<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-Q

<Table>
<C>          <S>
 (Mark One)
    [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934



             FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

                                   OR




    [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
             SECURITIES EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM           TO
</Table>

                         COMMISSION FILE NUMBER 0-07477

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

                             THE ENSTAR GROUP, INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
                   GEORGIA                                       63-0590560
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)
</Table>

                               401 MADISON AVENUE
                           MONTGOMERY, ALABAMA 36104
                    (Address of principal executive offices)
                                 (334) 834-5483
              (Registrant's telephone number, including area code)

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

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes [X]   No [ ]

     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 [X]   No [ ]

     The number of shares of Registrant's Common Stock, $.01 par value per
share, outstanding at May 15, 2003 was 5,465,753.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

     THIS FORM 10-Q AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY THE
ENSTAR GROUP, INC. OR MEMBERS OF ITS MANAGEMENT TEAM CONTAIN STATEMENTS WHICH
MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933, AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, 15 U.S.C.A. SECTIONS 77Z-2 AND 78U-5
(SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF
OR CURRENT EXPECTATIONS OF THE ENSTAR GROUP, INC. AND MEMBERS OF ITS MANAGEMENT
TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE
INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THE ENSTAR GROUP, INC.
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002, AND ARE
HEREBY INCORPORATED BY REFERENCE. THE ENSTAR GROUP, INC. UNDERTAKES NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED
ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE
OPERATING RESULTS OVER TIME.
                                        i
<PAGE>

                                     PART I

                             FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                              MARCH 31,   DECEMBER 31,
                                                                2003          2002
                                                              ---------   ------------
                                                               (DOLLARS IN THOUSANDS)
                                                                    (UNAUDITED)
<S>                                                           <C>         <C>
                                        ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 65,641      $ 55,375
  Certificates of deposit...................................     4,034         4,021
  Receivable from affiliate.................................       663           526
  Other current assets......................................       163           204
                                                              --------      --------
       Total current assets.................................    70,501        60,126
Partially owned equity affiliates...........................    55,384        67,983
Other assets................................................     3,511           500
                                                              --------      --------
       Total assets.........................................  $129,396      $128,609
                                                              ========      ========

                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities..................  $  1,119      $  1,043
  Income taxes payable......................................     5,626         5,595
                                                              --------      --------
       Total current liabilities............................     6,745         6,638
Deferred income taxes.......................................     1,197           741
Deferred liabilities........................................       597           561
Other liabilities...........................................       423           420
                                                              --------      --------
       Total liabilities....................................     8,962         8,360
                                                              --------      --------
Commitments and contingencies (Note 4)
Shareholders' equity:
  Common stock ($.01 par value; 55,000,000 shares
     authorized, 5,908,104 shares issued at March 31, 2003
     and December 31, 2002).................................        59            59
  Additional paid-in capital................................   188,491       188,425
  Deferred compensation of partially owned equity
     affiliate..............................................      (508)         (583)
  Accumulated other comprehensive income of partially owned
     equity affiliates:
     Unrealized holding gains on investments................        14            25
     Currency translation adjustment........................        87           101
  Accumulated deficit.......................................   (61,899)      (61,968)
  Treasury stock, at cost (442,351 shares)..................    (5,810)       (5,810)
                                                              --------      --------
       Total shareholders' equity...........................   120,434       120,249
                                                              --------      --------
       Total liabilities and shareholders' equity...........  $129,396      $128,609
                                                              ========      ========
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                        1
<PAGE>

                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                                 THREE MONTHS ENDED
                                                                     MARCH 31,
                                                              ------------------------
                                                                 2003          2002
                                                              ----------    ----------
                                                               (DOLLARS IN THOUSANDS,
                                                               EXCEPT PER SHARE DATA)
                                                                    (UNAUDITED)
<S>                                                           <C>           <C>
Interest income.............................................  $      237    $      418
Earnings of partially owned equity affiliates...............       1,025         1,886
Other income................................................         100            --
General and administrative expenses.........................        (790)         (728)
                                                              ----------    ----------
Income before income taxes and cumulative effect of a change
  in accounting principle...................................         572         1,576
Income taxes................................................        (503)          (38)
                                                              ----------    ----------
Income before cumulative effect of a change in accounting
  principle.................................................          69         1,538
Cumulative effect of a change in accounting principle, net
  of income taxes...........................................          --           967
                                                              ----------    ----------
Net income..................................................  $       69    $    2,505
                                                              ==========    ==========
Weighted average shares outstanding -- basic................   5,465,753     5,465,753
                                                              ==========    ==========
Weighted average shares outstanding -- assuming dilution....   5,842,116     5,731,540
                                                              ==========    ==========
Income per common share before change in accounting
  principle -- basic........................................  $     0.01    $     0.28
Cumulative effect of a change in accounting principle, net
  of income taxes...........................................          --          0.18
                                                              ----------    ----------
Net income per common share -- basic........................  $     0.01    $     0.46
                                                              ==========    ==========
Income per common share before change in accounting
  principle -- assuming dilution............................  $     0.01    $     0.27
Cumulative effect of a change in accounting principle, net
  of income taxes...........................................          --          0.17
                                                              ----------    ----------
Net income per common share -- assuming dilution............  $     0.01    $     0.44
                                                              ==========    ==========
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                        2
<PAGE>

                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

           CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<Table>
<Caption>
                                                                THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ----------------------
                                                               2003           2002
                                                              ------        --------
                                                              (DOLLARS IN THOUSANDS)
                                                                   (UNAUDITED)
<S>                                                           <C>           <C>
Net income..................................................    $69          $2,505
Other comprehensive income (loss) of partially owned equity
  affiliates:
  Unrealized holding gains (losses) on investments, net of
     income taxes of $7 and $0..............................      1            (158)
  Less: reclassification adjustment for gains included in
     net income.............................................    (12)             --
  Currency translation adjustment, net of income taxes of $9
     and $0.................................................    (14)            (25)
                                                                ---          ------
Other comprehensive loss....................................    (25)           (183)
                                                                ---          ------
Comprehensive income........................................    $44          $2,322
                                                                ===          ======
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                        3
<PAGE>

                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ----------------------
                                                                 2003        2002
                                                              ----------   ---------
                                                              (DOLLARS IN THOUSANDS)
                                                                   (UNAUDITED)
<S>                                                           <C>          <C>
Cash flows from operating activities:
  Net income................................................   $     69     $ 2,505
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Dividends received in excess of earnings of partially
      owned equity affiliates...............................     19,801      (1,886)
     Cumulative effect of a change in accounting principle
      from partially owned equity affiliate, net of income
      taxes.................................................         --        (967)
     Noncash compensation expense...........................         66         146
     Deferred income taxes..................................        471          --
  Changes in assets and liabilities:
     Accounts payable and accrued expenses..................        107         (53)
     Other, net.............................................        (70)         19
                                                               --------     -------
          Net cash provided by (used in) operating
           activities.......................................     20,444        (236)
                                                               --------     -------
Cash flows from investing activities:
  Capital contribution to Castlewood Holdings Limited.......     (7,169)         --
  Investment in JCF CFN LLC.................................     (2,996)         --
  Purchases of certificates of deposit......................     (1,410)     (1,382)
  Maturities of certificates of deposit.....................      1,397       1,357
                                                               --------     -------
          Net cash used in investing activities.............    (10,178)        (25)
                                                               --------     -------
Increase (decrease) in cash and cash equivalents............     10,266        (261)
Cash and cash equivalents at the beginning of the period....     55,375      73,366
                                                               --------     -------
Cash and cash equivalents at the end of the period..........   $ 65,641     $73,105
                                                               ========     =======
Supplemental disclosures of cash flow information:
  Income taxes paid.........................................   $     --     $    21
                                                               ========     =======
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                        4
<PAGE>

                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1:  GENERAL

     The Enstar Group, Inc. and Subsidiary, (the "Company"), is a publicly
traded company engaged in the operation of several equity affiliates in the
financial services industry. Enstar also continues its active search for one or
more additional operating businesses which meet its acquisition criteria.

     The condensed consolidated financial statements of the Company are
unaudited and, in the opinion of management, include all adjustments consisting
solely of normal recurring adjustments necessary to fairly state the Company's
financial condition and results of operations for the interim period. The
results of operations for the three months ended March 31, 2003 are not
necessarily indicative of the results to be expected for the full year. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 2002 included in
the Company's Form 10-K as filed with the Securities and Exchange Commission on
March 31, 2003 under the Securities Exchange Act of 1934, as amended.

NOTE 2:  SIGNIFICANT ACCOUNTING POLICIES

     (a) Use of Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management 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 and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The estimates susceptible to significant change are
those related to the valuation allowance for deferred tax assets and loss and
loss adjustment expenses included in earnings of partially owned equity
affiliates.

     (b) Cash Equivalents -- Cash equivalents consist of short term, highly
liquid investments with original purchased maturities of three months or less.

     (c) Partially Owned Equity Affiliates -- Partially owned equity affiliates
are accounted for under the equity method of accounting. Equity method
investments are recorded at cost and are adjusted periodically to recognize the
Company's proportionate share of the investee's income or loss, additional
contributions made and dividends and capital distributions received. In the
event any of the partially owned equity affiliates were to incur a loss and the
Company's cumulative proportionate share of the loss exceeded the carrying
amount of the equity method investment, application of the equity method would
be suspended and the Company's proportionate share of further losses would not
be recognized until the Company committed to provide further financial support
to the investee. The Company would resume application of the equity method once
the investee becomes profitable and the Company's proportionate share of the
investee's earnings equals it cumulative proportionate share of losses that were
not recognized during the period the application of the equity method was
suspended.

     (d) Comprehensive Income -- The Company reports comprehensive income in
accordance with Statement of Financial Accounting Standards ("SFAS") 130,
"Reporting Comprehensive Income" which defines comprehensive income as certain
changes in equity from non-owner sources. The Company recorded other
comprehensive income from Castlewood Holdings Limited ("Castlewood Holdings"),
one of its partially owned equity affiliates, which arose from unrealized
holding gains and losses from debt and equity securities that are classified as
available-for-sale and are carried at fair value and currency translation
adjustments resulting from the translations of financial information of
subsidiaries into U.S. dollars.

     (e) Revenue Recognition -- Revenue includes interest income earned from
cash, cash equivalents and certificates of deposit and the Company's
proportionate share of earnings from partially owned equity affiliates. Interest
income is recorded when earned. The Company's proportionate share of earnings
from partially

                                        5
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

owned equity affiliates is recorded as such earnings are recognized by the
partially owned equity affiliate with the exception of B-Line LLC ("B-Line")
which is recorded three months in arrears.

     (f) Stock-Based Compensation -- For the three months ended March 31, 2003
and 2002, the Company utilized various stock-based compensation plans for the
benefit of non-employee directors and certain officers. In 1997, the Company
adopted the Deferred Compensation and Stock Plan for Non-Employee Directors and
a long-term incentive program made up of three stock option/incentive plans.
Additionally, in 2001, the Company adopted the 2001 Outside Directors' Stock
Option Plan (the "2001 Directors' Plan") and amended certain provisions of an
existing plan. The Company accounts for these plans under the intrinsic value
recognition and measurement principles of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations. Compensation expense for the Deferred Compensation and
Stock Plan for Non-Employee Directors is recognized at the first of every
quarter for retainer fees and upon the occurrence of various Board of Director
and committee meetings. There is no compensation expense recognized in net
earnings for stock option/incentive plans that had an exercise price equal to
the market value of the Company's underlying common stock on the date of grant.
In connection with options granted in November 2001, the market value of the
Company's common stock on the date of grant exceeded the exercise price,
resulting in a charge to earnings for that year. In addition, compensation
expense is being recognized over the vesting life of these options through June
2004. Had compensation costs for grants under the Company's stock
option/incentive plans been determined based on the fair value recognition
provision of SFAS 123, "Accounting for Stock-Based Compensation," the Company's
pro forma net income and net income per share for the three months ended March
31, 2003 and 2002 would have been as follows:

<Table>
<Caption>
                                                                 THREE MONTHS
                                                                    ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2003       2002
                                                              -------   --------
                                                                 (DOLLARS IN
                                                              THOUSANDS, EXCEPT
                                                               PER SHARE DATA)
                                                                 (UNAUDITED)
<S>                                                           <C>       <C>
Net income, as reported.....................................   $  69     $2,505
Add: Stock-based employee compensation expense included in
  reported net income, net of income taxes..................      41        136
Deduct: Total stock-based employee compensation expense
  determined under fair value based method for all awards,
  net of income taxes.......................................     (88)      (133)
                                                               -----     ------
Pro forma net income........................................   $  22     $2,508
                                                               =====     ======
Income per common share:
  Basic -- as reported......................................   $0.01     $ 0.46
                                                               =====     ======
  Basic -- pro forma........................................   $0.00     $ 0.46
                                                               =====     ======
  Assuming dilution -- as reported..........................   $0.01     $ 0.44
                                                               =====     ======
  Assuming dilution -- pro forma............................   $0.00     $ 0.44
                                                               =====     ======
</Table>

     (g) Reclassifications -- Certain prior period amounts have been
reclassified in the financial statements to conform to the current period
presentation.

                                        6
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3:  PARTIALLY OWNED EQUITY AFFILIATES

  B-LINE

     In November 1998, the Company purchased membership units of B-Line for
$965,000 including $15,000 in expenses. Based in Seattle, Washington, B-Line
provides services to credit card issuers and other holders of similar
receivables. B-Line also purchases credit card receivables and recovers payments
on these accounts. At March 31, 2003, the Company's ownership percentage was
approximately 8.34%.

     The Company's B-Line membership units are accounted for under the equity
method. The operations of B-Line are reported by the Company three months in
arrears. Approximately $803,000 of the original $950,000 paid was recorded as
goodwill and was being amortized over a period of 10 years. Since the adoption
by the Company of SFAS 142, "Goodwill and Other Intangible Assets," in January
2002, goodwill is no longer being amortized. At March 31, 2003 and December 31,
2002 the Company had approximately $552,000 of unamortized goodwill.

  B.H. ACQUISITION

     In July 2000, the Company, through B.H. Acquisition Limited ("B.H.
Acquisition"), a joint venture with Castlewood Limited ("Castlewood") and an
entity controlled by Trident II, L.P. ("Trident"), acquired as an operating
business two reinsurance companies of Petrofina S.A., a subsidiary of TotalFina
Elf S.A. The reinsurance companies, Brittany Insurance Company Ltd. ("Brittany")
and Compagnie Europeenne d'Assurances Industrielles S.A. ("CEAI") were purchased
by B.H. Acquisition for $28.5 million and were accounted for by B.H. Acquisition
using the purchase method of accounting. Brittany and CEAI are principally
engaged in the active management of books of reinsurance business from
international markets. In exchange for a capital contribution of approximately
$9.6 million, the Company received 50% of the voting stock and a 33% economic
interest in B.H. Acquisition. As part of the transaction, Castlewood received
33% of the voting stock and a 45% economic interest in B.H. Acquisition. In May
2002, the Company received $3.3 million from B.H. Acquisition representing the
Company's proportionate share of a dividend from B.H. Acquisition. The Company's
ownership in B.H. Acquisition is accounted for using the equity method of
accounting.

     B.H. Acquisition had negative goodwill of approximately $3.0 million
recorded on its financial statements as of December 31, 2001. In accordance with
SFAS 142, B.H. Acquisition reversed this negative goodwill into earnings upon
adoption of SFAS 142 and presented it as a cumulative effect of a change in
accounting principle. The Company's proportionate share of this reversal was
$967,000, net of income taxes, and has been presented as a cumulative effect of
a change in accounting principle in the consolidated statement of income for the
three months ended March 31, 2002.

  CASTLEWOOD HOLDINGS LIMITED

     In November 2001, the Company, together with Trident and the shareholders
and senior management of Castlewood (the "Castlewood Principals"), completed the
formation of a new venture, Castlewood Holdings, to acquire and manage insurance
and reinsurance companies, including companies in "run-off" (insurance and
reinsurance companies that have ceased the underwriting of new policies), and to
provide management, consulting and other services to the insurance and
reinsurance industry (the "Castlewood Holdings Transaction"). The Castlewood
Principals contributed at closing all the shares of Castlewood to Castlewood
Holdings and received in exchange a 33 1/3% economic interest in the newly
incorporated Castlewood Holdings, plus notes and cash totaling $4.275 million.
As part of the transaction, the Company and Trident made capital commitments of
$39.5 million each, totaling $79 million, in exchange for their 33 1/3% economic
interests in Castlewood Holdings. The Company received 50% of the voting stock
of Castlewood Holdings and the

                                        7
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Castlewood Principals and Trident each received 25% of Castlewood Holdings'
voting stock. Castlewood is a private Bermuda-based firm, experienced in
managing and acquiring reinsurance operations.

     As a result of the contribution of Castlewood's outstanding stock to
Castlewood Holdings, the Company's 33% direct economic interest in B.H.
Acquisition increased by an additional 15% indirect economic interest through
Castlewood Holdings. The Company's combined voting interest in B.H. Acquisition
is limited to 50%. The Company's ownership in Castlewood Holdings is accounted
for using the equity method of accounting.

     Immediately following the closing of the Castlewood Holdings Transaction,
the Company and Trident each contributed $12.5 million to Castlewood Holdings.
The Company's capital contribution to Castlewood Holdings was derived from cash
on hand. In August 2002, the Company funded an additional $21 million to
Castlewood Holdings, which also was derived from cash on hand. The funds were
used, in part, to capitalize Fitzwilliam (SAC) Insurance Limited
("Fitzwilliam"), a wholly owned subsidiary of Castlewood Holdings. Fitzwilliam,
based in Bermuda, offers specialized reinsurance protections to related
companies, clients of Castlewood Holdings and other third-party companies. The
remaining commitment of approximately $7.2 million (which included $6.0 million
of the original commitment amount plus an amount increasing annually at 5% on
the unfunded portion of the original commitment amount) was funded in March 2003
from cash on hand. The funds were used for the purchase of The Toa-Re Insurance
Company (UK) Limited ("Toa-UK"), a London-based subsidiary of The Toa
Reinsurance Company, Limited (described below).

     In conjunction with the closing of the Castlewood Holdings Transaction, the
Company also transferred its shares in Revir Limited ("Revir"), a newly formed
Bermuda holding company, at cost to Castlewood Holdings. Revir then completed
the acquisition of two reinsurance companies, River Thames Insurance Company
Limited ("River Thames"), based in London, England, and Overseas Reinsurance
Corporation Limited ("Overseas Reinsurance"), based in Bermuda, from Rivers
Group Limited and Sedgwick Group Limited. The total purchase price of River
Thames and Overseas Reinsurance was approximately $15.2 million. The acquisition
of the two reinsurance companies has been accounted for by Revir using the
purchase method of accounting.

     In August 2002, Castlewood Holdings purchased Hudson Reinsurance Company
Limited, a Bermuda-based subsidiary of Amphion Holdings Inc. for approximately
$4.1 million.

     In March 2003, the Company received a cash dividend of approximately $20.8
million from Castlewood Holdings.

     In March 2003, Castlewood Holdings and Shinsei Bank, Limited ("Shinsei")
completed the acquisition of all of the outstanding capital stock of Toa-UK, a
London-based subsidiary of The Toa Reinsurance Company, Limited, for
approximately $46 million. Toa-UK underwrote reinsurance business throughout the
world between 1986 and 1994, when it stopped writing new business and is
currently operating in run-off. The acquisition was effected through Hillcot
Holdings Ltd. ("Hillcot"), a newly formed Bermuda company, in which Castlewood
Holdings and Shinsei have a 50.1% and 49.9% economic and voting interest,
respectively. Upon completion of the transaction, Toa-UK's name was changed to
Hillcot Re Limited. Castlewood Holdings' share of the transaction was funded
from cash on hand. J. Christopher Flowers, the Vice Chairman of the board of
directors of the Company and the Company's largest shareholder, is a director of
Shinsei.

  SUMMARIZED FINANCIAL INFORMATION

     In accordance with APB No. 18, "The Equity Method of Accounting for
Investments in Common Stock", the Company prepared summarized financial
information for B-Line, B.H. Acquisition and Castlewood Holdings as of March 31,
2003 and December 31, 2002 and for the three months ended March 31, 2003 and
2002, respectively. The Company accounts for its investment in B-Line three
months in arrears. This

                                        8
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

summarized financial information reflects the results of B-Line, B.H.
Acquisition and Castlewood Holdings for all periods presented.

<Table>
<Caption>
                                                            MARCH 31, 2003
                                             ---------------------------------------------
                                                          B.H.       CASTLEWOOD   COMBINED
                                             B-LINE    ACQUISITION    HOLDINGS     TOTAL
                                             -------   -----------   ----------   --------
                                                        (DOLLARS IN THOUSANDS)
<S>                                          <C>       <C>           <C>          <C>
Total assets...............................  $65,587    $121,457      $625,015    $812,059
Total liabilities..........................   34,524      83,968       497,903     616,395
Total equity...............................   31,063      37,489       127,112     195,664
</Table>

<Table>
<Caption>
                                                           DECEMBER 31, 2002
                                             ---------------------------------------------
                                                          B.H.       CASTLEWOOD   COMBINED
                                             B-LINE    ACQUISITION    HOLDINGS     TOTAL
                                             -------   -----------   ----------   --------
                                                        (DOLLARS IN THOUSANDS)
<S>                                          <C>       <C>           <C>          <C>
Total assets...............................  $58,036    $125,428      $514,597    $698,061
Total liabilities..........................   30,771      88,009       347,124     465,904
Total equity...............................   27,265      37,419       167,473     232,157
</Table>

<Table>
<Caption>
                                                    THREE MONTHS ENDED MARCH 31, 2003
                                              ---------------------------------------------
                                                           B.H.       CASTLEWOOD   COMBINED
                                              B-LINE    ACQUISITION    HOLDINGS     TOTAL
                                              -------   -----------   ----------   --------
                                                         (DOLLARS IN THOUSANDS)
<S>                                           <C>       <C>           <C>          <C>
Revenue.....................................  $11,602       $2          $6,299     $17,903
Operating income............................    3,798       96           2,178       6,072
Net income..................................    3,798       70           2,054       5,922
</Table>

<Table>
<Caption>
                                                    THREE MONTHS ENDED MARCH 31, 2002
                                               --------------------------------------------
                                                           B.H.       CASTLEWOOD   COMBINED
                                               B-LINE   ACQUISITION    HOLDINGS     TOTAL
                                               ------   -----------   ----------   --------
                                                          (DOLLARS IN THOUSANDS)
<S>                                            <C>      <C>           <C>          <C>
Revenue......................................  $7,578      $(247)       $6,343     $13,674
Operating income.............................   3,653        228         5,395       9,276
Net income...................................   3,653      3,318         4,400      11,371
</Table>

NOTE 4:  COMMITMENTS AND CONTINGENCIES

     In January 2003, the Company announced that it will contribute up to $10
million to JCF CFN LLC ("JCF CFN"), an entity controlled by JCF Associates I
LLC, the general partner of J.C. Flowers I LP, of which approximately $3 million
was funded from cash on hand in exchange for a 100% economic interest in JCF
CFN. JCF CFN has committed to invest in CFN Investment Holdings LLC ("CFN"), a
newly-formed limited liability company, or affiliated entities, together with
J.C. Flowers I LP, FIT CFN Holdings LLC (an affiliate of Fortress Investment
Group LLC) and affiliates of Cerberus Capital Management, L.P. J.C. Flowers I LP
is a fund managed by J. Christopher Flowers, Vice Chairman of the Company's
board of directors and the Company's largest shareholder. The Company intends to
use cash on hand to fund its remaining capital commitment to JCF CFN. The
Company's investment in JCF CFN is included in other assets at March 31, 2003.

     In March 2003, CFN announced the acquisition in bankruptcy of substantially
all of the assets of Conseco Finance Corporation ("Conseco Finance"), other than
Mill Creek Bank, for approximately $785 million. The acquisition was confirmed
by the U.S. Bankruptcy Court for the Northern District of

                                        9
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Illinois. The assets consist primarily of a portfolio of home equity and
manufactured housing loan securities as well as the associated servicing
businesses. JCF CFN has also invested in FPS DIP LLC, a second limited liability
company formed by the members of CFN to provide, together with one of Conseco
Finance's existing lenders, up to $125 million of debtor-in-possession financing
to Conseco Finance. The Company expects the acquisition of substantially all of
Conseco Finance's assets by CFN to close in the second quarter of 2003, at which
time the Company will fund its remaining capital commitment to JCF CFN.

NOTE 5:  INCOME TAXES

     Income tax expense was $503,000 for the three months ended March 31, 2003.
Income tax expense, including $13,000 recorded as a result of the cumulative
effect of a change in accounting principle, was $51,000 for the three months
ended March 31, 2002. The Company's effective tax rate for 2003 is substantially
greater than statutory rates primarily due to changes in the valuation allowance
related to deferred tax assets. The Company's effective tax rate for 2002 was
substantially less than statutory rates primarily due to the utilization of net
operating loss carryforwards for federal tax purposes.

     The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. The effect of temporary differences on the financial
statements includes undistributed earnings/losses from foreign operations and
tax credit carryforwards. The Company has established a valuation allowance for
the uncertainty of the realization of these net deferred tax assets. During the
three months ended March 31, 2003, the Company increased the valuation allowance
from $10.0 million to $10.3 million. Utilization of the remaining deferred tax
assets at March 31, 2003 is based on management's assessment of the Company's
earnings history, expectations of future taxable income, and other relevant
considerations.

NOTE 6:  SEGMENT INFORMATION

     The Company separately evaluates the performance of each of its partially
owned equity affiliates based on the different services provided by each of the
entities, and such evaluation is based on 100% of the entities' results of
operations. The Company also reviews separate financial results for Enstar's
corporate activity.

     B-Line provides services to credit card issuers and other holders of
similar receivables. B-Line also purchases credit card receivables and recovers
payments on these accounts. B.H. Acquisition, through its wholly owned
subsidiaries, Brittany and CEAI, is principally engaged in the active management
of books of reinsurance business from international markets. Castlewood Holdings
acquires and manages insurance and reinsurance companies, including companies in
"run-off," and provides management, consulting and other services to the
insurance and reinsurance industry.

     The Company accounts for its investment in B-Line three months in arrears.
A reconciliation of the consolidated financial information by segment to the
Company's consolidated financial statements as of March 31, 2003 and December
31, 2002 and for the three months ended March 31, 2003 and 2002, respectively,
is as follows:

<Table>
<Caption>
                                                         MARCH 31, 2003
                                    --------------------------------------------------------
                                                            B.H.       CASTLEWOOD
                                    CORPORATE   B-LINE   ACQUISITION    HOLDINGS     TOTAL
                                    ---------   ------   -----------   ----------   --------
                                                     (DOLLARS IN THOUSANDS)
<S>                                 <C>         <C>      <C>           <C>          <C>
Total reportable segment assets:
  Partially owned equity
     affiliates...................              $3,141     $12,452      $39,791     $ 55,384
  Corporate assets................   $74,012                                          74,012
                                     -------    ------     -------      -------     --------
     Total........................   $74,012    $3,141     $12,452      $39,791     $129,396
                                     =======    ======     =======      =======     ========
</Table>

                                        10
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                       DECEMBER 31, 2002
                                    --------------------------------------------------------
                                                            B.H.       CASTLEWOOD
                                    CORPORATE   B-LINE   ACQUISITION    HOLDINGS     TOTAL
                                    ---------   ------   -----------   ----------   --------
                                                     (DOLLARS IN THOUSANDS)
<S>                                 <C>         <C>      <C>           <C>          <C>
Total reportable segment assets:
  Partially owned equity
     affiliates...................              $2,825     $12,429      $52,729     $ 67,983
  Corporate assets................   $60,626                                          60,626
                                     -------    ------     -------      -------     --------
     Total........................   $60,626    $2,825     $12,429      $52,729     $128,609
                                     =======    ======     =======      =======     ========
</Table>

<Table>
<Caption>
                                                THREE MONTHS ENDED MARCH 31, 2003
                                     -------------------------------------------------------
                                                              B.H.       CASTLEWOOD
                                     CORPORATE   B-LINE    ACQUISITION    HOLDINGS    TOTAL
                                     ---------   -------   -----------   ----------   ------
                                                     (DOLLARS IN THOUSANDS)
<S>                                  <C>         <C>       <C>           <C>          <C>
Net underwriting income............                           $  2         $  698
Revenue............................              $11,602                    5,601
Net investment income..............                            470          1,458
Interest income....................    $ 237
Share of net income of partly-owned
  company..........................                                            31
General and administrative
  expenses.........................     (790)     (5,976)     (751)        (5,579)
Amortization of run-off
  provision........................                            375
Interest expense...................               (1,828)
Other income.......................      100
Foreign exchange loss..............                            (26)           (76)
                                       -----     -------      ----         ------
Income (loss) before income
  taxes............................     (453)      3,798        70          2,133
Income taxes.......................     (503)                                 (79)
                                       -----     -------      ----         ------
Net income (loss)..................    $(956)    $ 3,798      $ 70         $2,054
                                       =====
Company's economic ownership %.....                 8.34%       33%        33 1/3%
                                                 -------      ----         ------
Earnings of partially owned equity
  affiliates.......................              $   317      $ 23         $  685     $1,025
                                                 =======      ====         ======     ======
</Table>

                                        11
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                THREE MONTHS ENDED MARCH 31, 2002
                                      ------------------------------------------------------
                                                              B.H.       CASTLEWOOD
                                      CORPORATE   B-LINE   ACQUISITION    HOLDINGS    TOTAL
                                      ---------   ------   -----------   ----------   ------
                                                      (DOLLARS IN THOUSANDS)
<S>                                   <C>         <C>      <C>           <C>          <C>
Net underwriting income.............                         $ (247)
Revenue.............................              $7,578                   $6,343
Net investment income...............                            584         2,443
Interest income.....................    $ 418
Share of net income of partly-owned
  company...........................                                          157
General and administrative
  expenses..........................     (728)    (3,989)      (671)       (3,391)
Amortization of run-off provision...                            563
Interest expense....................                  64                      (38)
Foreign exchange gain (loss)........                            120          (916)
                                        -----     ------     ------        ------
Income (loss) before income taxes
  and cumulative effect of a change
  in accounting principle...........     (310)     3,653        349         4,598
Income taxes........................      (51)                               (198)
                                        -----     ------     ------        ------
Income (loss) before cumulative
  effect of a change in accounting
  principle.........................     (361)     3,653        349         4,400
Cumulative effect of a change in
  accounting principle..............                          2,969
                                        -----     ------     ------        ------
Net income (loss)...................    $(361)    $3,653     $3,318        $4,400
                                        =====
Company's economic ownership %......                8.34%        33%       33 1/3%
                                                  ------     ------        ------
Earnings of partially owned equity
  affiliates before cumulative
  effect of a change in accounting
  principle.........................              $  305     $  115        $1,466     $1,886
Cumulative effect of a change in
  accounting principle..............                            980                      980
                                                  ------     ------        ------     ------
Earnings of partially owned equity
  affiliates........................              $  305     $1,095        $1,466     $2,866
                                                  ======     ======        ======     ======
</Table>

     The income tax amount of $51,000 included in the corporate segment for the
three months ended March 31, 2002 includes $13,000 which is netted against the
Company's proportionate share of a cumulative effect of a change in accounting
principle in the Company's consolidated statement of income.

NOTE 7:  INCOME PER SHARE

     The table below illustrates the reconciliation between net income per
common share -- basic and net income per common share -- assuming dilution for
the three months ended March 31, 2003 and 2002. Net income per common
share -- basic is computed by dividing net income by the weighted average shares
outstanding. Net income per common share -- assuming dilution is computed by
dividing net income by the sum of the weighted average shares outstanding and
common share equivalents. Common share equivalents consist of stock units
deferred under the Deferred Compensation and Stock Plan for Non-Employee
Directors and stock options granted under the Company's stock option/incentive
plans.

                                        12
<PAGE>
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                THREE MONTHS ENDED
                                                                     MARCH 31,
                                                              -----------------------
                                                                 2003         2002
                                                              ----------   ----------
                                                              (DOLLARS IN THOUSANDS,
                                                              EXCEPT PER SHARE DATA)
                                                                    (UNAUDITED)
<S>                                                           <C>          <C>
Income before cumulative effect of a change in accounting
  principle.................................................  $       69   $    1,538
Cumulative effect of a change in accounting principle, net
  of income taxes...........................................          --          967
                                                              ----------   ----------
Net income..................................................  $       69   $    2,505
                                                              ==========   ==========
Income per common share before change in accounting
  principle -- basic........................................  $     0.01   $     0.28
Cumulative effect of a change in accounting principle, net
  of income taxes -- basic..................................          --         0.18
                                                              ----------   ----------
Net income per common share -- basic........................  $     0.01   $     0.46
                                                              ==========   ==========
Income per common share before change in accounting
  principle -- assuming dilution............................  $     0.01   $     0.27
Cumulative effect of a change in accounting principle, net
  of income taxes -- assuming dilution......................          --         0.17
                                                              ----------   ----------
Net income per common share -- assuming dilution............  $     0.01   $     0.44
                                                              ==========   ==========
Weighted average shares outstanding -- basic................   5,465,753    5,465,753
Common share equivalents....................................     376,363      265,787
                                                              ----------   ----------
Weighted average shares outstanding -- assuming dilution....   5,842,116    5,731,540
                                                              ==========   ==========
</Table>

NOTE 8:  RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued Interpretation No 46, "Consolidation of
Variable Purpose Entities," which requires consolidation by a business
enterprise of variable interest entities if the enterprise is determined to be
the primary beneficiary. This interpretation is effective immediately for new
variable interests created or obtained after January 31, 2003 and for periods
beginning after June 15, 2003 for variable interests that were acquired before
February 1, 2003. The Company is currently assessing the impact of this
interpretation on its consolidated financial statements.

NOTE 9:  SUBSEQUENT EVENTS

     The Company expects to receive in the second quarter of 2003 a commitment
fee of approximately $82,000 in connection with a standby purchase commitment
entered into by the Company through a newly-formed Cayman Islands limited
partnership with J.C. Flowers I LP, Shinsei and Castlewood Holdings. The
commitment was for the purchase of new shares of Allianz Aktiengesellschaft
("Allianz"), a German company, to be issued in connection with a rights offering
by Allianz to its existing shareholders. The commitment was never executed and
no funds were contributed by the Company. J.C. Flowers I LP is a fund managed by
J. Christopher Flowers, Vice Chairman of the Company's board of directors and
the Company's largest shareholder. Mr. Flowers also is a director of Shinsei.

                                        13
<PAGE>

                        INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Shareholders of
The Enstar Group, Inc.
Montgomery, Alabama

     We have reviewed the accompanying condensed consolidated balance sheet of
The Enstar Group, Inc. and Subsidiary ("Enstar") as of March 31, 2003, and the
related condensed consolidated statements of income, comprehensive income and
cash flows for the three-month periods ended March 31, 2003 and 2002. These
financial statements are the responsibility of Enstar's management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.

     Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.

     As discussed in Note 3 to the condensed consolidated financial statements,
effective January 1, 2002 Enstar changed its method of accounting for goodwill
pursuant to Statement of Financial Accounting Standards No. 142.

     We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Enstar as of December 31, 2002 and the related consolidated statements of
income, comprehensive income, shareholders' equity and cash flows for the year
then ended (not presented herein), and in our report dated March 25, 2003, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2002 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.

                                               /s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
May 13, 2003

                                        14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

     Through the operations of the Company's partially owned equity affiliates,
Castlewood Holdings and B.H. Acquisition, and their subsidiaries, the Company
has acquired and manages books of reinsurance business from the international
markets. In general, reinsurance is an arrangement in which the reinsurer agrees
to indemnify an insurance or reinsurance company against all or a portion of the
risks underwritten by such insurance or reinsurance company under one or more
insurance or reinsurance contracts. For a discussion of certain risks and
uncertainties relating to the Company's participation in the reinsurance
industry see "Safe Harbor Compliance Statement for Forward-Looking Statements"
included as Exhibit 99.1 to The Enstar Group, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 2002, and is hereby incorporated by
reference.

     The Company is also actively engaged in the search for one or more
additional operating businesses which meet the Company's acquisition criteria.

RECENT ACQUISITIONS

     In January 2003, the Company announced that it will contribute up to $10
million to JCF CFN, an entity controlled by JCF Associates I LLC, the general
partner of J.C. Flowers I LP, of which approximately $3 million has been funded
from cash on hand, in exchange for a 100% economic interest in JCF CFN. JCF CFN
has committed to invest in CFN, a newly-formed limited liability company, or
affiliated entities, together with J.C. Flowers I LP, FIT CFN Holdings LLC (an
affiliate of Fortress Investment Group LLC) and affiliates of Cerberus Capital
Management, L.P. J.C. Flowers I LP is a fund managed by J. Christopher Flowers,
Vice Chairman of the Company's board of directors and the Company's largest
shareholder. The Company intends to use cash on hand to fund its remaining
capital commitment to JCF CFN.

     In March 2003, CFN announced the acquisition in bankruptcy of substantially
all of the assets of Conseco Finance, other than Mill Creek Bank, for
approximately $785 million. The acquisition was confirmed by the U.S. Bankruptcy
Court for the Northern District of Illinois. The assets consist primarily of a
portfolio of home equity and manufactured housing loan securities as well as the
associated servicing businesses. JCF CFN has also invested in FPS DIP LLC, a
second limited liability company formed by the members of CFN to provide,
together with one of Conseco Finance's existing lenders, up to $125 million of
debtor-in-possession financing to Conseco Finance. The Company expects the
acquisition of substantially all of Conseco Finance's assets by CFN to close in
the second quarter of 2003, at which time the Company will fund its remaining
capital commitment to JCF CFN.

     In March 2003, Castlewood Holdings and Shinsei completed the acquisition of
all of the outstanding capital stock of Toa-UK, a London-based subsidiary of The
Toa Reinsurance Company, Limited, for approximately $46 million. Toa-UK
underwrote reinsurance business throughout the world between 1986 and 1994, when
it stopped writing new business and is currently operating in run-off. The
acquisition was effected through Hillcot, a newly formed Bermuda company, in
which Castlewood Holdings and Shinsei have a 50.1% and 49.9% economic and voting
interest, respectively. Castlewood Holdings' share of the transaction was funded
from cash on hand. In connection with the acquisition of Toa-UK, the Company
funded its remaining capital commitment to Castlewood Holdings of approximately
$7.2 million (which included $6.0 million of the original commitment amount plus
an amount increasing annually at 5% on the unfunded portion of the original
commitment amount) from cash on hand. J. Christopher Flowers, the Vice Chairman
of the board of directors of the Company and the Company's largest shareholder,
is a director of Shinsei.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's assets, aggregating approximately $129.4 million at March 31,
2003, consist primarily of approximately $65.6 million in cash and cash
equivalents, approximately $4.0 million in certificates of deposit

                                        15
<PAGE>

and approximately $55.4 million in partially owned equity affiliates. Total
assets at December 31, 2002 were approximately $128.6 million.

     The Company's total liabilities were approximately $9.0 million at March
31, 2003 compared to approximately $8.4 million at December 31, 2002. The
increase in total liabilities was primarily due to an increase in deferred
income taxes for the three months ended March 31, 2003.

     In March 2003, the Company received a cash dividend of approximately $20.8
million from Castlewood Holdings.

     The Company is currently engaged in the active search for one or more
additional operating businesses which meet the Company's acquisition criteria.
The Company primarily focuses on potential acquisitions in the financial
services industry in a global market which complement its current operating
businesses, investigating acquisition opportunities both within and outside the
United States when management believes that such opportunities might be
attractive. The Company may pay consideration in the form of cash, securities of
the Company or some combination of both. The Company may also borrow money in
connection with an acquisition.

     With the exception of various expenses incurred in connection with the
Company's search for one or more suitable acquisitions, its only needs are to
fund normal operating expenses and its remaining commitment to JCF CFN.

RESULTS OF OPERATIONS

     The Company reported net income of approximately $69,000 for the three
months ended March 31, 2003, compared to net income of approximately $2.5
million for the same period in the prior year. The change in net income from the
three months ended March 31, 2003 compared to the same period in the prior year
is primarily a result of a decrease in earnings from partially owned equity
affiliates, a decrease in interest income and an increase in income tax expense.

     Interest income was approximately $237,000 for the three months ended March
31, 2003 compared to approximately $418,000 for the three months ended March 31,
2002. Interest income was earned from cash, cash equivalents and certificates of
deposit. Interest income decreased due to a reduction of interest rates earned
on the Company's cash, cash equivalents and certificates of deposit and a
reduction in cash and cash equivalents resulting from capital contributions to
partially owned equity affiliates.

     Earnings of partially owned equity affiliates were approximately $1.0
million for the three months ended March 31, 2003 compared to $1.9 million for
the same period in the prior year. The Company recorded equity in earnings of
$23,000 and $115,000 from B.H. Acquisition for the three months ended March 31,
2003 and 2002, respectively. The Company's equity in earnings from B-Line LLC
("B-Line") was $317,000 for the three months ended March 31, 2003 compared to
$305,000 for the same period in 2002. The Company recorded equity in earnings of
$685,000 from Castlewood Holdings for the three months ended March 31, 2003
compared to approximately $1.5 million for the three months ended March 31,
2002. In addition, the Company reported income of $967,000, net of income taxes,
as its proportionate share of a cumulative effect of a change in accounting
principle incurred by B.H. Acquisition associated with the implementation of
SFAS 142 in the first quarter of 2002.

     Other income consists primarily of investment management fees charged to
Castlewood Holdings, one of the Company's partially owned equity affiliates.

     General and administrative expenses were $790,000 for the three months
ended March 31, 2003 compared to $728,000 for the same period in 2002. General
and administrative expenses include legal and professional fees as well as
travel expenses incurred in connection with the Company's search for one or more
additional operating companies. Most variances in legal and professional fees
and travel expenses can be attributed to the number of potential acquisition
candidates the Company locates as well as the degree of interest the Company may
have in such candidates. The stronger the interest in a candidate, the more
rigorous financial and legal due diligence the Company will incur with respect
to that candidate.

                                        16
<PAGE>

     Income tax expense was $503,000 for the three months ended March 31, 2003.
Income tax expense, including $13,000 recorded as a result of the cumulative
effect of a change in accounting principle, was $51,000 for the three months
ended March 31, 2002. The Company's effective tax rate for 2003 is substantially
greater than statutory rates primarily due to changes in the valuation allowance
related to deferred tax assets. The Company's effective tax rate for 2002 was
substantially less than statutory rates primarily due to the utilization of net
operating loss carryforwards for federal tax purposes.

RESULTS OF OPERATIONS -- PARTIALLY OWNED EQUITY AFFILIATES

     Since a substantial portion of the Company's results of operations are
comprised of the results of operations of Castlewood Holdings and B.H.
Acquisition, the following additional summary information is provided with
respect to those companies' results of operations:

  CASTLEWOOD HOLDINGS

     Castlewood Holdings reported consolidated net earnings of $2.1 million for
the three months ended March 31, 2003 compared to $4.4 million for the same
period in 2002. The reduction in income of $2.3 million for the quarter ended
March 31, 2003 compared to the same period in 2002 was due primarily to a loss
on a currency option of $945,000 and an increase in salaries and general and
administrative expenses.

     Underwriting income was $698,000 and $0 for the three months ended March
31, 2003 and March 31, 2002, respectively.

     Castlewood Holdings earned consulting fees of approximately $5.6 million
for the three months ended March 31, 2003 compared to $6.3 million for the same
period in 2002. Castlewood Holdings generates its consulting fees based on a
combination of fixed and success based fee arrangements. Consulting income will
vary depending on the success and timing of completion of success based fee
arrangements. Included in these amounts were $313,000 in consulting fees charged
to B.H. Acquisition, a related party, for each of the three months ended March
31, 2003 and 2002, respectively.

     Castlewood Holdings net income from a partly-owned company was $31,000 and
$157,000 for the three months ended March 31, 2003 and March 31, 2002,
respectively. These amounts represent Castlewood Holdings' proportionate share
of equity in earnings of B.H. Acquisition.

     Net investment income, excluding unrealized gains and losses, for the three
months ended March 31, 2003 was $1.5 million compared to $2.4 million for the
same period in 2002. Investment income includes interest income earned from
cash, cash equivalents and debt securities and, in 2003, a loss from a currency
option of $945,000. During the first quarter of 2003, Castlewood Holdings sold a
currency option as an economic hedge on Castlewood Holdings' portion of the
purchase price of Toa-UK. The weakening of the British pound from the sale date
of the currency option to the completion date of the Toa-UK transaction had an
adverse effect on Castlewood Holdings' hedge, resulting in the loss of $945,000.

     Salaries, benefits and accrued bonuses were $3.3 million for the three
months ended March 31, 2003 compared to $2.7 million for the same period in
2002. Castlewood Holdings is a service based company and therefore employee
salaries and benefits are its largest cost. The increased cost is mainly
attributable to the growth in staff of Castlewood Holdings over the past year.

     General and administrative expenses were $2.3 million for the three months
ended March 31, 2003 compared to $681,000 for the same period in 2002. General
and administrative expenses include, for example, rent and rent related costs,
professional fees (legal, investment, audit and actuarial) and travel expenses.
Castlewood Holdings operates in both the UK and Bermuda and staff travel
frequently in connection with Castlewood Holdings' search for acquisition
opportunities and in the general management of the business.

     Castlewood Holdings has recorded a foreign exchange loss of $76,000 and
$916,000 for the three months ended March 31, 2003 and March 31, 2002,
respectively. Through its subsidiaries, Castlewood Holdings conducts business in
a variety of non-U.S. currencies, the principal exposures being Euros and
British pounds. At each balance sheet date, recorded balances that are
denominated in a currency other than the functional

                                        17
<PAGE>

currency of Castlewood Holdings are adjusted to reflect the current exchange
rate. Revenue and expense items are translated into U.S. dollars at average
rates of exchange for the periods. The resulting exchange gains or losses are
included in net earnings.

     Income taxes of $79,000 were recorded for the three months ended March 31,
2003 compared to $198,000 for the same period in 2002. Under current Bermuda
law, Castlewood Holdings and its Bermuda subsidiaries are not required to pay
taxes in Bermuda on either income or capital gains. Castlewood Holdings and its
Bermuda subsidiaries have received an undertaking from the Bermuda government
that, in the event of income or capital gains taxes being imposed, Castlewood
Holdings and its Bermuda subsidiaries will be exempted from such taxes until the
year 2016. United Kingdom subsidiaries record income taxes based on their
graduated statutory rates, net of tax benefits arising from tax loss
carryforwards.

 B.H. ACQUISITION

     B.H. Acquisition reported net income of $70,000 for the three months ended
March 31, 2003 compared to approximately $3.3 million for the same period in the
prior year. Income was higher in 2002 as a result of approximately $3.0 million
of income from the cumulative effect of a change in accounting principle
associated with the implementation of SFAS 142 in the first quarter of 2002.

     Net underwriting income was $2,000 for the three months ended March 31,
2003 compared to a net underwriting loss of $247,000 for the same period in
2002.

     Net investment income, primarily from cash, cash equivalents and mutual
funds, was $470,000 and $584,000 for the three months ended March 31, 2003 and
2002, respectively.

     General and administrative expenses, net of amortization of run-off
provision, were $376,000 and $108,000 for the three months ended March 31, 2003
and March 31, 2002, respectively. General and administrative expenses include
legal, audit, management and actuarial expenses.

     B.H. Acquisition recorded a foreign exchange loss of $26,000 and gain of
$120,000 for the three months ended March 31, 2003 and 2002, respectively.
Through its subsidiaries, BH Acquisition conducts business in a variety of
foreign (non-U.S.) currencies, the principal exposures being Euros and British
pounds. At each balance sheet date, recorded balances that are denominated in a
currency other than the functional currency of B.H. Acquisition are adjusted to
reflect the current exchange rate. Revenue and expense items are translated into
U.S. dollars at average rates of exchange for the years. The resulting exchange
gains or losses are included in net income.

RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued Interpretation No 46, "Consolidation of
Variable Purpose Entities," which requires consolidation by a business
enterprise of variable interest entities if the enterprise is determined to be
the primary beneficiary. This interpretation is effective immediately for new
variable interests created or obtained after January 31, 2003 and for periods
beginning after June 15, 2003 for variable interests that were acquired before
February 1, 2003. The Company is currently assessing the impact of this
interpretation on its consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

 ENSTAR

     In the ordinary course of business, the Company has made a number of
estimates and assumptions relating to the reporting of results of operations and
financial condition in the preparation of its financial statements in conformity
with accounting principles generally accepted in the United States of America.
Actual results could differ significantly from those estimates under different
assumptions and conditions. The most significant accounting estimates inherent
in the preparation of the Company's consolidated financial statements include
estimates associated with its evaluation of income tax reserves.

                                        18
<PAGE>

     Income Tax Valuation Reserve -- The Company recognizes deferred tax assets
and liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. The effect of
temporary differences on the financial statements includes undistributed
earnings/losses from foreign operations and tax credit carryforwards. The
Company has established a valuation allowance for the uncertainty of the
realization of these net deferred tax assets. Utilization of the remaining
deferred tax assets at March 31, 2003 is based on management's assessment of the
Company's earnings history, expectations of future taxable income, and other
relevant considerations.

 CASTLEWOOD HOLDINGS AND B.H. ACQUISITION

     Certain amounts in Castlewood Holdings' and B.H. Acquisition's consolidated
financial statements are the result of transactions that require the use of best
estimates and assumptions to determine reported values. These amounts could
ultimately be materially different than what has been provided for in their
consolidated financial statements. The assessment of loss reserves and
reinsurance recoverable are considered to be the values requiring the most
inherently subjective and complex estimates. As such, the accounting policies
for these amounts are of critical importance to their consolidated financial
statements.

     Loss and Loss Adjustment Expenses -- Because a significant amount of time
can lapse between the assumption of risk, the occurrence of a loss event, the
reporting of the event to an insurance or reinsurance company and the ultimate
payment of the claim on the loss event, Castlewood Holdings' and B.H.
Acquisition's liability for unpaid losses and loss expenses is based largely
upon estimates. Castlewood Holdings' and B.H. Acquisition's management must use
considerable judgment in the process of developing these estimates. The
liability for unpaid losses and loss expenses for property and casualty business
includes amounts determined from loss reports on individual cases and amounts
for losses incurred but not reported. Such reserves are estimated by management
based upon reports received from ceding companies and independent actuarial
estimates of ultimate unpaid losses. These estimates are continually reviewed
and Castlewood Holdings' and B.H. Acquisition's ultimate liability may be
significantly greater than or less than the amount estimated, with any
adjustments in such estimates being reflected in the periods in which they
become known.

     Reinsurance Balances Receivable -- Loss exposure is managed through the use
of reinsurance. While reinsurance arrangements are designed to limit losses and
to permit recovery of a portion of direct unpaid losses, reinsurance does not
relieve Castlewood Holdings or B.H. Acquisition of their liabilities to their
insureds. Accordingly, loss reserves represent total gross losses, and
reinsurance recoverable represents anticipated recoveries of a portion of those
unpaid losses as well as amounts recoverable from reinsurers with respect to
claims, which have already been paid.

     Goodwill -- On January 1, 2002, Castlewood Holdings and B.H. Acquisition
adopted SFAS 142. This statement requires that goodwill be assessed for
impairment on at least an annual basis and that negative goodwill be reversed
immediately upon adoption. In assessing the recoverability of Castlewood
Holdings' goodwill, Castlewood Holdings must make assumptions regarding
estimated future cash flows to determine the fair value of the respective
assets. If these estimates or their related assumptions change in the future,
Castlewood Holdings may be required to record impairment charges for these
assets. In accordance with SFAS 142, B.H. Acquisition reversed its negative
goodwill into earnings upon adoption of SFAS 142 and presented it as a
cumulative effect of a change in accounting principle.

RECENT DEVELOPMENTS

     The Company expects to receive in the second quarter of 2003 a commitment
fee of approximately $82,000 in connection with a standby purchase commitment
entered into by the Company through a newly-formed Cayman Islands limited
partnership with J.C. Flowers I LP, Shinsei and Castlewood Holdings. The
commitment was for the purchase of new shares of Allianz Aktiengesellschaft
("Allianz"), a German company, to be issued in connection with a rights offering
by Allianz to its existing shareholders. The commitment was never executed and
no funds were contributed by the Company. J.C. Flowers I LP is a fund

                                        19
<PAGE>

managed by J. Christopher Flowers, Vice Chairman of the Company's board of
directors and the Company's largest shareholder. Mr. Flowers also is a director
of Shinsei.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risk from changes in interest rates. The
Company had cash and cash equivalents of approximately $65.6 million in interest
bearing accounts (interest at floating rates) and approximately $4.0 million of
short-term certificates of deposit (interest at fixed rates) at March 31, 2003.
Accordingly, each one percent change in market interest rates would change
interest income by approximately $696,000 per annum. However, any future
transactions affecting the Company's cash and cash equivalents and certificates
of deposit will change this estimate. Additionally, although interest rate
changes would affect the fair value of the Company's certificates of deposits,
the weighted average original term of certificates held by the Company at March
31, 2003 was approximately six months. The short-term nature of these
certificates limits the Company's risk of changes in the fair value of these
certificates.

     The Company is also exposed to foreign currency risk through its holdings
in partially owned equity affiliates and their subsidiaries. Foreign currency
risk is the risk that the Company will incur economic losses due to adverse
changes in foreign currency exchange rates. These entities conduct business in a
variety of foreign (non-U.S.) currencies, the principal exposures being in Euros
and British pounds. Assets and liabilities denominated in foreign currencies are
exposed to risk stemming from changes in currency exchange rates. Exchange rate
fluctuations impact the Company's and its partially owned equity affiliates'
reported consolidated financial condition, results of operations and cash flows
from year to year.

ITEM 4.  CONTROLS AND PROCEDURES

     Based on their evaluation of the Company's disclosure controls and
procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange
Act of 1934), as of a date within 90 days of the filing of this Form 10-Q, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that these controls and procedures are effective. There have been no significant
changes in internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, nor have there been
any significant deficiencies or material weaknesses. As a result, no corrective
actions were required or undertaken.

                                    PART II

                               OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

<Table>
<Caption>
REFERENCE
 NUMBER                            DESCRIPTION OF EXHIBITS
---------                          -----------------------
<C>         <S>  <C>
   2.1      --   Shareholders Agreement, dated as of July 3, 2000, among B.H.
                 Acquisition Limited, the Company and the other parties
                 thereto (incorporated by reference to Exhibit 2.1 to the
                 Current Report on Form 8-K, dated July 18, 2000).
   2.2      --   Investment Agreement, dated as of July 3, 2000, among B.H.
                 Acquisition Limited, the Company and the other parties
                 thereto (incorporated by reference to Exhibit 2.2 to the
                 Current Report on Form 8-K, dated July 18, 2000).
   2.3      --   Share Sale and Purchase Agreement, dated as of March 31,
                 2000, between PetroFina S.A. and B.H. Acquisition Limited
                 (incorporated by reference to Exhibit 2.3 to the Current
                 Report on Form 8-K, dated July 18, 2000).
   2.4      --   Share Sale and Purchase Agreement, dated as of March 31,
                 2000, between PetroFina S.A., Brittany Holdings Limited and
                 B.H. Acquisition Limited (incorporated by reference to
                 Exhibit 2.4 to the Current Report on Form 8-K, dated July
                 18, 2000).
</Table>

                                        20
<PAGE>

<Table>
<Caption>
REFERENCE
 NUMBER                            DESCRIPTION OF EXHIBITS
---------                          -----------------------
<C>         <S>  <C>
   2.5      --   Share Purchase and Capital Commitment Agreement, dated as of
                 October 1, 2001, between the Company, Castlewood Holdings,
                 Trident, Marsh & McLennan Capital Professionals Fund, L.P.,
                 Marsh & McLennan Employees' Securities Company, L.P. and the
                 other parties thereto (incorporated by reference to Exhibit
                 2.1 to the Current Report on Form 8-K, dated December 13,
                 2001).
   2.6      --   Amendment No. 1 and Waiver of Certain Closing Conditions to
                 the Share Purchase and Capital Commitment Agreement, dated
                 as of November 29, 2001 (incorporated by reference to
                 Exhibit 2.2 to the Current Report on Form 8-K, dated
                 December 13, 2001).
   2.7      --   Agreement Relating to the Sale and Purchase of the Entire
                 Issued Share Capital of Toa-UK, dated as of March 28, 2003,
                 between The Toa Reinsurance Company, Limited, Castlewood
                 Holdings and Shinsei (incorporated by reference to Exhibit
                 2.1 to the Current Report on Form 8-K, dated April 11,
                 2003).
   3.1      --   Articles of Incorporation of the Company, as amended on June
                 10, 1998 (incorporated by reference to Exhibit 3.1 to the
                 Quarterly Report on Form 10-Q, dated August 4, 1998).
   3.2      --   Bylaws of the Company, as amended on May 20, 1999
                 (incorporated by reference to Exhibit 3.2 to the Quarterly
                 Report on Form 10-Q, dated August 6, 1999).
   4.1      --   Rights Agreement between the Company and American Stock
                 Transfer & Trust Company, as Rights Agent, dated as of
                 January 20, 1997 (incorporated by reference to Exhibit 4.1
                 to Amendment No. 2 to the Registration Statement on Form 10,
                 dated March 27, 1997).
   4.2      --   Amendment Agreement, dated as of October 20, 1998, to the
                 Rights Agreement, dated as of January 20, 1997, between the
                 Company and American Stock Transfer & Trust Company
                 (incorporated by reference to Exhibit 10.2 to the Current
                 Report on Form 8-K dated October 20, 1998).
  99.1      --   The Enstar Group, Inc. Private Securities Litigation Reform
                 Act of 1995 Safe Harbor Compliance Statement For
                 Forward-Looking Statements (incorporated by reference to
                 Exhibit 99.1 to the Annual Report on Form 10-K, dated March
                 31, 2003).
  99.2      --   Certifications Pursuant to 18 U.S.C. Section 1350, as
                 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                 2002.
</Table>

     (b) Reports on Form 8-K

     There were no reports filed on Form 8-K for the quarter ended March 31,
2003.

                                        21
<PAGE>

                                   SIGNATURES

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

                                          THE ENSTAR GROUP, INC.

                                          By:      /s/ CHERYL D. DAVIS
                                            ------------------------------------
                                                      Cheryl D. Davis
                                               Chief Financial Officer, Vice
                                                          President
                                               of Corporate Taxes, Secretary
                                                    (Authorized Officer)
                                               (Principal Financial Officer)

Date: May 15, 2003

                                        22
<PAGE>

I, Nimrod T. Frazer, Chairman of the Board of Directors and Chief Executive
Officer, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of The Enstar Group,
Inc.;

     2. Based on my knowledge, this quarterly 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 quarterly
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-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 quarterly 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
     quarterly report (the "Evaluation Date"); and

          c. presented in this quarterly 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 officers 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 officers and I have indicated in this
quarterly 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.

                                          By:     /s/ NIMROD T. FRAZER
                                            ------------------------------------
                                                      Nimrod T. Frazer
                                             Chairman of the Board of Directors
                                                and Chief Executive Officer

Date: May 15, 2003

                                        23
<PAGE>

I, Cheryl D. Davis, Chief Financial Officer, Vice President of Corporate Taxes
and Secretary, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of The Enstar Group,
Inc.;

     2. Based on my knowledge, this quarterly 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 quarterly
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-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 quarterly 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
     quarterly report (the "Evaluation Date"); and

          c. presented in this quarterly 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 officers 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 functions):

          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 officers and I have indicated in this
quarterly 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.

                                          By:      /s/ CHERYL D. DAVIS
                                            ------------------------------------
                                                      Cheryl D. Davis
                                                  Chief Financial Officer,
                                             Vice President of Corporate Taxes,
                                                          Secretary
Date: May 15, 2003

                                        24