financial statements.

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

       a) a credit facility totaling $50 million, of which $25 million is
          available on an unsecured basis and $25 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 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 June 30, 2004, Scottish Annuity & Life Insurance Company (Cayman) Ltd.'s
shareholder's equity was $767.9 million. The other facility requires that we
maintain consolidated net worth of $520.0 million, a maximum debt to total
capitalization ratio of 30% and uncollateralized assets of 1.2 times any
unsecured borrowings. At June 30, 2004, our net worth was $669.6 million and the
ratio of debt to total capitalization was 19.4%. 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 June 30, 2004, there were no borrowings under the facilities.
Outstanding letters of credit under these facilities amounted to $33.8 million
as at June 30, 2004 and $31.2 million at December 31, 2003.

     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
five 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;


                                       51
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     o    Scottish Re (U.S.), Inc. is licensed, accredited, approved or
          authorized to write reinsurance in 48 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    Scottish Re Life Corporation is licensed, accredited, approved or
          authorized to write reinsurance in 50 states, the District of
          Columbia, Guam and the Federated States of Micronesia. When Scottish
          Re Life Corporation 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 250% of
Risk Based Capital ("RBC") 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 Annuity & Life Insurance Company (Cayman) Ltd. intends, subject to
regulatory approval, to enter into an agreement with Scottish Re Life
Corporation stating that it will (1) cause Scottish Re Life Corporation 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 Missouri and (2) provide Scottish Re
Life Corporation with enough liquidity to meet its obligations in a timely
manner.

     Scottish Re Group Limited and Scottish Annuity & Life Insurance Company
(Cayman) Ltd. have executed a similar agreement 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.

OFF BALANCE SHEET ARRANGEMENTS

     We have no obligations, assets or liabilities other than those disclosed in
the financial statements; no trading activities involving non-exchange traded
contracts accounted for at fair value; and no


                                       52
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

relationships and transactions with persons or entities that derive benefits
from their non-independent relationship with us or our related parties.

CHANGES IN ACCOUNTING STANDARDS

     In 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. In implementing the SOP we have made 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". Implementation of
this SOP has not had a material effect on our financial statements.

     Effective December 31, 2003, we adopted EITF 03-1. This EITF provides
guidance on disclosures for other than temporary impairments of debt and
marketable equity investments that have been accounted for under SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities".
Implementation did not have a material effect on our financial statements.

     In January 2003, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51" ("FIN 46"). FIN 46 provides a framework for
identifying variable interest entities and determining when a company should
include its assets, liabilities, non-controlling interests and results of
activities in the consolidated financial statements. A variable interest entity
is a legal structure used to conduct activities or hold assets that either (1)
has an insufficient amount of equity to carry out its principal activities
without additional subordinated financial support, (2) has a group of equity
owners that are unable to make significant decisions about its activities, or
(3) has a group of equity owners that do not have the obligation to absorb
losses or the right to receive returns generated by its operations.

     FIN 46 requires a variable interest entity to be consolidated if a party
with an ownership, contractual or other financial interest in the variable
interest entity is obligated to absorb a majority of the risk of loss from the
variable interest entity's activities, is entitled to receive a majority of the
variable interest entity's residual returns, or both. A variable interest holder
that consolidates the variable interest entity is called the primary
beneficiary. We have adopted FIN 46 in respect of the structured finance
facility discussed in note 13.

FORWARD-LOOKING STATEMENTS

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

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


                                       53
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

     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 financial 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
statements to reflect events or circumstances after the date of such statement
or to reflect the occurrence of unanticipated events.


                                       54
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     There have been no material changes since December 31, 2003. Please refer
to "Item 7A: Quantitative and Qualitative Disclosures About Market Risk" in our
Annual Report on Form 10-K.

Item 4. Controls and Procedures

     EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on their
evaluation, our principal executive officer and principal financial officer have
concluded that as of the end of the period covered by this report Scottish Re's
disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities and Exchange Act of 1934 (the "Exchange Act")) are
effective to ensure that information required to be disclosed by Scottish Re
Group Limited in 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.

     During the fourth quarter of 2004, we determined that the International
segment had incorrectly reported premiums earned, claims and other policy
benefits, acquisition costs and other insurance expenses and the income tax
benefit in the quarter and six months ended June 30, 2004. The effect of these
errors was to understate net income by $1.1 million in the three and six months
ended June 30, 2004 and to understate shareholders' equity at June 30, 2004 by
$1.1 million.

     The errors were made in the process of compiling income statement
information on the accrual of premiums and resulted from incorrect references
within the spreadsheets used to calculate these accruals. As a result incorrect
information was referenced by the summary used to prepare the journal entries
used in updating the general ledger. The errors were detected by management as
part of their ongoing analysis of internal controls over financial reporting for
Sarbanes Oxley Section 404 reporting.

     Our principal executive officers and principal financial officer have
concluded that the errors were the result of a material weakness that existed in
control procedures in compiling information on premium accruals. We have taken a
series of steps in our ongoing process to improve control processes, including
those involving the compilation of information used in reporting premium
accruals, and to avoid similar errors going forward. We have also taken steps to
improve controls around segregation of responsibilities and review of manually
prepared information and have strengthened procedures for the reconciliation of
all material general ledger balances. We are continuing the process of designing
and implementing, new systems and procedures involving our general ledger and
reporting capabilities, which are expected to enhance internal control
processes.



     CHANGES IN INTERNAL CONTROLS. There have been no changes in internal
control over financial reporting that occurred during the quarter ended June 30,
2004 that have materially affected, or are reasonably likely to materially
affect, Scottish Re Group Limited's internal control over financial reporting.


                                       55
<PAGE>

PART II.       OTHER INFORMATION

Item 1. Legal Proceedings

     The Company is not currently involved in any material litigation or
arbitration.

Item 2. Changes in Securities and Use of Proceeds

     Not applicable.

Item 3. Defaults Upon Senior Securities

     Not applicable.


                                       56
<PAGE>

Item 4. Submission of Matters to a Vote of Securities Holders

     The 2004 Annual Meeting of Shareholders of the Company was held on May 5,
2004. The following items of business were presented to the shareholders of the
Company (the "Shareholders"):


                              ELECTION OF DIRECTORS

     The results of the vote of the Shareholders with respect to the two Class
III Directors were elected as proposed in the Proxy Statement dated April 2,
2004 under the caption titled "Proposal for Election of Directors" were as
follows:



------------------------------- ----------------------- ------------------------
                                 Total Vote For Each      Total Vote Withheld
Name                                   Director           From Each Direcotor
----                                   --------           -------------------
------------------------------- ----------------------- ------------------------
Michael C. French                     31,296,272                454,580
------------------------------- ----------------------- ------------------------
Hazel R. O'Leary                      31,581,140                169,712
------------------------------- ----------------------- ------------------------

             APPROVAL OF THE 2004 EQUITY INCENTIVE COMPENSATION PLAN

     The results of the vote of the Shareholders with respect to the approval of
the 2004 Equity Incentive Compensation Plan as proposed were as follows:

For:           23,073,972
Against:       3,495,279
Abstain:       1,715,533


                      RATIFICATION OF INDEPENDENT AUDITORS

     The Board of Directors has selected, based upon the recommendation of the
Audit Committee, Ernst & Young, as the independent auditors for the Company for
the fiscal year ending December 31, 2004. The results of the vote of the
Shareholders with respect to this selection were as follows:


For:           31,589,554
Against:       121,015
Abstain:       40,283


                                       57
<PAGE>

Item 5. Other Information

     Not applicable.

Item 6. Exhibits and Reports on Form 8-K

A. Exhibits

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

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

    3.2      Articles of Association of Scottish Re Group Limited, as amended as
             of May 2, 2002 (incorporated herein by reference to Scottish Re
             Group Limited's Current Report on Form 8-K filed with the SEC on
             April 14, 2003).

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

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

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

    4.7      Form of Securities Purchase Agreement between Scottish Re Group
             Limited and the Non-Shareholder Investors (incorporated herein by
             reference to Exhibit 4.12 to Scottish Re Group Limited's
             Registration Statement on Form S-1).(1)

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


                                       58
<PAGE>

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

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

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

    10.1     Employment Agreement dated June 18, 1998 between Scottish Re Group
             Limited and Michael C. French (incorporated herein by reference to
             Exhibit 10.1 to Scottish Re Group Limited 's Registration Statement
             on Form S-1).(1)(15)

    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 Group Limited's Registration Statement on Form
             S-1).(1)(15)

    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 Group Limited's Registration Statement on Form S-1).(1)(15)

    10.4     Investment Management Agreement dated October 22, 1998 between
             Scottish Re Group Limited and General Re-New England Asset
             Management, Inc. (incorporated herein by reference to Exhibit 10.14
             to Scottish Re Group Limited'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 Group Limited'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 Group Limited's 1999 Annual Report on Form
             10-K).(2)(15)

    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 Group Limited's 1999 Annual Report on Form
             10-K).(2)(15)

    10.8     Employment Agreement dated September 18, 2000 between Scottish Re
             (U.S.), Inc. and Oscar R. Scofield (incorporated herein by
             reference to Exhibit 10.16 to Scottish Re Group Limited's 2000
             Annual Report on Form 10-K).(3)(15)

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


                                       59
<PAGE>

    10.10    Amendment No. 1, dated November 8, 2001, to Share Purchase
             Agreement dated August 6, 2001 by and between Scottish Re Group
             Limited 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 Group Limited's 2001 Annual Report on Form
             10-K). (4)(15)

    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 Group Limited's 2001 Annual Report on Form
             10-K). (4)(15)

    10.13    Service Agreement dated December 31, 2001 between Scottish Re
             Holdings Limited and Paul Andrew Bispham.(4)(15)

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

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

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

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

    10.18    Form of Indemnification Agreement between Scottish Re Group Limited
             and each of its directors and officers (incorporated by reference
             to Scottish Re Group Limited's Amended Quarterly Report on Form
             10-Q/A for the period ended September 30, 2002).(8)(15)

    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 Group Limited's Amended
             Quarterly Report on Form 10-Q/A for the period ended September 30,
             2002).(8)(15)

    10.20    Employment Agreement dated June 1, 2002 between Scottish Re Group
             Limited and Paul Goldean. (14)(15)

    10.21    Employment Agreement dated July 1, 2002 between Scottish Re Group
             Limited and Elizabeth Murphy (incorporated by reference to Scottish
             Re Group Limited's Amended Quarterly Report on Form 10-Q/A for the
             period ended September 30, 2002).(8)(15)

    10.22    Employment Agreement dated June 1, 2002 between Scottish Re Group
             Limited and Clifford J. Wagner (incorporated by reference to
             Scottish Re Group Limited's Amended Quarterly Report on Form 10-Q/A
             for the period ended September 30, 2002).(8)(15)


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<PAGE>

    10.23    Employment Agreement dated July 8, 2002 between Scottish Re Group
             Limited and Scott E. Willkomm (incorporated by reference to
             Scottish Re Group Limited's Amended Quarterly Report on Form 10-Q/A
             for the period ended September 30, 2002).(8)(15)

    10.24    Employment Agreement dated February 10, 2003 between Scottish Re
             Group Limited and Michael C. French (incorporated herein by
             reference to Scottish Re Group Limited's 2002 Annual Report on Form
             10-K). (12)(1)

    10.25    Employment Agreement dated February 10, 2003 between Scottish Re
             (U.S), Inc. and Oscar R. Scofield (incorporated herein by reference
             to Scottish Re Group Limited's 2002 Annual Report on Form 10-K).
             (12)(15)

    10.26    Amended Employment Agreement dated February 10, 2003 between
             Scottish Re Group Limited and Thomas A. McAvity (incorporated
             herein by reference to Scottish Re Group Limited's 2002 Annual
             Report on Form 10-K). (12)(15)

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

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

    10.29    Employment Agreement dated May 1, 2003 between Scottish Re Holdings
             Limited and David Huntley (incorporated herein by reference to
             Scottish Re Group Limited's Quarterly Report on Form 10-Q for the
             period ended June 30, 2003). (13)(15)

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

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

    10.33    Employment Agreement dated April 21, 2004, by and among Scottish
             Holdings, Inc. and Seth W. Vance. (14)(15)

    10.34    Amendment to Employment Agreement dated March 29, 2004, by and
             between Scottish Re (U.S.), Inc. and Oscar R. Scofield.
             (incorporated by reference to Scottish Re Group Limited's Quarterly
             Report on Form 10-Q for the six month period ended June 30, 2004,
             filed with the SEC on August 9, 2004). (15)


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<PAGE>

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

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

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

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

    ____________________

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

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

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

    (4)      Scottish Re Group Limited's 2001 Annual Report on Form 10-K was
             filed with the SEC on March 5, 2002.

    (5)      Scottish Re Group Limited's Current Report on Form 8-K was filed
             with the SEC on December 31, 2001.

    (6)      Scottish Re Group Limited's Current Report on Form 8-K/A was filed
             with the SEC on January 11, 2002.

    (7)      Scottish Re Group Limited's Current Report on Form 8-K was filed
             with the SEC on August 9, 2001.

    (8)      Scottish Re Group Limited's Amended Quarterly Report on Form 10-Q/A
             was filed with the SEC on August 8, 2002.

    (9)      Scottish Re Group Limited's Registration Statement on Form S-3 was
             filed with the SEC on January 31, 2003, as amended.

    (10)     Scottish Re Group Limited's Current Report on Form 8-K was filed
             with the SEC on December 17, 2003.

    (11)     Scottish Re Group Limited's Current Report on Form 8-K was filed
             with the SEC on January 6, 2004.

    (12)     Scottish Re Group Limited's 2002 Annual Report on Form 10-K was
             filed with the SEC on March 31, 2003.

    (13)     Scottish Re Group Limited's Quarterly Report on Form 10-Q was filed
             with the SEC on August 12, 2003.


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<PAGE>

    (14)     Scottish Re Group Limited's Quarterly Report on Form 10-Q was filed
             with the SEC on May 10, 2004.

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


B. Reports on Form 8-K

     The following reports on Form 8-K were filed during the three month period
ended June 30, 2004.

     Scottish Re Group Limited filed a report on Form 8-K on May 13, 2004 to
report under Items 7 (Financial Statements, Pro Forma Financial Information and
Exhibits) and 12 (Results of Operations and Financial Condition) Scottish Re
Group Limited's financial results for the three month period ended March 31,
2004.


                                       63
<PAGE>

                                   SIGNATURES

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

                            SCOTTISH RE GROUP LIMITED

Date: January 31, 2005      By: /s/ Scott E. Willkomm
                               ----------------------
                                Scott E. Willkomm
                                Chief Executive Officer and President

Date: January 31, 2005      By: /s/ Elizabeth A. Murphy
                               ------------------------
                                Elizabeth A. Murphy
                                Chief Financial Officer


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