<PAGE>

================================================================================


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


                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 12 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended MARCH 31, 2001
                        Commission file number 000-23481
                                -----------------

                                 ESG RE LIMITED
             (Exact name of Registrant as specified in its charter)


         Bermuda                                              Not Applicable
(State or other jurisdiction of                             (I.R.S. Employer
incorporation of organization)                              Identification No.)

                                16 Church Street
                             Hamilton HM11, Bermuda
                    (Address of executive offices, zip code)

                            Telephone (441) 295-2185
              (Registrant's telephone number, including area code)

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

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

The number of the Registrant's common shares (par value $1.00 per share)
outstanding as of May 08, 2001, was 11,787,725.



================================================================================



<PAGE>



                                 ESG RE LIMITED
          1.1 INDEX TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                      PAGE
<S>                                                                                                   <C>
Condensed Consolidated Balance Sheets as of  March 31, 2001 (unaudited) and December 31,               1
     2000
Condensed Consolidated Statements of Operations for the three months ended March 31,
     2001 and 2000 (unaudited)                                                                         2
Condensed Consolidated Statements of Cash Flows for the three months ended  March 31,
     2001 and 2000 (unaudited)                                                                         3
Condensed Consolidated Statements of Comprehensive Income for the three months ended
     March 31, 2001 and 2000 (unaudited)                                                               4
Notes to the Condensed Consolidated Financial Statements (unaudited)                                   5
Independent Accountants' Review Report                                                                 9
</TABLE>




<PAGE>


                         PART I - FINANCIAL INFORMATION
               ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                 ESG RE LIMITED
                      CONDENSED CONSOLIDATED BALANCE SHEETS
           (U.S. dollars in thousands except share and per share data)


<TABLE>
<CAPTION>
                                                                                    March 31,        December 31,
                                                                                       2001              2000
                                                                             -------------------------------------
                                                                                   (Unaudited)

<S>                                                                                   <C>               <C>
ASSETS
     Investments - available for sale, at fair value
        (cost: $163,409 and $166,513)                                                 $ 168,872         $ 168,478
     Cash and cash equivalents                                                           22,788            26,032
     Other investments                                                                   17,973            17,736
                                                                             -------------------------------------
         Total investments and cash                                                     209,633           212,246

     Accrued investment income                                                            2,739             3,240
     Management fees receivable                                                             379               713
     Reinsurance balances receivable                                                    226,591           241,587
     Reinsurance recoverable on incurred losses                                          15,855            15,633
     Funds retained by ceding companies                                                  19,436            18,432
     Prepaid reinsurance premiums                                                         3,974             5,432
     Deferred acquisition costs                                                          46,324            46,611
     Other assets                                                                         6,149             6,281
     Cash and cash equivalents held in a fiduciary capacity                               4,780             4,619
                                                                             -------------------------------------

TOTAL ASSETS                                                                          $ 535,860         $ 554,794
                                                                             =====================================

LIABILITIES
     Unpaid losses and loss expenses                                                   $175,754          $179,614
     Unearned premiums                                                                  141,825           148,124
     Acquisition costs payable                                                           58,575            64,604
     Reinsurance balances payable                                                        28,053            30,511
     Accrued expenses,  accounts payable, and other liabilities ($85 and $85
     due to related parties)                                                             13,359            13,756
     Fiduciary liabilities                                                                4,780             4,619
                                                                             -------------------------------------
         Total liabilities                                                              422,346           441,228
                                                                             -------------------------------------


SHAREHOLDERS' EQUITY
     Preference shares, 50,000,000 shares authorized; no shares issued and
         outstanding for 2001 and 2000                                                       --                --
     Class B common shares, 100,000,000 shares authorized; no  shares
         issued and outstanding for 2001 and 2000                                            --                --
     Common shares, par value $1 per share; 100,000,000 shares authorized;
         11,787,725 shares issued and outstanding for 2001 and 11,777,086
         shares issued and outstanding for 2000                                          11,788            11,777
     Additional paid-in capital                                                         207,717           207,646
     Accumulated other comprehensive income:
         Foreign currency translation adjustments, net of tax                            (5,021)           (5,331)
         Unrealized gains on securities,  net of reclassification
              adjustments and tax                                                         5,463             1,965
                                                                             -------------------------------------
     Accumulated other comprehensive income                                                 442            (3,366)
                                                                             -------------------------------------
     Retained (deficit)                                                                (106,433)         (102,491)
                                                                             -------------------------------------
         Total shareholders' equity                                                     113,514           113,566
                                                                             -------------------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                            $ 535,860         $ 554,794
                                                                             =====================================
</TABLE>

         The accompanying notes are an integral part of the consolidated
financial statements.



                                       1
<PAGE>


                                 ESG RE LIMITED
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (U.S. dollars in thousands except share and per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                          ------------------------------------
                                                                             March 31, 2001    March 31, 2000
                                                                          ------------------------------------
<S>                                                                       <C>                  <C>
REVENUES
     Net premiums written                                                           $37,193          $104,479
     Change in unearned premiums                                                      3,116           (46,668)
                                                                          ------------------------------------

     Net premiums earned                                                             40,309            57,811
     Management fee revenue                                                             230               362
     Net investment income                                                            3,408             2,926
     Gain (loss) on equity investments                                                  (27)              334
     Net realized investment gains (losses)                                             748            (1,415)
                                                                          ------------------------------------
                                                                                     44,668            60,018
                                                                          ------------------------------------
EXPENSES
     Losses and loss expenses                                                        29,985            45,229
     Acquisition costs                                                               11,934            14,679
     Administrative expenses                                                          6,692             7,416
                                                                          ------------------------------------
                                                                                     48,611            67,324
                                                                          ------------------------------------
NET (LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE TAXES                                                              (3,943)           (7,306)
     Income tax expense                                                                   -                 -
                                                                          ------------------------------------
NET (LOSS) INCOME FROM CONTINUING
OPERATIONS                                                                           (3,943)           (7,306)
       Net loss from discontinued operations  (Note 4)                                    -            (2,920)
                                                                          ------------------------------------
NET (LOSS) INCOME                                                                  $ (3,943)       $  (10,226)
                                                                          ====================================

  PER SHARE DATA
     Basic net loss per share from continuing operations                           $  (0.33)         $  (0.63)

     Diluted net loss per share from continuing operations                         $  (0.33)         $  (0.63)
                                                                          ====================================

     Basic net loss per share                                                      $  (0.33)         $  (0.88)

     Diluted net loss per share                                                    $  (0.33)         $  (0.88)
                                                                          ====================================
     Weighted average shares outstanding
        Basic                                                                    11,782,500        11,575,898
        Diluted                                                                  11,782,500        11,575,898
                                                                          ====================================


     Dividends declared per share                                                    $  ---           $  0.08
                                                                          ====================================
</TABLE>


         The accompanying notes are an integral part of the consolidated
financial statements.







                                       2
<PAGE>


                                 ESG RE LIMITED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (U.S. dollars in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                         -------------------------------------

                                                                            March 31, 2001    March 31, 2000
                                                                         -------------------------------------
<S>                                                                      <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net cash provided by (used in) operating activities                               $ (6,476)           $ 2,084
                                                                         -------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
     Cost of fixed maturity investments acquired - available
         for sale                                                                  (115,573)          (50,086)
     Proceeds  from sale of fixed  maturity  investments -
         available for sale                                                         119,141            53,821
     Funding of strategic investments                                                    --            (4,340)
     Purchases of fixed assets                                                         (278)             (450)
     Purchases of intangible assets                                                      --              (690)
                                                                         -------------------------------------
Net cash provided by (used in) investing activities                                   3,290            (1,745)
                                                                         -------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
     Dividends paid                                                                      --            (1,009)
     Repurchase of common shares                                                        (58)           (1,940)
                                                                         -------------------------------------
Net cash used in financing activities                                                   (58)           (2,949)
                                                                         -------------------------------------

Net decrease in cash                                                                 (3,244)           (2,610)
Cash and cash equivalents at January 1                                               26,032            28,278
                                                                         -------------------------------------

Cash and cash equivalents at March 31                                              $ 22,788          $ 25,668
                                                                         =====================================
</TABLE>


         The accompanying notes are an integral part of the consolidated
financial statements.



















                                       3
<PAGE>


                                 ESG RE LIMITED
            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                           (U.S. dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                             MARCH 31, 2001    MARCH 31, 2000
                                                                         -------------------------------------
<S>                                                                      <C>              <C>
Net (loss) income                                                                 $ (3,943)        $ (10,226)
                                                                         -------------------------------------
Other comprehensive income, net of tax:
  Foreign currency translation adjustments                                              310              546
  Unrealized losses on securities:
    Unrealized holding (losses)/gains arising during
          the period                                                                  3,498           (1,890)
    Less reclassification adjustment for losses included in net income                   --            1,415
                                                                         -------------------------------------
Other comprehensive income                                                            3,808               71

Comprehensive (loss) income                                                        $   (135)       $ (10,155)
                                                                         =====================================
</TABLE>


         The accompanying notes are an integral part of the consolidated
financial statements.



                                       4
<PAGE>


NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of ESG Re Limited
(together with its subsidiaries, the "Company") have been prepared in accordance
with generally accepted accounting principles in the United States of America
("U.S. GAAP") except pursuant to the rules and regulations of the Securities and
Exchange Commission which do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, these unaudited financial statements
reflect all adjustments considered necessary for a fair presentation of
financial position, results of operations and comprehensive income as of and for
the periods presented. The results of operations for any interim period are not
necessarily indicative of the results for a full year. These unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements, and related notes thereto, included in the
Company's 2000 Annual Report on Form 10-K.

The preparation of financial statements in accordance with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period as well as the disclosure of such amounts. Actual results
could materially differ from those estimates and assumptions.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company's condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S GAAP"). The Company's significant accounting policies include the
following:

    (A) PREMIUM REVENUES
Premiums written are estimated and recognized at the inception of the
reinsurance contract, based upon information received from intermediaries and
ceding companies. The Company compares estimated written premiums to actual
premiums as reported by ceding companies on a periodic basis. The timeliness and
frequency of ceding company reports vary considerably by ceding company, line of
business and geographic area, which means that the actual ultimate premium
written may not be known with certainty for prolonged periods. Differences
between such estimates and actual amounts as reported by ceding companies are
recorded in the period in which the actual amounts are determined.

The reinsurance contracts entered into by the Company are primarily of short
duration. Premiums written are recognized as earned over the coverage period in
proportion to the amount of protection provided. Unearned premium reserves are
established to cover the unexpired contract period.

    (B) RESERVE FOR LOSSES AND LOSS EXPENSES
The reserve for unpaid losses and loss adjustment expenses includes an estimate
of reported case reserves and an estimate for losses incurred but not reported.
Case reserves are estimated based on ceding company reports and other data
considered relevant to the estimation process. The liability for losses incurred
but not reported is based to a large extent on the expectations of ceding
companies about ultimate loss ratios at the inception of the contracts,
supplemented by industry experience and the Company's specific historical
experience where available. As the Company has limited specific historical
experience on a significant number of its programs on which to base its estimate
of losses incurred but not reported, its reliance on ceding company expectations
and industry experience is necessarily increased, which increases the
uncertainty involved in the loss estimation process.

The reserves as established by management are reviewed periodically, and
adjustments are made in the periods in which they become known. Although
management believes that an adequate provision has been made for the liability
for losses and loss expenses, based on all available information, there can be
no assurance that the ultimate losses will not differ significantly from the
amounts provided.




                                       5
<PAGE>


    (C) INVESTMENTS
Fixed maturity securities are classified as available for sale and are reported
at estimated fair value. Investments that are available for sale are expected to
be held for an indefinite period but may be sold depending on interest rates and
other considerations. Other investments over which the Company exercises
significant influence are accounted for under the equity method . Other
investments are accounted for at the lower of cost or estimated realizable
value. Unrealized investment gains and losses on investments available for sale,
net of applicable deferred income tax, are reported as a separate component of
"accumulated other comprehensive income". Realized gains or losses on sale of
investments are determined on the basis of average cost. The carrying values of
investments available for sale and other investments are adjusted for
impairments in value that are considered to be other than temporary.

    (D) DEFERRED ACQUISITION COSTS
Cost relating to the production of new business (primarily commissions and
certain costs of marketing) are deferred and included in the deferred
acquisition cost asset to the extent that such costs are recoverable from future
related policy revenues. The deferred acquisition costs are being amortized over
the periods in which the related premiums are earned. Such deferred costs are
reviewed to determine if they are recoverable from future income, including
investment income and, if not considered recoverable, are charged to expense.

    (E) REINSURANCE PREMIUMS CEDED
Reinsurance premiums ceded are reported as prepaid reinsurance premiums and
amortized over the respective contract or policy periods in proportion to the
amount of insurance protection provided. Commissions on reinsurance ceded are
deferred over the terms of the contracts of reinsurance to which they relate and
amortized in proportion to the amount of insurance protection provided.

    (F) FOREIGN CURRENCY TRANSLATION The functional and reporting currency of
the Company is U.S. dollars. Foreign currency receivables or payables that
are denominated in a currency other than U.S. dollars are translated into
U.S. dollars at the rates of exchange in effect at the balance sheet date.
The resulting exchange gains or losses are included in the results of
operations. Exchange gains and losses related to the translation of
investments available for sale are included in the net unrealized
appreciation (depreciation) of investments, net of deferred income taxes, as
a separate component of "accumulated other comprehensive income". Assets and
liabilities related to foreign operations are translated into U.S. dollars at
the exchange rate in effect at the balance sheet date; revenues and expenses
are translated into U.S. dollars using weighted average exchange rates for
the period. Gains and losses resulting from translating foreign currency
financial statements, net of deferred income taxes, are excluded from income
and included as a separate component of "accumulated other comprehensive
income."

    (G) USE OF ESTIMATES
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles 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 as well as the disclosure of such amounts. Actual results,
particularly for premiums written, premiums earned and loss reserves could
materially differ from those estimates and assumptions.

    (H) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's investments approximates their fair value
and is based on quoted market prices. Due to the uncertainty with respect to
both the timing and amount of the proceeds to be realized from the Company's
other investments, it is not practicable to determine the fair value of these
other investments. The carrying value of other financial instruments, including
cash and cash equivalents, accrued investment income, and other receivables and
payables approximate their estimated fair value due to the short term nature of
the balances.


3.  COMMITMENTS AND CONTINGENCIES

    (A)  EMPLOYMENT CONTRACTS


                                       6
<PAGE>


The Company had entered into employment contracts with several employees for
original terms of one to five years which have total minimum commitments of $2.8
million excluding any performance bonuses that are determined by the Board of
Directors of the Company as at March 31, 2001. The contracts include various
non-compete clauses following termination of employment.



    (B)  LEASE COMMITMENTS
The Company and its subsidiaries have various obligations under operating
leases. The future minimum commitments under operating leases and employment
contracts are as follows:

<TABLE>
<CAPTION>
                                          Employment         Lease
U.S. dollars in thousands                 Commitments     Commitments         Total
-----------------------------------------------------------------------------------------
<S>                                       <C>             <C>                 <C>
Years Ending December 31,
     2001                                         1,835              987           2,822
     2002                                           897              845           1,742
     2003                                           117              755             872
     2004                                            --              558             558
     2005                                            --              353             353
     Over five years                                 --              654             654
                                        -------------------------------------------------

Total                                           $ 2,849          $ 4,152         $ 7,001
                                        =================================================
</TABLE>


    (C)  LETTERS OF CREDIT
As of March 31, 2001, Secured Letters of Credit and Trust Accounts in the
aggregate amount of $102.2 million have been issued in favor of ceding companies
with $58.0 million related to Letters of Credit issued and $44.2 million related
to Trust Accounts in force. The Letters of Credit and Trust Accounts are secured
by a lien on the Company's fixed maturities investment portfolio, equal to 110%
of the amount of the outstanding Letters of Credit, and 102% of the amount of
the outstanding Trust Accounts. As of December 31, 2000, Secured Letters of
Credit and Trust Accounts in the amount of $95.8 million were issued in favor of
ceding companies.

    (D)  PENSION OBLIGATIONS
Certain subsidiaries of the Company are obligated to make contributions to
defined contribution pension plans for employees. As of March 31, 2001, there
were outstanding liabilities for pension contributions of $448 thousand.

    (E) CONTINGENCIES
ESG and its subsidiaries, in common with the insurance industry in general, are
subject to litigation, including claims for punitive damages, in the normal
course of their business. ESG does not believe that such litigation will have a
material adverse effect on its financial condition, future operating results or
liquidity.

In February 2000, Odyssey Re instituted an action in England against a broker,
Stirling Cooke Brown, alleging fraud and conspiracy on the reinsurance placement
of 1997 and 1998 Personal Accident and Workers Compensation "carve out" business
with Odyssey Re. These proceedings mirror earlier proceedings commenced in New
York which were dismissed on jurisdictional grounds. During 1998, ESG accepted a
25% quota share reinsurance treaty with Odyssey Re (UK) retroactive to January
1, 1998. This treaty covers various insurance companies involved in the
litigation Odyssey Re instituted in New York over 1997 and 1998 business. This
treaty terminated as of December 31, 1998 but ESG renewed its participation for
1999 directly to one of those ceding companies. In December 1999, the Company
gave notice to rescind its contract with Odyssey Re (UK) for misrepresentation
and failure to disclose material facts. On November 29, 2000 the Company filed
suit in the High Court to seek judicial confirmation of its rescission. On
February 5, 2001, Odyssey Re filed a response. On March 21, 2001, the Company
filed a motion for summary judgment. The company has also given notice to
rescind the 1999 account. At this time, the Company is unable to determine the
amount of its exposure and the possible effect upon the Company's business,
financial condition or results of operation from these two contracts.



                                       7
<PAGE>



4.  DISCONTINUED OPERATIONS

On August 10, 2000, the Board of Directors approved a plan for the divestiture
of its Health Care Division. Implementation of that plan resulted in the
divestiture of 4Sigma (formerly VVB Bermuda Limited) effective June 30, 2000, to
affiliates of the Chairman and senior management of the Health Care Division.
The investors in 4Sigma include the Company, affiliates of the Chairman of the
Company ("Chairman"), Dr. Gerald Moeller, previously a member of the board of
ESG Re Limited and Chief Executive-Healthcare Division and former management of
the Health Care Division. Terms comparable to those offered to the affiliates of
the Chairman were offered to non-related parties. The Company owns 8,000,000
convertible preference shares in 4Sigma. The book value of $8.0 million for the
Company's equity position is included in other investments.

The operations of 4Sigma have entered into a strategic partnership with
Bertelsmann/Springer for the marketing of its services to German health
insurers. Currently, sales proposals have been made to three of the largest
insurers with decisions due in the second quarter. The expectation is that the
group will be successful on at least one of the proposals. In the event none of
the proposals are accepted, then the group will be in a position to revisit its
business model and the Company would revalue its investment in 4Sigma.
Shareholders, including the Company, may be required to further fund 4Sigma's
operating cash requirements until decisions on the sales proposals have been
received.

For the three months of March 31, 2000, the Healthcare Division reported revenue
of $8 thousand and a net loss of $2,915 thousand, or $0.25 per share.

Additionally on August 10, 2000 the Board of Directors approved a plan to
liquidate its majority-owned subsidiary in Indonesia. This operation reported a
net loss of $5 thousand on revenues of $0.3 million in the first quarter of
2000.

5.  RELATED PARTIES

Included in net investment income for the three months ended March 31, 2001,
were related party investment expenses of $41 thousand.



                                       8
<PAGE>




                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT

To the Board of Directors and Shareholders of ESG Re Limited

We have reviewed the accompanying condensed consolidated balance sheet of ESG Re
Limited and subsidiaries as of March 31, 2001, and the related condensed
consolidated statements of operations, comprehensive income and cash flows for
the three month period ended March 31, 2001. These financial statements are the
responsibility of the Company'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 generally accepted auditing standards, 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 upon 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.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of ESG Re Limited
and subsidiaries as of December 31, 2000, and the related consolidated
statements of operations, comprehensive income, changes in shareholders' equity
and cash flows for the year then ended (not presented herein) and in our report
dated April 2, 2001, 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, 2000, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.

Deloitte & Touche
Chartered Accountants
Dublin, Ireland
May 15, 2001




                                       9
<PAGE>


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

THE FOLLOWING IS A DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AS OF
MARCH 31, 2001 AND THE RESULTS OF OPERATIONS OF ESG RE LIMITED AND SUBSIDIARIES
(THE "COMPANY" OR "ESG") FOR THE THREE MONTHS ENDED MARCH 31, 2001 AS COMPARED
TO THE THREE MONTHS ENDED MARCH 31, 2000. THIS DISCUSSION AND ANALYSIS SHOULD BE
READ IN CONJUNCTION WITH THE ATTACHED UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO AND THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF THE COMPANY AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2000 AND NOTES THERETO
INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000. THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR
THE THREE MONTHS ENDED MARCH 31, 2001 AND FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND NOTES THERETO HAVE BEEN REVIEWED BY INDEPENDENT ACCOUNTANTS IN
ACCORDANCE WITH STANDARDS ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS.

THE RESULTS OF OPERATIONS AND CASH FLOWS FOR ANY INTERIM PERIOD ARE NOT
NECESSARILY INDICATIVE OF RESULTS FOR THE FULL YEAR. IN ADDITION, THIS QUARTERLY
REPORT CONTAINS FORWARD-LOOKING STATEMENTS REGARDING FUTURE PROFIT LEVELS,
PREMIUM GROWTH, CASH FLOWS AND OTHER MATTERS, WHICH INVOLVE RISKS AND
UNCERTAINTIES THAT MAY AFFECT THE ACTUAL RESULTS OF OPERATIONS OF THE COMPANY.
THE FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS: CLAIMS
FREQUENCY, CLAIMS SEVERITY, ECONOMIC ACTIVITY, COMPETITIVE PRICING AND THE
REGULATORY ENVIRONMENT IN WHICH THE COMPANY OPERATES.


GENERAL

Effective with the divestiture of the health care business in June, 2000, the
Company now considers its reinsurance activities to constitute a single
operating segment on the basis that such activities are monitored and evaluated
primarily on a company-wide basis. The major lines of business of the Company's
reinsurance operations include medical expense, personal accident and
disability, credit, life and other special risk reinsurance. The results from
the Health Care division are reported in prior periods as discontinued
operations.



RESULTS OF OPERATIONS

For the three months ended March 31, 2001, the Company posted a net loss of $3.9
million, compared to a net loss of $10.2 million for the first quarter of 2000.
The net loss per share for the three months ended March 31, 2001 was $0.33
compared to a net loss per share of $0.88 for the first quarter of 2000.
Included in last year's first quarter results was a loss from discontinued
operations of $2.9 million or $0.25 per share representing the results from the
divested non-core health care operations.

For the three months ended March 31, 2001, gross premiums written declined in
line with the Company's strategy on select underwriting. For the three months
ended March 31, 2001, the Company wrote $43.2 million of gross written premiums,
compared to $111.8 million for the three months ended March 31, 2000.

Total revenues for the three months ended March 31, 2001 were $44.7 million,
consisting of net premiums earned of $40.3 million, net investment income of
$3.4 million, realized investment gains of $0.7 million, loss on equity
investments of less than $0.1 million and management fee revenue of $0.2
million. Total revenues for the three months ended March 31, 2000 were $60.0
million, consisting of net premiums earned of $57.8 million, net investment
income of $2.9 million, realized investment loses of $1.4 million, gain from
equity investments of $0.3 million and management fee revenue of $0.4 million.

For the three months ended March 31, 2001, ESG's expenses totaled $48.6
million, consisting of $30.0 million of losses and loss expenses, $11.9 million
of acquisition costs, and $6.7 million of operating expenses. Total expenses for
the three months ended March 31, 2000 were $67.3 million, consisting of $45.2
million of losses and loss expenses, $14.7 million of acquisition costs, and
$7.4 million of other operating expenses.



                                       10
<PAGE>


NET UNDERWRITING INCOME

Gross premiums written decreased by $68.6 million, or 61%, for the three months
ended March 31, 2001, compared to the corresponding prior year period. The
reduction is a reflection of the Company's stated objective to reduce writings,
concentrating on those key markets that offer the best profit opportunities.

An underwriting profit (before operating costs) of $1.3 million was posted in
the quarter ended March 31, 2001 in respect of the 2001 underwriting year
reflecting primarily the growth in the partnership enterprise division of the
business. Over 85% of the premium earned in the first quarter came from business
written during the 1999 and 2000 underwriting years, prior to the Company's
implementation of stricter, centralized underwriting controls. This business
contributed an underwriting loss of $2.9 million before operating expenses in
the quarter, of which $2.2 million is represented by the cost to exit certain
unprofitable books that automatically would have renewed. Rate increases being
effected on year 2001 written premium had little impact on first quarter results
but are expected to contribute significantly more in ensuing quarters as that
premium is earned.


Underwriting results for the three months ended March 31, 2001 and 2000, by line
of business and in total were as follows:

<TABLE>
<CAPTION>
Three months ended March 31, 2001                     Personal
U.S. dollars in thousands                  Medical    Accident     Credit      Life        Other       Total
----------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>        <C>        <C>             <C>      <C>
Gross premiums written                      $ 15,977    $ 13,342   $ 14,843   $  (1,177)      $ 240    $ 43,225
                                         =======================================================================
Net premiums written                          13,170      10,038     14,978      (1,123)        130      37,193
                                         =======================================================================
Net premiums earned                           13,251      26,145        (25)        687         251      40,309
Losses and loss expenses                     (11,218)    (19,761)        83         331         580     (29,985)
Acquisition costs                             (3,508)     (8,240)        89        (442)        167     (11,934)
Operating costs                               (2,167)     (4,276)         4        (112)        (41)     (6,592)
                                         -----------------------------------------------------------------------
Net underwriting income (loss)              $ (3,642)  $  (6,171)     $ 151       $ 464       $ 957   $  (8,262)
                                         =======================================================================
</TABLE>

<TABLE>
<CAPTION>
Three months ended March 31, 2000                     Personal
U.S. dollars in thousands                  Medical    Accident     Credit      Life        Other       Total
----------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>         <C>          <C>      <C>
Gross premiums written                      $ 70,379    $ 31,350    $ 3,808     $ 3,275      $2,956   $ 111,768
                                         =======================================================================
Net premiums written                          65,676      29,387      3,653       2,999       2,764     104,479
                                         =======================================================================
Net premiums earned                           38,692      14,003      1,981       2,054       1,081      57,811
Losses and loss expenses                     (31,423)    (11,264)      (257)     (1,003)     (1,282)    (45,229)
Acquisition costs                             (9,367)     (3,084)    (1,230)       (587)       (411)    (14,679)
Operating costs                               (4,357)     (1,664)      (236)       (244)       (128)     (6,629)
                                         -----------------------------------------------------------------------
Net underwriting income (loss)             $  (6,455)  $  (2,009)     $ 258       $ 220     $  (740)  $  (8,726)
                                         =======================================================================
</TABLE>

For the quarter ended March 31, 2001, as mentioned previously, overall Gross
Written Premiums declined from prior year levels. Both Medical and Personal
Accident premium writings have been reduced in-line with the Company's stated
objective to only write business that clearly meets its underwriting criteria.
In addition, the Company rescinded one Medical treaty underwritten in 1999,
which resulted in a reduction in Gross Written and Net Earned Premium of
$9.5million in the quarter.

The significant increase in Credit business is a function of the writing of
approximately $12.0 million of Bancassurance premium in the Partnership
Enterprise division in the quarter. This premium will be earned over the next
three to four years.


                                       11
<PAGE>


OPERATING RATIOS

The operating ratios for the three months ended March 31, 2001 and 2000, by line
of business and in total were as follows:

<TABLE>
<CAPTION>
                                                         Personal
Three months ended March 31, 2001            Medical     Accident      Credit       Life       Other      Total
------------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
<S>                                          <C>          <C>                      <C>                    <C>
Loss ratio                                     84.7%        75.6%        n/m%       (48.2)%      n/m%      74.4%
Acquisition expense ratio                      26.5%        31.5%        n/m%        64.3%       n/m%      29.6%
------------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Loss and acquisition expense
     ratio                                    111.2%       107.1%        n/m%         n/m%       n/m%     104.0%
------------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Operating expense ratio                                                                                    16.4%
                                                                                                        -----------
Combined ratio                                                                                            120.4%
                                                                                                        ===========
</TABLE>

<TABLE>
<CAPTION>
                                                         Personal
Three months ended March 31, 2000            Medical     Accident     Credit       Life        Other      Total
------------------------------------------ ------------ ----------- ----------- ------------ ---------- -----------
<S>                                        <C>         <C>         <C>          <C>       <C>          <C>
Loss ratio                                      81.2%       80.4%       13.0%        48.8%     118.6%       78.2%
Acquisition expense ratio                       24.2%       22.0%       62.1%        28.6%      38.0%       25.4%
------------------------------------------ ------------ ----------- ----------- ------------ ---------- -----------
Loss and acquisition expense
     ratio                                     105.4%      102.4%       75.1%        77.4%     156.6%      103.6%
------------------------------------------ ------------ ----------- ----------- ------------ ---------- -----------
Operating expense ratio                                                                                     11.5%
                                                                                                        -----------
Combined ratio                                                                                             115.1 %
                                                                                                        ===========
</TABLE>

The increase in combined ratio in the first quarter 2001 was a function of
operating costs being reflected as a percentage of a declining premium.

GEOGRAPHICAL DISTRIBUTION

The distribution of gross written premiums for the three months ended March 31,
2001 and 2000 and for the year ended December 31, 2000, was as follows:

<TABLE>
<CAPTION>
                                            Three months ended       Three months ended                Year ended
                                                March 31, 2001           March 31, 2000         December 31, 2000
------------------------------------- ------------------------- ------------------------ -------------------------
<S>                                   <C>                       <C>                      <C>
Western Europe                                          13.4%                   20.9%                    18.4%
North America                                           63.3%                   46.3%                    53.8%
Latin America                                            3.5%                   29.5%                    15.7%
Asia                                                    10.1%                    0.7%                     5.6%
Other                                                    9.7%                    2.6%                     6.5%
------------------------------------- ------------------------- ------------------------ -------------------------
Total                                                  100.0%                  100.0%                   100.0%
------------------------------------- ------------------------- ------------------------ -------------------------
</TABLE>

The increase in Asia is a reflection of the growing nature of the Company's
direct marketing business. The decrease in Latin America is primarily timing,
as the Company continues to focus its attention in this key market.

PRODUCT MIX

The distribution of gross premiums written by line of business for the three
months ended March 31, 2001 and 2000, and for the year ended December 31, 2000
was as follows:

<TABLE>
<CAPTION>
                                          Three months ended       Three months ended           Year ended
                                            March 31, 2001           March 31, 2000         December 31, 2000
-------------------------------------- ------------------------ ------------------------- -----------------------
<S>                                    <C>                      <C>                       <C>
Medical                                                 50.9%                    63.0%                  71.0%
</TABLE>


                                       12
<PAGE>

<TABLE>
<S>                                    <C>                      <C>                       <C>
Personal Accident                                       11.8%                    28.0%                  22.0%
Credit                                                  40.3%                     3.4%                   1.4%
Life                                                    (3.0)%                    2.9%                   3.7%
Other                                                     --%                     2.7%                   1.9%
-------------------------------------- ------------------------ ------------------------- -----------------------
Total                                                  100.0%                   100.0%                 100.0%
-------------------------------------- ------------------------ ------------------------- -----------------------
</TABLE>


MANAGEMENT FEE REVENUE

Management fee revenue for the quarter was $230 thousand, a reduction of $132
thousand from the corresponding prior period due to the Company retaining more
business for its own account.


OPERATING EXPENSES

Total operating expenses for the three months ended March 31, 2001 were $6.7
million, compared to $7.4 million for the three months ended March 31, 2000 and
$7.4 million for the three months ended December 31, 2000. Administrative
expenses in the quarter compare favourably with that reported in the fourth
quarter last year. The reduction in the "run rate" is more a function of one-off
items in the fourth quarter last year not repeating, as savings being generated
from the actions taken in that quarter are being re-invested in the Partnership
Enterprise division.


EXPOSURE MANAGEMENT

The Company manages its underwriting risk exposures primarily through an excess
of loss reinsurance program. This program generally provides limits up to a
maximum of $30 million per occurrence, with a minimum attachment point generally
of $250 thousand.




                                       13
<PAGE>



INVESTMENT RESULTS

For the three months ended March 31, 2001, net investment income totaled $3.4
million and net realized investment gains totaled $0.7 million. For the three
months ended March 31, 2000, net investment income totaled $2.9 million and net
realized investment losses totaled $1.4 million.

First quarter investment income results were favourably impacted by the upward
movement of bond prices with $0.7 million of investment gains realized.


The investment results for the three months ended March 31, 2001 and 2000 were
as follows:

<TABLE>
<CAPTION>

                                                                 Net          Annualized      Net Realized
March 31, 2001                                 Average       Investment        Effective       Investment
U.S dollars in thousands                     Investments      Income(1)          Yield       Gains/(Losses)
------------------------------------------- -------------- ---------------- ---------------- ---------------
<S>                                         <C>            <C>              <C>              <C>
Investments - available for sale                $ 168,675          $ 3,065            7.3%           $ 748
Other investments                                  17,855               88            2.0%              --
Cash and cash equivalents                          24,030              255            4.2%              --
------------------------------------------- -------------- ---------------- ---------------- ---------------
Total                                            $210,560          $ 3,408            6.5%           $ 748
------------------------------------------- -------------- ---------------- ---------------- ---------------
</TABLE>


<TABLE>
<CAPTION>
                                                                 Net          Annualized     Net Realized
March 31, 2000                                 Average       Investment       Effective       Investment
U.S dollars in thousands                     Investments      Income(1)         Yield       Gains/(Losses)
------------------------------------------- -------------- ---------------- --------------- ----------------
<S>                                         <C>            <C>              <C>             <C>
Fixed maturity investments                      $ 177,926          $ 2,659           6.0%       $ (1,415)
Other investments                                  11,851              128           4.3%             --
Cash and cash equivalents                          26,973              139           2.1%             --
------------------------------------------- -------------- ---------------- --------------- ----------------
Total                                           $ 216,750          $ 2,926           5.4 %       $ (1,415)
------------------------------------------- -------------- ---------------- --------------- ----------------
</TABLE>

(1)  Net investment income is net of investment-related expenses


LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2001, total investments and cash were $209.6 million compared to
$212.2 million at December 31, 2000. All fixed maturity securities in the
Company's investment portfolio are classified as available for sale and are
carried at fair value. The fixed maturity investment portfolio as of March 31,
2001, and December 31, 2000, were as follows:

<TABLE>
<CAPTION>
                                                                                                Average
March 31, 2001                                       Fair          Duration        Market        Credit
U.S. dollars in thousands                            Value         (Years)           Yield       Rating
------------------------------------------------ -------------- --------------- ------------- -------------
<S>                                              <C>            <C>             <C>           <C>
Corporate securities                                   $78,334       3.6               6.7%         AA
U.S. treasury securities and obligations of
     U.S. government corporations and agencies          30,902       2.9               5.9%        AAA
Mortgage & Asset backed securities                      35,419       2.6               8.1%        AAA
Obligations of states and political
     subdivisions                                       18,360       2.8               6.8%        AAA
Foreign currency debt securities                         5,857       2.9               4.9%        AAA
------------------------------------------------ -------------- --------------- ------------- -------------
Total                                                $ 168,872       3.0               6.5%         AA
------------------------------------------------ -------------- --------------- ------------- -------------
</TABLE>





                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                                                 Average
December 31, 2000                                    Fair          Duration        Market        Credit
U.S. dollars in thousands                            Value         (Years)           Yield       Rating
------------------------------------------------ -------------- --------------- -------------- ------------
<S>                                              <C>            <C>             <C>            <C>
Corporate securities                                   $71,382       3.0               6.6%         AA
U.S. treasury securities and obligations of
     U.S. government corporations and agencies          38,127       2.4               6.1%        AAA
Mortgage & Asset backed securities                      33,771       3.0               8.1%        AAA
Obligations of states and political
     subdivisions                                       18,753       3.0               7.3%        AAA
Foreign currency debt securities                         6,445       1.6               4.5%        AAA
------------------------------------------------ -------------- --------------- ------------- -------------
Total                                                 $168,478       2.6               6.5%         AA
------------------------------------------------ -------------- --------------- ------------- -------------
</TABLE>


The Company's investment policy objective is to maximize long-term investment
returns while maintaining a liquid, high-quality portfolio. To this end, the
investment policy requires that the portfolio have an average credit quality
rating of AA, no more than 3% of the portfolio invested in the securities of a
single issuer (other than issues of sovereign governments with a rating of AA or
better), and a target duration of 2.75 years. The Company's investment portfolio
as of March 31, 2001 and December 31, 2000 complies with the adopted investment
policy and guidelines.

The Company expects that its financial and operational needs for the foreseeable
future will be met by funds generated from operations and from liquidating a
small percentage of its investment portfolio. The Company expects to remain
highly capitalized after any near-term investment portfolio liquidation.

Shareholders' equity is largely unchanged from that reported in the Company's
10-K. As of March 31, 2001 it was $113.5 million compared to $113.6 million at
December 31, 2000. Book value per common share was $9.63 per share, as compared
to $9.64 per share at December 31, 2000.



                                       15
<PAGE>


CURRENT DEVELOPMENTS

On May 10, 2001 the Board of Directors of ESG Re Limited announced that Mr.
Alasdair Davis has been elected Chief Executive Officer of the company. Mr. John
C Head III, who was Chairman of the Board of Directors and Chief Executive
Officer will remain as Chairman.

The employment agreement with John C Head III as Chief Executive Officer was
terminated according to its terms on May 8, 2001. The agreement was filed as an
exhibit to the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on April 2, 2001. Mr Head will continue as Chairman of
the Board at an annual salary of $250,000.

MARKET RISK
The Company is subject to market risk arising from the potential change in value
of its various financial instruments. These changes may be due to fluctuations
in interest rates or foreign currency rates, or both in the case of foreign
currency investments. The Company monitors its exposure to interest rate and
currency rate risk on a quarterly basis and currently does not believe that the
use of derivatives to manage such risk is necessary. The Company intends to
reevaluate the need for a formal hedging strategy on a periodic basis, and may
determine that such a strategy, including the use of derivative instruments, is
appropriate in the future.

INTEREST RATE RISK
The largest source of market risk for the Company is interest rate risk on its
portfolio of fixed maturity investments, especially fixed rate instruments. In
addition, the credit worthiness of the issuer, relative values of alternative
investments, liquidity and general market conditions may affect fair values of
interest rate sensitive instruments.

The Company's general strategy with respect to fixed maturity securities is to
invest in high quality securities while maintaining diversification and to avoid
significant concentrations in individual issuers' industry segments or
countries.

FOREIGN CURRENCY RISK
The Company's functional currency is the U.S. dollar. However, the Company
writes reinsurance business in numerous geographic regions and currencies,
giving rise to the risk that the ultimate settlement of receivables and payables
on reinsurance transactions will differ from the amounts currently recorded as
assets and liabilities in the financial statements. The Company intends to hold
investments in currencies in which it will collect premiums and pay claims, thus
creating a partial natural hedge against exchange rate fluctuations. The Company
believes that its exposure to foreign currency risk is not material.

INFLATION
Inflation has not had a material impact on the Company's operations for the
periods presented. The Company writes reinsurance in Latin America which has
experienced periods of high inflation. However, it is possible that future
inflationary conditions may impact subsequent accounting periods.

THE EURO
On January 1, 1999, a single currency, the "Euro" was adopted as the national
currency of the 11 participating countries in the European Monetary Union,
including Germany and Ireland, two of the countries in which the Company
operates and in which the Company maintains a significant presence. ESG's German
and Irish subsidiaries will not be required to use the Euro for accounting
purposes prior to January 1, 2002. Currently, the Company expects that the
impact of the conversion will have no material impact on the Company's
operations, accounting systems or financial reporting.


                                       16
<PAGE>



PART II   OTHER INFORMATION

                            ITEM 1. LEGAL PROCEEDINGS

No material litigation is pending, to which the Company or any of its
subsidiaries or affiliates is a party or of which any of their properties is
subject other than the routine litigation incidental to the business.

                          ITEM 2. CHANGES IN SECURITIES

Not applicable.

                     ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

The Annual General Meeting of Shareholders was held pursuant to notice on May
7, 2001, at 9:00 a.m. local time, at Pedro Alvares Cabral Room, Four Seasons
Hotel The Ritz, Rua Rodrigo da Foneca, 88, Lisbon 1093, Portugal. There were
present at the meeting, in person or represented by proxy, the holders of
10,034,395 shares of the outstanding common stock of the Company, which
represented approximately 85 % of the outstanding shares as at March 15,
2001, the date of record. The matters voted on at the meeting and the votes
cast were as follows:

Proposal 1.  Election of Directors
John C Head III was re-elected as a Class 1 director to serve until the 2004
Annual General Meeting of Shareholders and Alasdair P. Davis was elected as a
Class 2 director to serve until the 2002 Annual General Meeting of Shareholders.

<TABLE>
<CAPTION>
                                           FOR                  ABSTAIN
<S>                                        <C>                  <C>
         John C Head III                   7,437,667            2,596,728
         Alasdair P. Davis                 7,526,662            2,507,733
</TABLE>

Proposal 2.  Ratification of the Appointment of Independent Auditors
The selection of Deloitte & Touche as independent auditors for the fiscal year
ending December 31, 2001 was ratified with 8,801,595 shares voting in favor of
such proposal and 3,500 shares abstaining from voting.

                           ITEM 5. OTHER TRANSACTIONS

Not applicable.

                     ITEM 6. EXHIBITS AND REPORT ON FORM 8-K

(a)      Exhibits

         Exhibit 11.1      Computation of Earnings Per Share

         Exhibit 15.1      Consent of Deloitte & Touche

(b)      Report on Form 8-K

The Company filed two reports on Form 8-K during the reporting period. The first
report was filed on January 31, 2001, with regard to the appointment of Alasdair
P. Davis to the Board of Directors, effective February 1, 2001. The second
report was filed on April 9, 2001 and included the Company's response to a
letter sent by a shareholder and addressed to each member of the Board of
Directors. As requested by the shareholder, the Company was making its response
public through the filing of the 8-K.



                                       17
<PAGE>


                                   SIGNATURES

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


May 15, 2001
                                 ESG RE LIMITED

                                 By:  /s/ MARK E OLEKSIK
                                      ------------------------------------------
                                 Name: Mark E Oleksik
                                 Title: SENIOR FINANCIAL OFFICER AND CONTROLLER