##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended
    March 31,
    2011ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period From
    to    001-33289
    Commission File Number
  ENSTAR GROUP LIMITED
 (Exact name of registrant as
    specified in its charter)
  Bermuda

N/A(State or other jurisdiction
    of incorporation or organization)

(I.R.S. Employer
    Identification No.)    P.O. Box HM
    2267
    Windsor Place,
    3rd

    Floor
    18 Queen Street
    Hamilton HM JXBermuda
 (Address of principal executive
    office, including zip code)
  (441) 292-3645
 (Registrants telephone
    number, including area code)
  þ o
  Regulation S-T o o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




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##### 





TABLE OF
    CONTENTS
   
 PagePART I  FINANCIAL
    INFORMATIONItem 1.

Financial Statements:Condensed Consolidated Balance Sheets
    as of March 31, 2011 and December 31, 2010
    (Unaudited)


1Condensed Consolidated Statements of
    Earnings for the Three-Month Periods Ended March 31, 2011
    and 2010 (Unaudited)


2Condensed Consolidated Statements of
    Comprehensive Income for the Three-Month Periods Ended
    March 31, 2011 and 2010 (Unaudited)


3Condensed Consolidated Statements of
    Changes in Shareholders Equity for the Three-Month Periods
    Ended March 31, 2011 and 2010 (Unaudited)


4Condensed Consolidated Statements of
    Cash Flows for the Three-Month Periods Ended March 31, 2011
    and 2010 (Unaudited)


5Notes to the Condensed Consolidated
    Financial Statements (Unaudited)


6Report of Independent Registered
    Public Accounting Firm


28Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


29Item 3.

Quantitative and Qualitative Disclosures about
    Market Risk


39Item 4.

Controls and Procedures


39PART II  OTHER
    INFORMATIONItem 1.

Legal Proceedings


40Item 1A.

Risk Factors


40Item 5.

Other Information


40Item 6.

Exhibits


41Signatures




42EX-10.1EXHIBIT 10.3EXHIBIT 10.4EXHIBIT 10.5EXHIBIT 10.6EX-15.1EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    FINANCIAL
    STATEMENTS  ENSTAR
    GROUP LIMITED
  UNAUDITED CONDENSED CONSOLIDATED BALANCE
    SHEETS
 As
    of March 31, 2011 and December 31, 2010
  March 31,


December 31,2011


2010(expressed in thousands of U.S. dollars, except share
    data)ASSETSShort-term investments,
    available-for-sale,
    at fair value (amortized cost: 2011  $nil
    2010  $7,209)

$



$
7,263Short-term investments, trading, at fair value


425,727



507,978Fixed maturities,
    available-for-sale,
    at fair value (amortized cost: 2011  $974,385;
    2010  $1,068,540)


1,006,350



1,094,947Fixed maturities, trading, at fair value


913,847



524,122Equities, trading, at fair value


63,655



60,082Other investments, at fair value


233,878



234,714Total investments


2,643,457



2,429,106Cash and cash equivalents


630,386



799,154Restricted cash and cash equivalents


570,815



656,200Accrued interest receivable


23,884



19,980Accounts receivable


20,208



24,790Income taxes recoverable


6,458



7,968Reinsurance balances receivable


1,006,627



961,442Funds held by reinsured companies


244,959



274,699Goodwill


21,222



21,222Other assets


63,028



41,343TOTAL ASSETS

$
5,231,044


$
5,235,904LIABILITIESLosses and loss adjustment expenses

$
3,394,988


$
3,291,275Reinsurance balances payable


191,434



231,435Accounts payable and accrued liabilities


41,168



94,390Income taxes payable


28,498



50,075Loans payable


204,430



245,278Other liabilities


157,097



107,630TOTAL LIABILITIES


4,017,615



4,020,083COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYShare capitalAuthorized, issued and fully paid, par value $1 each (authorized
    2011: 156,000,000; 2010: 156,000,000)Ordinary shares (issued and outstanding 2011: 12,983,532;
    2010:12,940,021)


12,984



12,940Non-voting convertible ordinary shares (issued 2011: 2,972,892;
    2010: 2,972,892)


2,973



2,973Treasury shares at cost (non-voting convertible ordinary shares
    2011: 2,972,892; 2010: 2,972,892)


(421,559
)


(421,559
)Additional paid-in capital


668,751



667,907Accumulated other comprehensive income


41,920



35,017Retained earnings


654,646



651,143Total Enstar Group Limited Shareholders Equity


959,715



948,421Noncontrolling interest


253,714



267,400TOTAL SHAREHOLDERS EQUITY


1,213,429



1,215,821TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

$
5,231,044


$
5,235,904    1




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
    EARNINGS
 For
    the Three-Month Periods Ended March 31, 2011 and
    2010
  Three Months EndedMarch 31,2011


2010(expressed in thousands of U.S. dollars, except share and per
    share data)INCOMEConsulting fees

$
4,036


$
14,128Net investment income


18,542



26,121Net realized and unrealized gains


3,368



2,202Gain on bargain purchase


13,105



39,051



42,451EXPENSESNet reduction in ultimate loss and loss adjustment expense
    liabilities:Reduction in estimates of net ultimate losses


(2,612
)


(1,942
)Reduction in provisions for bad debt






(5,339
)Reduction in provisions for unallocated loss adjustment expense
    liabilities


(11,537
)


(8,965
)Amortization of fair value adjustments


10,077



6,650(4,072
)


(9,596
)Salaries and benefits


10,382



15,190General and administrative expenses


17,750



10,487Interest expense


1,966



2,394Net foreign exchange loss


7,334



7,58833,360



26,063EARNINGS BEFORE INCOME TAXES AND SHARE OF NET EARNINGS OF PARTLY
    OWNED COMPANY


5,691



16,388INCOME TAXES


(617
)


(5,922
)SHARE OF NET EARNINGS OF PARTLY OWNED COMPANY






7,150NET EARNINGS


5,074



17,616Less: Net earnings attributable to noncontrolling interest


(1,571
)


(1,695
)NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED

$
3,503


$
15,921EARNINGS PER SHARE  BASIC:Net earnings attributable to Enstar Group Limited ordinary
    shareholders

$
0.27


$
1.17EARNINGS PER SHARE  DILUTED:Net earnings attributable to Enstar Group Limited ordinary
    shareholders

$
0.26


$
1.15Weighted average shares outstanding  basic


12,945,838



13,619,741Weighted average shares outstanding  diluted


13,220,332



13,831,697    2




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE INCOME
 For
    the Three-Month Periods Ended March 31, 2011 and
    2010
  Three Months EndedMarch 31,2011


2010(expressed in thousands of U.S. dollars)NET EARNINGS

$
5,074


$
17,616Other comprehensive income:Unrealized holding gains on investments arising during the period


8,736



760Reclassification adjustment for net realized and unrealized
    gains included in net earnings


(3,368
)


(2,202
)Decrease in defined benefit pension liability


272



Currency translation adjustment


2,206



5,572Total other comprehensive income


7,846



4,130Comprehensive income


12,920



21,746Less comprehensive income attributable to noncontrolling interest


(2,514
)


(3,160
)COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSTAR GROUP LIMITED

$
10,406


$
18,586    3




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##### Table of Contents



ENSTAR
    GROUP LIMITEDUNAUDITED CONDENSED CONSOLIDATED
    STATEMENTS OF CHANGES
    IN SHAREHOLDERS EQUITYFor the Three-Month Periods Ended
    March 31, 2011 and 2010
  Three Months EndedMarch 31,2011


2010(expressed in thousands of U.S. dollars)Share Capital  Ordinary SharesBalance, beginning of period

$
12,940


$
13,581Issue of shares


2



41Share awards granted/vested


42



79Balance, end of period

$
12,984


$
13,701Share Capital  Non-Voting Convertible Ordinary
    SharesBalance, beginning and end of period

$
2,973


$
2,973Treasury SharesBalance, beginning and end of period

$
(421,559
)

$
(421,559
)Additional Paid-in CapitalBalance, beginning of period

$
667,907


$
721,120Share awards granted/vested


168



5,286Issue of shares


126



215Amortization of share awards


550



149Balance, end of period

$
668,751


$
726,770Accumulated Other Comprehensive Income Attributable to Enstar
    Group LimitedBalance, beginning of period

$
35,017


$
8,709Foreign currency translation adjustments


1,595



3,887Net movement in unrealized holdings gains (losses) on investments


5,036



(1,221
)Decrease in defined benefit pension liability


272



Balance, end of period

$
41,920


$
11,375Retained EarningsBalance, beginning of period

$
651,143


$
477,057Net earnings attributable to Enstar Group Limited


3,503



15,921Balance, end of period

$
654,646


$
492,978Noncontrolling InterestBalance, beginning of period

$
267,400


$
274,271Return of capital


(16,200
)


Dividends paid






(6,010
)Net earnings attributable to noncontrolling interest


1,571



1,695Foreign currency translation adjustments


611



1,685Net movement in unrealized holding gains (losses) on investments


332



(220
)Balance, end of period

$
253,714


$
271,421    4




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
    CASH FLOWS
 For
    the Three-Month Periods Ended March 31, 2011 and
    2010
  Three Months Ended March 31,2011


2010(expressed in thousands of U.S. dollars)OPERATING ACTIVITIES:Net earnings

$
5,074


$
17,616Adjustments to reconcile net earnings to cash flows used in
    operating activities:Gain on bargain purchase


(13,105
)


Share of undistributed net earnings of partly owned company






(7,150
)Net realized and unrealized investment gain


(3,368
)


(2,202
)Share of net gain from other investments


(2,993
)


(7,797
)Other items


(1,339
)


(1,878
)Depreciation and amortization


384



335Amortization of bond premiums and discounts


4,538



780Net movement of trading securities held on behalf of
    policyholders


7,110



3,342Sales and maturities of trading securities


374,473



32,106Purchases of trading securities


(654,563
)


(127,351
)Changes in assets and liabilities:Reinsurance balances receivable


(43,567
)


(149,686
)Other assets


11,793



(18,204
)Losses and loss adjustment expenses


90,505



145,230Reinsurance balances payable


(40,079
)


2,351Accounts payable and accrued liabilities


(51,265
)


(17,638
)Other liabilities


26,048



(12,744
)Net cash flows used in operating activities


(290,354
)


(142,890
)INVESTING ACTIVITIES:Acquisitions, net of cash acquired


(7,949
)


157,184Sales and maturities of
    available-for-sale
    securities


101,109



40,993Purchase of
    held-to-maturity
    securities






(381,817
)Maturity of
    held-to-maturity
    securities






166,960Movement in restricted cash and cash equivalents


85,384



(55,479
)Funding of other investments


(4,108
)


(3,048
)Redemption of bond funds


10,136



Other investing activities


(143
)


(2
)Net cash flows provided by (used in) investing activities


184,429



(75,209
)FINANCING ACTIVITIES:Repayment of loans


(40,500
)


Distribution of capital to noncontrolling interest


(16,200
)


Dividends paid to noncontrolling interest






(6,010
)Net cash flows used in financing activities


(56,700
)


(6,010
)TRANSLATION ADJUSTMENT


(6,143
)


19,589NET DECREASE IN CASH AND CASH EQUIVALENTS


(168,768
)


(204,520
)CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


799,154



1,266,445CASH AND CASH EQUIVALENTS, END OF PERIOD

$
630,386


$
1,061,925Supplemental Cash Flow InformationNet income taxes paid

$
25,254


$
15,372Interest paid

$
2,231


$
3,687    5




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
 March 31, 2011 and December 31, 2010
 (Tabular information expressed in thousands of U.S. dollars
    except share and per share data)
 (unaudited)
  1.
    BASIS OF
    PREPARATION AND CONSOLIDATION  Form 10-Q Regulation S-X. Form 10-K
  Adoption
    of New Accounting Standards
        2.
    ACQUISITIONS    Laguna
   6




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    ACQUISITIONS  (contd)      Purchase price

$
21,223Net assets acquired at fair value

$
34,328Excess of net assets over purchase price (gain on bargain
    purchase)

$
(13,105
)       Cash

$
13,274Investments:Short-term investments, trading


1,154Fixed maturities, trading


30,765Total investments


31,919Reinsurance balances receivable


1,459Other assets


1,325Losses and loss adjustment expenses


(11,898
)Accounts payable


(1,751
)Net assets acquired at fair value

$
34,328     Clarendon
    3.
    SIGNIFICANT
    NEW BUSINESS  Shelbourne RITC Transactions
   7




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    SIGNIFICANT
    NEW BUSINESS  (contd)        4.
    RESTRICTED
    CASH AND CASH EQUIVALENTS    5.
    INVESTMENTS  Available-for-sale
  available-for-sale
  GrossGross


UnrealizedUnrealized


HoldingAmortized


Holding


Losses


FairCost


Gain


Non-OTTI


ValueAs at March 31, 2011U.S. government and agency

$
63,952


$
662


$
(131
)

$
64,483Non-U.S.
    government


236,004



11,308



(5
)


247,307Corporate


612,486



17,939



(336
)


630,089Residential mortgage-backed


18,839



591



(180
)


19,250Commercial mortgage-backed


17,178



1,706



(2
)


18,882Asset backed


25,926



631



(218
)


26,339$
974,385


$
32,837


$
(872
)

$
1,006,350   8




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)  GrossGross


UnrealizedUnrealized


HoldingAmortized


Holding


Losses


FairCost


Gain


Non-OTTI


ValueAs at December 31, 2010U.S. government and agency

$
65,115


$
766


$
(92
)

$
65,789Non-U.S.
    government


248,487



8,832



(314
)


257,005Corporate


695,372



16,513



(1,615
)


710,270Residential mortgage-backed


20,036



305



(234
)


20,107Commercial mortgage-backed


19,667



2,083



(11
)


21,739Asset backed


27,072



574



(346
)


27,300$
1,075,749


$
29,073


$
(2,612
)

$
1,102,210   available-for-sale
  12 Months or Greater


Less Than 12 Months


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesAs at March 31, 2011U.S. government and agency

$



$



$
32,910


$
(131
)

$
32,910


$
(131
)Non-U.S.
    government










4,995



(5
)


4,995



(5
)Corporate


23,241



(281
)


18,403



(55
)


41,644



(336
)Residential mortgage-backed


2,142



(179
)


31



(1
)


2,173



(180
)Commercial mortgage-backed


1,499



(1
)


445



(1
)


1,944



(2
)Asset backed


5,324



(217
)


211



(1
)


5,535



(218
)$
32,206


$
(678
)

$
56,995


$
(194
)

$
89,201


$
(872
)   12 Months or Greater


Less Than 12 Months


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesAs at December 31, 2010U.S. government and agency

$
801


$



$
22,976


$
(92
)

$
23,777


$
(92
)Non-U.S.
    government


7,710



(32
)


31,128



(282
)


38,838



(314
)Corporate


22,039



(318
)


107,735



(1,297
)


129,774



(1,615
)Residential mortgage-backed


2,368



(168
)


11,274



(66
)


13,642



(234
)Commercial mortgage-backed


530



(10
)


1,516



(1
)


2,046



(11
)Asset backed


10,554



(346
)


87







10,641



(346
)$
44,002


$
(874
)

$
174,716


$
(1,738
)

$
218,718


$
(2,612
)   available-for-sale
 9




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)    available-for-sale,
  Amortized


Fair


% of TotalCost


Value


Fair ValueAs at March 31, 2011Due in one year or less

$
387,872


$
397,483



39.5
%Due after one year through five years


518,079



537,321



53.4
%Due after five years through ten years


3,611



3,846



0.4
%Due after ten years


2,880



3,229



0.3
%912,442



941,879



93.6
%Residential mortgage-backed


18,839



19,250



1.9
%Commercial mortgage-backed


17,178



18,882



1.9
%Asset backed


25,926



26,339



2.6
%$
974,385


$
1,006,350



100.0
%   Amortized


Fair


% of TotalCost


Value


Fair ValueAs at December 31, 2010Due in one year or less

$
373,683


$
379,203



34.4
%Due after one year through five years


625,463



643,252



58.3
%Due after five years through ten years


5,307



5,539



0.5
%Due after ten years


4,521



5,070



0.5
%1,008,974



1,033,064



93.7
%Residential mortgage-backed


20,036



20,107



1.8
%Commercial mortgage-backed


19,667



21,739



2.0
%Asset backed


27,072



27,300



2.5
%$
1,075,749


$
1,102,210



100.0
%  10




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)  available-for-sale:
  Amortized


Fair


% of TotalCost


Value


Fair ValueAs at March 31, 2011AAA

$
391,116


$
406,612



40.4
%AA


255,904



263,424



26.2
%A


263,827



270,869



26.9
%BBB or lower


63,150



64,934



6.4
%Not Rated


388



511



0.1
%$
974,385


$
1,006,350



100.0
%   Amortized


Fair


% of TotalCost


Value


Fair ValueAs at December 31, 2010AAA

$
405,682


$
416,526



37.8
%AA


267,917



273,500



24.8
%A


332,401



341,447



31.0
%BBB or lower


69,359



70,274



6.4
%Not Rated


390



463



0.0
%$
1,075,749


$
1,102,210



100.0
%   Trading
    March 31,


December 31,2011


2010U.S. government and agency

$
200,531


$
162,014Non-U.S.
    government


205,083



129,861Corporate


814,112



637,114Municipal


1,567



2,297Residential mortgage-backed


82,507



82,399Commercial mortgage-backed


29,857



17,102Asset backed


5,917



1,313Equities


63,655



60,082$
1,403,229


$
1,092,182  11




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)    Fair


% of TotalValue


Fair ValueAs at March 31, 2011AAA

$
555,704



41.5
%AA


224,801



16.8
%A


479,129



35.8
%BBB or lower


64,528



4.8
%Not Rated


15,412



1.1
%$
1,339,574



100.0
%   Fair


% of TotalValue


Fair ValueAs at December 31, 2010AAA

$
395,881



38.4
%AA


177,302



17.2
%A


400,314



38.8
%BBB or lower


51,983



5.0
%Not Rated


6,620



0.6
%$
1,032,100



100.0
%   Other
    Investments
  March 31,


December 31,2011


2010Private equities

$
110,485


$
104,109Bond funds


93,916



102,279Hedge fund


23,230



22,037Other


6,247



6,289$
233,878


$
234,714    12




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)    Other-Than-Temporary
    Impairment Process
  available-for-sale other-than-temporary
  available-for-sale other-than-temporary
      Fair
    Value of Financial Instruments
    
    Level 1  Valuations based on unadjusted quoted
    prices in active markets for identical assets or liabilities
    that the Company has the ability to access. Valuation
    adjustments and block discounts are not applied to Level 1
    instruments.
    Level 2  Valuations based on quoted prices in
    active markets for similar assets or liabilities, quoted prices
    for identical assets or liabilities in inactive markets, or for
    which significant inputs are observable (e.g. interest rates,
    yield curves, prepayment speeds, default rates, loss severities,
    etc.) or can be corroborated by observable market data.
    Level 3  Valuations based on inputs that are
    unobservable and significant to the overall fair value
    measurement. The unobservable inputs reflect the Companys
    own assumptions about assumptions that market participants might
    use.   13




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)  Fixed Maturity Investments
        
    U.S. government and agency securities consist of securities
    issued by the U.S. Treasury and mortgage pass- through
    agencies such as the Federal National Mortgage Association, the
    Federal Home Loan Mortgage Corporation and other agencies. The
    significant inputs include the spread above the risk-free yield
    curve, reported trades and broker-dealer quotes. These are
    considered to be observable market inputs and, therefore, the
    fair values of these securities are classified within
    Level 2.
    Non-U.S. government
    securities consist of bonds issued by
    non-U.S. governments
    and agencies along with supranational organizations. The
    significant inputs include the spread above the risk-free yield
    curve, reported trades and broker-dealer quotes. These are
    considered to be observable market inputs and, therefore, the
    fair values of these securities are classified within
    Level 2.
    Corporate securities consist primarily of investment-grade debt
    of a wide variety of corporate issuers and industries. The fair
    values of these securities are determined using the spread above
    the risk-free yield curve, reported trades, broker-dealer
    quotes, benchmark yields, and industry and market indicators.
    These are considered observable market inputs and, therefore,
    the fair values of these securities are classified within
    Level 2. Where pricing is unavailable from pricing
    services, the Company obtains non-binding quotes from
    broker-dealers. This is generally the case when there is a low
    volume of trading activity and current transactions are not
    orderly. In this event, securities are classified within
    Level 3. As at March 31, 2011, the Company had one
    corporate security classified as Level 3.
    Municipal securities consist primarily of bonds issued by
    U.S.-domiciled
    state and municipal entities. The fair values of these
    securities are determined using the spread above the risk-free
    yield curve, reported trades, broker-dealer quotes and benchmark
    yields. These are considered observable market inputs and,
    therefore, the fair values of these securities are classified
    within Level 2.
    Asset-backed securities consist primarily of investment-grade
    bonds backed by pools of loans with a variety of underlying
    collateral. The significant inputs used to determine the fair
    value of these securities include the spread above the risk-free
    yield curve, reported trades, benchmark yields, broker-dealer
    quotes, prepayment speeds, and default rates. These are
    considered observable market inputs and, therefore, the fair
    values of these securities are classified within Level 2.
    Residential and commercial mortgage-backed securities include
    both agency and non-agency originated securities. The
    significant inputs used to determine the fair value of these
    securities include the spread above the risk-free yield curve,
    reported trades, benchmark yields, broker-dealer quotes,
    prepayment speeds, and 14




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)  default rates. These are considered observable market inputs
    and, therefore, the fair values of these securities are
    classified within Level 2. Where pricing is unavailable
    from pricing services, the Company obtains non-binding quotes
    from broker-dealers. This is generally the case when there is a
    low volume of trading activity and current transactions are not
    orderly. In this event, securities are classified within
    Level 3. As at March 31, 2011, the Company had one
    commercial mortgage-backed security classified as Level 3.      Equity Securities
      Other Investments
       15




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)  lock-up
    Fair
    Value Measurements
    March 31, 2011Quoted Prices in





SignificantActive Markets


Significant Other


Unobservablefor Identical Assets


Observable Inputs


Inputs


Total Fair(Level 1)


(Level 2)


(Level 3)


ValueU.S. government and agency

$



$
265,014


$



$
265,014Non-U.S.
    government






452,390







452,390Corporate






1,443,650



551



1,444,201Municipal






1,567







1,567Residential mortgage-backed






101,757







101,757Commercial mortgage-backed






47,777



962



48,739Asset backed






32,256







32,256Equities


59,680







3,975



63,655Other investments






93,916



139,962



233,878Total investments

$
59,680


$
2,438,327


$
145,450


$
2,643,457   16




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)  December 31, 2010Quoted Prices in





SignificantActive Markets


Significant Other


Unobservablefor Identical Assets


Observable Inputs


Inputs


Total Fair(Level 1)


(Level 2)


(Level 3)


ValueU.S. government and agency

$



$
227,803


$



$
227,803Non-U.S.
    government






386,866







386,866Corporate






1,346,854



530



1,347,384Municipal






2,297







2,297Residential mortgage-backed






102,506







102,506Commercial mortgage-backed






37,927



914



38,841Asset backed






28,613







28,613Equities


56,369



138



3,575



60,082Other investments






102,279



132,435



234,714Total investments

$
56,369


$
2,235,283


$
137,454


$
2,429,106     FixedMaturity


Other


EquityInvestments


Investments


Securities


TotalLevel 3 investments as of January 1, 2011

$
1,444


$
132,435


$
3,575


$
137,454Purchases






4,157







4,157Sales






(49
)






(49
)Total realized and unrealized losses through earnings


69



3,419



400



3,888Net transfers in and/or (out) of Level 3














Level 3 investments as of March 31, 2011

$
1,513


$
139,962


$
3,975


$
145,450       FixedMaturity


Other


EquityInvestments


Investments


Securities


TotalLevel 3 investments as of January 1, 2010

$
641


$
81,801


$
3,300


$
85,742Net purchases (sales and distributions)


579



3,049







3,628Total realized and unrealized losses through earnings


116



6,444



150



6,710Net transfers in and/or (out) of Level 3














Level 3 investments as of March 31, 2010

$
1,336


$
91,294


$
3,450


$
96,080  17




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##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS  (contd)    available-for-sale available-for-sale available-for-sale
  Restricted
    Investments
    March 31,


December 31,2011


2010Assets used for collateral in trust for third-party agreements

$
452,444


$
371,834Deposits with regulatory authorities


33,064



33,970Others


63,722



62,437$
549,230


$
468,241    6.
    DERIVATIVE
    INSTRUMENTS    7.
    REINSURANCE
    BALANCES RECEIVABLE  March 31,


December 31,2011


2010Recoverable from reinsurers on:Outstanding losses

$
460,464


$
425,336Losses incurred but not reported


162,325



141,118Fair value adjustments


(39,311
)


(41,014
)Total reinsurance reserves recoverable


583,478



525,440Paid losses


423,149



436,002$
1,006,627


$
961,442  18




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    REINSURANCE
    BALANCES RECEIVABLE  (contd)        March 31, 2011


December 31, 2010Reinsurance


% of


Reinsurance


% ofRecoverable


Total


Recoverable


TotalTop 10 reinsurers

$
731,955



72.7
%

$
726,201



75.5
%Other reinsurers balances > $1 million


235,843



23.4
%


198,737



20.7
%Other reinsurers balances < $1 million


38,829



3.9
%


36,504



3.8
%Total

$
1,006,627



100.0
%

$
961,442



100.0
%        19




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    LOSSES
    AND LOSS ADJUSTMENT EXPENSES    Three Months Ended March 31,2011


2010Balance as at January 1

$
3,291,275


$
2,479,136Less: total reinsurance reserves recoverable


525,440



347,7282,765,835



2,131,408Effect of exchange rate movement


34,372



(35,975
)Net reduction in ultimate loss and loss adjustment expense
    liabilities


(4,072
)


(9,596
)Net losses paid


(88,131
)


(83,225
)Acquired on purchase of subsidiaries


10,439



222,042Retroactive reinsurance contracts assumed


93,067



230,389Net balance as at March 31


2,811,510



2,455,043Plus: total reinsurance reserves recoverable


583,478



435,680Balance as at March 31

$
3,394,988


$
2,890,723     Three Months Ended March 31,2011


2010Net losses paid

$
(88,131
)

$
(83,225
)Net change in case and loss adjustment expense reserves


83,430



78,854Net change in incurred but not reported reserves


7,313



6,313Reduction in estimates of net ultimate losses


2,612



1,942Reduction in provisions for bad debt






5,339Reduction in provisions for unallocated loss adjustment expense
    liabilities


11,537



8,965Amortization of fair value adjustments


(10,077
)


(6,650
)Net reduction in ultimate loss and loss adjustment expense
    liabilities

$
4,072


$
9,596      20




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    LOSSES
    AND LOSS ADJUSTMENT
    EXPENSES  (contd)        9.
    LOANS
    PAYABLE      Facility

Date of Facility

March 31, 2011

December 31, 2010Unionamerica  Facility A

December 30, 2008

$
30,242


$
71,259Unionamerica  Facility B

December 30, 2008






154Knapton

April 20, 2010


21,528



21,532Enstar Group  Facility A

December 29, 2010


52,100



52,100Enstar Group  Facility B

December 29, 2010


62,900



62,900Total long-term bank debt




166,770



207,945Repurchase Agreements

October 1, 2010


37,660



37,333Total loans payable



$
204,430


$
245,278      21




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    LOANS
    PAYABLE  (contd)      10.
    EMPLOYEE
    BENEFITS  Form 10-K
  (a)
    Employee
    share plans    WeightedAverage FairNumber of


Value ofShares


the AwardNonvested  January 1, 2011


153,930


$
13,019Granted


67,767



5,625Vested


(17,767
)


(1,575
)Nonvested  March 31, 2011


203,930


$
20,369   (i)
    2006-2010
    Annual Incentive Compensation Program,
    2011-2015
    Annual Incentive Compensation Program and 2006 Equity Incentive
    Plan  2006-2010 2011-2015
    2006-2010
  (ii)
    Enstar
    Group Limited Employee Share Purchase Plan   22




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    EMPLOYEE
    BENEFITS  (contd)    (b)
    Options  WeightedAverage


IntrinsicNumber of


Exercise


Value ofShares


Price


SharesOutstanding  January 1, 2011


152,015


$
34.55


$
7,606Granted










Exercised


(49,037
)


19.63



(3,709
)Forfeited










Outstanding  March 31, 2011


102,978


$
41.61


$
5,996     Ranges of





Weighted AverageExercise

Number of

Weighted Average

RemainingPrices

Options

Exercise Price

Contractual Life$40 - $60


102,978


$
41.65



2.5 years   (c)
    Deferred
    Compensation and Stock Plan for Non-Employee
    Directors    (d)
    Pension
    plan       23




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    EARNINGS
    PER SHARE    2011


2010Basic earnings per share:Net earnings attributable to Enstar Group Limited

$
3,503


$
15,921Weighted average shares outstanding  basic


12,945,838



13,619,741Earnings per share attributable to Enstar Group
    Limited  basic

$
0.27


$
1.17Diluted earnings per share:Net earnings attributable to Enstar Group Limited

$
3,503


$
15,921Weighted average shares outstanding  basic


12,945,838



13,619,741Share equivalents:Unvested shares


174,486



39,313Restricted share units


17,489



14,397Options


82,519



158,246Weighted average shares outstanding  diluted


13,220,332



13,831,697Earnings per share attributable to Enstar Group
    Limited  diluted

$
0.26


$
1.15    12.
    RELATED
    PARTY TRANSACTIONS        13.
    TAXATION     24




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    TAXATION  (contd))        Three Months Ended March 31,2011


2010Earnings before income tax

$
4,120


$
21,843Expected tax rate


0.0
%


0.0
%Foreign taxes at local expected rates


50.9
%


54.2
%Benefit of loss carryovers


0.0
%


(11.8
)%Change in uncertain tax positions


1.2
%


0.3
%Change in valuation allowance


(12.7
)%


(15.1
)%Impact of Australian tax consolidation


(21.1
)%


Other


(3.3
)%


(0.5
)%Effective tax rate


15.0
%


27.1
%            25




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  14.
    SUBSEQUENT
    EVENTS    
    At the first closing, which occurred on April 20, 2011 (the
    First Closing), 531,345 of the Companys voting
    ordinary shares, par value $1.00 per share (Voting Common
    Shares), and 749,869 of the Companys newly created
    Series A convertible non-voting preference shares, par
    value $1.00 per share (the Non-Voting Preferred
    Shares), at a purchase price of $86.00 per share, or
    approximately $110.2 million in the aggregate. Subject to
    the receipt of shareholder approval of certain amendments to the
    Companys bye-laws to, among other things, create three new
    classes of non-voting ordinary shares (the Shareholder
    Approval), the Non-Voting Preferred Shares will convert on
    a
    share-for-share
    basis (subject to adjustment in certain circumstances) into
    non-voting ordinary shares of the Company, par value $1.00 (the
    Non-Voting Common Shares). At the First Closing, the
    Company also issued to the Purchasers warrants to acquire
    340,820 Non-Voting Preferred Shares or, subject to the receipt
    of the Shareholder Approval, Non-Voting Common Shares for an
    exercise price of $115.00 per share, subject to certain
    adjustments (the Warrants). The Purchasers may, at
    their election, satisfy the exercise price of the Warrants on a
    cashless basis by surrender of shares otherwise issuable upon
    exercise of the Warrants in accordance with a formula set forth
    in the Warrants. The Warrants expire on the ten year anniversary
    of the First Closing.
    At the second closing (the Second Closing), which is
    expected to occur after receipt of applicable regulatory
    approvals and satisfaction of other closing conditions (but not
    before December 23, 2011), 134,184 Voting Common Shares and
    827,504 Non-Voting Preferred Shares (unless the Company receives
    the Shareholder Approval, in which case the Purchasers will
    purchase Non-Voting Common Shares instead of Non-Voting
    Preferred Shares at the Second Closing), at a purchase price of
    $86.00 per share, or approximately $82.7 million in the
    aggregate.
    Subject to approval by the Companys shareholders of the
    issuance of securities in excess of limits imposed by the
    listing requirements of the Nasdaq Stock Market and satisfaction
    of other closing conditions, at a third closing (the Third
    Closing), 1,148,264 Non-Voting Preferred Shares (unless
    the Company receives the Shareholder Approval, in which case the
    Purchasers will purchase Non-Voting Common Shares instead of
    Non-Voting Preferred Shares at the Third Closing), at a purchase
    price of $86.00 per share, or approximately $98.7 million
    in the aggregate. If the Third Closing occurs, it is expected to
    occur simultaneously with the Second Closing.  share-for-share
   26




---



##### Table of Contents



ENSTAR
    GROUP LIMITED
  NOTES TO
    THE UNAUDITED CONDENSED
 CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    SUBSEQUENT
    EVENTS  (contd)      15.
    SEGMENT
    INFORMATION   27




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 28




---



##### Table of Contents



Item 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K
  Business
    Overview
      Recent
    Transactions
  Laguna
    Clarendon
    Significant
    New Business
  Shelbourne
    RITC Transactions
   29




---



##### Table of Contents



Results
    of Operations
    Three Months Ended March 31,2011


2010(in thousands of U.S. dollars)INCOMEConsulting fees

$
4,036


$
14,128Net investment income


18,542



26,121Net realized and unrealized gains


3,368



2,202Gain on bargain purchase


13,105



39,051



42,451EXPENSESNet reduction in ultimate loss and loss adjustment expense
    liabilities:Reduction in estimates of net ultimate losses


(2,612
)


(1,942
)Reduction in provisions for bad debt






(5,339
)Reduction in provisions for unallocated loss adjustment expense
    liabilities


(11,537
)


(8,965
)Amortization of fair value adjustments


10,077



6,650(4,072
)


(9,596
)Salaries and benefits


10,382



15,190General and administrative expenses


17,750



10,487Interest expense


1,966



2,394Net foreign exchange loss


7,334



7,58833,360



26,063Earnings before income taxes and share of net earnings of partly
    owned company


5,691



16,388Income taxes


(617
)


(5,922
)Share of net earnings of partly owned company






7,150NET EARNINGS


5,074



17,616Less: Net earnings attributable to noncontrolling interest


(1,571
)


(1,695
)NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED

$
3,503


$
15,921  30




---



##### Table of Contents



Comparison
    of the Three Months Ended March 31, 2011 and
    2010
    (i)
    a decrease in consulting fees of $10.1 million mainly related to
    lower fees earned from incentive based engagements;(ii)
    lower net reduction in ultimate loss and loss adjustment expense
    liabilities of $5.5 million;(iii)
    an increase in general and administrative expenses of
    $7.3 million due predominantly to an increase in
    professional fees relating largely to audit and third-party
    management fees as a result of 2010 acquisition activity;(iv)
    a decrease in net investment income of $7.6 million
    primarily as a result of lower unrealized gains in our private
    equity portfolio, classified as other investments, from
    $7.7 million in 2010 to $0.9 million in 2011; and(v)
    a decrease in our share of net earnings of partly owned company
    from $7.2 million in 2010 to $nil in 2011 as a result of
    our disposition of our investment in the partly owned company
    during 2010; partially offset by(vi)
    the gain on bargain purchase of $13.1 million in 2011,
    which arose in relation to our acquisition of Laguna;(vii)
    a decrease in income tax expense of $5.3 million due in
    large part to lower net earnings within our taxable
    subsidiaries; and(viii)
    a decrease in salary and benefit costs of $4.8 million due
    primarily to the release back to earnings of the unallocated
    portion of the 2010 year end bonus accrual provision.      Consulting
    Fees:
  Three Months Ended March 31,2011

2010

Variance(in thousands of U.S. dollars)Total

$
4,036


$
14,128


$
(10,092
)    31




---



##### Table of Contents



Net
    Investment Income and Net Realized and Unrealized
    Gains:
  Three Months Ended March 31,Net Investment Income

Net Realized and Unrealized  Gains2011

2010

Variance

2011

2010

Variance(in thousands of U.S. dollars)Total

$
18,542


$
26,121


$
(7,579
)

$
3,368


$
2,202


$
1,166       mark-to-market
  Fair Value Measurements
    March 31, 2011(in thousands of U.S. dollars)Quoted Prices inActive Markets


Significant Other


Significantfor Identified Assets


Observable Inputs


Unobservable Inputs


Total Fair(Level 1)


(Level 2)


(Level 3)


ValueU.S. government and agency

$



$
265,014


$



$
265,014Non-U.S.
    government






452,390







452,390Corporate






1,443,650



551



1,444,201Municipal






1,567







1,567Residential mortgage-backed






101,757







101,757Commercial mortgage-backed






47,777



962



48,739Asset backed






32,256







32,256Equities


59,680







3,975



63,655Other investments






93,916



139,962



233,878Total investments

$
59,680


$
2,438,327


$
145,450


$
2,643,457   Gain on
    Bargain Purchase:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
13,105


$



$
13,105    32




---



##### Table of Contents



Net
    Reduction in Ultimate Loss and Loss Adjustment Expense
    Liabilities:
    Three Months Ended March 31,2011


2010(in thousands of U.S. dollars)Net losses paid

$
(88,131
)

$
(83,225
)Net change in case and LAE reserves


83,430



78,854Net change in IBNR


7,313



6,313Reduction in estimates of net ultimate losses


2,612



1,942Reduction in provisions for bad debt






5,339Reduction in provisions for unallocated loss adjustment expense
    liabilities


11,537



8,965Amortization of fair value adjustments


(10,077
)


(6,650
)Net reduction in ultimate loss and loss adjustment expense
    liabilities

$
4,072


$
9,596               33




---



##### Table of Contents



Three Months EndedMarch 31,2011





2010(in thousands of U.S. dollars)Balance as of January 1

$
3,291,275






$
2,479,136Less: total reinsurance reserves recoverable


525,440







347,7282,765,835







2,131,408Effect of exchange rate movement


34,372







(35,975
)Net reduction in ultimate loss and loss adjustment expense
    liabilities


(4,072
)






(9,596
)Net losses paid


(88,131
)






(83,225
)Acquired on purchase of subsidiaries


10,439







222,042Retroactive reinsurance contracts assumed


93,067







230,389Net balance as at March 31

$
2,811,510






$
2,455,043Plus: total reinsurance reserves recoverable


583,478







435,680Balance as of March 31

$
3,394,988






$
2,890,723   Salaries
    and Benefits:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
10,382


$
15,190


$
4,808       (i)
    the reduction in the discretionary bonus accrual of
    $6.3 million due to the release back to earnings in 2011 of
    approximately $4.0 million relating to the unallocated
    portion of the 2010 year end bonus accrual provision and
    the reduction in net earnings for the three months ended
    March 31, 2011 as compared to 2010; partially offset by(ii)
    increased staff costs due to an increase in the average staff
    numbers from 296 for the three months ended March 31, 2010
    to 339 for the three months ended March 31, 2011; and

(iii)
    an increase from $0.1 million for the three months ended
    March 31, 2010 to $0.5 million for the three months
    ended March 31, 2011 in relation to the amortization of the
    unrecognized compensation costs in respect of the restricted
    shares that were awarded under our 2006 Equity Incentive Plan to
    an executive officer in 2011 and certain employees in 2010.    General
    and Administrative Expenses:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
17,750


$
10,487


$
(7,263
)    34




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##### Table of Contents



Interest
    Expense:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
1,966


$
2,394


$
428     Net Foreign Exchange Loss:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
7,334


$
7,588


$
254   available-for-sale
  Income
    Tax Expense:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
617


$
5,922


$
5,305     Share of
    Net Earnings of Partly Owned Company:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$



$
7,150


$
(7,150
)  35




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##### Table of Contents



Noncontrolling
    Interest:
  Three Months Ended March 31,2011


2010


Variance(in thousands of U.S. dollars)Total

$
1,571


$
1,695


$
124     Liquidity
    and Capital Resources
  Long-term
    Debt
        Private
    Placement
     36




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##### Table of Contents



Form 10-K
  Cash
    Flows
    (i)
    an increase in the net amount of purchases, sales and maturities
    of trading securities of $184.8 million. This increase
    reflects the decision of our investment committee to increase
    the allocation of our investment portfolio to trading
    securities; and(ii)
    a decrease in the net changes in assets and liabilities of
    $44.1 million.    (i)
    an increase of $101.1 million in the sales and maturities of
    available-for-sale securities due to the decision of our
    investment committee to increase the allocation of our
    investment portfolio to trading securities;(ii)
    a decrease in the net amount of purchases and maturities of
    held-to-maturity securities of $214.9 million due to the
    decision of our investment committee, discussed above, to
    increase the allocation of our investment portfolio to trading
    securities; and(iii)
    a decrease of $85.4 million of restricted cash and cash
    equivalents arising as a result of the purchase of restricted
    investments classified as trading securities. 37




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##### Table of Contents



(i)
    an increase of $40.5 million in the repayment of
    outstanding bank loans; and(ii)
    an increase of $16.2 million in distribution of capital
    paid to noncontrolling interest in 2011; partially offset by(iii)
    a decrease of $6.0 million in dividends paid to
    noncontrolling interest.  Commitments
    and Contingencies
    Form 10-K
  Critical
    Accounting Estimates
  Form 10-K
  Off-Balance
    Sheet and Special Purpose Entity Arrangements
  Regulation S-K.
  Cautionary
    Statement Regarding Forward-Looking Statements
      
    risks associated with implementing our business strategies and
    initiatives;
    the adequacy of our loss reserves and the need to adjust such
    reserves as claims develop over time;
    risks relating to the availability and collectability of our
    reinsurance;
    risks that we may require additional capital in the future which
    may not be available or may be available only on unfavorable
    terms;
    changes and uncertainty in economic conditions, including
    interest rates, inflation, currency exchange rates, equity
    markets and credit conditions, which could affect our investment
    portfolio, our ability to finance future acquisitions and our
    profitability;
    operational risks as a result of our past and future
    acquisitions, such as cash flow shortages, personnel recruitment
    challenges, additional integration costs and excessive
    management time and effort; 38




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##### Table of Contents




    losses due to foreign currency exchange rate fluctuations;
    tax, regulatory or legal restrictions or limitations applicable
    to us or the insurance and reinsurance business generally;
    increased competitive pressures, including the consolidation and
    increased globalization of reinsurance providers;
    emerging claim and coverage issues;
    lengthy and unpredictable litigation affecting assessment of
    losses
    and/or
    coverage issues;
    loss of key personnel;
    changes in our plans, strategies, objectives, expectations or
    intentions, which may happen at any time at managements
    discretion;
    operational risks, including system or human failures;
    the risk that ongoing or future industry regulatory developments
    will disrupt our business, or mandate changes in industry
    practices in ways that increase our costs, decrease our revenues
    or require us to alter aspects of the way we do business;
    changes in Bermuda law or regulation or the political stability
    of Bermuda;
    changes in tax laws or regulations applicable to us or our
    subsidiaries, or the risk that we or one of our
    non-U.S. subsidiaries
    become subject to significant, or significantly increased,
    income taxes in the United States or elsewhere; and
    changes in accounting policies or practices.  The factors listed above should be not construed as
    exhaustive and should be read in conjunction with the other
    cautionary statements and Risk Factors that are included in our
    Annual Report on
    Form 10-K
    for the year ended December 31, 2010, as well as in the
    other materials filed and to be filed with the
    U.S. Securities and Exchange Commission. We undertake no
    obligation to publicly update or review any forward looking
    statement, whether as a result of new information, future
    developments or otherwise.
  Item 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK  Form 10-K
  Item 4.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Changes
    in Internal Controls
   39




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##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1.
    LEGAL
    PROCEEDINGS    Item 1A.
    RISK
    FACTORS  Form 10-K
  Item 5.
    OTHER
    INFORMATION   40




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##### Table of Contents



Item 6.
    EXHIBITS  ExhibitNo.

Description10
.1*

Term Facility Agreement dated March 4, 2011 between Clarendon
    Holdings, Inc. and National Bank Limited.10
.2+

Enstar Group Limited 2011-2015 Annual Incentive Compensation
    Program (incorporated by reference to Exhibit 10.25 to the
    Companys Annual Report on Form 10-K, as filed with the
    Securities and Exchange Commission on March 7, 2011).10
.3*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Dominic F. Silvester, amending Amended
    and Restated Employment Agreement by and between Enstar Group
    Limited and Dominic F. Silvester.10
.4*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Paul J. OShea, amending
    Employment Agreement by and between Enstar Group Limited and
    Paul J. OShea.10
.5*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Nicholas A. Packer, amending Employment
    Agreement by and between Enstar Group Limited and Nicholas A.
    Packer.10
.6*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Richard J. Harris, amending Employment
    Agreement by and between Enstar Group Limited and Richard J.
    Harris.15
.1*

Deloitte & Touche Letter Regarding Unaudited Interim
    Financial Information.31
.1*

Certification pursuant to Rule 13a-14(a)/15d-14(a) of the
    Securities Exchange Act of 1934, as amended, as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2*

Certification pursuant to Rule 13a-14(a)/15d-14(a) of the
    Securities Exchange Act of 1934, as amended, as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1**

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.32
.2**

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.     *
    
    Filed herewith**
    
    Furnished herewith+
    
    Denotes management contract or compensatory arrangement 41




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##### Table of Contents



SIGNATURE       By:
    /s/  Richard
    J. Harris     42




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description10
.1*

Term Facility Agreement dated March 4, 2011 between
    Clarendon Holdings, Inc. and National Bank Limited.10
.2+

Enstar Group Limited 2011-2015 Annual Incentive Compensation
    Program (incorporated by reference to Exhibit 10.25 to the
    Companys Annual Report on Form 10-K, as filed with the
    Securities and Exchange Commission on March 7, 2011).10
.3*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Dominic F. Silvester, amending Amended
    and Restated Employment Agreement by and between Enstar Group
    Limited and Dominic F. Silvester.10
.4*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Paul J. OShea, amending
    Employment Agreement by and between Enstar Group Limited and
    Paul J. OShea.10
.5*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Nicholas A. Packer, amending Employment
    Agreement by and between Enstar Group Limited and Nicholas A.
    Packer.10
.6*+

Letter Agreement, effective January 1, 2011, by and between
    Enstar Group Limited and Richard J. Harris, amending Employment
    Agreement by and between Enstar Group Limited and Richard J.
    Harris.15
.1*

Deloitte & Touche Letter Regarding Unaudited Interim
    Financial Information.31
.1*

Certification pursuant to
    Rule 13a-14(a)/15d-14(a)
    of the Securities Exchange Act of 1934, as amended, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2*

Certification pursuant to
    Rule 13a-14(a)/15d-14(a)
    of the Securities Exchange Act of 1934, as amended, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1**

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.32
.2**

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     *
    
    Filed herewith**
    
    Furnished herewith+
    
    Denotes management contract or compensatory arrangement 43