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

                                    FORM 10-K

(Mark One)
|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [FEE REQUIRED]
      For the fiscal year ended December 31, 2002.

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
      For the transition period _________to_________

                         Commission file number 1-12823

                           LASALLE RE HOLDINGS LIMITED

             (Exact Name of Registrant as Specified in Its Charter)

           Bermuda                                             Not Applicable
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

              LOM Building, 27 Reid Street, Hamilton HM 11, Bermuda
                    (Address of Principal Executive Offices)
       Registrant's Telephone Number, including area code: (441) 292-3339

           Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                Title of Each Class                             Name of Each Exchange on Which Registered
<S>                                                                  <C>
Series A Preferred Shares, par value $1.00 per share                 Over The Counter Bulletin Board
</TABLE>

        Securities registered pursuant to Section 12(g) of the Act: None

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

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

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes |_| No |X|

      There was no voting stock held by non-affiliates on June 30, 2002.

      The number of shares outstanding of each of the issuer's classes of common
stock as of March 31, 2003:

         Class                              Outstanding at March 31, 2003

         Common Stock, $1.00 par value                         20,432,043

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<PAGE>

                           LASALLE RE HOLDINGS LIMITED
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item                                                                              Page Number
----                                                                              -----------
<S>                                                                                    <C>

                                     PART I

  1. BUSINESS ..................................................................        2

  2. PROPERTIES ................................................................       24

  3. LEGAL PROCEEDINGS .........................................................       24

  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................       25

                                     PART II

  5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS...       25

  6. SELECTED FINANCIAL DATA ...................................................       25

  7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
     CONDITION .................................................................       26

 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK .................       48

  8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...............................       56

  9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
     DISCLOSURE ................................................................       56

                                    PART III

 10. DIRECTORS AND EXECUTIVE OFFICERS ..........................................       56

 11. EXECUTIVE COMPENSATION ....................................................       57

 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ............       60

 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............................       61

 14. CONTROLS AND PROCEDURES ...................................................       61

                                     PART IV

 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ..........       62
</TABLE>


                                       i
<PAGE>

                                     PART I

Unless the context otherwise requires, references herein to the "Company"
include LaSalle Re Holdings Limited and its subsidiary, LaSalle Re Limited
("LaSalle Re"), and its subsidiaries LaSalle Re Corporate Capital Ltd. ("LaSalle
Re Capital"), LaSalle Re (Services) Limited ("LaSalle Re Services") and LaSalle
Re (Barbados) Ltd. ("LaSalle Re Barbados"), Oak Dedicated Limited, Oak Dedicated
Two Limited and Oak Dedicated Three Limited, (collectively called the "Oak
Entities").

                           FORWARD-LOOKING STATEMENTS

Some of the statements under "Business," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this Report may include forward-looking statements which reflect
our current views with respect to future events and financial performance. These
statements include forward-looking statements both with respect to us
specifically and the insurance and reinsurance sectors in general. Statements
which include the words "expect," "intend," "plan," "believe," "project,"
"anticipate," "will" and similar statements of a future or forward-looking
nature identify forward-looking statements for purposes of the federal
securities laws or otherwise.

All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those indicated in these
statements. We believe that these factors include, but are not limited to, those
described under "Risk Factors" below and the following:

Forward-looking statements involve known and unknown risks and uncertainties,
which may cause the Company's results to differ materially from such
forward-looking statements. These risks and uncertainties include, but are not
limited to, the following:

      -     actions by insurance regulators seizing or otherwise taking control
            of our insurance company subsidiaries or their assets or those of
            other affiliated entities;

      -     actions by our creditors or securities holders, or those of our
            parent company, Trenwick Group Ltd. ("Trenwick"), commencing
            liquidation or similar proceedings against us, our subsidiaries,
            Trenwick or their assets or those of other affiliated activities;

      -     actions by the Financial Services Authority or Lloyd's in the United
            Kingdom, which could result in our affiliate Trenwick Managing
            Agents being required to cease underwriting at Lloyd's;

      -     greater frequency or severity of claims and loss activity, including
            as a result of natural or man-made catastrophic events, than our
            underwriting, reserving or investment practices anticipate based on
            historical experience or industry data;

      -     failure of our business strategy due to changes in current or future
            market conditions;

      -     increased competition on the basis of financial strength, pricing,
            capacity, coverage terms or other factors;

      -     our lack of experience in operating insurance or reinsurance
            entities that are in runoff and are not writing new business;

      -     the effects of acts of terrorism or war;


                                       1
<PAGE>

      -     developments in the world's financial and capital markets that
            adversely affect the performance of our investments;

      -     changes in regulation or tax laws applicable to us, our
            subsidiaries, brokers or customers;

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

      -     changes in the distribution or placement of risks due to increased
            consolidation of insurance and reinsurance brokers;

      -     decreased demand for our insurance and reinsurance products at
            Lloyd's;

      -     loss of additional key personnel or consultants, or failure of
            management companies to provide services;

      -     inability of affiliated entities to provide administrative and other
            management services under the terms of administrative services
            agreements;

      -     the effects of mergers, acquisitions and divestitures;

      -     changes in rating agency policies or practices;

      -     changes in legal theories, including trends that impact verdicts in
            insurance claims litigation;

      -     changes in accounting policies or practices;

      -     changes in general economic conditions, including inflation, foreign
            currency exchange rates, interest rates, and other factors.

The foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements that are
included in this Report. We undertake no obligation to publicly update or review
any forward-looking statement, whether as a result of new information, future
developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from what we projected. Any forward-looking statements you read in this Report
reflect our current views with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the factors identified in this Report which could cause
actual results to differ before making an investment decision.

ITEM 1. BUSINESS

General

The Company was incorporated in Bermuda in September 1995 to act as a holding
company for LaSalle Re, which was incorporated in Bermuda in October 1993 and
commenced operations on November 22, 1993. It primarily acted as a multi-line
reinsurance company with emphasis on property catastrophe business.

On September 27, 2000, the Company, LaSalle Re, Trenwick Group Ltd. ("Trenwick")
and Trenwick Group Inc. completed a business combination (the "Trenwick/LaSalle
business combination"). Under the terms of the Trenwick/LaSalle business
combination, the common shareholders of the Company, LaSalle Re and


                                       2
<PAGE>

Trenwick Group Inc. exchanged their shares on a one-for-one basis for shares in
Trenwick. Following this transaction, the Company became a wholly owned
subsidiary of Trenwick and a guarantor of certain indebtedness owed by Trenwick
and certain of its direct and indirect subsidiaries.

Trenwick is a Bermuda-based specialty insurance and reinsurance holding company
with subsidiaries located in the United States and the United Kingdom, including
four runoff operations. Trenwick's operations at Lloyd's of London ("Lloyd's")
underwrite specialty property and casualty insurance as well as treaty and
facultative property and casualty reinsurance on a worldwide basis.

In 2002, Trenwick conducted several strategic reviews of its operations in light
of its capital constraints and determined that it was necessary for Trenwick to
reduce its operating leverage by reducing premium volumes to a level more
commensurate with its capital base and to concentrate its limited financial
resources on its core franchises and businesses, its United States treaty
reinsurance business and its Lloyd's operations, where it would be able to write
insurance and reinsurance based on direct or indirect financial support. As a
result, Trenwick voluntarily placed into runoff its United States specialty
program business formerly operated through its subsidiary, Canterbury Financial
Group, Inc., and its London-based specialty insurance and reinsurance company,
Trenwick International Limited. Additionally, in light of the increasing capital
requirements imposed by the market on catastrophe insurance providers, the
Company sold its in-force property catastrophe reinsurance business. Little or
no new insurance or reinsurance is presently being offered in these runoff
operations, including the Company, with the exception of business written at
Lloyd's through the Oak Entities, which are owned by the Company and are
described below under "Business Segments - Lloyd's - Corporate Members."

Trenwick's United States reinsurance company subsidiary, Trenwick America
Reinsurance Corporation ("Trenwick America Re") has been limited since November
2002 to providing, through an underwriting facility with Chubb Re, Inc. and its
affiliate Federal Insurance Company (together, "Chubb"), treaty reinsurance to
insurers of property and casualty risks. Trenwick announced on April 15, 2003
that it would cease underwriting reinsurance business under the Chubb facility.
Since inception in November 2002, Trenwick underwrote approximately $128 million
of reinsurance under the facility. Trenwick will continue to be entitled to the
economic benefits of existing business under the facility, subject to the terms
and conditions of the facility. Trenwick's ability to write reinsurance business
under the facility was severely constrained by its financial condition and
concerns arising with respect to its ongoing stability. As a result, Trenwick
ceased underwriting activities under the facility in order to reduce Trenwick's
costs. The effect of this cessation is that Trenwick America Re is now primarily
in runoff. Trenwick will continue to service and pay claims for all business
previously written through Trenwick America Re outside of the Chubb facility and
will jointly adjust and settle with Chubb any claim arising under the business
written under the Chubb facility, subject to Chubb's final authority.

From LaSalle Re's incorporation in 1993 until April 1, 2002, its primary
business activity was as a property and casualty reinsurer underwriting
worldwide specialty products with an emphasis on catastrophe reinsurance.
Catastrophe reinsurance contracts cover unpredictable events such as hurricanes,
windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes,
riots, floods and other man-made or natural disasters. Following losses
sustained in the September 11, 2001 terrorist attacks, Trenwick determined that
without additional capital LaSalle Re could no longer compete effectively in
this business nor could Trenwick remain in a business that was inherently
unpredictable and which could result in additional significant losses. Effective
April 1, 2002, LaSalle Re was placed into runoff following the sale of its
in-force catastrophe reinsurance business to Endurance Specialty Insurance Ltd.
("Endurance") (See "Significant Developments," below).

LaSalle Re's other business consisted primarily of participations in certain
Lloyd's syndicates through LaSalle Re Capital, which provided capital support to
those syndicates. Effective for the 2001 underwriting year at Lloyd's, LaSalle
Re Capital withdrew its capital support from all Lloyd's syndicates. LaSalle Re
Capital, which was incorporated in Bermuda in November 1996, is currently
inactive. On December 10, 2002, LaSalle Re, with the permission of the Bermuda
Monetary Authority ("BMA"), again became a


                                       3
<PAGE>

corporate capital provider at Lloyd's pursuant to an agreement between Trenwick,
LaSalle Re and the Company whereby the Oak Entities were contributed by Trenwick
to LaSalle Re. The Oak Entities (three separate subsidiaries), which are
incorporated in the United Kingdom, participate in Lloyd's syndicates managed by
Trenwick Managing Agents ("TMA"), a wholly owned subsidiary of Trenwick. The
contribution of the Oak Entities by Trenwick to LaSalle Re together with an
additional investment by LaSalle Re of $81.6 million was completed as part of
Trenwick's underwriting capital at Lloyd's for the 2003 year of account. In
return for its investment, LaSalle Re will receive 43% of the economic interest
(prior to the deduction of the Banks' letter of credit fees and profit
participation, discussed below in "- Significant Developments - Pledge by
Trenwick of the Company's Stock and Assets, Including the Stock of LaSalle Re")
in the 2003 year of account of syndicates managed by TMA at Lloyd's and will
also participate in the economic interest in the results of such syndicates for
the 2002 and prior years of account. For further discussion regarding the
Company's activities in the Lloyd's market, see "- Business Segments - Lloyd's -
Corporate Members," below.

LaSalle Re's other wholly owned subsidiaries include LaSalle Re Services
(currently inactive), which acted as a representative office for the Company in
the United Kingdom up until the completion of the Trenwick/LaSalle business
combination in September 2000 and LaSalle Re Barbados, which was incorporated in
Barbados in 2001 and acts as an investment holding company.

Significant Developments

During 2002 and the first quarter of 2003, a number of developments have
occurred that have significantly and negatively affected Trenwick's operations,
capital structure and the financial resources required to conduct its
businesses, including those of the Company. Set forth below are brief
descriptions of a number of these developments as well as certain material
transactions entered into by Trenwick and the Company to enable them to continue
to conduct business operations despite the adverse developments. Investors and
shareholders are cautioned that Trenwick and the Company have had a number of
significant adverse events which could make it extremely difficult to continue
in their current businesses, if at all, and they should carefully review this
annual report on Form 10-K, as well as Trenwick's annual report on Form 10-K for
the year ended December 31, 2002 filed with the Securities and Exchange
Commission, including the "Significant Developments," "Risk Factors" and
"Forward-Looking Statements" sections thereof, as well as other sections of this
Report and Trenwick's Report.

Going Concern Qualification

The Company's independent accountants, PricewaterhouseCoopers LLP, have stated,
in their audit report with respect to the Company's financial statements as at
and for the twelve months ended December 31, 2002, dated March 31, 2003, that
substantial doubt exists as to the Company's ability to continue as a going
concern. Trenwick's and the Company's ability to operate continue to be
adversely impacted by the deterioration in Trenwick's financial condition and
its lack of available financial resources to meet its obligations.

Sale of In-Force Business of the Company to Endurance

Trenwick and the Company's wholly owned subsidiary, LaSalle Re, entered into a
Transfer and Purchase Agreement, a Quota Share Retrocession Agreement, a Bill of
Sale, an Assignment Agreement, an Administrative Services Agreement and an
Assignment of Reinsurance Recoverables and Other Receivables, each dated as of
May 16, 2002, pursuant to which LaSalle Re sold to Endurance the in-force
property catastrophe business of LaSalle Re as of April 1, 2002. Concurrent with
the sale, substantially all of LaSalle Re's employees became employees of
Endurance. The Quota Share Retrocession Agreement was a 100% quota share
reinsurance agreement, with Endurance paying LaSalle Re a ceding commission of
25% of premiums ceded and additional profit sharing of 50% if the losses do not
exceed a loss ratio of 45%. In addition, Endurance will have the right to renew
LaSalle Re's in-force business as it expires in exchange for a 12.5% commission
on the business renewed. Included in the Company's results for the year ended


                                       4
<PAGE>

December 31, 2002 are $11.6 million in ceding commissions earned on the quota
share agreement with Endurance as well as $6.0 million in amortization of
acquisition costs on the related assumed business. The loss on sale of in-force
business recorded during 2002 of $20.1 million is net of the non-recurring
revenue and expense items incurred as a result of the sale, as detailed in the
table below (in millions).

<TABLE>
<S>                                                                              <C>
      Minimum proceeds related to sale of renewal rights                         $  8.0
      Accelerated amortization of reinsurance contracts not transferred in sale   (20.9)
      Legal expenses and investment banking fees                                   (4.4)
      Severance and related expenses                                               (2.8)
                                                                                 ------
      Net loss on sale of LaSalle Re's in-force reinsurance business             $(20.1)
                                                                                 ======
</TABLE>

Realization of any additional revenue from the renewal commission in excess of
the $8.0 million previously received, or future revenue from profit sharing
related to the loss ratio, is not known at this time; however, the Company and
LaSalle Re do not expect to receive significant revenues in 2003 from this
transaction.

Special dividend

Subsequent to LaSalle Re being placed into runoff, Trenwick borrowed $258
million from LaSalle Re in June 2002. Of the funds borrowed, Trenwick used
approximately $195 million to repay the outstanding term indebtedness under
Trenwick's bank credit facility, which had been guaranteed by the Company, and
utilized the remaining portion primarily for capital support of Trenwick's
Lloyd's operations (including the Oak Entities, which became wholly owned
subsidiaries of LaSalle Re effective December 10, 2002).

As the Company had agreed to cease future competitive activities in connection
with the Endurance transaction and did not have any plans to underwrite new
insurance or reinsurance through LaSalle Re, Trenwick applied to the BMA in
November 2002 for permission to recharacterize the $258 million loan as a
special dividend since it would more appropriately reflect the status of the
distribution. The Company has determined that the reduction in capital and
surplus resulting from the special dividend would not cause LaSalle Re to fall
below the minimum statutory capital and surplus of $100 million which is
required of a Class 4 insurer in Bermuda. In connection with this request, the
BMA and LaSalle Re agreed that LaSalle's Certificate of Registration be endorsed
to restrict LaSalle Re's license so that it can no longer write any insurance or
reinsurance without the prior written consent of the BMA.

The Company has accounted for this distribution as a dividend in the
accompanying Consolidated Financial Statements.

Dividend suspension

On November 29, 2002, the Company suspended the payment of dividends on its
Series A Preferred Shares as a result of restrictions on the Company under
Trenwick's credit agreement with various lending institutions, under which the
Company is a guarantor. The Company intends to accrue the dividends until
payment is reinstated, if ever. The date of dividend payment reinstatement has
not been determined by the Company. The Company does not expect to be able to
pay dividends to the holders of the Series A Preferred Shares in the foreseeable
future, if ever.

Transactions with Affiliates

In 2000, Trenwick borrowed $75 million from LaSalle Re. The proceeds of the loan
were used primarily for capital support of Trenwick's Lloyd's operations and for
general corporate purposes. The BMA recently confirmed to the Company that it
will allow LaSalle Re's existing $75 million loan to Trenwick, plus accrued
interest, to continue to be recorded as an admitted asset on LaSalle Re's
balance sheet. LaSalle Re's statutory capital and surplus is estimated to be
$133 million, which is above the $100 million minimum required as a Class 4
insurer in Bermuda. In light of Trenwick's current financial condition, there is


                                       5
<PAGE>

significant uncertainty as to whether Trenwick will be able, financially, to pay
principal or interest on this loan. Should the loan and related interest and
other related intercompany receivables be determined to not be realizable
because of the currentfuture uncertainties of Trenwick's financial condition,
LaSalle Re could fall below the minimum required statutory capital and surplus
amount of $100 million. The Company is required by Trenwick's credit agreement
(discussed below in "-- Pledge by Trenwick of the Company's Stock and Assets,
Including the Stock of LaSalle Re") to use its best efforts to obtain a
reduction in LaSalle Re's insurance license classification from the BMA. LaSalle
Re has notified the BMA that it intends to file with the BMA an application
during 2003 for a reduction in class from a Class 4 insurer to a Class 3
insurer, which could reduce its statutory capital and surplus requirement to
$29.4 million if applied to its December 31, 2002 statutory balance sheet. There
can be no assurance that such an application would be approved by the BMA or, if
approved, that the BMA would not impose more restrictive capital and surplus and
other financial requirements on LaSalle Re than those generally established for
Class 3 insurers.

During the years ended December 31, 2001 and 2000, the Company purchased $10.7
million and $13.0 million par value, respectively, of Trenwick Capital Trust I
Preferred Stock for $8.5 million and $9.9 million, respectively, which are
included in the Company's debt securities held for investment. The Trenwick
Capital Trust I Preferred Stock matures in 2037 and provides preferential
cumulative semi-annual cash distributions at an annual rate of 8.82% which are
guaranteed by Trenwick America Corporation, within certain limits, as to
distribution payments and liquidation or redemption payments. In November 2002,
Trenwick suspended the dividend payment on these securities. The market value of
these investments was $2.4 million at December 31, 2002. In accordance with the
Company's investment accounting policy, the Company determined that this
investment suffered an impairment of value that is considered to be other than
temporary and therefore the difference between amortized cost and market value
is included in the accompanying Consolidated Statement of Operations and
Comprehensive Income Statement as a realized loss of $16.0 million. No interest
has been accrued on these securities since August 1, 2002, the date of the last
dividend payment.

Acquisition of Oak Entities

On December 10, 2002, the capital stock of the Oak Entities was contributed by
Trenwick to LaSalle Re, prior to which certain indebtedness owed to Trenwick by
the Oak Entities was forgiven. The transaction was approved by the BMA. The Oak
Entities, as corporate capital providers, participate in several Lloyd's
syndicates managed by TMA. The Company, through its subsidiary LaSalle Re
Capital, also participated in one of these syndicates through the 2000 Lloyd's
year of account. The Company's financial statements have been restated to
include the accounts of the Oak Entities as a transfer of operations under
common control is accounted for in a manner similar to a pooling of interest.

Reserve Adjustments

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of the reserves for unpaid claims and claims expenses at
each of Trenwick's operating subsidiaries, including those of the Company. Based
upon the study conducted by independent actuarial consultants and additional
work performed during the quarter by Trenwick's internal actuaries, Trenwick
increased its reserves for unpaid claims and claims expenses in the fourth
quarter of 2002 by $107 million, which was net of a favorable adjustment of $6
million applicable to LaSalle Re. The fourth quarter 2002 increases in reserves
impact Trenwick's United States insurance subsidiaries and Trenwick
International. Trenwick's reserves at its Lloyd's operation, which includes the
Oak Entities, while also analyzed, were not adversely affected by this reserve
increase. The fourth quarter 2002 reserve increases followed reserve increases
made by Trenwick earlier in 2002, for an aggregate reserve increase for 2002 of
$303.4 million, of which $33.1 million applied to the Company. The reserve
increases recorded during the first nine months of 2002 include $21.5 million
related to LaSalle's Re exposure to the terrorist attacks of September 11, 2001
offset in part by reductions in LaSalle Re's other reserves of $19.0 million.
The remainder of the reserve increase relates primarily to the Oak Entities and
reflects a reassessment of reserves for unpaid claims and claims expenses in


                                       6
<PAGE>

light of recent reported loss activity trends across its major business groups
and principally impacts the 1998 to 2001 accident years.

Pledge by Trenwick of the Company's Stock and Assets, Including the Stock of
LaSalle Re

Concurrently with the Trenwick/LaSalle business combination in September of
2000, Trenwick America Corporation ("Trenwick America") and Trenwick Holdings
Limited ("Trenwick Holdings"), Trenwick's U.S. and U.K. holding companies,
entered into an amended and restated $490 million credit agreement with various
lending institutions (the "Banks"), which was guaranteed by the Company. The
credit agreement consisted of both a $260 million revolving credit facility and
a $230 million letter of credit facility. The revolving credit facility was
subsequently converted into a four-year term loan and repaid in full on June 17,
2002. Additionally, on December 24, 2002, the credit agreement was amended to
reduce the letter of credit facility, which is utilized by Trenwick to support
its underwriting operations at Lloyd's, to the currently outstanding $182.5
million. The letter of credit facility is scheduled to terminate on December 31,
2003, although the letters of credit issued pursuant to the facility are not
scheduled to expire until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, the Company has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of the Company, and the Company and Trenwick pledged the
capital stock of LaSalle Re as collateral to the Banks. In December of 2002,
Trenwick agreed to provide the Banks additional security interests as described
below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
the Company and Trenwick's other operating subsidiaries below "A-". The lowered
A.M. Best Company ratings constituted an event of default under the credit
agreement. In addition, increases in reserves for unpaid claims and claims
expenses at Trenwick's subsidiaries and the establishment of a deferred tax
asset reserve at Trenwick's United States subsidiaries in the third quarter of
2002 resulted in violations of the financial covenants in the credit agreement
requiring Trenwick to maintain a minimum tangible net worth and minimum
risk-based capital. On November 13, 2002, Trenwick, its subsidiaries (including
the Company) and the Banks executed a forbearance agreement with respect to the
events of default arising from the lowered A.M. Best Company ratings and
financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick agreed to pay a 5% per annum cash letter of credit fee,
issue pay-in-kind notes bearing interest at LIBOR plus 2.5% per annum to
evidence an additional 3.16% per annum letter of credit fee, issue warrants
equal to 10% of Trenwick's fully diluted equity capital, and pay 15% of the
profits earned by Trenwick's Lloyd's operations, including those of the Oak
Entities owned by LaSalle Re, for the 2002 and 2003 Lloyd's years of account.
Trenwick, Trenwick America and Trenwick Holdings agreed to provide the Banks a
security interest in, and the assets and property of, their direct and indirect
subsidiaries, including the Company, as additional collateral for the Banks, and
to cause its subsidiaries, including the Company, to provide a guaranty to the
Banks, subject to applicable laws and regulations and existing contractual
rights.

The December Amendments also prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common shares, the
Series A Preferred Shares of the Company and the capital securities of Trenwick
Capital Trust I). The December Amendments and the other amendments and waivers
entered into in the first quarter of 2003 waive certain other defaults, add
covenants further restricting the operation of Trenwick's business (including
that of the Company), prohibit Trenwick from making certain payments without the
Banks' approval, prohibit Trenwick and its subsidiaries (including the Company)
from selling or otherwise disposing of any assets or property, require Trenwick
to regularly report certain financial information to the Banks, and adjust
downward certain of the financial covenants.


                                       7
<PAGE>

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries will be prohibited from underwriting any insurance or
reinsurance business without the Banks' prior approval. In addition, Trenwick is
required to use its best efforts to terminate the letters of credit by December
31, 2003. In order to do so, the letters of credit would need to be replaced
with other letters of credit or collateral acceptable to Lloyd's. In the event
Trenwick has not terminated the letters of credit by December 31, 2003, it is
required on such date to collateralize with cash, cash equivalents and
marketable securities the full amount of the outstanding letters of credit. At
this time, Trenwick does not have sufficient available liquidity to
collateralize the letters of credit as required by the December Amendments.
Additionally, Trenwick does not believe that it will be able to replace the
letters of credit with other letters of credit or collateral acceptable to
Lloyd's.

Since December 2002, Trenwick has entered into additional amendments and
numerous waivers with the Banks providing for, among other things, waivers of
potential covenant defaults, further reductions in certain financial covenants,
additional financial reporting, approval of certain employee and other payments,
approval of the extension of the maturity of Trenwick America's senior notes
from April 1, 2003 to August 1, 2003, the payment of interest accrued through
April 1, 2003 to the holders of the senior notes and extension of numerous
deadlines imposed under the December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries (including the Company), including under
Trenwick America's senior notes, resulting in a cross default under the credit
agreement, Trenwick may be required to fully and immediately collateralize the
outstanding letters of credit under the terms of the credit agreement and the
guaranty agreement. No liability for any such amounts has been reflected in
Trenwick's financial statements. If events of default occur and are not waived,
there is substantial doubt as to Trenwick's ability to continue as a going
concern and Trenwick and/or one or more of its subsidiaries (including the
Company) may be forced to seek protection from creditors through proceedings
commenced in Bermuda and other jurisdictions including the United States. In
addition, at any time one or more of the insurance regulatory authorities having
jurisdiction over Trenwick's insurance company subsidiaries (including the
Bermuda Monetary Authority with respect to the Company and LaSalle Re, or the
Financial Services Authority or Lloyd's in the United Kingdom with respect to
Trenwick's Lloyd's operations) may commence voluntary or involuntary proceedings
for the formal supervision, rehabilitation or liquidation of such subsidiaries,
or one or more of the creditors of Trenwick or its subsidiaries (including the
Company) may commence proceedings against Trenwick or its subsidiaries,
including the Company, seeking their liquidation.

Pursuant to the December Amendments, the Company is also required among other
things to (1) use its best efforts to convert LaSalle Re to Class 3 insurer
status in Bermuda, (2) use its best efforts to secure loss portfolio transfers
at LaSalle Re and its subsidiaries in form and substance satisfactory to the
Banks, (3) use its best efforts to secure stop-loss reinsurance treaties
satisfactory to the Banks for the 2001, 2002 and 2003 years of account at
Lloyd's and (4) promptly pay, upon receipt of notice from Lloyd's, any solvency
deficit or cash call for the 2002 and prior years of account at Lloyd's.

Recent Ratings Actions

Moody's Investor Services announced on April 10, 2003 that it had withdrawn all
debt and preferred stock ratings of Trenwick and its subsidiaries. The action
reflects the failure of Trenwick America to pay the $75 million principal
payment on its Senior Notes due April 1, 2003 and the ongoing effort to
restructure Trenwick's debt obligations. The senior debt rating of Trenwick and
the rating of Trenwick America's trust preferred securities had previously been
lowered to "Ca" and "C," respectively, on January 31, 2003.

Standard and Poor's Ratings Services announced on April 2, 2003 that it had
lowered the counter-party credit ratings on Trenwick, Trenwick America and the
Company to "D" following the announced non-payment of


                                       8
<PAGE>

principal and interest on the Senior Notes. Standard & Poor's also stated that
despite the agreement in principal to extend the maturity of the Senior Notes,
it believes that the prospect for significant recoveries to the senior note
holders is very low. Standard & Poor's also announced on March 4, 2003 that it
placed its "CCC" counterparty credit and financial strength ratings on Trenwick
America's subsidiaries, Trenwick America Reinsurance Corporation ("Trenwick
America Re"), Dakota Specialty Insurance Company and The Insurance Corporation
of New York on CreditWatch negative. In addition, Standard and Poor's withdrew
its "CCC" counterparty credit and financial strength ratings on Chartwell
Insurance Company due to its merger with Trenwick America Re.

On April 2, 2003, A.M. Best Company announced that it had withdrawn the
financial strength rating of "C" (Weak) and assigned a "NR-4" rating (Rating
Withdrawn at Company's Request) to Trenwick America Re. Concurrently, A.M. Best
downgraded the debt rating of Trenwick America to "D" from "C" relating to its
Senior Notes. These rating actions followed the announced non-payment of
principal and interest on the Senior Notes. The financial strength rating of
Trenwick America Re had previously been downgraded to "C" (Weak) from "B-"
(Fair) on February 3, 2003.

On April 3, 2003, Fitch Ratings announced that it had lowered its long term and
senior debt rating on Trenwick America to "D" from "C". In addition, Fitch
lowered its long term ratings on Trenwick and the Company to "D" from "C".
Fitch's "C" ratings on the Company's Series A Preferred Shares and the capital
securities of Trenwick Capital Trust I were unchanged. Fitch's rating action
also followed the announced non-payment of principal and interest on the Senior
Notes. Fitch's "D" rating indicates that Fitch believes that Trenwick America's
senior note holders' recovery value is unlikely to exceed fifty percent.

Suspension of Trading From New York Stock Exchange

On March 25, 2003, the Series A Preferred Shares of the Company and the common
shares of Trenwick and were suspended from trading, pending application to the
Securities and Exchange Commission for delisting, by the New York Stock Exchange
("NYSE") as a result of failure to meet the NYSE's minimum continued listing
criteria. On the same day, Trenwick was notified that its common shares and the
Series A Perpetual Preferred Shares of the Company would be quoted on the Over
The Counter Bulletin Board ("OTC").

By letter dated March 24, 2003, the BMA issued permission for the free
transferability on an interim basis of the shares of Trenwick and the Company
while they are traded on the OTC Bulletin Board, on the condition that the BMA
is notified promptly of all instances in which Trenwick or the Company becomes
aware that a new shareholder has obtained 5% or more of either company's shares,
including background information on any such new 5% shareholder.

Business segments

The Company has two reportable business segments: reinsurance operations and
Lloyd's. The reinsurance segment provided reinsurance for property catastrophe
and for other lines of business that have similar characteristics, namely high
severity and low frequency. These lines included property risk excess, property,
pro rata treaty, casualty, marine, aviation, satellite, terrorism, multi-peril,
crop, and political risk coverages. Prior to December 10, 2002, the Lloyd's
syndicates segment in runoff was written through LaSalle Re Capital, which
provided capital support to selected Lloyd's syndicates. The lines of business
written by the selected syndicates included direct insurance, facultative
property reinsurance, marine insurance and reinsurance, professional indemnity,
directors and officers insurance and bankers blanket bond business. Effective
for the 2001 underwriting year at Lloyd's, LaSalle Re Capital withdrew its
capital support from all Lloyd's syndicates. As described below, LaSalle Re's
continuing underwriting activities arise as a result of the Oak Entities which
are corporate members at Lloyd's.


                                       9
<PAGE>

Reinsurance operations (in runoff)

The Company wrote property and casualty reinsurance on a worldwide basis through
its operating subsidiary LaSalle Re until April 1, 2002, when it sold LaSalle
Re's in-force business to Endurance and placed LaSalle Re into runoff. The
Company also wrote selected other lines of reinsurance at times when it believed
that market conditions were favorable.

The Company's objective is to maximize the economic value of the runoff through
effective claims settlement, commutation of assumed obligations where
appropriate, collection of reinsurance recoverables and effective cash
management. The overall financial condition of the runoff operation will
determine the Company's ability to successfully accomplish this goal. The
Company expects that it will manage outstanding liabilities until their natural
expiration, although it may explore other strategic alternatives to assure that
the interests of policyholders and ceding companies are protected, while
maximizing the potential for return. LaSalle Re has entered into an
administrative services agreement with Trenwick for Trenwick to provide LaSalle
Re with executive management, actuarial, accounting, treasury, claims and other
administrative services. From time to time the Company may also seek the advice
of outside experts and retain consultants to assist in these efforts.

Lloyd's - Corporate Members

As described above, on December 10, 2002, Trenwick, LaSalle Re and the Company
entered into an agreement pursuant to which the Oak Entities were contributed by
Trenwick to LaSalle Re, following the forgiveness of certain indebtedness owed
to Trenwick by the Oak Entities. LaSalle Re agreed to invest $81.6 million in
the Oak Entities which, together with the renewal of Trenwick's letter of credit
facility, provide funds at Lloyd's as part of Trenwick's underwriting capital at
Lloyd's for the 2003 year of account. The Oak Entities will receive 43% of the
economic interest (prior to the deduction of the Banks' letter of credit fees
and profit participation) in the 2003 year of account for syndicates managed by
TMA at Lloyd's.

Information Regarding Lloyd's Syndicates

Lloyd's is an internationally recognized insurance market place that has been
operating in England for over 300 years pursuant to legislation and custom. The
following is a general description of certain fundamental principles upon which
business is conducted at Lloyd's by Trenwick's subsidiaries, including the Oak
Entities, and other participants in the Lloyd's market.

Capital Support. The capital required to support a corporate member's
underwriting on a syndicate is determined by Lloyd's and is based on the
application of a risk based capital (RBC) model. The variables within the RBC
model are dependent on various criteria as applied to each Lloyd's syndicate and
corporate member. There are four main elements to the current RBC framework
which, when considered together, determine the level of capital required to
support underwriting. These are:

      o     the performance of each category of business assessed by risk code;

      o     a credit which is given for the diversity of the business contained
            within the syndicate;

      o     Lloyd's assessment of management performance; and

      o     the underwriting history of the corporate member.

Relationship between members and managing agents. Members conduct their business
as sole traders or corporate entities, grouped into annual ventures known as
syndicates, each of which is managed by a managing agent which may manage one or
more syndicates. All of Trenwick's Lloyd's operations, including that of the Oak
Entities are conducted through syndicates which are managed by TMA. See
"Business Management Services," below. At the end of each year the syndicate is
dissolved and a new syndicate is formed for the following year, although members
in existing syndicates have a priority for participating as members in the next
following year. Accordingly, the members participating on a syndicate may change
from year to year. In the conduct of the syndicate's business, the managing
agent acts for each member


                                       10
<PAGE>

under a separate agency agreement. The syndicate itself is not a legal entity.
Members of a syndicate are not in partnership, and no member has joint liability
with any other member of a syndicate for the risks underwritten through that
syndicate. Each member of the syndicate is responsible only for the proportion
of each risk written on his behalf and if an individual, such member may have
unlimited liability for that business to the full extent of his assets, although
no new members with unlimited liability are permitted. Each corporate member has
limited liability for that business.

Actual acceptance of risk is undertaken either by the active underwriter of each
syndicate or his underwriting deputies. The managing agent determines the
underwriting policy of, and appoints and supervises the active underwriter of,
each of its managed syndicates and supplies administrative and accounting
services for the managed syndicate. The members themselves generally take no
active part in the conduct of the business. That conduct is, by requirement of
Lloyd's, delegated exclusively to the managing agent.

The managing agent will agree and/or settle claims made against the syndicates
and establish systems to monitor and control the premium income earned by the
syndicate to see that members' premium limits are not exceeded. The managing
agent will also determine and carry into effect the syndicate's reinsurance
program and determine the premium for and effect the reinsurance required for
the syndicate to close each year of account (see below).

Year of Account. Lloyd's has its origin in marine insurance which, because of
the length of voyages, led to the development of the current three-year
accounting system whereby premiums, losses and expenses are accumulated over
three years before the result of a particular underwriting year's trading is
calculated. Under the three-year system, members' underwriting results are
stated by "year of account". Each year of account is a one-year venture that, as
a general rule, is fully accounted for and settled at the end of a 36-month
period. As a result, syndicates writing insurance in Lloyd's 2003 year of
account will not be "closed" for purposes of determining profit or loss
participation until reinsurance to close has been effected after December 31,
2005. Since December 31, 1994, the year of account to which a policy is
allocated has been determined by the inception date of the policy.

Reinsurance to close. At the close of a year of account, members' underwriting
liabilities with regard to the year are usually reinsured under a contract known
as reinsurance to close, or "RITC". Until the RITC is effected (currently at the
earliest, at the end of the third year of the account, i.e. two years after the
end of the relevant underwriting year) no profits in respect of the relevant
year of account can be distributed to members.

Through the payment of a premium for the RITC, a syndicate member's liabilities
in respect of risks allocated to the relevant year of account and not discharged
in full (including liabilities in respect of RITC of the preceding years of
account) are reinsured without limit in time or amount into a succeeding,
usually the next, underwriting year of account of the same syndicate; they may
also, on occasion, be reinsured by another syndicate.

Runoff account. A runoff account is a year of account that has not been closed
by RITC in the usual way. This may happen for a number of reasons, but primarily
from uncertainty as to future levels of liability and a consequent inability to
fix a fair premium for the RITC. In these circumstances, closure of the year of
account may take a number of years, during which, without Lloyd's consent, there
can be no release of the members' funds at Lloyd's nor of profits arising from
the underwriting or investments of that syndicate.

Premium Trust Fund. Each member's premiums are held in Premium Trust Funds
("PTF") and invested in assets until the close of the year of account. All
investment income from funds held in the PTF is similarly retained in the PTF
and may be reinvested during the course of the year of account. As stated above,
a year of account normally closes after the end of the third year. Funds
representing a members' underwriting profits arising in respect of a particular
year's underwriting on a syndicate will not normally be released from the PTF to
the member until the relevant year has been closed by RITC and Lloyd's has
confirmed the members' overall underwriting position as solvent. If a corporate
member becomes insolvent, underwriting


                                       11
<PAGE>

claims can still be met to the extent of the assets held in the members' PTF, as
these funds are not available to its general creditors.

Funds at Lloyd's. Under its Byelaws, Lloyd's has power to prescribe the amount
of security to be provided by a member in respect of its underwriting business
at Lloyd's. This security (which is additional to the amounts held under the
control of managing agents in a member's PTF) comprises a member's funds at
Lloyd's. These funds are held in accordance with the terms of prescribed form
Lloyd's Deposit Trust Deeds. The minimum required level of funds at Lloyd's is
reviewed by Lloyd's prior to the commencement of each year of account.

Lloyd's determines the investment criteria applicable to funds held within a
member's funds at Lloyd's, but a member is able to select the investment for
those funds within the established criteria. In addition to or in substitution
for depositing cash and/or securities as funds at Lloyd's, members are able to
provide Lloyd's, among other things, with letters of credit, bank guarantees or
a covenant and charge. The level of funds at Lloyd's fixes the member's maximum
overall premium limit ("OPL") and it may be necessary during any account year to
arrange additional funds at Lloyd's to increase OPL, or to maintain OPL when
such funds have been depleted by losses. All such funds at Lloyd's are subject
to trust arrangements designed to ensure that they are available to meet the
relevant member's Lloyd's losses and expenses.

The FSA requires Lloyd's to maintain net central assets which are adequate to
cover the aggregate of certain variable solvency margins, which relate to the
value of each member's PTF and each member's funds at Lloyd's. If at any time a
corporate member's funds at Lloyd's have fallen by more than 10 percent the
member will be obliged to notify Lloyd's, and Lloyd's may then give such
directions as it sees fit, including directing the member to reduce the overall
level of its underwriting business.

For solvency purposes, if a member's closed year losses, runoff account
deficiencies and cash calls on open years of account are not paid in full, they
must be provided for in addition to the member's funds at Lloyd's required to
support underwriting for succeeding years of account. To the extent that a
member's funds at Lloyd's are used to cover these provisions with the effect
that the member's funds at Lloyd's ratio is no longer satisfied, the member's
OPL will be correspondingly reduced for the next year of account.

Geographic diversification

Prior to April 1, 2002 when LaSalle Re was placed into runoff, the Company
diversified its property, casualty and other insurance and reinsurance exposures
across geographic zones in order to optimize its spread of risk. The Oak
Entities through their participation in a Lloyd's syndicate are the only
subsidiaries of the Company actively writing business as of December 31, 2002.
The geograghic diversification for the Oak Entities is determined by the
syndicate in which they participate.

Reinsurance protections purchased

As a result of the sale of LaSalle's in-force reinsurance business as of April
1, 2002, substantially all of the underlying contracts were ceded to Endurance.
All losses incurred on those contracts after April 1, 2002 are 100% reinsured by
Endurance. LaSalle Re establishes reserves for all unpaid claims and claim
expenses on any losses applicable to those ceded contracts and records a
corresponding reinsurance recoverable.

In 2002, LaSalle Re purchased two excess of loss programs that provided coverage
of $20 million in excess of the first $30 million of losses per occurrence and
$5 million in excess of the first $50 million of losses per occurrence, both of
which, as of April 1, 2002, were retroceded to Endurance as part of the sale of
LaSalle Re's in-force reinsurance business. A third excess of loss program,
which provided coverage of $25 million in excess of the first $100 million of
losses per occurrence for a four year period with a yearly aggregate limit of
$50 million and a contract aggregate limit of $150 million, was commuted by
LaSalle Re in December 2002.


                                       12
<PAGE>

In 2001, the Company purchased three excess of loss programs which provided
coverage of $20.0 million in excess of the first $30.0 million of losses per
occurrence, $5.0 million in excess of the first $50.0 million of losses per
occurrence and $25.0 million in excess of the first $75.0 million of losses per
occurrence.

During 1999, the Company purchased an excess of loss program which provided
coverage of $75.0 million in excess of the first $75.0 million of losses per
occurrence for a first loss event, $60.0 million excess of $75.0 million per
occurrence on the second loss event and $52.5 million excess of $125.0 million
per occurrence on the third loss event over a three-year period ended December
31, 2001, subject to a maximum aggregate recovery of $187.5 million. This
contract was canceled effective December 31, 2000.

In addition, in 1999 and 2000, the Company had a quota share arrangement with
CNA. This arrangement was canceled effective December 31, 2000. Under this
arrangement, the Company ceded an adjustable proportion of U.S. property
catastrophe premium, net of acquisition costs, and included an override
commission and profit commission payable to the Company.

The Company has also purchased other non-proportional excess of loss
protections, which provide for the recovery of losses from reinsurers in excess
of certain retentions that are related to the magnitude of market losses.
LaSalle Re Capital also participated in the reinsurance coverage purchased by
the Lloyd's syndicates it supported.

In addition, as part of the Company's capital protection strategy, the Company
has utilized a Catastrophe Equity Put ("CatEPut") option program since July 1,
1997. The CatEPut option was a capital replacement tool that enabled the Company
to put a pre-arranged amount of equity, through the issue of convertible
preferred shares, to the option writers at pre-negotiated terms, in the event of
a major catastrophe or series of large catastrophes that cause substantial
losses to the Company or its subsidiaries. After the Trenwick/LaSalle business
combination, Trenwick assumed the benefits and obligations of the Company under
the CatEPut option, and is the issuer of the convertible preferred shares
thereunder.

The Oak Entities purchase reinsurance generally to protect against extraordinary
losses or losses involving one or more underwriting classes. The amount
purchased is determined by TMA, subject to availability, with reference to the
syndicates' aggregate exposure and potential loss scenarios.

Marketing

There are no marketing activities for LaSalle Re and LaSalle Re Capital as they
are in runoff.

Marketing activities for the Oak Entities are managed by TMA through the Lloyd's
syndicates in which they participate.

Reserves

The Company establishes reserves for the estimated ultimate settlement costs of
all claims and claims expenses incurred with respect to business written by it.
Accounting principles generally accepted in the United States of America,
sometimes referred to as U.S. GAAP, do not permit the Company to establish
reserves with respect to its property catastrophe reinsurance until an event
occurs that may give rise to a claim. As a result, only reserves for unpaid
claims and claims expenses applicable to losses incurred up to the reporting
date may be set aside, with no allowance for the provision of a contingency
reserve to account for expected future losses.

The derivation of reserves for unpaid claims and claims expenses involves the
actuarial and statistical projection at any given time of the Company's
expectations of the ultimate settlement of loss and loss expenses. These loss
projections become necessary, primarily, as a result of time lags associated
with reinsurance loss reporting. These lags are principally attributable both to
claimant delays in reporting to the primary carrier as well as primary and
reinsurance company delays in gathering statistics and subsequently


                                       13
<PAGE>

reporting cession details to the Company. As a result, in addition to the loss
estimates reported by primary insurers on known claims, actuarially projected
estimates of reserves applicable to both the development (growth) of known
claims as well as the emergence of new claims reports related to loss events
which have been incurred but not reported ("IBNR losses") prior to the
evaluation date must be developed. In addition to the impact of reporting lags
upon the accuracy of estimated loss liabilities, other factors have significant
impact upon the ultimate settlement of insured losses, including loss cost
inflation, trends in the amount of insurance purchased in proportion to the full
value of insured properties, and trends in the size and demographics of insured
populations. Reserves for unpaid claims and claims expenses are not precise in
that they necessarily involve an attempt to predict the ultimate outcome of
future loss reporting and settlement activities.

Actuarial Methods

The Company uses a combination of data sources and commercially available
catastrophe models to establish appropriate loss reserves for a catastrophic
event. These models are employed upon the occurrence of an event to arrive at
initial estimates of losses to the Company for significant catastrophe events.
In addition, grouped and individual contract data illustrating the loss
development history for prior similar events, as well as actual loss emergence
experience of the underlying insurers, are analyzed to assist in the
determination of suitable loss reserves. The data derived from the industry
sources, and supplemented with the client-specific information, are then used to
arrive at estimates of loss emergence patterns and initial estimates of ultimate
loss ratios. These parameters are then applied, on a contract-by-contract basis,
to arrive at estimates of ultimate losses. These loss estimates are then
supplemented with the results derived from the catastrophe models, and final
initial loss estimates are selected and reduced for losses reported to the
Company to arrive at IBNR losses as of the date of evaluation. Loss estimates
for a catastrophe event are subsequently re-estimated based on the actual
reported and paid loss experience of the Company as of the evaluation date, and
utilizing and applying the historical reporting patterns for similar events and
contracts. The reserves for the Oak Entities and LaSalle Re Capital are
separately derived, primarily from an analysis using expected loss ratios which
is supplemented, when available, by actuarial evaluations produced for the
individual syndicates.

The reserves are prepared quarterly by the Chief Actuary of Trenwick and
reviewed by the Company's management. To the extent that reserves develop upward
or downward, the results are reflected in the net income in the period in which
the reserve deficiency or redundancy is evaluated. There can be no assurance
that the final loss settlements will not exceed the Company's reserves for
unpaid claims and claims expenses and have a material adverse effect upon the
Company's financial condition and results of operations in a particular period.

With the acquisition of the Oak Entities on December 10, 2002, LaSalle Re now
provides significant underwriting capacity to Lloyd's, principally to Syndicate
839 which is managed by TMA. Claims and claims expense reserves arising from
this participation have been recorded on the balance sheet of LaSalle Re
Holdings based on the review and analysis performed by TMA.

In connection with its review and analysis, TMA has engaged an independent
actuarial consulting firm to review the claim liabilities and prepare an
actuarial opinion for each of its non-life syndicates, including the actuarial
opinion required by Lloyd's solvency regulations. These opinions, which are
prepared solely for the use of Lloyd's regulators and TMA, assist syndicates in
establishing appropriate liability estimates for both establishing the
reinsurance to close and determining the open years of account.

Loss Development Analysis

Central estimates of loss reserves are derived separately for LaSalle Re's
reinsurance runoff operations and for its Lloyd's participation through the Oak
Entities. A range of plus or minus 5% is judgmentally defined about the central
estimate reserve estimate as representing a "reasonable" range for lower or
higher outcomes. Management, after reviewing the results of the actuarial
reserve reviews, then determines its best


                                       14
<PAGE>

estimate within the range. For year-end 2002, the range of net reserves
(indications in $ millions) was as follows:

                Low Range Indication                         $536
                Central Indication                           $565
                High Range Indication                        $593
                Actual Net Reserve                           $563
                Difference Central less Actual               $2

The $2 million difference between Central Indicated and Actual net reserves at
year end 2002 arises from judgments made by management to reduce estimates of
September 11, 2001 losses by $2 million because of the low level of reported
September 11, 2001 loss activity during the last three quarters of 2002.

Management believes that claim and claim expense liabilities are adequate.
However, the process of estimating claims and claim expense liabilities is
inherently imprecise and involves an evaluation of many variables, including
potentially unpredictable social and economic conditions. Accordingly, there can
be no assurance that LaSalle's ultimate liability will not vary significantly
from amounts reserved. In addition, with respect to the reinsurance portion of
LaSalle's business, the inherent uncertainties of estimating such liabilities
are greater than for the primary insurance portion, primarily due to the longer
term reporting nature of the reinsurance business, the diversity of development
patterns among different types of reinsurance, the necessary reliance on ceding
companies for information regarding reported claims and differing reserving
practices utilized by various ceding companies. Other items that have been
considered in determining year-end reserves but which may develop differently
than currently estimated include:

      o     September 11, 2001 related claims;

      o     Claims against insured financial services companies for certain
            types of practices including alleged misallocations of shares in
            initial public offerings;

      o     Directors and Officers liability insurance in the United States;

      o     Ultimate losses on business underwritten in the last four years, as
            reserve estimates are inherently more uncertain on recent business,
            where reported loss activity is still low relative to ultimate
            losses;

      o     Reinsurance collectibility - LaSalle Re and TMA review and monitor
            their reinsurance recoverables from reinsurers and make provision
            for uncollectible reinsurance as appropriate. However, given the
            magnitude of reinsurance recoverables, $913.0 million at year-end
            2002, the Company has a significant exposure to collectibility
            issues particularly for business underwritten at Lloyds.

The uncertainties in and the risk factors associated with the reserves for
unpaid claims and claims expenses at year-end 2002 are significantly different
than prior years at the Company, arising from exposure to Lloyd's business
through the Oak Entities. Given the deterioration in the Company's financial
condition and significant reduction in the net worth of LaSalle Re, the Company
is now less financially equipped to handle these uncertainties should there be
adverse development in its loss reserves. Consequently, there can be no
assurance as to the adequacy of reserves, and the risk of future developments,
both favorable and unfavorable, exists.

Investments

Composition of portfolio

The Company has implemented a set of investment guidelines designed to meet its
liquidity requirements and return objectives. The guidelines are intended to be
conservative, stressing preservation of principal, yield enhancement through the
identification of value and market inefficiencies, market liquidity and risk
reduction. The primary objective of the investment portfolio, as set forth in
the guidelines, is to maximize investment returns consistent with these
policies.


                                       15
<PAGE>

Quality of portfolio

The Company's investment guidelines requires the securities held in the
shareholder portfolio and the reserve portfolio to maintain an average quality
of A+ and AA, respectively. In addition, the shareholder portfolio and the
reserve portfolio will not invest in securities below A- and BB+, respectively.

Maturity and duration of portfolio

The Company's investment guidelines specify a one to four year duration for the
Company's investment portfolio, reflecting the need to maintain a liquid, short
duration portfolio to ensure the Company's ability to pay claims on a timely
basis. At December 31, 2002, the average maturity of the Company's portfolio was
1.1 years. The Company expects to periodically re-evaluate the target duration
in light of market conditions, including the level of interest rates, and
estimates of the duration of its liabilities.

The table below sets forth the distribution of the Company's debt securities
available for sale at December 31, 2002 by type, maturity and quality rating.

                            Debt Security Investments
            (Amounts expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                                        Average
                                                        Maturity     Fair     Amortized
                                                        in Years    Value       Cost
                                                        --------   --------   ---------
<S>                                                          <C>   <C>        <C>
           Type
           U.S. and U.K. federal government
              securities, including agencies                 0.9   $341,529   $339,619
           Other foreign government securities               0.2     58,681     58,468
           Mortgage and other asset-backed securities        0.7     93,516     93,179
           Corporate and other debt securities               4.0     62,111     61,782
                                                        --------   --------   --------
           Total debt securities                             1.1   $555,837   $553,048
                                                                   ========   ========

           Maturity
           Due in one year or less                                 $359,387   $359,354
           Due in one year through five years                       170,365    168,211
           Due in five years through ten years                       14,510     14,066
           Due after ten years                                       11,575     11,417
                                                                   --------   --------
           Total debt securities                                   $555,837   $553,048
                                                                   ========   ========

<CAPTION>

                                                 Investment Grade          Non-investment Grade
                                             ------------------------    ------------------------
Quality                                      Fair Value       Cost       Fair Value       Cost
                                             ----------    ----------    ----------    ----------
<S>                                          <C>           <C>           <C>           <C>
U.S. and U.K. federal government
  securities, including agencies             $  341,529    $  339,619    $       --    $       --
Other foreign government securities              58,681        58,468            --            --
Mortgage and other asset-backed securities       93,516        93,179            --            --
Corporate and other debt securities              59,746        59,417         2,365         2,365
                                             ----------    ----------    ----------    ----------
Total investment grade and
  non-investment grade debt securities       $  553,472    $  550,683    $    2,365    $    2,365
                                             ==========    ==========    ==========    ==========
Percentage of total debt securities                99.6%         99.6%          0.4%          0.4%

Investment Grade Quality (fair value)           Aaa           Aaa            A            Baa
                                             ----------    ----------    ----------    ----------
U.S. and U.K. federal government
</TABLE>


                                       16
<PAGE>

<TABLE>
<S>                                          <C>           <C>           <C>           <C>
  securities, including agencies             $  341,529    $       --    $       --    $       --
Other foreign government securities              58,681            --            --            --
Mortgage and other asset-backed securities       93,516            --            --            --
Corporate and other debt securities              22,140        29,419         8,187            --
                                             ----------    ----------    ----------    ----------
Total investment grade and
  non-investment grade debt securities       $  515,866    $   29,419    $    8,187    $       --
                                             ==========    ==========    ==========    ==========
Percentage of total debt securities                92.8%          5.3%          1.5%          0.0%

Non-investment Grade Quality (fair value)       Ba/B         Caa/Ca          P1        Not rated
                                             ----------    ----------    ----------    ----------
Mortgage and other asset-backed securities   $       --    $       --    $       --    $       --
Corporate and other debt securities                  --            --            --         2,365
                                             ----------    ----------    ----------    ----------
Total non-investment grade debt securities   $       --    $       --    $       --    $    2,365
                                             ==========    ==========    ==========    ==========
Percentage of total debt securities                 0.0%          0.0%          0.0%          0.4%
</TABLE>

Equity securities/Real estate

Pursuant to the Company's investment guidelines, the Company's investment
portfolio may not contain any direct investments in real estate, mortgage loans
or equity securities.

Foreign currency exposures

In an effort to manage exposure to foreign currency exchange rate fluctuations,
the Company may from time to time enter into foreign exchange contracts. These
contracts generally involve the exchange of one currency for U.S. dollars at
some future date. At December 31, 2002 and 2001, the Company had no principal
amounts outstanding under foreign exchange contracts.

Investment manager

Effective January 1, 2001, the Company appointed Wellington Management Company
LLP to act as its investment manager. Prior to this, LaSalle Re had an
investment management agreement with Aon Advisors (UK) Limited which terminated
December 31, 2000.

Management Services

LaSalle Re currently manages its runoff operations with a staff of three
employees and two consultants. LaSalle Re has also contracted with a third party
administrator in Bermuda, IAS, to provide accounting services on an as needed
basis and has entered into an administrative services agreement with Trenwick
for Trenwick to provide LaSalle Re with executive management, actuarial,
accounting, treasury, claims and other administrative services. From time to
time, LaSalle Re may utilize other consultants or managers to provide services.

The Oak Entities and the Lloyd's syndicates in which they participate are
managed by TMA pursuant to a standard agreement, set down by Lloyd's byelaws,
entitled Managing Agent's Agreement (Corporate Member) (the "Agreement"). TMA is
authorized by Lloyd's to manage syndicates including Syndicates 44 and 839, and
by the Financial Services Authority (the "FSA"), to carry out the regulated
activity of managing the underwriting capacity of a Lloyd's syndicate as a
managing agent at Lloyd's. Under the terms of the Agreement, TMA is appointed to
employ and manage the underwriter and his associates, who in turn accept risks,
pay claims, arrange reinsurance, close the account and strike a profit or loss
on the year's trading on behalf of the Oak Entities as a member of the relevant
syndicate. Under the terms of the Agreement, the Oak Entities have agreed to pay
TMA, as remuneration for its services in relation to each year of account, a fee
and a profit commission. For the 2003 year of account, the fee charged by TMA is
0.5% of the capacity allocated by each of the Oak Entities to Syndicates 44 and
839. At the close of the 2003 year of account, subject to certain adjustments
for prior year syndicate losses, TMA will be entitled to


                                       17
<PAGE>

deduct and retain 15% of any profit so determined, prior to the balance being
distributed to the Oak Entities. In the event of a loss being determined in
respect of the 2003 year of account, TMA will not receive any remuneration other
than the 0.5% fee.

Employees

As of December 31, 2002, the Company had five employees. The Company believes
that its employee relations are satisfactory. None of the Company's employees
are subject to collective bargaining agreements, and the Company knows of no
current efforts to implement such agreements at the Company.

Regulation and tax matters

Trenwick and its insurance and reinsurance company subsidiaries, including
LaSalle Re, are subject to regulatory oversight under the insurance statutes and
regulations of the jurisdictions in which they are domiciled and in which they
conduct business. These regulations vary from jurisdiction to jurisdiction and
are generally designed to protect ceding insurance companies and policyholders
by regulating such companies' financial integrity and solvency in their business
transactions and operations. Many of the insurance statutes and regulations
relate to financial reporting and enable regulators to closely monitor the
performance of the insurers. Typical required reports include information
concerning Trenwick's capital structure, ownership, financial condition, and
general business operations.

Because the Company, as well as Trenwick, Trenwick America and Trenwick
Holdings, are holding companies, their principal sources of funds consist of
permissible dividends, tax allocation payments and other statutorily permissible
payments from their respective regulated operating insurance company
subsidiaries, each of which is subject to oversight and regulatory supervision
by insurance regulators in its jurisdiction of domicile. As a result of recent
losses incurred by these operating inasurance company subsidiaries, their cash
distribution capacities have been significantly reduced. Each insurance
regulatory body, including those of Bermuda, New York, Connecticut, North
Dakota, the United Kingdom and Lloyd's, may act independently with respect to
the company or companies domiciled in its jurisdiction. To the extent that any
such regulator takes action with respect to an insurance company domiciled in
its jurisdiction, such as the commencement of voluntary or involuntary
proceedings for the formal supervision, conservation, rehabilitation or
liquidation of such company, such action could adversely impact the ability of
the Company or Trenwick to continue to function, or could precipitate other
actions by other insurance regulators with respect to the particular insurer or
insurers under their primary jurisdiction.

LaSalle Re, as a runoff company, will continue to be subject to regulation and
supervision in Bermuda. LaSalle Re was not admitted or authorized to do business
in any jurisdiction except Bermuda. The insurance laws of each state of the
United States do not directly regulate the sale of reinsurance within their
jurisdictions by alien insurers, such as LaSalle Re. Nevertheless, the sale of
reinsurance by alien reinsurers, such as LaSalle Re, to insurance companies
domiciled or licensed in United States jurisdictions is indirectly regulated by
state "credit for reinsurance" laws that operate to deny financial statement
credit to ceding insurers unless the non-admitted alien reinsurer posts
acceptable security for ceded liabilities and agrees to prescribed contract
provisions, such as insolvency and intermediary clauses. The Company conducted
its business at its principal offices in Bermuda and did not maintain an office
in the United States, and its personnel did not solicit, advertise, settle
claims or conduct other insurance activities in the United States. All policies
were issued and delivered and premiums were and continue to be received outside
the United States. The Company does not believe that it is subject to the
insurance laws of any state in the United States. From time to time, there have
been congressional and other initiatives in the United States regarding the
supervision and regulation of the insurance industry, including proposals to
supervise and regulate alien reinsurers. While none of these proposals have been
adopted to date on either the federal or state level, there can be no assurance
that federal or state legislation will not be enacted subjecting the Company to
supervision and regulation in the United States, which could have a material
adverse effect on the Company. In addition, no assurance can be given that if
the Company were to become subject to any laws of the United


                                       18
<PAGE>

States or any state thereof or of any other country at any time in the future,
it would be in compliance with such laws.

Bermuda Regulation

LaSalle Re and LaSalle Re Corporate Capital Ltd. are regulated by the Insurance
Act 1978 of Bermuda, as amended, and related regulations (the "Insurance Act"),
which provides that no person shall carry on an insurance business in or from
within Bermuda unless registered as an insurer under the Insurance Act by the
Supervisor of Insurance (the "Supervisor"), acting on the recommendation of the
Bermuda Monetary Authority (the "BMA"). Under the Insurance Act, insurance
business includes reinsurance business. The BMA, in deciding whether to
recommend registration, has broad discretion to act as it thinks fit in the
public interest. The Supervisor and the BMA are required by the Insurance Act to
determine whether the applicant is a fit and proper body to be engaged in the
insurance business and, in particular, whether it has, or has available to it,
adequate knowledge and expertise. The continued registration of an applicant as
an insurer is subject to its complying with the terms of its registration and
such other conditions as the Minister of Finance may impose from time to time.
The day to day supervision of insurers is the responsibility of the BMA.

The Insurance Act also imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
Supervisor powers to supervise, investigate, require information and the
production of documents and intervene in the affairs of insurance companies.
Although LaSalle Re Corporate Capital Ltd. is governed by the Insurance Act, it
is exempted from complying with most of the filings required to be made by
insurance companies by section 57 of the Insurance Act.

The Insurance Act distinguishes between insurers carrying on long-term business
and insurers carrying on general business. There are four classifications of
insurers carrying on general business, with Class 4 insurers subject to the
strictest regulation. LaSalle Re is registered as a Class 4 insurer in Bermuda
and is regulated as such under the Insurance Act.

LaSalle Re is in runoff and the BMA has placed restrictions on its continued
operations including that it may not enter into any new contracts of insurance
or reinsurance without the BMA's prior written approval, effective as of January
1, 2003, and that it must at all times meet and maintain relevant solvency
margins, liquidity and other ratios applicable under Bermuda law at all times
that it carries on insurance business.

Cancellation of Insurer's Registration

An insurer's registration may be canceled by the Supervisor on certain grounds
specified in the Insurance Act, including failure of the insurer to comply with
its obligations under the Insurance Act or if, in the opinion of the Supervisor
and the BMA, after consultation with the Insurance Advisory Committee (the
"IAC"), the insurer has not been carrying on business in accordance with sound
insurance principles.

The IAC, along with related sub-committees, which are appointed by the Minster
of Finance, advises the Supervisor and the BMA on matters connected with the
discharge of their functions and supervises and reviews the law and practice of
insurance in Bermuda, including reviews of accounting and administrative
procedures. In addition, the IAC may advise the Supervisor and the BMA on any
matter relating to the development of the insurance industry in Bermuda.

Principal Representative

An insurer is required to maintain a principal office in Bermuda and to appoint
and maintain a principal representative in Bermuda to oversee the insurer's
business and to report to the BMA and the Supervisor in connection with specific
events. For the purpose of the Insurance Act, LaSalle Re's principal office is
its executive offices in Hamilton, Bermuda, and LaSalle Re's principal
representative is Peter Woolf. Without a reason acceptable to the BMA, an
insurer may not terminate the appointment of its principal representative, and
the principal representative may not cease to act as such, unless 30 days'
notice in writing to BMA is


                                       19
<PAGE>

given of the intention to do so. It is the duty of the principal representative,
within 30 days of reaching the view that there is a likelihood that the insurer
will become insolvent or that a reportable "event" has, to the principal
representative's knowledge, occurred or is believed to have occurred, to make a
report in writing to the BMA setting forth all the particulars of the case that
are available to the principal representative. For example, the failure by the
insurer to comply substantially with a condition imposed upon the insurer by the
Supervisor relating to a solvency margin or a liquidity or other ratio would be
a reportable "event."

Independent Approved Auditor

Every registered insurer must appoint an independent auditor who will audit and
report annually on the statutory financial statements and the statutory
financial return of the insurer, both of which, in the case of LaSalle Re, are
required to be filed annually with the BMA. LaSalle Re's independent auditor
must be approved by the BMA and may be the same person or firm that audits
Trenwick's consolidated financial statements and reports for presentation to its
shareholders. LaSalle Re's independent auditor is PricewaterhouseCoopers LLP.

Loss Reserve Specialist

As a registered Class 4 insurer, LaSalle Re is required to submit an opinion of
its approved loss reserve specialist with its statutory financial return in
respect of its losses and loss expenses provisions. The loss reserve specialist,
who will normally be a qualified casualty actuary, must be approved by the BMA.
Robert Giambo, who is no longer an employee of Trenwick, had been approved to
act as LaSalle Re's loss reserve specialist. Mr. Giambo has submitted an opinion
which will be filed with LaSalle Re's statutory financial return for the year
ended December 31, 2002.

Statutory Financial Statements

LaSalle Re must prepare annual statutory financial statements. The Insurance Act
prescribes rules for the preparation and substance of these statutory financial
statements, which include, in statutory form, a balance sheet, an income
statement, a statement of capital and surplus and notes thereto. The insurer is
required to give detailed information and analyses regarding premiums, claims,
reinsurance and investments. The statutory financial statements are not prepared
in accordance with U.S. GAAP and are distinct from the financial statements
prepared for presentation to the insurer's shareholders under the Companies Act,
which financial statements will be prepared in accordance with U.S. GAAP. As a
general business insurer, LaSalle Re is required to submit the annual statutory
financial statements as part of the annual statutory financial return. The
statutory financial statements and the statutory financial return do not form
part of the public records maintained by the BMA.

Annual Statutory Financial Return

LaSalle Re is required to file with the BMA a statutory financial return no
later than four months after its financial year end unless specifically extended
upon application to the BMA. The statutory financial return for a Class 4
insurer includes, among other matters, a report of the approved independent
auditor on the statutory financial statements of the insurer, solvency
certificates, the statutory financial statements, the opinion of the loss
reserve specialist and a schedule of reinsurance ceded. The solvency
certificates must be signed by the principal representative and at least two
directors of the insurer certifying that the minimum solvency margin has been
met and whether the insurer complied with the conditions attached to its
certificate of registration. The independent approved auditor is required to
state whether, in its opinion, it was reasonable for the directors to make these
certifications. If an insurer's accounts have been audited for any purpose other
than compliance with the Insurance Act, a statement to that effect must be filed
with the statutory financial return.


                                       20
<PAGE>

Minimum Solvency Margin and Restrictions on Dividends and Distributions

Under the Insurance Act, the value of the general business assets of a Class 4
insurer, such as LaSalle Re, must exceed the amount of its general business
liabilities by an amount greater than the prescribed minimum solvency margin.

LaSalle Re:

            1. is required, with respect to its general business, to maintain a
      minimum solvency margin equal to the greatest of:

            a. $100,000,000;

            b. 50% of net premiums written (being gross premiums written less
      any premiums ceded by LaSalle Re, but LaSalle Re may not deduct more than
      25% of gross premiums when computing net premiums written); and

            c. 15% of net losses and loss expense reserves;

            2. is prohibited from declaring or paying any dividends during any
      financial year if it is in breach of its minimum solvency margin or
      minimum liquidity ratio or if the declaration or payment of such dividends
      would cause it to fail to meet such margin or ratio (and if it has failed
      to meet its minimum solvency margin or minimum liquidity ratio on the last
      day of any financial year, LaSalle Re will be prohibited, without the
      approval of the BMA, from declaring or paying any dividends during the
      next financial year);

            3. is prohibited from declaring or paying in any financial year
      dividends of more than 25% of its total statutory capital and surplus (as
      shown on its previous financial year's statutory balance sheet) unless if
      files with the BMA, (at least seven days before payment of such dividends)
      an affidavit stating that it will continue to meet the required margins;

            4. is prohibited, without the approval of the Supervisor, from
      reducing by 15% or more its total statutory capital as set out in its
      previous year's financial statements, and any application for such
      approval must include an affidavit stating that it will continue to meet
      the required margins; and

            5. is required, at any time it fails to meet its solvency margin,
      within 30 days (45 days where total statutory capital and surplus falls to
      $75 million or less) after becoming aware of that failure or having reason
      to believe that such failure has occurred, to file with the BMA a written
      report containing certain information.

Additionally, under the Companies Act, LaSalle Re may only declare or pay a
dividend if it has no reasonable grounds for believing that it is, or would
after the payment be, unable to pay its liabilities as they become due, or if
the realizable value of its assets would not be less than the aggregate of its
liabilities and its issued share capital and share premium accounts.

Minimum Liquidity Ratio

The Insurance Act provides a minimum liquidity ratio for general business
insurers, like LaSalle Re. An insurer engaged in general business is required to
maintain the value of its relevant assets at not less than 75% of the amount of
its relevant liabilities. Relevant assets include, but are not limited to, cash
and time deposits, quoted investments, unquoted bonds and debentures, first
liens on real estate, investment income due and accrued, accounts and premiums
receivable and reinsurance balances receivable. There are certain categories of
assets which, unless specifically permitted by the BMA, do not qualify as
relevant assets, such


                                       21
<PAGE>

as unquoted equity securities, investments in and advances to affiliates, and
real estate and collateral loans. The relevant liabilities are total general
business insurance reserves and total other liabilities less deferred income tax
and sundry liabilities (by interpretation, those not specifically defined).

Supervision, Investigation and Intervention

The BMA may appoint an inspector with extensive powers to investigate the
affairs of LaSalle Re if the BMA believes that such an investigation is in the
best interests of its policyholders or persons who may become policyholders. In
order to verify or supplement information otherwise provided to the BMA, the BMA
may direct LaSalle Re to produce documents or information relating to matters
connected with its business. If it appears to the BMA that there is a risk of
LaSalle Re becoming insolvent, or that LaSalle Re is in breach of the Insurance
Act or any conditions imposed upon its registration, the BMA may, among other
things, direct LaSalle Re (i) not to take on any new insurance business; (ii)
not to vary any insurance contract if the effect would be to increase its
liabilities; (iii) not to make certain investments; (iv) to liquidate certain
investments; (v) to maintain in, or transfer to the custody of, a specified
bank, certain assets; (vi) not to declare or pay any dividends or other
distributions or to restrict the making of such payments and/or (vii) to limit
LaSalle Re's premium income. In connection with the recent application of
LaSalle Re to the BMA to recharacterize a June 2002 loan of $258 million by
LaSalle Re to Trenwick as a special dividend, the BMA and LaSalle Re agreed that
LaSalle Re's Certificate of Registration be endorsed to restrict LaSalle Re's
license so that it can no longer write any insurance without the prior written
consent of the BMA.

Disclosure of Information

In addition to powers under the Insurance Act to investigate the affairs of an
insurer, the BMA may require certain information from an insurer (or certain
other persons) to be produced to them. Further, the BMA has been given powers to
assist other regulatory authorities, including foreign insurance regulatory
authorities, with their investigations involving insurance and reinsurance
companies in Bermuda but subject to restrictions. For example, the BMA must be
satisfied that the assistance being requested is in connection with the
discharge of regulatory responsibilities of the foreign regulatory authority.
Further, the BMA must consider whether cooperation is in the public interest.
The grounds for disclosure are limited and the Insurance Act provides sanctions
for breach of the statutory duty of confidentiality.

Transfer of Securities of Trenwick and LaSalle Re Holdings

The BMA must give specific permission for all issues and transfers of securities
of Bermuda companies involving persons who are not resident of Bermuda, unless
the company's securities are listed on an Appointed Stock Exchange as defined in
the Companies Act 1981.

On March 25, 2003, the common shares of Trenwick and the Series A Preferred
Shares of LaSalle Re Holdings were suspended from trading, pending application
to the Securities and Exchange Commission for delisting, by the NYSE as a result
of failure to meet the NYSE's minimum continued listing criteria. On the same
day, Trenwick was notified that its common shares and the Series A Preferred
Shares of LaSalle Re Holdings will be quoted on the OTC Bulletin Board.

By letter dated March 24, 2003, the BMA issued permission for the free
transferability on an interim basis of Trenwick's and LaSalle Re Holdings'
shares while they are quoted on the OTC Bulletin Board. This permission is
contingent on the condition that the BMA is notified promptly of any instances
in which Trenwick or LaSalle Re Holdings become aware that a new shareholder has
obtained 5% or more of either company's shares, including background information
on any such new 5% shareholder.

In the absence of the permission granted by the BMA discussed in the previous
paragraph, as a consequence of the suspension of trading, all transfers of
shares involving holders of Trenwick's or LaSalle Re Holdings' securities would
be required to be approved by the BMA before they could be entered into
Trenwick's or LaSalle Re Holdings' share register. This procedure would only
apply to share transfers involving


                                       22
<PAGE>

shareholders who hold shares in their own name on Trenwick's or LaSalle Re
Holdings' share register (a "record holder"). Shareholders who hold through
nominees, brokers, or banks, which in turn have accounts through other nominees,
would not be affected by this approval procedure unless one of the parties to
the transfer becomes a record holder on Trenwick's or LaSalle Re Holdings' share
register or the number of shares held by an existing record holder is increased
or decreased by the transfer. If the BMA's free transferability permission is
rescinded, this pre-approval process will cause a delay in share transfers.

United Kingdom Regulation - Oak Entities and LaSalle Re Capital

On December 1, 2001, the Financial Services and Markets Act (the "FSMA")
established the Financial Services Authority (the "FSA") as the primary
regulator responsible for regulating the financial services industry with
respect to the carrying on of "regulated activities" including insurance and
reinsurance in the U.K. It is a criminal offense for any person to engage in a
regulated activity in the U.K. unless that person is authorized by the FSA to
carry on that regulated activity. Trenwick's Lloyd's operations are directly or
indirectly regulated by the FSA.

The FSA has been granted broad authorization and intervention powers as it
relates to the operations of all insurers operating in the U.K., including (i)
periodic financial reporting requirements, (ii) supervision of management
through an "approved persons" regime which requires that certain "controlled
functions" within a regulated entity must be performed by individuals approved
by the FSA, (iii) various margin of solvency and related requirements for the
regulated entity and its parent company, (iv) reporting requirements relating to
all material related party transactions including certain intra group
transactions, (v) indirect restriction on dividend payments, (vi) formal
inspections and monitoring of regulated entities and regular formal interviews
of management, (vii) prior notification and approval by the FSA of the
acquisition of "control" including the direct or indirect acquisition of 10% or
more of the voting shares of the regulated entity or its parent companies and
(viii) enforcement of disciplinary measures including criminal prosecution where
it deems appropriate. In addition, the FSA is currently seeking to strengthen
its requirements for senior management arrangements and systems and controls of
insurance and reinsurance companies under its jurisdiction and intends to place
an increased emphasis on risk identification and management in relation to the
prudential regulation of insurance and reinsurance business in the U.K. For
example, the FSA is currently in consultation on a number of proposals,
including the regulation of the sale of general insurance, insurance mediation
and proposals aimed at ensuring adequate diversification of an insurer's or
reinsurer's exposures to any credit risk of its reinsurers.

Lloyd's Operations

Under the FSMA, Lloyd's is subject to the full range of supervisory and
disciplinary sanctions of the FSA. The Council of Lloyd's is permitted, subject
to the ultimate authority of the FSA, to continue its day to day supervisory
functions at Lloyd's, although the FSA may intervene directly or through Lloyd's
and either body may initiate investigative and disciplinary proceedings. In
addition, Lloyd's is required to notify the FSA of any matter that is likely to
be of material concern to the FSA concerning Lloyd's operations as well as those
of its constituent parties.

The Company's dedicated Lloyd's underwriting entities, the Oak Entities, as
Lloyd's corporate members are subject to regulation and/or supervision by the
Council of Lloyd's. Lloyd's operates under a self-regulatory regime arising
under the Lloyd's Act 1982 and the FSMA and has the power to set, interpret and
change the rules which govern the operation of the Lloyd's market. Lloyd's
prescribes, in respect of its managing agents and corporate members, certain
minimum standards relating to their management and control, solvency and various
other requirements. In addition, Lloyd's imposes restrictions against persons
becoming controllers and major shareholders of managing agents and corporate
members without the consent of Lloyd's first having been obtained.

Trenwick Managing Agents, which manage the Oak Entities, has been granted a
Scope of Permission Notice by the FSA to carry out a regulated activity -
'Managing the capacity of a Lloyd's syndicate as a managing


                                       23
<PAGE>

agent of Lloyd's'. As a regulated firm, Trenwick Managing Agents is required to
comply with the Rules made by the FSA, the Lloyd's Acts passed by UK Parliament,
and Lloyd's Byelaws. These regulations confer powers on the regulators to revoke
the Scope of Permission Notice, which could result in Trenwick Managing Agents
being required to cease underwriting at Lloyd's.

The FSA has begun to more closely monitor the activities of Lloyd's managing
agents. In February 2003, the FSA began to carry out risk assessments of
managing agents, looking at the potential exposure to the Lloyd's Central Fund.
In addition, the FSA has indicated its intention to become more directly
involved in monitoring both the performance of specific Lloyd's syndicates and
the financial strength of the Lloyd's market as a whole and, in that connection,
it is anticipated that there will be changes to Lloyd's regulatory reporting
among other things. Moreover, internal reforms proposed at Lloyd's are likely to
be adopted including moving to a franchise structure whereby the syndicates will
act as franchisees of Lloyd's, establishment of a new Franchise Board to govern
Lloyd's adoption of a one year accounting system in lieu of the three year
accounting system and elimination of new unlimited liability members. These and
other amendments are expected to be proposed in the amendments to the Lloyd's
Acts to modernize its governance structure and to remove unnecessary business
restrictions.

LaSalle Re Capital became a corporate member of Lloyd's in December 1996 and
commenced underwriting effective January 1, 1997. LaSalle Re Capital is only
licensed to carry on business related to Lloyd's. As a corporate member, LaSalle
Re Capital is subject to the regulatory jurisdiction of the Council of Lloyd's.

As corporate members of Lloyd's, the Oak Entities and LaSalle Re Capital are
required to file audited financial statements and an annual return, which is
part of the annual declaration of compliance process. The annual declaration of
compliance sets out the financial position of the corporate member and confirms
details of its directors and controllers. In addition, the Oak Entities and
LaSalle Re Capital are required to file audited solvency returns either
confirming the value of funds at Lloyd's ("FAL") held by the member as at the
previous December 31, or that it held no FAL at that date. Lloyd's will compare
the value of a corporate member's FAL derived from the solvency return with its
underwriting assets and liabilities as reported by the syndicates on which it
participates. Where a negative solvency position is disclosed, the corporate
member is required to provide sufficient additional funds to cover the
shortfall.

Under the terms of its license as a "member of a recognized association of
underwriters" under the Bermuda Insurance Act, LaSalle Re Capital is required to
meet and maintain the solvency requirements of Lloyd's. LaSalle Re Capital is
also required to send to the Bermuda Supervisor of Companies, within 30 days
after submission of the annual solvency return and declaration of compliance to
Lloyd's, a copy of those documents together with a copy of the audited annual
statements of each of the syndicates in which LaSalle Re Capital participates.
Further, LaSalle Re Capital must also appoint and maintain a principal
representative in Bermuda.

ITEM 2. PROPERTIES

The Company's executive offices are located in approximately 3,870 square feet
of leased office space in Hamilton, Bermuda. Management believes the Company's
current office space is adequate for its needs.

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries are at times party to various legal proceedings
generally arising in the normal course of its business. The Company does not
believe that the eventual outcome of any such pending proceeding will have a
material effect on its financial condition or business. Pursuant to the
Company's reinsurance arrangements, disputes are generally required to be
finally settled by arbitration.


                                       24
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of shareholders of the Company during the
fourth fiscal quarter of the calendar year ended December 31, 2002.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Following the business combintaion with Trenwick, the Company's Common Shares,
which were quoted on The New York Stock Exchange under the symbol "LSH", were
delisted. There is no established public trading market for the Company's Common
Shares, all of which are owned by Trenwick.

No dividends on common stock were paid by the Company during the year ended
December 31, 2000 while its common stock was publicly held (through September
27, 2000). The Company paid a quarterly dividend of $.547 on its Series A
preferred shares in each of the first three quarters of 2002 and each of the
four quarters of 2001 and 2000. The Company suspended payment of dividends on
its Series A Preferred Shares on November 29, 2002. See - "Business -
Significant Developments - Dividend Suspension," above.

ITEM 6. SELECTED FINANCIAL DATA

On December 10, 2002, the capital stock of the Oak Entities was contributed by
Trenwick to the Company. The Company and the Oak Entities are under the common
control of Trenwick, which was effective beginning on September 27, 2000, as a
result of the Trenwick/LaSalle business combination, therefore, this transaction
was accounted for at historical cost, in a manner similar to a pooling of
interests business combination. Accordingly, the selected financial data
presented herein for the 2002, 2001 and 2000 years have been restated to reflect
the combined operating results, cash flows and financial position of the Company
and the Oak Entities. The 1999 and 1998 selected financial data presented herein
includes only the results of the Company.

The 2002, 2001 and 2000 years presented below relate to a December 31 year end,
and the 1999 and 1998 years relate to a September 30 year end.

<TABLE>
<CAPTION>
                                      2002 Year    2001 Year     2000 Year    1999 Period     1999 Year      1998 Year
                                     -----------  -----------   -----------   -----------    -----------    -----------
                                            (Monetary amounts expressed in thousands of United States dollars)
Income Statement Data
<S>                                  <C>          <C>           <C>           <C>            <C>            <C>
Gross premiums written               $   536,898  $   522,292   $   412,292   $    10,307    $   139,010    $   155,316
Net premiums earned                      291,289      302,989       271,696        30,391        126,615        154,620
Net investment income                     29,439       50,446        46,681         8,588         34,462         39,863
Claims and claims expenses incurred      178,220      305,560       219,005        46,642        131,147         95,539
Policy acquisition costs                  72,173       97,376        76,058         5,878         19,844         22,661
Underwriting expenses                     50,696       33,640        37,429         4,533         13,733          8,932
Income (loss) before income taxes,
   minority interest and cumulative
   effect of change in accounting
   principle                             118,236      (76,423)      (20,067)      (19,831)        (5,679)        65,232
Minority interest(1)                          --           --           839        (4,990)        (2,845)        13,426
Net income (loss)                         85,509      (56,870)      (10,203)      (14,841)        (2,834)        51,806
Common dividends declared                264,000        7,500         1,500            --         17,543         44,641

Other Data
Loss ratio                                  61.2        100.8          80.6         153.5%         103.6%          61.8%
Expense ratio                               42.2         43.2          41.8          34.3%          26.5%          20.4%
Combined ratio                             103.4        144.0         122.4         187.8%         130.1%          82.2%
</TABLE>

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

                                       25
<PAGE>

<TABLE>
Balance Sheet Data (at end of
   period)
<S>                                  <C>          <C>           <C>           <C>            <C>            <C>
Total investments and cash           $   731,286  $   786,356   $   642,677   $   559,591    $   556,976    $   606,757
Total assets                           2,154,927    1,983,330     1,167,391       726,168        736,107        757,290
Unpaid claims and claims expenses      1,475,821    1,178,467       668,734       190,352        146,552         97,942
Minority interest(1)                          --           --            --        86,906         93,055        105,569
Total shareholders' equity               134,937      309,500       379,916       361,960        382,197        430,053
</TABLE>

(1)   Minority interest represents those shares in LaSalle Re that were held as
      exchangeable non-voting shares. These shares were exchangeable, at the
      option of the holder, for common shares of the Company on a one-for-one
      basis. These shares were exchanged for Trenwick common shares on a
      one-for-one basis following the Trenwick/LaSalle business combination.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION

The following discussion highlights material factors affecting the results of
operations of LaSalle Re Holdings Limited (the "Company") for each of the three
years ended December 31, 2002, 2001 and 2000. This discussion and analysis
should be read in conjunction with the consolidated financial statements and
notes thereto of the Company for the years ended December 31, 2002, 2001 and
2000 contained in this annual report.

Overview

The Company was incorporated in Bermuda in September 1995 to act as a holding
company for LaSalle Re Limited ("LaSalle Re"), which was incorporated in Bermuda
in October 1993 and commenced operations on November 22, 1993. It primarily
acted as a multi-line reinsurance company with emphasis on property catastrophe
business.

On September 27, 2000, the Company, LaSalle Re, Trenwick Group Ltd. ("Trenwick")
and Trenwick Group Inc. completed a business combination (the "Trenwick/LaSalle
business combination). Under the terms of the business combination, the common
shareholders of the Company, LaSalle Re and Trenwick Group Inc. exchanged their
shares on a one-for-one basis for shares in Trenwick. Following this
transaction, the Company became a wholly owned subsidiary of Trenwick, and a
guarantor of certain indebtedness owed by Trenwick and certain of its direct and
indirect subsidiaries.

Trenwick is a Bermuda-based specialty insurance and reinsurance holding company
with subsidiaries located in the United States and the United Kingdom, including
four runoff operations. Trenwick's operations at Lloyd's of London ("Lloyd's")
underwrite specialty property and casualty insurance as well as treaty and
facultative property and casualty reinsurance on a worldwide basis.

Trenwick's United States reinsurance company subsidiary, Trenwick America Re has
been limited since November 2002 to providing, through an underwriting facility
with Chubb Re, Inc. and its affiliate Federal Insurance Company, treaty
reinsurance to insurers of property and casualty risks. Trenwick announced on
April 15, 2003 that it would cease underwriting reinsurance business under the
Chubb facility. Since inception in November 2002, Trenwick underwrote
approximately $128 million of reinsurance under the facility. Trenwick will
continue to be entitled to the economic benefits of existing business under the
facility, subject to the terms and conditions of the facility. Trenwick's
ability to write reinsurance business under the facility was severely
constrained by its financial condition and concerns arising with respect to its
ongoing stability. As a result, Trenwick ceased underwriting activities under
the facility in order to reduce Trenwick's costs. The effect of this cessation
is that Trenwick America Re is now primarily in runoff. Trenwick will continue
to service and pay claims for all business previously written through Trenwick
America Re outside of the Chubb facility and will jointly adjust and settle with
Chubb any claim arising under the business written under the Chubb facility,
subject to Chubb's final authority.


                                       26
<PAGE>

In 2002, Trenwick conducted several strategic reviews of its operations in light
of its capital constraints and determined that it was necessary for Trenwick to
reduce its operating leverage by reducing premium volumes to a level more
commensurate with its capital base and to concentrate its limited financial
resources on its core franchises and businesses, its United States treaty
reinsurance business and its Lloyd's operations, where it would be able to write
insurance and reinsurance based on direct or indirect financial support. As a
result, Trenwick voluntarily placed into runoff its United States specialty
program business formerly operated through its subsidiary, Canterbury Financial
Group, Inc. and its London-based specialty insurance and reinsurance company,
Trenwick International Limited. Additionally, in light of the increasing capital
requirements imposed by the market on catastrophe insurance providers, Trenwick
sold the in-force property catastrophe reinsurance business of the Company.
Little or no new insurance or reinsurance is presently being offered in these
runoff operations, including the Company, with the exception of business written
through the Oak Entities owned by the Company, described below.

From LaSalle Re's incorporation in 1993 until April 1, 2002, its primary
business activity was as a property and casualty reinsurer underwriting
worldwide specialty products with an emphasis on catastrophe reinsurance.
Catastrophe reinsurance contracts cover unpredictable events such as hurricanes,
windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes,
riots, floods and other man-made or natural disasters. Following losses
sustained in the September 11, 2001 terrorist attacks, Trenwick determined that
without additional capital LaSalle Re could no longer compete effectively in
this business nor could Trenwick remain in a business that was inherently
unpredictable and which could result in additional significant losses. Effective
April 1, 2002, LaSalle Re was placed into runoff following the sale of its
in-force catastrophe reinsurance business to Endurance Specialty Insurance Ltd.
("Endurance") (See "Significant Developments," below).

LaSalle Re's other business consisted primarily of participations in certain
Lloyd's syndicates through LaSalle Re Capital, which provided capital support to
those syndicates. Effective for the 2001 underwriting year at Lloyd's, LaSalle
Re Capital withdrew its capital support from all Lloyd's syndicates. LaSalle Re
Capital, which was incorporated in Bermuda in November 1996, is currently
inactive. On December 10, 2002, LaSalle Re, with the permission of the Bermuda
Monetary Authority ("BMA"), again became a corporate capital provider at Lloyd's
pursuant to an agreement between Trenwick, LaSalle Re and the Company whereby
the Oak Entities were contributed by Trenwick to LaSalle Re. The Oak Entities
(three separate subsidiaries), which are incorporated in the United Kingdom,
participate in Lloyd's syndicates managed by Trenwick Managing Agents ("TMA"), a
wholly owned subsidiary of Trenwick. The contribution of the Oak Entities by
Trenwick to LaSalle Re, together with an additional investment by LaSalle Re of
$81.6 million, was completed as part of Trenwick's underwriting capital at
Lloyd's for the 2003 year of account. In return for its investment, LaSalle Re
will receive 43% of the economic interest (prior to the deduction of the Banks'
letter of credit fees and profit participation, discussed below in "Significant
Developments -- Pledge by Trenwick of the Company's Stock participation)and
Assets, Including the Stock of LaSalle Re") in the 2003 year of account of
syndicates managed by TMA at Lloyd's and will also participate in the economic
interest in the results of such syndicates for the 2002 and prior years of
account.

LaSalle Re's other wholly owned subsidiaries include LaSalle Re Services
(currently inactive), which acted as a representative office for the Company in
the United Kingdom until the completion of the Trenwick/LaSalle business
combination in September 2000, and LaSalle Re Barbados, which was incorporated
in Barbados in 2001 and acts as an investment holding company.

Significant Developments

During 2002 and the first quarter of 2003, a number of developments have
occurred that have significantly and negatively affected Trenwick's operations,
capital structure and the financial resources required to conduct its
businesses, including the Company. Set forth below are brief descriptions of a
number of these developments as well as certain material transactions entered
into by Trenwick and the Company to enable them to continue to conduct business
operations despite the adverse developments. Investors and shareholders are
cautioned that Trenwick and the Company have had a number of significant adverse
events


                                       27
<PAGE>

which could make it extremely difficult to continue in their current businesses,
if at all, and they should carefully review this annual report on Form 10-K as
well as Trenwick's annual report on Form 10-K for the year ended December 31,
2002 filed with the Securities and Exchange Commission, including the
"Significant Developments," "Risk Factors" and "Forward-Looking Statements"
sections thereof, as well as other sections of this Report and Trenwick's
Report.

Going Concern Qualification

The Company's independent accountants, PricewaterhouseCoopers LLP, have stated,
in their audit report with respect to the Company's financial statements as at
and for the twelve months ended December 31, 2002, that substantial doubt exists
as to the Company's ability to continue as a going concern. Trenwick's and the
Company's ability to operate continue to be adversely impacted by the
deterioration in Trenwick's financial condition and its lack of available
financial resources to meet its obligations.

Sale of In-Force Business of the Company to Endurance

Trenwick and the Company's wholly owned subsidiary, LaSalle Re, entered into a
Transfer and Purchase Agreement, a Quota Share Retrocession Agreement, a Bill of
Sale, an Assignment Agreement, an Administrative Services Agreement and an
Assignment of Reinsurance Recoverables and Other Receivables, each dated as of
May 16, 2002, pursuant to which Trenwick and LaSalle Re sold to Endurance the
in-force property catastrophe business of LaSalle Re as of April 1, 2002.
Concurrent with the sale, substantially all of LaSalle Re's employees became
employees of Endurance. The Quota Share Retrocession Agreement was a 100% quota
share reinsurance agreement, with Endurance paying LaSalle Re a ceding
commission of 25% of premiums ceded and additional profit sharing of 50% if the
losses do not exceed a loss ratio of 45%. In addition, Endurance will have the
right to renew LaSalle Re's in-force business as it expires in exchange for a
12.5% commission on the business renewed. Included in the Company's results for
the year ended December 31, 2002 are $11.6 million in ceding commissions earned
on the quota share agreement with Endurance as well as $6.0 million in
amortization of acquisition costs on the related assumed business. The loss on
sale of in-force business recorded during 2002 of $20.1 million is net of the
non-recurring revenue and expense items incurred as a result of the sale, as
detailed in the table below (in millions).

<TABLE>
<S>                                                                              <C>
      Minimum proceeds related to sale of renewal rights                        $  8.0
      Accelerated amortization of reinsurance contracts not transferred in sale  (20.9)
      Legal expenses and investment banking fees                                  (4.4)
      Severance and related expenses                                              (2.8)
                                                                                ------
      Net loss on sale of LaSalle Re's in-force reinsurance business            $(20.1)
                                                                                ======
</TABLE>

Realization of any additional revenue from the renewal commission in excess of
the $8.0 million previously received, or future revenue from profit sharing
related to the loss ratio, is not known at this time; however, the Company and
LaSalle Re do not expect to receive significant revenues in 2003 from this
transaction.

Special dividend

Subsequent to LaSalle Re being placed into runoff, Trenwick borrowed $258
million from LaSalle Re in June 2002. Of the funds borrowed Trenwick used
approximately $195 million to repay the outstanding term indebtedness under
Trenwick's bank credit facility which had been guaranteed by the Company and
utilized the remaining portion primarily for capital support of Trenwick's
Lloyd's operations (including the Oak Entities, which became wholly owned
subsidiaries of LaSalle Re effective December 10, 2002).

As the Company had agreed to cease future competitive activities in connection
with the Endurance transaction and did not have any plans to underwrite new
insurance or reinsurance through LaSalle Re, in November 2002, Trenwick applied
to the BMA for permission to recharacterize the $258 million loan as a special
dividend since it would more appropriately reflect the status of the
distribution. The Company has


                                       28
<PAGE>

determined that the reduction in capital and surplus resulting from the special
dividend would not cause LaSalle Re to fall below the minimum statutory capital
and surplus of $100 million which is required of a Class 4 insurer in Bermuda.
In connection with this request, the BMA and LaSalle Re agreed that LaSalle's
Certificate of Registration be endorsed to restrict LaSalle Re's license so that
it can no longer write any insurance without the prior written consent of the
BMA.

The Company has accounted for this distribution as a dividend in the
accompanying Consolidated Financial Statements.

Dividend suspension

On November 29, 2002, the Company suspended the payment of dividends on its
Series A Preferred Shares as a result of restrictions on the Company under
Trenwick's credit agreement with various lending institutions, under which the
Company is a guarantor. The Company intends to accrue the dividends until
payment is reinstated, if ever. The date of dividend payment reinstatement has
not been determined by the Company. The Company does not expect to be able to
pay dividends to the holders of the Series A Preferred Shares for the
foreseeable future, if ever.

Transactions with Affiliates

In 2000, Trenwick borrowed $75 million from LaSalle Re. The proceeds of the loan
were used primarily for capital support of Trenwick's Lloyd's operations,
including those of the Oak Entities, and for general corporate purposes. The BMA
recently confirmed to the Company that it will allow LaSalle Re's existing $75
million loan to Trenwick, plus accrued interest, to continue to be recorded as
an admitted asset on LaSalle Re's balance sheet. LaSalle Re's statutory capital
and surplus is estimated to be $133 million, which is above the $100 million
minimum required as a Class 4 insurer in Bermuda. In light of Trenwick's current
financial condition, there is significant uncertainty as to whether Trenwick
will be able, financially, to pay principal and interest on this loan. Should
the loan and related interest and other related intercompany receivables be
determined to not be realizable, LaSalle Re would fall below the minimum
required statutory capital and surplus amount of $100 million. The Company is
required by Trenwick's credit agreement (discussed below) to use its best
efforts to obtain a reduction in its insurance license classification from the
BMA. LaSalle Re has notified the BMA that it intends to file with the BMA an
application during 2003 for a reduction in class from a Class 4 insurer to a
Class 3 insurer, which would reduce its statutory capital and surplus
requirement to $29.4 million if applied to its December 31, 2002 statutory
balance sheet. There can be no assurance that such an application would be
approved by the BMA, or if approved, that the BMA would not impose more
restrictive capital and surplus and other financial requirements on LaSalle than
those generally established for Class 3 insurers.

During the years ended December 31, 2001 and 2000, the Company purchased $10.7
million and $13.0 million par value, respectively, of Trenwick Capital Trust I
Preferred Stock for $8.5 million and $9.9 million, respectively, which are
included in the Company's debt securities held for investment. The Trenwick
Capital Trust I Preferred Stock matures in 2037 and provides preferential
cumulative semi-annual cash distributions at an annual rate of 8.82% which are
guaranteed by Trenwick America Corporation, within certain limits, as to
distribution payments and liquidation or redemption payments. In November 2002,
Trenwick suspended the dividend payment on these securities. The market value of
these investments was $2.4 million at December 31, 2002. In accordance with the
Company's investment accounting policy, the Company determined that this
investment suffered an impairment of value that is considered to be other than
temporary and therefore the difference between amortized cost and market value
is included in the accompanying Consolidated Statement of Operations and
Comprehensive Income Statement as a realized loss of $16.0 million. No interest
has been accrued on these securities since August 1, 2002, the date of the last
dividend payment.


                                       29
<PAGE>

Acquisition of Oak Entities

On December 10, 2002, the capital stock of the Oak Entities was contributed by
Trenwick to LaSalle Re, prior to which certain indebtedness owed to Trenwick by
the Oak Entities was forgiven. The transaction was approved by the BMA. The Oak
Entities, as corporate capital providers, participate in several Lloyd's
syndicates managed by TMA. The Company, through its subsidiary LaSalle Re
Capital, participated in one of these syndicates through the 2000 Lloyd's year
of account.

Reserve Adjustments

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of the reserves for unpaid claims and claims expenses at
each of Trenwick's operating subsidiaries, including those of the Company. Based
upon the study conducted by independent actuarial consultants and additional
work performed during the quarter by Trenwick's internal actuaries, Trenwick
increased its reserves for unpaid claims and claims expenses in the fourth
quarter of 2002 by $107 million, which was net of a favorable adjustment of $6
million applicable to LaSalle Re. The fourth quarter 2002 increases in reserves
impact Trenwick's United States insurance subsidiaries and Trenwick
International. Trenwick's reserves at its Lloyd's operation, which includes the
Oak Entities, while also analyzed, were not adversely affected by this reserve
increase. The fourth quarter 2002 reserve increases followed reserve increases
made by Trenwick earlier in 2002, for an aggregate reserve increase for 2002 of
$303.4 million, of which $33.1 million applied to the Company. The reserve
increases recorded during 2002 include $21.5 million related to LaSalle Re's
exposure to the terrorist attacks of September 11, 2001 offset in part by
reductions in LaSalle Re's other reserves of $19.0 million. The remainder of the
reserve increase relates primarily to the Oak Entities and reflects a
reassessment of reserves for unpaid claims and claims expenses in light of
recent reported loss activity trends across its major business groups and
principally impacts the 1998 to 2001 accident years.

Pledge by Trenwick of the Company's Stock and Assets, Including the Stock of
LaSalle Re

Concurrently with the Trenwick/LaSalle business combination in September of
2000, Trenwick America Corporation ("Trenwick America") and Trenwick Holdings
Limited ("Trenwick Holdings"), Trenwick's U.S. and U.K. holding companies,
entered into an amended and restated $490 million credit agreement with various
lending institutions (the "Banks"), which was guaranteed by the Company. The
credit agreement consisted of both a $260 million revolving credit facility and
a $230 million letter of credit facility. The revolving credit facility was
subsequently converted into a four-year term loan and repaid in full on June 17,
2002. Additionally, on December 24, 2002, the credit agreement was amended to
reduce the letter of credit facility, which is utilized by Trenwick to support
its underwriting operations at Lloyd's, to the currently outstanding $182.5
million. The letter of credit facility is scheduled to terminate on December 31,
2003, although the letters of credit issued pursuant to the facility are not
scheduled to expire until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, the Company has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of the Company, and the Company and Trenwick pledged the
capital stock of LaSalle Re as collateral to the Banks. In December of 2002,
Trenwick agreed to provide the Banks additional security interests as described
below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
the Company and Trenwick's other operating subsidiaries below "A-". The lowered
A.M. Best Company ratings constituted an event of default under Trenwick's
credit agreement. In addition, increases in Trenwick's reserves for unpaid
claims and claims expenses and the establishment of a deferred tax asset reserve
related to Trenwick's United States subsidiaries in the third quarter of 2002
resulted in violations of the financial covenants in the credit agreement
requiring Trenwick to maintain a minimum tangible net worth and minimum
risk-based


                                       30
<PAGE>

capital. On November 13, 2002, Trenwick, its subsidiaries (including the
Company) and the Banks executed a forbearance agreement with respect to the
events of default arising from the lowered A.M. Best Company ratings and
financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account, including those of the Oak Entities
owned by LaSalle. To those Banks extending their letters of credit, Trenwick
agreed to pay a 5% per annum cash letter of credit fee, issue pay-in-kind notes
bearing interest at LIBOR plus 2.5% per annum to evidence an additional 3.16%
per annum letter of credit fee, issue warrants equal to 10% of Trenwick's fully
diluted equity capital, and pay 15% of the profits earned by Trenwick's Lloyd's
operations, including those of the Oak Entities, for the 2002 and 2003 Lloyd's
years of account. In connection with recent negotiations with the Banks,
Trenwick, Trenwick America and Trenwick Holdings agreed to provide the Banks a
security interest in, its and all of the respective equity interests, assets and
property of its direct and indirect subsidiaries, including the Company, as
additional collateral for the Banks, and to cause its subsidiaries, including
the Company, to provide a guaranty to the Banks, subject to applicable laws and
regulations and existing contractual rights.

The December Amendments also prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common shares, the
perpetual preferred shares of the Company and the capital securities issued by
Trenwick Capital Trust I). The December Amendments and the other amendments and
waivers entered into in the first quarter of 2003 waive certain other defaults,
add covenants further restricting the operation of Trenwick's business, prohibit
Trenwick from making certain payments without the Banks' approval, prohibit
Trenwick and its subsidiaries (including the Company) from selling or otherwise
disposing of any assets or property, require Trenwick to regularly report
certain financial information to the Banks, and adjust downward certain of the
financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries will be prohibited from underwriting any insurance or
reinsurance business without the Banks' prior approval. In addition, Trenwick is
required to use its best efforts to terminate the letters of credit by December
31, 2003. In order to do so, the letters of credit would need to be replaced
with other letters of credit or collateral acceptable to Lloyd's. In the event
Trenwick has not terminated the letters of credit by December 31, 2003, it is
required on such date to collateralize with cash, cash equivalents and
marketable securities the full amount of the outstanding letters of credit. At
this time, Trenwick does not have sufficient available liquidity to
collateralize the letters of credit as required by the December Amendments.
Additionally, Trenwick does not believe that it will be able to replace the
letters of credit with other letters of credit or collateral acceptable to
Lloyd's.

Since December 2002, Trenwick has entered into additional amendments and
numerous waivers with the Banks providing for, among other things, waivers of
potential covenant defaults, further reductions in certain financial covenants,
additional financial reporting, approval of certain employee and other payments,
approval of the extension of the maturity of Trenwick America's senior notes
from April 1, 2003 to August 1, 2003, the payment of interest accrued through
April 1, 2003 to the holders of the senior notes and extension of numerous
deadlines imposed under the December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries (including the Company), including under
Trenwick America's senior notes, resulting in a cross default under the credit
agreement, Trenwick may be required to fully and immediately collateralize the
outstanding letters of credit under the terms of the credit agreement and the
guaranty agreement. No liability for any such amounts has been reflected in
Trenwick's financial statements. If events of default occur and are not waived,
there is substantial doubt as to Trenwick's ability to continue


                                       31
<PAGE>

as a going concern and Trenwick and/or one or more of its subsidiaries
(including the Company) may be forced to seek protection from creditors through
proceedings commenced in Bermuda and other jurisdictions including the United
States. In addition, at any time one or more of the insurance regulatory
authorities having jurisdiction over Trenwick's insurance company subsidiaries
(including the Bermuda Monetary Authority with respect to Company and LaSalle
Re, or the Financial Services Authority or Lloyd's in the United Kingdom with
respect to Trenwick's Lloyd's operations) may commence voluntary or involuntary
proceedings for the formal supervision, rehabilitation or liquidation of such
subsidiaries, or one or more of the creditors of Trenwick or its subsidiaries
(including the Company) may commence proceedings against Trenwick or its
subsidiaries (including the Company) seeking their liquidation.

Pursuant to the December Amendments, the Company is also required, among other
things, to (1) use its best efforts to convert LaSalle Re to Class 3 insurer
status in Bermuda, (2) use its best efforts to secure loss portfolio transfers
at LaSalle Re and its subsidiaries in form and substance satisfactory to the
Banks, (3) use its best efforts to secure stop-loss reinsurance treaties
satisfactory to the Banks for the 2001, 2002 and 2003 years of account at
Lloyd's and (4) promptly pay, upon receipt of notice from Lloyd's, any solvency
deficit or cash call for the 2002 and prior years of account at Lloyd's.

Recent Ratings Actions

Moody's Investor Services announced on April 10, 2003 that it had withdrawn all
debt and preferred stock ratings of Trenwick Group Ltd. and its subsidiaries.
The action reflects the failure of Trenwick America to pay the $75 million
principal payment in its Senior Notes due April 1, 2003 and the ongoing effort
to restructure Trenwick's debt obligations. The senior debt rating of Trenwick
and the rating of Trenwick America's trust preferred securities and previously
been lowered to "Ca" and "C," respectively, on January 31, 2003.

Standard and Poor's Ratings Services announced on April 2, 2003 that it had
lowered the counter-party credit ratings on Trenwick, Trenwick America and the
Company to "D" following the announced non-payment of principal and interest on
the Senior Notes. Standard & Poor's also stated that despite the agreement in
principal to extend the maturity of the Senior Notes, it believes that the
prospect for significant recoveries to the senior note holders is very low.
Standard & Poor's also announced on March 4, 2003 that it placed its "CCC"
counterparty credit and financial strength ratings on Trenwick America's
subsidiaries, Trenwick America Reinsurance Corporation ("Trenwick America Re"),
Dakota Specialty Insurance Company ("Dakota") and The Insurance Corporation of
New York ("INSCORP") on CreditWatch negative. In addition, Standard and Poor's
withdrew its "CCC" counterparty credit and financial strength ratings on
Chartwell Insurance Company due to its merger with Trenwick America Re.

On April 2, 2003, A.M. Best Company announced that it had withdrawn the
financial strength rating of "C" (Weak) and assigned a "NR-4" rating (Rating
Withdrawn at Company's Request) to Trenwick America Re. Concurrently, A.M. Best
downgraded the debt rating of Trenwick America to "D" from "C" relating to its
Senior Notes. These rating actions followed the announced non-payment of
principal and interest on the Senior Notes. The financial strength rating of
Trenwick America Re had previously been downgraded to "C" (Weak) from "B-"
(Fair) on February 3, 2003.

On April 3, 2003, Fitch Ratings announced that it had lowered its long term and
senior debt rating on Trenwick America to "D" from "C". In addition, Fitch
lowered its long term ratings on Trenwick and the Company to "D" from "C".
Fitch's "C" ratings on the Company's Series A Preferred Shares and the capital
securities of Trenwick Capital Trust I were unchanged. Fitch's rating action
also followed the announced non-payment of principal and interest on the Senior
Notes. Fitch's "D" rating indicates that Fitch believes that the recovery value
to the holders of Trenwick America's Senior Notes, is unlikely to exceed fifty
percent.


                                       32
<PAGE>

Suspension of Trading From New York Stock Exchange

On March 25, 2003, the Series A Preferred Shares of the Company and the common
shares of Trenwick were suspended from trading, pending application to the
Securities and Exchange Commission for delisting, by the New York Stock Exchange
("NYSE") as a result of failure to meet the NYSE's minimum continued listing
criteria. On the same day, Trenwick was notified that its common shares and the
Series A Perpetual Preferred Shares of the Company would be quoted on the Over
The Counter Bulletin Board ("OTC").

By letter dated March 24, 2003, the BMA issued permission for the free
transferability on an interim basis of the shares of Trenwick and the Company
while they are traded on the OTC Bulletin Board, on the condition that the BMA
is notified promptly of all instances in which Trenwick or the Company becomes
aware that a new shareholder has obtained 5% or more of either company's shares,
including background information on any such new 5% shareholder.

Results of Operations - Years Ended December 31, 2002 and 2001

In addition to providing net income (loss) information, when comparing the
results of operations for the years ended December 31, 2002 and 2001, the
Company has also provided operating income (loss) and underwriting income (loss)
as management believes they are both meaningful measures of the Company's
results. Operating income (loss) differs from net income (loss) under accounting
principles generally accepted in the United States of America, sometimes
referred to as U.S. GAAP, and does not replace net income (loss) as the GAAP
measure of our results of operations. In arriving at operating income (loss), we
start with GAAP net income (loss) and exclude net realized investment gains and
losses, as well as non-recurring charges because i) net realized investment
gains and losses are unpredictable and not necessarily indicative of current or
future results and ii) charges such as reorganization expenses, and the
cumulative effect of changes in accounting principles and loss on sale of
business are non-recurring in nature and are also not necessarily indicative of
future results of operations. Underwriting income (loss), also a non-GAAP
financial measure, is net premiums earned less claims and claims expenses
incurred, acquisition costs and underwriting expenses.

On December 10, 2002, the capital stock of the Oak Entities was contributed by
Trenwick to the Company. As the Company and the Oak Entities were under common
control, this transaction was accounted for at historical cost, in a manner
similar to a pooling of interests business combination, accordingly, the results
of operations for the 2002 and 2001 years have been restated to reflect the
combined operating results of the Company and the Oak Entities.


                                       33
<PAGE>

                                             2002          2001        Change
                                             ----          ----        ------
                                                     (in thousands)

Underwriting loss                         $  (9,800)    $(133,587)    $ 123,787
Net investment income                        29,439        50,446       (21,007)
Interest expense                             (7,402)       (2,849)       (4,553)
Foreign currency losses                      (1,725)         (113)       (1,612)
Other income (expense)                         (661)          (17)         (644)
Goodwill accretion                               --           488          (488)
                                          ---------     ---------     ---------
Pre-tax operating income (loss)               9,851       (85,632)       95,483
Applicable income taxes (benefit)            44,313       (19,553)       63,866
                                          ---------     ---------     ---------
Operating income (loss)                     (34,462)      (66,079)       31,617
Net realized investment (losses) gains          820         9,209        (8,389)
Forgiveness of debt by Trenwick             127,698            --       127,698
Loss on sale of LaSalle Re's in-force
   reinsurance business                     (20,133)           --       (20,133)
Cumulative effect of change in
   accounting principle                      11,586            --        11,586
                                          ---------     ---------     ---------
Net income (loss)                            85,509       (56,870)      142,379
Dividends on preferred stock                 (6,563)       (6,563)           --
                                          ---------     ---------     ---------
Net income (loss) available to
   common shareholders                    $  78,946     $ (63,433)    $ 142,379
                                          =========     =========     =========

The operating loss of $34.5 million in 2002 represented a $31.6 million
improvement from the operating loss of $66.1 million recorded in 2001. This
improvement was primarily a result of improved underwriting results reported by
the Oak Entities and the absence of significant catastrophe losses in 2002 as
compared to 2001. The results for the years ended December 31, 2002 and December
31, 2001 included $21.5 million and $114.1 million, respectively, of catastrophe
losses, including losses related to the September 11, 2001 terrorist attacks.
The improved underwriting results were offset in part by a decrease in net
investment income and an increase in income taxes, which was a result of the
establishment of a full valuation allowance on the deferred tax asset related to
the Oak Entities.

Underwriting income (loss)

<TABLE>
<CAPTION>
                                                  2002           2001         Change
                                               ---------      ---------      ---------
                                                           (in thousands)
<S>                                            <C>            <C>            <C>
Net premiums earned                            $ 291,289      $ 302,989      $ (11,700)
                                               ---------      ---------      ---------
Claims and claims expenses incurred             (178,220)      (305,560)       127,340
Acquisition costs and underwriting expenses     (122,869)      (131,016)         8,147
                                               ---------      ---------      ---------
Total underwriting costs and expenses           (301,089)      (436,576)       135,487
                                               ---------      ---------      ---------
Net underwriting income (loss)                 $  (9,800)     $(133,587)     $ 123,787
                                               =========      =========      =========
Loss ratio                                          61.2%         100.8%         (39.6)%
Underwriting expense ratio                          42.2%          43.2%          (1.0)%
                                               ---------      ---------      ---------
Combined ratio                                     103.4%         144.0%         (40.6)%
                                               =========      =========      =========
</TABLE>

The underwriting loss of $9.8 million in 2002 represented a $123.8 million
improvement compared to the underwriting loss of $133.6 million in 2001. The
improvement is due primarily to the absence of major catastrophe events in 2002,
which included only $21.5 million in losses related to the September 11, 2001
terrorist attacks, while 2001 results included $114.1 in catastrophe losses.
Claims and claims expenses incurred in both 2002 and 2001 are discussed further
below under the caption "Claims and Claims Expenses".


                                       34
<PAGE>

Premiums written

Gross premiums written for 2002 were $536.9 million compared to $522.3 million
for 2001, an increase of $14.6 million. Details of gross premiums written are
provided below.

<TABLE>
<CAPTION>
                                                 2002         2001       Change
                                              ---------    ---------    ---------
                                                         (in thousands)
<S>                                           <C>          <C>          <C>
Worldwide property catastrophe reinsurance    $  76,384    $ 140,331    $ (63,947)
Lloyd's syndicates - continuing                 460,080      377,601       82,479
Lloyd's syndicates - runoff                         434        4,360       (3,926)
                                              ---------    ---------    ---------
Total                                         $ 536,898    $ 522,292    $  14,606
                                              =========    =========    =========
</TABLE>

Worldwide property catastrophe reinsurance gross premium writings for 2002
compared to 2001 decreased by $63.9 million. The decrease is a result of the
sale of LaSalle Re's in-force business to Endurance effective April 1, 2002,
after which LaSalle Re ceased underwriting operations, combined with the
inclusion of $14.4 million of reinstatement premiums written in 2001 as a result
of the September 11, 2001 terrorist attacks.

The increase in Lloyd's syndicates continuing gross premium written can be
attributed to both the addition of treaty, professional indemnity and financial
institutional business, formerly written by Trenwick International, a United
Kingdom affiliate of the Oak Entities, as well as to rate increases on renewed
lines of business written through the Oak Entities, particularly aviation.
Premiums written through the Lloyd's syndicates in runoff continue to decrease
as the open years of account run out.

Premiums earned

                                             2002          2001         Change
                                          ---------     ---------     ---------
                                                     (in thousands)

Gross premiums written                    $ 536,898     $ 522,292     $  14,606
Change in gross unearned  premiums          (19,315)      (40,289)       20,974
                                          ---------     ---------     ---------
Gross premiums earned                       517,583       482,003        35,580
                                          ---------     ---------     ---------

Premiums ceded                             (266,884)     (202,653)      (64,231)
Change in premiums ceded                     40,590        23,639        16,951
                                          ---------     ---------     ---------
Amortized ceded premiums                   (226,294)     (179,014)      (47,280)
                                          ---------     ---------     ---------
Net premiums earned                       $ 291,289     $ 302,989     $ (11,700)
                                          =========     =========     =========

Gross premiums ceded for 2002 were $266.9 million compared to $202.7 million for
2001. This increase was a result of the sale of LaSalle's in-force reinsurance
business as of April 1, 2002 which was accounted for as a 100% ceded quota share
contract, combined with an increase of ceded premiums related to the Oaks
Entities, which is commensurate with the increase in gross premiums written.
These increases in 2002 were offset in part by the reduction in reinstatement
premiums from 2001 of $31.8 million which were incurred as a result of the
September 11, 2001 terrorist attacks.

Net premiums earned in 2002 were $291.3 million compared to $303.0 million for
2001. The decrease in net premiums earned is due to the sale of LaSalle Re's
inforce reinsurance business and is offset in part by the reduction in earned
premiums during 2001 of $22.7 million as a result of reinstatement premiums
related to the September 11, 2001 terrorist attacks.

Claims and claims expenses

Claims and claims expenses for 2002 were $178.2 million, a decrease of $127.4
million compared to claims and claims expenses of $305.6 million for 2001. The
decrease in 2002 is attributable to a reduction in catastrophe losses in the
first quarter of 2002, the period in which the Company underwrote property
catastrophe reinsurance through LaSalle Re, compared to $114.1 million of
catastrophe losses in the 2001


                                       35
<PAGE>

results. Included in the $173.3 million of claim and claim expenses incurred
during 2002 are additional reserves for the September 11, 2001 terrorist attacks
of $21.5 million, and reserve increases of $30.6 million related to the Oak
Entities, partially offset by net reductions in prior year reserves for unpaid
claims and claims expenses of $19.0 million at LaSalle Re. The increases
recorded by the Oak Entities reflect a reassessment of reserves for unpaid
claims and claims expenses in light of recent reported loss activity trends and
principally impact the 1998 to 2001 accident years.

Claims and claims expenses for 2001 included $114.1 million in catastrophe
losses, of which $92.9 million related to the September 11, 2001 terrorist
attacks. The Company's primary exposure to this event relates to LaSalle Re's
commercial property damage coverage, which includes business interruption and
incidental workers' compensation coverage, and the Oaks Entities' catastrophe
aviation coverage. The Company's estimated gross loss from the September 11,
2001 terrorist attacks is $417.6 million and $254.3 million net of reinsurance
recoverable. The Company's exposure to aviation losses was based upon two
maximum losses and two partial losses. Additionally, for purposes of these loss
estimates, the Company has assumed that the property loss on September 11, 2001
was one occurrence, however, the Company's loss estimates would not be
materially different if the September 11, 2001 property loss was determined to
be two occurrences. Estimates of its property and related losses are based upon
an assessment of individual policies which the Company has determined have
exposure to the event. This assessment included market share analysis, probable
maximum loss analysis, independent risk modeling analysis and cedant loss
estimates.

The Company's 2001 results also include other catastrophe losses totaling $22.1
million. Included in this amount are losses related to Tropical Storm Allison
and storms affecting the midwest United States amounting to $10.5 million, and
losses related to the November 12, 2001 American Airlines crash in Queens, New
York of $6.5 million.

Underwriting expenses

                                            2002          2001         Change
                                         ---------     ---------     ---------
                                                    (in thousands)
Policy acquisition costs                 $  72,173     $  97,376     $ (25,203)
Underwriting expenses                       50,696        33,640        17,056
                                         ---------     ---------     ---------
Total expenses                           $ 122,869     $ 131,016     $  (8,147)
                                         =========     =========     =========
Underwriting expense ratio                    42.2%         43.2%         (1.0)%
                                         =========     =========     =========

Total expenses, comprising policy acquisition costs and underwriting expenses,
for 2002 decreased by $8.1 million compared to total underwriting expenses for
2001. The decrease is primarily the result of the sale of LaSalle Re's inforce
reinsurance business to Endurance combined with $11.6 million of ceded
commissions earned related to the quota share reinsurance contract associated
with the transaction.

Underwriting expenses for 2002 were $50.7 million compared to $33.6 million for
2001, an increase of $17.1 million. The increase can be attributed to the
increase in premium volume from the transfer of business from affiliate,
combined with an increase in premium levies from Lloyd's, both occurring in the
Oak Entities. These increases were offset in part by a decrease in underwriting
expenses at LaSalle Re as a result of the sale of LaSalle Re's inforce business
to Endurance.

The improvement in the expense ratio is primarily the result of the commissions
earned by LaSalle Re related to the Endurance transaction.


                                       36
<PAGE>

Net investment income

                                            2002          2001         Change
                                         ---------     ---------     ---------
                                                    (in thousands)
Average invested assets                  $ 692,331     $ 707,189     $ (14,858)
Average amortized yields                       5.7%          6.2%         (0.5)%

Investment income - portfolio            $  35,061     $  44,152     $  (9,091)
Investment income - non-portfolio               17         2,548        (2,531)
Intercompany investment income               4,350         4,688          (338)
Reserve for affiliate interest income       (9,038)           --        (9,038)
Investment expenses                           (951)         (942)           (9)
                                         ---------     ---------     ---------
Net investment income                    $  29,439     $  50,446     $ (21,007)
                                         =========     =========     =========

Net investment income for 2002 was $29.4 million compared to $50.4 million for
2001. The decrease in net investment income in 2002 was primarily due to the
reduction in invested assets for a portion of the year as a result of the
Company's dividend of $258 million to Trenwick in June 2002, combined with an
overall decrease in market yields over the course of 2002. In addition, the
Company recorded a 100% valuation reserve on its interest receivable on loans to
Trenwick at December 31, 2002, which was recorded as a reduction to net
investment income.

Foreign currency gains (losses)

The Company recorded foreign currency losses in 2002 of $1.7 million compared to
losses of $0.1 in 2001. The increase in the foreign currency losses is a result
of the U.S. dollar weakening, primarily during the third and fourth quarters of
2002.

Non-operating income and expenses

Net realized gains on investments were $0.8 million during 2002, compared to
$8.7 million for 2001. In 2002, net gains are net of a loss of $16.0 million on
the Company's investment in the Trenwick Capital Trust I securities relating to
a decline in market value that was determined to be other than temporary. This
loss was offset by realized gains recognized upon the sale of securities in
connection with LaSalle Re's dividend of $258 million to Trenwick, and related
to Lloyd's funding for the operations of the Oaks Entities. The gains in 2001
resulted from a change in investment managers and a consequential repositioning
of the portfolio to reflect a new investment philosophy.

In connection with its contribution of the capital stock of the Oak Entities to
the Company in December 2002, Trenwick agreed to forgive $127.7 million of
indebtedness due from the Oak Entities, which was recorded as other income.

During the year ended December 31, 2002, Trenwick recorded a loss of $20.1
million on the sale of LaSalle Re's in-force property catastrophe reinsurance
business to Endurance. The loss includes non-recurring revenues of $8.0 million
related to the sale of renewal rights, offset by $28.1 million of non-recurring
expenses which consists of accelerated amortization of reinsurance contracts not
transferred in the sale, as well as legal expenses, investment banking fees and
severance and related costs.

The Company adopted Statement of Financial Accounting Standards No. 142
effective January 1, 2002. As a result, the Company wrote off its negative
goodwill as of January 1, 2002 as a cumulative effect of change in accounting
principle, which increased net income for the year ended December 31, 2002 by
$11.6 million.


                                       37
<PAGE>

Results of Operations - Years Ended December 31, 2001 and 2000

In addition to providing net income (loss) information, when comparing the
results of operations for the years ended December 31, 2002 and 2001, the
Company has also provided operating income (loss) and underwriting income
(loss), as management believes they are both meaningful measures of the
Company's results. Operating income (loss) differs from net income (loss) under
accounting principles generally accepted in the United States, sometimes
referred to as U.S. GAAP, and does not replace net income (loss) as the GAAP
measure of our results of operations. In arriving at operating income (loss), we
start with GAAP net income (loss) and exclude net realized investment gains and
losses, as well as non-recurring charges because i) net realized investment
gains and losses are unpredictable and not necessarily indicative of current or
future results and ii) charges such as reorganization expenses, the cumulative
effect of changes in accounting principles and loss on sale of business are
non-recurring in nature and are also not necessarily indicative of future
results of operations. Underwriting income (loss), also a non-GAAP financial
measure, is net premiums earned less claims and claims expenses incurred,
acquisition costs and underwriting expenses.

On December 10, 2002, the capital stock of the Oak Entities was contributed by
Trenwick to the Company. As the Company and the Oak Entities were under common
control, this transaction was accounted for at historical cost, in a manner
similar to a pooling of interests business combination. Accordingly, the results
of operations for the 2001 and 2000 years have been restated to reflect the
combined operating results of the Company and the Oak Entities.

<TABLE>
<CAPTION>
                                                    2001          2000        Change
                                                 ---------     ---------     ---------
                                                            (in thousands)
<S>                                              <C>           <C>           <C>
Underwriting loss                                $(133,587)    $ (60,796)    $ (72,791)
Net investment income                               50,446        46,681         3,765
Interest expense                                    (2,849)       (1,224)       (1,625)
Other income (expense)                                 (17)          337          (354)
Goodwill accretion                                     488           122           366
Foreign currency losses                               (113)         (244)          131
Corporate expenses                                      --        (3,255)        3,255
                                                 ---------     ---------     ---------
Pre-tax operating loss                             (85,632)      (18,379)      (67,253)
Applicable income taxes (benefit)                  (19,553)      (10,703)       (8,850)
                                                 ---------     ---------     ---------
Operating loss                                     (66,079)       (7,676)      (58,403)
Net realized investment (losses) gains               9,209        (1,688)       10,897
                                                 ---------     ---------     ---------
Loss before minority interest                      (56,870)       (9,364)      (47,506)
Minority interest in net income of subsidiary           --          (839)          839
                                                 ---------     ---------     ---------
Net loss                                           (56,870)      (10,203)      (46,667)
Dividends on preferred stock                        (6,563)       (6,563)           --
                                                 ---------     ---------     ---------
Net loss available to common shareholders        $ (63,433)    $ (16,766)    $ (46,667)
                                                 =========     =========     =========
</TABLE>


The operating loss of $66.1 million in 2001 represented a $58.4 million increase
in operating loss compared to a $7.7 million operating loss recorded in 2000.
This increase was primarily due to the deterioration of underwriting results in
2001 caused primarily by losses incurred related to the September 11, 2001
terrorist attacks ($141.8 million gross and $86.8 million net of reinsurance
recoverable) combined with the occurrence of other catastrophes during the year.


                                       38
<PAGE>

Underwriting income (loss)

<TABLE>
<CAPTION>
                                                  2001           2000         Change
                                               ---------      ---------      ---------
                                                           (in thousands)
<S>                                            <C>            <C>            <C>
Net premiums earned                            $ 302,989      $ 271,696      $  31,293
                                               ---------      ---------      ---------
Claims and claims expenses incurred             (305,560)      (219,005)       (86,555)
Acquisition costs and underwriting expenses     (131,016)      (113,487)       (17,259)
                                               ---------      ---------      ---------
Total underwriting costs and expenses           (436,576)      (332,492)      (104,084)
                                               ---------      ---------      ---------
Net underwriting loss                          $(133,587)     $ (60,796)     $ (72,791)
                                               =========      =========      =========

Loss ratio                                         100.8%          80.6%          20.2%
Underwriting expense ratio                          43.2%          41.8%           1.4%
                                               ---------      ---------      ---------
Combined ratio                                     144.0%         122.4%          21.6%
                                               =========      =========      =========
</TABLE>

The underwriting loss of $133.6 million in 2001 represented a $72.8 million
increase compared to the underwriting loss of $60.8 million in the 2000 year.
The increase in the underwriting loss in 2001 was due to an increase in
catastrophe losses of $53.9 million; 2001 included catastrophe losses of $114.1
million, while 2000 included catastrophe losses of $60.2 million.

Losses incurred from the September 11, 2001 terrorist attacks of $114.7 million
consist of claims and claims expenses incurred of $92.0 million and $22.7
million of net reinstatement premiums on assumed and ceded contracts.

Premiums written

Gross premiums written for 2001 were $522.3 million compared to $412.2 million
for 2000, an increase of $110.1 million, or 26.7%. Details of gross premiums
written are provided below.

<TABLE>
<CAPTION>
                                                2001         2000         Change
                                              ---------    ---------    ---------
                                                         (in thousands)
<S>                                           <C>          <C>          <C>
Worldwide property catastrophe reinsurance    $ 140,331    $ 101,570    $  38,761
Lloyd's syndicates - continuing                 377,601      289,475       88,126
Lloyd's syndicates - runoff                       4,360       21,197      (16,837)
                                              ---------    ---------    ---------
Total                                         $ 522,292    $ 412,242    $ 110,050
                                              =========    =========    =========
</TABLE>

The increase in worldwide property catastrophe reinsurance gross premium
writings for 2001 compared to 2000 resulted primarily from new property
catastrophe business combined with reinstatement premiums of $14.4 million
generated by reinstated coverage on assumed contracts impacted by losses from
the September 11, 2001 terrorist attacks.

The increase in Lloyd's syndicates gross written premiums from continuing
business for 2001 compared to 2000 is a result of rate increases on business
written by the Oak Entities, while the decrease in premiums written through
runoff syndicates is as anticipated.

Premiums earned

                                          2001 Year     2000 Year      Change
                                          ---------     ---------     ---------
                                                     (in thousands)
Gross premiums written                    $ 522,292     $ 412,242     $ 110,050
Change in gross unearned premiums           (40,289)      (21,636)      (18,653)
                                          ---------     ---------     ---------
Gross premiums earned                       482,003       390,606        91,397
                                          =========     =========     =========


                                       39
<PAGE>

Premiums ceded                             (202,653)     (118,508)      (84,145)
Change in premiums ceded                     23,639          (402)       24,041
                                          ---------     ---------     ---------
Amortized ceded premiums                   (179,014)     (118,910)      (60,104)
                                          ---------     ---------     ---------
Net premiums earned                       $ 302,989     $ 271,696     $  31,293
                                          =========     =========     =========

Gross premiums ceded for 2001 were $202.7 million compared to $118.5 million for
2000. This increase was primarily due to an increase in business written by the
Oak Entities which purchase significantly more reinsurance than LaSalle Re to
manage various risks, including aviation. Ceded premiums also increased as a
result of $31.8 million in reinstatements resulting from losses from the
September 11, 2001 terrorist attacks.

Net premiums earned in 2001 and 2000 were $303.0 million and $271.7 million,
respectively. The increase is commensurate with the increase in gross premiums
written.

Claims and claims expenses

Claims and claims expenses for 2001 were $305.6 million, an increase of $86.6
million compared to claims and claims expenses of $219.0 million for 2000. The
increase is due to losses associated with the September 11, 2001 terrorist
attacks. The Company's estimated loss from the September 11, 2001 terrorist
attacks through December 31, 2001 was $396.1 million gross and $232.8 million
net of reinsurance recoverable. The Company's incurred losses related to the
September 11, 2001 terrorist attacks are based upon estimates of its ultimate
exposure derived from a manual assessment of its outstanding policies. The
assessment included market share analysis, probable maximum loss analysis,
independent risk modeling analysis and cedent loss estimates. The Company's
primary exposure for this event relates to commercial property damage, which
includes business interruption and incidental workers' compensation coverage,
and catastrophe aviation coverage. In addition, the Company incurred losses of
$10.5 million associated with Tropical Storm Alison and storms affecting the
midwest United States, and $6.5 million of losses on the November 12, 2001
American Airlines crash in Queens, New York. Claims and claims expenses incurred
in 2000 included $6.5 million of catastrophe losses relating to U.K. floods and
an increase of $20.4 million in prior period occurrences, principally losses
relating to two storms, Martin and Anatol, which hit Europe in late December
1999.

Underwriting expenses

                                             2001          2000         Change
                                          ---------     ---------     ---------
                                                      (in thousands)
Policy acquisition costs                  $  97,376     $  76,058     $  21,318
Underwriting expenses                        33,640        37,429        (3,789)
                                          ---------     ---------     ---------
Total expenses                            $ 131,016     $ 113,487     $  17,529
                                          =========     =========     =========

Expense ratio                                  43.2%         41.8%          1.4%
                                          =========     =========     =========

Total expenses, comprising policy acquisition costs and underwriting expenses,
for 2001 increased by $17.5 million compared to total underwriting expenses for
2000. Total expenses as a percentage of net premiums earned were 43.2% for 2001
compared to 41.8% for 2000. The increase in the ratio occurred principally
because of an increase in the amount of amortized ceded premiums.

Underwriting expenses for 2001 were $33.6 million compared to $37.4 million for
2000, a decrease of $3.8 million. The decrease is due to a reduction in business
written by LaSalle Re following its acquisition by Trenwick.


                                       40
<PAGE>

Net investment income

                                             2001          2000         Change
                                          ---------     ---------     ---------
                                                      (in thousands)
Average invested assets                   $ 707,189     $ 651,625     $  55,564
Average annualized yields                       6.2%          6.9%          0.7%

Investment income - portfolio             $  44,152     $  45,049     $    (897)
Investment income - non-portfolio             2,548         2,805          (257)
Intercompany investment income                4,688            --         4,688
Investment expenses                            (942)       (1,173)          231
                                          ---------     ---------     ---------
Net investment income                     $  50,446     $  46,681     $   3,765
                                          =========     =========     =========

Net investment income for 2001 was $50.4 million compared to $46.7 million for
2000. The increase in net investment income in 2001 was primarily due to changes
in the allocation of investments to higher yielding debt securities following a
change in investment managers.

Interest expense

Interest expense was $2.8 million in 2001 as compared to interest expense of
$1.2 million in 2000. The increase is mainly a result of increased letter of
credit fees relating to the Company's Lloyd's operations. Interest expense in
2000 also included financing charges associated with a ceded reinsurance
contract and other interest expenses related to the commitment fees payable on
the Company's credit facility which was canceled effective at the end of
September of 2000.

Corporate expenses

The Company did not record any corporate expenses for 2001. The expenses of $3.3
million for 2000 relate primarily to the Company's decision to cancel the
implementation of new reinsurance software as a result of the Trenwick/LaSalle
business combination.

Non-operating income and expenses

Net realized gains on investments were $9.2 million during 2001, compared to net
realized losses of $1.7 million for 2000. The gains in 2001 resulted from a
change in investment managers and a consequential re-positioning of the
portfolio to reflect a new investment philosophy.

Liquidity and capital resources

As a holding company, the Company's assets consist primarily of all of the
outstanding voting stock of LaSalle Re. The Company's operating capital is
derived from dividends and other permitted payments from LaSalle Re and its
subsidiaries, including fees for services provided to LaSalle Re and its
subsidiaries which are subject to review by the BMA. The Company's ability to
generate operating capital is limited and its ability to meet its obligations is
dependent upon funding from LaSalle Re. There is substantial uncertainty as to
what amount of future funds it will receive from LaSalle Re.

LaSalle Re's sources of funds consist of investment income and proceeds from
sales and redemptions of investments. Cash is used primarily to pay losses and
loss expenses, commissions, excise taxes, administrative expenses and dividends.
Under the Insurance Act, LaSalle Re is prohibited from paying dividends of more
than 25% of its opening statutory capital and surplus unless it files with the
Bermuda Supervisor of Companies an affidavit (at least 7 days before payment of
such dividends) stating that it will continue to meet the required minimum
solvency margin and minimum liquidity ratio requirements and from declaring or
paying any dividends without the prior approval of the Bermuda Minister of
Finance if it failed


                                       41
<PAGE>

to meet its required margins on the last day of the previous fiscal year. The
Insurance Act also requires LaSalle Re to maintain a minimum solvency margin and
minimum liquidity ratio and prohibits dividends that would result in a breach of
these requirements. In addition, LaSalle Re is prohibited under the Insurance
Act from reducing its opening total statutory capital by 15% or more without the
approval of the Minister of Finance. LaSalle Re currently meets these
requirements.

As of December 31, 2002, the Company's consolidated investments and cash totaled
$806.3 million as compared to $861.4 million at December 31, 2001. Both balances
include a loan to Trenwick of $75.0 million. Interest is charged on this loan at
a variable rate equal to that generated by the Company's investment portfolio
and the loan is repayable upon demand. In light of Trenwick's current financial
condition there is significant uncertainty as to whether Trenwick will be able,
financially, to pay principal or interest on this loan. At December 31, 2002,
the Company established a 100% valuation reserve for the cumulative intercompany
interest receivable of $9.0 million. The decrease in consolidated investments
and cash of $55.1 million primarily resulted from a special dividend of $258.0
million paid to Trenwick in the second quarter of 2002, offset by cash flows
from operations.

As of December 31, 2002, the Company's consolidated shareholders' equity totaled
$134.9 million compared to $309.5 million at December 31, 2001. The decrease of
$174.6 million was primarily a result of the special dividend to Trenwick
referred to above.

Operating activities produced a net cash inflow of $76.4 million for the year
ended December 31, 2002 compared to $51.5 million for the year ended December
31, 2001. The increase in cash flow from operations was due primarily to an
increase in premiums collected and an increase in net investment income
received.

As of December 31, 2002, 98.1% of the debt securities held in the Company's
investment portfolio were rated "AA" or better and 99.6% were rated "A" or
better by Standard and Poor's or Moody's.

Dividends Paid

The Company paid a quarterly dividend of $0.5469 per share to the holders of
record of its Series A Preferred Shares in March, June and September of 2002. On
November 29, 2002, the Company suspended the payment of dividends on its Series
A Preferred Shares. The Company intends to accrue the dividends until payment is
reinstated, if ever. The date of dividend payment reinstatement has not been
determined by the Company. The Company does not expect to be able to pay
dividends to holders of the Series A Preferred Shares for the foreseeable
future, if ever. In addition, the Company paid common dividends to Trenwick in
2002 totaling $264 million.

Financings, Financing Capacity and Capitalization

In connection with the Trenwick/LaSalle business combination, effective
September 27, 2000 the Company cancelled its stand alone committed $100 million
line of credit.

As of December 31, 2002, the Company had $261,727 in letters of credit
outstanding. This amount includes $170,698 in letters of credit outstanding to
provide capital to support the participation in certain Lloyd's syndicates, of
which $156,751 of the letters of credit are outstanding under the senior credit
facility (described in the immediately following paragraph). The remaining
letters of credit balance is outstanding primarily under a secured letter of
credit facility under which letters of credit totaling $91,029 at December 31,
2002 have been issued in favor of ceding insurance companies to secure LaSalle
Re's obligations under various reinsurance contracts. At year end 2002, LaSalle
Re had pledged $120,722 of debt securities as collateral for its letters of
credit of the letters of credit outstanding relates primarily to the United
States business formerly written by LaSalle Re.

Concurrently with the Trenwick/LaSalle business combination in September of
2000, Trenwick America Corporation ("Trenwick America") and Trenwick Holdings
Limited ("Trenwick Holdings"), Trenwick's


                                       42
<PAGE>

U.S. and U.K. holding companies, entered into an amended and restated $490
million credit agreement with various lending institutions (the "Banks"), which
was guaranteed by the Company. The credit agreement consisted of both a $260
million revolving credit facility and a $230 million letter of credit facility.
The revolving credit facility was subsequently converted into a four-year term
loan and repaid in full on June 17, 2002. Additionally, on December 24, 2002,
the credit agreement was amended to reduce the letter of credit facility, which
is utilized by Trenwick to support its underwriting operations at Lloyd's, to
the currently outstanding $182.5 million. The letter of credit facility is
scheduled to terminate on December 31, 2003, although the letters of credit
issued pursuant to the facility will not expire until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of the Company, which was a guarantor of the obligations under
the credit agreement, and LaSalle Re as collateral to the Banks. In December of
2002, Trenwick agreed to provide the Banks additional security interests as
described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's operating subsidiaries below "A-". The lowered A.M. Best Company
ratings constituted an event of default under the credit agreement. In addition,
increases in Trenwick's reserves for unpaid claims and claims expenses and the
establishment of a deferred tax asset reserve related to Trenwick's United
States Subsidiaries in the third quarter of 2002 resulted in Trenwick violating
the financial covenants in the credit agreement requiring Trenwick to maintain a
minimum tangible net worth and minimum risk-based capital. On November 13, 2002,
Trenwick, its subsidiaries and the Banks executed a forbearance agreement with
respect to the events of default arising from Trenwick's lowered A.M. Best
Company ratings and financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick agreed to pay a 5% per annum cash letter of credit fee,
issue pay-in-kind notes bearing interest at LIBOR plus 2.5% per annum to
evidence an additional 3.16% per annum letter of credit fee, issue warrants
equal to 10% of Trenwick's fully diluted equity capital, and pay 15% of the
profits earned by Trenwick's Lloyd's operations, including those of the Oak
Entities owned by LaSalle Re, for the 2002 and 2003 Lloyd's years of account. In
addition, Trenwick, Trenwick America and Trenwick Holdings agreed to provide the
Banks a security interest in, and the assets and property of, their direct and
indirect subsidiaries (including the Company) as additional collateral for the
Banks, and to cause the subsidiaries to provide a guaranty to the Banks, subject
to applicable laws and regulations and certain existing contractual rights of
holders of other indebtedness.

The December Amendments also prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common shares, the
Series A Preferred Shares of the Company and the capital securities issued by
Trenwick Capital Trust I). The December Amendments and the other amendments and
waivers entered into in the first quarter of 2003 waive certain other defaults,
add covenants further restricting the operation of Trenwick's business
(including that of the Company), prohibit Trenwick from making certain payments
without the Banks' approval, prohibit Trenwick and its subsidiaries from selling
or otherwise disposing of any assets or property (including the Company),
require Trenwick to regularly report certain financial information to the Banks,
and adjust downward certain of the financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries will be prohibited from underwriting any insurance or
reinsurance business without the Banks' prior approval. In addition, Trenwick is
required to use its best efforts to terminate the letters of credit by December
31, 2003. In order to do so, the letters of credit would need to be replaced
with other letters of credit or collateral acceptable to Lloyd's. In the event
Trenwick has


                                       43
<PAGE>

not terminated the letters of credit by December 31, 2003, it is required on
such date to collateralize with cash, cash equivalents and marketable securities
the full amount of the outstanding letters of credit. At this time, Trenwick
does not have sufficient available liquidity to collateralize the letters of
credit as required by the December Amendments. Additionally, Trenwick does not
believe that it will be able to replace the letters of credit with other letters
of credit or collateral acceptable to Lloyd's.

Since December 2002, Trenwick has entered into additional amendments and
numerous waivers with the Banks providing for, among other things, waivers of
potential covenant defaults, further reductions in certain financial covenants,
additional financial reporting, approval of certain employee and other payments,
approval of the extension of the maturity of Trenwick America's senior notes
from April 1, 2003 to August 1, 2003, the payment of interest accrued through
April 1, 2003 to the holders of the senior notes and extension of numerous
deadlines imposed under the December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes, resulting in
a cross default under the credit agreement, Trenwick may be required to fully
and immediately collateralize the outstanding letters of credit under the terms
of the guaranty agreement. No liability for any such amounts has been reflected
in Trenwick's financial statements for any future event of default. If the
potential future events of default occur and are not waived, there is
substantial doubt as to Trenwick's ability to continue as a going concern and
Trenwick and/or one or more of its subsidiaries may be forced to seek protection
from creditors through proceedings commenced in Bermuda and other jurisdictions
including the United States. In addition, at any time one or more of the
insurance regulatory authorities having jurisdiction over Trenwick's insurance
company subsidiaries (including the Bermuda Monetary Authority with respect to
the Company and LaSalle Re, or the Financial Services Authority or Lloyd's in
the United Kingdom, with respect to Trenwick's Lloyd's operations) may commence
voluntary or involuntary proceedings for the formal supervision, rehabilitation
or liquidation of Trenwick or its subsidiaries, including the Company, or one or
more of the creditors of Trenwick or its subsidiaries, including the Company may
commence proceedings against Trenwick or its subsidiaries seeking their
liquidation.

Trenwick's ability to refinance its existing debt obligations or raise
additional capital is dependent upon several factors, including financial
conditions with respect to both the equity and debt markets and the ratings of
its securities as established by the rating agencies. As a result of the
continued deterioration of Trenwick's financial condition, its senior debt
ratings have been downgraded by Standard & Poor's Corporation to "D" and by
Moody's Investor Services to "C." Trenwick's ability to refinance its
outstanding debt obligations, as well as the cost of such borrowings, has been
materially adversely affected by these ratings downgrades.

Catastrophe Equity Put

On September 27, 2000, Trenwick assumed the benefits and obligations of LaSalle
Re Limited under a $100 million catastrophe equity put option. The catastrophe
equity put option was amended and restated as of January 1, 2001 and amended as
of January 25, 2002. As amended, the catastrophe equity put option enabled
Trenwick to raise up to $55 million of equity, through the issue of convertible
preferred shares to European Reinsurance Company of Zurich ("European Re"), a
subsidiary of Swiss Reinsurance Company, in the event there was a qualifying
catastrophic event or events occurring prior to January 1, 2002.

As a result of the terrorist attacks of September 11, 2001, LaSalle Re incurred
in excess of $140 million in catastrophe losses as defined under the catastrophe
equity put option agreement and Trenwick delivered notice of exercise of the
catastrophe equity put on March 28, 2002. On July 1, 2002, Trenwick commenced an
arbitration proceeding seeking $55 million in damages and other relief against
European Re. The claims arose out of European Re's failure to meet its
obligations under the catastrophe equity put. On September 6, 2002, the
catastrophe equity put option was amended and restated and the pending
arbitration proceedings were terminated. Under the terms of the second restated
agreement, European Re purchased 550,000 of Trenwick's Series B Cumulative
Perpetual Preferred Shares (the "Series B Shares") with a liquidation


                                       44
<PAGE>

preference of $100 per share for an aggregate purchase price of $40 million. The
Series B Shares bear cumulative dividends, payable quarterly in arrears, based
upon the Series B Shares' Standard & Poor's rating at LIBOR plus a margin
determined in accordance with the following schedule:

                Standard & Poor's Rating                LIBOR Margin
                BBB- or above                                  3.75%
                BB+                                            4.25%
                BB                                             4.50%
                BB-                                            4.75%
                Below BB-                                      6.00%

These factors adjust upward by 0.25% on the third anniversary if the securities
are still unrated, and upward by 0.50% on the fifth anniversary if they are
still unrated. Also, if the Standard & Poor's rating is below BBB- on the fifth
anniversary, the factors adjust upward by an additional 0.50%. The maximum
adjustment based upon these circumstances is 0.75%. At December 31, 2002, the
Series B Shares were rated "D" by Standard & Poor's.

The Series B Shares are convertible into common shares of Trenwick after five
years or upon the occurrence of certain "conversion events" or the failure of
Trenwick to maintain certain levels of capital. As of December 31, 2002, the
Series B Shares would be settled with approximately 12.2 million common shares
of Trenwick upon conversion. On February 20, 2003, Trenwick delivered a notice
to European Re that Trenwick's GAAP Net Worth (as defined in the Certificate of
Designation, Preferences and Rights (the "Certificate of Designation") of the
Series B Shares) had fallen below $225 million. Trenwick's GAAP Net Worth did
not equal or exceed $225 million during the period from February 20, 2003
through April 21, 2003 (which is 60 days after the date of notice). As a result,
a Net Worth Conversion Event (as defined in the Certificate of Designation)
occurred on April 21, 2003, and the Series B Shares are now convertible at the
option of European Re into Trenwick common shares upon 60 trading days advance
notice to Trenwick. European Re has not delivered to Trenwick such a notice of
conversion. Should European Re convert such Series B Shares, substantial
dilution to existing common shares will occur. In addition, depending on the
conversion ratio of Series B Shares to Trenwick common shares, which is based
upon the trading price of Trenwick common shares and the book value and number
of shares converted, this conversion could result in European Re obtaining
control of Trenwick, and therefore the Company, subject to compliance with
applicable insurance law and regulation. See Note 8 of the Notes to the
Consolidated Financial Statements for further discussion of the Series B shares
and the conversion events relating thereto.

Critical Accounting Policies

The accounting policies described below are those the Company considers critical
in preparing its consolidated financial statements. These policies include
significant estimates made by management using information available at the time
the estimates are made. However, as described below, these estimates could
change materially if different information or assumptions were used. The
descriptions below are summarized and have been simplified for clarity. A more
detailed description of the significant accounting policies used by Trenwick in
preparing its financial statements is included in the Notes to the Consolidated
Financial Statements and the note references are included below.

Unpaid Claims and Claims Expenses

Claims and claims expenses are recorded as incurred, at management's best
estimate, in order to match claims and claims expense costs with premiums over
the contract periods. The amount provided for unpaid claims and claims expenses
consists of any unpaid reported claims and claims expenses and estimates for
incurred but not reported claims and claims expenses, net of estimated salvage
and subrogation. The estimates for claims and claims expenses incurred but not
reported were developed based on historical claims and claims expense experience
and an actuarial evaluation of expected claims and claims expense experience.
Reserves for unpaid claims and claims expenses, by their very nature, do not
represent an exact


                                       45
<PAGE>

calculation of the liability and, while the Company has established reserves
equal to the current best estimate of ultimate losses, there remains a
likelihood that further changes in such claim estimates, either upward or
downward, will occur in the future. Adjustments to previously reported reserves
for unpaid claims and claims expenses are considered changes in estimates for
accounting purposes and are reflected in the income statement in the period in
which the adjustment becomes known.

Unpaid claims and claims expenses are recorded based on actuarial estimates of
losses inherent in that period's claims, including losses for which claims have
not yet been reported. Estimates of unpaid claims and claims expenses rely on
actuarial observations of ultimate loss experience for similar historical
events. Historical insurance industry experience indicates that a high degree of
inherent variability exists in assessing the ultimate amount of losses under
short-duration property and casualty contracts. This inherent variability is
particularly significant for liability-related exposures, including latent
claims issues (such as asbestos and environmental related coverage disputes),
because of the extended period of time, often many years, that transpires
between when a given claim event occurs and the ultimate full settlement of such
claim. This situation is then further exacerbated for reinsurance entities (as
opposed to primary insurers) due to coverage often being provided on an
"excess-of-loss" basis and the resulting time lags in receiving current claims
data. Additionally, the uncertainty is increased as a result of the diversity of
development patterns among different types of reinsurance and the necessary
reliance on ceding companies for information regarding reported claims and
differing reserving practices among ceding companies. Other items that have been
considered in determining year-end reserves but may develop differently than
currently estimated include:

      o     September 11, 2001 related claims, particularly with respect to
            catastrophe coverage underwritten in LaSalle Re;

      o     Claims against insured financial services companies for certain
            types of practices including alleged misallocations of shares in
            initial public offerings;

      o     Directors and Officers liability insurance in the United States;

      o     Ultimate losses on business underwritten in the last four years, as
            reserve estimates are inherently more uncertain on recent business,
            where reported loss activity is still low relative to ultimate
            losses;

      o     Reinsurance collectibility -the Company reviews and monitors its
            reinsurance recoverables from its reinsurers and makes provision for
            uncollectible reinsurance as appropriate. However, given the
            magnitude of reinsurance recoverables, $913 million at December 31,
            2002, the Company has a significant exposure to collectibility
            issues.

The Company's management continually evaluates the potential for changes in
unpaid claims and claims expenses to adjust recorded reserves and to proactively
modify underwriting criteria and product offerings. In recent periods and
continuing throughout 2002, the level of reported claims activity related to
prior year loss events, particularly for liability-related exposures
underwritten in 1997 through 2001, has been significantly higher than
anticipated. Full consideration of these trends was incorporated into a
comprehensive reserve study completed in the fourth quarter of 2002. Insurance
reserves, by their very nature, do not represent an exact calculation of
liability and, while the Company has established reserves equal to the current
best estimate of ultimate losses, there remains a likelihood that further
changes in such loss estimates, either upward or downward, will occur in the
future.

Management believes that the Company's claim and claim expense liabilities are
adequate. However, the process of estimating claims and claim expense
liabilities is inherently imprecise and involves an evaluation of many
variables, including potentially unpredictable social and economic conditions.
Accordingly, there can be no assurance that the Company's ultimate liability
will not vary significantly from amounts reserved. The uncertainties in and the
risk factors associated with the claims reserves at December 31, 2002 are
similar to the uncertainties at prior year ends. However, given the Company's
current surplus levels, it is now less financially equipped to handle these
uncertainties should there be adverse development in the loss reserves. Reserves
for the Company's participation in Lloyd's syndicates through its Lloyd's
corporate members are included in the year end reserves. Part of the reserve
represents reinsurance to close balances brought


                                       46
<PAGE>

forward to the open years of account (for example, 1996 reinsured into the 1997
open year. Favorable or unfavorable development of the prior year's reserves can
influence the results of the open years of 2000, 2001 and 2002.

Reinsurance Recoverable Balances

The Company purchases reinsurance to reduce its exposure on individual risks,
catastrophic losses and other large losses. The Company estimates the amount of
uncollectible receivables from its reinsurers each period and establishes an
allowance for uncollectible amounts. The amount of the allowance is based on the
age of unpaid amounts, information about the creditworthiness of the Company's
reinsurers, and other relevant information. Estimates of uncollectible
reinsurance amounts are reviewed quarterly, and changes are recorded in the
period they become known. A significant change in the level of uncollectible
reinsurance amounts would have a significant effect on the Company's results of
operations and financial position. Also see Note 6 of the Notes to the
Consolidated Financial Statements.

Investments

Investments are classified as available for sale and recorded at fair value, and
unrealized investment gains and losses are reflected in shareholders' equity.
Investment income is recorded when earned, and capital gains and losses are
recognized when investments are sold. Investments are reviewed periodically to
determine if they have suffered an impairment of value that is considered other
than temporary. If investments are determined to be impaired, a capital loss is
recognized at the date of determination.

Testing for impairment of investments also requires significant management
judgment. The identification of potentially impaired investments, the
determination of their fair value and the assessment of whether any decline in
value is other than temporary are the key judgment elements. The discovery of
new information and the passage of time can significantly change these
judgments. Revisions of impairment judgments are made when new information
becomes known, and any resulting impairment adjustments are made at that time.
The current economic environment and recent volatility of securities markets
increase the difficulty of determining fair value and assessing investment
impairment. The same influences tend to increase the risk of potentially
impaired assets.

The Company seeks to match the maturities of invested assets with the payment of
expected liabilities. By doing this, the Company attempts to make cash available
as payments become due. If a significant mismatch of the maturities of assets
and liabilities were to occur and the Company had to liquidate investments prior
to their maturity, it may incur realized losses and the effect on the Company's
results of operations could be significant. Also see Note 7 of the Notes to the
Consolidated Financial Statements.

Deferred Income Taxes

Deferred income tax assets and liabilities are computed based on temporary
differences between financial statement and income tax bases of assets and
liabilities using enacted income tax rates in effect for the year in which the
differences are expected to reverse. FASB Statement No. 109 requires a valuation
allowance to be recorded when it is more likely than not that some or all of the
deferred tax assets will not be realized. Due to the Company's cumulative losses
generated in recent years by the Oak Entities and uncertainties as to the amount
of taxable income to be generated in future years, as of December 31, 2002, the
Company could not support the future realizability of its net deferred tax
asset. The effects of this determination on the Company's results from
operations are significant. As of December 31, 2002, the Company established a
valuation allowance of $44.8 million, so as to record a valuation allowance for
the full amount of its net deferred tax asset applicable to the Oak Entities.
The Company's Bermuda operations are not subject to income tax. Also see Note 9
of the Notes to the Consolidated Financial Statements.


                                       47
<PAGE>

Quantitative and Qualitative Disclosure About Market Risk

The following sections address the significant market risks associated with The
Company's business activities as of December 31, 2002 and 2001. The Company's
primary market risk exposures are:

o     foreign currency exchange risk, in particular the U.S. dollar to the
      British pound sterling;

o     interest rate risk on fixed and variable rate U.S. dollar and British
      pound sterling denominated short and long-term instruments.

With respect to the Company's investment portfolio, the risk management strategy
is to place its investments with high credit quality issuers and to limit the
amount of credit exposure with respect to particular ratings categories and any
one issuer. The Company selects investments with characteristics such as
duration, yield, currency and liquidity to reflect the underlying
characteristics of related estimated claim liabilities.

As of December 31, 2002, the Company's exposure to high yield investments was
minimal. While these investments are more susceptible to credit risk, their
total market value represents less than 1% of total investments and cash, and
therefore management believes that the exposure to credit risk is not material.
The Company has no derivatives and its investments do not contain terms that may
result in potential losses due to leverage.

Foreign Currency Exchange Rate Risk

Foreign currency risk is the risk that the Company will incur economic losses
due to adverse changes in foreign currency exchange rates. This risk arises
principally from Oak Entities' operations and securities denominated in foreign
currencies. The Company's international businesses generally maintain assets and
liabilities in local currencies, substantially limiting exchange rate risk to
net assets denominated in the foreign currency. The Company's foreign currency
denominated net assets are principally in British pounds sterling. At December
31, 2002 and December 31, 2001, the Company's net assets of foreign subsidiaries
was approximately $45.8 million and $(24.8) million, respectively. Foreign debt
securities and foreign cash on deposit were $4.1 million and $5 million,
respectively, at December 31, 2002.

The Company's reinsurance and Lloyd's operations all have exposures to movements
in various currencies around the world (particularly the British pound sterling,
the Euro and the Canadian dollar) as such businesses are denominated in those
currencies. Therefore, changes in currency exchange rates affect the Company's
balance sheet, statement of operations and statement of cash flows. This
exposure is somewhat mitigated by the fact that premiums received are invested
in the same currency portfolios, to partially offset related unpaid claims and
claims expense liabilities denominated in the same currency.

Management estimates that a 10% immediate unfavorable change in each of the
foreign currency exchange rates to which the Company is exposed as of December
31, 2002 would have decreased the fair value of the Company's foreign
denominated net assets by approximately $4.6 million, which was comprised
primarily of exposure to the British pound sterling. At December 31, 2001, the
same 10% shift in foreign currency exchange rates would have resulted in a
potential gain in fair value of approximately $2.5 million.

Interest Rate Risk

The Company's fixed maturity investments and indebtedness are subject to
interest rate risk. Increases and decreases in prevailing interest rates
generally translate into decreases and increases in the fair value of fixed
maturity investments and the interest payable on the Company's outstanding
variable rate debt. Additionally, the fair value of interest rate sensitive
instruments may be affected by the creditworthiness of the issuer, a prepayment
option, relative values of alternative investments, liquidity of the investment
and other general market conditions.


                                       48
<PAGE>

The Company monitors its sensitivity to interest rate risk by evaluating the
change in its financial assets and liabilities relative to hypothetical
increases and decreases in interest rates. It is assumed that the changes occur
immediately and uniformly to each category of instrument containing interest
rate risks. Significant variations in market interest rates could produce
changes in the timing of repayments due to prepayment options available. The
fair value of such instruments could be affected and therefore actual results
might differ from those reflected in this summary.

A 100 basis point increase in market interest rates would have resulted in an
estimated pre-tax loss in the fair value of these instruments of $4.3 million
and $14.0 million at December 31, 2002 and December 31, 2001, respectively.
Similarly, a 100 basis point decrease in market interest rates would have
resulted in an estimated pre-tax gain in the fair value of these instruments of
$4.2 million and $14.0 million at December 31, 2002 and December 31, 2001,
respectively.

Effects of Inflation

The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local economy. The effects of inflation are
considered in pricing and in estimating reserves for unpaid claims and claim
expenses. The actual effects of inflation on the Company's results cannot be
accurately known until claims are ultimately settled.

Accounting Standards

Effective January 1, 2002, the Company adopted a new Financial Accounting
Standards Board statement which amended the accounting for goodwill and other
intangible assets. This new statement suspended systematic goodwill amortization
and required the Company to credit the negative goodwill balance of $11.6
million to operations as of January 1, 2002 as a cumulative effect of an
accounting change.


                                       49
<PAGE>

                           FUTURE BUSINESS OPERATIONS

The future operations of the Company and its financial results will differ
materially from those of 2002 and prior years as the Company has sold the
in-force business of its primary operating subsidiary, LaSalle Re, and has
placed LaSalle Re into runoff. In addition, under the terms of Trenwick's
agreements with the Banks, and particularly under the December Amendments,
Trenwick and its subsidiaries, including the Company, are subject to financial
and operational restrictions which limit their flexibility to pursue business
and strategic alternatives. These restrictions will apply so long as Trenwick
and its subsidiaries (including the Company) have unpaid reimbursement
obligations to the Banks with respect to the letters of credit. In addition, the
Company and LaSalle Re have material receivables from Trenwick, as described
above in "-Transactions with Affiliates," which may not be realizable because of
the current uncertainties of Trenwick's financial condition.

The result of the foregoing is that the future operations of the Company, at
least in the next several years, are likely to consist substantially of the
management in runoff of LaSalle Re, including administration of claims,
regulatory reporting, settlement of reinsurance agreements (including
commutations thereof where appropriate), cash and investment management and
related matters, and the ongoing participation in Lloyd's syndicates through the
Oak Entities as corporate capital providers. The costs involved in the runoff
operations are likely to differ significantly from those of prior years, where a
significant portion of the operating costs related to underwriting, marketing
and securing reinsurance for new business. The reimbursement of costs as they
relate directly to LaSalle Re's runoff will be subject to review by the Bermuda
Monetary Authority (the "BMA") which may challenge these costs or impose other
restrictions with respect to the runoff including the provision of an acceptable
runoff plan. Adverse loss developments, weakness in reinsurance recoveries or
the failure to realize the value of its investments including the intercompany
receivables, among other factors, could significantly and negatively impact the
success of any runoff. It is unlikely that any amounts will be available to the
equity holders of the Company until such time as the BMA has been assured of the
minimum capital and solvency of LaSalle Re. In addition, the BMA has recently
notified the Company that it will not permit the granting of a security interest
in LaSalle Re's assets to the Banks as collateral under Trenwick's credit
agreement. In the event that the runoff is not successful, it is also possible
that LaSalle Re may be placed under the control of the BMA, voluntarily or
involuntarily, through rehabilitation, liquidation or other similar proceedings.

RISK FACTORS

You should carefully consider the risks described below regarding us and our
Series A Preferred Shares. The risks and uncertainties described below are not
the only ones we face. There may be additional risks and uncertainties. If any
of the following risks actually occur or continue to occur, our business,
financial condition or results of operations could be materially and adversely
affected and the trading price of our Series A Preferred Shares could decline
further.

Our auditors have expressed doubt as to our ability to continue as a going
concern.

Our independent accountants, PricewaterhouseCoopers LLP, have stated, in their
audit report with respect to our financial statements as at and for the twelve
months ended December 31, 2002, that substantial doubt exists as to our ability
to continue as a going concern. Trenwick's and our ability to operate continue
to be adversely impacted by the deterioration in Trenwick's financial condition
and its lack of available financial resources to meet its obligations including
amounts owed to the Company and LaSalle Re.

Trading of our Series A Preferred Shares has been suspended by the New York
Stock Exchange.

The New York Stock Exchange has suspended from trading, pending application to
the Securities and Exchange Commission, our Series A Preferred Shares for
failure to meet the New York Stock Exchange's


                                       50
<PAGE>

minimum listing requirements. Our Series A Preferred Shares were quoted on the
Over-The-Counter (OTC) Bulletin Board beginning on Tuesday, March 25, 2003.

In light of the significant developments and other factors referred to in this
Report, which have materially and adversely impacted the Company, its operations
and its future prospects, it is unlikely that our Series A Preferred Shares will
realize significant value in the near term, if at all. As a result, it is
possible that a market will not continue in our Series A Preferred Shares, in
which case the liquidity of the securities may be severely limited.

By letter dated March 24, 2003, the BMA issued permission for the free
transferability on an interim basis of Trenwick's and the Company's shares while
they are quoted on the OTC Bulletin Board. This permission is contingent on the
condition that the BMA is notified promptly of any instances in which Trenwick
or the Company become aware that a new shareholder has obtained 5% or more of
either company's shares, including background information on any such new 5%
shareholder.

In the absence of the permission granted by the BMA discussed in the previous
paragraph, as a consequence of the suspension of trading, all transfers of
shares involving holders of Trenwick's or the Company's securities would be
required to be approved by the BMA before they could be entered into Trenwick's
or the Company's share register. This procedure would only apply to share
transfers involving shareholders who hold shares in their own name on Trenwick's
or the Company's share register (a "record holder"). Shareholders who hold
through nominees, brokers, or banks, which in turn have accounts through other
nominees, would not be affected by this approval procedure unless one of the
parties to the transfer becomes a record holder on Trenwick's or the Company's
share register or the number of shares held by an existing record holder is
increased or decreased by the transfer. If the BMA's free transferability
permission is rescinded, this pre-approval process will cause a delay in share
transfers.

We are unable to pay dividends and will continue to be unable to do so for the
foreseeable future.

In connection with other actions being taken in
the fourth quarter of 2002, on November 29, 2002, the Company elected to suspend
the payment of dividends to holders of our Series A Preferred Shares effective
immediately, as a result of restrictions on the Company under Trenwick's credit
agreement with various lending institutions. The Company intends to accrue the
dividends until payment is reinstated. We do not expect to be able to pay
dividends to holders of our Series A Preferred Shares for the foreseeable
future.

We have guaranteed the obligations of Trenwick and Trenwick Holdings under
Trenwick's credit agreement, which guaranty is supported by a security interest
in all of LaSalle Re's shares.

Trenwick currently has outstanding $182.5 million of letters of credit issued by
the banks under its credit facility. Trenwick is obligated to reimburse the
banks for any amounts drawn on these letters of credit, and for related fees and
expenses. No amounts have been drawn on the letters of credit to date. The banks
have provided Trenwick with several waivers of potential defaults and extensions
of deadlines under the credit facility, but Trenwick does not presently have the
liquidity necessary to satisfy the banks by the deadlines that have been
imposed. The Company has guaranteed the obligations of Trenwick and Trenwick
Holdings under the credit facility and has pledged as security all of its shares
of LaSalle Re. If potential events of default under the credit facility are not
cured or waived by its lenders, the Banks could exercise their rights under the
pledge. As a result, upon the occurrence of an event of default, there is
substantial doubt as to our ability to continue as a going concern.

Trenwick has issued convertible preferred shares that may result in substantial
dilution to existing Trenwick common shareholders and/or a change in control of
Trenwick, and therefore the Company. Neither we nor Trenwick have the ability to
control settlement of Trenwick's convertible preferred shares.


                                       51
<PAGE>

As a result of the September 11, 2001 terrorist attacks, LaSalle Re incurred
large catastrophe losses that enabled Trenwick to exercise its rights under a
catastrophe equity put option with European Reinsurance Company of Zurich, a
subsidiary of Swiss Reinsurance Company ("European Re"). In this transaction,
Trenwick issued Series B shares to European Re for a purchase price of $40
million. These Series B shares are convertible into Trenwick's common shares
upon the occurrence of certain events, including Trenwick's failure to maintain
a net worth (as defined) under generally accepted accounting principles of $225
million. Trenwick's net worth is below $225 million, and European Re is able to
convert the Series B preferred shares into Trenwick common shares upon not less
than 60 trading days' notice to Trenwick. Should European Re convert such Series
B Shares, substantial dilution to existing Trenwick common shareholders will
occur. In addition, depending on the conversion ratio of preferred shares to
common shares, which is based upon the trading price of Trenwick common shares
and the book value and number of shares converted, this conversion could result
in European Re obtaining control of Trenwick, and therefore the Company, subject
to compliance with applicable insurance law and regulation.


We are a holding company and substantially all of our assets are held in LaSalle
Re and LaSalle Re's participation in Lloyd's. LaSalle Re's assets are generally
unavailable to pay the debts of the holding company and there is substantial
uncertainty as to whether we will ultimately receive any value from them.

We are a holding company with no material assets other than the stock of our
operating subsidiaries, our intercompany receivables due from Trenwick (the
collectability of which are in doubt), and LaSalle Re's participation in
Lloyd's. Our ability to pay dividends to our shareholders will be dependent on
the earnings and cash flows of LaSalle Re in runoff and our Lloyd's operations
and their ability to pay dividends or to advance or repay funds to us. Payment
of dividends and advances and repayments from LaSalle Re is regulated by the BMA
and regulatory restrictions, including minimum solvency and liquidity
thresholds. We do not expect LaSalle Re will be able to pay dividends or advance
or repay any funds to us in the foreseeable future.

We are in discussions with the BMA concerning capital adequacy and other issues
relating to LaSalle Re, and the BMA may institute supervision, rehabilitation,
conservation or liquidation proceedings with respect to LaSalle Re.

We have been engaged in discussions with the BMA and with LaSalle Re's consent,
the BMA has restricted the license of LaSalle Re to prohibit it from writing any
new business without its prior written approval. The BMA, as well as regulators
in the United Kingdom and the United States, which regulate Trenwick's other
insurance company subsidiaries, may act independently of one another with
respect to the insurance company domiciled in its jurisdiction. Any action by an
insurance regulator, such as the commencement of voluntary or involuntary
supervision, rehabilitation, conservation or liquidation proceedings with
respect to one of these companies, could precipitate additional actions by the
other insurance regulators. In the event of any such proceedings, it is unlikely
that the assets of the insurance companies will be available to satisfy each
other's liabilities, or the liabilities of Trenwick or the Company.

Our financial strength ratings have been significantly downgraded or withdrawn
by Rating Agencies.

Our financial strength ratings have been downgraded significantly by Standard &
Poor's, and Fitch, and have been withdrawn by Moody's Investor Services. These
downgrades generally reflect the ratings services' views that our business
prospects and financial flexibility are very limited.

LaSalle Re's catastrophe liability and other insurance business, from which we
historically derived a majority of our revenue, has ceased to write new business
and is in runoff.


                                       52
<PAGE>

We have placed LaSalle Re's catastrophe, liability and other insurance business
into runoff and no new business is being written in LaSalle Re. Our objective is
to maximize the economic value of the runoff through effective claims
settlement, commutation of assumed obligations where appropriate, collection of
reinsurance recoverables and effective cash management. While it is possible
that some positive economic value may result over time from the runoff of
LaSalle Re's business, we do not expect it to contribute significantly to our
revenue or results of operations in the near term, if at all, and there are
significant uncertainties that could if realized adversely affect our ability to
continue a solvent runoff of LaSalle Re.

Our ability to attract and retain key management personnel has been negatively
affected.

We have experienced the loss of most of our personnel in the last year,
including a majority of our senior executives. A number of executives positions
at the Company, including the position of Acting Chief Executive Officer, are
now being filled by consultants under short term arrangements or by employees or
consultants of Trenwick. Our ability to operate our business has been, and will
continue to be, dependent on our ability and the ability of Trenwick to retain
the services of key senior executive officers and to attract and retain
additional qualified personnel in the future as employees and consultants. The
loss of the services of any of our key executive officers or the inability to
hire and retain other highly qualified personnel in the future could adversely
affect our ability to conduct our business. Our financial situation and that of
our subsidiaries has made it, and likely will continue to make it, difficult to
retain key employees and consultants.

Our reinsurers may not satisfy their obligations to us.

Our business model relied to a large extent on reinsurance to reduce our
underwriting risk. As of December 31, 2002, our reinsurance recoverable balance
was approximately $913 million. LaSalle Re is subject to credit risk with
respect to its reinsurers because the transfer of risk to a reinsurer does not
relieve the LaSalle Re of its liability to the insureds. In addition, reinsurers
may be unwilling to pay us even though they have the financial resources and are
contractually obligated to do so. Unfavorable arbitration decisions or the
failure of one or more of the reinsurers to honor their obligations or make
timely payments would impact our cash flow and could cause us to incur
significant losses. In the event of the rehabilitation, supervision,
conservation or liquidation of LaSalle Re, we may not be able to influence the
outcome of the collectibility of reinsurance recoverables, in that it will be
the responsibility of the regulators supervising such proceedings.

If actual claims exceed our loss reserves, our financial results could be
significantly adversely affected.

Our results of operations and financial condition depend upon our ability to
assess accurately the potential losses associated with the risks that we insure
and reinsure. To the extent actual claims continue to exceed our expectations,
we will be required to immediately recognize the less favorable experience. This
could cause a material increase in our liabilities and a reduction in our
profitability, including an operating loss and reduction of capital.

We establish loss reserves to cover our estimated liability for the payment of
all losses and loss expenses incurred with respect to premiums earned on the
policies that we write. We utilize actuarial models as well as historical
insurance industry loss development patterns to establish appropriate loss
reserves, as well as estimates of future trends in claims severity, frequency
and other factors. Establishing an appropriate level of loss reserves is an
inherently uncertain process. Accordingly, actual claims and claim expenses paid
will likely deviate, perhaps substantially, from the reserve estimates reflected
in our consolidated financial statements.

If our loss reserves are determined to be inadequate, we will be required to
increase loss reserves at the time of such determination with a corresponding
reduction in our net income or increase our net loss in the period in which the
deficiency is rectified. It is possible that claims in respect of events that
have occurred could


                                       53
<PAGE>

exceed our loss reserves and have a material adverse effect on our results of
operations or our financial condition in general.

The effects of emerging claim and coverage issues on our business are uncertain.

As industry practices and legal, judicial, social and other environmental
conditions change, unexpected and unintended issues related to claims and
coverage may emerge. These issues may adversely affect our business by either
extending coverage beyond our underwriting intent or by increasing the number or
size of claims. In some instances, these changes may not become apparent until
some time after we have issued insurance or reinsurance contracts that are
affected by the changes. As a result, the full extent of liability under our
insurance or reinsurance contracts may not be known for many years after a
contract is issued.

Recent events may result in political, regulatory and industry initiatives which
could adversely affect our business.

The supply of insurance and reinsurance coverage has decreased due to withdrawal
of capacity and substantial reductions in capital resulting from, among other
things, the terrorist attacks of September 11, 2001. This tightening of supply
may result in governmental intervention in the worldwide insurance and
reinsurance markets. We are currently unable to predict the extent to which new
political, regulatory and industry initiatives may affect the demand for our
products or the risks which may be available for us to consider underwriting. At
the same time, threats of further terrorist attacks and the military initiatives
and political unrest in the Middle East and Asia have adversely affected general
economic, market and political conditions, increasing many of the risks
associated with the insurance markets worldwide.

The insurance and reinsurance business is historically cyclical, and we expect
to experience periods with excess underwriting capacity and unfavorable premium
rates.

Historically, insurers and reinsurers have experienced significant fluctuations
in operating results due to competition, frequency of occurrence or severity of
catastrophic events, levels of capacity, general economic conditions and other
factors. The supply of insurance and reinsurance is related to prevailing
prices, the level of insured losses and the level of industry surplus which, in
turn, may fluctuate in response to changes in rates of return on investments
being earned in the insurance and reinsurance industry. As a result, the
insurance and reinsurance business historically has been a cyclical industry
characterized by periods of intense price competition due to excessive
underwriting capacity as well as periods when shortages of capacity permitted
favorable premium levels. Although premium levels for many products have
increased in recent months, the supply of insurance and reinsurance may
increase, either by capital provided by new entrants or by the commitment of
additional capital by existing insurers or reinsurers, which may cause prices to
decrease. Any of these factors could lead to a significant reduction in premium
rates, less favorable policy terms and fewer submissions for our underwriting
services. In addition to these considerations, changes in the frequency and
severity of losses suffered by insureds and insurers may affect the cycles of
the insurance and reinsurance business significantly, and we expect to
experience the effects of such cyclicality.

U.S. persons who own our shares may have more difficulty in protecting their
interests than U.S. persons who are shareholders of a U.S. corporation.

The Bermuda Companies Act, which applies to us, differs in certain material
respects from laws generally applicable to U.S. corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
the Companies Act which includes, where relevant, information on modifications
thereto adopted pursuant to our bye-laws, applicable to us, which differ in
certain respects from provisions of Delaware corporate law. Because the
following statements are summaries, they do not discuss all aspects of Bermuda
law that may be relevant to us and our shareholders.


                                       54
<PAGE>

Interested Directors. Under Bermuda law and our bye-laws, a transaction entered
into by us, in which a director has an interest, will not be voidable by us, and
such director will not be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at the first
opportunity at a meeting of directors, or in writing to the directors. In
addition, our bye-laws allow a director to be taken into account in determining
whether a quorum is present and to vote on a transaction in which that director
has an interest following a declaration of the interest pursuant to the
Companies Act provided that the director is not disqualified from doing so by
the chairman of the meeting. Under Delaware law, such transaction would not be
voidable if:

      o The material facts as to such interested director's relationship or
      interests were disclosed or were known to the board of directors and the
      board of directors in good faith authorized the transaction by the
      affirmative vote of a majority of the disinterested directors;

      o Such material facts were disclosed or were known to the shareholders
      entitled to vote on such transaction and the transaction was specifically
      approved in good faith by vote of the majority of shares entitled to vote
      thereon; or

      o The transaction was fair as to the corporation as of the time it was
      authorized, approved or ratified.

Certain Transactions with Significant Shareholders. As a Bermuda company, we may
enter into certain business transactions with our significant shareholders,
including asset sales, in which a significant shareholder receives, or could
receive, a financial benefit that is greater than that received, or to be
received, by other shareholders with prior approval from our board of directors
but without obtaining prior approval from our shareholders.

Shareholders' Suits. The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders in many U.S. jurisdictions. Class
actions and derivative actions are generally not available to shareholders under
the laws of Bermuda. However, the Bermuda courts ordinarily would be expected to
follow English case law precedent, which would permit a shareholder to commence
an action in the name of the company to remedy a wrong done to the company where
an act is alleged to be beyond the corporate power of the company, is illegal or
would result in the violation of our memorandum of association or bye-laws.
Furthermore, courts would review acts that are alleged to constitute a fraud
against the minority shareholders or where an act requires the approval of a
greater percentage of our shareholders than actually approved it. The winning
party in such an action generally would be able to recover a portion of
attorneys' fees incurred in connection with such action. Our bye-laws provide
that shareholders waive all claims or rights of action that they might have,
individually or in the right of the company, against any director or officer for
any act or failure to act in the performance of such director's or officer's
duties, except with respect to any fraud or dishonesty of such director or
officer.

Indemnification of Directors and Officers. Under Bermuda law and our bye-laws,
we may indemnify our directors, officers or any other person appointed to a
committee of the board of directors (and their respective heirs, executors or
administrators) to the full extent permitted by law against all actions, costs,
charges, liabilities, loss, damage or expense incurred or sustained by such
person by reason of any act done, concurred in or omitted in the conduct of our
business or in the discharge of his/her duties; provided that such
indemnification shall not extend to any matter in which any of such persons is
found, in a final judgment or decree not subject to appeal, to have committed
fraud or dishonesty.

We are a Bermuda company and it may be difficult for you to enforce judgments
against us or our directors and executive officers.

We are incorporated pursuant to the laws of Bermuda and our business is based in
Bermuda. In addition, certain of our current and former directors and officers
may reside outside the United States, and all or a substantial portion of our
assets and the assets of such persons are located in jurisdictions outside the
United States. As such, it may be difficult or impossible to effect service of
process within the United States upon us or those persons or to recover against
us or them on judgments of U.S. courts, including judgments predicated upon
civil liability provisions of the U.S. federal securities laws. Further, no
claim may be brought in Bermuda against us or our directors and officers in the
first instance for violation of U.S. federal


                                       55
<PAGE>

securities laws because these laws have no extraterritorial jurisdiction under
Bermuda law and do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability on us or our directors and officers if the facts
alleged in a complaint constitute or give rise to a cause of action under
Bermuda law.

Further, there is no treaty in effect between the United States and Bermuda
providing for the enforcement of judgments of U.S. courts, and there are grounds
upon which Bermuda courts may not enforce judgments of U.S. courts. Because
judgments of U.S. courts are not automatically enforceable in Bermuda, it may be
difficult for you to recover against us based upon such judgments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this item can be found in the Consolidated
Financial Statements and Notes thereto beginning on page F-1.

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

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

In connection with the Trenwick/LaSalle business combination in 2000, all of the
external directors of the Company resigned their directorships and, in certain
cases, became directors of Trenwick, leaving Guy Hengesbaugh as the sole
director of the Company. Trenwick appointed a second director of the Company
following the Trenwick/LaSalle business combination who resigned in January
2002. James F. Billett, Jr. was appointed as a director of the Company in
January 2002 and resigned in January 2003. The Board of Directors of the Company
presently consists of W. Marston Becker and Alan L. Hunte.

W. Marston Becker, 50, has served as Acting Chairman of the Board of Directors
and Acting Chief Executive Officer of the Company since November 2002. Mr.
Becker is Chairman of the Compensation Committee and a member of the Executive
Committee of Trenwick. Mr. Becker was a director of Trenwick Group Inc. from
1997 until the Trenwick/LaSalle business combination in September 2000. He has
been Chairman of Hales & Company, an investment company, since June 2000. He was
President - Specialty Insurance of Royal & SunAlliance USA, Inc. from its
acquisition of Orion Capital Corporation in November 1999 until May 2000 and a
director of Royal & Sun Alliance USA, Inc. from November 1999 until December
2000. From January 1997 to November 1999, he was Chairman of the Board and Chief
Executive Officer of Orion Capital Corporation, an insurance holding company. He
was previously Vice Chairman of the Board (March 1996 to December 1996) and
Senior Vice President (July 1994 to March 1996) of Orion Capital Corporation and
served as President and Chief Executive Officer of the DPIC Companies
(subsidiaries of Orion Capital Corporation) from July 1994 to June 1996 and as
President and Chief Executive Officer of McDonough Caperton Insurance Group, an
insurance brokerage firm, from March 1987 to July 1994.

Alan L. Hunte, 54, has been President and a Director of the Company since
February 8, 2003. Mr. Hunte has served as the Chief Financial Officer of
Trenwick since March 26, 2002 and Executive Vice President of Trenwick since
1999. Before that, Mr. Hunte served as Chief Financial Officer of Trenwick Group
Inc. from 1993 through 1999, Treasurer from 1987 through 1993, and Vice
President from 1984 through 1987. He has been a Director and Treasurer of
Trenwick America Re since 1988 and also Executive Vice President and Chief
Financial Officer of Trenwick America Re since 1993. Mr. Hunte is a Chartered
Accountant, having served as audit manager for a public accounting firm prior to
joining the Company in 1981.


                                       56
<PAGE>

Peter Woolf has been Senior Vice President, Underwriting, of the Company from
April 1, 2002 until his resignation on February 28, 2003. From June 1, 1999
through March 30, 2002, Mr. Woolf was Vice President of Underwriting of the
Company. Prior to June 1, 1999, Mr. Woolf was Vice President of Underwriting at
Partner Re. Mr. Woolf has been a consultant to the Company from March 1, 2003 to
April 30, 2003.

Ginette Handfield was Senior Vice President and Chief Financial Officer of the
Company from April 1, 2002 until her resignation on March 31, 2003. From October
27, 1999 to March 31, 2002 she was Finance Director and Director at Trenwick
International Limited. From August 20, 1996 to October 27, 1999 Ms. Handfield
was Financial Controller of Sorema UK Ltd.

James F. Billett, Jr., 58, was a director of the Company from January 2002
through January 2003. Mr. Billett served as Chairman of the Board and Chief
Executive Officer of Trenwick from August 2000 through January 2003. Mr. Billett
served as the Chairman of the Board and Chief Executive Officer of Trenwick
Group Inc. and its predecessor from 1978 until the Trenwick/LaSalle business
combination in 2000, and served as President of Trenwick Group Inc. from 1988
until the Trenwick/LaSalle business combination. Mr. Billett was formerly a Vice
President of General Reinsurance Corporation.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth, in summary form, information concerning total
compensation paid to the Company's current Acting Chief Executive Officer during
fiscal year 2002 and the three other most highly paid executive officers of the
Company who served in such capacities as of December 31, 2002 for services
rendered to the Company during each of the last three fiscal years, if
applicable.

<TABLE>
<CAPTION>
                                                                                   Restricted
                                                                                      stock         Securities    All other
 Name and principal         Fiscal     Salary        Bonus       Other annual       awards(1)       underlying   compensation
      position               year        ($)          ($)       compensation ($)        ($)           options         ($)
      --------               ----        ---          ---       ----------------        ---           -------         ---
<S>                          <C>       <C>          <C>             <C>              <C>               <C>       <C>
W. Marston Becker            2002           --           --              --               --               --           --
   Acting Chief
   Executive Officer
   (effective
   November 2002)
Peter Woolf                  2002      218,205      288,260(2)           --               --               --       27,825(4)
   Senior Vice               2001      199,500      190,000(2)           --           64,496(3)         9,083       24,454(4)
   President,                2000      192,000       10,000(2)           --               --               --       23,201(4)
   Underwriting
   Officer (effective
   April 1, 2002)
Ginette Handfield            2002      228,992       79,936(5)       85,500(6)            --            3,274      288,239(8)
   Senior Vice               2001      179,433       40,572(5)           --           58,106(7)         8,184       75,932(8)
   President and Chief       2000      174,176       39,535(5)           --           21,203(7)            --       70,446(8)
   Financial Officer
   (effective
   March 15, 2002)
Guy D. Hengesbaugh           2002      273,525      597,715(9)       70,000(10)           --               --    1,235,210(12)
   Chief Executive           2001      468,900           --         120,000(10)      224,992(11)       31,690       51,575(12)
   Officer and               2000      450,000      386,364(9)      165,710(10)           --               --       56,376(12)
   President (effective
   July 1, 1999 to
   July 31, 2002)
</TABLE>

(1)   The restricted shares of Trenwick common stock vest in equal annual
      installments over five years from the date of award. Dividends are paid on
      restricted shares at the same rate as paid to all shareholders and, as
      permitted, those amounts have not been included in this table. The
      aggregate total of unvested restricted share holdings of each of


                                       57
<PAGE>

the named executives as of December 31, 2002, at the then-applicable market
price per share of $0.72, were as follows:

            Name                   Unvested Restricted Shares (#)     Value ($)
            ----                   ------------------------------     ---------
            W. Marston Becker                    0                        0

            Guy D. Hengesbaugh                   0                        0

            Peter Woolf                        1,817                    $1,308

            Ginette Handfield                  3,151                    $2,269

(2)   Mr. Woolf earned a bonus of $201,000 in 2002 and $150,000 in 2001 under a
      cash incentive bonus agreement and an incentive bonus payment of $87,260
      as a result of the sale of LaSalle Re's in-force business to Endurance in
      May 2002. Mr. Woolf received an underwriting bonus of $40,000 in 2001 and
      $10,000 in 2000.

(3)   Includes 3,028 restricted common shares of Trenwick awarded to Mr. Woolf
      on March 1, 2001 based upon the closing price per share of Trenwick's
      common stock on such date. The restricted shares were scheduled to vest in
      equal annual installments over five years from the date of award. Upon
      termination of Mr. Woolf's employment on March 31, 2003 the unvested
      restricted shares were cancelled. Dividends were paid on restricted shares
      at the same rate as paid to all shareholders and, as permitted those
      amounts have not been included in this table.

(4)   Consists of $21,825, $19,950 and $19,200 paid in connection with monthly
      pension contributions and $6,000, $4,504 and $4,001 earned as part of an
      automobile allowance program for the years 2002, 2001 and 2000,
      respectively.

(5)   Ms. Handfield earned a bonus of $50,000 as an incentive bonus payment as a
      result of the sale of LaSalle Re's in-force business to Endurance in May
      2002 and $29,936, $40,572 and $39,535 under a cash incentive bonus
      agreement for the year 2002, 2001 and 2000, respectively.

(6)   Ms. Handfield received housing expenses in 2002 of $85,500.

(7)   Amount reflects 2,728 and 1,631 restricted common shares of Trenwick
      awarded to Ms. Handfield on March 1, 2001 and 2000, respectively, based on
      the closing price per share of Trenwick's common stock on such dates of
      $21.30 and $13.00, respectively. The restricted shares were scheduled to
      vest in equal annual installments over five years from the date of award.
      Upon termination of Ms. Handfield's employment on March 31, 2003 the
      unvested restricted shares were cancelled. Dividends were paid on
      restricted shares at the same rate as paid to all shareholders and, as
      permitted those amounts have not been included in this table.

(8)   Includes $32,635, $42,114 and $39,284 for monthly pension contributions
      for 2002, 2001 and 2000, respectively, and $250,000 paid in 2002 to Ms.
      Handfield in accordance with the terms of the severance provisions of her
      employment agreement with the Company. Also includes automobile allowances
      of $5,437, $31,400 and $30,469 for 2002, 2001 and 2000, respectively, and
      private healthcare and life insurance benefits of $167, $2,418 and $2,388
      for 2002, 2001 and 2000, respectively.

(9)   Mr. Hengesbaugh earned incentive bonuses of $597,715 as a result of the
      sale of LaSalle Re's in-force business to Endurance in May 2002. During
      2000, he earned a bonus of $136,364 under a cash incentive bonus agreement
      and an additional merit cash bonus of $250,000.

(10)  Includes housing expenses of $70,000 for 2002 and $120,000 for each of
      2001 and 2000.

(11)  Amount reflects 10,563 restricted common shares of Trenwick awarded to Mr.
      Hengesbaugh on March 1, 2001, based on the closing price per share of
      Trenwick's common stock on such date of $21.30. The restricted shares were
      scheduled to vest in equal annual installments over five years from the
      date of award, beginning in 2002. Upon termination of Mr. Hengesbaugh's
      employment on July 31, 2002 these restricted shares were cancelled.
      Dividends were paid on restricted shares at the same rate as paid to all
      shareholders and, as permitted those amounts have not been included in
      this table.

(12)  Consists of $27,352, $46,575 and $45,000 for monthly pension contributions
      for 2002, 2001 and 2000, respectively. In accordance with the terms of Mr.
      Hengesbaugh's employment agreement and related termination agreement,
      includes severance payments for salary, unused vacation and housing
      expenses of $1,207,858.


                                       58
<PAGE>

The following table sets forth information with respect to Trenwick stock option
grants to the named executives in 2002. The options granted during 2002 to the
named executive officers pursuant to Trenwick's equity incentive plans become
exercisable in five equal annual installments beginning one year from the date
of grant, but become immediately exercisable in full in the event of a change in
control of Trenwick. The exercise price of the options equals the fair market
value of the Trenwick common stock at the date of the grant. The options are
subject to termination prior to their expiration date in the event of
termination of the grantee's employment.

                        Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                          Percent of
                                             Total
                           Number of        Options                                      Potential Realizable Value at
                          Securities      Granted to                                     Assumed Annual Rates of Stock
                          Underlying     Employees in      Exercise                      Price Appreciation for Option
                            Options       Fiscal Year       Price        Expiration                 Term ($)
      Name                Granted (#)         (%)         ($/Share)         Date              5%                10%
-----------------        -------------   ------------     ----------    ------------     ------------       -----------
<S>                          <C>             <C>            <C>           <C>  <C>          <C>               <C>
W. Marston Becker            1,000           0.19%          $8.40         5/15/2012         $5,283            $13,387
</TABLE>


The following table sets forth information for each individual who served in
2002 as the CEO or a named executive officer of the Company with regard to the
number of Trenwick common shares underlying unexercised stock options and the
value of such stock options at December 31, 2002.

                           2002 Year-End Option Values

<TABLE>
<CAPTION>
                                  Number of securities underlying            Value of unexercised
                                      unexercised options/SARs            in-the-money options/SARs
                                        at December 31, 2002                at December 31, 2002
Name                                Exerciseable/Unexerciseable          Exerciseable/Unexerciseable
----                                ---------------------------          ---------------------------
<S>                                         <C>                                     <C>
W. Marston Becker                            6,250/1,000                            $0/$0

Peter Woolf                                 16,816/7,267                            $0/$0

Ginette Handfield                             0/3,274                               $0/$0

Guy D. Hengesbaugh                              0/0                                 $0/$0
</TABLE>

                      Employment Contracts and Arrangements

On August 26, 2002, W. Marston Becker was elected to the position of Acting
Chairman of the Board of Directors and Acting Chief Executive Officer of
Trenwick pursuant to the terms of a letter agreement, entered into between
Trenwick and Mr. Becker, dated August 26, 2002 and subsequently amended on March
25, 2003 (the "Becker Agreement"). Under the Becker Agreement, Mr. Becker is
entitled to compensation from Trenwick for his services at a monthly rate of
$50,000 through December 31, 2002 and $75,000, commencing January 1, 2003. In
addition, under the Becker Agreement, Mr. Becker is entitled to a cash incentive
bonus, in the aggregate amount of $600,000, payable in three installments of
$200,000 on or before March 28, 2003 and on June 30 and December 31, 2003,
provided his engagement has not been terminated prior to such date. In the event
there is a "change in control" of Trenwick, the amount of cash incentive bonus
not previously paid to Mr. Becker will become due and payable on the date of
such change in control unless Mr. Becker's engagement has been terminated before
such date.

Trenwick has agreed under the Becker Agreement to indemnify Mr. Becker for
claims, damages and liabilities resulting from his acts or omissions which are
not found to be in bad faith or involve intentional misconduct or a knowing
violation of law. The Becker Agreement may be terminated by mutual agreement


                                       59
<PAGE>

between Trenwick and Mr. Becker or 30 days following delivery of written notice
of termination of the agreement by either Trenwick or Mr. Becker. Mr. Becker is
subject to customary confidentiality provisions under the Becker Agreement.

Effective October 1, 1999, LaSalle Re entered into an amended employment
agreement with Guy D. Hengesbaugh to reflect Mr. Hengesbaugh's promotion to the
position of President and Chief Executive Officer. The agreement provided for
automatic renewal on a daily basis, so that the remaining term of the agreement
would always equal two years. The agreement provided for an annual salary of
$450,000 which, effective March 1, 2001, was increased to $468,900. In addition,
Mr. Hengesbaugh was entitled to an annual non-discretionary bonus based in part
on the amount by which LaSalle Re's return on equity for that year exceeded 10%
per annum, and was also eligible to receive a discretionary bonus. The agreement
provided Mr. Hengesbaugh with various benefits, including disability and pension
benefits, automobile allowance, club membership, housing and living allowance
and reimbursement of reasonable business expenses. The agreement also includes a
non-competition and non-solicitation covenant that will generally apply for a
period of 12 months following the termination of Mr. Hengesbaugh's employment.
Mr. Hengesbaugh resigned his offices of President and CEO on July 31, 2002 and
received severance and other payments totaling $1,274,233 as a result.

Since the completion of the Trenwick/LaSalle business combination, the Company's
directors have not been compensated for any services provided to the Company as
directors.

In addition, since the completion of the Trenwick/LaSalle business combination,
the Company's common shares are no longer registered under Section 12 of the
Securities Exchange Act of 1934. Accordingly, no share price information is
available to provide the basis for a performance graph.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The Company is a wholly owned subsidiary of Trenwick. The following table
discloses the Acting Chief Executive Officer's and the named executive officers'
ownership in the Company's parent, Trenwick, at March 31, 2003.

<TABLE>
<CAPTION>
                                                   Number of Common
Name of beneficial owner                                Shares(1)                 Percentage of class
------------------------                                ---------                 -------------------
<S>                                                     <C>                               <C>
W. Marston Becker                                        35,250                           *
Peter Woolf                                              21,661(2)                        *
Ginette Handfield                                         2,290(3)                        *
Guy D. Hengesbaugh                                        7,700                           *

All Directors and Executive Officers as a Group         198,192                           *
</TABLE>

*     Less than 1%

(1)   Based on the most recent information available to the Company. Includes
      shares of restricted stock that would vest if the holder were to exercise
      certain options pursuant to which such restricted shares were granted as
      anti-dilution adjustments, which options are exercisable within 60 days of
      April 15, 2003.

(2)   Includes 1,817 of unvested restricted shares and options to purchase
      18,633 common shares which are exercisable within 60 days of April 15,
      2003.

(3)   Represents unvested restricted shares.


                                       60
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Underwriting services agreement and underwriting support services agreement

Effective on October 1, 1998, the Company entered into an underwriting support
services agreement (the "Underwriting Support Services Agreement") with CNA Re
Services Company ("CRSC") and CNA Bermuda. Under the Underwriting Support
Services Agreement, which expired on September 30, 2001, CRSC provided
underwriting support services to the Company on a daily or hourly fee basis when
and as requested by the Company. The Company paid CNA Bermuda a $333,333 annual
retainer, which was credited against CRSC's daily or hourly fees and associated
travel expenses. In recognition of the contribution made by CNA Bermuda to the
development of the Company's business, the Company agreed, subject to certain
conditions, to pay CNA Bermuda an underwriting profit commission of 1.67% of the
aggregate net underwriting profits of LaSalle Re for each fiscal year during the
term of the Underwriting Support Services Agreement for which the Company's loss
ratio was 70% or less.

While the Underwriting Support Services Agreement did not terminate until
September 30, 2001, the Company has not utilized the agreement since the
Trenwick/LaSalle business combination. The Company accrued and expensed all fees
payable under the agreement during the year ended December 31, 2000. This
amounted to $786,000.

Loan to an executive officer

The Company loaned Mr. Hengesbaugh $142,321 in 2001 to finance a portion of the
purchase price of a home in Bermuda. The loan was evidenced by a demand
promissory note and interest was payable at the rate of 8% per annum. In
connection with the termination of Mr. Hengesbaugh's employment in July 2002,
the principal plus accrued and unpaid interest on this loan was deducted from
the severance payments made to Mr. Hengesbaugh and the loan was satisfied in
full.

Indemnification; Insurance

Trenwick has agreed to indemnify the present and former directors and officers
of Trenwick Group Inc. and the Company against liabilities arising out of the
Trenwick Group Inc./LaSalle Re Holdings Limited business combination in
September 2000. Subject to applicable Bermuda law and public policy, Trenwick
will honor indemnification rights of the current and former directors and
officers of Trenwick Group Inc., the Company or any of their respective
subsidiaries. In addition, Trenwick agreed to maintain, for all former and
current directors and officers of Trenwick Group Inc., the Company and their
respective subsidiaries, the current directors' and officers' liability
insurance, fiduciary liability insurance and indemnification policies maintained
by Trenwick Group Inc. and the Company for at least six years from the effective
time of the Trenwick Group Inc./LaSalle Re Holdings Limited business
combination.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, the Company carried
out an evaluation, under the supervision and with the participation of our
management, including the Acting Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15 promulgated under the Securities
and Exchange Act of 1934. Based on that evaluation, our management, including
the Acting Chief Executive Officer and Chief Financial Officer, concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic reports to be filed
with the Securities and Exchange Commission. In addition, there have been no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies or
material weaknesses. It should be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future


                                       61
<PAGE>

events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions, regardless of how
remote.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      The following documents are filed as a part of this report:

      (a) Financial Statements and Schedules:

            1. Financial Statements

                  See Index to Financial Statements on page F-1 of this report,
                  which is incorporated herein by reference.

            2. Financial Statement Schedules:

                  All schedules have been omitted since the required information
                  is presented elsewhere in this report or is not applicable.

            3. Exhibits

               Exhibit
               Number   Description
               ------   -----------

               3.1      Memorandum of Association.
                        Incorporated by reference to Exhibit 3.1 to Registration
                        Statement on Form S-1 (No. 33-97304)

               3.2      Bye-Laws.
                        Incorporated by reference to Exhibit 3.2 to Form 10-Q
                        for the quarterly period ended March 31, 1998 (File No.
                        1-12823)

               10.1     Underwriting Support Services Agreement, Dated October
                        1, 1998 among LaSalle Re, CRSC and CNA Bermuda.
                        Incorporated by reference to Exhibit 3.2 to Form 10-Q
                        for the quarterly period ended March 31, 1998 (File No.
                        1-12823)

               10.2     Employment Agreement dated October 1, 1998 between Guy
                        D. Hengesbaugh and LaSalle Re*
                        Incorporated by reference to Exhibit 10.12 to Form 10-K
                        for the fiscal year ended September 30, 1998 (File No.
                        1-12823)

               10.3     Quota Share Arrangement, dated as of April 1, 1999,
                        between LaSalle Re and Continental Casualty Company.
                        Incorporated by reference to Exhibit 10.2 to Form 10-Q
                        for the quarterly period ended March 31, 1999 (File No.
                        1-12823)

               10.4     Quota Share Treaty between CNA International Reinsurance
                        Company Limited and LaSalle Re in respect of 1999
                        underwriting year of account (London office).
                        Incorporated by reference to Exhibit 10.32 to Form 10-K
                        for the fiscal year ended September 30, 1999 (File No.
                        1-12823)


                                       62
<PAGE>

               10.5     Quota Share Treaty between CNA International Reinsurance
                        Company Limited and LaSalle Re in respect of 1999
                        underwriting year of account (Amsterdam office).
                        Incorporated by reference to Exhibit 10.38 to Form 10-K
                        for the fiscal year ended September 30, 1999 (File No.
                        1-12823)

               10.6     LMX Quota Share Retrocessional Agreement between
                        Continental Casualty Company and LaSalle Re for the 1999
                        underwriting year of Account.
                        Incorporated by reference to Exhibit 10.43 to Form 10-K
                        for the fiscal year ended September 30, 1999 (File No.
                        1-12823)

               10.7     Transfer and Purchase Agreement, dated as of May 16,
                        2002, among Trenwick Group Ltd., LaSalle Re Limited, and
                        Endurance Specialty Insurance Ltd.
                        Incorporated by reference to Exhibit 99.1 to Trenwick
                        Group Ltd.'s Current Report on Form 8-K, filed on May
                        22, 2002 (file no. 1-12823).

               10.8     Quota Share Retrocession Agreement, dated as of May 16,
                        2002, between LaSalle Re Limited and Endurance Specialty
                        Insurance, Ltd.
                        Incorporated by reference to Exhibit 99.2 to the
                        Company's Current Report on Form 8-K, filed on May 22,
                        2002 (file no. 1-12823).

               10.9     Bill of Sale and Assignment Agreement, dated as of May
                        16, 2002, among LaSalle Re Limited and Endurance
                        Specialty Insurance Ltd.
                        Incorporated by reference to Exhibit 99.3 to the
                        Company's Current Report on Form 8-K, filed on May 22,
                        2002 (file no. 1-12823).

               10.10    Administrative Services Agreement, dated as of May 16,
                        2002, between LaSalle Re Limited and Endurance Specialty
                        Insurance Ltd.
                        Incorporated by reference to Exhibit 99.4 to the
                        Company's Current Report on Form 8G-K, filed on May 22,
                        2002 (file no. 1-12823).

               10.11    Assignment of Reinsurance Recoverables and Other
                        Receivables, dated as of May 16, 2002, between LaSalle
                        Re Limited and Endurance Insurance Ltd.
                        Incorporated by reference to Exhibit 99.5 to the
                        Company's Current Report on Form 8-K, filed on May 22,
                        2002 (file no. 1-12823).

               10.12    Forbearance Agreement, dated as of November 11, 2002,
                        among Trenwick Group Ltd., Trenwick America Corporation,
                        Trenwick Holdings Limited, LaSalle Re Holdings Limited
                        and certain lending institutions party to the Credit
                        Agreement and JP Morgan Chase, as administrative agent,
                        incorporated by reference to Exhibit 10.1 to the
                        company's Quarterly Report on Form 10-Q for the three
                        months ended September 30, 2002 (File No. 1-12823).

               10.13    Amendment to Forbearance Agreement, dated as of November
                        21, 2002, among Trenwick America Corporation, Trenwick
                        Holdings Limited, Trenwick Group Ltd., LaSalle Re
                        Holdings Limited, the lending institutions party to the
                        Credit Agreement, and JPMorgan Chase Bank. Incorporated
                        by reference to Exhibit 99.1 to the Company's Current
                        Report on Form 8-K, filed on December 3, 2002 (File No.
                        1-12823).


                                       63
<PAGE>

               10.14    Second Amendment to the Forbearance Agreement, dated as
                        of December 6, 2002, among Trenwick America Corporation,
                        Trenwick Holdings Limited, Trenwick Group Ltd., LaSalle
                        Re Holdings Limited, the lending institutions party to
                        the Credit Agreement, and JPMorgan Chase Bank.
                        Incorporated by reference to Exhibit 99.1 to the
                        Company's Current Report on Form 8-K, filed on December
                        12, 2002 (File No. 1-12823).

               10.15    Third Amendment and Consent to the Forbearance
                        Agreement, dated as of December 9, 2002, among Trenwick
                        America Corporation, Trenwick Holdings Limited, Trenwick
                        Group Ltd., LaSalle Re Holdings Limited, the lending
                        institutions party to the Credit Agreement, and JP
                        Morgan Chase Bank. Incorporated by reference to Exhibit
                        99.2 to the Company's Current Report on Form 8-K, filed
                        on December 12, 2002 (File No. 1-12823).

               10.16    Trenwick Group Ltd. Term Sheet LOC Facility, dated as
                        December 3, 2002. Incorporated by reference to Exhibit
                        99.3 to the Company's Current Report on Form 8-K, filed
                        on December 12, 2002 (File No. 1-12823).

               10.17    Fourth Amendment and Waiver to the Credit Agreement,
                        dated as of December 24, 2002, among Trenwick America
                        Corporation, Trenwick Holdings Limited, Trenwick UK
                        Holdings Limited, the lending institutions from time to
                        time party to the Credit Agreement, Wachovia Bank,
                        National Association and JP Morgan Chase Bank.
                        Incorporated by reference to Exhibit 99.1 to the
                        Company's Current Report on Form 8-K, filed on December
                        26, 2002 (File No. 1-12823).

               10.18    Fourth Amendment to the Holdings Guaranty, dated as of
                        December 24, 2002, among Trenwick Group Ltd. and the
                        lending institutions from time to time party to the
                        Credit Agreement. Incorporated by reference to Exhibit
                        99.2 to the Company's Current Report on Form 8-K, filed
                        on December 26, 2002 (File No. 1-12823).

               10.19    Fifth Amendment to the Credit Agreement, dated as of
                        January 16, 2003, among Trenwick America Corporation,
                        Trenwick Holdings Limited, Trenwick UK Holdings Limited,
                        the lending institutions from time to time party to the
                        Credit Agreement, Wachovia Bank, National Association
                        and JP Morgan Chase Bank. Incorporated by reference to
                        Exhibit 99.1 to the Company's Current Report on Form
                        8-K, filed on March 18, 2003 (File No. 1-12823).

               10.20    Fifth Amendment and Consent to the Holdings Guaranty,
                        dated as of January 16, 2003, among Trenwick Group, Ltd.
                        and the lending institutions from time to time party to
                        the Credit Agreement. Incorporated by reference to
                        Exhibit 99.2 to the Company's Current Report on Form
                        8-K, filed on March 18, 2003 (File No. 1-12823).

               10.21    Sixth Amendment and Waiver to the Credit Agreement,
                        dated as of January 27, 2003, among Trenwick America
                        Corporation, Trenwick Holdings Limited, Trenwick UK
                        Holdings Limited, the lending institutions from time to
                        time party to the Credit Agreement, Wachovia Bank,
                        National Association and JP Morgan Chase Bank.
                        Incorporated by reference to Exhibit 99.4 to the
                        Company's Current Report on Form 8-K, filed on March 18,
                        2003 (File No. 1-12823).


                                       64
<PAGE>

               10.22    Sixth Amendment and Consent to the Holdings Guaranty,
                        dated as of January 27, 2003, among Trenwick Group Ltd.
                        and the lending institutions form time to time party to
                        the Credit Agreement. Incorporated by reference to
                        Exhibit 99.5 to the Company's Current Report on Form
                        8-K, filed on March 18, 2003 (File No. 1-12823).

               10.23    Seventh Amendment and Waiver to the Credit Agreement,
                        dated as of March 7, 2003, among Trenwick America
                        Corporation, Trenwick Holdings Limited, Trenwick UK
                        Holdings Limited, the lending institutions from time to
                        time party to the Credit Agreement, Wachovia Bank,
                        National Association and JP Morgan Chase Bank.
                        Incorporated by reference to Exhibit 99.6 to the
                        Company's Current Report on Form 8-K, filed on March 18,
                        2003 (File No. 1-12823).

               10.24    Seventh Amendment to the Holdings Guaranty, dated as of
                        March 7, 2003, among Trenwick Group Ltd. and the lending
                        institutions form time to time party to the Credit
                        Agreement. Incorporated by reference to Exhibit 99.7 to
                        the Company's Current Report on Form 8-K, filed on March
                        18, 2003 (File No. 1-12823).

               10.25    Fourth Waiver to the Credit Agreement, dated as of March
                        14, 2003, among Trenwick America Corporation, Trenwick
                        Holdings Limited, Trenwick UK Holdings Limited, the
                        lending institutions from time to time party to the
                        Credit Agreement, Wachovia Bank, National Association
                        and JP Morgan Chase Bank. Incorporated by reference to
                        Exhibit 99.8 to the Company's Current Report on Form
                        8-K, filed on March 18, 2003 (File No. 1-12823).

               10.26    Fifth Waiver to the Credit Agreement, dated as of March
                        21, 2003, by and among Trenwick America Corporation,
                        Trenwick Holdings Limited, Trenwick UK Holdings Limited,
                        the lending institutions from time to time party to the
                        Credit Agreement, Wachovia Bank, National Association,
                        as Syndication Agent, Fleet National Bank, as
                        Documentation Agent, and JPMorgan Chase Bank, as
                        Administrative Agent. Incorporated by reference to
                        Exhibit 99.1 to the Company's Current Report on Form
                        8-K, filed on April 11, 2003 (File No. 1-16089).

               10.27    Eighth Amendment to the Holdings Guaranty, dated as of
                        March 24, 2003, by and among Trenwick Group Ltd. and the
                        lending institutions from time to time party to the
                        Credit Agreement. Incorporated by reference to Exhibit
                        99.2 to the Company's Current Report on Form 8-K, filed
                        on April 11, 2003 (File No. 1-16089).

               10.28    Eighth Amendment to the Credit Agreement, dated as of
                        March 28, 2003, by and among Trenwick America
                        Corporation, Trenwick Holdings Limited, Trenwick UK
                        Holdings Limited, the lending institutions from time to
                        time party to the Credit Agreement, Wachovia Bank,
                        National Association, as Syndication Agent, Fleet
                        National Bank, as Documentation Agent, and JPMorgan
                        Chase Bank, as Administrative Agent. Incorporated by
                        reference to Exhibit 99.3 to the Company's Current
                        Report on Form 8-K, filed on April 11, 2003 (File No.
                        1-16089).

               10.29    Ninth Amendment to the Holdings Guaranty, dated as of
                        March 28, 2003, by and among Trenwick Group Ltd. and the
                        lending institutions from time to time party to the
                        Credit Agreement. Incorporated by reference to Exhibit
                        99.4 to the Company's Current Report on Form 8-K, filed
                        on April 11, 2003 (File No. 1-16089).


                                       65
<PAGE>

               10.30    Ninth Amendment and Waiver to the Credit Agreement,
                        dated as of April 8, 2003, by and among Trenwick America
                        Corporation, Trenwick Holdings Limited, Trenwick UK
                        Holdings Limited, the lending institutions from time to
                        time party to the Credit Agreement, Wachovia Bank,
                        National Association, as Syndication Agent, Fleet
                        National Bank, as Documentation Agent, and JPMorgan
                        Chase Bank, as Administrative Agent. Incorporated by
                        reference to Exhibit 99.5 to the Company's Current
                        Report on Form 8-K, filed on April 11, 2003 (File No.
                        1-16089).

               10.31    Tenth Amendment and Consent to the Holdings Guaranty,
                        dated as of April 8, 2003, by and among Trenwick Group
                        Ltd. and the lending institutions from time to time
                        party to the Credit Agreement. Incorporated by reference
                        to Exhibit 99.6 to the Company's Current Report on Form
                        8-K, filed on April 11, 2003 (File No. 1-16089).

               10.32    Agreement, dated as of December 10, 2002, between
                        LaSalle Re Limited and Trenwick Group Ltd. Incorporated
                        by reference to Exhibit 99.10 to the Company's Current
                        Report on Form 8-K, filed on March 18, 2003 (File No.
                        1-12823).

               10.33    Consulting Agreement, dated as of August 26, 2002,
                        between Trenwick Group Ltd. and W. Marston Becker,
                        incorporated by reference to Exhibit 10.2 to the
                        Company's Quarterly Report on Form 10-Q for the three
                        months ended September 30, 2002 (File No. 1-12823).*

               10.34    Amended and Restated Consulting Agreement between
                        Trenwick Group Ltd. and W. Marston Becker, dated March
                        25, 2003 **

               10.35    Amendment No. 1 to Amended and Restated Employment
                        Agreement between Guy D. Hengesbaugh and LaSalle Re
                        Limited, dated as of April 30, 2002 as amended.**

               12.1     Statement re computation of ratio of earnings to
                        combined fixed charges and preferred share dividends.
                        Incorporated by reference to Exhibit 12.1 to Form 10-K
                        for the fiscal year ended September 30, 1999.

               21.1     Subsidiaries of the Registrant.
                        Incorporated by reference to Exhibit 21.1 to
                        Registration Statement on Form S-1 (No. 333-14861)

               99.1     Certification of Acting Chief Executive Officer **

               99.2     Certification of Chief Financial Officer **

               *  Management contract or compensatory plan or arrangement.

               ** Filed herewith.

      (b) Reports on Form 8-K:

The Company filed Current Reports on Form 8-K on the following dates during the
fourth quarter of 2002:

            October 28, 2002, reporting the lowering by A.M. Best Company on
            October 18, 2002 of the financial strength ratings of the operating
            subsidiaries of Trenwick, including LaSalle Re, and the


                                       66
<PAGE>

            existence of an event of default under the Credit Agreement among
            Trenwick America Corporation, Trenwick Holdings Limited and various
            financial institutions.

            October 29, 2002, reporting (a) the entry by Trenwick America
            Reinsurance Corporation into an underwriting facility with a
            subsidiary of Chubb Corporation on October 25, 2002 and (b) Trenwick
            announcement on October 25, 2002 that it had engaged independent
            actuaries to conduct a review of Trenwick reserves for unpaid claims
            and claims expenses at each of its operating subsidiaries.

            October 31, 2002, reporting the immediate cessation of underwriting
            of Trenwick United States specialty program insurance business.

            November 5, 2002, reporting the execution by Trenwick Managing
            Agents Limited of a letter agreement with National Indemnity Company
            on November 4, 2002 pursuant to which National Indemnity Company
            agreed to provide to Trenwick Lloyd's Syndicate 839 $150 million in
            capital and a $45 million quota share reinsurance facility for the
            2003 year of account.

            November 15, 2002, reporting the entry on November 13, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and the Company into a Forbearance Agreement dated as of November
            11, 2002 with certain lending institutions party to the Credit
            Agreement dated as of November 24, 1999 and amended and restated as
            of September 27, 2000, and JP Morgan Chase Bank, as administrative
            agent.

            December 3, 2002, reporting the entry on November 21, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and the Company into an extension of the Forbearance Agreement, and
            the suspension of dividends and distributions payable on the
            outstanding Trenwick Series B Cumulative Convertible Perpetual
            Preferred Shares, The Company's Series A Preferred Shares and
            Trenwick Capital Trust I 8.82% Exchange Subordinated Capital Income
            Securities.

            December 12, 2002, reporting (a) the entry on December 8, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and the Company into an agreement in principle with Trenwick's
            letter of credit providers, (b) the entry by Trenwick, Trenwick
            America Corporation, Trenwick Holdings Limited and the Company into
            amendments to the Forbearance Agreement on December 6, 2002 and
            December 9, 2002, extending the forbearance period until December
            31, 2002, (c) the hiring of Greenhill & Co. as a financial advisor
            and (d) the cessation of underwriting at Trenwick International
            Limited.

            December 26, 2002, reporting the entry on December 24, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and Trenwick UK Holdings Limited into a Fourth Amendment and Waiver
            to the Credit Agreement, extending for an additional year $182
            million of letters of credit utilized by Trenwick to support its
            underwriting operations at Lloyd's. and a Fourth Amendment to the
            Holdings Guaranty, dated as of December 24, 2002, providing for
            Trenwick to pledge all of its equity interests, assets and property
            as collateral for the renewing letter of credit providers.


                                       67
<PAGE>
                           LASALLE RE HOLDINGS LIMITED

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----
                                                                          Number
                                                                          ------

REPORT OF INDEPENDENT ACCOUNTANTS ......................................    F-2

CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 2002 AND 2001 ...............    F-3

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME -
   YEARS ENDED DECMEBER 31, 2002, 2001 AND 2000 ........................    F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS - YEARS ENDED DECEMBER 31, 2002,
   2001 AND 2000 .......................................................    F-5

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - YEARS ENDED
  DECEMBER 31, 2002, 2001 AND 2000 .....................................    F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .............................    F-7


                                      F-1
<PAGE>

                        Report of Independent Accountants

To the Board of Directors and
Shareholders of LaSalle Re Holdings Limited:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15 (a) 1 on page 62, present fairly, in all material
respects, the financial position of LaSalle Re Holdings Limited (the "Company")
(a subsidiary of Trenwick Group Ltd.) and its subsidiaries at December 31, 2002
and December 31, 2001, and the results of their operations and cash flows for
each of the three years in the period ended December 31, 2002, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 15 to the financial
statements, Trenwick Group Limited is currently required to collateralize with
cash or cash equivalents, 60% of the outstanding letters of credit under its
senior credit facility by August 1, 2003 and, at this time, Trenwick Group
Limited does not have sufficient available liquidity to collateralize the
letters of credit. The capital stock of the Company and LaSalle Re Limited has
been pledged as collateral to the banks providing the letters of credit. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans and other circumstances in regard to these
matters are also described in Notes 15 to the financial statements. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

As discussed in Note 13 to the financial statements, the Company changed its
method of accounting for goodwill in 2002.


PricewaterhouseCoopers LLP
New York, New York
March 31, 2003 except for Note 8
to the financial statements as to
which the date is April 21, 2003.


                                      F-2
<PAGE>

                          LaSalle Re Holdings Limited
                           Consolidated Balance Sheets
           (Amounts expressed in thousands of United States dollars,
                        except share and per share data)
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                            2002           2001
                                                        -----------    -----------
<S>                                                     <C>            <C>
ASSETS:
Debt securities available for sale, at fair value       $   555,837    $   673,188
Cash and cash equivalents                                   175,449        113,168
Accrued investment income                                     7,879         18,242
Premiums receivable                                         251,699        271,359
Reinsurance recoverable balances                            912,974        649,745
Prepaid reinsurance premiums                                114,645         72,180
Deferred policy acquisition costs                            37,091         36,347
Net deferred income taxes                                        --         44,313
Trenwick Group Ltd. advances                                  9,898         11,651
Trenwick Group Ltd. loan                                     75,000         75,000
Reinsurance deposits and other assets                        14,455         18,137
                                                        -----------    -----------
Total assets                                            $ 2,154,927    $ 1,983,330
                                                        ===========    ===========

LIABILITIES:
Unpaid claims and claims expenses                       $ 1,475,821      1,178,467
Unearned premium income                                     243,675        203,582
Reinsurance balances payable                                246,311        124,449
Negative goodwill                                                --         11,585
Other liabilities                                            29,695         65,401
Trenwick Group Ltd. loan                                         --         88,780
Due to affiliates                                            24,488          1,566
                                                        -----------    -----------
Total liabilities                                         2,019,990      1,673,830
                                                        -----------    -----------

SHAREHOLDERS' EQUITY:
Series A preferred shares, $1.00 par value, 3,000,000
  shares issued and outstanding, at liquidation value        75,000         75,000
Common shares, $1.00 par value, 20,432,043
  shares issued and outstanding                              20,432         20,432
Additional paid in capital                                  307,914        292,039
Retained earnings (accumulated deficit)                    (267,829)       (82,775)
Accumulated other comprehensive income (loss)                  (580)         4,804
                                                        -----------    -----------
Total shareholders' equity                                  134,937        309,500
                                                        -----------    -----------
Total liabilities and shareholders' equity              $ 2,154,927    $ 1,983,330
                                                        ===========    ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      F-3
<PAGE>

                           LaSalle Re Holdings Limited
         Consolidated Statements of Operations and Comprehensive Income
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                    2002         2001         2000
                                                 ---------    ---------    ---------
REVENUES:
<S>                                              <C>          <C>          <C>
Net premiums earned                              $ 291,289    $ 302,989    $ 271,696
Net investment income                               29,439       50,446       46,681
Net realized investment gains (losses)                 820        9,209       (1,688)
Negative goodwill accretion                             --          488          122
Other income                                       127,037          (17)         337
                                                 ---------    ---------    ---------
Total revenues                                     448,585      363,115      317,148
                                                 ---------    ---------    ---------
EXPENSES:
Claims and claims expenses incurred                178,220      305,560      219,005
Policy acquisition costs                            72,173       97,376       76,058
Underwriting expenses                               50,696       33,640       37,429
Loss on sale of LaSalle Re's in-force
  reinsurance business                              20,133           --           --
General and administrative expenses                     --           --        3,255
Interest expense                                     7,402        2,849        1,224
Foreign currency losses                              1,725          113          244
                                                 ---------    ---------    ---------
Total expenses                                     330,349      439,538      337,215
                                                 ---------    ---------    ---------

Income (loss) before income taxes, minority
  interest and cumulative effect of change in
  accounting principal                             118,236      (76,423)     (20,067)
Minority interest in subsidiary net income              --           --          839
                                                 ---------    ---------    ---------
Income (loss) before income taxes and
  cumulative effect of change in
  accounting principal                             118,236      (76,423)     (20,906)
Applicable income taxes (benefit)                   44,313      (19,553)     (10,703)
                                                 ---------    ---------    ---------
Net income (loss) before cumulative effect
  of change in accounting principal                 73,923      (56,870)     (10,203)
Cumulative effect of change in
  accounting principal                              11,586           --           --
                                                 ---------    ---------    ---------
Net income (loss)                                   85,509      (56,870)     (10,203)
Preferred share dividends                            6,563        6,563        6,563
                                                 ---------    ---------    ---------
Net income (loss) available to
  common shareholders                            $  78,946    $ (63,433)   $ (16,766)
                                                 =========    =========    =========
COMPREHENSIVE INCOME (LOSS):
Net income (loss)                                $  85,509    $ (56,870)   $ (10,203)
Other comprehensive income (loss):
   Net unrealized investment gains (losses)         (5,110)        (943)      14,401
   Foreign currency translation adjustments           (274)       1,460           --
                                                 ---------    ---------    ---------
  Total other comprehensive income (loss)           (5,384)         517       14,401
                                                 ---------    ---------    ---------
Comprehensive income (loss)                      $  80,125    $ (56,353)   $   4,198
                                                 =========    =========    =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      F-4
<PAGE>

                           LaSalle Re Holdings Limited
                      Consolidated Statements of Cash Flows
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                        2002         2001         2000
                                                    -----------    ---------    ---------
OPERATING ACTIVITIES:
<S>                                                 <C>            <C>          <C>
Premiums collected, net of acquisition costs        $   639,558    $ 381,470    $ 257,343
Ceded premiums paid, net of acquisition costs          (269,728)    (126,197)     (96,462)
Claims and claims expenses paid                        (461,864)    (273,410)    (194,720)
Claims and claims expenses recovered                    183,490       63,932       57,355
Underwriting expenses paid                              (63,446)     (39,555)     (29,143)
Net investment income received                           45,506       44,801       39,582
Other income received, net of other expenses paid         2,722            9       (2,069)
Taxes recovered                                             205          478          552
Interest expense paid                                        --           --      (14,323)
                                                    -----------    ---------    ---------
Cash from (for) operating activities                     76,443       51,528       18,115
                                                    -----------    ---------    ---------
INVESTING ACTIVITIES:
Debt securities sales                                   733,800      401,454      416,252
Debt securities maturities                              727,010       75,305       73,000
Debt securities purchases                            (1,296,176)    (527,986)    (419,185)
Trenwick Group Ltd. loan                                     --           --      (75,000)
Investment in subsidiary                                (81,638)          --           --
Additions to premises and equipment                        (533)          --         (491)
Other investing activities                                   --           --       (2,250)
                                                    -----------    ---------    ---------
Cash from (for) investing activities                     82,463      (51,227)      (7,674)
                                                    -----------    ---------    ---------
FINANCING ACTIVITIES:
Common share sales                                           --           --          430
Share and option repurchases                                 --           --       (3,978)
Intercompany loans                                      158,068           --        8,695
Equity put option premium payments                           --        9,834         (825)
Repayment of long term debt                              (2,049)        (526)          --
Preferred share dividends paid                           (4,922)      (6,563)      (6,563)
Common share dividends paid                            (264,000)      (7,500)      (1,500)
Capital contributions                                        --           --       27,301
                                                    -----------    ---------    ---------
Cash for financing activities                          (112,903)      (4,755)      23,560
                                                    -----------    ---------    ---------

Effect of exchange rate on cash                          16,278        7,733       17,738
Change in cash and cash equivalents                      62,281        3,279       51,739
Cash and cash equivalents,
  beginning of period                                   113,168      109,889       58,150
                                                    -----------    ---------    ---------
Cash and cash equivalents, end of period            $   175,449    $ 113,168    $ 109,889
                                                    ===========    =========    =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      F-5
<PAGE>

                           LaSalle Re Holdings Limited
           Consolidated Statements of Changes in Shareholders' Equity
  (Amounts expressed in thousands of United States dollars except share data)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                                    2002         2001         2000
                                                                 ---------    ---------    ---------
<S>                                                              <C>          <C>          <C>
Shareholders' equity, beginning of period                        $ 309,500    $ 379,916    $ 311,253
Preferred and common shares and
  and additional paid in capital:
Common shares sold under employee stock
  purchase plans                                                        --           --          247
Common shares issued on exercise of options
  and warrants                                                          --           --            8
Common shares issued under employee
  compensation plan                                                     --           --            7
Exercise of options to acquire shares in subsidiary                     --           --          105
Compensation recognized under employee plans                            --           --          243
Equity put option cost recognized, net of
  applicable minority interest                                          --           --         (630)
Minority interest change                                                --           --         (684)
Common share issued to acquire minority interest
  in subsidiary                                                         --           --       77,863
Acquisition costs                                                       --           --       (1,596)
Capital contribution from Trenwick Group Ltd.                       15,875                        --

Deferred compensation under share award plan:
Compensation deferred, net of applicable
  minority interest                                                     --           --          310
Compensation expense recognized, net of
  applicable minority interest                                          --           --          208
Acquisition of minority interest                                        --           --          (73)
Minority interest change                                                --           --            2

Retained earnings (deficit):
Net income (loss)                                                   85,509      (56,870)     (10,203)
Preferred share dividends declared                                  (6,563)      (6,563)      (6,563)
Common share dividends declared                                   (264,000)      (7,500)      (1,500)
Shares repurchased on exercise of share options                         --           --       (2,439)
Minority interest change                                                --           --         (176)

Accumulated other comprehensive income (loss):
Other comprehensive income (loss)                                   (5,384)         517       14,401
Acquisition of minority interest                                        --           --         (891)
Minority interest change                                                --           --           24
                                                                 ---------    ---------    ---------
Shareholders' equity, end of period                              $ 134,937    $ 309,500    $ 379,916
                                                                 =========    =========    =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      F-6
<PAGE>

                           LaSalle Re Holdings Limited
                   Notes to Consolidated Financial Statements
  (Amounts expressed in thousands of United States dollars except share and per
                                   share data)
                  Years Ended December 31, 2002, 2001 and 2000

Note 1 Organization and Basis of Presentation

      Organization

      LaSalle Re Holdings Limited (the "Company") was incorporated on September
      20, 1995 under the laws of Bermuda to act as an investment holding
      company. LaSalle Re Limited ("LaSalle Re") was incorporated on October 26,
      1993 under the laws of Bermuda and commenced operations on November 22,
      1993. LaSalle Re is licensed under the Insurance Act, 1978 as amended by
      the Insurance Amendment Act, 1995 of Bermuda to write insurance business
      and operates as a multi-line reinsurance company, with emphasis on
      property catastrophe business. Effective April 1, 2002, LaSalle Re was
      placed into runoff. See Note 3.

      On August 26, 1994, LaSalle Re incorporated a subsidiary company in the
      United Kingdom to act as a representative office for the Company. In
      addition, on June 11, 1996, LaSalle Re incorporated a subsidiary company
      in Bermuda to provide capital support to selected Lloyd's syndicates.
      Following the Trenwick/LaSalle business combination, the Company closed
      its UK representative office and ceased to actively participate as a
      corporate member in Lloyd's.

      On September 27, 2000, the Company completed a business combination with
      Trenwick Group Ltd. ("Trenwick") and Trenwick Group Inc. Under the terms
      of the business combination, the common shareholders of the Company,
      Trenwick, Trenwick Group Inc., and the minority shareholders of LaSalle Re
      exchanged their shares on a one-for-one basis for shares in Trenwick.
      Following this transaction, the Company became a wholly owned subsidiary
      of Trenwick.

      On December 10, 2002, Trenwick contributed the capital stock of Oak
      Dedicated Limited, Oak Dedicated Two Limited and Oak Dedicated Three
      Limited (collectively called the "Oak Entities") to the Company. In
      connection with its contribution of the capital stock of the Oak Entities
      to the Company in December 2002, Trenwick agreed to forgive $127,698 of
      indebtedness due from the Oak Entities, which was recorded as other
      income. Concurrent with the transaction, LaSalle Re contributed $81,638 to
      the Oak Entities. The Oak Entities participate in Lloyd's syndicates which
      are managed by Trenwick Managing Agents ("TMA"), a wholly owned subsidiary
      of Trenwick. As the Company and the Oak Entities were under common
      control, the contribution of the ownership from Trenwick was accounted for
      at historical cost, in a manner similar to a pooling of interests business
      combination, accordingly, the results of operations for the 2002, 2001 and
      2000 years have been restated to reflect the combined operating results of
      the Company and the Oak Entities.

      Basis of presentation

      These financial statements include the accounts of the Company and its
      subsidiaries after elimination of significant inter-company accounts and
      transactions. Certain items in prior financial statements have been
      reclassified to conform to the current presentation.

      These financial statements were prepared in conformity with accounting
      principles that are generally accepted in the United States of America,
      sometimes referred to as U.S. GAAP. In preparing these financial
      statements, management is required to make estimates and assumptions that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements,
      as well as the reported amounts of revenues and expenses during the
      reporting periods. Actual amounts may differ from these estimates.


                                      F-7
<PAGE>

      The accompanying financial statements have been prepared assuming the
      Company will continue as a going concern. As discussed in Note 15 to the
      financial statements, Trenwick is required to collateralize, with cash or
      cash equivalents, 60% of the outstanding letters of credit under its
      senior credit facility by August 1, 2003. At this time, Trenwick does not
      have sufficient available liquidity to collateralize the letters of
      credit. The capital stock of the Company and LaSalle Re Limited has been
      pledged as collateral to the banks providing the letters of credit. These
      matters raise substantial doubt about the Company's ability to continue as
      a going concern. The financial statements do not include any adjustments
      that might result from the outcome of these uncertainties.

      Monetary assets and liabilities denominated in currencies other than the
      U.S. dollar are translated at the rates of exchange at the balance sheet
      dates. The related revenues and expenses are translated at the exchange
      rates in effect at the date of the transaction. Transaction gains and
      losses on currencies other than the U.S. dollar are included in
      operations. The assets and liabilities of operations whose functional
      currency is other than the United States dollar are translated at the
      rates of exchange at the balance sheet dates. Revenues and expenses of
      these operations are translated at the average exchange rates during each
      period. The effects of these translation adjustments, net of applicable
      income taxes, are recorded as a cumulative translation adjustment within
      other comprehensive income. Transaction gains and losses on currencies
      other than the United States dollar are included in operations.
      Disclosures included in the Notes to the Consolidated Financial Statements
      denominated in United Kingdom pounds sterling ((pound)) have been
      converted to United States dollars at various rates based upon various
      factors, including in some cases the date of the transaction described.

      Other significant accounting policies are presented in italics within the
      appropriate footnotes.

Note 2 Business Combinations

      As described above, following shareholder and regulatory approval,
      Trenwick issued 36,668,599 of its common shares on a one-for-one, tax-free
      basis to the former shareholders of the Company (15,634,394 shares,
      including 26,656 restricted shares issued under share award plans), the
      minority shareholders of LaSalle Re, then a 77.5% owned subsidiary of the
      Company (4,797,649 shares), and the former shareholders of Trenwick Group
      Inc. (16,236,551 shares, including 224,331 restricted shares issued under
      share award plans).

      The acquisition of the minority interest in LaSalle Re was accounted for
      as a purchase. Under the purchase basis of accounting, the purchase price
      ($77,207) was allocated to the identifiable assets acquired and
      liabilities assumed, based on their estimated fair values at the date of
      acquisition and recorded the over allocated excess ($12,196) as negative
      goodwill. Recent changes in accounting for negative goodwill and its
      accretion are described in Note 13.

Note 3 Sale of Property Catastrophe Business

      Effective April 1, 2002, the Company and Trenwick sold the in-force
      property catastrophe reinsurance business of its subsidiary, LaSalle Re to
      Endurance Specialty Insurance, Ltd. ("Endurance"). The sale was effected
      through a 100% quota share reinsurance agreement, with Endurance paying
      Trenwick a ceding commission of 25% and additional profit sharing of 50%
      if the losses do not exceed a loss ratio of 45%. In addition, Endurance
      will have the right to renew LaSalle's in-force business as it expires in
      exchange for a 12.5% commission on the business renewed. Included in the
      results for the year ended December 31, 2002 are $11,523 in ceding
      commissions earned on the quota share with Endurance accounted for as
      ceded acquisitions costs, as well as $6,012 in amortization of acquisition
      costs on the related assumed business.

      In connection with this transaction, the Company recorded the following
      non-recurring revenues and expenses during the year ended December 31,
      2002:


                                      F-8
<PAGE>

            Minimum proceeds related to sale of renewal rights   $  8,000
            Accelerated amortization of reinsurance
                contracts not transferred in sale                 (20,949)
            Legal expenses and investment banking fees             (4,370)
            Severance and related expenses                         (2,814)
                                                                 --------
            Net loss on sale of LaSalle Re's in-force
               reinsurance business                              $(20,133)
                                                                 ========

Note 4 Transactions with Affiliates

      Subsequent to LaSalle Re being placed into runoff, Trenwick borrowed $258
      million from LaSalle Re in June 2002. Of the funds borrowed, Trenwick used
      approximately $195 million to repay the outstanding term indebtedness
      under Trenwick's bank credit facility, which had been guaranteed by the
      Company, and utilized the remaining portion primarily for capital support
      of Trenwick's Lloyd's operations (including the Oak Entities, which became
      wholly owned subsidiaries of LaSalle Re effective December 10, 2002).

      As the Company had agreed to cease future competitive activities in
      connection with the Endurance transaction and did not have any plans to
      underwrite new insurance or reinsurance through LaSalle Re, Trenwick
      applied to the Bermuda Monetary Authority (the "BMA") in November 2002 to
      recharacterize the $258,000 loan as a special dividend since it would more
      appropriately reflect the status of the distribution. The Company has
      determined that the reduction in capital and surplus resulting from the
      special dividend would not cause LaSalle Re to fall below the minimum
      statutory capital and surplus of $100 million which is required of a Class
      4 insurer. In connection with this request, the BMA and LaSalle Re agreed
      that LaSalle's Certificate of Registration be endorsed to restrict LaSalle
      Re's license so that it can no longer write any insurance without the
      prior written consent of the BMA. The Company has accounted for this
      distribution as a dividend in the accompanying Consolidated Financial
      Statements.

      In 2000, Trenwick borrowed $75,000 from LaSalle Re. The proceeds of the
      loan were used primarily for capital support of Trenwick's Lloyd's
      operations and for general corporate purposes. The BMA recently confirmed
      to the Company that it will allow LaSalle Re's existing $75,000 loan to
      Trenwick, plus accrued interest, to continue to be recorded as an admitted
      asset on LaSalle Re's statutory balance sheet. LaSalle Re's statutory
      capital and surplus is estimated to be $133,105, which is above the
      $100,000 minimum required as a Class 4 insurer in Bermuda. In light of
      Trenwick's current financial condition, there is significant uncertainty
      as to whether Trenwick will be able, financially, to pay principal or
      interest on this loan. Should the loan and related interest and other
      related intercompany receivables be determined to not be realizable
      because of future uncertainties of Trenwick's financial condition, LaSalle
      Re could fall below the minimum required statutory capital and surplus
      amount of $100,000. The Company is required by Trenwick's credit agreement
      (referred to below) to use its best efforts to obtain a reduction in
      LaSalle Re's insurance license classification from the BMA. LaSalle Re has
      notified the BMA that it intends to file with the BMA an application
      during 2003 for a reduction in class from a Class 4 insurer to a Class 3
      insurer, which could reduce the statutory capital and surplus requirement
      to $29,405 million if applied to its December 31, 2002 statutory balance
      sheet. There are no assurances that such an application would be approved
      by the BMA, or, if approved, that the BMA would not impose more
      restrictive capital and surplus and other financial requirements on
      LaSalle Re than those generally established for Class 3 insurers.

      During the years ended December 31, 2001 and 2000, the Company purchased
      $10,700 and $13,000 par value, respectively, of Trenwick Capital Trust I
      Preferred Stock for $8,500 and $9,900, respectively. The Trenwick Capital
      Trust I Preferred Stock matures in 2037 and provides preferential
      cumulative semi-annual cash distributions at an annual rate of 8.82% which
      are guaranteed by Trenwick America Corporation, within certain limits, as
      to distribution payments


                                      F-9
<PAGE>

      and liquidation or redemption payments. In November 2002, Trenwick
      suspended the dividend payment on these securities. The market value of
      these investments was $2,365 at December 31, 2002 and are included in the
      Company's debt securities held for investment. In accordance with the
      Company's investment accounting policy, the Company determined that this
      investment suffered an impairment of value that is considered to be other
      than temporary and therefore the difference between amortized cost and
      market value is included in the accompanying 2002 Consolidated Statement
      of Operations and Comprehensive Income as a realized loss of $16,000. No
      interest has been accrued on these securities since August 1, 2002, the
      date of the last dividend payment.

Note 5 Segment And Geographic Information

      Segment Information

      Prior to December 31, 2002, the Company conducted its business in two
      segments: worldwide property catastrophe reinsurance and Lloyd's
      syndicates through LaSalle Re Corporate Capital, both of which are now in
      runoff. Effective December 31, 2002, the Company conducts business through
      the Oak Entites which participate in Lloyd's Syndicate 839 (Refer to Note
      1). Since the acquisition was effective December 31, 2002, the Oak
      Entities are shown as Lloyd's syndicate- continuing in the business
      segment financial information in the table below. LaSalle Re Corporate
      Capital participated in Lloyd's Syndicate 839 during the years presented
      below and therefore those assets, revenues and net income are shown as
      part of Lloyd's syndicate- continuing. The worldwide property catastrophe
      reinsurance segment, which was formerly written in Bermuda, provided
      reinsurance for property catastrophe and for other lines of business,
      which have similar characteristics, namely high severity and low
      frequency. Effective April 1, 2002, the Company ceased underwriting
      property catastrophe reinsurance (Refer to Note 3).

      The following tables present business segment financial information for
      the Company at year end 2002 and 2001 and for the years ended December 31,
      2002, 2001 and 2000:

          Total assets:                                    2002         2001
                                                       ----------   ----------
          Worldwide property catastrophe reinsurance   $  364,798   $  765,697
          Lloyd's syndicate- continuing                 1,731,106    1,137,827
          Lloyd's syndicates- runoff                       59,023       79,806
                                                       ----------   ----------
          Total assets                                 $2,154,927   $1,983,330
                                                       ==========   ==========

<TABLE>
<CAPTION>
                                                          2002         2001         2000
                                                       ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>
          Total revenues:
          Worldwide property catastrophe reinsurance   $  44,840    $ 128,455    $ 120,349
          Lloyd's syndicate- continuing                  403,879      223,264      175,188
          Lloyd's syndicates- runoff                        (134)      11,396       21,611
                                                       ---------    ---------    ---------
          Total revenues                               $ 448,585    $ 363,115    $ 317,148
                                                       =========    =========    =========

          Net income (loss):
          Worldwide property catastrophe reinsurance   $  22,031    $    (593)   $  31,639
          Lloyd's syndicate- continuing                   66,628      (48,982)     (24,194)
          Lloyd's syndicates- runoff                      (3,150)      (7,295)     (17,648)
                                                       ---------    ---------    ---------
          Net income (loss)                            $  85,509    $ (56,870)   $ (10,203)
                                                       =========    =========    =========
</TABLE>


                                      F-10
<PAGE>

      Geographic Information

      The following table presents the Company's gross premiums written
      allocated to the geographic region in which the risks originate:

                                                 2002       2001       2000
                                                --------   --------   --------
          Gross premiums written:
          United States                         $193,346   $158,596   $ 96,216
          United Kingdom                         143,716    187,009    177,478
          Europe, excluding United Kingdom        63,809     71,005     27,324
          Australia, New Zealand and Far East     25,887     20,764     16,084
          Worldwide                              110,140     84,918     95,140
                                                --------   --------   --------
          Gross premiums written                $536,898   $522,292   $412,242
                                                ========   ========   ========

Note 6 Underwriting Activities

      Premiums

      Premiums written are estimated based upon reports received from ceding
      companies. These estimates are adjusted when a contract contains a no
      claims bonus with a provision for the return premium recorded
      simultaneously with the written premium. In addition, estimates are
      reviewed with adjustments recorded in the period in which the actual
      amounts are determined. Reinstatement premiums are recognized at the time
      a loss occurs when coverage is reinstated. Premiums are earned on property
      catastrophe excess of loss contracts on a pro rata basis over the period
      the coverage is provided, which is generally 12 months. Under pro rata
      property catastrophe contracts, the risks underlying the contracts incept
      throughout the policy period and premiums generally are earned over an 18
      month period. Premiums written are estimated for LaSalle Re Corporate
      Capital Ltd. from reports submitted to the Company by the syndicates.
      These premiums are earned in accordance with the related underlying risk
      attachment periods, which average between 18-24 months. Reinstatement
      premiums are earned over the remaining life of the contract. Unearned
      premiums represent the portion of premiums written which are applicable to
      the unexpired terms of the policies in-force.

      The components of premiums written and earned are as follows:

                                        2002         2001         2000
          Direct premiums written    $ 417,021    $ 376,760    $ 282,079
          Assumed premiums written     119,877      145,532      130,163
          Ceded premiums written      (266,884)    (202,654)    (118,508)
                                     ---------    ---------    ---------
          Net premiums written         270,014    $ 319,638    $ 293,734
                                     =========    =========    =========

          Direct premiums earned     $ 381,763    $ 331,479    $ 250,477
          Assumed premiums earned      135,820      150,524      140,129
          Ceded premiums earned       (226,294)    (179,014)    (118,910)
                                     ---------    ---------    ---------
          Net premiums earned        $ 291,289    $ 302,989    $ 271,696
                                     =========    =========    =========

      Policy Acquisition Costs

      Policy acquisition costs primarily consist of commissions and brokerage
      expenses incurred at policy or contract issue date. These costs vary with
      and are primarily related to the acquisition of business. Policy
      acquisition costs are deferred and amortized over the period in which the
      related premiums are earned. Deferred policy acquisition costs are
      periodically reviewed to determine that they do not exceed recoverable
      amounts after allowing for anticipated investment income.


                                      F-11
<PAGE>

      The components of policy acquisition costs are as follows:

                                           2002         2001         2000
                                         --------    ---------    ---------
          Gross policy acquisition
            costs deferred               $ 51,867    $ 100,658    $ 103,813
          Ceded policy acquisition
            costs deferred                (21,300)        (114)        (963)
                                         --------    ---------    ---------
          Net policy acquisition costs
            deferred                       30,567    $ 100,544    $ 102,850
                                         ========    =========    =========

          Policy acquisition costs
            expensed                     $ 72,173    $  97,376    $  76,058
                                         ========    =========    =========

      Claims and Claims Expenses

      Claims and claims expenses are recorded as incurred, at management's best
      estimate, so as to match claims and claims expense costs with premiums
      over the contract periods. The amount provided for unpaid claims and
      claims expenses consists of any unpaid reported claims and claims expenses
      and estimates for incurred but not reported claims and claims expenses,
      net of salvage and subrogation. The estimates for claims and claims
      expenses incurred but not reported are developed based on industry
      information, contract reviews, historical claims and claims expense
      experience and an actuarial evaluation of expected claims and claims
      expense experience. Any adjustments to these estimates are reflected in
      income when known. The amount included as claims incurred in respect of
      business written by the Oak Entities and LaSalle Re Corporate Capital Ltd.
      is derived from an analysis of expected loss ratios.

      Given the inherent nature of major catastrophic events, considerable
      uncertainty underlies the assumptions and associated estimated reserves
      for claims and claims expenses. These estimates are reviewed and, as
      experience develops and new information becomes known, the reserves are
      adjusted as necessary. Such adjustments, if any, are reflected in results
      of operations in the period in which they are determined and account for
      as changes in estimates. Due to the inherent uncertainty in estimating the
      liability for claims and claims expenses, there can be no assurance that
      the ultimate liability will not exceed recorded amounts, with a resulting
      material effect on the Company. Based on the current information available
      used in estimating the liability, management believes that the Company's
      recorded amount is adequate to meet its future obligations.

      The components of net claims and claims expenses incurred are as follows:

<TABLE>
<CAPTION>
                                                     2002         2001         2000
                                                  ---------    ---------    ---------
<S>                                               <C>          <C>          <C>
      Gross claims and claims expenses incurred   $ 285,616    $ 768,329    $ 355,776
      Ceded claims and claims expenses incurred    (107,396)    (462,768)    (136,771)
                                                  ---------    ---------    ---------
      Net claims and claims expenses incurred     $ 178,220    $ 305,560    $ 219,005
                                                  =========    =========    =========
</TABLE>

      The following table presents a reconciliation of the beginning and ending
      balances of net liabilities for unpaid claims and claims expenses. The
      gross liabilities for unpaid claims and claims expenses at period ends are
      as reflected in the balance sheet. The net liabilities for unpaid claims
      and claims expenses are after deductions for reinsurance recoverable on
      unpaid claims and claims expenses, also as reflected in the balance sheet.


                                      F-12
<PAGE>

<TABLE>
<CAPTION>
                                                           2002           2001         2000
                                                       -----------    -----------    ---------
<S>                                                    <C>            <C>            <C>
      Net unpaid claims and claims expenses,
        beginning of period                            $   528,723    $   412,381    $ 374,347
                                                       -----------    -----------    ---------

      Net unpaid claims and claims expenses
        of Lloyd's syndicates ownership acquired            65,591             --           --
                                                       -----------    -----------    ---------

      Provision, net of reinsurance recoverable:
        Claims incurred in the current period              145,126        295,639      191,839
        Claims incurred prior to the current period         33,094          9,921       27,166
                                                       -----------    -----------    ---------
        Total provision                                    178,220        305,560      219,005
                                                       -----------    -----------    ---------

      Payments, net of reinsurance:
         Claims incurred in the current period             (16,300)       (38,417)     (19,540)
         Claims incurred prior to the current period      (263,775)      (171,061)    (131,121)
                                                       -----------    -----------    ---------
         Total payments                                   (280,075)      (209,478)    (150,661)
      Foreign currency translation adjustment
        to net unpaid claims and
        claims expenses                                     62,465         20,259      (30,309)
                                                       -----------    -----------    ---------

      End of period:
        Net unpaid claims and claims expenses              554,924        528,722      412,381
        Reinsurance recoverable on unpaid
         claims and claims expenses                        912,974        649,745      256,352
                                                       -----------    -----------    ---------
        Gross unpaid claims and
         claims expenses                               $ 1,467,898    $ 1,178,467    $ 668,734
                                                       ===========    ===========    =========
</TABLE>

      Unpaid claims and claims expense at year end 2002 of $1,475,821 include
      amounts approved for payment but unpaid at year end 2002 of $7,923. These
      amounts are reflected in the above table as payments within the period
      when approved. The amount in the above table reflected as net unpaid
      claims and claims expenses of Lloyd's syndicates ownership acquired
      represents the reinsurance liabilities incurred to close out prior years
      of accounts on syndicates for which the Oak Entities provided a greater
      percentage of capital in 2002 than 2001.

      The provision for claims incurred prior to the current period recorded
      during 2002 of $33,094 included a reduction of expense of $5,804 related
      to the Company's reassessment of reserve levels in connection with
      extensive work performed by both internal actuaries and independent
      actuarial consultants in all of the Company's businesses. Additionally,
      the 2002 provision for claims incurred prior to the current period
      included $21,508 related to the September 11, 2001 terrorist attacks. This
      increase was recorded following an independent actuarial review of
      Trenwick exposure to the events and also was based on additional losses
      reported by ceding companies.

      The increase in the Company's incurred claims for 2001 was primarily the
      result of losses relating to the September 11, 2001 terrorist attacks.
      There was minimal prior year development on a net basis in 2001. Adverse
      development associated with Lloyd's syndicates segment was off set by
      favorable development on catastrophic large losses which occurred prior to
      2001.

      The prior year development for the 2000 year was due primarily to
      additional incurred claims from European Storms Martin and Anatol. Both of
      these storms occurred in December 1999. The increase in the Company's
      incurred claims followed an increase in the market estimate of the size


                                      F-13
<PAGE>

      of the insured claims. This was due to new information emerging following
      the elapse of time from the date of loss.

      Inflation

      Inflation raises the cost of economic losses and non-economic damages
      covered by insurance contracts and therefore is a factor in determining
      effective rates of reinsurance and the appropriateness of reserves. The
      methods used to estimate individual case reserves and reserves for claims
      incurred but not yet reported implicitly incorporate the effects of
      inflation in the projection of ultimate losses. Due to the inherent
      uncertainties of estimating unpaid claims and claims expenses, actual
      claims and claims expenses may deviate, perhaps substantially, from
      estimates reflected in these financial statements. Management believes
      that its claim estimation methods are reasonable and prudent and that its
      unpaid claims and claims expenses at year end 2002 are adequate.

      Reinsurance

      Reinsurance and retrocessional agreements are entered into to reduce our
      exposure on large catastrophic losses. Reinsurance premiums are expensed
      on a pro-rata basis over the period the coverage is provided. Reinsurance
      contracts, which do not meet insurance accounting risk transfer
      requirements are classified as deposits. These deposits are treated as
      financing transactions and interest income or interest expense is credited
      or charged to them according to contract terms. Reinstatement premiums on
      certain reinsurance and retrocessional agreements are paid when a
      catastrophic event occurs to reinstate coverage over the remaining life of
      the contract.

      Effective April 1, 2002, the Company and Trenwick sold the in-force
      business of LaSalle Re to Endurance effected by a quota share reinsurance
      contract. Refer to Note 3.

      In 2002, LaSalle Re purchased two excess of loss programs which provided
      coverage of $20,000 in excess of the first $30,000 of losses per
      occurrence and $5,000 in excess of the first $50,000 of losses per
      occurrence both of which, as of April 1, 2002, were retroceded to
      Endurance as part of the sale of LaSalle's in-force reinsurance business.
      A third excess of loss program which provided coverage of $25,000 in
      excess of the first $100,000 of losses per occurrence for a four year
      period with a yearly limit of $50,000 and a contract aggregate limit of
      $150,000 was commuted by LaSalle Re in December 2002.

      In 2001, the Company purchased three excess of loss programs which
      provided coverage of $20,000 in excess of the first $30,000 of losses per
      occurrence, and $5,000 in excess of the first $50,000 of losses per
      occurrence and $25,000 in excess of the first $75,000 of losses per
      occurrence.

      Reinsurance recoverable balances

      The components of reinsurance recoverable balances at year end 2002 and
      2001 are as follows:

                                            2002       2001
                                          --------   --------

      Paid claims                         $102,644   $ 38,807
      Unpaid claims and claims expenses    810,330    610,938
                                          --------   --------
      Reinsurance recoverable balances    $912,974   $649,745
                                          ========   ========

      All of the paid claims recoverable and $770,328 and $553,759 of the unpaid
      claims and claims expenses at year end 2002 and 2001, respectively,
      related to the Oak Entities.

      The allowance for doubtful accounts on reinsurance recoverable balances at
      year end 2002 and 2001 was $52,588 and $26,541, respectively.


                                      F-14
<PAGE>

      Reinsurance agreements provide for recovery of a portion of certain claims
      and claims expenses from reinsurers. The Company remains liable in the
      event that the reinsurer is unable to meet its obligation.

Note 7 Investing Activities

      Debt Security Investments

      Debt securities have been classified as "available for sale" and are
      reported at estimated fair value using quoted market prices or broker
      dealer quotes.

      Fair value and amortized cost or cost of debt securities at year end 2002
      and 2001 follow:

<TABLE>
<CAPTION>
                                                             2002                  2001
                                                      -------------------   -------------------
                                                        Fair                 Fair
                                                       Value       Cost      Value       Cost
                                                      --------   --------   --------   --------
<S>                                                   <C>        <C>        <C>        <C>
      U.S. and U.K. federal government securities,
         including agencies                           $341,530   $339,619   $145,444   $142,255
      Other foreign government securities               58,681     58,468     35,127     34,174
      Mortgage and other asset-backed securities        93,515     93,179    161,425    158,826
      Corporate and other debt securities               62,111     61,782    331,192    330,034
                                                      --------   --------   --------   --------
      Debt securities fair value and amortized cost   $555,837   $553,048   $673,188   $665,289
                                                      ========   ========   ========   ========
</TABLE>

      Certain of the Company's investments are pledged as security for letters
      of credit. See Note 8.

      Gross unrealized gains and losses on debt securities at year end 2002 and
      2001 follow:

<TABLE>
<CAPTION>
                                                             2002                  2001
                                                      -------------------   -------------------
                                                       Gains      Losses     Gains      Losses
                                                      --------   --------   --------   --------
<S>                                                   <C>        <C>        <C>        <C>
      U.S. and U.K. federal government
         securities, including agencies               $  2,005   $    (95)  $  3,798   $    (38)
      Other foreign government securities                  228        (14)       928         (4)
      Mortgage and other asset-backed securities           354        (18)     2,241        (41)
      Corporate and other debt securities                  361        (32)     7,680     (6,665)
                                                      --------   --------   --------   --------
      Debt securities gross gains and losses          $  2,948   $   (159)  $ 14,647   $ (6,748)
                                                      ========   ========   ========   ========
</TABLE>

      The fair value and amortized cost for debt securities are shown below by
      contractual maturity periods, except mortgage-backed and asset-backed
      securities which are included based on expected maturity dates. Actual
      maturities will differ from contractual maturities because borrowers
      generally have the right to prepay obligations.

                                                          Amortized
                                              Fair Value     Cost
                                              ----------  ---------
      Due in one year or less                  $359,387   $359,354
      Due after one year through five years     170,365    168,211
      Due after five years through ten years     14,510     14,066
      Due after ten years                        11,575     11,417
                                               --------   --------
      Debt securities total maturities         $555,837   $553,048
                                               ========   ========

      Net Investment Income and Net Investment Gains (Losses)

      Investment income, consisting principally of interest, is recognized when
      earned, net of investment expenses. In computing interest income, premiums
      are amortized and discounts are accreted on debt securities utilizing the
      interest method. The amortization and accretion for mortgage-backed and
      other asset-backed securities is adjusted, when sufficient information
      exists to estimate the


                                      F-15
<PAGE>

      probability and timing of their prepayments, to the amount that would have
      existed had the new effective yield been applied since the acquisition of
      the security.

      The Company generally limits investments in debt securities that are rated
      below investment grade, as these investments are subject to a higher
      degree of credit risk than investment grade securities. The Company also
      monitors the creditworthiness of the portfolio, including below investment
      grade securities and writes down investments when fair values decline for
      reasons other than changes in interest rates or other perceived temporary
      conditions. Realized gains or losses on disposition of investments are
      determined on the basis of specific identification.

      Sources of net investment income follow:

                                             2002        2001        2000
                                           --------    --------    --------

      Debt securities interest             $ 31,382    $ 39,538    $ 37,409
      Cash and cash equivalents interest      3,679       4,614       7,546
      Intercompany investment income          4,350       4,688          --
      Other investment income                    17       2,548       2,805
                                           --------    --------    --------
      Gross investment income                39,428      51,388      47,760
      Other investment expenses                (951)       (942)     (1,078)
      Reserve for intercompany
        investment income                    (9,038)         --          --
                                           --------    --------    --------
      Net investment income                $ 29,439    $ 50,446    $ 46,681
                                           ========    ========    ========

      Net realized gains (losses) on sales of investments and their effect on
      net income follow:

                                                 2002        2001        2000
                                               --------    --------    --------

      Debt securities realized gains           $ 19,580    $  9,709    $    538
      Debt securities realized losses           (18,760)       (500)     (2,226)
                                               --------    --------    --------
      Net realized investment gains (losses)        820       9,209      (1,688)
      Applicable minority interest                   --          --        (450)
                                               --------    --------    --------
      Net realized investment gains (losses)
        included in net income (loss)          $    820    $  9,209    $ (1,238)
                                               ========    ========    ========

      The Company did not write down the value of any securities during the
      2002, 2001 and 2000 years, as any declines were viewed to be temporary.

      Net Unrealized Investment Gains (Losses)

      Unrealized investment gains (losses) are calculated as the difference
      between recorded values (fair value) and amortized cost or cost. Net
      unrealized investment gains and losses, are net of applicable deferred
      income taxes are included in shareholders' equity as accumulated other
      comprehensive income.


                                      F-16
<PAGE>

      Net unrealized gains (losses) on investments and their effect on other
      comprehensive income (loss) follow:

<TABLE>
<CAPTION>
                                                          2002        2001        2000
                                                        --------    --------    --------
<S>                                                     <C>         <C>         <C>
      Debt securities net gains (losses)                $ (4,290)   $  8,266    $ 12,197
      Applicable minority interest                            --          --         966
                                                        --------    --------    --------
      Net investment gains (losses) included in
        comprehensive income                              (4,290)      8,266      13,163
      Less net realized investment gains (losses)
        included in net income (loss)                        820       9,209      (1,238)
                                                        --------    --------    --------
      Net unrealized investment gains (losses)
        included in other comprehensive income (loss)   $ (5,110)   $   (943)   $ 14,401
                                                        ========    ========    ========
</TABLE>

Note 8 Financing Activities

      Letters of Credit

      As of December 31, 2002, the Company is a party to $261,727 in letters of
      credit outstanding. This amount includes $170,698 in letters of credit
      outstanding to provide support for the participation in certain Lloyd's
      syndicates, of which $156,751 is outstanding under Trenwick's senior
      credit facility, which is guaranteed by the Company. The remaining balance
      is outstanding primarily under a secured letter of credit facility
      totaling $91,029 at December 31, 2002 issued in favor of ceding insurance
      companies to secure LaSalle Re's obligations under various reinsurance
      contracts. At year end 2002, LaSalle Re had pledged $120,722 of debt
      securities as collateral for its letters of credit of the letters of
      credit outstanding relates primarily to the United States business
      formerly written by LaSalle Re.

      Minority interest

      Prior to the Trenwick/LaSalle business combination, the minority interest
      disclosed in the financial statements represented founding shareholders'
      ownership of exchangeable non-voting shares in LaSalle Re. These shares
      were held by certain founding shareholders who would otherwise have held,
      or caused another shareholder to hold, directly, indirectly or
      constructively, in excess of 9.9% of the voting power of the Company or
      LaSalle Re. The exchangeable non-voting shares in LaSalle Re were
      exchangeable, at the option of the holder, for common shares of the
      Company, on a one-for-one basis, unless the board of directors of the
      Company determined such exchange would cause actual or potential adverse
      tax consequences to the Company or any shareholder. The exchangeable
      non-voting shares at all times ranked as to assets, dividends and in all
      other respects on a parity with the common shares of LaSalle Re, except
      that they did not have the right to vote on any matters except as required
      by Bermuda law and in connection with certain actions by the Company.

      Share Capital

      At year end 2002, the authorized share capital of the Company was
      100,000,000 shares, par value $1.00 per share, which includes both
      preferred and common shares. At year end 2002 and 2001, the Company had
      3,000,000 Series A preferred shares and 20,432,043 common shares fully
      paid, issued and outstanding.

      The preferred shares have a par value of $1.00 per share and are entitled
      to a liquidation preference of $25.00 per share ($75,000 aggregate). Under
      certain circumstances, the preferred shares may be redeemed in whole at a
      redemption price of $26.00 per share ($78,000 aggregate). Dividends on the
      preferred shares, are cumulative at 8.75% of the liquidation preference
      per annum ($2.1875 per share). On or after March 27, 2007, the preferred
      shares may be redeemed, in whole or in part, at a redemption price of
      $25.00 per share. Prior thereto, under certain circumstances, the
      preferred shares may be redeemed in whole at a redemption price of $26.00
      per share ($78,000 aggregate). The payment of dividends on Company's
      preferred shares was suspended effective November 29, 2002. Accrued
      dividends of $1,641 are included in other liabilities in the Company's
      2002 Consolidated Balance Sheet.


                                      F-17
<PAGE>

      Shareholder stock options

      Prior to the Trenwick/LaSalle business combination, the Company had issued
      options to purchase common shares to certain shareholders and their
      affiliates and LaSalle Re had issued options to purchase exchangeable
      non-voting shares. These options became exercisable on October 1, 1996 and
      were exercisable until November 22, 2003. As the options were granted to
      certain of the founding shareholders and their affiliates as an inducement
      to purchase stock in LaSalle Re, no compensation expense has been recorded
      in connection with the options.

      During 2000, a total number of 27,270 options to purchase exchangeable
      non-voting shares were exercised for cash and 81,308 in cashless
      transactions resulting in the issuance of 80,678 common shares. In
      addition 454,500 exchangeable non-voting shares were repurchased at a
      value of $6.89. There were no outstanding options at year end 2000.

      Catastrophe Equity Put

      The Company entered into a multi-year catastrophe equity put in July 1997,
      which was renewed through December 2000. The catastrophe equity put
      enabled the Company to exercise an option to raise equity through the
      insurance of convertible preferred shares at pre-negotiated terms, in the
      event of a major catastrophe or series of large catastrophes that caused
      substantial losses to the Company or its subsidiaries. On September 27,
      2000, Trenwick assumed the benefits and obligations of the Company under
      the $100,000 catastrophe equity put option. The catastrophe put option was
      amended and restated as of January 1, 2001 and amended as of January 25,
      2002. As amended, the catastrophe equity put enabled Trenwick to raise up
      to $55,000 of equity, through the issue of convertible preferred shares to
      European Reinsurance Company of Zurich ("European Re"), a subsidiary of
      Swiss Reinsurance Company, in the event there was a qualifying
      catastrophic event or events occurring prior to January 1, 2002.

      As a result of the terrorist attacks of September 11, 2001, LaSalle Re
      incurred in excess of $140,000 in catastrophe losses as defined under the
      option agreement and Trenwick delivered notice of exercise of the
      catastrophe equity put on March 28, 2002. On July 1, 2002, Trenwick
      commenced an arbitration proceeding seeking $55,000 in damages and other
      relief against European Re. The claims arose out of European Re's failure
      to meet its obligations under the catastrophe equity put. On September 6,
      2002, the catastrophe put option was amended and restated and the pending
      arbitration proceedings were terminated. Under the terms of the second
      restated agreement, European Re purchased 550,000 of Trenwick's Series B
      Cumulative Perpetual Preferred Shares (the "Series B Shares") with a
      liquidation preference of $100 per share for an aggregate purchase price
      of $40,000. The Series B Shares bear cumulative dividends, payable
      quarterly in arrears, based upon the Series B Shares' Standard & Poor's
      rating at LIBOR plus a margin determined in accordance with the following
      schedule:

                Standard & Poor's Rating                LIBOR Margin

                BBB- or above                                  3.75%
                BB+                                            4.25%
                BB                                             4.50%
                BB-                                            4.75%
                Below BB-                                      6.00%

      These factors adjust upward by 0.25% on the third anniversary if the
      securities are still unrated, and upward by 0.50% on the fifth anniversary
      if they are still unrated. Also, if the Standard & Poor's rating is below
      "BBB-" on the fifth anniversary, the factors adjust upward by an
      additional 0.50%. The maximum adjustment based upon these circumstances is
      0.75%. At December 31, 2002, the Series B Shares were rated "D" by
      Standard & Poor's.


                                      F-18
<PAGE>

      The Series B Shares are convertible into common shares of Trenwick after
      five years or upon the occurrence of certain "special conversion events"
      at the greater of book value or the average thirty-day trading price of
      the common shares. Special conversion events are either the occurrence of
      a change in control without the written consent of the registered holders
      of more than 50% of the Series B Shares outstanding ("Change in Control
      Conversion Event"), or the failure of Trenwick to maintain a GAAP net
      worth as defined under the terms of the agreement equal to at least
      $225,000 for a period of more than sixty days ("Net Worth Conversion
      Event"). On February 20, 2003, Trenwick notified European Re that its GAAP
      net worth at December 31, 2002 was less than $225,000. The GAAP net worth
      of Trenwick remained below $225,000 through April 21, 2003 and a Net Worth
      Conversion Event occurred on such date. As a result, European Re may
      convert its Series B Shares into common shares of Trenwick upon no less
      than 60 trading days notice. European Re has not delivered to Trenwick
      such a notice of conversion. The conversion price of the Series B shares
      is the greater of 1) the liquidity factor times the average thirty day
      stock price preceding the conversion date, 2) the liquidity factor times
      book value per common share or 3) par value of a common share. The
      liquidity factor will be calculated as an amount equal to 0.8 if the
      conversion occurs within 60 days after a Change in Control Conversion
      Event or 1.0 if the conversion does not occur within 60 days after the
      occurrence of a Change in Control Conversion Event.

      Trenwick has the option to redeem the Series B Shares after the first
      anniversary of the issuance at the liquidation preference of $1.00 per
      share plus an early redemption premium of $2.00 per share if redeemed
      before the second anniversary, or $1.00 per share if redeemed between the
      second and third anniversary.

      The maximum number of Trenwick common shares that could be required to be
      issued upon conversion of the Series B Shares is 550,000,000 which would
      occur when both the book value of common stock and the average thirty-day
      trading price of the common shares were less than or equal to $0.10 per
      share. Trenwick currently has the authority to issue up to 150,000,000
      preferred and common shares without prior authorization from the
      shareholders and the Board of Directors. Trenwick, therefore does not
      currently have the ability to control settlement of the Series B Shares
      and has therefore recorded them as temporary equity in Trenwick's balance
      sheet. As of December 31, 2002, the Series B shares would be settled with
      12,188,756 common shares upon conversion. The following table details how
      changes in the price of Trenwick's common shares or changes in book value
      would affect the settlement amounts:

<TABLE>
<CAPTION>
            Average market value of
                 common shares
                                                         Book value per share
           --------------------------  ----------------------------------------------------------
                                       $0.10-$0.50    $0.51-$1.00    $1.01-$2.00   $2.01-$5.00
                                       -----------    -----------    -----------   -----------
<S>               <C>                    <C>             <C>            <C>           <C>
                  $0.10-$0.50           550 - 110       108 - 55       54 - 28       27 - 11
                  $0.51-$1.00           108 - 55        108 - 55       54 - 28       27 - 11
                  $1.01-$2.00            54 - 28         54 - 28       54 - 28       27 - 11
                  $2.01-$5.00            27 - 11         27 - 11       27 - 11       27 - 11
                                               Range of shares issuable upon conversion
                                                             (in millions)
</TABLE>


                                      F-19
<PAGE>

Note 9 Income Taxation

      Income taxes are provided based upon amounts reported in the financial
      statements and the provisions of currently enacted tax laws. Income taxes
      are allocated to operations, other comprehensive income and shareholders'
      equity, as applicable.

      Current income tax assets and liabilities are provided for estimated
      income taxes refundable or payable based on the current year's income tax
      return. Deferred income tax assets and liabilities are recognized for the
      estimated future income tax effects of temporary differences and
      carryforwards. Temporary differences are the differences between the
      financial statement carrying amounts of assets and liabilities and their
      tax bases, as well as the timing of income or expense recognition for
      financial reporting and tax purposes of items not related to assets and
      liabilities. Valuation allowances are established to reduce the carrying
      amount of deferred income tax assets, if necessary, to amounts that are
      more likely than not to be realized. Trenwick periodically reviews the
      adequacy of these valuation allowances and records any changes in
      allowances through earnings.

      The Company is incorporated under the laws of Bermuda and is subject to
      Bermuda law with respect to taxation. Under current Bermuda law, it is not
      required to pay any income or capital gains taxes in Bermuda. Furthermore,
      it has received an undertaking from the Bermuda Minister of Finance that,
      in the event of any Bermuda income or capital gains taxes being imposed,
      they will be exempt from those taxes until 2016.

      Other than with respect to the Company's U.K. subsidiaries engaged in the
      Lloyd's business, the Company does not consider itself to be engaged in a
      trade or business in the United States and accordingly does not expect to
      be subject to United States income taxes.

      The Company's U.K. subsidiaries are corporate members of Lloyd's. Pursuant
      to a Closing Agreement between Lloyd's and the United States Internal
      Revenue Service, the corporate names will be treated as engaged in
      business in the United States and are subject to United States corporate
      income tax on its net income from U.S. sources. The Company's U.K.
      subsidiaries are also subject to U.K. corporation tax, with the assessment
      made at the end of thirty-six months.

      In evaluating the realizability of the Company's net deferred tax asset
      during 2002, management concluded that the Company's current circumstances
      do not support a position that it is more likely than not that it will be
      able to realize these future tax benefits. Accordingly, the Company
      established a full valuation allowance on its net deferred tax asset as of
      year-end 2002. The Company will periodically review the sufficiency of its
      valuation allowance and record any future changes in allowances through
      earnings.

      Income (loss) before income taxes and the provision for income taxes by
      jurisdiction and by allocation between current and deferred for the years
      ended 2002, 2001 and 2000 follow:

<TABLE>
<CAPTION>
                                                       2002       2001        2000
                                                     --------   --------    --------
<S>                                                  <C>        <C>         <C>
      Income (loss) before income taxes and
         cumulative effect of change in accounting
         principle by jurisdiction:
      Bermuda                                        $ 10,442   $   (593)   $ 34,117
      United Kingdom                                  107,794    (75,830)    (55,023)
                                                     --------   --------    --------
      Total                                          $118,236   $(76,423)   $(20,906)
                                                     ========   ========    ========

      Income taxes by jurisdiction:
      U.K. federal income tax expense (benefit)      $ 44,313   $(19,553)   $(10,703)
      Other income tax expense (benefit)                   --         --          --
                                                     --------   --------    --------
</TABLE>


                                      F-20
<PAGE>

<TABLE>

<S>                                                  <C>        <C>         <C>
      Total                                          $ 44,313   $(19,553)   $(10,703)
                                                     ========   ========    ========

      Current and deferred income taxes:
      Current income tax expense (benefit)           $     --   $     --    $     --
      Deferred income tax expense (benefit)            44,313    (19,553)    (10,703)
                                                     --------   --------    --------
      Total income tax expense (benefit)             $ 44,313   $(19,553)   $(10,703)
                                                     ========   ========    ========
</TABLE>

      For jurisdictions other than the U.K., there are no significant
      differences between the effective tax rates for each jurisdiction and the
      applicable statutory tax rates.

      For the 2002, 2001 and 2000 years, the U.K. effective tax rate of 40.86%,
      25.78% and 19.75% respectively, differs from the statutory tax rate of 30%
      as follows:

<TABLE>
<CAPTION>
                                                              2002        2001        2000
                                                           ---------    --------    --------
<S>                                                        <C>          <C>         <C>
      Income (loss) before U.K. income taxes               $ 107,794    $(75,830)   $(55,023)
                                                           ---------    --------    --------
      Income tax expense (benefit) at 30% statutory rate   $  32,338    $(22,749)   $(16,507)
      Valuation allowance                                     50,088       3,195       3,004
      Non-taxable loan forgiveness                           (38,309)         --          --
      Other UK corporate tax expenses                            196           1       2,800
                                                           ---------    --------    --------
      Total U.K. income tax expense (benefit)              $  44,313    $(19,553)   $(10,703)
                                                           =========    ========    ========
</TABLE>

      At December 31, 2002, the Company's U.K. subsidiaries had net operating
      loss carryforwards as a result of underwriting losses. These losses were
      generated from both the Lloyd's members open and closed years of accounts.
      The trading losses that have been declared by the Lloyd's members,
      including closed years of accounts through 1999, amount to approximately
      $143,950 and may be carried forward indefinitely to offset future profits
      of the specific U.K. company that generated the loss. The remaining U.K.
      net operating loss carryforwards from the open years of account have been
      determined on an accrual basis and will not be finalized until the close
      of the underwriting year of account. At December 31, 2002, these losses
      totaled $8,385.

      As of April 2000, it became legally possible to group the current year
      profits and losses of U.K. companies that have a common worldwide parent.
      Pursuant to this legislation, the Company's U.K. subsidiaries may group
      its profits and losses along with other affiliates that are owned by
      Trenwick. In addition, new legislation was introduced effective for tax
      years beginning on or after January 1, 2000, which permits Lloyd's members
      to disclaim technical reserves for tax purposes. The new legislation also
      provides a calculation whereby additional receipts or expense may be
      included in taxable income depending upon the payout of claims relative to
      the reserves taken into account for tax purposes within a margin of error.
      Management has reviewed the new legislation and during 2002 amended its
      2000 U.K. returns and elected to disclaim a portion of its technical
      reserves. Each year, management will re-evaluate the appropriateness of
      the amount of disclaimed reserves. At December 31, 2002, disclaimed
      technical reserves for the 2002 tax year were estimated at $12,777.
      Disclaimed loss reserves are temporary differences that represent future
      tax deductions. Deferred income tax assets (liabilities) attributable to
      temporary differences at December 31, 2002 and 2001, respectively, follow:


                                      F-21
<PAGE>

                                                           2002        2001
                                                         --------    --------
      Deferred income tax assets:
      Disclaimed loss reserves                           $  3,833    $     --
      Net operating loss carryforwards                     43,185      43,864
      Losses not yet realized for tax purposes              2,516         558
      Other deferred tax assets                             6,753       6,257
                                                         --------    --------
      Deferred tax asset, gross of valuation allowance   $ 56,287    $ 50,679
      Valuation allowance                                 (56,287)     (6,199)
                                                         --------    --------
      Deferred tax asset, net of valuation allowance     $     --    $ 44,480
                                                         --------    --------

      Deferred income tax liabilities:
      Unrealized investment gains                        $     --    $     --
      Other deferred tax liabilities                           --         167
                                                         --------    --------
      Gross deferred income tax liabilities                    --         167
                                                         --------    --------
      Net deferred income tax asset                      $     --    $ 44,313
                                                         ========    ========

Note 10 Employee Benefits and Compensation Arrangements

      Retirement Plans

      The Company recognizes expenses for employee retirement plans as they are
      incurred.

      The Company has a defined contribution plan for its full-time employees in
      Bermuda; the plan is administered by an independent life insurance
      company. The Company contributes 10% of an eligible employee's total
      compensation to the plan; employee contributions can be made to the plan
      subject to a maximum of 10% of the employee's total compensation. On May
      16, 2002, the date of the closing of the sale of LaSalle's in-force
      business to Endurance, substantially all employees were transferred to
      Endurance. The transferred employees vested 100% on the date of the sale
      and are eligible to withdraw all funds due them under the plan in
      accordance with Bermuda law. Expense applicable to the Oak Entities is an
      allocation from TMA.

      The Company's expenses for employee retirement plans for the years ended
      2002, 2001 and 2000 were $2,161, $1,257, and $1,374, respectively.

Note 11 Earnings Per Share Common Share

      As of September 27, 2000, the Company became a wholly owned subsidiary of
      Trenwick. As the Company no longer has publicly held common shares, it no
      longer presents earnings per common share.

Note 12 Insurance Regulation

      LaSalle Re and LaSalle Re Capital are regulated by the Insurance Act 1978
      of Bermuda and related regulations (the "Insurance Act"), which provides
      that no person shall carry on an insurance business in or from within
      Bermuda unless registered as an insurer under the Insurance Act by the
      Minister of Finance. Under the Insurance Act, insurance business includes
      reinsurance business. The Minister of Finance, in deciding whether to
      grant registration, has broad discretion to act as he thinks fit in the
      public interest. The Minister of Finance is required by the Insurance Act
      to determine whether the applicant is a fit and proper body to be engaged
      in the insurance business and, in particular, whether it has, or has
      available to it, adequate knowledge and expertise. The continued
      registration of an applicant as an insurer is subject to its complying
      with the terms of its registration and such other conditions as the
      Minister of Finance may impose from time to time. An Insurance Advisory
      Committee appointed by the Bermuda Minister of Finance advises the Bermuda
      Monetary Authority ("BMA") on matters connected with the discharge of the
      BMA's functions. Sub-committees of the Insurance Advisory Committee
      supervise and review the law and practice of insurance in Bermuda,
      including reviews of accounting and administrative procedures. The
      day-to-day supervision of insurers is the responsibility of the BMA.


                                      F-22
<PAGE>

      LaSalle Re, the Company's insurance subsidiary, is subject to Bermuda
      insurance regulations, which mandate minimum solvency margins and
      liquidity ratios. As a Class 4 Insurer, LaSalle Re must maintain a minimum
      statutory capital and surplus level of the greater of $100,000, 50% of net
      premiums written ($2,262 for 2002), or 15% of net loss reserves ($29,405
      at year end 2002). In addition, Bermuda insurance regulations restrict the
      payment of dividends from retained earnings or additional paid-in-capital
      which exceed certain thresholds without prior approval from the Bermuda
      Minister of Finance. At December 31, 2002, LaSalle Re had negative
      retained earnings and is therefore precluded from paying dividends.
      Statutory capital and surplus of LaSalle Re was $133,105 and $430,463 at
      year end 2002 and 2001, respectively; statutory net income (loss) was
      $(36,059), $(13,757) and $9,992 for the years ended December 31, 2002 and
      2001, and for the fifteen months ended December 31, 2000, respectively.

      The Insurance Act also imposes on Bermuda insurance companies solvency and
      liquidity standards and auditing and reporting requirements and grants to
      the Minister of Finance powers to supervise, investigate, require
      information and the production of documents and intervene in the affairs
      of insurance companies. Although LaSalle Re Corporate Capital Ltd. is
      governed by the Insurance Act, it is exempted from complying with most of
      the filings required to be made by insurance companies by section 57 of
      the Insurance Act.

      See Note 4 for a discussion of the Company's and Trenwick's recent
      discussions with the BMA concerning recent affiliate transactions and the
      restriction on LaSalle Re's license such that it can no longer write any
      insurance without the prior written consent of the BMA.

      U.K. Regulation

      The Company's subsidiaries are subject to regulatory oversight under the
      insurance statutes and regulations of the jurisdictions in which they
      conduct business, including Bermuda and the United Kingdom. These
      regulations vary from jurisdiction to durisdiction and are generally
      designed to protect ceding insurance companies and policyholders by
      regulating the Company's financial integrity and solvency in its business
      transactions and operations. Many of the insurance statutes and
      regulations applicable to the Company's subsidiaries relate to reporting
      and enable regulators to closely monitor the Company's performance.
      Typical required reports include information concerning the Company's
      capital structure, ownership, financial condition, and general business
      operations. Under the applicable U.K. laws, the Oak Entities may make
      distributions only from accumulated realized profits, net of accumulated
      realized losses.

Note 13 Negative Goodwill

      Negative goodwill represents the unamortized excess of the fair value over
      the purchase price of identifiable net assets of acquired entities.
      Through the 2001 year, negative goodwill was accreted on a straight-line
      basis over twenty-five years.

      Effective January 1, 2002, the Company adopted a new Financial Accounting
      Standards Board statement which amended the accounting for goodwill and
      other intangible assets. This new statement suspended systematic goodwill
      amortization and its implementation resulted in crediting negative
      goodwill of $11,586 to operations as of January 1, 2002 as a cumulative
      effect of an accounting change.

      The following table presents the pro forma effect on net loss and loss per
      common share for the years ended December 31, 2001 and 2000 had this
      accounting standard been effective January 1, 2000 as compared to net loss
      available to common shareholders and loss per common share for the year
      ended December 31, 2002.


                                      F-23
<PAGE>

                                                  2002      2001        2000
                                                -------   --------    --------
      Net income (loss) available to
      common shareholders:
      Reported net income (loss) available
        to common shareholders                  $78,946   $(63,433)   $(16,766)
        Less goodwill accretion                      --        488         122
      Cumulative effect of change
        in accounting for goodwill               11,586         --
      Adjusted net income (loss) available to   -------   --------    --------
        common shareholders                     $67,360   $(63,921)   $(16,888)
                                                =======   ========    ========

Note 14 Fair Value of Financial Instruments

      The fair value of a financial instrument is defined as the amount at which
      the instrument could be exchanged in a current transaction between willing
      parties. Fair values are estimated based upon quoted market prices or
      broker dealer quotes and these estimates may vary in the near term.

      Fair value disclosures with respect to debt securities are detailed in
      Note 7 to the financial statements. The fair value of other financial
      instruments, principally cash and cash equivalents, reinsurance balances
      receivable, accrued investment income, promissory note receivable and
      other liabilities, approximates their recorded value due to the short term
      nature of the balances.

Note 15 Commitments, Contingencies, Concentrations and Related-Party
Transactions

      Commitments

      The Company no longer leases office space in Bermuda. The Company uses
      office space leased by Trenwick and is charged by Trenwick for the space
      used. The Oak Entities are allocated rental expense from TMA based on the
      administrative services agreement between the Oak Entities and TMA.

      Total office rent expense for the years 2002, 2001 and 2000 years was
      $327, $791 and $838 respectively.

      Contingencies

      Concurrently with the business combination involving the Company and
      Trenwick Group Inc. in September of 2000, Trenwick America Corporation
      ("Trenwick America") and Trenwick Holdings Limited ("Trenwick Holdings"),
      Trenwick's U.S. and U.K. holding companies, entered into an amended and
      restated $490 million credit agreement with various lending institutions
      (the "Banks"), which was guaranteed by the Company. The credit agreement
      consisted of both a $260 million revolving credit facility and a $230
      million letter of credit facility. The revolving credit facility was
      subsequently converted into a four-year term loan and repaid in full on
      June 17, 2002. Additionally, on December 24, 2002, the credit agreement
      was amended to reduce the letter of credit facility, which is utilized by
      Trenwick to support its underwriting operations at Lloyd's, to the
      currently outstanding $182.5 million. The letter of credit facility is
      scheduled to terminate on December 31, 2003, although the letters of
      credit issued pursuant to the facility will not expire until December 31,
      2006.

      Pursuant to a guaranty agreement entered into concurrently with the credit
      agreement, the Company has guaranteed the obligations of Trenwick America
      and Trenwick Holdings under the credit agreement. In April of 2002,
      Trenwick pledged the capital stock of the Company, and the Company and
      Trenwick pledged the capital stock of LaSalle Re as collateral to the


                                      F-24
<PAGE>

      Banks. In December of 2002, Trenwick agreed to provide the Banks
      additional security interests as described below.

      On October 18, 2002, A.M. Best Company lowered the financial strength
      ratings of Trenwick's operating subsidiaries below A-. The lowered A.M.
      Best Company ratings constituted an event of default under Trenwick's
      credit agreement. In addition, increases in Trenwick's reserves for unpaid
      claims and claims expenses and the establishment of a deferred tax asset
      reserve related to its United States subsidiaries in the third quarter of
      2002 resulted in Trenwick violating the financial covenants in the credit
      agreement requiring Trenwick to maintain a minimum tangible net worth and
      minimum risk-based capital. On November 13, 2002, Trenwick, its
      subsidiaries (including the Company) and the Banks executed a forbearance
      agreement with respect to the events of default arising from Trenwick's
      lowered A.M. Best Company ratings and financial covenant violations.

      Subsequently, an amendment and waiver of default under the credit
      agreement and amendment to the guaranty agreement were entered into on
      December 24, 2002 (the "December Amendments"). The December Amendments
      extended the letter of credit facility through December 31, 2003 to
      support Trenwick's underwriting operation at Lloyd's for the 2003 year of
      account. To those Banks extending their letters of credit, Trenwick agreed
      to pay a 5% per annum cash letter of credit fee, issue pay-in-kind notes
      bearing interest at LIBOR plus 2.5% per annum to evidence an additional
      3.16% per annum letter of credit fee, issue warrants equal to 10% of
      Trenwick's fully diluted equity capital, and pay 15% of the profits earned
      by Trenwick's Lloyd's operations, including that of the Oak Entities, for
      the 2002 and 2003 Lloyd's years of account. In addition, Trenwick,
      Trenwick America and Trenwick Holdings agreed to provide the Banks a
      security interest in, and the assets and property of, their direct and
      indirect subsidiaries (including the Company) as additional collateral for
      the Banks, and to cause the subsidiaries (including the Company) to
      provide a guaranty to the Banks, subject to applicable laws and
      regulations and existing contractual rights.

      The December Amendments also prohibit Trenwick and its subsidiaries from
      declaring or paying any dividends (including on Trenwick's common shares,
      the Series A Preferred Shares of the Company and the capital securities of
      Trenwick Capital Trust I). The December Amendments and the other
      amendments and waivers entered into in the first quarter of 2003 waive
      certain other defaults, add covenants further restricting the operation of
      Trenwick's business (including that of the Company), prohibit Trenwick
      from making certain payments without the Banks' approval, prohibit
      Trenwick and its subsidiaries (including the Company) from selling or
      otherwise disposing of any assets or property, require Trenwick to
      regularly report certain financial information to the Banks, and adjust
      downward certain of the financial covenants.

      Pursuant to the December Amendments, Trenwick is required to collateralize
      with cash, cash equivalents and marketable securities 60% of the
      outstanding letters of credit by August 1, 2003. If it is unable to do so,
      Trenwick's insurance company subsidiaries will be prohibited from
      underwriting any insurance or reinsurance without the Banks' prior
      approval. In addition, Trenwick is required to use its best efforts to
      terminate the letters of credit by December 31, 2003. In order to do so,
      the letters of credit would need to be replaced with other letters of
      credit or collateral acceptable to Lloyd's. In the event Trenwick has not
      terminated the letters of credit by December 31, 2003, it is required on
      such date to collateralize with cash, cash equivalents and marketable
      securities the full amount of the outstanding letters of credit. At this
      time, Trenwick does not have sufficient available liquidity to
      collateralize the letters of credit as required by the December
      Amendments. Additionally, Trenwick does not believe that it will be able
      to replace the letters of credit with other letters of credit or
      collateral acceptable to Lloyd's.

      Since December 2002, Trenwick has entered into additional amendments and
      numerous waivers with the Banks providing for, among other things, waivers
      of potential covenant defaults, further


                                      F-25
<PAGE>

      reductions in certain financial covenants, additional financial reporting,
      approval of certain employee and other payments, approval of the extension
      of the maturity of Trenwick America's senior notes from April 1, 2003 to
      August 1, 2003, the payment of interest accrued through April 1, 2003 to
      the holders of the senior notes, and extension of numerous deadlines
      imposed under the December Amendments.

      If there is an event of default under the credit agreement, including as a
      result of Trenwick failing to collateralize the letters of credit as
      described above, or if there is an event of default under other
      outstanding indebtedness of Trenwick or its subsidiaries (including the
      Company), including under Trenwick America's senior notes, resulting in a
      cross default under the credit agreement, Trenwick may be required to
      fully and immediately collateralize the outstanding letters of credit
      under the terms of the credit agreement and the guaranty agreement. No
      liability for any such amounts has been reflected in Trenwick's or the
      Company's financial statements for any future event of default. If the
      events of default occur and are not waived, there is substantial doubt as
      to Trenwick's ability to continue as a going concern and Trenwick and/or
      one or more of its subsidiaries (including the Company) may be forced to
      seek protection from creditors through proceedings commenced in Bermuda
      and other jurisdictions including the United States. In addition, at any
      time one or more of the insurance regulatory authorities having
      jurisdiction over Trenwick's insurance company subsidiaries (including the
      Bermuda Monetary Authority with respect to the Company and LaSalle Re, or
      the Financial Services Authority or Lloyd's in the United Kingdom with
      respect to Trenwick's Lloyd's operations) may commence voluntary or
      involuntary proceedings for the formal supervision, rehabilitation or
      liquidation of such subsidiaries, or one or more of the creditors of
      Trenwick or its subsidiaries may commence proceedings against Trenwick or
      its unregulated subsidiaries seeking their liquidation.

      Trenwick's ability to refinance its existing debt obligations or raise
      additional capital is dependent upon several factors, including financial
      conditions with respect to both the equity and debt markets and the
      ratings of its securities as established by the rating agencies. As a
      result of the continued deterioration of Trenwick financial condition, its
      senior debt ratings have been downgraded by Standard & Poor's Corporation
      to "D." Trenwick ability to refinance its outstanding debt obligations, as
      well as the cost of such borrowings, has been materially adversely
      affected by these ratings downgrades.

      Concentrations

      During the year ended December 31, 2002, the Company received 27.9% of its
      gross written premiums through five brokers of which Marsh and McLennan
      accounted for 6.5%, Aon Reinsurance Agency accounted for 8.5%, Heath
      Lambert accounted for 3.9%, WillisFaber accounted for 3.0%, and Guy
      Carpenter accounted for 6.0%. During 2001, Aon Reinsurance Agency
      accounted for 23.5%, Marsh and McLennan accounted for 20.5%, Heath Lambert
      accounted for 13.7%, and Willis Faber accounted for 7.4% and Guy Carpenter
      accounted for 7.2%. During 2000, Aon Reinsurance Agency accounted for
      16.5%, Marsh and McLennan accounted for 13.6%, Heath Lambert accounted for
      15.6%.

      Loss of all or a substantial portion of the business provided by these
      brokers could have a material adverse effect on the Company's continuing
      underwriting business.


                                      F-26
<PAGE>

      Other Related Party Transactions

      Two of the Company's founding shareholders were CNA Financial and Aon.
      Their ownership of the Company during the period prior to the
      Trenwick/LaSalle business combination was between 15.6% and 18.3% for CNA
      and 15.3% and 18.0% for Aon. The Company had numerous business
      relationships with both companies, the principal ones of which are
      summarized below:

                                                               2000
                                                             -------
           Premiums assumed through Aon                      $30,340
           Brokerage costs on premiums assumed through Aon     3,034
           Investment management services from Aon               821
           Premiums assumed from CNA                             668
           Premiums ceded to CNA                               6,556
           Override and profit commissions on premiums
              ceded to CNA                                     1,244
           Underwriting support services from CNA                685

      While the 2001 underwriting support services agreement between the Company
      and CNA did not terminate until September 30, 2001, the Company did not
      utilize CNA's underwriting support services following the Trenwick/LaSalle
      business combination. Consequently, all fees payable between September 30,
      2000 and September 30, 2001 were accrued and expensed at the date of the
      Trenwick/LaSalle business combination.

      The investment management services agreement between LaSalle Re Holdings
      Limited and Aon terminated at year end 2000.

      The Company loaned Mr. Hengesbaugh, the Company's former Chief Executive
      Officer, $142 in 2001 to finance a portion of the purchase price of a home
      in Bermuda. The loan was evidenced by a demand promissory note and
      interest was payable at the rate of 8% per annum. The loan was repaid in
      2002 prior to Mr. Hengesbaugh's resignation from the Company.


                                      F-27
<PAGE>

Note 16 Additional Operating Cash Flow Information

<TABLE>
<CAPTION>
                                                         2002         2001        2000
                                                      ---------    ---------    --------
<S>                                                   <C>          <C>          <C>
Net income (loss)                                     $  85,509    $ (56,870)   $(10,203)
Investment premium amortization, net                        608          788      (1,011)
Net realized investment losses (gains)                    2,688       (7,567)      1,731
Deferred income taxes                                    44,313      (19,553)    (10,703)
Depreciation and amortization expense                     1,377          218         204
Cumulative effect of change in accounting principle     (11,586)          --          --
Unrealized loss (gain) on foreign exchange                              (803)        (735)
Negative goodwill accretion                                             (488)        (122)
Minority interest in undistributed
   net income (loss) of subsidiaries                                      --         839
Restricted stock compensation expense                        46           --         693
Forgiveness of loans by TGL                            (127,698)          --          --
Other                                                       501                     (977)
Changes in assets and liabilities:
   Accrued investment income                             10,363         (691)     (3,476)
   Premiums receivable                                   23,413      (74,434)    (37,766)
   Reinsurance recoverable balances                    (263,230)    (393,393)    (47,379)
   Prepaid reinsurance premiums                         (42,466)     (22,718)    (10,027)
   Deferred policy acquisition costs                       (744)      (2,511)     (4,995)
   Other assets                                          44,243       (3,098)     11,265
   Trenwick Group Ltd. advances                          31,656       (7,649)     (5,598)
   Unpaid claims and claims expenses                    297,353      509,715      89,875
   Unearned premium income                               40,094       37,165      15,901
   Reinsurance balances payable                           1,430       62,974      31,206
   Other liabilities                                    (61,427)      30,445        (607)
                                                      ---------    ---------    --------
Cash from operating activities                        $  76,443    $  51,530    $ 18,115
                                                      =========    =========    ========
</TABLE>


                                      F-28
<PAGE>

Note 17 Unaudited Quarterly Financial Data

<TABLE>
<CAPTION>
                                                 Quarter                 2002           2001            2000
                                         ------------------------     -----------    ------------    ------------
<S>                                                                      <C>             <C>             <C>
      Net premiums earned                Fourth quarter                  $70,063         $53,033         $68,743
                                         Third quarter                    19,583          90,383          63,575
                                         Second quarter                   94,819          81,840          75,681
                                         First quarter                   106,824          77,733          63,697

      Net investment income              Fourth quarter                     (821)         13,391          12,361
                                         Third quarter                     7,752          12,327           9,606
                                         Second quarter                   10,675          12,536          13,027
                                         First quarter                    11,833          12,192          11,687

      Net realized investment            Fourth quarter                   (6,288)            239             228
        gains (losses)                   Third quarter                       113           1,139             270
                                         Second quarter                    5,478           1,602              38
                                         First quarter                     1,517           6,229          (2,224)

      Net income (loss)                  Fourth quarter                   46,417           8,948          16,700
          before cumulative              Third quarter                     5,342         (77,301)        (10,446)
          effect of change in            Second quarter                   21,780          (7,320)         10,054
          accounting principle           First quarter                       384          18,803         (26,511)

      Net income (loss)                  Fourth quarter                   44,777           7,308          15,060
        available to common              Third quarter                     3,701         (78,942)        (12,087)
        shareholders                     Second quarter                   20,139          (8,961)          8,413
                                         First quarter                    10,329          17,162         (28,152)
</TABLE>


                                      F-29
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Bermuda, on the
30th day of April, 2003.

                                      LASALLE RE HOLDINGS LIMITED

                                      /S/  W. Marston Becker
                                         ---------------------------------
                                      By  Name: W. Marston Becker
                                          Title: Director, Acting Chairman and
                                                 Acting Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated and on the 30th day of April 2003.

           Signature                                Title
           ---------                                -----


  /s/  W. Marston Becker         Director, Acting Chairman and Acting Chief
-----------------------------    Executive Officer (Principal Executive Officer)
          W. Marston Becker


 /s/  Alan L. Hunte              Director, President and Chief Financial Officer
-----------------------------    (Principal Financial Officer and Principal
       Alan L. Hunte             Accounting Officer)



                                       68
<PAGE>

                 CERTIFICATION OF ACTING CHIEF EXECUTIVE OFFICER

I, W. Marston Becker, certify that:

      1. I have reviewed this annual report on Form 10-K of LaSalle Re Holdings
Limited;

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

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

      4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

      a. designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

      b. evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

      c. presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

      5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):

      a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and

      b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and

      6. The Registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April  30, 2003


      /s/ W. Marston Becker
      -------------------------------------
         W. Marston Becker
         Acting Chief Executive Officer
         (Principal Executive Officer)


                                       69
<PAGE>

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Alan L. Hunte, certify that:

      1. I have reviewed this annual report on Form 10-K of LaSalle Re Holdings
Limited (the "Registrant");

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

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

      4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

      a. designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

      b. evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

      c. presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

      5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):

      a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and

      b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and

      6. The Registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 30, 2003


       /s/ Alan L. Hunte
-------------------------------------
Alan L. Hunte
President and Chief Financial Officer


                                       70