ANNUITY & LIFE RE HOLDINGS LTD, S-1/A, 1998-03-20

ANNUITY & LIFE RE HOLDINGS LTD
S-1/A, 1998-03-20
LIFE INSURANCE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1998

REGISTRATION NO. 333-43301
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

ANNUITY AND LIFE RE (HOLDINGS), LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

<TABLE>
<S> <C> <C>
BERMUDA 6311 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OF ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
VICTORIA HALL, VICTORIA STREET CT CORPORATION SYSTEM
P.O. BOX HM1262 1633 BROADWAY
HAMILTON, HM FX, BERMUDA NEW YORK, NEW YORK 10019
(441) 296-7667 (212) 664-1666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND
INCLUDING AREA CODE, OF REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE,
PRINCIPAL EXECUTIVE OFFICES) OF AGENT FOR SERVICE)
</TABLE>

COPIES TO:

<TABLE>
<S> <C> <C>
F. DOUGLAS RAYMOND, III, ESQ. CHARLES G. COLLIS, ESQ. CRAIG B. BROD, ESQ.
DRINKER BIDDLE & REATH LLP CONYERS DILL & PEARMAN CLEARY, GOTTLIEB, STEEN & HAMILTON
1100 PHILADELPHIA NATIONAL BANK BUILDING CLARENDON HOUSE ONE LIBERTY PLAZA
1345 CHESTNUT STREET 2 CHURCH STREET, P.O. BOX HM666 NEW YORK, NEW YORK 10006
PHILADELPHIA, PENNSYLVANIA 19107-3496 HAMILTON, HM CX, BERMUDA (212) 225-2000
(215) 988-2700 (441) 295-1422
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus, one to be
used in connection with the underwritten offering of the Common Shares (the
"Underwritten Offering Prospectus") and a second to be used in connection with
the direct offering of Common Shares by the Company to certain of its directors
and officers (the "Direct Sales Prospectus"). The two prospectuses are identical
except for the front and back cover pages and except that the section captioned
"Underwriting" in the Underwritten Offering Prospectus is replaced by the
section captioned "Plan of Distribution" in the Direct Sales Prospectus.
Alternative pages for use in the Direct Sales Prospectus are designated as such
and are set forth immediately following the form of the Underwritten Offering
Prospectus contained herein.

<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION -- DATED MARCH 20, 1998

PROSPECTUS
- --------------------------------------------------------------------------------
16,750,000 Shares
ANNUITY AND LIFE RE (HOLDINGS), LTD.
Common Shares
- --------------------------------------------------------------------------------

All of the 16,750,000 common shares, par value $1.00 per share (the "Common
Shares"), offered hereby (the "Offering") are being sold by Annuity and Life Re
(Holdings), Ltd. (the "Company"). Prior to the Offering, the Company has not
conducted any business and there has been no public market for the Common
Shares. The initial public offering price will be $15.00 per Common Share.

In connection with the formation of the Company and the establishment of a core
group of strategic investors, The Prudential Insurance Company of America, EXEL
Limited, Risk Capital Reinsurance Company, Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P. (collectively, the "Strategic
Investors") have severally agreed to purchase for investment directly from the
Company an aggregate of 5,638,299 Common Shares and Class B Warrants to purchase
an aggregate of 397,500 Common Shares. Such purchases will be consummated
simultaneously with the consummation of the Offering for an aggregate purchase
price for the Common Shares and the Class B Warrants of $79.5 million. The
aggregate purchase price to be paid by the Strategic Investors is based on a
price of $14.10 for (i) one Common Share and (ii) the right to purchase
approximately seven one-hundredths of a Common Share under the Class B Warrants.
The exercise price for the Class B Warrants will be $15.00 per share. The
closing of the Offering made hereby is conditioned upon the closing of sales by
the Company to the Strategic Investors of Common Shares and related Class B
Warrants with an aggregate purchase price of at least $50.0 million.

The Company is also offering by a separate prospectus up to 221,121 Common
Shares directly to certain of its directors and officers at a price per share
equal to the initial public offering price per share, less the per share
underwriting discounts and commissions, for an aggregate purchase price if all
such purchases are made of approximately $3.1 million. Any such purchases are
also expected to be consummated simultaneously with the consummation of the
Offering. The offering to such directors and officers, together with the
purchases by the Strategic Investors, are referred to in this Prospectus as the
"Direct Sales." See "Direct Sales."

An application has been made to have the Common Shares approved for quotation in
The Nasdaq Stock Market's National Market (the "Nasdaq National Market") under
the symbol "ALREF."

The Common Shares offered hereby are subject to limitations on ownership,
transfers and voting rights which, among other things, generally prevent
transfers to holders beneficially owning 10% or more of the Common Shares of the
Company (other than as described herein), require divestiture of Common Shares
to reduce the beneficial ownership of any holder to less than 10% of the Common
Shares of the Company and reduce the voting power of any holder beneficially
owning 10% or more of the Common Shares of the Company to less than 10% of the
total voting power of the Company's capital stock. See "Description of Capital
Stock."

SEE "RISK FACTORS" ON PAGES 9 TO 16 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON SHARES
OFFERED HEREBY.
- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=============================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Common Share............... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(3)....................... $ $ $ (4)
=============================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting certain advisory fees and offering expenses payable by the
Company estimated to be $4,200,000. See "Use of Proceeds."

(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 2,512,500 additional Common Shares on the same
terms and conditions as set forth above. If all such additional shares are
purchased by the Underwriters, the total Price to Public will be $ ,
the total Underwriting Discounts and Commissions will be $ and the
total Proceeds to Company will be $ . See "Underwriting."
(4) Assuming completion of all the Direct Sales, the total proceeds to the
Company will be $ . If the Underwriters' over-allotment option
described above is exercised in full, the total proceeds to the Company
including the Direct Sales will be $ . See "Direct Sales."
- --------------------------------------------------------------------------------
The Common Shares are offered by the several Underwriters subject to delivery by
the Company and acceptance by the Underwriters, to prior sale and to withdrawal,
cancellation or modification of the offer without notice. Delivery of the shares
to the Underwriters is expected to be made through the facilities of The
Depository Trust Company, New York, New York, on or about , 1998.
------------------------
Joint Lead Managers and Joint Bookrunners
PRUDENTIAL SECURITIES INCORPORATED MERRILL LYNCH & CO.
------------------------
BT ALEX. BROWN
CIBC OPPENHEIMER
SCHRODER & CO. INC.
, 1998
<PAGE> 4

CONSENT UNDER THE EXCHANGE CONTROL ACT 1972 (AND REGULATIONS THEREUNDER) HAS
BEEN OBTAINED FROM THE BERMUDA MONETARY AUTHORITY FOR THE ISSUE AND TRANSFER OF
THE COMMON SHARES BEING OFFERED PURSUANT TO THIS OFFERING. IN ADDITION, A COPY
OF THIS DOCUMENT HAS BEEN DELIVERED TO THE REGISTRAR OF COMPANIES IN BERMUDA FOR
FILING PURSUANT TO THE COMPANIES ACT 1981 OF BERMUDA. IN GIVING SUCH CONSENT AND
IN ACCEPTING THIS PROSPECTUS FOR FILING, THE BERMUDA MONETARY AUTHORITY AND THE
REGISTRAR OF COMPANIES IN BERMUDA ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL
SOUNDNESS OF ANY PROPOSAL OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE
OR OPINIONS EXPRESSED HEREIN.

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

In this Prospectus, amounts are expressed in United States dollars and the
financial statements contained herein have been prepared in accordance with
United States generally accepted accounting principles ("GAAP").

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING PURCHASES OF THE COMMON SHARES TO STABILIZE ITS MARKET PRICE,
PURCHASES OF THE COMMON SHARES TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON SHARES MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 5

ENFORCEABILITY OF CIVIL LIABILITIES
UNDER UNITED STATES FEDERAL SECURITIES LAWS

The Company is organized pursuant to the laws of Bermuda. In addition,
certain of the directors and officers of the Company, as well as certain of the
experts named herein, reside outside the United States, and all or a substantial
portion of their assets and the assets of the Company are or may be located in
jurisdictions outside the United States. In particular, Annuity and Life
Reassurance, Ltd., the Company's sole subsidiary, through which the Company
expects to conduct all its operations, is also a Bermuda corporation. Therefore,
it may be difficult for investors to effect service of process within the United
States upon such persons or to recover against the Company or such persons on
judgments of courts in the United States, including judgments predicated upon
the civil liability provisions of the United States federal securities laws.
However, the Company may be served with process in the United States with
respect to actions against it arising out of or in connection with violations of
United States federal securities laws relating to offers and sales of Common
Shares made hereby by serving CT Corporation System, 1633 Broadway, New York,
New York 10019, its United States agent irrevocably appointed for that purpose.

The Company has been advised by Conyers Dill & Pearman, its Bermuda
counsel, that there is doubt as to whether the courts of Bermuda would enforce
(i) judgments of United States courts obtained in actions against the Company or
its directors and officers, as well as the experts named herein, who reside
outside the United States predicated upon the civil liability provisions of the
United States federal securities laws, or (ii) original actions brought in
Bermuda against the Company or such persons predicated solely upon United States
federal securities laws. The Company has also been advised by Conyers Dill &
Pearman that there is no treaty in effect between the United States and Bermuda
providing for such enforcement, and there are grounds upon which Bermuda courts
may not enforce judgments of United States courts. Certain remedies available
under the laws of United States jurisdictions, including certain remedies
available under the United States federal securities laws, may not be allowed in
Bermuda courts as contrary to that nation's public policy.

3
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, included elsewhere in this Prospectus. Unless the
context otherwise requires, references herein to the "Company" mean Annuity and
Life Re (Holdings), Ltd., together with its wholly-owned subsidiary, Annuity and
Life Reassurance, Ltd. ("Annuity Reassurance"), through which the Company
expects to conduct all its operations. The Company and Annuity Reassurance were
incorporated on December 2, 1997 in Bermuda and neither has any operating
history. Annuity Reassurance has been licensed in Bermuda as a long-term
insurer, which license authorizes it to write reinsurance on annuity and life
insurance-related risks. See "Glossary of Selected Annuity and Life Insurance
Terms" for definitions of certain terms used in this Prospectus. Unless
otherwise noted, this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised.

THE COMPANY

The Company and Annuity Reassurance were recently organized in Bermuda to
provide annuity and life reinsurance. The Company intends to market its
reinsurance products to select insurers and reinsurers on a worldwide basis,
with its primary target market initially being North America. Upon consummation
of the Offering, the Company expects to be the first publicly-traded
Bermuda-based reinsurance company focused principally on writing annuity and
life reinsurance.

By focusing on annuity and life reinsurance, the Company will seek to
participate in what it believes to be a market with significant growth
potential. As of year end 1996, according to LIMRA International, Inc., an
independent research organization ("LIMRA"), United States annuity assets under
management totaled approximately $919 billion, and, according to A.M. Best
Company, Inc. ("A.M. Best"), approximately $17.6 trillion of life insurance was
in force in the United States. Management believes that annuity reinsurance
presents an attractive opportunity because of the large potential size of the
market coupled with the limited number of companies currently providing such
reinsurance on a third-party basis. Furthermore, management believes that the
demand for the Company's life reinsurance products should be aided by growth in
new life reinsurance business production which management estimates, based on
industry surveys grew at a compounded annual rate of approximately 28% from 1993
to 1996, excluding retrocessional and group life reinsurance.

The Company's business strategy has been developed to respond to a number
of trends in the insurance and reinsurance industries, which trends management
believes are increasing the demand for annuity and life reinsurance, including:

- Increasing risk-based capital and reserve requirements being applied to
annuity issuers and life insurers by regulatory bodies and rating
agencies;

- Continuing consolidation in the annuity and life insurance industry,
including strategic decisions to divest large blocks of business through
the use of reinsurance;

- Increasing demutualization activity by mutual life insurers leading to
increasing demand for reinsurance;

- Growing use of multiple reinsurance partners by annuity issuers and life
insurers; and

- Expanding price sensitivity among purchasers of reinsurance.

Management believes that through controls on overhead costs and the absence of a
corporate level tax in Bermuda on the Company's revenues and earnings, the
Company will be able to capitalize on these trends by having one of the lowest
cost structures in the annuity and life reinsurance industry. The Company
expects that its low cost structure will enable it to offer its products at
attractive prices and to compete effectively in the annuity and life reinsurance
market.

4
<PAGE> 7

Upon consummation of the Offering and the Direct Sales, the Company will
have an equity capitalization of approximately $314.8 million. Management
believes that this level of capitalization will demonstrate a strong financial
position and a high level of commitment to the annuity and life reinsurance
market and will enable the Company to compete for desirable business and
establish long-term relationships with a select group of primary insurers and
reinsurers. As a newly-formed entity, the Company's capital is presently
unencumbered by issues of loss reserve adequacy, unrealized losses in its
investment portfolio and uncollectible reinsurance. In addition, although the
Company does expect that it may seek a working capital line of credit to finance
its operations, the Company does not presently have any indebtedness. In part
because of the Company's expected capitalization following the Offering and the
Direct Sales, A.M. Best has assigned Annuity Reassurance a preliminary Best
Rating of "A-" (Excellent), and Standard & Poor's Ratings Service ("Standard &
Poor's") and Duff & Phelps Credit Rating Co. ("Duff & Phelps") have assigned
Annuity Reassurance preliminary claims paying ability ratings of "A-" and "A,"
respectively. The A.M. Best and Duff & Phelps ratings are contingent on the
Company raising gross proceeds of $250 million in the Offering. The Standard &
Poor's rating is contingent on the Company raising gross proceeds of $200
million in the Offering. A.M. Best assigns an "A-" (Excellent) rating to
companies that have, in its opinion, on balance, excellent financial strength,
operating performance and market profile, as well as strong abilities to meet
their ongoing obligations to policyholders. Standard & Poor's assigns an "A-"
rating to companies that have, in its opinion, good financial security, but
their capacity to meet policyholder obligations is somewhat susceptible to
adverse economic and underwriting conditions. Duff & Phelps assigns an "A"
rating to companies that it characterizes as having high claims paying ability,
average protection factors and an expectation of variability in risk over time
due to economic or underwriting conditions. Each rating represents the
respective rating agency's opinion of the Company's ability to meet its
obligations to its policyholders.

The Company's principal executive office is located at Victoria Hall,
Victoria Street, P.O. Box HM1262, Hamilton, HM FX, Bermuda, and its telephone
number is (441) 296-7667.

BUSINESS STRATEGY

The Company's objective is to develop an efficient, low cost annuity and
life reinsurance business that will enable it to achieve attractive total rates
of return for its shareholders through prudent underwriting of insurance risks
and careful management of its investment portfolio. The Company will seek to
achieve this objective through the implementation of its business strategy, the
principal components of which are:

- - Maintain Low Cost Structure

Management believes that the price of reinsurance is the primary determinant
used by its potential clients in selecting an annuity or life reinsurer.
Consequently, a key component of the Company's business strategy is to
maintain a low cost structure. The Company intends to focus on writing
primarily treaty reinsurance and reinsuring large blocks of business where the
underlying policies meet the underwriting criteria of the primary insurer. The
Company anticipates that this focus will permit it to make fewer underwriting
assessments than would typically be required with respect to the underwriting
of a large number of individual policies. As a consequence, the Company
expects to limit its number of employees initially to approximately ten and to
use third-party service providers to perform certain functions. As a part of
this strategy, the Company has contracted with Marsh & McLennan Management
Services (Bermuda) Limited ("Marsh & McLennan") to provide claims processing
and other administrative services. By minimizing its personnel and overhead
costs, the Company expects to be better able to control expense levels as
market conditions for writing reinsurance fluctuate. In addition, the Company
also expects to benefit from the absence of a corporate level tax in Bermuda
on the Company's revenues and earnings. As a result of these factors, the
Company expects to have one of the lowest cost structures in the annuity and
life reinsurance industry.

- - Utilize a Disciplined Underwriting Approach

are mortality risk and investment risk. Mortality risk is actuarially
quantifiable when spread across large numbers of insureds. The Company will be
exposed to investment risk when the products it reinsures guarantee an
investment return or fixed benefit. The Company intends to manage these risks
by using modeling techniques to structure its investments in an effort to
match its anticipated liabilities under reinsurance policies. In addition, the
Company's underwriting guidelines limit the maximum aggregate net risk on any
one life to $1.0 million and require any purchaser of reinsurance from the
Company to retain at least 10% of the total risk being reinsured. Waivers of
the Company's underwriting guidelines, including waivers of the 10% retention
requirement, must be approved by the Company's Board of Directors. Initially,
the Company intends to supplement its underwriting analyses with commercially
available actuarial models and may retain consultants to assist in the
analysis of the risks that it reinsures, while it develops its own proprietary
models. The Company believes that its focus on annuity and life reinsurance
will enable it to structure its reinsurance products to meet the specific
requirements of its clients while managing its exposure to the risks being
assumed. Furthermore, the reinsurance of annuity and life insurance products
will not expose the Company to the catastrophic risks normally associated with
property/casualty reinsurance, which the Company does not intend to write.

- - Employ Professional Investment Management

The Company will seek to generate attractive levels of investment income
through a professionally managed fixed income investment portfolio. Annuity
Reassurance has entered into an investment advisory agreement with Pacific
Investment Management Company ("PIMCO"), which is anticipated to manage
initially approximately 50% of Annuity Reassurance's investment portfolio.
Annuity Reassurance has also retained Alliance Capital Management L.P. and The
Prudential Investment Corporation (together with PIMCO, the "Investment
Managers"). Annuity Reassurance may also retain other investment managers from
time to time. Each Investment Manager will have discretionary authority over
the portion of Annuity Reassurance's investment portfolio allocated to it,
subject to the investment guidelines established by Annuity Reassurance (the
"Investment Guidelines"). Annuity Reassurance's investment portfolio will
principally consist of investment grade fixed income securities and will be
invested in an effort to match Annuity Reassurance's anticipated liabilities
under the reinsurance policies it writes. Assets held in the investment
portfolio that Annuity Reassurance believes exceed such anticipated
liabilities, if any, will be invested in an attempt to maximize total return
as well as to provide for diversification of risk and maintenance of
liquidity, and up to 25% of such assets may be invested in fixed income
securities that are rated below investment grade. The Investment Guidelines
require Annuity Reassurance's overall fixed income portfolio to maintain a
minimum weighted average rating of "A." The Investment Guidelines prohibit any
investment in common equity securities or equity-based futures and options
other than pursuant to strategies intended to hedge the equity-based
investment risk associated with annuity and life insurance products which
Annuity Reassurance reinsures.

- - Capitalize on Skill and Experience of Management and Board of Directors

6
<PAGE> 9

Mr. Reale was assigned overall pricing responsibility for that company's
United States life and annuity reinsurance market. William W. Atkin, the Chief
Financial Officer and Treasurer of the Company, has over 24 years experience
in the insurance industry. Mr. Atkin formerly served as an Executive Vice
President, the Chief Financial Officer and a director of Security Mutual Life
Insurance Company of New York where he was responsible for that company's
operating plans, annuity product line and relationships with credit rating
agencies, investment advisors, banks and independent accountants. Richard
Tucker, a Vice President of the Company, has over 18 years of experience in
the insurance and reinsurance industries and was formerly a Senior Vice
President and a director of PaineWebber Life Insurance Company. While employed
by PaineWebber Life Insurance Company, Mr. Tucker was responsible for that
company's financial and administrative operations, development of variable
annuity products and negotiation of annuity reinsurance agreements. Robert P.
Mills, Jr., a Vice President and the Chief Actuary of the Company, has over 26
years of experience in the insurance and reinsurance industries. Mr. Mills was
formerly an Assistant Vice President and Actuary for Allmerica Financial where
he was responsible for reinsurance administration and pricing. The Company's
Board of Directors consists of several individuals with extensive experience
in the insurance and financial services industries. Management believes that
the reputation and expertise possessed by the Company's officers and directors
should provide the Company with a marketing advantage.

STRATEGIC INVESTORS

In connection with the formation of the Company, management determined it
would be desirable to have a core group of investors composed of companies in
the insurance or reinsurance industries. In furtherance of this goal, the
Company has entered into agreements with The Prudential Insurance Company of
America ("Prudential Insurance"), EXEL Limited ("EXEL"), Risk Capital
Reinsurance Company ("Risk Capital"), Insurance Partners, L.P. ("Insurance
Partners") and Insurance Partners Offshore (Bermuda), L.P. ("Insurance Partners
Offshore") for the purchase for investment directly from the Company of an
aggregate of 5,638,299 Common Shares and Class B Warrants to purchase an
aggregate of 397,500 Common Shares. Such purchases will be completed
simultaneously with the consummation of the Offering for an aggregate purchase
price for the Common Shares and the Class B Warrants of $79.5 million. The
aggregate purchase price to be paid by the Strategic Investors is based on a
price of $14.10 for (i) one Common Share and (ii) the right to purchase
approximately seven one-hundredths of a Common Share under the Class B Warrants.
The exercise price of the Class B Warrants will be $15.00 per share. Prudential
Insurance is the largest life insurance company in the United States based on
total assets at December 31, 1997. EXEL is a diversified Bermuda-based insurer
and reinsurer. Risk Capital provides reinsurance and other forms of capital,
either on a stand-alone basis or as part of integrated solutions for insurance
companies with capital needs that cannot be met by reinsurance alone. Insurance
Partners and Insurance Partners Offshore are investment partnerships formed to
sponsor acquisitions, recapitalizations, demutualizations and other structured
transactions in the property/casualty, life and health insurance and reinsurance
industries.

7
<PAGE> 10

THE OFFERING

<TABLE>
<S> <C>
Common Shares Offered in the Offering....................... 16,750,000 shares
Direct Sales(1)............................................. 5,859,420 shares
Common Shares to be Outstanding after the Offering and the
Direct Sales(2)........................................... 22,609,420 shares
Use of Proceeds from the Offering and the Direct Sales...... The net proceeds of the Offering
and Direct Sales are estimated to
be approximately $232.0 million
and $82.6 million, respectively.
Substantially all of the net
proceeds will be contributed to
the capital of Annuity Reassurance
to support its reinsurance
underwriting capacity. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol...................... ALREF
</TABLE>

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

(1) Unless otherwise noted, this Prospectus assumes that upon consummation of
the Offering the sale of 5,638,299 Common Shares and Class B Warrants to
purchase 397,500 Common Shares to the Strategic Investors has been completed
and the 221,121 Common Shares offered by the Company to certain of its
directors and officers have been purchased. Such directors and officers have
indicated their intention to make such purchases, but are not obligated to
do so.

(2) The Annuity Re Purpose Trust, a Bermuda trust (the "Purpose Trust"), owns
12,000 Common Shares, which constitute all of the currently outstanding
Common Shares. Upon consummation of the Offering, the Purpose Trust has
agreed to sell such Common Shares to the Company for an aggregate price of
$12,000 and such Common Shares will be cancelled. Common Shares to be
outstanding after the Offering and the Direct Sales excludes the 12,000
Common Shares currently held by the Purpose Trust, 2,713,132 Common Shares
issuable upon exercise of outstanding Class A Warrants, 397,500 Common
Shares issuable upon exercise of Class B Warrants to be included in the
Direct Sales, 1,220,013 Common Shares issuable upon exercise of options to
be granted to management and certain directors upon consummation of the
Offering and 173,505 Common Shares reserved for future issuance pursuant to
the Company's Initial Stock Option Plan (the "Stock Option Plan"). If the
Underwriters' over-allotment option is exercised in full, upon consummation
of the Offering and the Direct Sales 25,121,920 Common Shares will be
outstanding, the number of Common Shares issuable upon exercise of
outstanding Class A Warrants will increase to 3,014,629 Common Shares, the
number of Common Shares issuable upon exercise of options to be granted to
management and certain directors upon consummation of the Offering will
increase to 1,338,101 Common Shares and the number of Common Shares reserved
for future issuance pursuant to the Stock Option Plan will increase to
193,605 Common Shares. The number of Common Shares issuable upon exercise of
the Class B Warrants will not change if the Underwriters' over-allotment
option is exercised. The Class A Warrants, Class B Warrants and options are
not currently exercisable. See "Management -- Stock Option Plan,"
"Description of Capital Stock -- Warrants" and "Direct Sales."

RISK FACTORS

Business such as the Company which are in their initial stages of
development present substantial business and financial risks and may suffer
significant losses for reasons not anticipated by management. In addition, the
Company's business strategy has not been tested and may not succeed. Investors
should consider the material risk factors involved in connection with an
investment in the Common Shares and the impact to investors from various
circumstances which could adversely affect the Company's business. See "Risk
Factors."

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<PAGE> 11

RISK FACTORS

An investment in the Common Shares involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus, in connection
with the investment in the Common Shares.

When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "plan," "intend" and similar
expressions are intended to identify forward-looking statements regarding among
other things: (i) the Company's business and growth strategies; (ii) the
Company's relationship with third-party service providers and clients; (iii) the
use of the net proceeds of the Offering and the Direct Sales; (iv) trends in the
insurance and reinsurance industries; (v) government regulations; (vi) the
Company's financing plans; (vii) trends affecting the Company's financial
condition or results of operations; and (viii) the declaration and payment of
dividends. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Factors
that could cause or contribute to such differences include, but are not limited
to, those described below, and under the heading "Management's Discussion and
Analysis of Financial Condition and Plan of Operations" and elsewhere in this
Prospectus.

START UP OPERATIONS; RELIANCE ON SERVICE PROVIDERS. The Company and
Annuity Reassurance were formed on December 2, 1997, and neither has any
operating history. Annuity Reassurance has been licensed in Bermuda as a
long-term insurer, which license authorizes it to write reinsurance on annuity
and life insurance-related risks. Businesses which are starting up or in their
initial stages of development present substantial business and financial risks
and may suffer significant losses. They must successfully develop business
relationships, establish operating procedures, hire staff and complete other
tasks appropriate for the conduct of their intended business activities.
Furthermore, the Company intends to have only a limited staff and at least
initially to outsource many functions, including claims processing and
investment management. The Company currently has retained Marsh & McLennan and
the Investment Managers to perform such functions. The Company will be dependent
upon the quality of the services provided by such firms. The inability of the
Company to retain qualified service providers or the failure of outside service
providers to perform adequately their functions could delay or prevent the
Company from fully implementing its business strategy or could otherwise
adversely affect the Company. See "Business."

COMPETITION AND FINANCIAL RATINGS. The reinsurance industry is highly
competitive. The Company will compete with major reinsurers, many of which have
substantially greater financial, marketing and management resources than the
Company. Competition in the types of reinsurance business that the Company
intends to underwrite is based on many factors, including premium charges, the
general reputation and perceived financial strength of the reinsurers, other
terms and conditions of products offered, ratings assigned by independent rating
agencies, speed of claims payment and reputation and experience in the
particular line of reinsurance to be written. The Company has no experience in
competing against such other companies, and there can be no assurance that it
will be successful. Furthermore, because the Company expects to rely at least
initially on a small number of clients, its business may be more susceptible to
the adverse effects of competition from other reinsurers.

Insurance ratings are used by insurers and reinsurance intermediaries as an
important means of assessing the financial strength and quality of reinsurers.
In addition, the rating of a company purchasing reinsurance may be adversely
affected by an unfavorable rating or the lack of a rating of its reinsurer. The
Company has received a preliminary Best Rating of "A-" (Excellent) from A.M.
Best and preliminary claims paying ability ratings of "A-"and "A" from Standard
& Poor's and from Duff & Phelps, respectively. The A.M. Best and Duff & Phelps
ratings are contingent upon the Company raising gross proceeds of $250 million
in the Offering. The Standard & Poor's rating is contingent on the Company
raising gross proceeds of $200 million in the Offering. If the Company fails to
satisfy these conditions and consequently does not receive a final rating from
such firms, the Company's prospects would be adversely affected. See
"Business -- Competition."

DEPENDENCE ON KEY EMPLOYEES. The Company will be substantially dependent
in the implementation of its business strategy on Lawrence S. Doyle, the
President and Chief Executive Officer of the Company,
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<PAGE> 12

Robert J. Reale, a Senior Vice President and the Chief Underwriter of the
Company, William W. Atkin, the Chief Financial Officer and Treasurer of the
Company, Richard Tucker, a Vice President of the Company, and Robert P. Mills,
Jr., a Vice President and the Chief Actuary of the Company. Messrs. Doyle,
Reale, Atkin, Tucker and Mills have each entered into an employment contract
with the Company for a term expiring three years after the consummation of the
Offering. See "Management -- Employment Agreements." The loss of the services of
these individuals, or the inability of the Company to hire and retain other
talented personnel, could delay or prevent the Company from fully implementing
its business strategy or could otherwise adversely affect the Company.

Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may
not engage in any gainful occupation in Bermuda without an appropriate
Governmental work permit. Such a work permit may be granted or extended upon
showing that, after proper public advertisement, no Bermudian (or spouse of a
Bermudian) is available who meets the minimum standards for the advertised
position. Mr. Doyle, the President and Chief Executive Officer of the Company,
and Mr. Mills, a Vice President and the Chief Actuary of the Company, are
working in Bermuda under work permits which expire in 2003 and 2001,
respectively. Messrs. Reale, Atkin and Tucker have not yet been issued work
permits. While the Company is not currently aware of any reason why the work
permits for these officers would not be issued, there can be no assurance to
that effect. The failure of these work permits to be issued could adversely
affect the Company.

MARKET FOR ANNUITY AND LIFE REINSURANCE. The market for annuities and many
life insurance products in the United States is based in large part on the
favorable tax treatment such products receive relative to certain other
investment alternatives. Any material change in such tax treatment, including
the imposition of a "flat tax" or a national sales tax in lieu of the current
federal income tax structure in the United States, would have an adverse effect
on the market for such products. The current budget proposal submitted to
Congress by the Clinton Administration includes certain provisions which, if not
modified, would reduce the tax advantages of certain annuity and life insurance
products. These provisions include a tax on exchanges between certain types of
annuity and life insurance products, including exchanges among investment
options within a variable annuity, and increased taxes on the owners of certain
corporate-owned life insurance policies. If these proposed tax changes were
enacted into law, they would adversely affect the Company. Furthermore, a
general economic downturn or a downturn in the equity and other capital markets
could adversely affect the market for many annuity and life insurance products.
If the market for annuities or life insurance were adversely affected, it would
likely depress the demand for reinsurance of annuities or life insurance, which
would have an adverse effect on the Company. In addition, the market for annuity
reinsurance products is currently not well developed and there can be no
assurance that such a market will develop in the future. As the Company is not
aware of any other publicly-traded reinsurance company that focuses on the
annuity reinsurance market to the extent the Company intends, the Company
expects to be more sensitive to adverse conditions in such market than such
other reinsurance companies.

INVESTMENT RISKS. Risk management and the success of the Company's
investment strategy are expected to be crucial to the success of the Company's
business. In particular, the Company's ability to structure its investments to
match its anticipated liabilities under reinsurance policies has not been
tested. Therefore, no assurance can be given that the Company will successfully
match the structure of its investments with its anticipated liabilities under
reinsurance policies. If the Company's calculations with respect to these
reinsurance liabilities are incorrect, or if it improperly structures its
investments to match such liabilities, it could be forced to liquidate
investments prior to maturity at a significant loss.

The Investment Guidelines also permit up to 25% of the portion of Annuity
Reassurance's investment portfolio, if any, in excess of the amounts allocated
to offset liabilities under reinsurance policies to be invested in below
investment grade fixed income securities. While any investment carries some
risk, the risks associated with lower-rated securities are greater than the
risks associated with investment grade securities. The risk of loss of principal
or interest through default is greater because lower-rated securities are
usually unsecured and are often subordinated to an issuer's other obligations.
Additionally, the issuers of these securities frequently have high debt levels
and are thus more sensitive to difficult economic conditions, individual
corporate developments and rising interest rates which could impair an issuer's
capacity or willingness to meet its

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<PAGE> 13

financial commitment on such lower-rated securities. Consequently, the market
price of these securities may be quite volatile, and the risk of loss is
greater.

Annuity Reassurance may also from time to time purchase or sell common
equity securities or equity-based futures and options solely pursuant to
strategies intended to hedge the equity-based investment risk associated with
annuity and life insurance products which it reinsures. The failure of Annuity
Reassurance to match its equity investments accurately with its equity-based
liabilities could expose the Company to the volatility of the equity markets and
potential losses on such equity securities and equity-based futures and options.
In addition, the possible lack of liquidity for certain futures and options
could adversely affect the Company. See "Business -- Investment Strategy."

Annuity Reassurance has entered into an investment advisory agreement with
PIMCO, which firm is anticipated to manage initially approximately 50% of
Annuity Reassurance's investment portfolio. Annuity Reassurance has also
retained Alliance Capital Management L.P. and The Prudential Investment
Corporation. Annuity Reassurance may also retain other investment managers from
time to time. Each Investment Manager will have discretionary authority over the
portion of Annuity Reassurance's investment portfolio allocated to it, subject
to the Investment Guidelines adopted by Annuity Reassurance. The performance of
Annuity Reassurance's investment portfolio, therefore, will depend to a great
extent on the ability of the Investment Managers to select and manage
appropriate investments. There can be no assurance that the Investment Managers
will be successful in meeting the Company's investment objectives. See
"Business -- Investment Managers."

The success of any investment activity is affected by general economic
conditions, which may adversely affect the markets for interest-rate-sensitive
securities and equity securities, including the level and volatility of interest
rates and the extent and timing of investor participation in such markets.
Unexpected volatility or illiquidity in the markets in which Annuity Reassurance
directly or indirectly holds positions could adversely affect the Company.

REGULATION. Annuity Reassurance is a registered Bermuda insurance company
and is subject to regulation and supervision in Bermuda. Generally the Bermudian
statutes and regulations applicable to Annuity Reassurance are less restrictive
than those that would be applicable to Annuity Reassurance were it subject to
the insurance laws of any state in the United States. Among other things, the
Bermuda statutes and regulations require Annuity Reassurance to maintain minimum
levels of capital and surplus; prescribe solvency standards that it must meet;
limit transfers of ownership of its capital shares; and provide for the
performance of certain periodic examinations of Annuity Reassurance and its
financial condition. These statutes and regulations may, in effect, restrict the
ability of Annuity Reassurance to write reinsurance policies and distribute
funds to the Company. See "Business -- Regulation -- Bermuda."

Annuity Reassurance is not licensed or admitted as an insurer in any
jurisdiction except Bermuda. The insurance laws of each state in the United
States and of many other jurisdictions regulate the sale of insurance and
reinsurance within their jurisdiction by insurers, such as Annuity Reassurance,
which are not admitted to do business within such jurisdiction. With some
exceptions, the sale of insurance within a jurisdiction where the insurer is not
admitted to do business is prohibited. The Company expects to conduct its
business through its Bermuda office either directly or through intermediaries,
such as brokers and consultants. The Company does not intend to maintain an
office, and it does not expect its personnel to solicit, advertise, settle
claims or conduct other activities which may constitute the transaction of the
business of insurance, in any jurisdiction in which the Company is not licensed
or otherwise authorized to engage in such activities. However, there can be no
assurance that inquiries or challenges to the Company's insurance activities in
such jurisdictions will not be raised in the future or that the Company's
location, regulatory status or restrictions on its activities resulting
therefrom will not adversely affect the Company. Furthermore, because many
jurisdictions do not permit insurance companies to take credit for reinsurance
obtained from unlicensed or non-admitted insurers on their statutory financial
statements unless appropriate security measures are in place, it is anticipated
that the Company's reinsurance clients will typically require it to post a
letter of credit or other collateral. Although the Company has received
commitments from two commercial banks to provide standby letter of credit
facilities, such commitments are subject to several conditions, including the
negotiation of definitive documentation. If

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<PAGE> 14

the Company is unable to obtain a letter of credit facility from such banks or
from other lenders on commercially acceptable terms, the Company's ability to
operate its business will be severely limited. See
"Business -- Regulation -- United States and Other" and
"Business -- Competition."

Recently, the insurance and reinsurance regulatory framework has become
subject to increased scrutiny in many jurisdictions, including the United
States, various states within the United States and elsewhere. In the past,
there have been Congressional and other initiatives in the United States
regarding increased supervision and regulation of the insurance industry,
including proposals to supervise and regulate reinsurers domiciled outside the
United States ("alien reinsurers"). If the Company were to become subject to any
insurance laws of the United States or any state thereof or of any other
jurisdiction at any time in the future, there can be no assurance that it would
be in compliance with such laws or that coming into compliance with such laws
would not have an adverse effect on the Company.

It is not possible to predict the future impact of changing law or
regulation on the operations of the Company. Such changes, if any, could have an
adverse effect on the Company.

HOLDING COMPANY STRUCTURE. The Company is a holding company and will not
conduct reinsurance operations of its own. The Company, at least initially, will
have no significant operations or assets other than its ownership of the capital
stock of Annuity Reassurance. Dividends and other permitted payments from
Annuity Reassurance are expected to be the Company's sole source of funds to pay
expenses and dividends, if any. The payment of dividends by Annuity Reassurance
to the Company is limited under Bermuda law and regulations, including Bermuda
insurance law. Under the Insurance Act 1978 of Bermuda, as amended, and related
regulations (the "Insurance Act"), Annuity Reassurance must maintain long-term
business assets with a value at least $250,000 greater than its long-term
business liabilities and is prohibited from declaring or paying dividends that
would result in non-compliance with such requirement. In addition, under the
Bermuda Companies Act 1981, the Company and Annuity Reassurance may only declare
or pay a dividend if there are reasonable grounds for believing that they are,
or would after the payment be, able to pay their respective liabilities as they
become due. Accordingly, there is no assurance that dividends will be declared
or paid by the Company in the future. See "Dividend Policy," "Management's
Discussion and Analysis of Financial Condition and Plan of
Operations -- Liquidity and Capital Resources" and "Business -- Regulation --
Bermuda."

FOREIGN CORPORATION, SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS. The
Company is organized pursuant to the laws of Bermuda. In addition, certain of
the directors and officers of the Company, as well as certain of the experts
named herein, reside outside the United States, and all or a substantial portion
of their assets and the assets of the Company are or may be located in
jurisdictions outside the United States. Although the Company has irrevocably
appointed an agent in the City of New York to receive service of process with
respect to actions against it arising out of or in connection with violations of
United States federal securities laws relating to offers and sales of Common
Shares in the Offering, it may be difficult for investors to effect service of
process within the United States upon such persons or to recover against them or
the Company on judgments of United States courts, including judgments predicated
upon civil liability provisions of the United States federal securities laws.
See "Enforceability of Civil Liabilities Under United States Federal Securities
Laws."

INCOME TAX RISKS

Taxation of the Company and Annuity Reassurance. The Company and Annuity
Reassurance are Bermuda corporations and neither intends to file United States
tax returns. The Company and Annuity Reassurance plan to operate in such a
manner that they will not be subject to United States tax (other than United
States excise tax on reinsurance premiums and withholding tax on certain
investment income from United States sources) because they do not intend to
engage in business in the United States. However, because definitive
identification of activities which constitute being engaged in trade or business
in the United States is not provided by the Internal Revenue Code of 1986, as
amended (the "Code"), or regulations or court decisions, there can be no
assurance that the Internal Revenue Service ("IRS") will not contend that

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<PAGE> 15

the Company and/or Annuity Reassurance is engaged in trade or business in the
United States. If the Company or Annuity Reasurrance were considered to be
engaged in business in the United States (and, if such company were to qualify
for benefits under the income tax treaty between the United States and Bermuda,
such business were attributable to a "permanent establishment" in the United
States), it would be subject to United States tax at regular corporate rates on
its taxable income that is effectively connected with its United States business
plus an additional 30% "branch profits" tax on such income remaining after the
regular tax, in which case there could be an adverse affect on the Company. See
"Certain Tax Considerations."

The United States currently imposes an excise tax on insurance and
reinsurance premiums paid to foreign insurers or reinsurers with respect to
risks located in the United States. In addition, the Company may be subject to
withholding tax on certain investment income from United States sources. There
can be no assurance that such taxes will not be increased or that other taxes
will not be imposed on the Company's business.

Controlled Foreign Corporation Rules. United States persons who may,
directly or through certain attribution rules, acquire 10% or more of the Common
Shares of the Company, should consider the possible application of the
"controlled foreign corporation" ("CFC") rules. Each "United States shareholder"
of a CFC who owns shares in the CFC on the last day of the CFC's taxable year
generally must include in his gross income for United States federal income tax
purposes his pro-rata share of the CFC's "subpart F income," even if the subpart
F income has not been distributed. For these purposes, any United States person
who owns directly or indirectly 10% or more of the voting stock of a foreign
corporation will be considered to be a "United States shareholder." In general,
a foreign insurance company such as Annuity Reassurance is treated as a CFC only
if such "United States shareholders" collectively own more than 25% of the total
combined voting power or total value of the company's stock for an uninterrupted
period of 30 days or more during any year. The Company believes that, because of
the anticipated dispersion of the Company's share ownership among holders and
because of the restrictions in the Company's Bye-Laws on transfer, issuance or
repurchase of the voting shares of the Company, shareholders who acquire Common
Shares in the Offering will not be subject to treatment as "United States
shareholders" of a CFC. In addition, because under the Bye-Laws no single
shareholder will be permitted to exercise 10% or more of the total combined
voting power of the Company, shareholders of the Company should not be viewed as
"United States shareholders" of a CFC for purposes of these rules. There can be
no assurance, however, that these rules will not apply to shareholders of the
Company. See "Certain Tax Considerations."

Related Person Insurance Income Risks. If Annuity Reassurance's related
person insurance income ("RPII") determined on a gross basis were to equal or
exceed 20% of its gross insurance income in any taxable year, a United States
person who owns Common Shares in the Company directly or indirectly on the last
day of the taxable year may be required to include in income for United States
federal income tax purposes the shareholder's pro-rata share of Annuity
Reassurance's RPII for the taxable year, determined as if such RPII were
distributed proportionately to such United States persons at that date. RPII is
generally underwriting premium and related investment income attributable to
insurance or reinsurance policies where the direct or indirect insureds are
United States shareholders or are related to United States shareholders of the
insurance or reinsurance company issuing such policies. Although Annuity
Reassurance does not currently believe that the 20% threshold will be met in
1998 and subsequent years, the amount of RPII earned by Annuity Reassurance will
depend on a number of factors that may be beyond its control. Consequently,
there can be no assurance that Annuity Reassurance's RPII will not equal or
exceed 20% of its gross insurance income in any taxable year. See "Certain Tax
Considerations."

If a shareholder who is a United States person disposes of shares in a
foreign insurance corporation that has RPII (even if the amount of RPII is less
than 20% of the corporation's gross insurance income) and in which United States
persons own 25% or more of the shares, any gain from the disposition will
generally be treated as ordinary income to the extent of the shareholder's
portion of the corporation's undistributed earnings and profits that were
accumulated during the period that the shareholder owned the shares (potentially
whether or not such earnings and profits are attributable to RPII). In addition,
such a shareholder will be required to comply with certain reporting
requirements, regardless of the amount of shares owned by
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<PAGE> 16

the shareholder. These rules should not apply to dispositions of Common Shares
because the Company is not itself directly engaged in the insurance business and
because proposed United States Treasury regulations applicable to this situation
appear to apply only in the case of shares of corporations that are directly
engaged in the insurance business. There can be no assurance, however, that the
IRS will interpret the proposed regulations in this manner or that the proposed
regulations will not be promulgated in final form in a manner that would cause
these rules to apply to dispositions of Common Shares. See "Certain Tax
Considerations."

Passive Foreign Investment Company Risks. To avoid significant potential
adverse United States federal income tax consequences for any United States
person who owns Common Shares of the Company, it is important that the Company
not constitute a "passive foreign investment company" (a "PFIC") in any year in
which such person is a shareholder. In general, a foreign corporation is a PFIC
for a taxable year if 75% or more of its income constitutes "passive income" or
50% or more of its assets produce passive income. "Passive income" generally
includes interest, dividends and other investment income. However, "passive
income" does not include income "derived in the active conduct of an insurance
business by a corporation which is predominantly engaged in an insurance
business." This exception is intended to ensure that income derived by a bona
fide insurance company is not treated as passive income, except to the extent
such income is attributable to financial reserves in excess of the reasonable
needs of the insurance business. Because the Company, through Annuity
Reassurance, intends to be predominantly engaged in an insurance business and
does not intend to have financial reserves in excess of the reasonable needs of
its insurance business, the Company does not expect to meet the requirements for
a PFIC. There can be no assurance, however, that the IRS or a court will concur
in this view. See "Certain Tax Considerations."

Bermuda Taxes. The Company and Annuity Reassurance have each received an
assurance from the Bermuda Minister of Finance under The Exempted Undertakings
Tax Protection Act 1966 of Bermuda to the effect that if there is enacted in
Bermuda any legislation imposing tax computed on profits or income, or computed
on any capital asset, gain or appreciation, or any tax in the nature of estate
duty or inheritance tax, then the imposition of any such tax shall not be
applicable to the Company, Annuity Reassurance or to any of their operations or
the shares, debentures or other obligations of the Company or Annuity
Reassurance until March 2016. There can be no assurance that after such date the
Company or Annuity Reassurance would not be subject to any such tax.

LIMITATIONS ON OWNERSHIP, TRANSFERS AND VOTING RIGHTS. Except as described
below with respect to transfers of Common Shares executed on the Nasdaq National
Market, under the Company's Bye-Laws, the Company's directors (or their
designee) are required to decline to register any transfer of shares of the
Company, including Common Shares, if they have any reason to believe that such
transfer would result in a person (or any group of which such person is a
member) beneficially owning, directly or indirectly, 10% or more of any class of
shares of the Company. Similar restrictions apply to issuances and repurchases
of shares by the Company. The directors (or their designee) also may, in their
absolute discretion, decline to register the transfer of any shares if they have
reason to believe that such transfer may expose the Company, any subsidiary or
shareholder thereof or any person purchasing reinsurance from the Company to
adverse tax or regulatory treatment in any jurisdiction or if they have reason
to believe that registration of such transfer under the Securities Act of 1933,
as amended (the "Securities Act"), or under any blue sky or other United States
securities laws or under the laws of any other jurisdiction is required and such
registration has not been duly effected. A transferor of Common Shares will be
deemed to own such shares for dividend, voting and reporting purposes until a
transfer of such Common Shares has been registered on the Register of Members of
the Company. The Company is authorized to request information from any holder or
prospective acquiror of Common Shares as necessary to effect registration of any
such transaction, and may decline to register any such transaction if complete
and accurate information is not received as requested.

The Company's directors will not decline to register any transfer of Common
Shares executed on the Nasdaq National Market for the reasons described above.
However, if any transfer results in the transferee (or any group of which such
transferee is a member) beneficially owning, directly or indirectly, 10% or more
of any class of the Company's shares or causes the Company's directors (or their
designee) to have reason to believe that such transfer may expose the Company,
any subsidiary or shareholder thereof or any person purchasing reinsurance from
the Company to adverse tax or regulatory treatment in any jurisdiction, under
the Company's Bye-Laws, the directors (or their designee) are empowered to
deliver a notice to the transferee

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<PAGE> 17

demanding that such transferee surrender to an agent designated by the directors
(the "Agent") certificates representing the shares and any dividends or
distributions that the transferee has received as a result of owning the shares.
A transferee who has resold the shares before receiving such notice will be
required to transfer to the Agent the proceeds of the sale, to the extent such
proceeds exceed the amount that the transferee paid for the shares, together
with any dividends or distributions that the transferee received from the
Company. As soon as practicable after receiving the shares and any dividends or
distributions that the transferee received, the Agent will use its best efforts
to sell such shares and any non-cash dividends or distributions in an arm's-
length transaction on the Nasdaq National Market. After applying the proceeds
from such sale toward reimbursing the transferee for the price paid for the
shares, the Agent will pay any remaining proceeds and any cash dividends and
distributions to organizations described in Section 501(c)(3) of the Code that
the directors designate. The proceeds of any such sale by the Agent or the
surrender of dividends or distributions will not inure to the benefit of the
Company or the Agent, but such amounts may be used to reimburse expenses
incurred by the Agent in performing its duties.

In addition, the Bye-Laws generally provide that any person (or any group
of which such person is a member) holding directly, or by attribution, or
otherwise beneficially owning voting shares of the Company carrying 10% or more
of the total voting rights attached to all of the Company's outstanding capital
shares, will have the voting rights attached to its voting shares reduced so
that it may not exercise more than approximately 9.9% of such total voting
rights. Because of the attribution provisions of the Code and the rules of the
Securities and Exchange Commission (the "Commission") regarding determination of
beneficial ownership, this requirement may have the effect of reducing the
voting rights of a shareholder whether or not such shareholder directly holds of
record 10% or more of the voting shares of the Company. Further, the directors
(or their designee) have the authority to request from any shareholder certain
information for the purpose of determining whether such shareholder's voting
rights are to be reduced. Failure to respond to such a notice, or submitting
incomplete or inaccurate information, gives the directors (or their designee)
discretion to disregard all votes attached to such shareholder's Common Shares.
See "Description of Capital Stock -- Common Shares."

NO PRIOR PUBLIC MARKET. Before the Offering there has been no public
market for the Common Shares. There can be no assurance that an active trading
market for the Common Shares will develop or be sustained following the
completion of the Offering or that the market price of the Common Shares will
not decline from the initial public offering price. The initial public offering
price for the Common Shares offered hereby was established by the Company and
the representatives of the Underwriters and may not be indicative of the market
price of the Common Shares after the Offering.

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering and the
Direct Sales, the Company will have outstanding 22,609,420 Common Shares, Class
A Warrants to purchase an aggregate of 2,713,132 Common Shares, Class B Warrants
to purchase an aggregate of 397,500 Common Shares and options to purchase an
aggregate of 1,220,013 Common Shares. If the Underwriters' over-allotment option
is exercised in full, 25,121,920 Common Shares will be outstanding, the number
of Common Shares issuable upon exercise of outstanding Class A Warrants will
increase to an aggregate of 3,014,629 Common Shares and the number of Common
Shares issuable upon exercise of outstanding options will increase to an
aggregate of 1,338,101 Common Shares. The number of Common Shares issuable upon
exercise of the Class B Warrants will not change if the Underwriters'
over-allotment option is exercised. The Class A Warrants, Class B Warrants and
options are not currently exercisable. See "Management -- Stock Option Plan,"
"Description of Capital Stock -- Warrants" and "Direct Sales." Except as
disclosed in "Description of Capital Stock -- Restrictions on Transfer" and as
discussed below with respect to the lock-up agreements, the Common Shares sold
in the Offering and any Common Shares sold in the Direct Sales to the Company's
directors and officers will be freely transferable without restriction or
further registration under the Securities Act, except for any of those Common
Shares owned by an "affiliate" of the Company within the meaning of Rule 144
under the Securities Act (which sales will be subject to volume limitations and
certain other restrictions). The Common Shares to be sold to the Strategic
Investors in the Direct Sales and the Common Shares underlying the Class A
Warrants, the Class B Warrants and the options are "restricted securities" as
defined in Rule 144 under the Securities Act and may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from registration. The Strategic Investors, the holders of Class A Warrants and
the

15
<PAGE> 18

holders of the Class B Warrants have been granted rights to require the Company
to register the Common Shares purchased by the Strategic Investors in the Direct
Sales and the Common Shares underlying the Class A Warrants and the Class B
Warrants, which rights are not exercisable prior to the first anniversary of the
consummation of the Offering. The Company has agreed not to permit the
acceleration of the exercisability of such rights without the prior written
consent of Prudential Securities Incorporated and Merrill Lynch & Co. on behalf
of the Underwriters. The Company does intend to register the resale of the
Common Shares underlying the outstanding options promptly following the first
anniversary of the consummation of the Offering. The Company, its directors and
officers, the holders of Class A Warrants and the Strategic Investors have
executed agreements (the "lock-up agreements") under which they have agreed that
they will not, without the prior written consent of Prudential Securities
Incorporated and Merrill Lynch & Co. on behalf of the Underwriters and, in
addition, in the case of the Strategic Investors, the Company, directly or
indirectly offer, sell, offer to sell, contract to sell, transfer, assign,
pledge, hypothecate, grant any option to purchase, or otherwise sell or dispose
(or announce any offer, sale, offer of sale, contract of sale, transfer,
assignment, pledge, hypothecation, grant of any option to purchase or other sale
or disposition) of any Common Shares or other capital stock of the Company or
any other securities convertible into, or exercisable or exchangeable for, any
Common Shares or other capital stock of the Company for a period of one year
after the date of this Prospectus, except for Prudential Insurance, which has
agreed to such restrictions for a period of 180 days after the date of this
Prospectus. Such agreements do not prevent the Company from granting options
under the Stock Option Plan so long as such options are not exercisable until
one year from the date of this Prospectus. Prudential Securities Incorporated,
Merrill Lynch & Co. and the Company may, in their discretion at any time and
without notice, jointly release all or any portion of the securities subject to
such lock-up agreements. No prediction can be made as to the effect, if any,
that future sales of Common Shares, or the availability of Common Shares for
future sale, will have on the market price of the Common Shares prevailing from
time to time. Sales of substantial amounts of Common Shares in the public market
following the Offering, or the perception that such sales could occur, could
adversely affect the market price of the Common Shares and may make it more
difficult for the Company to sell its equity securities in the future at a time
and at a price which it deems appropriate. If the persons holding the Class A
Warrants, Class B Warrants or options cause a large number of the Common Shares
underlying such securities to be sold in the market, such sales could have an
adverse effect on the market price for the Common Shares. See "Shares Eligible
for Future Sale."

IMPACT OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115. Annuity
Reassurance's investment portfolio is expected to consist primarily of
securities considered available for sale within the meaning of Financial
Accounting Standards No. 115. Securities available for sale may be disposed of
to meet liquidity requirements, or for any other reason, and are carried in the
balance sheet at fair (or market) value. Changes in the market value of these
securities are accounted for through adjustments to shareholders' equity.
Although not currently planned, Annuity Reassurance's investment portfolio may
in the future consist of securities to be held to maturity within the meaning of
Financial Accounting Standards No. 115. Securities held to maturity may be
disposed of only under certain specific circumstances and are carried in the
balance sheet at amortized cost. If Annuity Reassurance's investment portfolio
contained one or more securities classified as held to maturity and Annuity
Reassurance had to sell any of those securities, then all such securities
remaining in the held to maturity portfolio would have to be transferred to the
available for sale portfolio. This would result in those securities immediately
being valued on the balance sheet at market value, and any difference between
the market value and amortized cost at the date of transfer would then be
recognized as an adjustment to shareholders' equity at that date. Depending on
the market conditions for such securities at the date of transfer, this could
decrease the Company's reported shareholders' equity and adversely affect the
market price for the Common Shares.

FOREIGN CURRENCY FLUCTUATIONS. The Company's functional currency is the
United States dollar. However, because the Company expects that it may write a
portion of its business and receive premiums in currencies other than United
States dollars and may maintain a small portion of its investment portfolio in
investments denominated in currencies other than United States dollars, the
Company may experience exchange losses to the extent its foreign currency
exposure is not properly managed or otherwise hedged, which in turn would
adversely affect the Company's statement of operations and financial condition.

16
<PAGE> 19

USE OF PROCEEDS

The net proceeds from the sale of the 16,750,000 Common Shares offered in
the Offering are estimated to be $232.0 million (after deducting underwriting
discounts and commissions, certain advisory fees and other estimated expenses,
including payments to Inter-Atlantic Securities Corporation for its services and
reimbursement for certain expenses related to the Offering). See "Certain
Relationships and Related Party Transactions." The net proceeds from the Direct
Sales are estimated to be $82.6 million. Substantially all of the net proceeds
of the Offering and the Direct Sales will be contributed to the capital of
Annuity Reassurance to support its reinsurance underwriting capacity and will be
invested in accordance with the Investment Guidelines. See
"Business -- Investment Strategy." Until so invested, such proceeds will be
invested in short-term, investment grade, interest-bearing securities.

17
<PAGE> 20

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997 and as adjusted to give effect to the Offering
and the Direct Sales and the receipt of the net proceeds therefrom. See "Use of
Proceeds."

<TABLE>
<CAPTION>
AS ADJUSTED FOR
THE OFFERING AND THE
ACTUAL DIRECT SALES(2)
------ --------------------------
($ IN THOUSANDS)
<S> <C> <C>
Preferred Shares, par value $1.00 per share (50,000,000
shares authorized; no shares outstanding; no shares
outstanding as adjusted).................................. $ -- $ --
Common Shares, par value $1.00 per share (100,000,000 shares
authorized; 12,000 shares outstanding; 22,609,420 shares
outstanding as adjusted)(1)............................... 12 22,609
Additional paid-in capital.................................. 238 292,221
Retained earnings........................................... -- --
---- --------
Total shareholders' equity................................ 250 314,830
---- --------
Total capitalization........................................ $250 $314,830
==== ========
</TABLE>

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

(1) The Purpose Trust owns 12,000 Common Shares, which constitute all of the
currently outstanding Common Shares. Upon consummation of the Offering, the
Purpose Trust has agreed to sell such Common Shares to the Company for an
aggregate price of $12,000 and such Common Shares will be cancelled. Common
Shares outstanding excludes 2,713,132 Common Shares issuable upon exercise
of outstanding Class A Warrants, 397,500 Common Shares issuable upon
exercise of the Class B Warrants to be included in the Direct Sales,
1,220,013 Common Shares issuable upon exercise of options to be granted to
management and certain directors upon consummation of the Offering and
173,505 Common Shares reserved for future issuance pursuant to the Stock
Option Plan. If the Underwriters' over-allotment option is exercised in
full, 25,121,920 Common Shares will be outstanding, the number of Common
Shares issuable upon exercise of outstanding Class A Warrants will increase
to 3,014,629 Common Shares, the number of Common Shares issuable upon
exercise of options to be granted to management and certain directors upon
consummation of the Offering will increase to 1,338,101 Common Shares and
the number of Common Shares reserved for future issuance pursuant to the
Stock Option Plan will increase to 193,605 Common Shares. The number of
Common Shares issuable upon exercise of the Class B Warrants will not change
if the Underwriters' over-allotment option is exercised. The Class A
Warrants, Class B Warrants and options are not currently exercisable. See
"Management -- Stock Option Plan," "Description of Capital
Stock -- Warrants" and "Direct Sales."

(2) As adjusted does not give effect to any exercise of the Underwriters'
over-allotment option and excludes the 12,000 Common Shares currently held
by the Purpose Trust.

18
<PAGE> 21

DIVIDEND POLICY

The Company is a newly formed corporation and has not declared or paid any
cash dividends on its Common Shares. The Board of Directors of the Company
intends to declare and pay out of earnings a quarterly dividend of $.04 per
Common Share beginning at the end of the first full fiscal quarter following the
consummation of the Offering. It is the Company's policy to retain all earnings
in excess of such quarterly dividend to support the growth of its business. If
the Company's current and retained earnings do not support the payment of such
quarterly dividend, the dividend may be reduced or eliminated. In the event that
the Company makes a payment to shareholders in excess of its current and
retained earnings, such payment would be treated as a return of capital to
holders of the Common Shares. The declaration and payment of dividends by the
Company will be at the discretion of its Board of Directors and will depend upon
the Company's results of operations and cash flows, the financial position and
capital requirements of Annuity Reassurance, general business conditions, legal,
tax, regulatory and any contractual restrictions on the payment of dividends and
other factors the Board of Directors of the Company deems relevant. The
Company's ability to pay dividends depends on the ability of Annuity Reassurance
to pay dividends to the Company. While the Company is not itself subject to any
significant legal prohibitions on the payment of dividends, Annuity Reassurance
is subject to Bermuda regulatory constraints which affect its ability to pay
dividends to the Company. Accordingly, there is no assurance that dividends will
be declared or paid in the future. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operations -- Liquidity and Capital Resources"
and "Business -- Regulation."

19
<PAGE> 22

DILUTION

Purchasers of the Common Shares offered in the Offering will experience an
immediate dilution in net tangible book value of their Common Shares from the
initial public offering price. After giving effect to the Offering and the
Direct Sales, the pro forma net tangible book value of the Common Shares (after
deducting underwriting discounts and commissions, certain advisory fees and
other estimated expenses of the Offering, including fees payable to
Inter-Atlantic Securities Corporation) will be approximately $314.8 million, or
approximately $13.92 per outstanding share. This represents an immediate
dilution in net tangible book value to investors purchasing shares in the
Offering of approximately $1.08 per share, without taking into account any
Common Shares issuable upon exercise of Class A Warrants, Class B Warrants and
options. Pro forma "net tangible book value" per outstanding share represents
shareholders' equity divided by the number of outstanding Common Shares,
including the Common Shares issued in the Offering and the Direct Sales. The
following table illustrates this per share dilution:

<TABLE>
<S> <C>
Initial public offering price............................... $15.00
Pro forma net tangible book value per outstanding share upon
completion of the Offering and the Direct Sales(1)........ 13.92
------
Dilution to new investors in the Offering................... $ 1.08
======
</TABLE>

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

(1) Does not include 2,713,132 Common Shares issuable upon exercise of
outstanding Class A Warrants (3,014,629 Common Shares if the Underwriters'
over-allotment option is exercised in full), 397,500 Common Shares issuable
upon exercise of the Class B Warrants to be included in the Direct Sales,
1,220,013 Common Shares issuable upon exercise of options to be granted to
management and certain directors upon consummation of the Offering
(1,338,101 Common Shares if the Underwriters' over-allotment option is
exercised in full) and 173,505 Common Shares reserved for future issuance
under the Stock Option Plan (193,605 Common Shares if the Underwriters'
over-allotment option is exercised in full). The number of Common Shares
issuable upon exercise of the Class B Warrants will not change if the
Underwriters' over-allotment option is exercised. The Class A Warrants,
Class B Warrants and options are not currently exercisable. The exercise of
the Class A Warrants, Class B Warrants and the options to be granted to
management and certain directors upon consummation of the Offering are not
expected to be dilutive to purchasers of the Common Shares in the Offering
because the exercise price per share of such warrants and options is equal
to the initial public offering price per share. See "Management -- Stock
Option Plan," "Description of Capital Stock -- Warrants" and "Direct Sales."

The following table summarizes the number of Common Shares purchased from
the Company, the total consideration paid and the average price per share paid
in the Direct Sales and the Offering, assuming estimated underwriting discounts
and commissions:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE PER
AMOUNT PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Direct Sales................ 5,859,420 25.92% $ 82,617,822(1) 24.75% $14.10(2)
Offering.................... 16,750,000 74.08% $251,250,000 75.25% $15.00
---------- ------ ------------ ------ ------
Total....................... 22,609,420 100.00% $333,867,822 100.00% $14.77
========== ====== ============ ======
</TABLE>

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

(1) Represents amount paid in the aggregate for Common Shares and Class B
Warrants in the Direct Sales, of which approximately $1.6 million has been
estimated by the Company as the purchase price of the Class B Warrants.

(2) The average price per share is based on the number of Common Shares
purchased in the Direct Sales and does not take into account the Common
Shares underlying the Class B Warrants.

The calculations of net tangible book value and other computations above
assume no exercise of the Underwriters' over-allotment option.

20
<PAGE> 23

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

The following unaudited pro forma consolidated balance sheet has been based
on the historical consolidated balance sheet of the Company as of December 31,
1997, and gives effect to the Offering and the Direct Sales as if they were
consummated on December 31, 1997. The unaudited pro forma balance sheet is based
on assumptions management believes are reasonable. The unaudited pro forma
balance sheet is presented for informational purposes only and does not purport
to be indicative of the balance sheet data as of any future date. The pro forma
unaudited balance sheet should be read in conjunction with the Company's
historical consolidated balance sheet and notes thereto and other information
contained herein. As the Company had no operations on or prior to December 31,
1997, pro forma consolidated statements of income and cash flows are not
presented.

PRO FORMA CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997

(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA CONSOLIDATED
INFORMATION ADJUSTMENTS BALANCE SHEET
----------- ------------ -------------
<S> <C> <C> <C>
ASSETS
Cash............................................ $250,000 $314,580,806(a) $314,830,806
Deferred equity offering costs.................. 233,000 (233,000)(b) --
Capitalized organization costs.................. -- 75,000(c) 75,000
-------- ------------ ------------
Total Assets.......................... $483,000 $314,422,806 $314,905,806
======== ============ ============
LIABILITIES
Accounts payable................................ $233,000 $ (158,000)(d) $ 75,000
-------- ------------ ------------
Total Liabilities..................... $233,000 $ (158,000) $ 75,000
-------- ------------ ------------
STOCKHOLDERS' EQUITY
Preferred Shares (par value $1.00;
50,000,000 shares authorized;
no shares outstanding)........................ $ -- $ -- $ --
Common Shares (par value $1.00;
100,000,000 shares authorized;
12,000 shares outstanding; 22,609,420 shares
outstanding pro forma)........................ 12,000 22,597,420(e) 22,609,420
Additional paid-in capital...................... 238,000 291,983,386(f) 292,221,386
-------- ------------ ------------
Total stockholders' equity............ $250,000 $314,580,806 $314,830,806
======== ============ ============
Total liabilities and stockholders' equity...... $483,000 $314,422,806 $314,905,806
======== ============ ============
</TABLE>

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

(a) To record the net proceeds of the Offering and the Direct Sales, less
$12,000 which will be paid to the Purpose Trust in exchange for the Common
Shares it currently holds.

(b) To record the payment of deferred equity costs out of the proceeds of the
Offering.

(c) To record estimated capitalized organization costs of $75,000 incurred in
forming and organizing the Company. It is the Company's policy to
capitalize those costs that have been incurred in the Company's formation
and organization and to amortize such costs to income over a period of five
years.

(d) To record $75,000 of organization costs and the payment of $233,000 of
deferred equity offering costs.

(e) To record 22,609,420 Common Shares sold in the Offering and the Direct
Sales, less the 12,000 Common Shares to be repurchased by the Company from
the Purpose Trust.

(f) To record additional paid-in capital received in the Offering and the
Direct Sales, net of estimated offering costs to be incurred by the Company
in completing the Offering. Such costs include aggregate financial advisory
fees of $3.0 million and an additional $1.2 million of other estimated
Offering costs consisting of legal, accounting and printing expenses as
well as filing fees and other costs related to the Offering.

21
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

GENERAL

The Company and Annuity Reassurance were formed on December 2, 1997 under
the laws of Bermuda, and neither has any operating history. Annuity Reassurance
has been licensed in Bermuda as a long-term insurer, which license authorizes it
to write reinsurance on annuity and life insurance-related risks. Their fiscal
years end on December 31. The Company's financial statements are prepared in
accordance with GAAP.

LIQUIDITY AND CAPITAL RESOURCES

The Company will rely primarily on cash dividends from Annuity Reassurance
to pay its operating expenses and dividends, if any. The Board of Directors of
the Company intends to declare and pay out of earnings a quarterly dividend of
$.04 per Common Share beginning at the end of the first full fiscal quarter
following the consummation of the Offering. It is the Company's policy to retain
all earnings in excess of such quarterly dividend to support the growth of its
business. If the Company's current and retained earnings do not support the
payment of such quarterly dividend, the dividend may be reduced or eliminated.
In the event that the Company makes a payment to shareholders in excess of its
current and retained earnings, such payment would be treated as a return of
capital to holders of the Common Shares. The declaration and payment of
dividends by the Company will be at the discretion of its Board of Directors and
will depend upon the Company's results of operations and cash flows, the
financial position and capital requirements of Annuity Reassurance, general
business conditions, legal, tax, regulatory and any contractual restrictions on
the payment of dividends and other factors the Board of Directors of the Company
deems relevant. While the Company is not itself subject to any significant legal
prohibitions on the payment of dividends, Annuity Reassurance is subject to
Bermuda regulatory constraints which affect its ability to pay dividends to the
Company. Accordingly, there is no assurance that dividends will be declared or
paid in the future. See "Dividend Policy" and
"Business -- Regulation -- Bermuda."

The principal sources of funds for Annuity Reassurance's operations are
expected to be substantially all of the net proceeds of the Offering and the
Direct Sales, premiums, fees and net investment income, as well as maturities
and sales of invested assets. These funds are expected to be used primarily to
pay policy benefits, claims, operating expenses and commissions, as well as to
purchase new investments and, subject to Bermuda law, to make dividend payments
to the Company.

The principal risks associated with the reinsurance of both annuity and
life insurance products are mortality risk and investment risk. Mortality risk
is actuarially quantifiable when spread across large numbers of insureds. The
Company will be exposed to investment risk when the products it reinsures
guarantee an investment return or fixed benefit. The Company intends to manage
these risks by using modeling techniques to structure its investments in an
effort to match its anticipated liabilities under reinsurance policies. No
assurance can be given, however, that the Company will successfully match the
structure of its investments with its liabilities under reinsurance policies. If
the Company's calculations with respect to these reinsurance liabilities are
incorrect, or if it improperly structures its investments to match such
liabilities, it could be forced to liquidate investments prior to maturity at a
significant loss. Annuity Reassurance may also from time to time purchase or
sell common equity securities or equity-based futures and options solely
pursuant to strategies intended to hedge the equity-based investment risk
associated with the annuity and life insurance products which it reinsures. The
failure of Annuity Reassurance to match its equity investments accurately with
its equity-based liabilities could expose the Company to the volatility of the
equity markets and potential losses on such equity securities and equity-based
futures and options. In addition, the possible lack of liquidity for certain
futures and options could adversely affect the Company.

Annuity Reassurance is not licensed or admitted as an insurer in any
jurisdiction other than Bermuda. Because many jurisdictions do not permit
insurance companies to take credit for reinsurance obtained from unlicensed or
non-admitted insurers on their statutory financial statements unless appropriate
security mechanisms are in place, it is anticipated that the Company's
reinsurance clients will typically require it to post a letter of credit or
other collateral. In the event that the Company should default under the letter
of credit facility, it may be required to liquidate prematurely all or a
substantial portion of its investment portfolio

22
<PAGE> 25

and/or its other assets which have been pledged as security for the facility or
otherwise secure its obligations to its reinsureds, which would likely have a
material adverse effect on the Company. Although the Company has received
commitments from two commercial banks to provide standby letter of credit
facilities, such commitments are subject to several conditions, including the
negotiation of definitive documentation. If the Company is unable to obtain a
letter of credit facility from such banks or from different lenders on
commercially acceptable terms, the Company's ability to operate its business
will be severely limited.

The Company does not currently have any material commitments for any
capital expenditures over the next twelve months. Its principal expenditures are
expected to consist of settlement of claims, compensation expenses and payments
to third-party service providers.

Marsh & McLennan has informed the Company that the information systems it
will use on the Company's behalf are Year 2000 compliant. Although the Company
has not independently tested such compliance, the Company does not believe that
it will have to commit any material resources to address any deficiencies in its
information systems related to Year 2000 issues.

Pursuant to an agreement between Inter-Atlantic Securities Corporation and
the Company, Inter-Atlantic Securities Corporation has agreed to provide certain
services in connection with the formation of the Company, including assistance
in recruiting senior management and obtaining necessary governmental permits.
Furthermore, in return for certain services related to the Offering, including
assistance in preparing a registration statement for the Common Shares,
retaining underwriters in connection with the Offering and such other services
as the Company or Inter-Atlantic Securities Corporation deems appropriate, the
Company has agreed to pay Inter-Atlantic Securities Corporation a fee of $2.0
million upon consummation of the Offering. Pursuant to such agreement,
Inter-Atlantic Securities Corporation is also entitled to receive an annual fee
of $600,000 for services provided after the consummation of the Offering, which
is payable in quarterly installments commencing on the first anniversary of the
consummation of the Offering through the fifth anniversary of the consummation
of the Offering. In exchange for such annual fee, Inter-Atlantic Securities
Corporation will assist the Company in the development of products, financial
planning, management of assets and liabilities, international marketing efforts
and such other services as the Company may request.

The Company is also obligated to reimburse Inter-Atlantic Securities
Corporation for expenses it incurs in connection with performing services
related to the formation of the Company, the Offering and the Company's ongoing
operations. At December 22, 1997, Inter-Atlantic Securities Corporation had
incurred expenses in connection with the Company's organization of approximately
$75,000 and costs in connection with the Offering of approximately $400,000. If
the Offering is successfully completed prior to June 30, 1998, certain of these
incurred but not currently payable expenses may be paid directly by the Company
rather than paid to Inter-Atlantic Securities Corporation as a reimbursement. If
the Offering is not successfully completed prior to June 30, 1998,
Inter-Atlantic Securities Corporation will only be entitled to reimbursement of
expenses incurred by it on or after December 23, 1997. Upon consummation of the
Offering, expenses incurred by Inter-Atlantic Securities Corporation are
currently estimated to be approximately $1,625,000, of which approximately
$75,000 relates to services provided in connection with the formation of the
Company, approximately $1.2 million relates to the Offering and approximately
$350,000 relates to operating expenses incurred on the Company's behalf. The
expenses payable to Inter-Atlantic Securities Corporation that relate to the
formation of the Company will be capitalized and amortized to income evenly over
five years. The fees and expenses payable to Inter-Atlantic Securities
Corporation that relate to services provided to the Company in connection with
the Offering will be deducted from the gross proceeds of the Offering. The
annual fee of $600,000 and the expenses payable to Inter-Atlantic Securities
Corporation as reimbursement of operating expenses incurred on the Company's
behalf will be expensed by the Company when incurred.

Upon consummation of the Offering, the Company has agreed to pay Prudential
Securities Incorporated an advisory fee equal to $1.0 million (plus
reimbursement of related out-of-pocket expenses) for investment banking and
financial advisory services in connection with the Offering and related matters.

The Company expects that the net proceeds of the Offering and Direct Sales
will permit it to begin implementation of its business strategy. Over time,
internally generated funds plus a working capital line of
23
<PAGE> 26

credit and the capital base established by the Offering and Direct Sales are
expected to be sufficient to operate the Company's business, although no such
working capital line has yet been established and no assurance can be given that
such a facility will be obtained on terms acceptable to the Company.
Consequently, the Company does not presently anticipate that it will incur any
material indebtedness in the ordinary course of its business other than
obtaining letters of credit as security for its reinsurance agreements and a
working capital line of credit. However, there can be no assurance that the
Company will not be required to incur other indebtedness in order to implement
its business strategy.

CURRENCY

The Company's functional currency is the United States dollar. However,
because the Company expects that it may write a portion of its business and
receive premiums in currencies other than United States dollars and may maintain
a small portion of its investment portfolio in investments denominated in
currencies other than United States dollars, the Company may experience exchange
losses to the extent its foreign currency exposure is not properly managed or
otherwise hedged, which in turn would adversely affect the Company's statement
of operations and financial condition. The Company will attempt to manage its
foreign currency risk by seeking to match its liabilities under reinsurance
policies that are payable in foreign currencies with investments that are
denominated in such currencies. Furthermore, the Company may use forward foreign
currency exchange contracts in an effort to hedge against movements in the value
of foreign currencies relative to the United States dollar. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the contract.
Foreign currency exchange contracts will not eliminate fluctuations in the value
of the Company's assets and liabilities denominated in foreign currencies but
rather allow the Company to establish a rate of exchange for a future point in
time. The Company does not expect that it will enter into such contracts with
respect to a material amount of its assets.

TAXATION

Bermuda does not currently impose a corporate level tax on the profits or
income of the Company, although it may do so in the future. The Company and
Annuity Reassurance have each received an assurance from the Bermuda Minister of
Finance under The Exempted Undertakings Tax Protection Act 1966 of Bermuda to
the effect that if there is enacted in Bermuda any legislation imposing tax
computed on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or inheritance tax, then
the imposition of any such tax shall not be applicable to the Company, Annuity
Reassurance or to any of their operations or shares, debentures or other
obligations of the Company or Annuity Reassurance until March 2016. There can be
no assurance that after such date the Company or Annuity Reassurance would not
be subject to any such tax. See "Certain Tax Considerations -- Taxation of the
Company and Annuity Reassurance -- Bermuda." Because the Company and Annuity
Reassurance are not expected to conduct business in the United States, and
Annuity Reassurance will not be licensed to do business in the United States or
any other jurisdiction except Bermuda, and because Annuity Reassurance expects
to qualify for the benefits of the tax treaty between the United States and
Bermuda, it is not expected that the Company or Annuity Reassurance will be
subject to United States federal income taxes or any other corporate level tax.

The United States does impose an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located in
the United States. The rate of tax applicable to reinsurance premiums to be paid
to Annuity Reassurance is currently 1%. In addition, the Company may be subject
to withholding tax on certain investment income from United States sources, but
the Company does not expect to incur such withholding taxes in any material
amounts. See "Certain Tax Considerations."

EFFECTS OF INFLATION

The effects of inflation on the Company will be implicitly considered in
pricing and estimating reserves for unpaid losses. The actual effects of
inflation on the results of the Company cannot be accurately known until claims
are ultimately settled.

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BUSINESS

By focusing on annuity and life reinsurance, the Company will seek to
participate in what it believes to be a market with significant growth
potential. As of year end 1996, according to LIMRA, United States annuity assets
under management totaled approximately $919 billion, and, according to A.M.
Best, approximately $17.6 trillion of life insurance was in force in the United
States. Management believes that annuity reinsurance presents an attractive
opportunity because of the large potential size of the market coupled with the
limited number of companies currently providing such reinsurance on a
third-party basis. Furthermore, management believes that the demand for the
Company's life reinsurance products should be aided by growth in new life
reinsurance business production which management estimates, based on industry
surveys, grew at a compounded annual rate of approximately 28% from 1993 to
1996, excluding retrocessional and group life reinsurance.

- Increasing risk-based capital and reserve requirements being applied to
annuity issuers and life insurers by regulatory bodies and rating
agencies;

- Continuing consolidation in the annuity and life insurance industry,
including strategic decisions to divest large blocks of business through
the use of reinsurance;

- Increasing demutualization activity by mutual life insurers leading to
increasing demand for reinsurance;

- Growing use of multiple reinsurance partners by annuity issuers and life
insurers; and

- Expanding price sensitivity among purchasers of reinsurance.

Upon consummation of the Offering and the Direct Sales, the Company will
have an equity capitalization of approximately $314.8 million. Management
believes that this level of capitalization will demonstrate a strong financial
position and a high level of commitment to the annuity and life reinsurance
market and will enable the Company to compete for desirable business and
establish long-term relationships with a select group of primary insurers and
reinsurers. As a newly-formed entity, the Company's capital is presently
unencumbered by issues of loss reserve adequacy, unrealized losses in its
investment portfolio and uncollectible reinsurance. In addition, although the
Company does expect that it may seek a working capital line of credit to finance
its operations, the Company does not presently have any indebtedness. In part
because of the Company's expected capitalization following the Offering and the
Direct Sales, A.M. Best has assigned Annuity Reassurance a preliminary Best
Rating of "A-" (Excellent), and Standard & Poor's and Duff & Phelps have
assigned Annuity Reassurance preliminary claims paying ability ratings of "A-"
and "A," respectively. The A.M. Best and Duff & Phelps ratings are contingent on
the Company raising gross proceeds of $250 million in the Offering. The Standard
& Poor's rating is contingent on the Company raising gross proceeds of $200
million in the Offering. A.M. Best assigns an "A-" (Excellent) rating to
companies that have, in its opinion on balance, excellent financial strength,
operating performance and market profile, as well as strong abilities to meet
their ongoing obligations to policy holders. Standard & Poor's assigns an "A-"
rating to companies that have, in its opinion, good financial security, but
their capacity to meet policyholder

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obligations is somewhat susceptible to adverse economic and underwriting
conditions. Duff & Phelps assigns an "A" rating to companies that it
characterizes as having high claims paying ability, average protection factors
and an expectation of variability in risk over time due to economic or
underwriting conditions. Each rating represents the respective rating agency's
opinion of the Company's ability to meet its obligations to its policyholders.

The Company's principal executive office is located at Victoria Hall,
Victoria Street, P.O. Box HM1262, Hamilton, HM FX, Bermuda, and its telephone
number is (441) 296-7667.

BUSINESS STRATEGY

- - Maintain Low Cost Structure

Management believes that the price of reinsurance is the primary determinant
used by its potential clients in selecting an annuity or life reinsurer.
Consequently, a key component of the Company's business strategy is to
maintain a low cost structure. The Company intends to focus on writing
primarily treaty reinsurance and reinsuring large blocks of business where the
underlying policies meet the underwriting criteria of the primary insurer. The
Company anticipates that this focus will permit it to make fewer underwriting
assessments than would typically be required with respect to the underwriting
of a large number of individual policies. As a consequence, the Company
expects to limit its number of employees initially to approximately ten and to
use third-party service providers to perform certain functions. As a part of
this strategy, the Company has contracted with Marsh & McLennan to provide
claims processing and other administrative services. By minimizing its
personnel and overhead costs, the Company expects to be better able to control
expense levels as market conditions for writing reinsurance fluctuate. In
addition, the Company also expects to benefit from the absence of a corporate
level tax in Bermuda on the Company's revenues and earnings. As a result of
these factors, the Company expects to have one of the lowest cost structures
in the annuity and life reinsurance industry.

- - Utilize a Disciplined Underwriting Approach

The Company's reinsurance underwriting strategy is to utilize an experienced
underwriting team to select opportunities with acceptable risk/return profiles
based on sophisticated actuarial and investment modeling techniques. The
principal risks associated with the reinsurance of both annuity and life
insurance products are mortality risk and investment risk. Mortality risk is
actuarially quantifiable when spread across large numbers of insureds. The
Company will be exposed to investment risk when the products it reinsures
guarantee an investment return or fixed benefit. The Company intends to manage
these risks by using modeling techniques to structure its investments in an
effort to match its anticipated liabilities under reinsurance policies. In
addition, the Company's underwriting guidelines limit the maximum aggregate
net risk on any one life to $1.0 million and require any purchaser of
reinsurance from the Company to retain at least 10% of the total risk being
reinsured. Waivers of the Company's underwriting guidelines, including waivers
of the 10% retention requirement, must be approved by the Company's Board of
Directors. Initially, the Company intends to supplement its underwriting
analyses with commercially available actuarial models and may retain
consultants to assist in the analysis of the risks that it reinsures, while it
develops its own proprietary models. The Company believes that its focus on
annuity and life reinsurance will enable it to structure its reinsurance
products to meet the specific requirements of its clients while managing its
exposure to the risks being assumed. Furthermore, the reinsurance of annuity
and life insurance products will not expose the Company to the catastrophic
risks normally associated with property/casualty reinsurance, which the
Company does not intend to write.

- - Employ Professional Investment Management

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investment portfolio. Annuity Reassurance has also retained Alliance Capital
Management L.P. and The Prudential Investment Corporation. Annuity Reassurance
may also retain other investment managers from time to time. Each Investment
Manager will have discretionary authority over the portion of Annuity
Reassurance's investment portfolio allocated to it, subject to Annuity
Reassurance's Investment Guidelines. Annuity Reassurance's investment
portfolio will principally consist of investment grade fixed income securities
and will be invested in an effort to match Annuity Reassurance's anticipated
liabilities under the reinsurance policies it writes. Assets held in the
investment portfolio that Annuity Reassurance believes exceed such anticipated
liabilities, if any, will be invested in an attempt to maximize total return
as well as to provide for diversification of risk and maintenance of
liquidity, and up to 25% of such assets may be invested in fixed income
securities that are rated below investment grade. The Investment Guidelines
require Annuity Reassurance's overall fixed income portfolio to maintain a
minimum weighted average rating of "A". The Investment Guidelines prohibit any
investment in common equity securities or equity-based futures and options
other than pursuant to strategies intended to hedge the equity-based
investment risk associated with annuity and life insurance products which
Annuity Reassurance reinsures.

- - Capitalize on Skill and Experience of Management and Board of Directors

The Company has assembled a senior management team of experienced insurance
and reinsurance professionals to implement its strategy. The Company's
President and Chief Executive Officer, Lawrence S. Doyle, has over 32 years of
experience in the insurance and reinsurance industries and was formerly the
President and Chief Executive Officer of a Bermuda-based start up reinsurance
Company, GCR. Mr. Doyle founded GCR in 1993 as a reinsurer specializing in
catastrophe risk and was largely responsible for the development of a new
client base, the hiring of marketing, underwriting and administrative
personnel and the overall development of the business. In 1997, GCR was
acquired by EXEL, and Mr. Doyle became an Executive Vice President of EXEL.
Before founding GCR, Mr. Doyle was Senior Vice President of Hartford Insurance
Group in charge of international operations, where he was employed for 27
years, the last six of which he was also the President of Hartford Fire
International. Robert J. Reale, a Senior Vice President and the Chief
Underwriter of the Company has over 19 years of experience in the insurance
and reinsurance industries and was formerly a Vice President of Swiss Re. Mr.
Reale also served as the President of Swiss-Am Reassurance Company and
Atlantic International Reinsurance Company (Barbados), both affiliates of
Swiss Re. While employed by Swiss Re, Mr. Reale was assigned overall pricing
responsibility for that company's United States life and annuity reinsurance
market. William W. Atkin, the Chief Financial Officer and Treasurer of the
Company, has over 24 years experience in the insurance industry. Mr. Atkin
served as an Executive Vice President, the Chief Financial Officer and a
director of Security Mutual Life Insurance Company of New York. While employed
by Security Mutual Life Insurance Company of New York, Mr. Atkin was
responsible for that company's operating plans, annuity product line and
relationships with credit rating agencies, investment advisors, banks and
independent accountants. Richard Tucker, a Vice President of the Company, has
over 18 years of experience in the insurance and reinsurance industries and
was formerly a Senior Vice President and a director of PaineWebber Life
Insurance Company. While employed by PaineWebber Life Insurance Company, Mr.
Tucker was responsible for that company's financial and administrative
operations, development of variable annuity products and negotiation of
annuity reinsurance agreements. Robert P. Mills, Jr., a Vice President and the
Chief Actuary of the Company, has over 26 years of experience in the insurance
and reinsurance industries. Mr. Mills was formerly an Assistant Vice President
and Actuary for Allmerica Financial where he was responsible for reinsurance
administration and pricing. The Company's Board of Directors consists of
several individuals with extensive experience in the insurance and financial
services industries. Management believes that the reputation and expertise
possessed by the Company's officers and directors should provide the Company
with a marketing advantage.

INDUSTRY TRENDS

The Company's business strategy has been developed to respond to a number
of trends in the insurance and reinsurance industries, which management believes
are increasing the demand for annuity and life reinsurance.

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<PAGE> 30

As of year end 1996, according to LIMRA, United States annuity assets under
management totaled approximately $919 billion, and, according to A.M. Best,
approximately $17.6 trillion of life insurance was in force in the United
States. Management believes that annuity reinsurance presents an attractive
opportunity because of the large potential size of the market coupled with the
limited number of companies currently providing such reinsurance on a
third-party basis. Furthermore, management believes that the demand for the
Company's life reinsurance products should be aided by the growth in new life
reinsurance business production which management estimates, based on industry
surveys, grew at a compounded annual rate of approximately 28% from 1993 to
1996, excluding retrocessional and group life reinsurance.

In recent years, state insurance regulators in the United States have
established increasingly stringent reserve and capital requirements applicable
to outstanding insurance policies, which management believes has created
additional demand for reinsurance. For example, certain regulations have
recently been approved by individual states that are expected to increase
reserve requirements for many annuity and life insurance products, the most
prominent being the adoption by New York of Regulation 147, which sets higher
capital standards for certain products, including guaranteed renewable term life
insurance. Other states have adopted a version of the National Association of
Insurance Commissioners' Valuation of Life Insurance Policies Model Regulation,
which is similar to Regulation 147. Management believes that this trend towards
higher risk-based capital and reserve requirements will continue in the future
and that the Company will benefit from an associated increased demand for
reinsurance. In addition, rating agencies are emphasizing quality of capital, as
well as scale of core operations, efficiency and cost structure in determining
the financial strength of primary life insurers. Management believes that these
trends will also increase the demand for reinsurance as primary insurers seek to
improve their return on equity, level of efficiency and accessibility to
available capital.

Management expects that there will be continuing consolidation in the
annuity and life insurance industry. This trend is likely to increase the need
for reinsurance of annuity and life insurance products as acquirers seek to
restructure the resulting entities, focus on core markets and achieve better
leveraging of existing capital to improve financial performance. In addition,
primary insurers are expected to continue to seek reinsurance for large blocks
of business as part of an effort towards greater strategic focus on well-defined
product markets.

Furthermore, some mutual life insurers have announced plans to
"demutualize" during the upcoming years. Demutualization is a process by which a
mutual life insurer, a non-stock corporation owned by its policyholders, becomes
a shareholder-owned insurance company. As part of the demutualization process,
mutual life insurers will be subject to close examination by regulatory
authorities and the investing public. Once demutualized, such insurers will
generally be required to report public financial results on a quarterly basis.
Management believes that these factors will cause many such companies to
restructure their lines of business, to improve the quality of their reinsurance
as well as to generate higher levels of earnings by accelerating the reporting
of the results of profitable blocks of business through reinsurance.

Management also believes that the growing use of multiple reinsurance
partners by annuity issuers and life insurers will present opportunities for the
Company to market its reinsurance products. Primary insurers often prefer to
diversify their risk among multiple reinsurers so as to reduce their dependence
upon any one reinsurer.

Management further believes that expanding price sensitivity among
purchasers of reinsurance will favor the Company's reinsurance products. The
Company, because of its anticipated control of overhead costs and the absence of
a corporate level tax in Bermuda, is expected to have one of the lowest cost
structures in the annuity and life reinsurance industry. This anticipated low
cost structure is expected to enable the Company to offer its products at
attractive prices and to take advantage of this increasing price sensitivity
among purchasers of reinsurance.

OVERVIEW OF REINSURANCE

Reinsurance is an arrangement under which an insurance company (the
"reinsurer") agrees to indemnify or assume the obligations of another insurance
company (the "ceding company" or "cedent") for all or a portion of the insurance
risks underwritten by the ceding company. It is standard industry practice for
primary

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insurers to reinsure portions of their insurance risks with other insurance
companies under indemnity reinsurance agreements. Such practice permits primary
insurers to write policies in amounts larger than the risks they are willing to
retain. Reinsurance is generally designed to (i) reduce the net liability of the
ceding company on individual risks, thereby assisting the ceding company in
increasing the volume of business it can underwrite, as well as increasing the
maximum risk it can underwrite on a single life or risk; (ii) assist in
stabilizing operating results by leveling fluctuations in the ceding company's
loss experience; (iii) assist the ceding company in meeting applicable
regulatory capital requirements; (iv) assist in reducing the short-term
financial impact of sales and other acquisition costs; and (v) enhance the
ceding company's financial strength and statutory capital. Ceding companies
typically contract with more than one reinsurer to reinsure their business.

Reinsurance may be written on an indemnity or an assumption basis. However,
the Company presently expects to write only indemnity reinsurance. Indemnity
reinsurance does not discharge a ceding company from liability to the
policyholder; a ceding company is required to pay the full amount of its
insurance obligations regardless of whether it is entitled or able to receive
payments from its reinsurers. By contrast, reinsurance written on an assumption
basis effectively transfers the ceding company's obligations to the reinsurer
and, in some cases, eliminates the ceding company's further liability to the
insured. Reinsurers also may themselves purchase reinsurance, known as
retrocession reinsurance, to limit their own risk exposure. Reinsurance
companies enter into retrocession agreements with other reinsurers
("retrocessionaires") for reasons similar to those that cause primary insurers
to purchase reinsurance.

ANNUITY AND LIFE INSURANCE PRODUCTS TO BE REINSURED

The Company's primary business will be the reinsurance of the obligations
of insurers under annuity and life insurance contracts. The Company expects to
enter into reinsurance agreements with respect to cedents' obligations on one or
more of their individual and group annuity products, including fixed annuities,
variable annuities, equity-linked annuities, guaranteed investment contracts and
structured settlements, and individual life insurance products, including term
life insurance, universal life insurance, variable life insurance and whole life
insurance. The Company expects to write reinsurance both on a direct and
brokered basis with both primary annuity issuers and life insurers as well as
reinsurers.

When the Company enters into a reinsurance contract it will generally
receive periodic premium payments from the ceding company and will agree to
indemnify the ceding company for certain risks. Generally, the Company expects
to agree to indemnify the ceding company for a stated percentage of the ceding
company's risks associated with the reinsured business (often called "quota
share" or "proportional reinsurance"). The risks reinsured by the Company may
include mortality and investment risks and, to a lesser extent, early surrender
and lapse risks. Generally, most life reinsurance is written on a yearly
renewable term basis, where the predominant risk is the mortality of the
insured. However, most other types of fixed annuity and life reinsurance
typically contain a certain level of investment risk, with the reinsurer often
reinsuring a stated percentage of the ceding company's investment risk. The
Company's underwriting guidelines limit the maximum aggregate net risk on any
one life to $1.0 million and require any purchaser of reinsurance from the
Company to retain at least 10% of the total risk being reinsured. Waivers of the
Company's underwriting guidelines, including waivers of the 10% requirement,
must be approved by the Company's Board of Directors.

Annuity Products to be Reinsured

The Company expects to reinsure primarily "fixed" annuities, but may also
reinsure "variable" annuities from time to time. Fixed annuities are a type of
"general account" product because the assets backing fixed annuities are
recorded as part of the insurer's general funds and are subject to the claims of
its general creditors. In contrast, variable annuities are a type of "separate
account" product because the assets backing the variable annuities are placed in
segregated accounts and are generally not subject to the claims of the insurer's
general creditors. Annuities are long-term savings vehicles that generally are
marketed to customers over the age of 45 who are planning for retirement and
seeking secure, tax-deferred savings products. United States annuity products
generally enjoy an advantage over certain other retirement savings products
because the payment of United States federal income taxes on income credited on
annuity policies is deferred during
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the investment accumulation period. The current budget proposal submitted to
Congress by the Clinton Administration includes certain provisions which, if not
modified, would reduce the tax advantages of certain annuity products. These
provisions include a tax on exchanges between certain types of annuity products,
including exchanges among investment options within a variable annuity. These
tax changes would not affect holders of annuities that do not make such
exchanges. If these proposed tax changes are enacted into law, they would
adversely affect the Company. See "Risk Factors -- Market for Annuity and Life
Reinsurance."

General account annuities, which include equity-linked annuities, generally
have specified or minimum guaranteed performance levels. Consequently, general
account annuities involve a greater commitment of statutory surplus than
separate account annuities, as a reserve against the investment risk associated
with such policies, and therefore are more frequently reinsured. Separate
account annuities are investment vehicles that are held in segregated accounts
for the benefit of the policyholder and are not commingled with the other assets
of the insurance company. Holders of such annuities themselves generally bear
the risks of the underlying investments. The return on separate account
annuities depends solely on the performance of the assets underlying the
particular separate account and, therefore, require less capital reserves than
fixed annuities.

The Company also may reinsure certain structured settlement contracts and
guaranteed investment contracts. Structured settlement contracts typically
provide for periodic payments arising from the settlement of personal injury and
other legal claims and from lottery payouts. Structured settlement contracts, as
well as guaranteed investment contracts issued by insurance companies, are often
classified as annuities in that they require periodic payments over a specified
period of time.

Insurance companies offer a variety of annuity products including (i)
single premium deferred annuities ("SPDAs"), which, in general, are savings
vehicles in which the policyholder, or annuitant, makes a single premium payment
to an insurance company and the insurance company credits the account of the
annuitant with earnings at a specified interest rate (the "crediting rate")
which may exceed but may not be lower than any contractually guaranteed minimum
crediting rate, and (ii) flexible premium deferred annuities ("FPDAs"), which
are deferred annuities in which the policyholder may elect to make more than one
premium payment. In addition, certain insurance companies in the United States
market a variety of tax-qualified retirement annuities to individuals
participating in tax-qualified plans, including employees of public schools and
certain other tax-exempt organizations. Tax-qualified retirement annuities tend
to be purchased by customers who are younger than purchasers of other annuity
products.

Insurance companies that issue annuities generally incorporate a number of
features in their annuity products designed to reduce the early withdrawal or
surrender of the policies and to partially compensate the company for lost
investment opportunities and costs if policies are withdrawn early. Typically,
the policyholder is permitted to withdraw all or part of the premium paid plus
the amount credited to his or her account, less a penalty or surrender charge
for withdrawals. Often, an insurer's deferred annuity contract provides for
penalty-free partial withdrawals, typically up to 10% of the accumulation value
annually. Annuity policies typically impose some surrender charge during the
period ranging from the first five years to the term of the policy. The initial
surrender charge on annuity policies generally ranges from 5% to 10% of the
premium and decreases over the surrender charge period. Surrender charges are
set at levels intended to protect the issuer from loss caused by early
terminations and to reduce the likelihood of policyholders terminating their
policies during periods of increasing interest rates, thereby lengthening the
effective duration of policy liabilities and improving the issuer's ability to
maintain profitability on such policies.

Life Insurance Products to be Reinsured

The Company expects to reinsure traditional life insurance products, such
as term life and whole life, and also non-traditional products, including
variable life and universal life. A term life insurance policy is a pure
mortality risk insurance product with no investment component. A term life
insurance policy is generally renewable for a fixed number of years, but the
policy expires without value at the end of the stated period. A traditional
whole life insurance policy is permanent life insurance combining an investment
component along with a death benefit. The insurance company credits the
investment component of the whole life policy with

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interest, generally guaranteed, at regular intervals. Term life and whole life
policies are typically obligations of an insurance company's general account.

Variable life insurance provides a return linked to an underlying portfolio
in which policyholders are typically able to allocate their premiums among a
variety of investment funds. Like variable annuities, the assets backing
variable life insurance products are placed in separate accounts. As the total
return on the investment portfolio increases or decreases, as the case may be,
the death benefit or surrender value of the variable life policy may increase or
decrease. Single premium variable life products provide a death benefit to the
policy beneficiary based on a single premium deposit. Universal life and
interest-sensitive whole life insurance policies (which can either be single or
flexible premium policies) provide life insurance with adjustable rates of
return based on current interest rates. These policies provide policyholders
flexibility in the available coverage, timing and amount of premium payments and
the amount of the death benefit, provided there are sufficient policy funds to
cover all applicable policy charges.

The Company may also reinsure corporate owned life insurance ("COLI"). COLI
is life insurance purchased by a company on the life of its employees, with the
company named as the beneficiary under the policy. Through the purchase of COLI,
corporations have been able to use the favorable tax treatment of life insurance
to fund a variety of employee benefit liabilities such as post-retirement health
care and non-qualified benefit programs. The current budget proposal submitted
to Congress by the Clinton Administration includes certain provisions which, if
not modified, would increase taxes on the owners of certain COLI policies. If
these proposed tax changes were enacted into law, they could adversely affect
the Company; however, the Company does not expect the reinsurance of COLI
policies owned by United States persons to be a material portion of its
business. See "Risk Factors -- Market for Annuity and Life Insurance."

Like annuities, life insurance policies are subject to surrender. However,
they are generally less susceptible to surrender than are annuity contracts
because policyholders must generally undergo a new underwriting process and
incur new policy acquisition costs in order to obtain new life insurance
policies.

MARKETING

The Company has devised a marketing plan which calls for the development of
relationships with potential clients which management believes have a perceived
need for reinsurance based on regulatory filings, management's industry
knowledge and market trends. Given the nature of the Company's business, it
expects to target a limited number of potential clients which the Company
expects will be likely purchasers of its reinsurance products. Management
believes that these potential clients focus principally on price and, to a
lesser extent, service when making a decision between two or more reinsurance
companies offering similar products. The Company anticipates that it will be
able to capitalize on the relationships its officers and directors have
established in the insurance industry in the marketing of its products. The
Company also expects that its anticipated low cost structure will enable it to
offer its annuity and life reinsurance products at attractive prices. The
Company will also seek to compete on the basis of service by evaluating each
client's specific reinsurance needs and tailoring its reinsurance programs to
meet those needs, and by being responsive in processing claims. Initially, it is
anticipated that insurers and reinsurers located in North America will comprise
the majority of the Company's customers.

The Company may, from time to time, use intermediaries (reinsurance brokers
and consultants functioning as brokers) to enter into reinsurance treaties and,
to a lesser extent, facultative arrangements with ceding companies.
Intermediaries would generally not have the authority to bind the Company to any
reinsurance agreement, nor would the Company commit in advance to accept any
business generated by an intermediary. Any efforts of the intermediaries engaged
by the Company will be overseen and monitored by the Company's management and
Board of Directors. The Company has held discussions with several of such
intermediaries and has notified them of the Company's intention to write annuity
and life reinsurance upon completion of the Offering.

During its first year of operation, the Company expects to reinsure annuity
and life insurance-related business with a small number of ceding companies, and
five to ten ceding companies may represent a majority of the Company's
reinsurance activities.

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RETROCESSIONAL ARRANGEMENTS

The Company may reinsure, or retrocede, portions of certain risks for which
it has accepted liability. Retrocessional arrangements will allow the Company
greater underwriting capacity while limiting its risk profile. The Company's
current policy is not to retain a net liability on any one life in excess of
$1.0 million. Liability in excess of the established limit, if not approved by
the Board of Directors, will generally be retroceded to retrocessionaires.

UNDERWRITING

The Company's reinsurance underwriting strategy is to utilize an
experienced underwriting team to select opportunities with acceptable
risk/return profiles based on sophisticated actuarial and investment modeling
techniques. The principal risks associated with the reinsurance of both annuity
and life insurance products are mortality risk and investment risk. Mortality
risk is actuarially quantifiable when spread across large numbers of insureds.
The Company will be exposed to investment risk when the products it reinsures
guarantee an investment return or fixed benefit. The Company intends to manage
these risks by using modeling techniques to structure its investments in an
effort to match its anticipated liabilities under reinsurance agreements.
Initially, the Company intends to supplement its underwriting analyses with
commercially available actuarial models and may retain consultants to assist in
the analysis of the risks that it reinsures, while it develops its own
proprietary models. The Company believes that its focus on annuity and life
reinsurance will enable it to structure its reinsurance products to meet the
specific requirements of its clients while managing its exposure to the risks
being assumed. The underwriting process will be designed to specify an adequate
premium for a given exposure that is intended to be commensurate with the amount
of capital the Company estimates it is placing at risk. The Company's Chief
Executive Officer and Chief Underwriter will jointly approve all underwriting
decisions made under the Company's underwriting guidelines.

The Company has developed and its Board of Directors has approved
underwriting guidelines, with the objective of controlling the risks of the
reinsurance policies written as well as to determine appropriate pricing levels.
The Company's current underwriting guidelines include the following policies:
(i) the Company will not assume more than 90% of a risk and will require the
ceding company to retain at least 10% of every reinsured risk; (ii) the Company
will limit its net liability on any one life to no more than $1.0 million; (iii)
the ceding company must, among other things, be domiciled in the United States,
Canada, Western Europe, Australia or Bermuda, and possess underwriting and
claims practices consistent with industry practice; and (iv) the ceding company
may not exercise recapture rights for a period of ten years. The Company's
underwriting guidelines also provide that the Company may not write reinsurance
on, among other things: (i) group conversions, non-contractual conversions,
rollover or policy exchanges, or in cases in which full evidence and selection
criteria are not applied; (ii) policies that do not provide the maximum normal
levels of suicide and contestable periods; or (iii) business issued under an
experimental underwriting program or if the business to be reinsured is
comprised of more than 10% of substandard issues.

Any deviation from the Company's underwriting guidelines, as they may be
amended from time to time, will require the approval of the Board of Directors,
as will the approval of contracts in excess of a certain size or involving a
certain level of risk and contracts involving equity investment risks. In
approving contracts in excess of a certain size, the Board may also waive or
relax the requirement that cedents retain 10% of the reinsured risk. The Company
expects to review regularly its underwriting guidelines in light of changing
industry conditions, market developments and changes in technology. The Company
reserves the right at all times to amend, modify or supplement its underwriting
guidelines in response to such factors or for other reasons, including changing
the approved domiciles for reinsurance clients. The Company also will endeavor
to ensure that the underwriting guidelines of its ceding clients are compatible
with those of the Company. Toward this end, the Company anticipates that it will
periodically retain unaffiliated service providers to conduct reviews of the
Company's ceding clients' underwriting and claims personnel and procedures.

The Company will determine whether to assume any particular reinsurance
business by considering many factors, including the type of risks to be covered,
actuarial evaluations, historical performance data for the cedent and the
industry as a whole, the cedent's retention, the product to be reinsured,
pricing assumptions,

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underwriting standards, reputation and financial strength of the cedent, the
likelihood of establishing a long-term relationship with the cedent and the
market share of the cedent. Pricing of the Company's reinsurance products will
be based on the Company's actuarial models which incorporate a number of
factors, including assumptions for mortality, expenses, demographics,
persistency and investment returns, as well as certain macroeconomic factors,
such as inflation, and certain regulatory factors, such as taxation and minimum
surplus requirements.

REINSURANCE AGREEMENTS

Automatic and Facultative Treaties

Although the Company's reinsurance policies may be written on an automatic
treaty basis or a facultative basis, the Company expects to write policies
primarily on an automatic treaty basis. An automatic reinsurance treaty provides
that the ceding company will cede risks to a reinsurer on specified policies
where the underlying policies meet the ceding company's underwriting criteria.
The reinsurer does not approve each individual risk, but rather analyzes the
risks associated with the entire group of policies covered by the treaty.
Automatic reinsurance treaties generally provide that the reinsurer will be
liable for a stated portion of the risk associated with the specified policies
written by the ceding company and that the cedent will retain a specified
portion of the risk for its own account (the "retention"). Automatic reinsurance
treaties also specify the ceding company's mortality limit on an individual
life, which is the maximum amount of risk on a given life that can be ceded
automatically and that the reinsurer must accept. The mortality limit may be
stated either as a multiple of the ceding company's retention or as a stated
dollar amount. Automatic business tends to be very price-competitive.

The Company will generally require ceding companies to retain at least 10%
of every risk reinsured by the Company, thereby increasing the ceding companies'
incentive to underwrite risks with care and, when appropriate, to contest claims
diligently. The Company's reinsurance agreements may provide for rights of
recapture, which will permit the ceding company to increase the amount of
liability it retains on the reinsured policies after the policies have remained
in force for a designated period of time. Accordingly, an increase in the amount
of liability retained by the ceding company will decrease both the Company's
insurance in force and premiums to be received.

The Company intends to focus on writing primarily treaty reinsurance and on
reinsuring large blocks of business where the underlying policies meet the
underwriting criteria of the primary insurer. The Company anticipates that this
focus will permit it to make fewer underwriting assessments than would typically
be required with respect to the underwriting of a large number of individual
policies. As a consequence, the Company expects to limit its number of employees
initially to approximately ten and to use third-party service providers to
perform certain functions.

To a lesser extent, the Company may also enter into facultative reinsurance
arrangements. Facultative reinsurance is individually underwritten by the
reinsurer for each policy to be reinsured, with the pricing and other terms
established at the time the policy is underwritten based upon rates negotiated
in advance. Facultative reinsurance normally is purchased by insurance companies
for medically impaired lives, unusual risks or liabilities in excess of binding
limits on their automatic treaties. Facultative reinsurance requires
significantly more underwriting staff and other corporate infrastructure than
automatic treaty reinsurance.

Forms of Reinsurance

Annuity and life reinsurance may be written as coinsurance, modified
coinsurance or yearly renewable term insurance, which vary with the type of risk
assumed and the manner of pricing the reinsurance. Once a contract is reinsured,
it typically cannot be unilaterally removed from the reinsurance agreement,
except pursuant to a ceding company's recapture rights. Recapture rights permit
the ceding company to reassume all or a portion of the risk formerly ceded to
the reinsurer after an agreed-upon period of time (generally 10 years) and
subject to certain other conditions, including that the ceding company kept its
full retention.

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Under a coinsurance or modified coinsurance arrangement, the reinsurer
will, depending upon the terms of the contract, share in all material risks
inherent in the underlying policies, including the risk of loss due to
mortality, surrender and lapse, as well as investment performance. Under
modified coinsurance arrangements the ceding company retains ownership of the
assets supporting the reserves, whereas in coinsurance the ceding company
transfers the right to ownership of the assets supporting the reserves to the
reinsurer. Annuity reinsurance is traditionally written on a coinsurance or
modified coinsurance basis. Under coinsurance or modified coinsurance
arrangements, the Company's reinsurance agreements may remain in force for the
life of the underlying policies reinsured. In such cases, it is expected that
the Company would be entitled to renewal premiums absent the death of the
insured, voluntary surrender or lapse of the policy due to nonpayment of premium
or the recapture by the ceding company of the risks reinsured. Both the cedent
and the reinsurer generally have the right to terminate the agreement, with
respect to new policies only, upon reasonable notice. While annuity contracts
underlying coinsurance or modified coinsurance reinsurance are long-term
policies, they may or may not involve long-term investment risk. Management
estimates that a significant amount of annuity contracts currently underlying
reinsurance treaties call for an annual (or more frequent) reset of credited
interest rates to market rates.

Life reinsurance is primarily written on a yearly renewable term basis.
Under a yearly renewable term treaty, the reinsurer assumes only the mortality
risk. At the end of the year, premiums readjust based on the age of the policy
and the age of the insured.

Generally, the amount of life reinsurance ceded under reinsurance
agreements is stated on either an excess or a quota share basis. Reinsurance on
an excess basis covers amounts in excess of an agreed-upon retention limit.
Retention limits vary by ceding company and also vary by age and underwriting
classification of the insured, product and other factors. Under quota share or
"proportional" reinsurance, the ceding company states its retention in terms of
a fixed percentage of the risk that will be retained, with the remainder up to
the maximum binding limit to be ceded to one or more reinsurers. The Company
plans to write reinsurance on both excess and quota share bases.

The Company may occasionally reinsure insurance policies on an experience
rated basis, under which the ceding company receives a refund of a portion of
the profits (through the retention of future premiums) resulting from favorable
claims experience with respect to the underlying policies.

ADMINISTRATION

The Company has entered into a contract with Marsh & McLennan to provide
management, administrative and consulting services to the Company. These
services are anticipated initially to include: (i) policyholder services,
including the issuance, endorsement and cancellation of policies and the
collection of premiums; (ii) claims processing; (iii) analysis of reinsurance
programs; (iv) maintenance of the Company's books and records, the preparation
of periodic reports to the Company and the administration of payroll and
employee benefits; (v) maintenance of bank accounts; and (vi) preparation of
Bermuda governmental reports. The initial term of the contract expires on
December 31, 1998, and the contract is renewable annually thereafter. The
contract is subject to termination by either party at any time upon 90 days'
written notice. Pursuant to the contract, Marsh & McLennan is entitled to
receive fees based on hourly rates with a $15,000 per year minimum. In addition,
the Company has agreed to indemnify Marsh & McLennan with regard to certain
liabilities to which Marsh & McLennan may become subject in connection with
performing services for the Company. As the Company's business grows, management
expects that it may become more cost effective to retain additional employees to
perform some of the functions that will initially be provided by Marsh &
McLennan. Management believes that the contractual relationship with Marsh &
McLennan will provide the Company with the flexibility needed to add such
additional employees in an orderly fashion.

The Company may also employ third-party contractors to conduct periodic
audits of the underlying policies reinsured by the Company.

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RESERVES

In accordance with Bermuda insurance regulations, the Company will
establish and carry as liabilities actuarially determined reserves which will be
calculated to meet the Company's future obligations. Future policy benefits and
policy claims are expected to comprise the majority of the Company's financial
obligations and reserves therefor will be maintained on both a Bermuda
regulatory and GAAP basis. Future policy benefits will be based upon the
Company's best estimates of mortality, persistency and investment income, with
appropriate provision for adverse deviation and other factors. The liabilities
for future policy benefits established by the Company with respect to individual
risks or classes of business may be greater or less than those established by
ceding companies due to the use of different investment, mortality and other
assumptions. The Company's reserves will be computed at amounts that, with
additions from premiums to be received and with interest on such reserves
compounded annually at certain assumed rates, are expected to be sufficient to
meet the Company's policy obligations at their maturities or in the event of an
insured's death. Reserves may include unearned premiums, premium deposits,
claims reported but not yet paid, claims incurred but not reported and claims in
the process of settlement.

Coinsurance agreements regarding variable products will ordinarily require
the Company to establish separate accounts to hold policyholder-controlled
assets and liabilities. Such assets and liabilities will be segregated from the
Company's other assets and liabilities on both the Company's Bermuda regulatory
and GAAP statements. While the Company has legal responsibility for the proper
maintenance of such segregated accounts, the books and records of such accounts
initially will be maintained by Marsh & McLennan as part of its insurance
services contract with the Company.

The stability of the Company's annuity and interest-sensitive life
reinsurance reserves is expected to be enhanced by policy restrictions on
withdrawal of funds by policyholders. Withdrawals in excess of allowable
penalty-free amounts are generally assessed a surrender charge during a penalty
period, ranging from the first five years to the term of the policy.

INVESTMENT STRATEGY

Investments made by Annuity Reassurance will be governed by the Investment
Guidelines and by accounting regulations prescribed by Bermuda insurance laws
and regulations. Annuity Reassurance's investment portfolio will principally
consist of investment grade fixed income securities and will be invested in an
effort to match Annuity Reassurance's anticipated liabilities under the
reinsurance policies it writes. Assets held in the investment portfolio that
Annuity Reassurance believes exceed such anticipated liabilities, if any, will
be invested in an attempt to maximize total return as well as to provide for
diversification of risk and maintenance of liquidity, and up to 25% of such
assets may be invested in fixed income securities that are rated below
investment grade. While any investment carries some risk, the risks associated
with lower-rated securities are greater than the risks associated with
investment grade securities. The risk of loss of principal or interest through
default is greater because lower-rated securities are usually unsecured and are
often subordinated to an issuer's other obligations. Additionally, the issuers
of these securities frequently have high debt levels and are thus more sensitive
to difficult economic conditions, individual corporate developments and rising
interest rates which could impair an issuer's capacity or willingness to meet
its financial commitment on such lower-rated securities. Consequently, the
market price of these securities may be quite volatile, and the risk of loss is
greater. The Investment Guidelines require Annuity Reassurance's overall fixed
income investment portfolio to maintain a minimum weighted average rating of
"A." A fixed income security rated "A" by Standard & Poor's is somewhat
susceptible to the adverse effects of changes in circumstances and economic
conditions, however, the issuer's capacity to meet its financial commitment on
the security is still strong. The Company will not invest in any fixed income
securities in emerging markets or which are not rated by a major rating agency.

The Investment Guidelines also provide that Annuity Reassurance may
purchase, among other things, securities issued by the United States government
and its agencies and instrumentalities, securities issued by foreign governments
if rated "A" or better by at least one major rating agency, asset backed
securities,

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preferred stocks, mortgage backed securities and corporate debt securities
(including convertible debt securities), but may not include payment-in-kind
corporate securities.

Furthermore, the Investment Guidelines prohibit investments in (i) direct
real estate; (ii) oil and gas limited partnerships; (iii) commodities; (iv)
venture capital investments, including private equity or its equivalent; and (v)
United States investments consisting of (a) partnership interests, (b) residual
interests in Real Estate Mortgage Investment Conduits, (c) any "pass through"
certificate unless all underlying debt was issued on or after July 18, 1984, (d)
cash settlement options and forwards if no United States exchange traded future
on the same property exists, (e) options and forwards on indices which are not
traded on United States exchanges, (f) collateralized mortgage obligations,
unless issued with an opinion of counsel stating that such obligations will be
considered debt for tax purposes, (g) real property interests, including equity
in and convertible debt obligations of real property holding corporations the
sale of which would be subject to tax, (h) any tangible property, (i) any debt
obligation the interest on which does not qualify as "portfolio interest" or is
otherwise subject to United States withholding tax and (j) any investment that
does not qualify as a stock or security for purposes of Section 864(b)(2) of the
Code.

The Company will be exposed to two primary sources of investment risk on
its fixed income investments: credit risk, relating to the uncertainty
associated with the continued ability of a given obligor to make timely payments
of principal and interest, and interest rate risk, relating to the market price
and/or cash flow variability associated with changes in market interest rates.
The Company will seek to manage credit risk through industry and issuer
diversification and asset allocation. The Company will seek to manage interest
rate risk by structuring its investments to match its anticipated liabilities
under reinsurance agreements, and through the use of hedging techniques. The
reinsurance of certain products may obligate the Company to credit a return with
respect to a reinsured policy which is derived from a market or other benchmark
rate. In order to manage the investment risks associated with these products,
the Company may enter into interest rate hedges or other similar transactions.
The Company may also enter into hedges to reduce potential mismatch between
durations of assets and liabilities and offset the potential cash flow impact
caused by interest rate changes. The Investment Guidelines provide that the
fixed income investment portfolio may not be leveraged and that purchases of
securities on margin and short sales may not be made without approval from the
Finance and Investment Committee of the Company's Board of Directors.

The Finance and Investment Committee of the Company's Board of Directors
will periodically review Annuity Reassurance's investment portfolio and the
performance of the Investment Managers. The Finance and Investment Committee can
approve exceptions to the Investment Guidelines and will periodically review the
Investment Guidelines in light of prevailing market conditions. The Investment
Managers and the Investment Guidelines may change from time to time as a result
of such reviews.

INVESTMENT MANAGERS

Annuity Reassurance has entered into an investment advisory agreement with
PIMCO, which is anticipated to manage initially approximately 50% of Annuity
Reassurance's investment portfolio. Annuity Reassurance has also retained
Alliance Capital Management L.P. and The Prudential Investment Corporation. The
Company conducted extensive interviews with several investment management firms
before selecting the Investment Managers. The Investment Managers were selected
primarily based on their expertise in managing fixed-income investments. Each
Investment Manager will have discretionary authority

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over the portion of Annuity Reassurance's investment portfolio allocated to it,
subject to the Investment Guidelines.

PIMCO is one of the largest fixed income money managers in the United
States. PIMCO is a subsidiary of PIMCO Advisors L.P. According to information
supplied by PIMCO, as of December 31, 1997, PIMCO had aggregate assets under
management of approximately $118.0 billion, of which approximately 90% consisted
of fixed-income assets and approximately 10% consisted of equity-related assets.
The agreement with PIMCO will continue until December 31, 1999, although PIMCO
may terminate the agreement at any time upon 30 days' advance notice, and the
Company may terminate PIMCO's authority to manage the Company's investment
portfolio at any time, effective immediately upon notice, although PIMCO would
be entitled to its fees for 30 days after such notice is given. PIMCO is
entitled to receive a fee for its services at an annual rate between 0.50% and
0.20% of the value of the assets it manages on behalf of the Company.

Alliance Capital Management L.P. will receive a fee for its services at an
annual rate between 0.25% and 0.17% of the value of the assets it manages on
behalf of the Company and The Prudential Investment Corporation will receive a
fee for its services at an annual rate between 0.20% and 0.15% of the value of
the assets it manages on behalf of the Company. The exact fee rate charged by
each Investment Manager is dependent upon the amount of assets it manages on
behalf of the Company. The agreement with Alliance Capital Management L.P. may
be terminated by either party upon 30 days' prior written notice. The agreement
with The Prudential Investment Corporation may be terminated by the Company
without advance notice and by The Prudential Investment Corporation upon 45
days' prior written notice.

COMPETITION

The reinsurance industry is highly competitive, and the Company expects to
compete with the major reinsurers. The Company's initial target market will be
North America. According to management's estimates, there are approximately 25
reinsurers of annuity or life insurance products located in the United States.
There are also numerous foreign reinsurers which compete for reinsurance
business in the United States and abroad. These competitors primarily reinsure
life insurance and health insurance risks and, to a lesser degree, annuity
risks. Upon consummation of the Offering, the Company expects to be the first
publicly-traded Bermuda based reinsurance company that focuses principally on
writing annuity and life reinsurance. Most, if not all, of these competitors are
expected to compete for annuity and life reinsurance business in the future.
Most of these competitors are well established, have significant operating
histories and strong claims paying ability ratings, and have developed
long-standing client relationships through existing treaties with cedents.

Reinsurers compete on the basis of many factors, including premium charges,
the general reputation and perceived financial strength of the reinsurers, other
terms and conditions of the products offered, ratings assigned by independent
rating agencies, speed of claims payment and reputation and experience in the
particular line of reinsurance to be written. The Company believes that the
reinsurers with the largest market share in the United States annuity and life
reinsurance market include Lincoln National Corporation, Transamerica Occidental
Life Insurance Company, Reinsurance Group of America Inc., General Re Corp.,
Life Re Corp. and Employers Reassurance Corporation, and on a global basis also
include Swiss Reinsurance and Munich Reinsurance. The Company has no experience
in competing with such other companies and there can be no assurance that it
will be successful.

Insurance ratings are used by insurers and reinsurance intermediaries as an
important means of assessing the financial strength and quality of reinsurers.
In addition, a ceding company's own rating may be adversely affected by an
unfavorable rating or the lack of a rating of its reinsurer. A.M. Best has
assigned Annuity Reassurance a preliminary Best Rating of "A-" (Excellent), and
Standard & Poor's and Duff & Phelps have assigned Annuity Reassurance
preliminary claims paying ability ratings of "A-" and "A," respectively. The
A.M. Best and Duff & Phelps ratings are contingent on the Company raising gross
proceeds of $250 million in the Offering. The Standard & Poor's rating is
contingent on the Company raising gross proceeds of $200 million in the
Offering. A.M. Best assigns an "A-" (Excellent) rating to companies that have,
in its opinion, on balance, excellent financial strength, operating performance
and market profile, as well as strong abilities to

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meet their ongoing obligations to policyholders. Standard & Poor's assigns an
"A-" rating to companies that have, in its opinion, good financial security, but
their capacity to meet policyholder obligations is somewhat susceptible to
adverse economic and underwriting conditions. Duff & Phelps assigns an "A"
rating to companies that it characterizes as having high claims paying ability,
average protection factors and an expectation of variability in risk over time
due to economic or underwriting conditions. Each rating represents the
respective rating agency's opinion of the Company's ability to meet its
obligations to its policyholders.

Annuity Reassurance is not licensed or admitted as an insurer in any
jurisdiction other than Bermuda. Because many jurisdictions do not permit
insurance companies to take credit for reinsurance obtained from unlicensed or
non-admitted insurers on their statutory financial statements unless appropriate
security measures are in place, it is anticipated that the Company's reinsurance
clients will typically require it to post a letter of credit or other
collateral. Although the Company has received commitments from two commercial
banks to provide standby letter of credit facilities, such commitments are
subject to several conditions, including the negotiation of definitive
documentation. If the Company is unable to obtain a letter of credit facility
from such banks or from other lenders on commercially acceptable terms, the
Company's ability to operate its business will be severely limited.

PROPERTY

The Company has subleased office space in Hamilton, Bermuda from Marsh &
McLennan at which the principal offices of the Company and Annuity Reassurance
are located. The subleased office space consists of offices and work stations
for eight employees. The $5,000 monthly rent payable to Marsh & McLennan
includes utilities and certain office furnishings and equipment. The sublease is
scheduled to expire on December 31, 1998, and is renewable annually thereafter
by agreement of the parties, but it may be terminated at any time by either
party on 90 days' written notice.

LEGAL PROCEEDINGS

The Company is not currently involved in any litigation or arbitration. The
Company anticipates that it will be subject to litigation and arbitration in the
ordinary course of business.

REGULATION

Bermuda

The Insurance Act 1978, as amended, and Related Regulations. As a holding
company, the Company is not subject to Bermuda insurance regulations. The
Insurance Act, which regulates the insurance business of Annuity Reassurance,
provides that no person shall carry on an insurance business in or from within
Bermuda unless registered as an insurer under the Insurance Act by the Minister
of Finance (the "Minister"). The Minister, in deciding whether to grant
registration, has broad discretion to act as the Minister thinks fit in the
public interest. The Minister is required by the Insurance Act to determine
whether the applicant is a fit and proper body to be engaged in the insurance
business and, in particular, whether it has, or has available to it, adequate
knowledge and expertise. The registration of an applicant as an insurer is
subject to its complying with the terms of its registration and such other
conditions as the Minister may impose at any time.

An Insurance Advisory Committee appointed by the Minister advises the
Minister on matters connected with the discharge of the Minister's functions and
sub-committees thereof supervise and review the law and practice of insurance in
Bermuda, including reviews of accounting and administrative procedures.

The Insurance Act imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
Minister powers to supervise, investigate and intervene in the affairs of
insurance companies. Certain significant aspects of the Bermuda insurance
regulatory framework are set forth below.

Classification of Insurers. The Insurance Act distinguishes between
insurers carrying on long-term business and insurers carrying on general
business. As Annuity Reassurance has been incorporated to provide

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reinsurance of annuity and life insurance-related risks, it has been registered
as a long-term insurer in Bermuda and will be regulated as such under the
Insurance Act.

An insurer carrying on long-term business is required to keep its accounts
in respect of its long-term business separate from any accounts kept in respect
of any other business and all receipts of its long-term business form part of
its long-term business fund. No payment may be made from an insurer's long-term
business fund for any purpose other than a purpose related to the insurer's
long-term business, except insofar as such payment can be made out of any
surplus certified by the insurer's approved actuary to be available for
distribution otherwise than to policyholders. No insurer carrying on long-term
business may declare or pay a dividend to any person other than a policyholder
unless the value of the assets in its long-term business fund as certified by
the insurer's approved actuary exceeds the liabilities of the insurer's
long-term business by at least the $250,000 margin prescribed by the Insurance
Act, and the amount of any such dividend may not exceed the aggregate of (i)
that excess, and (ii) any other funds properly available for payment of
dividends, such as funds arising out of business of the insurer other than
long-term business. See "Risk Factors -- Holding Company Structure."

Annuity Reassurance may not carry on general business (e.g., property
casualty, aviation and marine) without first being registered as a general
business insurer by the Minister under the Insurance Act. The Company has no
current intention to do so.

Cancellation of Insurer's Registration. An insurer's registration may be
cancelled by the Minister on certain grounds specified in the Insurance Act,
including failure of the insurer to comply with its obligations under the
Insurance Act or, if in the opinion of the Minister after consultation with the
Insurance Advisory Committee, the insurer has not been carrying on business in
accordance with sound insurance principles.

Independent Approved Auditor. Every registered insurer must appoint an
independent auditor who will annually audit and report on the Statutory
Financial Statements and the Statutory Financial Return of the insurer, which
are required to be filed annually with the Registrar of Companies in Bermuda.
The independent auditor of the insurer must be approved by the Minister and may
be the same person or firm which audits the insurer's financial statements and
reports for presentation to its shareholders. Annuity Reassurance's independent
auditor is KPMG Peat Marwick.

Approved Actuary. Annuity Reassurance, as a registered long-term insurer,
is required to submit an annual actuary's certificate when filing its Statutory
Financial Return. The actuary's certificate shall state whether or not, in the
opinion of the insurer's approved actuary, the aggregate amount of the
liabilities of the insurer in relation to long-term business as at the end of
the relevant year exceeded the aggregate amount of those liabilities as shown in
the insurer's statutory balance sheet. The approved actuary, who will normally
be a qualified life actuary, must be approved by the Minister. Annuity
Reassurance's approved actuary is John W. Rayner of Abbott Associates Limited.

Statutory Financial Statements. An insurer must prepare annual Statutory
Financial Statements. The Insurance Act prescribes rules for the preparation and
substance of such Statutory Financial Statements (which include, in statutory
form, a balance sheet, income statement, a statement of capital and surplus and
notes thereto). The insurer is required to give detailed information and
analyses regarding premiums, claims, reinsurance and investments. The Statutory
Financial Statements are not prepared in accordance with United States GAAP and
are distinct from the financial statements prepared for presentation to the
insurer's shareholders under the Companies Act 1981 of Bermuda, which financial
statements may be prepared in accordance with United States GAAP. An insurer is
required to submit the annual Statutory Financial Statements as part of the
annual Statutory Financial Return.

Minimum Solvency Margin. The Insurance Act provides that the value of the
long-term business assets of an insurer carrying on long-term business must
exceed the amount of its long-term business liabilities by at least $250,000.
The minimum statutory capital and surplus requirement of $250,000 was met at the
balance sheet date.

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Annual Statutory Financial Return. Annuity Reassurance is required to file
with the Registrar of Companies in Bermuda a Statutory Financial Return no later
than four months after its financial year end (unless specifically extended).
Annuity Reassurance has been granted an exemption from such requirement for its
financial year ended December 31, 1997 because it had not commenced operations
by such date. The Statutory Financial Return includes, among other matters, a
report of the approved independent auditor on the Statutory Financial Statements
of the insurer, a solvency certificate, the Statutory Financial Statements
themselves and a certificate of the approved actuary. The solvency certificate
must be signed by the principal representative and at least two directors of the
insurer who are required to certify whether the Minimum Solvency Margin has been
met, and the independent approved auditor is required to state whether in its
opinion it was reasonable for the directors to so certify. Where an insurer's
accounts have been audited for any purpose other than compliance with the
Insurance Act, a statement to that effect must be filed with the Statutory
Financial Return.

Supervision, Investigation and Intervention. The Minister may appoint an
inspector with extensive powers to investigate the affairs of an insurer if the
Minister believes that an investigation is required in the interest of the
insurer's policyholders or persons who may become policyholders. In order to
verify or supplement information otherwise provided to the Minister, the
Minister may direct an insurer to produce documents or information relating to
matters connected with the insurer's business.

If it appears to the Minister that there is a risk of the insurer becoming
insolvent, or that it is in breach of the Insurance Act or any conditions
imposed upon its registration, the Minister may, among other things, direct the
insurer (i) not to take on any new insurance business, (ii) not to vary any
insurance contract if the effect would be to increase the insurer's liabilities,
(iii) not to make certain investments, (iv) to realize certain investments, (v)
to maintain, or transfer to the custody of a specified bank, certain assets,
(vi) not to declare or pay any dividends or other distributions or to restrict
the making of such payments, and/or (vii) to limit its premium income.

An insurer is required to maintain a principal office in Bermuda and to
appoint and maintain a principal representative in Bermuda. For the purpose of
the Insurance Act, the principal office of Annuity Reassurance is at the
Company's offices in Hamilton, Bermuda, and Lawrence S. Doyle, the Company's
President and Chief Executive Officer, is the principal representative of
Annuity Reassurance. Without a reason acceptable to the Minister, an insurer may
not terminate the appointment of its principal representative, and the principal
representative may not cease to act as such, unless 30 days' notice in writing
to the Minister is given of the intention to do so. It is the duty of the
principal representative, within 30 days of reaching the view that there is a
likelihood of the insurer for which the principal representative acts becoming
insolvent or that a reportable "event" has, to the principal representative's
knowledge, occurred or is believed to have occurred, to make a report in writing
to the Minister setting out all the particulars of the case that are available
to the principal representative. Examples of such a reportable "event" include
failure by the insurer to comply substantially with a condition imposed upon the
insurer by the Minister relating to a solvency margin or a liquidity or other
ratio.

Certain Bermuda Law Considerations. The Company and Annuity Reassurance
have been designated as non-resident for exchange control purposes by the
Bermuda Monetary Authority whose permission for the issue and transfer of the
Common Shares has been obtained. This designation allows the Company and Annuity
Reassurance to engage in transactions, or to pay dividends to non-residents of
Bermuda who are holders of the Common Shares, in currencies other than the
Bermuda Dollar.

The transfer of the Common Shares between persons regarded as non-resident
in Bermuda for exchange control purposes and the issue of the Common Shares
after the completion of the Offering to such persons may be effected without
specific consent under the Exchange Control Act 1972 and regulations thereunder.
Issues and transfers of the Common Shares to any person regarded as resident in
Bermuda for exchange

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control purposes requires specific prior approval under the Exchange Control Act
1972. The common shares of Annuity Reassurance cannot be transferred without the
consent of the Bermuda Monetary Authority.

In accordance with Bermuda law, share certificates are issued only in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust. The Company will take no notice of
any trust applicable to any of its Common Shares whether or not it had notice of
such trust.

As "exempted companies," the Company and Annuity Reassurance are exempt
from Bermuda laws restricting the percentage of share capital that may be held
by non-Bermudians, but as exempted companies they may not participate in certain
business transactions, including (i) the acquisition or holding of land in
Bermuda (except that required for their business and held by way of lease or
tenancy for terms of not more than 21 years) without the express authorization
of the Bermuda legislature, (ii) the taking of mortgages on land in Bermuda to
secure an amount in excess of $50,000 without the consent of the Minister, (iii)
the acquisition of any bonds or debentures secured by any land in Bermuda, other
than certain types of Bermuda government securities, or (iv) the carrying on of
business of any kind in Bermuda, including insuring domestic risks, except in
furtherance of their business carried on outside Bermuda, and, in the case of
Annuity Reassurance, reinsuring any long-term business risks undertaken by any
company incorporated in Bermuda and permitted to engage in the insurance and
reinsurance business, or under a license granted by the Minister.

United States and Other

In addition to the regulatory requirements imposed by the jurisdictions in
which a reinsurer is licensed, a reinsurer's business operations are affected by
regulatory requirements in other jurisdictions in which its ceding companies are
located governing "credit for reinsurance" which are imposed on its ceding
companies. In general, a ceding company which obtains reinsurance from a
reinsurer that is licensed, accredited or approved by the jurisdiction in which
the ceding company files statutory financial statements is permitted to reflect
in its statutory financial statements a credit in an aggregate amount equal to
the liability for unearned premiums and loss reserves and loss expense reserves
ceded to the reinsurers. Many jurisdictions also permit ceding companies to take
credit on their statutory financial statements for reinsurance obtained from
unlicensed or non-admitted reinsurers if adequate security is posted. Because
Annuity Reassurance is not licensed, accredited or approved in any jurisdiction
except Bermuda, Annuity Reassurance expects that its reinsurance contracts will
typically require it to post a letter of credit or other security.

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<PAGE> 44

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The table below sets forth the names, ages and titles of the directors and
executive officers of the Company and Annuity Reassurance.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY AND ANNUITY REASSURANCE
---- --- -------------------------------------------------
<S> <C> <C>
Lawrence S. Doyle.......... 54 President, Chief Executive Officer and Director
Robert J. Reale............ 41 Senior Vice President and Chief Underwriter
William W. Atkin........... 50 Chief Financial Officer and Treasurer
Richard Tucker(1).......... 41 Vice President
Robert P. Mills, Jr. ...... 48 Vice President and Chief Actuary
Charles G. Collis(2)....... 36 Secretary and Director
Frederick S. Hammer........ 61 Chairman and Director
Robert M. Lichten.......... 57 Deputy Chairman and Director
Robert Clements............ 65 Director
Albert R. Dowden........... 56 Director
Michael P. Esposito,
Jr. ..................... 58 Director
Lee M. Gammill, Jr. ....... 63 Director
Donald J. Matthews......... 64 Director
Brian M. O'Hara............ 49 Director
Jerry S. Rosenbloom........ 58 Director
Walter A. Scott............ 60 Director
Jon W. Yoskin, II.......... 58 Director
</TABLE>

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

(1) Mr. Tucker is a Senior Vice President of Annuity Reassurance.

(2) Mr. Collis has indicated his intention to resign as a director of the
Company and Annuity Reassurance prior to the consummation of the Offering.
Mr. Collis will, however, continue to serve as Secretary of both companies.

Lawrence S. Doyle, age 54, was elected President, Chief Executive Officer
and a director of the Company upon its formation. Mr. Doyle, who has over 32
years of experience in the insurance and reinsurance industries, was the
President and Chief Executive Officer of GCR Holdings Limited, a Bermuda-based
start up reinsurer specializing in catastrophe risk, and its subsidiary Global
Capital Reinsurance Limited from 1993 until their acquisition by EXEL Limited in
1997, whereupon Mr. Doyle became an Executive Vice President of EXEL Limited.
Mr. Doyle founded GCR in 1993 and was largely responsible for the development of
a new client base, the hiring of marketing, underwriting and administrative
personnel and the overall development of the business. Prior thereto, Mr. Doyle
was Senior Vice President of the Hartford Insurance Group in charge of
international operations, where he was employed for 27 years, the last six of
which he was also the President of Hartford Fire International.

Robert J. Reale, age 41, became a Senior Vice President and the Chief
Underwriter of the Company on February 1, 1998. Prior thereto, Mr. Reale, who
has over 19 years of experience in the insurance and reinsurance industries, was
a consultant at Tillinghast-Towers Perrin, a consulting and actuarial company,
from 1997 to 1998. He served as a Vice President of Swiss Re Life & Health
America, Inc. from 1989 to 1997 and as the President of Swiss-Am Reassurance
Company and Atlantic International Reinsurance Company (Barbados), two companies
affiliated with Swiss Re, from 1995 to 1996. While employed by Swiss Re, Mr.
Reale was assigned overall pricing responsibility for that company's United
States life and annuity reinsurance market. Mr. Reale has been a Fellow of the
Society of Actuaries since 1986.

William W. Atkin, age 50, became Chief Financial Officer and Treasurer of
the Company on March 15, 1998. Prior thereto, Mr. Atkin served from 1987 to 1998
as an Executive Vice President and the Chief

42
<PAGE> 45

Financial Officer of Security Mutual Life Insurance Company of New York, where
he was employed for 24 years. Mr. Atkin also served as a director of such
company from 1990 to 1998. While employed by Security Mutual Life Insurance
Company of New York, Mr. Atkin was responsible for that company's operating
plans, annuity product line and relationships with credit rating agencies,
investment advisors, banks and independent accountants.

Richard Tucker, age 41, became a Vice President of the Company and a Senior
Vice President of Annuity Reassurance on March 15, 1998. Prior thereto, Mr.
Tucker, who has over 18 years experience in the insurance and reinsurance
industries, served from 1992 to 1998 as a Senior Vice President and a director
of PaineWebber Life Insurance Company. While employed by PaineWebber Life
Insurance Company, Mr. Tucker was responsible for that company's financial and
administrative operations, development of variable annuity products and
negotiation of annuity reinsurance agreements. Mr. Tucker has been a Fellow of
the Society of Actuaries since 1984.

Robert P. Mills, Jr., age 48, became a Vice President and the Chief Actuary
of the Company on January 15, 1998. Prior thereto, Mr. Mills served as Assistant
Vice President and Actuary for Allmerica Financial, a life insurance provider,
where he was employed for 26 years. Mr. Mills spent 15 years working in
reinsurance administration and pricing while at Allmerica Financial. Mr. Mills
has been a Fellow of the Society of Actuaries since 1975.

Charles G. Collis, age 36, is an attorney in the law firm of Conyers Dill &
Pearman, the Company's Bermuda counsel, where he has worked since 1990.

Frederick S. Hammer, age 61, was elected Chairman of the Board and a
director of the Company upon its formation. Mr. Hammer has been Vice Chairman of
Inter-Atlantic Capital Partners, Inc. since 1994. He is non-executive Chairman
of the Board of National Media Corporation and serves as a director of IKON
Office Solutions, Inc., Provident American Corporation and Medallion Financial
Corporation. Mr. Hammer served as Chairman and Chief Executive Officer of Mutual
of America Capital Management Corporation from 1993 to 1994 and as President of
SEI Asset Management Group from 1989 to 1993. From 1985 to 1989, Mr. Hammer was
Chairman and Chief Executive Officer of Meritor Savings Bank, and prior thereto
he was an Executive Vice President of The Chase Manhattan Corporation, where he
was responsible for its global consumer activities.

Robert M. Lichten, age 57, was elected Deputy Chairman of the Board and a
director of the Company upon its formation. Mr. Lichten has been Vice Chairman
of Inter-Atlantic Capital Partners, Inc. since 1994. Mr. Lichten served as a
Managing Director of Smith Barney Inc. from 1990 to 1994 and as a Managing
Director of Lehman Brothers Inc. from 1988 to 1990. Prior thereto, he served as
an Executive Vice President of The Chase Manhattan Corporation, where he was
responsible for asset liability management and was President of The Chase
Investment Bank.

Robert Clements, age 65, was elected a director of the Company on February
19, 1998. Mr. Clements has been Chairman and a director of Risk Capital
Holdings, Inc., a global reinsurance company, since its formation in 1995. He
also currently serves as an advisor to Marsh & McClennan Risk Capital Corp., a
subsidiary of J&H Marsh & McClennan Companies, Inc., and he served as Chairman
of the Board and Chief Executive Officer of Marsh & McClennan Risk Capital Corp.
from 1994 to 1996. Prior thereto, he served as President of Marsh & McClennan
Companies, Inc. since 1992, having been Vice Chairman of the Board in 1991. Mr.
Clements was Chairman of Marsh & McClennan, Incorporated, a subsidiary of Marsh
& McClennan Companies, Inc., from 1988 to 1992. Mr. Clements presently serves as
a director of EXEL Limited and Hiscox plc. and serves as Chairman of the Board
of the College of Insurance. Mr. Clements is serving as a director of the
Company as the nominee of Risk Capital.

Albert R. Dowden, age 56, was elected a director of the Company on February
19, 1998. Mr. Dowden has been President and Chief Executive Officer of Volvo
Group North America, Inc. and Senior Vice President of AB Volvo since 1991.
Prior to 1991, Mr. Dowden served as Executive Vice President of Volvo Group
North America, Inc., having previously served as Executive Vice President and
Deputy Managing Director of Volvo Cars North America, Inc. He currently serves
as a director of National Media Corporation.

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<PAGE> 46

Michael P. Esposito, Jr., age 58, was elected a director of the Company
upon its formation. Mr. Esposito has been Vice Chairman of Inter-Atlantic
Capital Partners, Inc. since 1995. He has been non-executive Chairman of the
Board of EXEL Limited since 1995 and a director since 1986. He also serves as a
director of Mid Ocean Limited, Risk Capital Holdings, Inc. and Forest City
Enterprises, Inc. Mr. Esposito served as Executive Vice President and Chief
Corporate Compliance, Control and Administration Officer of The Chase Manhattan
Corporation from 1992 to 1995, having previously served as Executive Vice
President and Chief Financial Officer from 1987 to 1992.

Lee M. Gammill, Jr., age 63, was elected a director of the Company on
February 19, 1998. Mr. Gammill currently serves as Chairman of the Gammill
Group, a provider of financial and consulting services to the insurance
industry. From 1994 to 1997, Mr. Gammill served as Vice Chairman of the Board of
New York Life Insurance Company, where he was employed for more than 40 years.
He currently serves as a director of Guarantee Life Insurance Company and
National Affiliated Corporation.

Donald J. Matthews, age 64, was elected a director of the Company on
February 19, 1998. Mr. Matthews has been President and Chief Operating Officer
of American Capital Access, a financial guarantee company, since 1997. From 1992
to 1997, he served as Senior Vice President and a Principal of Johnson and
Higgins where he was employed for 23 years and where he also most recently
served as Chairman of the Global Financial Group.

Brian M. O'Hara, age 49, was elected a director of the Company on February
19, 1998. Mr. O'Hara has been Chairman of the Board, President and Chief
Executive Officer of X.L. Insurance Company, Ltd. and President and Chief
Executive Officer of EXEL Limited since 1994. Mr. O'Hara served as President and
Chief Operating Officer of X.L. Insurance Company, Ltd. and as Vice Chairman of
the Board of EXEL Limited from 1986 to 1994. Prior thereto, he served as a
director and Senior Vice President and Chief Underwriting Officer of Trenwick
America Group from 1979 to 1986. Mr. O'Hara currently serves as a director of
EXEL Limited and Mid Ocean Limited.

Jerry S. Rosenbloom, age 58, was elected a director of the Company on
February 19, 1998. Mr. Rosenbloom has been the Frederick H. Ecker Professor of
Insurance and Risk Management at the Wharton School of the University of
Pennsylvania since 1974. He currently serves as a director of Mutual Risk
Management Ltd. and Harleysville Insurance Company and has been nominated to
serve as a director of Terra Nova Bermuda Holdings.

Walter A. Scott, age 60, was elected a director of the Company on February
19, 1998. Mr. Scott has been a director of ACE Ltd., a Bermuda property casualty
insurance company, since 1989. He served as a consultant to ACE Ltd. from 1994
to 1996 and was Chairman of the Board, President and Chief Executive Officer of
ACE Ltd. from 1991 to 1994 and was President and Chief Executive Officer of ACE
Ltd. from 1989 to 1991. Mr. Scott currently serves as a director of Overseas
Partners Limited.

Jon W. Yoskin, II, age 58, was elected a director of the Company on
February 19, 1998. Mr. Yoskin has been Chairman of the Board and Chief Executive
Officer of Tri-Arc Financial Services, Inc., an insurance broker, since 1988 and
has served as Chairman of the Board and Chief Executive Officer of Magellan
Insurance Company, Ltd. since 1996. He currently serves as a director of
National Media Corporation.

PROVISIONS GOVERNING THE COMPANY'S BOARD OF DIRECTORS

Number and Terms of Directors

The Company's Bye-Laws provide that the Board of Directors shall be divided
into three classes. The first class, whose initial term expires at the first
annual meeting of the Company's shareholders following completion of the
Offering, is comprised of Messrs. Hammer, Clements, Collis, Gammill and Yoskin;
the second class, whose initial term expires at the second annual meeting of the
Company's shareholders following completion of the Offering, is comprised of
Messrs. Lichten, Dowden, O'Hara and Scott; and the third class, whose initial
term expires at the third annual meeting of the Company's shareholders following
completion of the Offering, is comprised of Messrs. Doyle, Esposito, Matthews
and Rosenbloom. Following their initial terms, all classes of directors shall be
elected to three-year terms.

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<PAGE> 47

In connection with the Direct Sale to Risk Capital, and, for so long as
Risk Capital owns at least 500,000 Common Shares, the Company has agreed to
nominate for election as a director of the Company one person selected by Risk
Capital. Similarly, in connection with the Direct Sales to Insurance Partners
and Insurance Partners Offshore, and, for so long as such firms collectively own
at least 500,000 Common Shares, the Company has agreed to nominate for election
as a director of the Company one person jointly selected by Insurance Partners
and Insurance Partners Offshore. In exchange for such right, and, for so long as
any person selected by Risk Capital or Insurance Partners and Insurance Partners
Offshore, respectively, is a director (and during any period after such person's
designation but before his or her election), such Strategic Investors will not
vote or permit any of the Common Shares beneficially owned by them to be voted
for the election of any director of the Company, other than the nominee they
selected. Each such Strategic Investor is permitted to assign its right to
select one person to be nominated for election as a director of the Company only
upon the prior written consent of the Company, which may not be unreasonably
withheld. Robert Clements is serving as a director of the Company as the nominee
of Risk Capital. Insurance Partners and Insurance Partners Offshore have not yet
exercised their joint right to select one person to be nominated for election as
a director of the Company.

Committees of the Board

The Board has established Executive, Finance and Investment, Audit and
Compensation committees. Each committee reports to the Board.

Executive Committee. The Board has appointed an Executive Committee to
exercise all of the authority of the Board between meetings of the full Board.
The Executive Committee does not, however, have authority to take any action on
matters committed or reserved by Bermuda law, the Company's Bye-Laws or
resolution of the Board of Directors to the full Board or another committee of
the Board. The Executive Committee will regularly review the Company's business
and report or make recommendations to the Board thereon. The Executive Committee
presently consists of five directors of the Company (presently Messrs. Hammer
(Chairman), Doyle, Esposito, Lichten and Scott).

Finance and Investment Committee. The Board has appointed a Finance and
Investment Committee to establish and monitor the Company's investment policies
and the performance of the Investment Managers. The Finance and Investment
Committee presently consists of six members (presently Messrs. Lichten
(Chairman), Hammer, Esposito, Gammill, O'Hara and Doyle, who serves as an ex
officio member).

Audit Committee. The Board has appointed an Audit Committee to review the
Company's internal administrative and accounting controls and to recommend to
the Board the appointment of independent auditors. The Audit Committee presently
consists of four directors of the Company (presently Messrs. Scott (Chairman),
Dowden, Matthews and Rosenbloom), none of whom is an officer or employee of the
Company or Annuity Reassurance.

Compensation Committee. The Board has appointed a Compensation Committee
to review the performance of corporate officers and the Company's compensation
policies and procedures and to make recommendations to the Board with respect to
such policies and procedures. The Compensation Committee also administers any
stock option plans and incentive compensation plans of the Company. The
Compensation Committee presently consists of four directors of the Company
(presently Messrs. Esposito (Chairman), Clements, Matthews and Yoskin), none of
whom is an officer or employee of the Company or Annuity Reassurance.

Compensation of Directors

Directors who are employees of the Company will not be paid any fees or
additional compensation for services as members of the Company's Board of
Directors or any committee thereof. Non-employee directors will receive cash in
the amount of $20,000 per annum and $1,000 per board or committee meeting
attended. The Chairman of the Board and Committee Chairmen will receive an
additional $1,000 per annum. Non-employee directors who are not directors,
officers or employees of Inter-Atlantic Capital Partners, Inc. or its affiliates
will also receive options to acquire 15,000 Common Shares upon the later of (i)
their election to the
45
<PAGE> 48

Company's Board of Directors and (ii) the consummation of the Offering. Such
options become exercisable in three equal annual installments commencing on the
first anniversary of the date of grant and will have an exercise price equal to
the fair market value of the Common Shares on the date of grant. On the date of
each annual meeting of the Company's shareholders, each non-employee director
whose term as a director has not ended as of the date of such annual meeting
will receive options to acquire 2,000 Common Shares. Such options will be
immediately exercisable if granted after the first anniversary of the
consummation of the Offering and will have an exercise price equal to the fair
market value of the Common Shares on the date of grant. If any such options are
granted before the first anniversary of the consummation of the Offering, they
will not become exercisable until such first anniversary. All directors will be
reimbursed for travel and other expenses incurred in attending meetings of the
Board or committees thereof.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is currently composed of Messrs. Esposito
(Chairman), Clements, Matthews and Yoskin. No member of the Compensation
Committee is or was an officer or employee of the Company or Annuity
Reassurance, nor has any executive officer of the Company served as a director
or a member of the compensation committee of any other company, one of whose
executive officers serves as a member of the Company's Board or Compensation
Committee.

Messrs. Clements, Matthews and Yoskin have expressed their non-binding
intentions to purchase $423,000, $70,500 and $28,200 of Common Shares,
respectively, directly from the Company as part of the Direct Sales. Because
such Common Shares will not be sold through the Underwriters as part of the
Offering, the purchase price per share will be equal to the initial public
offering price per share, less the per share underwriting discounts and
commissions. Based on the initial public offering price of $15.00 per share, the
number of Common Shares that Messrs. Clements, Matthews and Yoskin are expected
to purchase would be approximately 30,000, 5,000 and 2,000 Common Shares,
respectively. Mr. Esposito purchased on December 9, 1997 for $50,575 a Class A
Warrant to purchase an aggregate number of Common Shares equal to 2.575% of the
sum of (i) the Common Shares outstanding immediately following the consummation
of the Offering (including the Direct Sales, but excluding any Common Shares
held by the Purpose Trust) and (ii) the Common Shares issuable upon exercise or
conversion of any security outstanding immediately following the consummation of
the Offering except for the Class A Warrants, the Class B Warrants and any
options granted by the Company under its Stock Option Plan. Mr. Esposito is also
a shareholder, director and officer of Inter-Atlantic Capital Partners, Inc., a
subsidiary of which is entitled to certain payments from the Company for
services provided in connection with the Company's formation, the Offering and
the Company's operations following the Offering. See "Certain Relationships and
Related Party Transactions."

EXECUTIVE COMPENSATION

The Company did not pay any compensation to its executive officers during
the fiscal period ended December 31, 1997. Messrs. Doyle, Reale, Atkin, Tucker
and Mills are currently receiving compensation from the Company pursuant to the
terms of their respective employment agreements.

EMPLOYMENT AGREEMENTS

The Company, Annuity Reassurance and Mr. Doyle have entered into an
Employment Agreement that became effective on January 1, 1998. The Employment
Agreement provides that Mr. Doyle will serve as Chief Executive Officer and
President of the Company and Annuity Reassurance for an initial term ending on
the third anniversary of the consummation of the Offering and for consecutive
one year terms thereafter, subject to three months' advance notice by either the
Company or Mr. Doyle of a decision not to renew. Pursuant to the terms of his
Employment Agreement, Mr. Doyle began receiving an annual salary of $240,000 on
January 1, 1998. Upon consummation of the Offering, Mr. Doyle's salary will
increase to $350,000 per year, he will be eligible to participate in all
employee benefit programs maintained by the Company, and he will receive a
monthly housing and travel allowance of $8,333.

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<PAGE> 49

The Company, Annuity Reassurance and Mr. Reale have entered into an
Employment Agreement that became effective on February 1, 1998. The Employment
Agreement provides that Mr. Reale will serve as a Senior Vice President and the
Chief Underwriter of the Company and Annuity Reassurance for an initial term
ending on the third anniversary of the consummation of the Offering and for
consecutive one year terms thereafter, subject to three months' advance notice
by either the Company or Mr. Reale of a decision not to renew. Pursuant to the
terms of his Employment Agreement, Mr. Reale is entitled to receive an annual
salary of $200,000. Upon consummation of the Offering, the Company will
contribute monthly ten percent of Mr. Reale's base monthly salary to a
retirement plan for his benefit, he will be eligible to participate in all
employee benefit programs maintained by the Company and will receive a monthly
housing and travel allowance of $8,333. At that time, Mr. Reale will also
receive a one-time cash bonus of $25,000, which will be treated as an advance of
and deducted from any cash bonus that may be awarded for the Company's initial
fiscal year.

The Company, Annuity Reassurance and Mr. Atkin have entered into an
Employment Agreement that became effective on March 15, 1998. The Employment
Agreement provides that Mr. Atkin will serve as Chief Financial Officer and
Treasurer of the Company and Annuity Reassurance for an initial term ending on
the third anniversary of the consummation of the Offering and for consecutive
one year terms thereafter, subject to three months' advance notice by either the
Company or Mr. Atkin of a decision not to renew. Pursuant to the terms of his
Employment Agreement, Mr. Atkin is entitled to receive an annual salary of
$180,000. Upon consummation of the Offering, Mr. Atkin will be eligible to
participate in all employee benefit programs maintained by the Company, and he
will receive a monthly housing and travel allowance of $8,333.

The Company, Annuity Reassurance and Mr. Tucker have entered into an
Employment Agreement that became effective on March 15, 1998. The Employment
Agreement provides that Mr. Tucker will serve as a Vice President of the Company
and a Senior Vice President of Annuity Reassurance for an initial term ending on
the third anniversary of the consummation of the Offering and for consecutive
one year terms thereafter, subject to three months' advance notice by either the
Company or Mr. Tucker of a decision not to renew. Pursuant to the terms of his
Employment Agreement, Mr. Tucker is entitled to receive an annual salary of
$165,000. Upon consummation of the Offering, Mr. Tucker will be eligible to
participate in all employee benefit programs maintained by the Company, and he
will receive a monthly travel and housing allowance of $9,667.

The Company, Annuity Reassurance and Mr. Mills have entered into an
Employment Agreement that became effective on January 15, 1998. The Employment
Agreement provides that Mr. Mills will serve as a Vice President and the Chief
Actuary of the Company and Annuity Reassurance for an initial term ending on the
third anniversary of the consummation of the Offering and for consecutive one
year terms thereafter, subject to three months' advance notice by either the
Company or Mr. Mills of a decision not to renew. Pursuant to the terms of his
Employment Agreement, Mr. Mills is entitled to receive an annual salary of
$125,000. Upon consummation of the Offering, Mr. Mills will be eligible to
participate in all employee benefit programs maintained by the Company and he
will receive a monthly housing and travel allowance of $10,416.

The Employment Agreements of Messrs. Doyle, Reale, Atkin, Tucker and Mills
provide that they will be eligible for an annual cash bonus based on performance
targets established by the Compensation Committee of the Company's Board of
Directors. Mr. Doyle's bonus will be equal to 60% of the total amount available
for bonuses to senior management based on the performance targets established by
the Compensation Committee, up to a maximum of $2.0 million per year. Messrs.
Reale, Atkin, Tucker and Mills will each be eligible to receive a bonus of up to
two times his annual salary based on performance targets established by the
Compensation Committee. The Compensation Committee has not yet set such
performance targets for the Company's initial fiscal year.

The Employment Agreements of Messrs. Doyle, Reale, Atkin, Tucker and Mills
provide that each of them will receive, subject to the consummation of the
Offering, options to purchase Common Shares under the Company's Stock Option
Plan. Mr. Doyle will receive options to purchase Common Shares equal to three
percent of the Common Shares outstanding immediately following the consummation
of the Offering and the Direct Sales. Mr. Reale will receive options to purchase
Common Shares equal to seven-tenths of one percent

47
<PAGE> 50

of the Common Shares outstanding immediately following the consummation of the
Offering and the Direct Sales. Mr. Atkin will receive options to purchase Common
Shares equal to one-half of one percent of the Common Shares outstanding
immediately following the consummation of the Offering and the Direct Sales. Mr.
Tucker will receive options to purchase 66,667 Common Shares. Mr. Mills will
receive options to purchase Common Shares equal to one-half of one percent of
the Common Shares issued in the Offering. The exercise price of the options to
be awarded under the Employment Agreements is equal to the initial public
offering price per share. The options become exercisable in three equal annual
installments beginning on the first anniversary of the consummation of the
Offering.

Each Employment Agreement provides that if the officer is terminated by the
Company for serious cause or the officer resigns without good reason, the
officer will forfeit all bonus amounts for the then current fiscal year, and the
Company will be liable to the officer only for accrued but unpaid salary,
accrued but unpaid bonuses from a prior fiscal year and reimbursable business
expenses incurred prior to the termination. If the employment of Mr. Doyle is
terminated by the Company without serious cause or by Mr. Doyle with good
reason, the Company will continue to pay Mr. Doyle's base salary for a period of
18 months from such termination. If the employment of Messrs. Reale, Tucker or
Mills is terminated by the Company without serious cause or by Messrs. Reale,
Tucker or Mills with good reason, the Company will continue to pay Messrs.
Reale's, Tucker's or Mills' base salary, as the case may be, for a period of one
year from such termination. If the employment of Mr. Atkin is terminated by the
Company without serious cause or by Mr. Atkin with good reason, the Company will
pay Mr. Atkin not less than $15,000 per month for a period of one year from such
termination. Additionally, in each such case, Messrs. Doyle, Reale, Atkin,
Tucker and Mills shall be entitled to any accrued but unpaid salary, any earned
but unpaid bonuses from a prior fiscal year, reimbursement of business expenses
incurred prior to the termination, travel and housing allowances for six months
after the date of termination and reasonable relocation expenses from Bermuda to
the United States.

The Employment Agreements of Messrs. Doyle and Mills provide that neither
will, for a period of (i) one year following the termination of his employment
by the Company without serious cause or by such officer for good reason or (ii)
two years following the termination of his employment with the Company for any
other reason, acquire any financial or beneficial interest (unless such interest
is less than one percent in a publicly traded corporation) in, provide
consulting or other services to, be employed by, or own, manage, operate or
control any entity engaged in any business similar to that of the Company at the
time of the termination of his employment. Mr. Reale's Employment Agreement
provides that he will not, for the same time periods, acquire any financial or
beneficial interest (unless such interest is less than one percent in a publicly
traded corporation) in any entity engaged in any business similar to that of the
Company at the time of the termination of his employment or become employed by
any such entity that does not have its headquarters in the United States.
Furthermore, Mr. Reale is prohibited from soliciting business from any clients
of the Company or Annuity Reassurance for a period of two years following the
termination of his employment. Mr. Atkin's Employment Agreement provides that he
will not, for the same time periods, acquire any financial or beneficial
interest (unless such interest is less than one percent in a publicly traded
corporation) in, provide consulting or other services to, be employed by, or
own, manage, operate or control any entity engaged in any business similar to
that of the Company at the time of the termination of his employment.
Notwithstanding the preceding restrictions, Mr. Atkin's Employment Agreement
provides that he is not prohibited, following the termination of his employment
with the Company, from obtaining employment with an employer in the life
insurance industry that does not have reinsurance operations. Mr. Tucker's
Employment Agreement provides that he will not, for the same time periods,
acquire any financial or beneficial interest (unless such interest is less than
one percent in a publicly traded corporation) in any entity engaged in any
business directly competitive to the business engaged in by the Company at the
time of the termination of his employment or become employed by any such entity
that does not have its headquarters in the United States. Furthermore, Mr.
Tucker is prohibited from soliciting business from any clients of the Company or
Annuity Reassurance for a period of two years following the termination of his
employment.

The Employment Agreements of Messrs. Doyle, Reale, Atkin, Tucker and Mills
also provide that they will keep secret and retain in the strictest confidence
all confidential matters that relate to the Company or any affiliate of the
Company. In addition, pursuant to each of the Employment Agreements, upon a
change in

48
<PAGE> 51

control of the Company, Messrs. Doyle's, Reale's, Atkin's, Tucker's and Mills'
respective options to purchase Common Shares will become exercisable
immediately, and if their employment with the Company is terminated without
serious cause, or if they terminate their employment with the Company for good
reason within one year following a change in control, they will be entitled to
receive a lump sum payment equal to two times their respective annual base
salaries as of the date of termination, travel and housing allowances for one
year from the date of termination, reasonable relocation expenses from Bermuda
to the United States plus an amount equal to any income taxes payable by them by
reason of such payments occurring in connection with a change of control.

STOCK OPTION PLAN

The Company's Board of Directors adopted the Annuity and Life Re
(Holdings), Ltd. Initial Stock Option Plan on December 3, 1997 and amended it on
February 19, 1998. The Stock Option Plan is intended to attract and retain
selected employees, directors and consultants (collectively, the "Eligible
Individuals") and to motivate them to exercise their best efforts on behalf of
the Company and any subsidiary or parent of the Company (a "Related
Corporation"). Options granted under the Stock Option Plan may be "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Code, or may be
options not intended to be ISOs ("Non-Qualified Stock Options"). The aggregate
maximum number of Common Shares for which options may be granted under the Stock
Option Plan will be equal to the lesser of (i) 5.5% of the Common Shares
outstanding immediately following the consummation of the Offering and the
Direct Sales plus 150,000 Common Shares or (ii) 1,700,000 Common Shares. No
option may be granted under the Stock Option Plan after December 2, 2007,
although options outstanding on December 2, 2007 may extend beyond that date.

Administration. The Stock Option Plan is administered by the Compensation
Committee, whose members are designated by the Company's Board of Directors.
Under the terms of the Stock Option Plan, the Compensation Committee must
consist of at least two directors. It is intended (although not required) that
each member of the Compensation Committee administering the Plan be a
"non-employee" director within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director"
within the meaning of Treasury Regulation sec.1.162-27(e)(3) or any successor
provision. If the Compensation Committee does not consist solely of two or more
non-employee directors (within the meaning of Rule 16b-3), each option must be
approved by the full Board. The Compensation Committee has the authority to (i)
select the Eligible Individuals to be granted ISOs and Non-Qualified Stock
Options under the Stock Option Plan, (ii) grant options on behalf of the Company
and (iii) set the date of grant and other terms of the options, including the
times and the price at which options will be granted. Unless otherwise specified
in the Option Agreement, options under the Stock Option Plan are exercisable in
three equal annual installments, commencing with the first anniversary of the
grant date. The Compensation Committee may, in its discretion, accelerate the
date on which an option may be exercised.

Eligibility. Only employees of the Company and/or a Related Corporation
are eligible to receive ISOs under the Stock Option Plan. Non-Qualified Stock
Options may be granted to all Eligible Individuals. (An Eligible Individual who
receives an option grant is hereinafter be referred to as an "Optionee.") As of
March 15, 1998, there were five employees of the Company eligible to receive
ISOs and seventeen Eligible Individuals (including employees) eligible to
receive non-qualified stock options.

Terms and Conditions of Option. All options terminate on the earliest of:
(i) the expiration of the term specified in the option document, which may not
exceed ten years (five years, in the case of an ISO if the Optionee on the date
of grant owns, directly or by attribution, shares possessing more than 10% of
the total combined voting power of all classes of shares of the Company); or
(ii) an accelerated expiration date if the Optionee's employment or service as a
director terminates before the expiration of the term specified in the option
document, unless otherwise provided in the stock option agreement related to the
option. However, if the Optionee's employment or service as a director
terminates for "cause" (as defined in the Stock Option Plan) prior to the
expiration date of the option, such option will terminate immediately.

The option price for an ISO may not be less than 100% of the fair market
value of the shares subject to the option on the date that the option is
granted. If an ISO is granted to an employee who then owns, directly

49
<PAGE> 52

or by attribution under the Code, Common Shares possessing more than 10% of the
total combined voting power of all classes of shares of the Company, the option
price must be at least 110% of the fair market value of the shares on the date
that the option is granted. The aggregate fair market value of the Common Shares
(determined on the date the ISOs are granted) with respect to which ISOs are
exercisable for the first time by any one employee during any calendar year will
not exceed $100,000.

An Optionee may, in the discretion of the Committee, pay for Common Shares
covered by his or her option (i) in cash or its equivalent, (ii) in Common
Shares previously acquired by the Optionee (subject, in the discretion of the
Compensation Committee, to certain holding period requirements), (iii) in whole
or in part, in Common Shares newly acquired by the Optionee upon exercise of the
option (which will be a "disqualifying disposition" in the case of an ISO),
determined at the Compensation Committee's discretion, (iv) through a
combination of (i), (ii) or (iii), above, or (v) in the case of options granted
to an employee or consultant, by delivering a properly executed notice of
exercise of the option to the Company and a broker, with irrevocable
instructions to the broker promptly to deliver to the Company the amount of sale
or loan proceeds necessary to pay the exercise price of the option.

If an Optionee's employment or service with the Company (or a Related
Corporation in case of an employee or consultant) is terminated prior to the
expiration date fixed for his or her option for any reason other than death,
disability or cause, the Optionee may exercise such options that would have been
exercisable as of the termination date, or in the case of an employee or
consultant, to such other extent permitted by the Compensation Committee, at any
time prior to the earlier of the expiration date of such option or (i) in the
case of a director, three months after the date of such termination of service
as a director, and (ii) in the case of an employee or consultant, an accelerated
termination date determined by the Compensation Committee, which, unless
otherwise determined by the Compensation Committee, may not be later than three
months after the date of such termination of employment or service.

If an Optionee's employment or service with the Company (or a Related
Corporation in the case of an employee or consultant) is terminated by reason of
death or disability, or if an Optionee dies after termination of the Optionee's
employment or service but before expiration of the Optionee's option, such
option may be exercised to the extent of the number of Common Shares with
respect to which the Optionee could have exercised it on the date of such
termination or death, or in the case of an employee or consultant, to any
greater extent determined by the Compensation Committee, prior to the earlier of
the expiration date of the option or (i) in the case of a director, one year
after the date of such termination of service or death, and (ii) in the case of
an employee or consultant, an accelerated termination date determined by the
Compensation Committee, which, in the case of disability, unless otherwise
determined by the Compensation Committee, may not be later than one year after
the termination of employment, and in the case of death, may not be later than
one year after the date of death.

In the event of a corporate transaction such as a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation,
each outstanding option will be assumed by the surviving corporation or by a
parent or subsidiary of such corporation if such corporation is the employer
corporation; provided, however, the Compensation Committee has the discretion to
terminate all or a portion of the outstanding options if it determines it is in
the best interests of the Company. Additionally, upon a "change in control" of
the Company, all outstanding options shall become fully vested and exercisable.
In the event of a change in control in which outstanding options are not assumed
by the surviving entity, the Compensation Committee will terminate all
outstanding options on at least seven days' notice.

Option Document; Restriction on Transferability. All options will be
evidenced by a written option document containing provisions consistent with the
Stock Option Plan and such other provisions as the Compensation Committee deems
appropriate. Except as may be provided in an option agreement with regard to
Non-Qualified Stock Options, no option granted under the Stock Option Plan may
be transferred, except by will or the laws of descent and distribution. If the
Optionee is married at the time of exercise and if the Optionee requests at the
time of exercise, the certificate will be registered in the name of the Optionee
and his or her spouse, jointly, with right of survivorship.

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<PAGE> 53

Amendments to Options and the Stock Option Plan; Discontinuance of the
Stock Option Plan. Subject to the provisions of the Stock Option Plan, the
Compensation Committee may not amend an option document without an Optionee's
consent if the amendment is unfavorable to the Optionee. The Board of Directors
may suspend or discontinue the Stock Option Plan or amend it in any respect
whatsoever, except that, without the approval of the holders of a majority of
the shares of the Company present, in person or by proxy, and entitled to vote
at a duly called meeting, no such action may be taken, with respect to ISOs, to
change the class of employees eligible to participate in the Stock Option Plan,
increase the maximum number of Common Shares with respect to which ISOs may be
granted under the Stock Option Plan (except as permitted under the Stock Option
Plan with respect to capital adjustments) or extend the duration of the Stock
Option Plan. Shareholder approval is also required for any amendment that
requires shareholder approval to comply with Rule 16b-3 or any successor
thereto, if such compliance is intended.

Registration Statement on Form S-8. The Company intends to file with the
Commission a Registration Statement on Form S-8 relating to the Stock Option
Plan promptly following the first anniversary of the consummation of the
Offering.

Stock Option Grants. The following table sets forth information concerning
the stock options to be granted upon consummation of the Offering by the Company
to its executive officers under the Stock Option Plan.

INITIAL OPTION GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATE OF
---------------------------------------------------------------- COMMON SHARE PRICE
NUMBER OF APPRECIATION FOR OPTION
COMMON SHARES PERCENT OF TOTAL EXERCISE TERM(2)
UNDERLYING OPTIONS GRANTED TO PRICE EXPIRATION ------------------------------
NAME OPTIONS GRANTED(1) EMPLOYEES PER SHARE DATE 5% 10%
---- ------------------ ------------------ --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Lawrence S. Doyle 678,283 61.66% (3) (4) $6,398,528 $16,215,126
Robert J. Reale 158,266 14.39% (3) (4) $1,492,990 $ 3,783,529
William W. Atkin 113,047 10.28% (3) (4) $1,066,420 $ 2,702,517
Richard Tucker 66,667 6.06% (3) (4) $ 628,898 $ 1,593,750
Robert P. Mills, Jr. 83,750 7.61% (3) (4) $ 790,049 $ 2,002,139
</TABLE>

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

(1) If the Underwriters' over-allotment option is exercised in full, the number
of Common Shares underlying Mr. Doyle's options will increase to 753,658
Common Shares, the Common Shares underlying Mr. Reale's options will
increase to 175,853 Common Shares, the Common Shares underlying Mr. Atkin's
options will increase to 125,610 Common Shares and the Common Shares
underlying Mr. Mills' options will increase to 96,313 Common Shares. The
number of Common Shares underlying Mr. Tucker's options will not change if
the Underwriters' overallotment option is exercised.

(2) Potential realizable value is based on the initial public offering price of
$15.00 per share. The assumed annual rates of Common Share price
appreciation have been provided for illustrative purposes only in accordance
with the rules and regulations of the Commission and should not be construed
as projected appreciation rates for price of the Common Shares.

(3) The exercise price per share is equal to the initial public offering price
per share.

(4) The options expire on the tenth anniversary of the consummation of the
Offering.

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<PAGE> 54

PRINCIPAL STOCKHOLDERS

The table below sets forth the expected beneficial ownership of Common
Shares, after giving effect to the Offering and the Direct Sales, by all persons
who are expected to beneficially own 5% or more of the Common Shares and by each
director and executive officer of the Company and by the directors and executive
officers of the Company as a group (assuming no exercise of the Underwriters'
over-allotment option). Certain directors of the Company (Messrs. Esposito,
Hammer & Lichten) are restricted in their ability to purchase Common Shares in
the Offering or in the Direct Sales because of their affiliation with
Inter-Atlantic Securities Corporation, which is a member of the National
Association of Securities Dealers, Inc. ("NASD"). Certain directors and officers
of the Company have expressed their intention to purchase the Common Shares
indicated in the table below in the Direct Sales, but are under no obligation to
purchase such Common Shares.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) NUMBER OF SHARES PERCENT OF CLASS
---------------------------------------- ---------------- ----------------
<S> <C> <C>
EXEL Limited(2)............................................. 1,418,440 6.27%
Risk Capital Reinsurance Company(3)......................... 1,418,440 6.27
Insurance Partners, L.P.(4)(6).............................. 1,143,065 5.06
Insurance Partners Offshore (Bermuda), L.P.(5)(6)........... 629,985 2.79
Lawrence S. Doyle(7)........................................ 70,922 *
Richard Tucker(8)........................................... 35,461 *
Robert Clements(9).......................................... 30,000 *
William W. Atkin(10)........................................ 21,277 *
Robert J. Reale(11)......................................... 21,277 *
Robert P. Mills, Jr.(12).................................... 14,184 *
Jerry S. Rosenbloom(13)..................................... 10,000 *
Donald J. Matthews(13)...................................... 5,000 *
Walter A. Scott(13)......................................... 5,000 *
Albert R. Dowden(13)........................................ 2,000 *
Lee M. Gammill, Jr.(13)..................................... 2,000 *
Brian M. O'Hara(13)......................................... 2,000 *
Jon W. Yoskin, II(13)....................................... 2,000 *
Charles G. Collis........................................... -- --
Michael P. Esposito, Jr.(14)................................ -- --
Frederick S. Hammer(15)..................................... -- --
Robert M. Lichten(16)....................................... -- --
All directors and executive officers as a group (seventeen
persons).................................................. 221,121 *%
</TABLE>

- ---------------
* Less than 1%.

(1) The address for Insurance Partners, L.P. is 201 Main Street, Fort Worth,
Texas 76012 and the address for Insurance Partners Offshore (Bermuda), L.P.
is 41 Cedar Avenue, P.O. Box HM 1179, Hamilton, HM EX, Bermuda. The address
for EXEL is Cumberland House, One Victoria Street, P.O. Box HM2245,
Hamilton HM JX, Bermuda. The address of Risk Capital is 20 Horseneck Lane,
Greenwich, Connecticut 06830. The address for each other beneficial owner
is c/o Annuity and Life Re (Holdings), Ltd., Victoria Hall, Victoria
Street, P.O. Box HM1262, Hamilton, HM FX, Bermuda.

(2) Does not include 100,000 Common Shares issuable upon exercise of Class B
Warrants which are not currently exercisable.

(3) Does not include 100,000 Common Shares issuable upon exercise of Class B
Warrants which are not currently exercisable. For so long as Risk Capital
owns at least 500,000 Common Shares, the Company has agreed to nominate for
election as a director of the Company one person selected by Risk Capital.
In exchange for such right and for so long as any person selected by Risk
Capital is a director (and during any period after such person's
designation but before his or her election) Risk Capital will not vote or
permit any of the Common Shares beneficially owned by it to be voted for
the election of any director of the Company, other than the nominee
selected by Risk Capital.

(4) Each of Insurance GenPar, L.P., the general partner of Insurance Partners
("IGP"), Insurance GenPar MGP, L.P., the general partner of IGP ("IMGP")
and Insurance GenPar MGP, Inc., the general partner of IMGP (the "IP
General Partner") may be deemed to beneficially own such Common Shares.
Robert A. Spass owns 40% of capital stock of the IP General Partner and
Daniel L. Doctoroff and Steven B. Gruber each own 30% of the capital stock
of the IP General Partner. Each of

52
<PAGE> 55

Messrs. Spass, Doctoroff and Gruber disclaim beneficial ownership of the
Common Shares owned by Insurance Partners that he may be deemed to have.
Does not include 80,586 Common Shares issuable upon exercise of Class B
Warrants which are not currently exercisable.

(5) Each of Insurance GenPar (Bermuda), L.P., the general partner of Insurance
Partners Offshore ("IGPB"), Insurance GenPar (Bermuda) MGP, L.P., the
general partner of IGPB ("IMGPB"), and Insurance GenPar (Bermuda) MGP,
Ltd., the general partner of IMGPB (the "IPB General Partner"), may be
deemed to beneficially own such Common Shares. Mr. Spass owns 40% of the
capital stock of the IPB General Partner and Messrs. Doctoroff and Gruber
each own 30% of the capital stock of the IPB General Partner. Each of
Messrs. Spass, Doctoroff and Gruber disclaims beneficial ownership of the
Common Shares owned by Insurance Partners Offshore that he may be deemed to
have. Does not include 44,414 Common Shares issuable upon exercise of Class
B Warrants which are not currently exercisable.

(6) For so long as Insurance Partners and Insurance Partners Offshore
collectively own at least 500,000 Common Shares, the Company has agreed to
nominate for election as a director of the Company one person jointly
selected by Insurance Partners and Insurance Partners Offshore.

(7) Does not include 678,283 Common Shares (753,658 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of options which are not currently exercisable.

(8) Does not include 66,667 Common Shares issuable upon exercise of options
which are not currently exercisable.

(9) Does not include 15,000 Common Shares issuable upon exercise of options
which are not currently exercisable. Mr. Clements intends to transfer
certain shares that he intends to purchase in the Direct Sales to a
family-owned entity, subject to such entity executing a lock-up agreement
for a period of one year. See "Underwriting."

(10) Does not include 113,047 Common Shares (125,610 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of options which are not currently exercisable.

(11) Does not include 158,266 Common Shares (175,853 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of options which are not currently exercisable.

(12) Does not include 83,750 Common Shares (96,313 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of options which are not currently exercisable.

(13) Does not include 15,000 Common Shares issuable upon exercise of options
which are not currently exercisable.

(14) Does not include 582,193 Common Shares (646,889 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of Class A Warrants which are not currently exercisable.

(15) Does not include 388,129 Common Shares (431,259 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of Class A Warrants held by Mr. Hammer which are not currently
exercisable. Also does not include 194,064 Common Shares (215,630 Common
Shares if the Underwriters' over-allotment option is exercised in full)
issuable upon exercise of Class A Warrants initially acquired by Mr. Hammer
and subsequently transferred to certain trusts for the benefit of his
children and grandchildren, as to which he disclaims beneficial ownership.
The trustees of such trusts have executed lock-up agreements for a period
of one year after the date of this Prospectus. See "Underwriting."

(16) Does not include 582,193 Common Shares (646,889 Common Shares if the
Underwriters' over-allotment option is exercised in full) issuable upon
exercise of Class A Warrants which are not currently exercisable. Mr.
Lichten intends to transfer certain of such shares to certain trusts for
the benefit of his children and grandchildren, as to which he will disclaim
beneficial ownership, subject to execution by the trustees thereof of
lock-up agreements for a period of one year. See "Underwriting."

The Purpose Trust currently owns 12,000 Common Shares, which constitute all
of the currently outstanding Common Shares. Upon consummation of the Offering,
the Purpose Trust has agreed to sell such Common Shares to the Company for an
aggregate price of $12,000 and such Common Shares will be cancelled.

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<PAGE> 56

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following descriptions summarize certain relationships and the terms of
certain agreements of the Company. Such summaries of agreements do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the relevant agreements. A copy of each
such agreement is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.

INTER-ATLANTIC RELATIONSHIPS

Certain directors of the Company (Messrs. Esposito, Hammer and Lichten) are
owners, directors and/or officers of Inter-Atlantic Capital Partners, Inc.
and/or its subsidiary, Inter-Atlantic Securities Corporation. Inter-Atlantic
Capital Partners, Inc. is a United States domiciled corporation and
Inter-Atlantic Securities Corporation is a registered broker-dealer which
provides investment banking services for insurance companies and other financial
services firms. Inter-Atlantic Capital Partners, Inc. has loaned $12,000 to the
Purpose Trust which will be repaid upon consummation of the Offering. Pursuant
to an agreement between Inter-Atlantic Securities Corporation and the Company,
Inter-Atlantic Securities Corporation has agreed to provide certain services in
connection with the formation of the Company, including assistance in recruiting
senior management and obtaining necessary governmental permits. Furthermore, in
return for certain services related to the Offering, including assistance in
preparing a registration statement for the Common Shares, retaining underwriters
in connection with the Offering and such other services as the Company or Inter-
Atlantic Securities Corporation deems appropriate, the Company has agreed to pay
Inter-Atlantic Securities Corporation a fee of $2.0 million upon consummation of
the Offering. Pursuant to such agreement, Inter-Atlantic Securities Corporation
is also entitled to receive an annual fee of $600,000 for services provided
after the consummation of the Offering, which is payable in quarterly
installments commencing on the first anniversary of the consummation of the
Offering through the fifth anniversary of the consummation of the Offering. In
exchange for such annual fee, Inter-Atlantic Securities Corporation will assist
the Company in the development of products, financial planning, management of
assets and liabilities, international marketing efforts and such other services
as the Company may request.

The Company is also obligated to reimburse Inter-Atlantic Securities
Corporation for expenses it incurs in connection with performing services
related to the formation of the Company, the Offering and the Company's ongoing
operations. At December 22, 1997, Inter-Atlantic Securities Corporation had
incurred expenses in connection with the Company's organization of approximately
$75,000 and costs in connection with the Offering of approximately $400,000. If
the Offering is successfully completed prior to June 30, 1998, certain of these
incurred but not currently payable expenses may be paid directly by the Company
rather than paid to Inter-Atlantic Securities Corporation as a reimbursement. If
the Offering is not successfully consummated prior to June 30, 1998,
Inter-Atlantic Securities Corporation will only be entitled to reimbursement of
expenses incurred by it on or after December 23, 1997. Upon consummation of the
Offering, expenses incurred by Inter-Atlantic Securities Corporation are
currently estimated to be approximately $1,625,000, of which approximately
$75,000 relates to services provided in connection with the formation of the
Company, approximately $1.2 million relates to the Offering and approximately
$350,000 relates to operating expenses incurred on the Company's behalf. The
expenses payable to Inter-Atlantic Securities Corporation that relate to the
formation of the Company will be capitalized and amortized to income evenly over
five years. The fees and expenses payable to Inter-Atlantic Securities
Corporation that relate to services provided to the Company in connection with
the Offering will be deducted from the gross proceeds of the Offering. The
annual fee of $600,000 and the expenses payable to Inter-Atlantic Securities
Corporation as reimbursement of operating expenses incurred on the Company's
behalf will be expensed by the Company when incurred.

In connection with the formation of the Company, six individuals employed
by Inter-Atlantic Capital Partners, Inc. and/or Inter-Atlantic Securities
Corporation (Messrs. Esposito, Hammer, Andrew S. Lerner, Lichten, William S.
Ogden, Jr. and Arnold Welles) purchased for $238,000 in the aggregate Class A
Warrants to purchase up to an aggregate number of Common Shares equal to 12% of
the sum of (i) the Common Shares outstanding immediately following the
consummation of the Offering (including the Direct Sales, but excluding any
Common Shares held by the Purpose Trust) and (ii) the Common Shares issuable
54
<PAGE> 57

upon exercise or conversion of any security outstanding immediately following
the consummation of the Offering except for the Class A Warrants, the Class B
Warrants and any options granted by the Company under its Stock Option Plan. The
exercise price of the Class A Warrants will be equal to the initial public
offering price per share, subject to customary anti-dilution adjustments for
certain events, including stock splits and the issuance of Common Shares at a
price below the initial public offering price per share. The Class A Warrants
become exercisable in three equal annual installments commencing on the first
anniversary of the consummation of the Offering. In the event of a change of
control of the Company, the Class A Warrants then outstanding will become
immediately exercisable. The Class A Warrants will expire on January 15, 2008.
The holders of the Class A Warrants have also been granted rights to require the
Company to register the Common Shares underlying the Class A Warrants, which
rights become exercisable on the first anniversary of the consummation of the
Offering. See "Description of Capital Stock -- Warrants."

STRATEGIC INVESTOR RELATIONSHIPS

Prudential Insurance has agreed to purchase Common Shares and Class B
Warrants to purchase Common Shares in connection with the Direct Sales. See
"Direct Sales." Prudential Securities Incorporated, a representative of the
Underwriters, and The Prudential Investment Corporation, one of the Investment
Managers, are wholly-owned subsidiaries of Prudential Insurance. See
"Underwriting."

EXEL has agreed to purchase Common Shares and Class B Warrants to purchase
Common Shares in connection with the Direct Sales. See "Direct Sales." Brian M.
O'Hara, a director of the Company, currently serves as the President and Chief
Executive Officer of EXEL. In addition, Michael P. Esposito, Jr., a director of
the Company, currently serves as a non-executive Chairman of the Board of EXEL,
and Robert Clements, a director of the Company, currently serves as a director
of EXEL. Robert M. Lichten, a director of the Company, has agreed to serve as a
director of a United States-based subsidiary of EXEL.

Risk Capital has agreed to purchase Common Shares and Class B Warrants to
purchase Common Shares as part of the Direct Sales. See "Direct Sales." Michael
P. Esposito, Jr., a director of the Company, is a director of Risk Capital and
Risk Capital Holdings, Inc., the parent company of Risk Capital. Robert
Clements, a director of the Company, currently serves as Chairman and a director
of Risk Capital and Risk Capital Holdings, Inc. Furthermore, an affiliate of
Marsh & McLennan was a sponsor of Risk Capital Holdings, Inc. and, based on
filings with the Commission, currently holds approximately a 13% ownership
interest in Risk Capital Holdings, Inc. The Company has contracted with Marsh &
McLennan to provide office space and certain administrative services. See
"Business -- Administration" and "Business -- Property." EXEL was also an
initial investor in Risk Capital Holdings, Inc. and, based on filings with the
Commission, currently holds approximately a 28% ownership interest in such
company and has the right to designate two of its directors.

In connection with the Direct Sale to Risk Capital, and, for so long as
Risk Capital owns at least 500,000 Common Shares, the Company has agreed to
nominate for election as a director of the Company one person selected by Risk
Capital. Similarly, in connection with the Direct Sales to Insurance Partners
and Insurance Partners Offshore, and, for so long as such firms collectively own
at least 500,000 Common Shares, the Company has agreed to nominate for election
as a director of the Company one person jointly selected by Insurance Partners
and Insurance Partners Offshore. In exchange for such right, and, for so long as
any person selected by Risk Capital or Insurance Partners and Insurance Partners
Offshore, respectively, is a director (and during any period after such person's
designation but before his or her election), such Strategic Investors will not
vote or permit any of the Common Shares beneficially owned by them to be voted
for the election of any director of the Company, other than the nominee selected
by them. Each such Strategic Investor is permitted to assign its right to select
one person to be nominated for election as a director of the Company only upon
the prior written consent of the Company, which may not be unreasonably
withheld. Robert Clements is serving as a director of the Company as the nominee
of Risk Capital. Insurance Partners and Insurance Partners Offshore have not yet
exercised their joint right to select one person to be nominated for election as
a director of the Company.

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MANAGEMENT RELATIONSHIPS

The Company's officers, Messrs. Doyle, Reale, Atkin, Tucker and Mills, have
expressed their non-binding intention to purchase $1,000,000, $300,000,
$300,000, $500,000 and $200,000 of Common Shares, respectively, directly from
the Company as part of the Direct Sales. Based on an initial public offering
price of $15.00 per share, the number of Common Shares that Messrs. Doyle,
Reale, Atkin, Tucker and Mills are expected to purchase would be approximately
70,922, 21,277, 21,277, 35,461 and 14,184 Common Shares, respectively, and,
collectively, such purchases are expected to total approximately 163,121 Common
Shares. Similarly, certain directors of the Company have expressed their
intention to purchase an aggregate of 58,000 Common Shares directly from the
Company as part of the Direct Sales. Because such Common Shares will not be sold
through the Underwriters as part of the Offering, the purchase price per share
will be equal to the initial public offering price per share, less the per share
underwriting discounts and commissions. The Company intends to make loans to
Messrs. Doyle, Reale, Atkin, Tucker and Mills in the amounts of $500,000,
$225,000, $225,000, $250,000 and $100,000, respectively, to partially finance
such purchases in the event such purchases are completed. Such loans will bear
interest at 7% per annum and must be repaid within five years of the
consummation of the Direct Sales, except that $75,000 of the loans made to
Messrs. Reale and Atkin must be repaid within 14 months of the consummation of
the Direct Sales. Any such purchases will be completed simultaneously with the
consummation of the Offering and the other Direct Sales.

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DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock summarizes certain
provisions of the Company's Memorandum of Association and Bye-Laws. Such
summaries do not purport to be complete and are subject to, and are qualified in
their entirely by reference to, all of the provisions of the Memorandum of
Association and Bye-Laws. A copy of the Memorandum of Association and Bye-Laws
are filed as exhibits to the Registration Statement of which this Prospectus is
a part.

GENERAL

The Company's authorized share capital upon consummation of the Offering
and the Direct Sales will consist of: (i) 100,000,000 Common Shares, of which
22,609,420 Common Shares will be outstanding and (ii) 50,000,000 preferred
shares, par value $1.00 per share (the "Preferred Shares"), none of which will
be outstanding. In addition an aggregate of 2,713,132 Common Shares will be
issuable upon exercise of outstanding Class A Warrants, an aggregate of 397,500
Common Shares will be issuable upon exercise of Class B Warrants to be included
in the Direct Sales and an aggregate of 1,220,013 Common Shares will be issuable
upon exercise of options to be granted to management and certain directors upon
consummation of the Offering, in each case, subject to adjustment as provided
therein. If the Underwriters' over-allotment option is exercised in full,
25,121,920 Common Shares will be outstanding, the number of Common Shares
issuable upon exercise of outstanding Class A Warrants will increase to an
aggregate of 3,014,629 Common Shares and the number of Common Shares issuable
upon exercise of options to be granted to management and certain directors upon
consummation of the Offering will increase to an aggregate of 1,338,101 Common
Shares. The number of Common Shares issuable upon exercise of the Class B
Warrants will not change if the Underwriters' over-allotment option is
exercised. The outstanding Class A Warrants, Class B Warrants and options are
not currently exercisable. The Purpose Trust currently owns 12,000 Common
Shares, which constitute all of the currently outstanding Common Shares. Upon
consummation of the Offering, the Purpose Trust has agreed to sell such Common
Shares to the Company for an aggregate price of $12,000, and such Common Shares
will be cancelled.

COMMON SHARES

Holders of the Common Shares have no pre-emptive, redemption, conversion or
sinking fund rights. The quorum required for a general meeting of shareholders
is two or more persons present in person and representing in person or by proxy
more than 50% of the Common Shares (without giving effect to the limitation on
voting rights described below). Subject to the limitation on voting rights
described below, holders of Common Shares are entitled to one vote per share on
all matters submitted to a vote of holders of Common Shares. Most matters to be
approved by holders of Common Shares require approval by a simple majority of
the votes cast at a meeting at which a quorum is present. Furthermore, a
resolution to remove the Company's auditor before the expiration of the
auditor's term of office must be approved by the holders of at least two-thirds
of the Common Shares present in person or by proxy and voting thereon (after
giving effect to the limitation on voting rights) at a meeting at which a quorum
is present.

In the event of a liquidation, dissolution or winding-up of the Company,
the holders of Common Shares are entitled to share equally and ratably in the
assets of the Company, if any remain after the payment of all debts and
liabilities of the Company and the liquidation preference of any outstanding
Preferred Shares.

Limitation on Voting Rights. Each Common Share has one vote on a poll of
the shareholders, except that, if and for as long as the number of issued
Controlled Shares (as defined below) of any person would constitute 10% or more
of the combined voting power of the issued voting shares of the Company (after
giving effect to any prior reduction in voting power as described below), each
such issued Controlled Share,

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regardless of the identity of the registered holder thereof, will confer only a
fraction of a vote as determined by the following formula (the "Formula"):

(T - C) / (9.1 X C)

Where: "T" is the aggregate number of votes conferred by all the issued shares
immediately prior to that application of the Formula with respect to any
particular shareholder, adjusted to take into account any prior reduction
taken with respect to any other shareholder pursuant to the "sequencing
provision" described below; and

"C" is the number of issued Controlled Shares attributable to such
person. "Controlled Shares" of any person refers to all Common Shares or
voting Preferred Shares owned by such person, whether (i) directly, (ii)
with respect to persons who are United States persons, by application of
the attribution and constructive ownership rules of Sections 958(a) and
958(b) of the Code or (iii) beneficially, directly or indirectly, within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations
thereunder.

The Formula will be applied successively as many times as may be necessary
to ensure that no person will be a 10% Shareholder (as defined below) at any
time (the "sequencing provision"). For the purposes of determining the votes
exercisable by shareholders as of any date, the Formula will be applied to the
shares of each shareholder in declining order based on the respective numbers of
total Controlled Shares attributable to each shareholder. Thus, the Formula will
be applied first to the votes of shares held by the shareholder to whom the
largest number of total Controlled Shares is attributable and thereafter
sequentially with respect to the shareholder with the next largest number of
total Controlled Shares. In each case, calculations are made on the basis of the
aggregate number of votes conferred by the issued voting shares as of such date,
as reduced by the application of the Formula to any issued voting shares of any
shareholder with a larger number of total Controlled Shares as of such date.
"10% Shareholder" means a person who owns, in aggregate, (i) directly, (ii) with
respect to persons who are United States persons, by application of the
attribution and constructive ownership rules of Sections 958(a) and 958(b) of
the Code or (iii) beneficially, directly or indirectly, within the meaning of
Section 13(d)(3) of the Exchange Act, issued voting shares of the Company
carrying 10% or more of the total combined voting rights attaching to all issued
shares.

The directors are empowered to require any shareholder to provide
information as to that shareholder's beneficial share ownership, the names of
persons having beneficial ownership of the shareholder's shares, relationships
with other shareholders or any other facts the directors may deem relevant to a
determination of the number of Controlled Shares attributable to any person. The
directors may disregard the votes attached to shares of any holder failing to
respond to such a request or submitting incomplete or untrue information.

The directors retain certain discretion to make such final adjustments to
the aggregate number of votes attaching to the voting shares of any shareholder
that they consider fair and reasonable in all the circumstances to ensure that
no person will be a 10% Shareholder at any time.

Restrictions on Transfer. The Bye-Laws contain several provisions
restricting the transferability of Common Shares. Except as described below with
respect to transfers of Common Shares executed on the Nasdaq National Market,
the directors (or their designee) are required to decline to register a transfer
of shares if they have reason to believe that the result of such transfer would
be to increase the number of total Controlled Shares of any person to 10% or
more of a class of the Company's shares. Similarly, the Company is restricted
from issuing or repurchasing Common Shares if such issuance or repurchase would
increase the number of total Controlled Shares of any person to 10% or more of a
class of the Company's shares.

The directors (or their designee) also may, in their absolute discretion,
decline to register the transfer of any Common Shares, except for transfers
executed on the Nasdaq National Market, if they have reason to believe (i) that
such transfer may expose the Company, any subsidiary or shareholder thereof or
any person ceding insurance to the Company or any such subsidiary to adverse tax
or regulatory treatment in any jurisdiction or (ii) that registration of such
transfer under the Securities Act or under any United States state securities
laws or under the laws of any other jurisdiction is required and such
registration has not been duly effected.

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The Company's directors will not decline to register any transfer of Common
Shares executed on the Nasdaq National Market for the reasons described above.
However, if any such transfer results in the transferee (or any group of which
such transferee is a member) beneficially owning, directly or indirectly, 10% or
more of any class of the Company's shares or causes the Company's directors (or
their designee) to have reason to believe that such transfer may expose the
Company, any subsidiary or shareholder thereof or any person purchasing
reinsurance from the Company to adverse tax or regulatory treatment in any
jurisdiction, under the Company's Bye-Laws, the directors (or their designee)
are empowered to deliver a notice to the transferee demanding that such
transferee surrender to an agent designated by the directors (the "Agent")
certificates representing the shares and any dividends or distributions that the
transferee has received as a result of owning the shares. A transferee who has
resold the shares before receiving such notice will be required to transfer to
the Agent the proceeds of the sale, to the extent such proceeds exceed the
amount that the transferee paid for the shares, together with any dividends or
distributions that the transferee received from the Company. As soon as
practicable after receiving the shares and any dividends or distributions that
the transferee received, the Agent will use its best efforts to sell such shares
and any non-cash dividends or distributions in an arm's-length transaction on
the Nasdaq National Market. After applying the proceeds from such sale toward
reimbursing the transferee for the price paid for the shares, the Agent will pay
any remaining proceeds and any cash dividends and distributions to organizations
described in Section 501(c)(3) of the Code that the directors designate. The
proceeds of any such sale by the Agent or the surrender of dividends or
distributions will not inure to the benefit of the Company or the Agent, but
such amounts may be used to reimburse expenses incurred by the Agent in
performing its duties.

The Company is authorized to request information from any holder or
prospective acquiror of Common Shares as necessary to give effect to the
transfer, issuance and repurchase restrictions described above, and may decline
to effect any such transaction if complete and accurate information is not
received as requested.

Conyers Dill & Pearman, Bermuda counsel to the Company, have advised the
Company that while the precise form of the restrictions on transfer contained in
the Bye-Laws is untested, as a matter of general principle, restrictions on
transfers are enforceable under Bermuda law and are not uncommon. A proposed
transferee will be permitted to dispose of any Common Shares purchased that
violate the restrictions and as to the transfer of which registration is
refused. The transferor of such Common Shares will be deemed to own such Common
Shares for dividend, voting and reporting purposes until a transfer of such
Common Shares has been registered on the Register of Members of the Company.

If the directors refuse to register a transfer for any reason, they must
notify the proposed transferor and transferee within thirty days of such
refusal. The Bye-Laws also provide that the Board may suspend the registration
of transfers at such time and for such periods as the Board may determine,
provided that they may not suspend the registration of transfers for more than
45 days in any period of 365 consecutive days.

The directors have designated the Company's Chief Executive Officer to
exercise their authority to decline to register transfers or to limit voting
rights as described above, or to take any other action, for as long as such
officer is also a director.

PREFERRED SHARES

Pursuant to the Bye-Laws and Bermuda law, the Board by resolution may
establish one or more series of Preferred Shares having such number of shares,
designations, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations as may be fixed by the Board without any
further shareholder approval, which, if any such Preferred Shares are issued,
will include restrictions on voting and transfer intended to avoid having the
Company constitute a "controlled foreign corporation" for United States federal
income tax purposes. Such rights, preferences, powers and limitations as may be
established could have the effect of discouraging an attempt to obtain control
of the Company. The issuance of Preferred Shares could also adversely affect the
voting power of the holders of Common Shares, deny shareholders the receipt of a
premium on their Common Shares in the event of a tender or other offer for the
Common Shares and have a depressive effect on the market price of the Common
Shares. The Company has no present plan to issue any Preferred Shares.

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WARRANTS

Class A Warrants. Upon completion of the Offering and the Direct Sales,
Class A Warrants to purchase an aggregate of 2,713,132 Common Shares, subject to
adjustment as provided in the warrants, will be outstanding. If the
Underwriters' over-allotment option is exercised in full, the number of Common
Shares issuable upon exercise of the Class A Warrants will increase to 3,014,629
Common Shares. The exercise price of the Class A Warrants is equal to the
initial public offering price per share, subject to customary anti-dilution
adjustments for certain events, including stock splits and the issuance of
Common Shares at a price below the initial public offering price per share. The
Class A Warrants become exercisable in three equal annual installments
commencing on the first anniversary of the consummation of the Offering. In the
event of a change of control of the Company, the Class A Warrants then
outstanding will become immediately exercisable. The Class A Warrants expire on
January 15, 2008.

The Class A Warrant holders have been granted certain registration rights
with respect to the sale of the Common Shares underlying the warrants, and have
entered into agreements with the Underwriters under which they have agreed not
to dispose of such shares or the warrants for a one-year period from the date of
this Prospectus without the prior written consent of Prudential Securities
Incorporated and Merrill Lynch & Co. on behalf of the Underwriters. See "Shares
Eligible for Future Sale" and "Underwriting."

Class B Warrants. Upon completion of the Offering and the Direct Sales,
Class B Warrants to purchase an aggregate of 397,500 Common Shares will be
outstanding. The exercise price of the Class B Warrants is $15.00 per share,
subject to customary anti-dilution adjustments for certain events, including
stock splits and the issuance of Common Shares below the exercise price for the
Class B Warrants or below the then current fair market value of the Common
Shares. The Class B Warrants become exercisable in three equal annual
installments commencing on the first anniversary of the consummation of the
Direct Sales. In the event of a change of control of the Company, the Class B
Warrants then outstanding will become immediately exercisable. The Class B
Warrants will expire on the tenth anniversary of the consummation of the Direct
Sales.

The Class B Warrant holders have been granted certain registration rights
with respect to the sale of the Common Shares underlying the Warrants, and have
entered into agreements with the Underwriters under which they have agreed not
to dispose of such shares or warrants for a one-year period from the date of
this Prospectus without the prior written consent of Prudential Securities
Incorporated and Merrill Lynch & Co. on behalf of the Underwriters and the
Company, except for Prudential Insurance, which has agreed to such restriction
for a period of 180 days from the date of this Prospectus. See "Shares Eligible
for Future Sale," "Direct Sales" and "Underwriting."

OPTIONS

Upon consummation of the Offering, the Company will grant options to
purchase an aggregate of 1,220,013 Common Shares pursuant to its Stock Option
Plan. An additional 173,505 Common Shares are reserved for future issuance under
the Stock Option Plan. If the Underwriters' over-allotment option is exercised
in full, the number of Common Shares issuable upon exercise of the options to be
issued upon consummation of the Offering will increase to 1,338,101 Common
Shares, and the number of Common Shares reserved for future issuance under the
Stock Option Plan will increase to 193,605 Common Shares. See
"Management -- Stock Option Plan."

The Company intends to file with the Commission a Registration Statement on
Form S-8 relating to the Stock Option Plan promptly following the first
anniversary of the consummation of the Offering. The individuals who will be
granted options upon consummation of the Offering have entered into agreements
with the Underwriters under which they have agreed not to dispose of such
options for a one-year period from the date of this Prospectus without the prior
written consent of Prudential Securities Incorporated and Merrill Lynch & Co. on
behalf of the Underwriters. See "Shares Eligible for Future Sale" and
"Underwriting."

BYE-LAWS

The Bye-Laws provide for the corporate governance of the Company, including
the establishment of share rights, modification of such rights, issuance of
share certificates, imposition of a lien over shares in
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respect of unpaid amounts on those shares and other debts or liabilities of a
shareholder to the Company, calls on shares which are not fully paid, the
transfer of shares, alterations to capital, the calling and conduct of general
meetings, proxies, the appointment and removal of directors, conduct and powers
of directors, the payment of dividends, the appointment of an auditor and the
winding-up of the Company.

The Bye-Laws provide that the Board shall be elected annually and shall
consist of three approximately equal classes, each class to be elected to serve
for a three year term. Shareholders may only remove a director prior to the
expiration of such director's term at a special meeting of shareholders at which
a majority of the votes cast thereon is cast in favor of such action. A special
meeting of shareholders may be convened by the Chairman or any two directors or
any director and the Secretary or on the request of shareholders holding not
less than 10% of the paid-up share capital of the Company as carries the right
to vote at general shareholders' meetings.

The Bye-Laws also provide that if the Board in its absolute discretion
determines that share ownership by any shareholder may result in adverse tax,
regulatory or legal consequences to the Company, any of its subsidiaries or any
other shareholder, then the Company will have the option, but not the
obligation, to repurchase all or part of the shares held by such shareholder to
the extent the Board determines it is necessary or advisable to avoid or cure
such adverse or potential adverse consequences. The Company will also be
entitled to assign this repurchase right to one or more third parties, including
other shareholders. The price to be paid for such Common Shares will be the fair
market value of such shares.

The Bye-Laws provide that each director may appoint an alternate director,
who shall have the power to attend and vote at any meeting of the Board at which
such director is not personally present and generally to perform at such meeting
all the functions of such director. In addition, the Board may delegate any of
its powers to a committee appointed by the Board, which may consist partly or
entirely of non-directors.

TRANSFER AGENT

The Company's registrar and transfer agent for the Common Shares is First
Chicago Trust Company of New York.

DIFFERENCES IN CORPORATE LAW

The Companies Act 1981 of Bermuda (the "Act"), which applies to the
Company, differs in certain material respects from laws generally applicable to
United States corporations and their shareholders. Set forth below is a summary
of certain significant provisions of the Act (including modifications adopted
pursuant to the Bye-Laws) applicable to the Company which differ in certain
respects from provisions of Delaware corporate law. The following statements are
summaries and do not purport to deal with all aspects of Bermuda law that may be
relevant to the Company and its shareholders.

Interested Directors. Bermuda law and the Bye-Laws provide that any
transaction entered into by the Company in which a director has an interest is
not voidable by the Company nor can such director be liable to the Company for
any profit realized pursuant to such transaction provided the nature of the
interest is disclosed at the first opportunity at a meeting of directors, or in
writing to the directors. Under Delaware law such transaction would not be
voidable if (i) the material facts as to such interested director's relationship
or interests are disclosed or are known to the board of directors and the board
in good faith authorizes the transaction by the affirmative vote of a majority
of the disinterested directors, (ii) such material facts are disclosed or are
known to the stockholders entitled to vote on such transaction and the
transaction is specifically approved in good faith by vote of the stockholders
or (iii) the transaction is fair as to the corporation as of the time it is
authorized, approved or ratified. Under Delaware law, such interested director
could be held liable for a transaction in which such director derived an
improper personal benefit.

Mergers and Similar Arrangements. The Company may acquire the business of
another Bermuda exempted company or a company incorporated outside Bermuda when
such business is within its business purpose as set forth in its Memorandum of
Association. The Company may, with the approval of a majority of votes cast at a
general meeting of the shareholders at which a quorum is present, amalgamate
with another Bermuda company or with a body incorporated outside Bermuda. In the
case of an amalgamation, a
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shareholder may apply to a Bermuda court for a proper valuation of such
shareholder's shares if such shareholder is not satisfied that fair value has
been paid for such shares. The court ordinarily would not disapprove the
transaction on that ground absent evidence of fraud or bad faith. Under Delaware
law, with certain exceptions, a merger, consolidation or sale of all or
substantially all the assets of a corporation must be approved by the board of
directors and a majority of the outstanding shares entitled to vote thereon.
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may, under certain circumstances, be entitled to
appraisal rights pursuant to which such stockholder may receive cash in the
amount of the fair value of the shares held by such stockholder (as determined
by a court) in lieu of the consideration such stockholder would otherwise
receive in the transaction.

Takeovers. Bermuda law provides that where an offer is made for shares of
a company and, within four months of the offer, the holders of not less than 90%
of the shares which are the subject of the offer accept, the offeror may by
notice require the nontendering shareholders to transfer their shares on the
terms of the offer. Dissenting shareholders may apply to the court within one
month of the notice objecting to the transfer. The burden is on the dissenting
shareholders to show that the court should exercise its direction to enjoin the
required transfer, which the court will be unlikely to do unless there is
evidence of fraud or bad faith or collusion between the offeror and the holders
of the shares who have accepted the offer as a means of unfairly forcing out
minority shareholders. Delaware law provides that a parent corporation, by
resolution of its board of directors and without any shareholder vote, may merge
with any subsidiary of which it owns at least 90% of each class of capital
stock. Upon any such merger, dissenting stockholders of the subsidiary would
have appraisal rights.

Shareholder's Suit. The rights of shareholders under Bermuda law are not
as extensive as the rights of shareholders under legislation or judicial
precedent in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English case
law precedent, which would permit a shareholder to commence an action in the
name of the Company to remedy a wrong done to the Company where the act
complained of is alleged to be beyond the corporate power of the Company or is
illegal or would result in the violation of the Memorandum of Association or
Bye-Laws. Furthermore, consideration would be given by the court to acts that
are alleged to constitute a fraud against the minority shareholders or where an
act requires the approval of a greater percentage of the Company's shareholders
than actually approved it. The winning party in such an action generally would
be able to recover a portion of attorneys' fees incurred in connection with such
action. The Bye-Laws provide that shareholders waive all claims or rights of
action that they might have, individually or in the right of the Company,
against any director or officer for any act or failure to act in the performance
of such director's or officer's duties, except with respect to any fraud or
dishonesty of such director or officer. Class actions and derivative actions
generally are available to stockholders under Delaware law for, among other
things, breach of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court has discretion to
permit the winning party to recover attorneys' fees incurred in connection with
such action.

Indemnification of Directors. The Company may indemnify its directors or
officers in their capacity as such in respect of any loss arising or liability
attaching to them by virtue of any rule of law in respect of any negligence,
default, breach of duty or breach of trust of which a director or officer may be
guilty in relation to the Company other than in respect of his own fraud or
dishonesty. Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in defense of an action, suit or proceeding by reason of such position if (i)
such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
(ii), with respect to any criminal action or proceeding, such director or
officer had no reasonable cause to believe his conduct was unlawful.

Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda, which will include the Memorandum of
Association (including its objects and powers) and any alteration to the
Memorandum of Association and documents relating to any increase or reduction of
authorized capital. The shareholders have the additional right to inspect the
Bye-Laws, minutes of general meetings and audited
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financial statements of the Company, which must be presented to the annual
general meeting of shareholders. The register of shareholders of the Company is
also open to inspection by shareholders without charge, and to members of the
public for a fee. The Company is required to maintain its share register in
Bermuda but may establish a branch register outside Bermuda. The Company is
required to keep at its registered office a register of its directors and
officers which is open for inspection by members of the public without charge.
Bermuda law does not, however, provide a general right for shareholders to
inspect or obtain copies of any other corporate records. Delaware law permits
any shareholder to inspect or obtain copies of a corporation's shareholder list
and its other books and records for any purpose reasonably related to such
person's interest as a shareholder.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and the Direct Sales, the Company will have
outstanding 22,609,420 Common Shares, Class A Warrants to purchase an aggregate
of 2,713,132 Common Shares, Class B Warrants to purchase an aggregate of 397,500
Common Shares and options to purchase an aggregate of 1,220,013 Common Shares.
If the Underwriters' over-allotment option is exercised in full, 25,121,920
Common Shares will be outstanding, the number of Common Shares issuable upon
exercise of outstanding Class A Warrants will increase to an aggregate of
3,014,629 Common Shares and the number of Common Shares issuable upon exercise
of outstanding options will increase to an aggregate of 1,338,101 Common Shares.
The number of Common Shares issuable upon exercise of the Class B Warrants will
not change if the Underwriters' over-allotment option is exercised. The Class A
Warrants, Class B Warrants and options are not currently exercisable. See
"Management -- Stock Option Plan," "Description of Capital Stock -- Warrants"
and "Direct Sales." Except as disclosed in "Description of Capital
Stock -- Restrictions on Transfer" and as discussed below with respect to the
lock-up agreements, the Common Shares sold in the Offering and any Common Shares
sold in the Direct Sales to the Company's directors and officers will be freely
transferable without restriction or further registration under the Securities
Act, except for any of those Common Shares owned at any time by an "affiliate"
of the Company within the meaning of Rule 144 under the Securities Act (which
sales will be subject to the volume limitations and certain other restrictions).
The Common Shares to be sold to the Strategic Investors in the Direct Sales and
the Common Shares underlying the Class A Warrants, the Class B Warrants and the
options are "restricted securities" as defined in Rule 144 under the Securities
Act and may not be resold in the absence of registration under the Securities
Act or pursuant to an exemption from registration.

The Company, its directors and officers, the holders of Class A Warrants
and the Strategic Investors have executed agreements (the "lock-up agreements")
under which they have agreed that they will not, without the prior written
consent of Prudential Securities Incorporated and Merrill Lynch & Co. on behalf
of the Underwriters and, in addition, in the case of the Strategic Investors,
the Company, directly or indirectly offer, sell, offer to sell, contract to
sell, transfer, assign, pledge, hypothecate, grant any option to purchase, or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, transfer, assignment, pledge, hypothecation, grant of any option to
purchase or other sale or disposition) of any Common Shares or other capital
stock of the Company or any other securities convertible into, or exercisable or
exchangeable for, any Common Shares or other capital stock of the Company for a
period of one year after the date of this Prospectus, except for Prudential
Insurance, which has agreed to such restrictions for a period of 180 days after
the date of this Prospectus. Such agreements do not prevent the Company from
granting options under the Stock Option Plan so long as such options are not
exercisable until one year from the date of this Prospectus. Prudential
Securities Incorporated, Merrill Lynch & Co. and the Company may, in their
discretion at any time and without notice, jointly release all or any portion of
the securities subject to such lock-up agreements.

The Strategic Investors, the holders of the Class A Warrants and the
holders of the Class B Warrants have been granted rights to require the Company
to register the Common Shares purchased by the Strategic Investors in the Direct
Sales and the Common Shares underlying the Class A Warrants and the Class B
Warrants, which rights are not exercisable prior to the first anniversary of the
consummation of the Offering. The Company has agreed not to permit the
acceleration of the vesting of such rights without the prior written consent of
Prudential Securities Incorporated and Merrill Lynch & Co. on behalf of the
Underwriters.

The holders of the Class A Warrants have the right to require the
registration under the Securities Act of all or a portion of the Common Shares
underlying such warrants for sale in an underwritten public offering if, at any
time on or after the first anniversary of the consummation of the Offering and
before the tenth anniversary thereof, holders of 10% or more of such shares give
written notice to the Company requesting such registration. Holders of Class A
Warrants also have the right to require the registration under the Securities
Act of all or a portion of the Common Shares underlying such Warrants for sale
in open market transactions or negotiated block trades if, at any time on or
after the first anniversary of the consummation of the Offering and before the
tenth anniversary thereof, holders of 5% or more of such shares give written
notice to the Company requesting such registration. In addition, if the Company
proposes, other than pursuant to the two methods

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mentioned immediately above, to file a registration statement under the
Securities Act to register any of its Common Shares for public sale under the
Securities Act (including pursuant to requests of the holders of Class B
Warrants or the Common Shares sold to the Strategic Investors in the Direct
Sales), the holders of the Class A Warrants have the right to request the
inclusion of all or a portion of their Common Shares underlying the Class A
Warrants in the registration statement, and the Company is required to use
commercially reasonable efforts to include such shares in the registration
statement.

The holders of the Class B Warrants and the Common Shares sold to the
Strategic Investors in the Direct Sales each have the right to require the
registration under the Securities Act for sale in an underwritten public
offering of all or a portion of the Common Shares underlying such warrants or
sold to the Strategic Investors in the Direct Sales if, at any time on or after
the first anniversary of the consummation of the Direct Sales and before the
tenth anniversary thereof, such holder gives written notice to the Company
requesting such registration. Holders of Class B Warrants and the Common Shares
sold to the Strategic Investors in the Direct Sales also each have the right to
require the registration under the Securities Act for sale in open market
transactions or negotiated block trades of all or a portion of the Common Shares
underlying such warrants or sold in the Direct Sales if, at any time on or after
the first anniversary of the consummation of the Direct Sales and before the
tenth anniversary thereof, such holder gives written notice to the Company
requesting such registration. In addition, if the Company proposes, other than
pursuant to the two methods mentioned immediately above, to file a registration
statement under the Securities Act to register any of its Common Shares for
public sale under the Securities Act (including pursuant to requests of the
holders of Class A Warrants, other Class B Warrants or other Common Shares sold
to Strategic Investors in the Direct Sales), the holders of the Class B Warrants
and the Common Shares sold to the Strategic Investors in the Direct Sales have
the right to request the inclusion of all or a portion of the Common Shares
underlying the Class B Warrants or sold in the Direct Sales in the registration
statement, and the Company is required to use commercially reasonable efforts to
include such shares in the registration statement.

Each of the registration rights agreements entered into by the Company
provides that at any time when a registration statement covering Common Shares
sold to the Strategic Investors in the Direct Sales and the Common Shares
underlying the warrants is effective, if the Company determines after a good
faith inquiry that a sale of such Common Shares would require disclosure of
non-public material information, the disclosure of which would have a material
adverse effect on the Company, sales of such Common Shares will be suspended
until the earlier of (i) 20 days after the Company makes notification of its
good faith determination or (ii) such time as the Company makes notification
that the material information has been disclosed to the public, or ceases to be
material or that sales pursuant to the registration statement can resume.

In connection with such registrations, the Company is required to bear all
registration and selling expenses, including underwriters' discounts and
compensation, brokers' commissions or similar selling expenses. The registration
rights may be transferred to any assignee or transferee of the Common Shares,
the Class A Warrants, the Class B Warrants or the Common Shares underlying such
warrants. The Company also intends to file a registration statement on Form S-8
covering the resale of the Common Shares issuable upon exercise of options
issued under the Stock Option Plan promptly following the first anniversary of
the consummation of the Offering.

No prediction can be made as to the effect, if any, that future sales of
Common Shares, or the availability of Common Shares for future sale, will have
on the market price of the Common Shares prevailing from time to time. Sales of
substantial amounts of Common Shares in the public market following the
Offering, or the perception that such sales could occur, could adversely affect
the market price of the Common Shares and may make it more difficult for the
Company to sell its equity securities in the future at a time and at a price
which it deems appropriate. If the persons holding the outstanding Class A
Warrants, Class B Warrants or options cause a large number of the Common Shares
underlying such securities to be sold in the market, such sales could have an
adverse effect on the market price for the Common Shares.

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DIRECT SALES

The Company has entered into a securities purchase agreement with each of
the Strategic Investors for the purchase of Common Shares and Class B Warrants
as part of the Direct Sales. Prudential Insurance has agreed to purchase
1,028,369 Common Shares and Class B Warrants to purchase an additional 72,500
Common Shares for an aggregate purchase price of $14.5 million. EXEL and Risk
Capital have each agreed to purchase 1,418,440 Common Shares and Class B
Warrants to purchase an additional 100,000 Common Shares for an aggregate
purchase price for each such purchaser of $20.0 million. Insurance Partners has
agreed to purchase 1,143,065 Common Shares and Class B Warrants to purchase an
additional 80,586 Common Shares for an aggregate purchase price of $16.1
million. Insurance Partners Offshore has agreed to purchase 629,985 Common
Shares and Class B Warrants to purchase an additional 44,414 Common Shares for
an aggregate purchase price of $8.9 million. The Company did not separately
negotiate a price for the Common Shares and the Class B Warrants issued to the
Strategic Investors. The aggregate purchase price is based on a price of $14.10
for (i) one Common Share and (ii) the right to purchase approximately seven
one-hundredths of a Common Share under the Class B Warrants. The Company has
estimated the aggregate value of the Class B Warrants at $1.6 million as of the
date the Strategic Investors agreed to purchase such warrants. The Class B
Warrants will be exercisable at $15.00 per share.

The issuance of the Common Shares and Class B Warrants in the Direct Sales
is subject to a number of conditions precedent customary in transactions of this
nature, including the accuracy of the parties' respective representations and
warranties, delivery of legal opinions and compliance with the parties'
respective covenants set forth in the securities purchase agreement. In
addition, such issuances are further subject to (i) the consummation of a public
offering of the Common Shares in which the Company will have received not less
than $150 million in net proceeds (after deducting underwriting discounts and
commissions), (ii) the amount of such net proceeds from the public offering must
exceed the net proceeds to the Company from the Direct Sales to the Strategic
Investors and to the Company's directors and officers by a ratio of at least 2.5
to 1.0, and (iii) the total number of Common Shares outstanding immediately
following the Offering and the Direct Sales will not exceed 25,500,000 Common
Shares.

In addition to the sales being made to the Strategic Investors, the Company
is offering by a separate prospectus up to 221,121 Common Shares directly to its
directors and officers at the initial public offering price per share, less the
per share underwriting discounts and commissions, for an aggregate purchase
price if all such purchases are made of approximately $3.1 million. All such
purchases are expected to be consummated simultaneously with the consummation of
the Offering.

In connection with the Direct Sale to Risk Capital, and, for so long as
Risk Capital owns at least 500,000 Common Shares, the Company has agreed to
nominate for election as a director of the Company one person selected by Risk
Capital. Similarly, in connection with the Direct Sales to Insurance Partners
and Insurance Partners Offshore, and, for so long as such firms collectively own
at least 500,000 Common Shares, the Company has agreed to nominate for election
as a director of the Company one person jointly selected by Insurance Partners
and Insurance Partners Offshore. In exchange for such right and for so long as
any person selected by Risk Capital or Insurance Partners and Insurance Partners
Offshore, respectively, is a director (and during any period after such person's
designation but before his or her election), such Strategic Investors will not
vote or permit any of the Common Shares beneficially owned by them to be voted
for the election of any director of the Company, other than the nominee they
select. Each such Strategic Investor is permitted to assign its right to select
one person to be nominated for election as a director of the Company only upon
the prior written consent of the Company, which may not be unreasonably
withheld. Robert Clements is serving as a director of the Company as the nominee
of Risk Capital. Insurance Partners and Insurance Partners Offshore have not yet
exercised their joint right to select one person to be nominated for election as
a director of the Company.

Each of the Strategic Investors and the individuals that are expected to
purchase Common Shares as part of the Direct Sales has executed an agreement
under which they have agreed that they will not, without the prior written
consent of Prudential Securities Incorporated and Merrill Lynch & Co. on behalf
of the Underwriters and, in addition, in the case of the Strategic Investors,
the Company, directly or indirectly offer,

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sell, offer to sell, contract to sell, transfer, assign, pledge, hypothecate,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, transfer, assignment, pledge,
hypothecation, grant of any option to purchase or other sale or disposition) of
any Common Shares or other capital stock of the Company or any other securities
convertible into, or exercisable or exchangeable for, any Common Shares or other
capital stock of the Company for a period of one year after the date of this
Prospectus, except for Prudential Insurance, which has agreed to such
restrictions for a period of 180 days after the date of this Prospectus.
Prudential Securities Incorporated, Merrill Lynch & Co. and the Company may, in
their discretion at any time and without notice, jointly release all or any
portion of the securities subject to such lock-up agreements. The Company has
granted the Strategic Investors rights to require the Company to register the
Common Shares they purchase in the Direct Sales and the Common Shares underlying
the Class B Warrants issued in the Direct Sales. Such rights become exercisable
on the first anniversary of the consummation of the Offering. The Company has
agreed not to permit the acceleration of the vesting of such rights without the
prior written consent of Prudential Securities Incorporated and Merrill Lynch &
Co. on behalf of the Underwriters. See "Shares Eligible for Future Sales" and
"Underwriting."

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CERTAIN TAX CONSIDERATIONS

The following summary of the taxation of the Company and Annuity
Reassurance and the taxation of the Company's shareholders is based upon current
law. Legislative, judicial or administrative changes may be forthcoming that
could affect this summary. The statements as to United States federal income tax
law set forth below represent the opinion of Drinker Biddle & Reath LLP, United
States counsel to the Company, subject to the qualifications and assumptions set
forth in such statements. The statements as to Bermuda tax law set forth below
represent the opinion of Conyers Dill & Pearman, Bermuda counsel to the Company,
subject to the qualifications and assumptions set forth in such statements. The
statements as to the Company's beliefs and intentions as to factual matters
represent the views of the Company's management and do not represent legal
opinions of its counsel.

TAXATION OF THE COMPANY AND ANNUITY REASSURANCE

Bermuda

Under current Bermuda law, there is no income tax or capital gains tax
payable by the Company or Annuity Reassurance. The Company and Annuity
Reassurance have each received an assurance from the Bermuda Minister of Finance
under The Exempted Undertakings Tax Protection Act 1966 of Bermuda to the effect
that if there is enacted in Bermuda any legislation imposing tax computed on
profits or income, or computed on any capital asset, gain or appreciation, or
any tax in the nature of estate duty or inheritance tax, then the imposition of
any such tax shall not be applicable to the Company, Annuity Reassurance or to
any of their operations or the shares, debentures or other obligations of the
Company or Annuity Reassurance until March 2016. These assurances are subject to
the proviso that they are not construed so as to prevent the application of any
tax or duty to such persons as are ordinarily resident in Bermuda (the Company
and Annuity Reassurance are not so currently designated) or to prevent the
application of any tax payable in accordance with the provisions of The Land Tax
Act 1967 of Bermuda or otherwise payable in relation to the property leased to
the Company or Annuity Reassurance. The Company and Annuity Reassurance, under
current rates, will pay annual Bermuda government fees of $25,000 and $3,360,
respectively, and Annuity Reassurance will pay annual insurance fees of $2,500.

United States

The Company and Annuity Reassurance intend to operate their business in a
manner that will not cause them to be treated as engaged in a trade or business
within the United States. In furtherance thereof the Company's board of
directors has adopted operating guidelines, developed in consultation with its
United States counsel, for the purpose of achieving this result. Accordingly,
the Company and Annuity Reassurance do not currently plan to file United States
income tax returns. However, because definitive identification of activities
that constitute being engaged in a trade or business in the United States is not
provided by the Code or regulations or court decisions, there can be no
assurance that the IRS will not contend that the Company and/or Annuity
Reassurance is engaged in a trade or business in the United States. A foreign
corporation deemed to be so engaged would be subject to United States income
tax, as well as branch profits tax, on its income that is treated as effectively
connected with the conduct of that trade or business unless the corporation is
entitled to relief under the permanent establishment provision of a tax treaty,
as discussed below. Section 842 of the Code requires that foreign insurance
companies carrying on an insurance business within the United States have a
certain minimum amount of effectively connected net investment income even if
they have no United States source investment income. Otherwise, the income tax,
if imposed, would be based on effectively connected income computed in a manner
generally analogous to that applied to the income of a domestic corporation,
except that a foreign corporation can anticipate an allowance of deductions and
credits only if it files a United States income tax return. Under regulations,
the foreign corporation would be entitled to deductions and credits for the
taxable year only if the return for that year is timely filed under rules set
forth therein. Penalties may be assessed for failure to file tax returns. The
federal income tax rates currently are a maximum of 35% for a corporation's
effectively connected income and 30% for branch profits tax. The branch profits
tax is imposed on net income after subtracting the regular corporate tax and
making certain other adjustments.

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Under the income tax treaty between Bermuda and the United States (the
"Treaty"), provided that the predominant business activity of Annuity
Reassurance is acting as the reinsurer of risks underwritten by other insurance
companies (together with the investing or reinvesting of assets held in respect
of insurance reserves, capital and surplus incident to the carrying on of its
insurance business), Annuity Reassurance will be subject to United States income
tax on any income found to be effectively connected with a United States trade
or business only if that trade or business is conducted through a permanent
establishment in the United States. No regulations interpreting the Treaty have
been issued. While there can be no assurance, Annuity Reassurance intends to
operate its business in a manner that will not cause it to be considered to have
a permanent establishment in the United States. Annuity Reassurance would not be
entitled to the benefits of the Treaty if (i) less than 50% of Annuity
Reassurance's stock were beneficially owned, directly or indirectly, by Bermuda
residents or United States citizens or residents, or (ii) Annuity Reassurance's
income were used in substantial part to make disproportionate distributions to,
or to meet certain liabilities to, persons who are not Bermuda residents or
United States citizens or residents. While there can be no assurance, the
Company believes that neither of those circumstances will apply after the sale
of Common Shares offered hereby. The treaty may not, however, provide relief
from United States branch profits tax.

Foreign corporations not engaged in a trade or business in the United
States are nonetheless subject to United States income tax at a rate of 30% of
the gross amount of certain "fixed or determinable annual or periodical gains,
profits, and income" derived from sources within the United States as enumerated
in Section 881(a) of the Code (such as dividends and interest on certain
investments). The Company does expect Annuity Reassurance to be subject to such
taxes on dividends from United States companies in which Annuity Reassurance
will make portfolio investments.

The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located in
the United States. The rate of tax applicable to reinsurance premiums paid to
Annuity Reassurance is currently 1%.

Other Countries

Annuity Reassurance may be subject to taxes imposed by other countries on
dividends or interest received from payors located in those countries.

TAXATION OF SHAREHOLDERS

Bermuda Taxation

Currently, there is no Bermuda withholding tax on dividends paid by the
Company or Annuity Reassurance.

United States Taxation

UNITED STATES SHAREHOLDERS

General. The following discussion summarizes certain United States federal
income tax consequences relating to the acquisition, ownership and disposition
of Common Shares by a beneficial owner who is (i) a citizen or resident of the
United States, (ii) a United States domestic corporation or (iii) otherwise
subject to United States federal income taxation on a net income basis in
respect of the Common Shares. This summary deals only with Common Shares
acquired by purchasers in the Offering and held as capital assets and does not
deal with the tax consequences applicable to all categories of investors, some
of which (such as broker-dealers who hold Common Shares as part of hedging or
conversion transactions and investors whose functional currency is not the
United States dollar) may be subject to special rules. Prospective purchasers of
the Common Shares are advised to consult their own tax advisers with respect to
their particular circumstances and with respect to the effects of United States
federal, state, local or other laws to which they may be subject.

Dividends. Distributions with respect to the Common Shares will be treated
as ordinary dividend income to the extent of the Company's current or
accumulated earnings and profits as determined for United States federal income
tax purposes, subject to the discussion below relating to the potential
application of the
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"controlled foreign corporation" or "passive foreign investment company" rules.
Such dividends will not be eligible for the dividends-received deduction allowed
to United States corporations under Section 243 of the Code. The amount of any
distribution in excess of the Company's current and accumulated earnings and
profits will first be applied to reduce the holder's tax basis in the Common
Shares, and any amount in excess of tax basis will be treated as gain from the
sale or exchange of the Common Shares.

Classification of the Company and Annuity Reassurance as Controlled Foreign
Corporations. Under Section 951(a) of the Code, each "United States
shareholder" of a foreign corporation that is a "controlled foreign corporation"
(a "CFC") for an uninterrupted period of 30 days or more during a taxable year
who owns shares in the CFC directly or indirectly through foreign entities on
the last day during such taxable year on which the corporation is a CFC must
include in its gross income for United States federal income tax purposes his
pro-rata share of the CFC's "subpart F income," even if the subpart F income is
not distributed. The Company anticipates that substantially all of the income of
the Company and Annuity Reassurance will be subpart F income. Under Section
951(b) of the Code, any United States corporation, citizen, resident or other
United States person who owns, directly or indirectly through foreign entities,
or is considered to own (by application of the rules of constructive ownership
set forth in Section 958(b) of the Code, generally applying to family members,
partnerships, estates, trusts, controlled corporations or holders of certain
options), 10% or more of the total combined voting power of all classes of stock
of the foreign corporation will be considered to be a "United States
shareholder." In general, a foreign insurance company such as Annuity
Reassurance is treated as a CFC only if such "United States shareholders"
collectively own more than 25% of the total combined voting power or total value
of the corporation's stock. Because of the expected dispersion of the Company's
share ownership following the Offering and the restrictions on transfer,
issuance or repurchase of Common Shares, and because the Company's Bye-Laws
provide that no single shareholder is permitted to hold 10% or more of the total
combined voting power of the Company, shareholders of the Company should not be
viewed as United States shareholders of a CFC for purposes of these rules.
However, there can be no assurance that the IRS will not successfully take a
contrary position.

RPII Companies. Different definitions of "United States shareholder" and
"controlled foreign corporation" are applicable in the case of a foreign
corporation which earns "related person insurance income" ("RPII"). RPII is
defined in Section 953(c)(2) of the Code as any "insurance income" of a foreign
corporation attributable to policies of insurance or reinsurance with respect to
which the person (directly or indirectly) insured is a "United States
shareholder" of such corporation or a "related person" to such a shareholder. In
general, "insurance income" is income (including underwriting premium and
investment income) attributable to the issuing of any insurance or reinsurance
contract in connection with risks located in a country other than the country
under the laws of which the CFC is created or organized and which would be taxed
under the provisions of the Code relating to insurance companies if the income
were the income of a domestic insurance company.

Generally, the term "related person" for this purpose means someone who
controls or is controlled by the United States shareholder or someone who is
controlled by the same person or persons who control the United States
shareholder. "Control" is measured by either more than 50% in value or more than
50% in voting power of stock, applying constructive ownership principles similar
to the rules of Section 958 of the Code. For purposes of inclusion of Annuity
Reassurance's RPII in the income of United States shareholders, unless an
exception applies, the term "United States shareholder" includes all United
States persons who own, directly or indirectly, any amount (rather than 10% or
more) of Annuity Reassurance's stock. Annuity Reassurance will be subject to the
CFC provisions for RPII purposes if such persons collectively own directly,
indirectly or constructively 25% or more of the stock of Annuity Reassurance by
vote or value for an uninterrupted period of at least 30 days during any taxable
year.

RPII Exceptions. The special RPII rules do not apply if (i) direct or
indirect insureds and persons related to such insureds, whether or not United
States persons, are treated at all times during the taxable year as owning less
than 20% of the voting power and less than 20% of the value of the stock of
Annuity Reassurance, (ii) RPII, determined on a gross basis, is less than 20% of
Annuity Reassurance's gross insurance income for the taxable year, (iii) Annuity
Reassurance elects to be taxed on its RPII as if the RPII were effectively
connected with the conduct of a United States trade or business and to waive all
treaty
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benefits with respect to RPII or (iv) Annuity Reassurance elects to be treated
as a United States corporation. Annuity Reassurance does not intend to make
either of the described elections. Thus, only exceptions (i) and (ii) may be
available.

The Company does not expect that Annuity Reassurance will knowingly enter
into reinsurance arrangements in which, in the aggregate, the direct or indirect
insureds are, or are related to, owners of 20% or more of the Common Shares.
Accordingly, the Company anticipates that exception (i) will, and that exception
(ii) may, apply to Annuity Reassurance. There can be no assurance, however, that
this will be the case. If neither of these exceptions were to apply, each United
States person owning, directly or indirectly, stock in the Company (and
therefore, indirectly in Annuity Reassurance) at the end of any taxable year
would generally be required to include in its gross income for United States
federal income tax purposes its share of the RPII for the entire taxable year,
determined as if such RPII were distributed proportionately only to such United
States shareholders at that date, but limited to Annuity Reassurance's
current-year earnings and profits reduced by the shareholder's pro-rata share,
if any, of certain prior-year deficits in earnings and profits.

Computation of RPII. In order to determine how much RPII Annuity
Reassurance has earned in each taxable year, the Company intends to obtain and
rely upon information from its insureds to determine whether any of the insureds
or persons related to such insureds own shares of the Company and are United
States persons. Annuity Reassurance intends to include in its insurance
application and renewal forms, or related documents, a provision requesting
information as to whether the policyholders (or a related person) are or have
been, and a notice if they should become, a shareholder of the Company. In
addition, Annuity Reassurance will send a letter after each taxable year to each
person who was a policyholder requesting such policyholder to represent whether
it was a shareholder of the Company or related to a shareholder during the year.
For any taxable year in which Annuity Reassurance's gross RPII is 20% or more of
its gross insurance income for the year, the Company may also seek information
from its shareholders as to whether direct or indirect owners of its shares at
the end of the year are United States persons so that the RPII may be determined
and apportioned among such persons. To the extent the Company is unable to
determine whether a direct or indirect owner of shares is a United States
person, the Company may assume that such owner is not a United States person,
thereby increasing the per share RPII amount for all United States shareholders.
Although Annuity Reassurance intends to operate in a manner that would minimize
RPII, there can be no assurance that an investor will not be required to include
amounts in its income in respect of RPII in any taxable year.

Apportionment of RPII to United States Shareholders. If direct or indirect
insureds and persons related to such insureds were to own more than 20% of the
voting power or value of Annuity Reassurance's common shares and Annuity
Reassurance's RPII determined on a gross basis for any future taxable year were
to be 20% or more of its gross insurance income, every United States person who
owns directly or indirectly Common Shares on the last day of that year would be
required to include in its gross income its share of Annuity Reassurance's RPII
for such year, whether or not distributed. A United States person who owns
Common Shares during the Company's taxable year but not on the last day of the
taxable year on which Annuity Reassurance is a controlled foreign corporation
within the meaning of the RPII provision of the Code, which would normally be
December 31, would not be required to include in its gross income any part of
Annuity Reassurance's RPII. Correspondingly, a United States person who owns
directly or indirectly, Common Shares on the last day of the taxable year on
which Annuity Reassurance is a controlled foreign corporation for purposes of
those provisions would be required to include in its income its share of the
RPII for the entire year even though such holder does not own the Common Shares
for the entire year.

Information Reporting. Each United States person who is a direct or
indirect shareholder of the Company on the last day of the Company's taxable
year would be required to attach to the income tax or information return such
holder would normally file for the period which includes that date a Form 5471
if Annuity Reassurance were a CFC for RPII purposes for any continuous
thirty-day period during its taxable year whether or not any net RPII income is
required to be reported. Annuity Reassurance will not be considered to be a CFC
for this purpose and, therefore, Form 5471 will not be required, for any taxable
year in which (i) Annuity Reassurances's gross RPII constitutes less than 20% of
its gross insurance income or (ii) less than 20% of the voting power or value of
Annuity Reassurance's common shares is owned by direct or
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indirect insureds and persons related to such insureds. For any year in which
Annuity Reassurance's gross RPII constitutes 20% or more of its gross insurance
income and its direct or indirect insureds and persons related to such insureds
own more than 20% of the voting power or value of Annuity Reassurance's common
shares, the Company intends to provide Form 5471 to its direct or indirect
United States shareholders for attachment to the returns of shareholders. The
amounts of the RPII inclusions may be subject to adjustment based upon
subsequent IRS examination. A tax-exempt organization would be required to
attach Form 5471 to its information return in the circumstances described above.
Failure to file Form 5471 may result in penalties. In addition, United States
persons who at any time own 10% or more of the shares of the Company may have an
independent obligation to file certain information returns.

Tax-Exempt Shareholders. United States tax-exempt organizations would
generally be required to treat subpart F insurance income, including RPII, that
is includable in income by the tax-exempt entity, as unrelated business taxable
income within the meaning of Section 512 of the Code.

Dividend; Basis; Exclusion of Dividends from Gross Income. A United States
shareholder's tax basis in his Common Shares would be increased by the amount of
any RPII that the shareholder includes in his income. The shareholder could
exclude from income the amount of any distribution by the Company to the extent
of the RPII included in such shareholder's income for the year in which the
distribution was paid or for any prior year. A shareholder's tax basis in his
Common Shares would be reduced by the amount of such distributions that are
excluded from his income. Although, in certain circumstances, a United States
shareholder might be able to exclude from his income distributions with respect
to RPII that a prior shareholder included in his income, that exclusion would
not generally be available to holders who purchase Common Shares in the public
trading markets and are therefore unable to identify the previous shareholder
and demonstrate that such shareholder had previously included the RPII in his
income.

Dispositions of Common Shares. Subject to the discussion below relating to
the potential application of Section 1248 of the Code or the passive foreign
investment company rules, a United States shareholder will, upon the sale or
exchange of any Common Shares, recognize a gain or loss for United States income
tax purposes equal to the difference between the amount realized upon such sale
or exchange and the shareholder's basis in the Common Shares. If the
shareholder's holding period for such Common Shares is more than eighteen
months, any gain will be subject to tax at a current maximum marginal tax rate
of 20% for individuals and 35% for corporations.

Section 1248 of the Code provides that if a United States person disposes
of stock in a foreign corporation and such person owned directly, indirectly or
constructively 10% or more of the voting shares of the corporation at any time
during the five-year period ending on the date of disposition when the
corporation was a CFC, any gain from the sale or exchange of the shares may be
treated as ordinary income to the extent of the CFC's previously untaxed
earnings and profits during the period that the shareholder held the shares
(with certain adjustments). A 10% United States shareholder may in certain
circumstances be required to report a disposition of shares of a CFC by
attaching IRS Form 5471 to the United States income tax or information return
that the shareholder would normally file for the taxable year in which the
disposition occurs. Section 953(c)(7) of the Code generally provides that
Section 1248 will also apply to any sale or exchange of shares in a foreign
corporation that earns RPII if the foreign corporation would be taxed as an
insurance company if it were a domestic corporation, regardless of whether the
selling shareholder is or was a 10% shareholder or whether RPII constitutes 20%
or more of the corporation's gross insurance income. Existing Treasury
regulations do not address whether Section 1248 of the Code and the requirement
to file Form 5471 would apply if the foreign corporation is not a CFC but the
foreign corporation has a subsidiary that is a CFC or that would be taxed as an
insurance company if it were a domestic corporation (although, as discussed
above, shareholders of 10% or more of the shares of the Company may have an
independent obligation to file Form 5471). Section 1248 of the Code and the
requirement to file Form 5471 should not apply to dispositions of Common Shares
because the Company does not intend to directly engage in the insurance business
and, under proposed regulations, these provisions appear to be applicable only
in the case of shares of corporations that are directly engaged in the insurance
business. There can be no assurance, however, that the IRS will interpret the
proposed regulations in this manner or that the proposed regulations will not be
amended or promulgated in final form so as to provide that Section 1248 of the
Code and the requirement to file

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Form 5471 will apply to dispositions of Common Shares. In that event, the
Company would notify shareholders that Section 1248 of the Code and the
requirement to file Form 5471 will apply to dispositions of Common Shares.
Thereafter, the Company would send a notice after the end of each calendar year
to all persons who were shareholders during the year notifying them that Section
1248 of the Code and the requirement to file Form 5471 apply to dispositions of
Common Shares. The Company would attach to this notice a copy of Form 5471
completed with all Company information and instructions for completing the
shareholder information.

Foreign Tax Credit. Because it is anticipated that United States persons
will own a majority of the Company's shares, only a portion of the current
income inclusions under the CFC, RPII and passive foreign investment company
rules, if any, and of dividends paid by the Company (including any gain from the
sale of Common Shares that is treated as a dividend under Section 1248 of the
Code) will be treated as foreign source income for purposes of computing a
shareholder's United States foreign tax credit limitations. The Company will
consider providing shareholders with information regarding the portion of such
amounts constituting foreign source income to the extent such information is
reasonably available. It is also likely that substantially all of the RPII and
dividends that are foreign source income will constitute either "passive" or
"financial services" income for foreign tax credit limitation purposes. Thus, it
may not be possible for most United States shareholders to utilize excess
foreign tax credits to reduce United States tax on such income.

Uncertainty as to Application of RPII. Regulations interpreting the RPII
provisions of the Code exist only in proposed form. It is not certain whether
these regulations will be adopted in their proposed form or what changes might
ultimately be made thereto or whether any such changes, as well as any
interpretation or application of the RPII rules by the IRS, the courts or
otherwise, might have retroactive effect. The description of RPII herein is
therefore qualified. Accordingly, the meaning of the RPII provisions and the
application thereof to the Company and Annuity Reassurance is uncertain. These
provisions include the grant of authority to the United States Treasury
Department to prescribe "such regulations as may be necessary to carry out the
purpose of this subsection including . . . regulations preventing the avoidance
of this subsection through cross insurance arrangements or otherwise." In
addition, there can be no assurance that the IRS will not challenge any
determinations by the Company or Annuity Reassurance as to the amount, if any,
of RPII that should be includable in the income of a holder of Common Shares or
that the amounts of the RPII inclusions will not be subject to adjustment based
upon subsequent IRS examination. Each United States person who is considering an
investment in Common Shares should consult his tax advisor as to the effects of
these uncertainties.

Passive Foreign Investment Companies. Sections 1291 through 1298 of the
Code contain special rules applicable to foreign corporations that are "passive
foreign investment companies" ("PFICs"). In general, a foreign corporation will
be a PFIC if 75% or more of its income constitutes "passive income" or 50% or
more of its assets produce passive income. If the Company were to be
characterized as a PFIC, its United States shareholders would be subject to a
penalty tax at the time of their sale of, or receipt of an "excess distribution"
with respect to, their Common Shares, unless such shareholders (i) elected from
the outset to be taxed on their pro-rata share of the Company's earnings whether
or not such earnings were distributed or (ii) elected to mark their Common
Shares to market as of the end of each taxable year and to treat as ordinary
income (or loss) the annual appreciation (or depreciation) in the value of such
shares. In general, a shareholder receives an "excess distribution" if the
amount of the distribution is more than 125% of the average distribution with
respect to the stock during the three preceding taxable years (or shorter period
during which the taxpayer held the stock). In general, the penalty tax is
computed by assuming that the excess distribution or gain (in the case of a
sale) with respect to the shares was taxed in equal annual portions at the
highest applicable ordinary income tax rate throughout the holder's period of
ownership, and that interest accrued on each tax amount for each prior year from
the due date of such prior year's return. The interest charge is equal to the
applicable rate imposed on underpayments of United States federal income tax for
such period.

For the above purposes, passive income is defined to include income of the
kind which would be foreign personal holding company income under Section 954(c)
of the Code, and generally includes interest, dividends, annuities and other
investment income. However, the PFIC statutory provisions contain an express
exception for income "derived in the active conduct of an insurance business by
a corporation which is
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<PAGE> 76

predominantly engaged in an insurance business." This exception is intended to
ensure that income derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable to financial
reserves in excess of the reasonable needs of the insurance business. In the
Company's view, Annuity Reassurance will be predominantly engaged in an
insurance business and will not have financial reserves in excess of the
reasonable needs of its insurance business. The PFIC statutory provisions
(unlike the RPII provisions of the Code) contain a look-through rule that states
that, for purposes of determining whether a foreign corporation is a PFIC, such
foreign corporation shall be treated as if it received "directly its
proportionate share of the income," and as if it "held its proportionate share
of the assets," of any other corporation in which it owns at least 25% by value
of the stock. While no explicit guidance is provided by the statutory language,
under the look-through rule the Company should be deemed to own the assets and
to have received the income of Annuity Reassurance directly for purposes of
determining whether the Company qualifies for the aforementioned insurance
exception. This interpretation of the look-through rule is consistent with the
legislative intention generally to exclude bona fide insurance companies from
the application of PFIC provisions. There can be no assurance, however, as to
what positions the IRS or a court might take in the future on whether the
Company or Annuity Reassurance is predominantly engaged in an insurance business
and does not have financial reserves in excess of the reasonable needs of such
business. United States persons who are considering an investment in Common
Shares should consult their tax advisors as to the effects of the PFIC rules.

Other. Information reporting to the IRS by paying agents and custodians
located in the United States will be required with respect to payments of
dividends on the Common Shares to United States persons. Thus, a holder of
Common Shares may be subject to backup withholding at the rate of 31% with
respect to dividends paid to such persons, unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. Backup
withholding is not an additional tax and may be credited against a holder's
regular federal income tax liability.

NON-UNITED STATES SHAREHOLDERS

Subject to certain exceptions, non-United States persons will be subject to
United States federal income tax on dividend distributions with respect to, and
gain realized from the sale or exchange of, Common Shares only if such dividends
or gains are effectively connected with the conduct of a trade or business
within the United States. Nonresident alien individuals will not be subject to
United States estate tax with respect to Common Shares of the Company.

* * *

The foregoing discussion is based upon current law. The tax treatment of an
owner of Common Shares, or a person treated as an owner of Common Shares for
United States federal income, state, local or non-United States tax purposes,
may vary depending on the owner's particular tax situation. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could be retroactive and could affect the tax consequences to owners of Common
Shares. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX CONSEQUENCES OF OWNERSHIP
AND DISPOSITION OF THE COMMON SHARES.

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UNDERWRITING

The underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT
Alex. Brown Incorporated, CIBC Oppenheimer Corp. and Schroder & Co. Inc. are
acting as representatives (the "Representatives"), have severally agreed,
subject to the terms and conditions contained in the underwriting agreement (the
"Underwriting Agreement"), to purchase from the Company the number of Common
Shares set forth below opposite their respective names:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ----------
<S> <C>
Prudential Securities Incorporated..........................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
BT Alex. Brown Incorporated.................................
CIBC Oppenheimer Corp. .....................................
Schroder & Co. Inc. ........................................

----------
Total....................................................... 16,750,000
==========
</TABLE>

The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the Common Shares set forth above if any are purchased. The
closing of the Offering made hereby is conditioned upon the simultaneous closing
of sales by the Company to the Strategic Investors in the Direct Sales of Common
Shares and related Class B Warrants with an aggregate purchase price of at least
$50.0 million.

The Underwriters, through the Representatives, have advised the Company
that they propose to offer the Common Shares set forth above initially at the
public offering price set forth on the cover page of this Prospectus; that the
Underwriters may allow to selected dealers a concession of $ per share;
and that such dealers may reallow a concession of $ per share to
certain other dealers. After the Offering, the initial public offering price and
the concessions may be changed by the Representatives.

The Company has granted to the Underwriters an over-allotment option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
2,512,500 additional Common Shares at the initial public offering price per
share, less underwriting discounts and commissions, as set forth on the cover
page of this Prospectus. The Underwriters may exercise such option solely for
the purpose of covering any over-allotments incurred in the sale of the Common
Shares offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional Common Shares as the number set forth
next to such Underwriter's name in the preceding table bears to 16,750,000.

The Company, its directors and officers, the holders of the Class A
Warrants and the Strategic Investors have executed agreements pursuant to which
they have agreed, except for certain limited exceptions, that they will not
directly or indirectly, without the prior written consent of Prudential
Securities Incorporated and

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Merrill Lynch & Co. on behalf of the Underwriters and, in addition, in the case
of the Strategic Investors, the Company, offer, sell, offer to sell, contract to
sell, transfer, assign, pledge, hypothecate, grant any option to purchase, or
otherwise sell or dispose (or announce any offer, sale, offer to sell, contract
of sale, transfer, assignment, pledge, hypothecation, grant of any option to
purchase or other sale or disposition) of any Common Shares or other capital
stock of the Company or any other securities convertible into, or exercisable or
exchangeable for, any Common Shares or other capital stock of the Company for a
period of one year after the date of this Prospectus, except for Prudential
Insurance, which has agreed to such restrictions for a period of 180 days after
the date of this Prospectus. Such agreements do not prevent the Company from
granting options under the Stock Option Plan so long as such options are not
exercisable until one year from the date of this Prospectus. Prudential
Securities Incorporated, Merrill Lynch & Co. and the Company may, in their
discretion, at any time and without notice, jointly release all or any portion
of the securities subject to such lock-up agreements. The Company also has
agreed not to accelerate the exercisability of the registration rights granted
to the Strategic Investors, the Class A Warrant holders and the Class B Warrant
holders and not to file any registration statement on Form S-8 with respect to,
or otherwise register for resale with the Commission, Common Shares underlying
stock options or warrants for a period of one year from the date of this
Prospectus, in each case, without the prior written consent of Prudential
Securities Incorporated and Merrill Lynch and Co. on behalf of the Underwriters.

The Company has agreed to indemnify the several Underwriters and contribute
to losses arising out of certain liabilities, including liabilities under the
Securities Act.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Prior to the Offering, there has been no public market for the Common
Shares. The Offering price was determined by the Company and the Representatives
as an appropriate per share price in light of the Company's desired
capitalization.

Upon consummation of the Offering, the Company will pay Prudential
Securities Incorporated an advisory fee equal to $1.0 million (plus
reimbursement of related out-of-pocket expenses) for investment banking and
financial advisory services in connection with the Offering and related matters.

The Company has entered into an investment advisory agreement with The
Prudential Investment Corporation, as one of the Investment Managers. See
"Business -- Investment Managers." Prudential Securities Incorporated and The
Prudential Investment Corporation are wholly-owned subsidiaries of Prudential
Insurance. Prudential Insurance, one of the Strategic Investors, has agreed to
purchase 1,028,369 Common Shares and Class B Warrants to purchase an additional
72,500 Common Shares for an aggregate purchase price of $14.5 million. See
"Direct Sales."

In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Shares.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Shares for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Shares in connection with the Offering than
they are committed to purchase from the Company, and in such case may purchase
Common Shares in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to 2,512,500 Common Shares, by exercising
the Underwriters' over-allotment option referred to above. In addition,
Prudential Securities Incorporated and Merrill Lynch & Co., on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby they may reclaim from an Underwriter (or any selling group
member participating in the Offering) for the account of the other Underwriters,
the selling concession with respect to Common Shares that are distributed in the
Offering but subsequently purchased by Prudential Securities Incorporated for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph

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<PAGE> 79

may result in the maintenance of the price of the Common Shares at a level above
that which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required and, if they are undertaken, they may be
discontinued at any time.

LEGAL MATTERS

The validity of the Common Shares under Bermuda law will be passed upon for
the Company by Conyers Dill & Pearman, Hamilton, Bermuda. Certain matters as to
United States law in connection with the Offering will be passed upon for the
Company by Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania. Certain
matters as to United States law in connection with the Offering will be passed
upon for the Underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New
York. Drinker Biddle & Reath LLP, who serve as United States counsel to the
Company, also served as United States counsel to Inter-Atlantic Capital
Partners, Inc. in connection with the establishment of the Company and Annuity
Reassurance in 1997 and continues to represent Inter-Atlantic Capital Partners,
Inc. on an ongoing basis.

EXPERTS

The consolidated balance sheet of the Company as of December 31, 1997
included in this Prospectus and in the Registration Statement has been audited
by KPMG Peat Marwick, independent auditors, as indicated in their report with
respect thereto, and is included herein in reliance on the authority of said
firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement on Form
S-1 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain items of which are omitted as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the Common Shares offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.

Upon completion of the Offering, the Company will be subject to the
informational reporting requirements of the Exchange Act and, in accordance
therewith, will file reports, proxy and information statements and other
information with the Commission. The Registration Statement, the exhibits and
schedules forming a part thereof, as well as such reports, proxy and information
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549-1004 and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the public reference
section of the Commission at its Washington address at prescribed rates. The
Commission also maintains an Internet web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission.

After giving effect to the Offering, the Company will be treated as a
domestic corporation for purposes of certain requirements of the Exchange Act,
including the proxy rules. Pursuant to Rule 3b-4 under the Exchange Act, a
"foreign private issuer" is a non-United States issuer other than an issuer that
meets the

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following conditions: (1) more than 50% of the outstanding voting securities of
the issuer are held of record by residents of the United States and (2) any of
the following: (i) the majority of the executive officers or directors of the
issuer are United States citizens or residents, (ii) more than 50% of the assets
of the issuer are located in the United States or (iii) the business of the
issuer is administered principally in the United States. By virtue of (1) and
(2)(i), the Company does not expect that it will be a "foreign private issuer,"
although there is no assurance of such. If the Company were to be treated as a
"foreign private issuer," it would be exempted from the proxy and short-swing
profit rules under Sections 14 and 16 of the Exchange Act and, for reporting
purposes under the Exchange Act, would be subject to rules applicable to
"foreign private issuers."

The Company intends to furnish its shareholders with annual reports
containing financial statements audited by an independent accounting firm and
quarterly reports containing unaudited financial statements for the first three
quarters of each fiscal year.

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<PAGE> 81

GLOSSARY OF SELECTED ANNUITY AND LIFE INSURANCE TERMS

A.M. Best rating........... A.M. Best Company, Inc.'s Best Ratings provide an
overall opinion of an insurance company's ability
to meet its obligations to policyholders based on
a quantitative and qualitative evaluation of a
company's financial strength, operating
performance and market profile. A.M. Best
maintains a letter scale rating system consisting
of 14 different ratings ranging from "A++"
(superior) to "F" (in liquidation). An "A-"
(excellent) rating is assigned by A.M. Best to
companies which have, on balance, excellent
financial strength, operating performance and
market profile when compared to the standards
established by the A.M. Best Company and which in
A.M. Best's opinion have a strong ability to meet
their ongoing obligations to policyholders.

Acquisition costs.......... Commission and brokerage fees paid for the
production of premiums written and certain other
acquisition and underwriting expenses.

Alien insurer or
reinsurer.................. An insurer or reinsurer organized under the laws of
a non-United States jurisdiction.

Annuitant.................. The person on whose life or life expectancy the
annuity payouts are based.

Annuity.................... A form of contract sold by an insurer that
guarantees a fixed or variable payment to the
annuitant over time. Annuity payments can
commence immediately or be deferred.

Annuity payouts............ An amount paid at regular intervals under one of
several plans typically available to the annuity
owner and/or any other payee. This amount may be
paid on a variable or fixed basis or a
combination of both.

Approved actuary........... A person approved by the Minister of Finance of
Bermuda that certifies whether or not, in his
opinion, the aggregate amount of the long-term
business liabilities of an insurer in relation to
its long-term business assets at the end of the
relevant year exceeded the aggregate amount of
those liabilities as shown in the insurer's
statutory balance sheet.

Assumption Reinsurance..... An arrangement under which an insurance company
(the "reinsurer") agrees to assume the
obligations of another insurance company (the
"ceding company" or "cedent") for all or a
portion of the insurance risks underwritten by
the ceding company. Reinsurance written on an
assumption basis effectively transfers the ceding
company's obligations to the reinsurer and, in
some cases, eliminates the ceding company's
further liability to the insured.

Automatic reinsurance...... Reinsurance of a specified type or category of risk
defined in a reinsurance agreement (often called
a "treaty") between a ceding company and a
reinsurer. Typically, in automatic reinsurance
the ceding company is obligated to offer and the
reinsurer is obligated to accept a specified
portion of all such type or category of risks
originally insured or reinsured by the ceding
company.

Beneficiary................ The person designated to receive life or annuity
benefits in case of the policy owner's or
annuitant's death.

Broker..................... One who negotiates contracts of insurance or
reinsurance, receiving a commission for placement
and other services rendered, between (i) a
policyholder and a primary insurer, on behalf of
the insured party,

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(ii) a primary insurer and reinsurer, on behalf
of the primary insurer, or (iii) a reinsurer and
a retrocessionaire, on behalf of the reinsurer.

Cedent; Ceding company..... See "Reinsurance; Reinsurer."

Coinsurance................ A form of reinsurance with respect to which the
risk generally is reinsured on the same plan as
that of the original policy. The reinsurer
receives the gross premium charged to the
policyholder on the reinsured part of the policy
less expense allowances granted the ceding
company by the reinsurer. The reinsurer maintains
policy reserves and is liable for its share of
policy benefits.

Corporate owned life
insurance ("COLI")......... An individual or group life insurance policy owned
by a company or a trust sponsored by a company.
The proceeds from such a policy may be used to
help fund general corporate liabilities, such as
the cost of employee benefit programs.

Credited rates............. Interest rates applied to annuity and life
insurance policies, whether contractually
guaranteed or currently declared for a specified
period, as outlined in the policy or contract.
Minimum crediting rates are often set by laws or
regulations.

Duff & Phelps rating....... Duff & Phelps Credit Rating Co.'s claims paying
ability ratings provide an overall opinion of an
insurance company's ability to meet its
obligations to policyholders. Duff & Phelps
maintains a letter scale rating system consisting
of 18 different ratings ranging from "AAA" to
"DD." An "A" rating is assigned by Duff & Phelps
to companies that have, in Duff & Phelps'
opinion, high claims paying ability, average
protection factors and a variability to risk over
time due to economic and/or underwriting
conditions.

Duration................... A measure, expressed in years, of the price
sensitivity of a financial instrument to changes
in interest rates.

Facultative reinsurance.... A type of reinsurance whereby the ceding company is
not obligated to offer, and the reinsurer is not
obligated automatically to accept, all or a
portion of each risk originally insured by the
ceding company. Facultative risks are typically
underwritten on a case-by-case basis.

Fixed annuity.............. An annuity which guarantees an annuitant that a
specific sum of money will be paid in the future,
either as a lump sum or as periodic income.
Assets supporting fixed annuities are subject to
claims of general creditors of the issuer of the
annuity and are sometimes referred to as "general
account" annuities.

United States generally
accepted accounting
principles ("GAAP")...... United States accounting principles as set forth in
opinions of the Accounting Principles Board of
the American Institute of Certified Public
Accountants and/or statements of the Financial
Accounting Standards Board and/or their
respective successors and which are applicable in
the circumstances as of the date in question.

Guaranteed investment
contracts.................. Insurance contracts that guarantee a specified rate
of return.

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Indemnity reinsurance...... An arrangement under which an insurance company
(the "reinsurer") agrees to indemnify another
insurance company (the "ceding company" or
"cedent") for all or a portion of the insurance
risks underwritten by the ceding company.
Reinsurance written on an indemnity basis does
not legally discharge the primary insurer from
its liability with respect to its obligations to
the insured.

Long term insurer.......... Under Bermuda law, a long term insurer means an
insurer carrying on long-term business, which
includes effecting and carrying out contracts of
insurance on human life or contracts to pay
annuities on human life.

Modified coinsurance....... A form of reinsurance that differs from coinsurance
only in that reserves are retained by the ceding
company while the risk remains with the
reinsurer. The ceding company normally pays
interest to replace the interest the reinsurer
would have earned if it had held the assets
corresponding to the reserves in its own
investment portfolio.

Mortality.................. The relative incidence of death.

Persistency................ The rate which insurance policies or annuity
contracts remain in force, expressed as a
percentage of the number of policies remaining in
force over the previous year.

Primary insurer............ An insurance company that contracts with the
consumer (the insured) to provide insurance
coverage. Such primary insurer may then cede a
portion of its business to one or more
reinsurers.

Quota share reinsurance.... A term describing all forms of reinsurance in which
the reinsurer receives a pro-rata part of the
premiums and pays a pro-rata part of the losses
arising in connection with the policies reinsured
(sometimes known as "proportional" reinsurance,
"pro-rata" reinsurance or "participating"
reinsurance).

Recapture right............ The ceding company's right to cancel reinsurance
under certain conditions. A recapture occurs when
a ceding company cancels an in force reinsurance
cession to increase the risk it retains.

Reinsurance; Reinsurer..... An arrangement under which an insurance company
(the"reinsurer") agrees to indemnify or assume
the obligations of another insurance company (the
"ceding company" or "cedent") for all or a
portion of the insurance risks underwritten by
the ceding company.

Reserves................... Liabilities established by insurers that generally
represent the estimated discounted present value
of the net cost of claims, repayments or contract
liabilities and the related expenses that the
insurer will ultimately be required to pay in
respect of insurance or annuities it has written.

Retention.................. The amount or portion of insurance risk that a
ceding company retains for its own account. In
quota share reinsurance, the retention may be a
percentage of the original policy's limit. In
excess of loss business, the retention typically
is a dollar amount of loss, a loss ratio or a
percentage.

Retrocessional reinsurance;
Retrocessionaire......... An arrangement under which a reinsurer cedes to
another reinsurer (the "retrocessionaire") all or
a portion of the insurance risks underwritten

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by the first reinsurer. Retrocessional
reinsurance does not legally discharge the ceding
reinsurer from its liability with respect to its
obligations to the original ceding company.

Standard & Poor's rating... Standard & Poor's insurance claims paying ability
rating is the opinion of Standard & Poor's of an
operating insurance company's financial capacity
to meet the obligations of its insurance policies
in accordance with their terms. Standard & Poor's
ratings range from "AAA" to "CCC". An "A-" rating
is assigned by Standard & Poor's to companies
which in its opinion have good financial
security, but their capacity to meet policyholder
obligations is somewhat susceptible to adverse
economic and underwriting conditions.

Separate account........... A segregated account established by an insurance
company to hold customer assets and liabilities
on behalf of a customer in connection with
variable life and variable annuity products. The
funds in a separate account are maintained
separately from those in other separate accounts
and other assets of the insurer, and are not
subject to claims of the insurer's general
creditors.

Structured settlement
contracts.................. Contracts providing for periodic payments to a
person for a determinable number of years or for
life, typically in settlement of an injury claim
or a lottery award.

Surplus relief reinsurance;
Financial reinsurance.... A type of reinsurance which is primarily designed
to increase temporarily a ceding company's
statutory capital.

Surrender charge........... A charge applied if an annuity or life insurance
policy is surrendered for its cash value prior to
a specified date. Such a charge is usually
intended to recover all or a portion of the
policy acquisition costs and act as a deterrent
to early surrender.

Term life insurance........ A form of life insurance which provides mortality
protection during a stated period of time, but
expires without policy cash value in the event
the policy owner survives the stated period.

Treaty reinsurance......... See "Automatic reinsurance."

Underwriting............... The insurer's or reinsurer's process of reviewing
contracts submitted for insurance or reinsurance
coverage, deciding whether to accept all or part
of the coverage requested and determining the
applicable premiums.

Underwriting capacity...... The maximum amount of insurance that an insurance
or reinsurance company can underwrite, which is
limited by its existing surplus. Reinsurance
serves to increase an insurer's underwriting
capacity by reducing its exposure from particular
risks and thereby increasing available surplus.

Underwriting expenses...... The aggregate of policy acquisition costs,
including commissions, and the portion of
administrative, general and other expenses
attributable to underwriting operations.

Unearned premiums.......... Premiums written but not yet earned, as they are
attributable to the unexpired portion of the
related contract term.

Universal life insurance... A form of life insurance that combines term
insurance and a cash value savings component.
Premium payments and coverage usually can vary
82
<PAGE> 85

at the option of the policyholder. This coverage
can be fixed or variable. Premiums are credited
to the account as is interest on the underlying
assets. Specific charges are made against the
account for the cost of insurance protection and
for the insurer's expenses. This form of life
insurance allows considerable flexibility as to
the amount and timing of premium payments and for
the level of death benefits provided.

Variable annuity........... An annuity which includes a provision for benefit
payments to vary according to the investment
experience of the separate account in which the
premiums paid for the annuity are allocated.

Variable life insurance.... An investment-oriented form of life insurance that
offers fixed premiums and a minimum death benefit
as well as providing a return linked to an
underlying portfolio of securities that may be in
either a separate or general account of the
insurer.

Whole life insurance....... A form of life insurance which provides guaranteed
death benefits and guaranteed cash values to
policyholders.

83
<PAGE> 86

INDEX TO CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheet as of December 31, 1997....................... F-3
Notes to Consolidated Balance Sheet......................... F-4
</TABLE>

F-1
<PAGE> 87

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Annuity and Life Re (Holdings), Ltd.

We have audited the accompanying consolidated balance sheet of Annuity and
Life Re (Holdings), Ltd. as at December 31, 1997. This financial statement is
the responsibility of the company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.

We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of the company as at December
31, 1997 in conformity with United States generally accepted accounting
principles.

KPMG PEAT MARWICK
Chartered Accountants

Hamilton, Bermuda

March 19, 1998

F-2
<PAGE> 88

ANNUITY AND LIFE RE (HOLDINGS), LTD.

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997

(EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<S> <C>
ASSETS
Cash........................................................ $250,000
Deferred equity offering costs.............................. 233,000
--------
Total Assets...................................... $483,000
========
LIABILITIES (NOTE 3)
Accounts payable............................................ $233,000
========
Total Liabilities................................. $233,000
========
STOCKHOLDERS' EQUITY (NOTE 4)

Preferred Shares -- (par value $1.00; 50,000,000 shares
authorized; no shares outstanding)........................ $ --
Common Shares -- (par value $1.00; 100,000,000 shares
authorized; 12,000 shares outstanding).................... 12,000
Additional paid-in capital.................................. 238,000
--------
Total stockholders' equity........................ $250,000
========
Total liabilities and stockholders' equity.................. $483,000
========
</TABLE>

The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE> 89

ANNUITY AND LIFE RE (HOLDINGS), LTD.

NOTES TO CONSOLIDATED BALANCE SHEET

1. ORGANIZATION

Annuity and Life Re (Holdings), Ltd. ("Holdings") was incorporated on
December 2, 1997 under the laws of Bermuda to provide annuity and life
reinsurance to insurers and reinsurers. Holdings will operate through a
wholly-owned subsidiary, Annuity and Life Reassurance, Ltd. ("Annuity
Reassurance," and together with Holdings, the "Company"). Annuity Reassurance is
licensed under the insurance laws of Bermuda. The Company's initial
capitalization of $250,000, as reflected on the Balance Sheet, was provided by
Frederick S. Hammer, Robert M. Lichten, Michael P. Esposito, Jr., Andrew S.
Lerner, William S. Ogden, Jr. and Arnold Welles (referred to as the "Class A
Warrant Holders") (see notes 3 and 4) and the Annuity Re Purpose Trust, which
was lent $12,000 by Inter-Atlantic Capital Partners, Inc. See note 3. The
Company's fiscal year end is December 31.

At the balance sheet date, the Company had not commenced operations.
Therefore, consolidated statements of income and cash flows have not been
presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statement is prepared in accordance with United
States generally accepted accounting principles which require 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 statement. Actual results could differ from those estimates. The
following are the significant accounting policies adopted by the Company:

(a) Premium income and related expenses

Reinsurance premiums from traditional life and annuity policies with life
contingencies will be recognized generally as revenue when due from
policyholders. Traditional life policies include those contracts with fixed and
guaranteed premiums and benefits, and consist principally of whole life and term
insurance policies. Benefits and expenses are matched with such income so as to
result in the recognition of profits over the life of the contracts. This is
achieved by means of the provision for liabilities for future policy benefits
and deferral and subsequent amortization of policy acquisition costs.

For contracts with a single premium or a limited number of premium payments
due over a significantly shorter period than the total period over which
benefits are provided ("limited payment contracts"), reinsurance premiums will
be recorded as income when due with any excess profit deferred and recognized in
income in a constant relationship to the insurance in force or, for annuities,
in relation to the amount of expected future benefit payments.

Premiums from universal life and investment-type contracts will be reported
as deposits to policy holders' account balances. Revenues from these contracts
will consist of amounts assessed during the period against policyholders'
account balances for mortality charges, policy administration charges and
surrender charges. Policy benefits and claims that are charged to expense will
include benefit claims incurred in the period in excess of related
policyholders' account balances.

(b) Deferred policy acquisition costs

The costs of acquiring new business, principally commissions, underwriting,
agency and policy issue expenses, all of which vary with and are primarily
related to the production of new business, will be deferred. Deferred policy
acquisition costs will be subject to recoverability testing at the time of the
policy issuance and loss recognition testing at the end of each accounting
period.

For traditional life and annuity policies with life contingencies, deferred
policy acquisition costs will be charged to expense using assumptions consistent
with those used in computing policy reserves. Assumptions as

F-4
<PAGE> 90
ANNUITY AND LIFE RE (HOLDINGS), LTD.

NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)

to anticipated premiums will be estimated at the date of the policy issuance and
will be consistently applied during the life of the contracts. Deviations from
estimated experience will be reflected in earnings in the period such deviations
occur. For these contracts, the amortization periods generally will be for the
estimated life of the policy.

For universal life and investment-type products, deferred acquisition costs
will be amortized over the expected average life of the contracts as a constant
percentage of the present value of estimated gross profits arising principally
from investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, which is updated at the
end of each accounting period. In computing amortization, interest shall accrue
to the unamortized balance of capitalized acquisition costs at the rate used to
discount expected gross profit. The effect on the amortization of deferred
policy acquisition costs of revisions to estimated gross profits will be
reflected in earnings in the period such estimated gross profits are revised.

The development of policy reserves for the Company's products will require
management to make estimates and assumptions regarding mortality, lapse, expense
and investment experience. Such estimates will be primarily based on historical
experience and information provided by ceding companies. Actual results could
differ materially from those estimates. Management will monitor actual
experience, and where circumstances warrant, will revise its assumptions and the
related reserve estimates.

For traditional life policies, future benefit and dividend liabilities will
be estimated using a net level premium method on the basis of actuarial
assumptions as to mortality, persistency and interest established at policy
issue. Assumptions established at policy issue as to mortality and persistency
are based on anticipated experience which, together with interest and expense
assumptions, provide a margin for adverse deviation. When the liabilities for
future policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future benefits and
expenses for that product, deferred acquisition costs will be written off and
thereafter, if required, a premium deficiency reserve will be established by a
charge to income. Benefit liabilities for traditional annuities during the
accumulation period are equal to the accumulated present value of expected
future payments.

Premiums for universal life and investment-type contracts will be reported
as deposits to clients' account balances. Revenues from these contracts will
consist of amounts assessed during the period against clients' account balances
for mortality charges, policy administration and surrender charges. Policy
benefits and claims that are charged to expense will include benefit claims
incurred in the period in excess of related clients' account balances and
interest credited to clients' account balances.

(d) Investments

The Company will classify its investments in fixed income and equity
securities as available for sale and, accordingly, such securities will be
carried at fair value. The cost of fixed income securities will be adjusted for
amortization of premiums and discounts. The cost of fixed income and equity
securities will be adjusted for declines in value that are considered other than
temporary.

Realized gains and losses on investments will be recognized in net income,
net of related amortization of deferred acquisition costs, using the specific
identification method. Changes in fair values of securities carried at fair
value are reflected directly in shareholders' equity, after deductions for
related adjustments for deferred acquisition expenses and amounts required to
satisfy policyholder commitments that would have been recorded had these
securities been sold at their fair value.

F-5
<PAGE> 91
ANNUITY AND LIFE RE (HOLDINGS), LTD.

NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)

(e) Translation of foreign currencies

The Company's functional currency is the United States dollar. Premiums
written and receivable in foreign currencies will be recorded at exchange rates
prevailing on the date the contract attaches and liabilities for future benefits
payable in foreign currencies at the time such liabilities are first recorded.
Exchange gains or losses resulting from the periodic revaluation and settlement
of such assets and liabilities will be recorded in the Company's statement of
operations.

(f) Organizational expenses

Organization expenses consist of legal, accounting and incorporation
expenses incurred in connection with the formation and organization of the
Company and include certain expense reimbursements to Inter-Atlantic Securities
Corporation ("Inter-Atlantic"). Such costs will be capitalized and amortized to
income evenly over five years.

Certain equity offering costs incurred in connection with the Company's
planned initial public offering, including certain amounts payable for
investment banking and financial advisory services, will be deducted from the
gross proceeds of the offering.

(g) Earnings per Common Share

The Company will calculate earnings per common share based upon the
guidance provided in Financial Accounting Standards Board Statement No. 128
"Earnings per Share." This statement requires the presentation of two amounts of
earnings per share when the company has a complex capital structure. These
amounts are earnings per common share and earnings per common share-assuming
dilution.

Basic earnings per common share will be calculated by dividing net income
attributable to common shareholders by the weighted average number of common
shares outstanding during the period.

Diluted earnings per common share will be calculated by dividing the net
income attributable to common shareholders by the weighted average number of
common shares outstanding during the period, plus dilutive potential common
shares. Options and warrants issued by the Company will be considered dilutive
potential common shares and will be included in the calculation using the
treasury stock method.

3. AGREEMENTS WITH RELATED PARTIES

Formation and Initial Public Offering

The Company has entered into an agreement with Inter-Atlantic, whereby
Inter-Atlantic has agreed to provide financial advisory services to the Company
in connection with its organization and planned initial public offering. Such
services include, among other things, assistance in recruiting senior
management, obtaining necessary governmental permits, preparing a registration
statement, retaining underwriters and such other services as the Company or
Inter-Atlantic deems appropriate. Certain officers and directors of the Company
are also beneficial owners, directors or officers of Inter-Atlantic and/or its
parent company, Inter-Atlantic Capital Partners, Inc.

The Company will reimburse Inter-Atlantic for expenses incurred in
connection with the organization of the Company and the planned initial public
offering provided that such offering is successfully consummated prior to June
30, 1998. Subsequent to the successful consummation of the planned initial
public offering, Inter-Atlantic will also receive a fee equal to $2.0 million as
compensation for financial advisory services provided to the Company in
connection with its planned initial public offering. If such offering is not
successfully consummated prior to June 30, 1998, Inter-Atlantic will only be
entitled to reimbursement of expenses incurred on or after December 23, 1997.
Prior to this date, Inter-Atlantic incurred expenses in connection with the
Company's organization of approximately $75,000 and costs in connection with the

F-6
<PAGE> 92
ANNUITY AND LIFE RE (HOLDINGS), LTD.

NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)

planned initial public offering of approximately $400,000. The Company has
accrued offering expenses of $233,000 incurred by Inter-Atlantic during the
period December 23 to 31, 1997. In addition, Inter-Atlantic will provide
financial advisory and other services to the Company for a term of five years in
exchange for four annual payments of $600,000 beginning on the first anniversary
of the consummation of the planned initial public offering. Such services
include, among other things, assistance in the development of products,
financial planning, management of assets and liabilities, international
marketing efforts and such other services as the Company may request.

In connection with the formation of the Company, the Class A Warrant
Holders purchased Class A Warrants to purchase up to an aggregate number of
common shares equal to 12% of the sum of (i) the common shares outstanding
immediately following the consummation of the planned initial public offering
(but excluding any shares held by the Annuity Re Purpose Trust) and (ii) the
common shares issuable upon exercise or conversion of any security outstanding
immediately following the consummation of the planned initial public offering,
except for certain warrants issued by the Company and any options granted by the
Company under its Initial Stock Option Plan.

4. STOCKHOLDERS' EQUITY

Preferred Stock

The Company is authorized to issue 50,000,000 preferred shares of par value
$1.00 each. At the balance sheet date there were no preferred shares issued or
outstanding.

Common Stock

The Company is authorized to issue 100,000,000 common shares of par value
$1.00 each. At the balance sheet date 12,000 common shares were outstanding.

Warrants

In connection with its initial capitalization, the Company has issued Class
A Warrants to the Class A Warrant Holders to purchase up to an aggregate number
of common shares equal to 12% of the sum of (i) the common shares outstanding
immediately following the consummation of the planned initial public offering
(but excluding any shares held by the Annuity Re Purpose Trust) and (ii) the
Common Shares issuable upon exercise or conversion of any security outstanding
immediately following the consummation of the planned initial public offering,
except for certain warrants issued by the Company and any options granted by the
Company under its Initial Stock Option Plan. The consideration paid for these
warrants of $238,000 has been recorded as additional paid in capital. The
exercise price of the warrants will be equal to the initial public offering
price per share of the Company's common shares. The Class A Warrants become
exercisable over three years commencing on the first anniversary of the
consummation of the Company's initial public offering. The Class A Warrants will
expire on January 15, 2008.

5. STOCK PLANS

Stock Option Plan

The Board of Directors has adopted a Stock Option Plan (the "plan") under
which it may grant, subject to certain restrictions, Incentive Stock Options
(ISO's) and Non-Qualified Stock Options (NQSO's). The aggregate number of common
shares for which options may be granted under the plan is limited to the lessor
of (i) 5.5 percent of the common shares outstanding immediately following the
consummation of the Company's initial public offering, plus 150,000 shares or
(ii) 1,700,000 common shares. Only eligible employees of the Company are
entitled to ISO's, while NQSO's may be granted to eligible employees, non-
employee Directors and consultants.

F-7
<PAGE> 93
ANNUITY AND LIFE RE (HOLDINGS), LTD.

NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)

The plan will be administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has the authority to select the parties to
be granted ISO's and NQSO's, to set the date of grant and other terms of the
options granted under the plan.

The minimum exercise price of the ISO's will be equal to the fair market
value, as defined in the plan, of the Company's optioned common shares at the
date of grant. The term of the ISO's is not more than ten years from the date of
grant. Unless otherwise provided in the option agreement, the ISO's shall be
exercisable in three equal annual installments, commencing on the first
anniversary of the grant date.

Subject to the consummation of the offering, options will be granted to the
President and Chief Executive Officer and other senior executives of the Company
to purchase common shares. The exercise price of such options will be equal to
the public offering price per share.

Each person who becomes an eligible non-employee Director, as defined in
the plan, shall be granted an option to purchase 15,000 common shares on the
later of (i) the date he or she becomes an eligible non-employee Director or
(ii) the date the planned initial public offering is consummated. The options
shall have an exercise price equal to the fair market value of the optioned
common shares on the date the options are granted and shall be exercisable in
three equal installments commencing with the first anniversary of the grant
date. In addition, subject to certain conditions, each non-employee Director
shall be granted an option to purchase 2,000 common shares at each successive
annual general meeting after December 31, 1998. These options shall have an
exercise price equal to the fair market value of the optioned common shares on
the date the options are granted and shall be immediately exercisable if granted
after the first anniversary of the consummation of the planned initial public
offering. If such options are granted prior to the first anniversary of the
consummation of the planned initial public offering, such options shall become
exercisable on such anniversary.

In addition, Directors shall receive cash of $20,000 per annum plus $1,000
per board or committee meeting attended. Committee Chairmen shall receive an
additional $1,000 per annum.

6. TAXATION

Under current Bermuda law neither the Company nor Annuity Reassurance is
required to pay any taxes in Bermuda on either income or capital gains. The
Company and Annuity Reassurance have each received an assurance from the
Minister of Finance in Bermuda that in the event of any such taxes being imposed
the Company will be exempted from taxation until the year 2016. The Company
intends to operate in a manner such that it will owe no United States tax other
than premium excise taxes and withholding taxes on certain investments.

7. STATUTORY REQUIREMENTS AND DIVIDEND RESTRICTIONS

Under The Bermuda Insurance Act, 1978, and related regulations, Annuity
Reassurance is required to maintain certain levels of solvency and liquidity.
The minimum statutory capital and surplus requirement of $250,000 was met at the
balance sheet date.

The Company's ability to pay dividends depends on the ability of Annuity
Reassurance to pay dividends to the Company. While the Company itself is not
subject to any significant legal prohibitions on the payment of dividends,
Annuity Reassurance will be subject to Bermuda regulatory constraints which
affect its ability to pay dividends to the Company. Annuity Reassurance is
prohibited from declaring or paying a dividend if such payment would reduce its
statutory surplus below $250,000.

NOTE 8. SUBSEQUENT EVENTS

The Company has entered into Securities Purchase Agreements with five
investors ("the strategic investors") whereby the strategic investors agreed to
purchase an aggregate of 5,638,299 common shares and Class B Warrants to
purchase an aggregate of 397,500 common shares for an aggregate purchase price
of

F-8
<PAGE> 94
ANNUITY AND LIFE RE (HOLDINGS), LTD.

NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)

$79.5 million. The exercise price of the Class B Warrants is $15.00 per share,
and they are exercisable in equal amounts over a three year period commencing
one year after the closing of the sales to the strategic investors and expire
ten years after the closing of such sales. Certain sales restrictions apply to
the common shares purchased by the strategic investors directly from the Company
and to the common shares issuable upon the exercise of the Class B Warrants.

One of the strategic investors is affiliated with Prudential Securities
Incorporated, one of the underwriters of the Company's planned initial public
offering, and with The Prudential Investment Corporation, which serves as one of
the Company's investment managers. The Company has agreed to pay a fee of $1.0
million (plus reimbursement of related out-of-pocket expenses) to Prudential
Securities Incorporated for investment banking and financial advisory services
in connection with the Company's planned initial public offering and related
matters. Marsh & McLennan Management Services (Bermuda) Limited, which has
contracted to provide office space and administrative services to the Company,
is affiliated with a significant shareholder of one of the other strategic
investors.

F-9
<PAGE> 95

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY
SECURITY OTHER THAN THE COMMON SHARES OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE COMMON
SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Enforceability of Civil Liabilities under
United States Federal Securities Laws.... 3
Prospectus Summary......................... 4
Risk Factors............................... 9
Use of Proceeds............................ 17
Capitalization............................. 18
Dividend Policy............................ 19
Dilution................................... 20
Unaudited Pro Forma Consolidated Balance
Sheet.................................... 21
Management's Discussion and Analysis of
Financial Condition and Plan of
Operations............................... 22
Business................................... 25
Management................................. 42
Principal Stockholders..................... 52
Certain Relationships and Related Party
Transactions............................. 54
Description of Capital Stock............... 57
Shares Eligible for Future Sale............ 64
Direct Sales............................... 66
Certain Tax Considerations................. 68
Underwriting............................... 75
Legal Matters.............................. 77
Experts.................................... 77
Additional Information..................... 77
Glossary of Selected Annuity and Life
Insurance Terms.......................... 79
Index to Consolidated Balance Sheet........ F-1
</TABLE>

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

16,750,000 Shares

ANNUITY AND

LIFE RE (HOLDINGS), LTD.

Common Shares

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

PROSPECTUS

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

Joint Lead Managers
and Joint Bookrunners

PRUDENTIAL SECURITIES INCORPORATED

MERRILL LYNCH & CO.

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

BT ALEX. BROWN

CIBC OPPENHEIMER

SCHRODER & CO. INC.
, 1998

======================================================
<PAGE> 96

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.

[ALTERNATE PAGE FOR THE DIRECT SALES PROSPECTUS]

SUBJECT TO COMPLETION -- DATED MARCH 20, 1998

PROSPECTUS
- --------------------------------------------------------------------------------

221,121 SHARES

ANNUITY AND LIFE RE (HOLDINGS), LTD.
COMMON SHARES

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

All of the 221,121 common shares, par value $1.00 per share (the "Common
Shares"), offered hereby are being sold by Annuity and Life Re (Holdings), Ltd.
(the "Company"). The Company is offering such Common Shares directly to certain
of its directors and officers at a price per share equal to the initial public
offering price per share in the Offering (as defined below), less the per share
underwriting discounts and commissions therein, for an aggregate purchase price
if all such Common Shares are sold of approximately $3.1 million. This
Prospectus, other than this page and the section entitled "Plan of
Distribution," was also used in the Company's underwritten initial public
offering of 16,750,000 Common Shares, and unless the context otherwise requires,
references herein to the "Offering" are to such underwritten offering. The
offering made hereby will be consummated simultaneously with the consummation of
the Offering. Prior to the Offering, the Company has not conducted any business
and there has been no public market for the Common Shares.

In connection with the formation of the Company and the establishment of a core
group of strategic investors, The Prudential Insurance Company of America, EXEL
Limited, Risk Capital Reinsurance Company, Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P. (collectively, the "Strategic
Investors") have severally agreed to purchase for investment directly from the
Company an aggregate of 5,638,299 Common Shares and Class B Warrants to purchase
an aggregate of 397,500 Common Shares. Such purchases will be consummated
simultaneously with the consummation of the Offering for an aggregate purchase
price for the Common Shares and the Class B Warrants of $79.5 million. The
aggregate purchase price to be paid by the Strategic Investors is based on a
price of $14.10 for (i) one Common Share and (ii) the right to purchase
approximately seven one-hundredths of a Common Share under the Class B Warrants.
The exercise price for the Class B Warrants will be $15.00 per share. Such
purchases by the Strategic Investors, together with the Common Shares being
offered hereby, are collectively referred to in this Prospectus as the "Direct
Sales." See "Direct Sales."

An application has been made to have the Common Shares approved for quotation in
The Nasdaq Stock Market's National Market (the "Nasdaq National Market") under
the symbol "ALREF."

The Common Shares offered hereby are subject to limitations on ownership,
transfers and voting rights which, among other things, generally prevent
transfers to holders beneficially owning 10% or more of the Common shares of the
Company (other than as described herein), require divestiture of Common Shares
to reduce the beneficial ownership of any holder to less than 10% of the Common
Shares of the Company and reduce the voting power of any holder beneficially
owning 10% or more of the Common shares of the Company to less than 10% of the
total voting power of the Company's capital stock. See "Description of Capital
Stock."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

, 1998
<PAGE> 97

[ALTERNATE PAGE FOR THE DIRECT SALES PROSPECTUS]

PLAN OF DISTRIBUTION

The Company is offering directly the Common Shares offered hereby to its
directors and officers at a per share price equal to the initial public offering
price per Common Share in the Offering, less the per share underwriting
discounts and commissions. Such sales are to be consummated simultaneously with
the other Direct Sales and the Offering.

<PAGE> 98

[ALTERNATE PAGE FOR THE DIRECT SALES PROSPECTUS]

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON
SHARES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE COMMON SHARES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Enforceability of Civil Liabilities under
United States Federal Securities Laws... 3
Prospectus Summary........................ 4
Risk Factors.............................. 9
Use of Proceeds........................... 17
Capitalization............................ 18
Dividend Policy........................... 19
Dilution.................................. 20
Unaudited Pro Forma Consolidated Balance
Sheet................................... 21
Management's Discussion and Analysis of
Financial Condition and Plan of
Operations.............................. 22
Business.................................. 25
Management................................ 42
Principal Stockholders.................... 52
Certain Relationships and Related Party
Transactions............................ 54
Description of Capital Stock.............. 57
Shares Eligible for Future Sale........... 64
Direct Sales.............................. 66
Certain Tax Considerations................ 68
Plan of Distribution......................
Legal Matters............................. 77
Experts................................... 77
Additional Information.................... 77
Glossary of Selected Annuity and Life
Insurance Terms......................... 79
Index to Consolidated Balance Sheet....... F-1
</TABLE>

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

221,121 Shares

ANNUITY AND
LIFE RE (HOLDINGS), LTD.

Common Shares

----------------------
PROSPECTUS
----------------------

, 1998

======================================================
<PAGE> 99

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses payable by the Registrant in
connection with this Registration Statement. All of such expenses are estimates,
other than the filing and quotation fees payable to the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. and The Nasdaq
National Market.

<TABLE>
<S> <C>
Advisory Fees............................................... $3,000,000
Fees and Expenses of Counsel................................ 470,000
Printing Expenses........................................... 250,000
Reimbursement of other expenses to Inter-Atlantic Securities
Corporation............................................... 174,392
Filing Fee -- Securities and Exchange Commission............ 93,108
Quotation Fees -- The Nasdaq National Market................ 90,000
Fees and Expenses of Accountants............................ 70,000
Filing Fee -- National Association of Securities Dealers,
Inc....................................................... 30,500
Miscellaneous Expenses...................................... 20,000
Blue Sky Fees and Expenses.................................. 2,000
----------
Total............................................. $4,200,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 31 of the Registrant's Bye-Laws provides that: (a) the directors
and officers of the Registrant shall be indemnified from and against all
actions, costs, charges, losses, damages and expenses which they shall incur by
reason of any act done in connection with their duty as a director or officer of
the Registrant (b) each director and officer of the Registrant shall be
indemnified out of the funds of the Registrant against all liabilities incurred
by him as such a director or officer of the Registrant in defending any
proceedings in which judgment is given in his favor or he is acquitted or
relieved from liability and (c) funds shall be advanced to each director or
officer of the Registrant on his incurring liability prior to judgment provided
that should he be found guilty of a criminal or other offense for which he
cannot by law be indemnified he shall reimburse the Registrant for the funds
advanced.

Section 32 of the Registrant's Bye-Laws provides that each shareholder
agrees to waive any claim or right of action such shareholder might have against
any director or officer on account of any action taken by such director or
officer, or the failure of such director or officer to take any action in the
performance of his or her duties with or for the Registrant, provided that such
waiver does not extend to any matter in respect of any fraud or dishonesty that
may attach to such director or officer.

The Registrant has obtained a Directors and Officers and Company
Reimbursement Policy from Underwriters at Lloyd's, London that provides
liability insurance for the Registrant's directors and officers.

Reference is made to the form of Underwriting Agreement to be filed as
Exhibit 1.1 hereto for provisions providing that the Underwriters are obligated,
under certain circumstances, to indemnify the directors, certain officers and
the controlling persons of the Registrant against certain liabilities under the
Securities Act of 1933, as amended (the "Securities Act").

Reference is made to the Agreement to be filed as Exhibit 10.4 hereto for
provisions providing that the Registrant and Inter-Atlantic Securities
Corporation are each obligated to indemnify the other for certain actions.

II-1
<PAGE> 100

Reference is made to the Registration Rights Agreements filed as Exhibits
10.5 and 10.13 hereto for provisions providing that the Registrant and certain
holders of Common Shares, Class A Warrants and/or Class B Warrants are each
obligated to indemnify the other for certain actions.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since its formation, the Registrant has issued the following securities
that were not registered under the Securities Act:

(a) On December 3, 1997, the Registrant sold 12,000 Common Shares to
the Annuity Re Purpose Trust, a Bermuda trust, for an aggregate price of
$12,000. The Registrant will repurchase these shares upon consummation of
the Offering and such shares will be cancelled.

(b) On December 9, 1997, the Registrant sold Class A Warrants for an
aggregate price of $238,000 to Frederick S. Hammer, Robert M. Lichten,
Michael P. Esposito, Jr., William S. Ogden, Jr., Andrew S. Lerner and
Arnold Welles to purchase up to an aggregate number of Common Shares equal
to 12% of the sum of (i) the Common Shares outstanding immediately
following the consummation of the Offering (but excluding any shares held
by the Annuity Re Purpose Trust) and (ii) the Common Shares issuable upon
exercise or conversion of any security outstanding immediately following
the consummation of the Offering, except for the Class A Warrants and any
options granted by the Company under its Initial Stock Option Plan at an
exercise price equal to the initial public offering price per share. On
March 4, 1997, the outstanding Class A Warrants were amended to provide
that the aggregate number of Common Shares issuable upon exercise thereof
would be equal to 12% of the sum of (i) the Common Shares outstanding
immediately following the consummation of the Offering (but excluding any
shares held by the Annuity Re Purpose Trust) and (ii) the Common Shares
issuable upon exercise or conversion of any security outstanding
immediately following the consummation of the Offering, except for the
Class A Warrants, the Class B Warrants and any options granted by the
Company under its Initial Stock Option Plan.

(c) On March 4, 1998, the Registrant contracted to sell 1,028,369
Common Shares and Class B Warrants to purchase an additional 72,500 Common
Shares to The Prudential Insurance Company of America for an aggregate
price of $14.5 million.

(d) On March 4, 1998, the Registrant contracted to sell 1,418,440
Common Shares and Class B Warrants to purchase an additional 100,000 Common
Shares to EXEL Limited for an aggregate price of $20.0 million.

(e) On March 4, 1998, the Registrant contracted to sell 1,418,440
Common Shares and Class B Warrants to purchase an additional 100,000 Common
Shares to Risk Capital Reinsurance Company for an aggregate price of $20.0
million.

(f) On March 19, 1998, Registrant contracted to sell 1,143,065 Common
Shares and Class B Warrants to purchase an additional 80,586 Common Shares
to Insurance Partners, L.P. for an aggregate price of $16.1 million.

(g) On March 19, 1998, Registrant contracted to sell 629,985 Common
Shares and Class B Warrants to purchase an additional 44,414 Common Shares
to Insurance Partners Offshore (Bermuda), L.P. for an aggregate price of
$8.9 million.

No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving a public offering. All of the foregoing securities are
deemed restricted securities for purposes of the Securities Act.

II-2
<PAGE> 101

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1** Memorandum of Association, as amended.
3.2*** Bye-Laws.
4.1* Specimen Common Share Certificate.
4.2** Form of Amended and Restated Class A Warrant.
4.3*** Form of Class B Warrant.
5.1*** Opinion of Conyers Dill & Pearman.
8.1*** Opinion of Conyers Dill & Pearman (included in Exhibit 5.1).
8.2*** Opinion of Drinker Biddle & Reath LLP.
10.1** Employment Agreement, dated as of December 5, 1997, between
Lawrence S. Doyle and the Registrant.
10.2** Initial Stock Option Plan.
10.3** Insurance Management Agreement, dated as of December 22,
1997, between Marsh & McLennan Management Services (Bermuda)
Limited and the Registrant and Addendum to Insurance
Management Agreement.
10.4** Agreement, dated as of December 23, 1997, between
Inter-Atlantic Securities Corp. and the Registrant.
10.5** Registration Rights Agreement dated as of January 9, 1998
between the Registrant and the holders of the Class A
Warrants.
10.6** Employment Agreement, dated as of January 8, 1998, between
Robert J. Reale and the Registrant.
10.7** Employment Agreement, dated as of January 5, 1998, between
Robert P. Mills, Jr. and the Registrant.
10.8** Amendment No. 1, dated as of February 27, 1998, to
Employment Agreement, dated as of December 5, 1997, between
Lawrence S. Doyle and the Registrant.
10.9** Amendment No. 1, dated as of February 27, 1998, to
Employment Agreement, dated as of January 8, 1998, between
Robert J. Reale and the Registrant.
10.10** Amendment No. 1, dated as of February 27, 1998, to
Employment Agreement, dated as of January 5, 1998, between
Robert P. Mills, Jr. and the Registrant.
10.11** Amendment No. 1 to the Initial Stock Option Plan.
10.12*** Form of Securities Purchase Agreement entered into by The
Prudential Insurance Company of America and the Registrant,
EXEL Limited and the Registrant, Risk Capital Reinsurance
Company and the Registrant, Insurance Partners, L.P. and the
Registrant and Insurance Partners Offshore (Bermuda), L.P.
and the Registrant.
10.13*** Form of Registration Rights Agreement to be entered into
between The Prudential Insurance Company of America and the
Registrant, EXEL Limited and the Registrant, Risk Capital
Reinsurance Company and the Registrant, Insurance Partners,
L.P. and the Registrant and Insurance Partners Offshore
(Bermuda), L.P. and the Registrant.
10.14** Letter Agreement, dated as of March 4, 1998, between Risk
Capital Reinsurance Company and the Registrant.
</TABLE>

II-3
<PAGE> 102

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.15** Employment Agreement, dated as of March 2, 1998, between
William W. Atkin and the Registrant.
10.16*** Employment Agreement, dated as of March 5, 1998, between
Richard Tucker and the Registrant.
10.17* Letter Agreement, dated as of December 23, 1997, between
Prudential Securities Incorporated and the Registrant and
related indemnification agreement.
10.18*** Letter Agreement, dated as of March 19, 1998, among
Insurance Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P. and the Registrant.
10.19*** Form of Letter Agreement between The Prudential Insurance
Company of America and Registrant, EXEL Limited and
Registrant and Risk Capital Reinsurance Company and
Registrant.
10.20*** Letter Agreement between Insurance Partners, L.P. and
Registrant, dated as of March 19, 1998.
10.21*** Letter Agreement between Insurance Partners Offshore
(Bermuda), L.P. and Registrant, dated as of March 19, 1998.
21.1** Subsidiaries of the Registrant.
23.1*** Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2*** Consent of Drinker Biddle & Reath LLP (included in Exhibit
8.2).
23.3*** Consent of KPMG Peat Marwick.
24.1**** Powers of Attorney of Michael P. Esposito, Jr., Frederick S.
Hammer and Robert M. Lichten.
24.2** Powers of Attorney of Albert R. Dowden, Donald J. Matthews,
Lee M. Gammill, Jr., Walter A. Scott and Jon W. Yoskin, II.
24.3*** Powers of Attorney of Robert Clements, Brian M. O'Hara and
Jerry S. Rosenbloom.
</TABLE>

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

* To be filed.

** Previously filed.

*** Filed herewith.

**** Included on signature page to Company's Registration Statement on Form S-1
(333-43301) previously filed with the Securities and Exchange Commission on
December 24, 1997.

(b) Financial Statement Schedules

All schedules of the Registrant for which provision is made in the
applicable accounting regulations of the Commission are not required, are
inapplicable, or have been disclosed in the notes to the consolidated financial
statements and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent,

II-4
<PAGE> 103

submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.

2. For the purposes of determining any liability under the Securities
Act of 1933, each posteffective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

II-5
<PAGE> 104

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 19th day of March, 1998.

ANNUITY AND LIFE RE (HOLDINGS), LTD.

By: /s/ LAWRENCE S. DOYLE
------------------------------------
Lawrence S. Doyle
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ LAWRENCE S. DOYLE President, Chief Executive March 19, 1998
- --------------------------------------------------- Officer and Director
Lawrence S. Doyle (Principal Executive Officer)

/s/ WILLIAM W. ATKIN Chief Financial Officer and March 19, 1998
- --------------------------------------------------- Treasurer (Principal
William W. Atkin Financial and Accounting
Officer)

* Chairman and Director March 19, 1998
- ---------------------------------------------------
Frederick S. Hammer

* Deputy Chairman and Director March 19, 1998
- ---------------------------------------------------
Robert M. Lichten

* Director March 19, 1998
- ---------------------------------------------------
Robert Clements

* Director March 19, 1998
- ---------------------------------------------------
Albert R. Dowden

* Director March 19, 1998
- ---------------------------------------------------
Michael P. Esposito, Jr.

* Director March 19, 1998
- ---------------------------------------------------
Lee M. Gammill, Jr.

* Director March 19, 1998
- ---------------------------------------------------
Donald J. Matthews

* Director March 19, 1998
- ---------------------------------------------------
Brian M. O'Hara

* Director March 19, 1998
- ---------------------------------------------------
Jerry S. Rosenbloom
</TABLE>

II-6
<PAGE> 105

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director March 19, 1998
- ---------------------------------------------------
Charles G. Collis

* Director March 19, 1998
- ---------------------------------------------------
Walter A. Scott

* Director March 19, 1998
- ---------------------------------------------------
Jon W. Yoskin, II
</TABLE>

* Lawrence S. Doyle, pursuant to a Power of Attorney executed by each of the
directors and officers noted above and included in the signature page of the
initial filing of this Registration Statement or as an exhibit to this filing,
by signing his name hereto, does hereby sign and execute this Amendment No. 3
to the Registration Statement on behalf of each of the persons noted above, in
the capacities indicated, and does hereby sign and execute this Amendment No.
3 to the Registration Statement on his own behalf, in the capacities
indicated.

/s/ LAWRENCE S. DOYLE
--------------------------------------
Lawrence S. Doyle

II-7
<PAGE> 106

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ----
<S> <C> <C>
1.1* Form of Underwriting Agreement.
3.1** Memorandum of Association, as amended.
3.2*** Bye-Laws.
4.1* Specimen Common Share Certificate.
4.2** Form of Amended and Restated Class A Warrant.
4.3*** Form of Class B Warrant.
5.1*** Opinion of Conyers Dill & Pearman.
8.1*** Opinion of Conyers Dill & Pearman (included in Exhibit 5.1).
8.2*** Opinion of Drinker Biddle & Reath LLP.
10.1** Employment Agreement, dated as of December 5, 1997, between
Lawrence S. Doyle and the Registrant.
10.2** Initial Stock Option Plan.
10.3** Insurance Management Agreement, dated as of December 22,
1997, between Marsh & McLennan Management Services (Bermuda)
Limited and the Registrant and Addendum to Insurance
Management Agreement.
10.4** Agreement, dated as of December 23, 1997, between
Inter-Atlantic Securities Corp. and the Registrant.
10.5** Registration Rights Agreement, dated as of January 9, 1998,
between the Registrant and the holders of the Class A
Warrants.
10.6** Employment Agreement, dated as of January 8, 1998, between
Robert J. Reale and the Registrant.
10.7** Employment Agreement, dated as of January 5, 1998, between
Robert P. Mills, Jr. and the Registrant.
10.8** Amendment No. 1, dated as of February 27, 1998, to
Employment Agreement, dated as of December 5, 1997, between
Lawrence S. Doyle and the Registrant.
10.9** Amendment No. 1, dated as of February 27, 1998, to
Employment Agreement, dated as of January 8, 1998, between
Robert J. Reale and the Registrant.
10.10** Amendment No. 1, dated as of February 27, 1998, to
Employment Agreement, dated as of January 5, 1998, between
Robert P. Mills, Jr. and the Registrant.
10.11** Amendment No. 1 to the Initial Stock Option Plan.
10.12*** Form of Securities Purchase Agreement entered into by The
Prudential Insurance Company of America and the Registrant,
EXEL Limited and the Registrant, Risk Capital Reinsurance
Company and the Registrant, Insurance Partners, L.P. and the
Registrant and Insurance Partners Offshore (Bermuda), L.P.
and the Registrant.
10.13*** Form of Registration Rights Agreement to be entered into
between The Prudential Insurance Company of America and the
Registrant, EXEL Limited and the Registrant, Risk Capital
Reinsurance Company and the Registrant, Insurance Partners,
L.P. and the Registrant and Insurance Partners Offshore
(Bermuda), L.P. and the Registrant.
10.14** Letter Agreement, dated as of March 4, 1998, between Risk
Capital Reinsurance Company and the Registrant.
</TABLE>

<PAGE> 107

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ----
<S> <C> <C>
10.15** Employment Agreement, dated as of March 2, 1998, between
William W. Atkin and the Registrant.
10.16*** Employment Agreement, dated as of March 5, 1998, between
Richard Tucker and the Registrant.
10.17* Letter Agreement, dated as of December 23, 1997, between
Prudential Securities Incorporated and the Registrant and
related indemnification agreement.
10.18*** Letter Agreement, dated as of March 19, 1998, among
Insurance Partners, L.P., Insurance Partners Offshore
(Bermuda), L.P. and the Registrant.
10.19*** Form of Letter Agreement between The Prudential Insurance
Company of America and Registrant, EXEL Limited and
Registrant and Risk Capital Reinsurance Company and
Registrant.
10.20*** Letter Agreement between Insurance Partners, L.P. and
Registrant, dated as of March 19, 1998.
10.21*** Letter Agreement between Insurance Partners Offshore
(Bermuda), L.P. and Registrant, dated as of March 19, 1998.
21.1** Subsidiaries of the Registrant.
23.1*** Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2*** Consent of Drinker Biddle & Reath LLP (included in Exhibit
8.2).
23.3*** Consent of KPMG Peat Marwick.
24.1**** Powers of Attorney of Michael P. Esposito, Jr., Frederick S.
Hammer and Robert M. Lichten.
24.2** Powers of Attorney of Albert R. Dowden, Lee M. Gammill, Jr.,
Donald J. Matthews, Walter A. Scott and Jon W. Yoskin, II.
24.3*** Powers of Attorney of Robert Clements, Brian M. O'Hara and
Jerry S. Rosenbloom.
</TABLE>

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

* To be filed.

** Previously filed.

*** Filed herewith.

**** Included on signature page to Company's Registration Statement on Form S-1
(333-43301) previously filed with the Securities and Exchange Commission on
December 24, 1997.

<PAGE> 1

EXHIBIT 3.2

BYE-LAWS

B Y E - L A W S

ANNUITY AND LIFE RE (HOLDINGS), LTD.

<PAGE> 2

Exhibit 3.2

B Y E - L A W S

ANNUITY AND LIFE RE (HOLDINGS), LTD.

<PAGE> 3
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Interpretation....................................................... 1

2. Board of Directors................................................... 6

3. Management of the Company............................................ 6

4. Power to appoint chief executive officer............................. 6

5. Power to appoint manager............................................. 6

6. Power to authorise specific actions.................................. 7

7. Power to appoint attorney............................................ 7

8. Power to appoint and dismiss employees............................... 7

9. Power to borrow and charge property.................................. 7

10. Power to purchase shares of the Company.............................. 7

11. Election of Directors................................................ 9

12. Defects in appointment of Directors.................................. 10

13. Alternate Directors.................................................. 10

14. Removal of Directors................................................. 11

15. Vacancies on the Board............................................... 11

16. Notice of meetings of the Board...................................... 12

17. Quorum at meetings of the Board...................................... 12

18. Meetings of the Board................................................ 13

19. Unanimous written resolutions........................................ 13

20. Contracts and disclosure of Directors' interests..................... 13

21. Remuneration of Directors............................................ 14
</TABLE>

-i-
<PAGE> 4
<TABLE>
<S> <C>
22. Other interests of Directors......................................... 14

23. Power to delegate to a committee..................................... 15

24. Officers of the Company.............................................. 15

25. Appointment of Officers.............................................. 15

26. Remuneration of Officers............................................. 15

27. Duties of Officers................................................... 15

28. Chairman of meetings................................................. 16

29. Register of Directors and Officers................................... 16

30. Obligations of Board to keep minutes................................. 17

31. Indemnification of Directors and Officers of the Company............. 17

32. Waiver of claim by Member............................................ 18

33. Notice of annual general meeting..................................... 18

34. Notice of special general meeting.................................... 19

35. Accidental omission of notice of general meeting..................... 19

36. Meeting called on requisition of Members............................. 19

37. Short notice......................................................... 19

38. Postponement of Meetings............................................. 20

39. Quorum For General Meeting........................................... 20

40. Adjournment of meetings.............................................. 20

41. Attendance at meetings............................................... 20

42. Written resolutions.................................................. 21

43. Attendance of Directors.............................................. 22

44. Voting at meetings................................................... 22
</TABLE>

-ii-
<PAGE> 5

<TABLE>
<S> <C>
45. Voting on show of hands.............................................. 22

46. Decision of chairman................................................. 22

47. Demand for a poll.................................................... 23

48. Seniority of joint holders voting.................................... 24

49. Instrument of proxy.................................................. 24

50. Representation of corporations at meetings........................... 24

51. Rights of shares..................................................... 25

52. Limitation on voting rights of Controlled Shares..................... 26

53. Power to issue shares................................................ 29

54. Variation of rights and alteration of share capital.................. 30

55. Registered holder of shares.......................................... 30

56. Death of a joint holder.............................................. 31

57. Share certificates................................................... 31

58. Calls on shares...................................................... 31

59. Contents of Register of Members...................................... 31

60. Inspection of Register of Members.................................... 32

61. Reserved............................................................. 32

62. Instrument of transfer............................................... 32

63. Restriction on transfer.............................................. 33

64. Transfers by joint holders........................................... 34

65. Lien on Shares....................................................... 35

66. Registration on bankruptcy........................................... 36

67. Declaration of dividends by the Board................................ 36
</TABLE>

-iii-
<PAGE> 6
<TABLE>
<S> <C>
68. Other distributions.................................................. 36

69. Reserve fund......................................................... 37

70. Deduction of amounts due to the Company.............................. 37

71. Unclaimed dividends.................................................. 37

72. Interest on dividend................................................. 37

73. Issue of bonus shares................................................ 37

74. Records of account................................................... 37

75. Financial year end................................................... 38

76. Financial statements................................................. 38

77. Appointment of Auditor............................................... 38

78. Remuneration of Auditor.............................................. 38

79. Vacation of office of Auditor........................................ 39

80. Access to books of the Company....................................... 39

81. Report of the Auditor................................................ 39

82. Record dates......................................................... 39

83. Notices to Members of the Company.................................... 40

84. Notices to joint Members............................................. 40

85. Service and delivery of notice....................................... 40

86. The Seal............................................................. 41

87. Manner in which seal is to be affixed................................ 41

88. Determination to wind up Company..................................... 41

89. Winding-up/distribution by liquidator................................ 41

90. Alteration of Bye-laws............................................... 42
</TABLE>

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<PAGE> 7
B Y E - L A W S
of
ANNUITY AND LIFE RE (HOLDINGS), LTD.

INTERPRETATION

1. Interpretation

(1) In these Bye-laws the following words and expressions shall, where not
inconsistent with the context, have the following meanings respectively:-

(a) "Act" means the Companies Act 1981 of Bermuda as amended from
time to time;

(b) "Affiliate" has the meaning ascribed thereto in Rule 144
promulgated under the Securities Act;

(d) "Auditor" includes any individual or partnership;

(e) "Board" means the Board of Directors appointed or elected
pursuant to these Bye-laws and acting by resolution in
accordance with the Act and these Bye-laws or the Directors
present at a meeting of Directors at which there is a quorum;

(f) "Business Day" means any day, other than a Saturday, a Sunday
or any day on which banks in Hamilton, Bermuda or The City of
New York, United States are authorized or obligated by law or
executive order to close;

(g) "Code" means the United States Internal Revenue Code of 1986,
as amended from time to time, or any federal statute from time
to time in effect that has replaced such statute, and any
reference in these Bye-laws to a provision of the Code or a
rule or regulation promulgated thereunder means such
provision, rule or regulation as amended from time to time or
any provision of a federal law, or any federal rule or
regulation, from time to time in effect that has replaced such
provision, rule or regulation;

(h) "Common Shares" means the common shares, par value U.S.$1.00
per share, of the Company and includes a fraction of a Common
Share;

<PAGE> 8
(i) "Company" means the company for which these Bye-laws are
approved and confirmed;

(j) "Controlled Shares" of any Person means all Common Shares
owned by such Person, whether:

(i) directly;

(ii) with respect to Persons who are United States Persons,
by application of the attribution and constructive
ownership rules of Sections 958(a) and 958(b) of the
Code; or,

(iii) beneficially owned, directly or indirectly, within the
meaning of Section 13(d)(3) of the Exchange Act and the
rules and regulations thereunder;

(k) "debenture" means debenture stock, mortgages, bonds and any
other such debt securities of the Company whether constituting
a charge on the assets of the Company or not;

(l) "Director" means a director of the Company and shall include
an Alternate Director;

(m) "dividend" includes a bonus or capitalization issue of shares;

(n) "Exchange Act" means the United States Securities Exchange Act
of 1934 as amended from time to time or any federal statute
from time to time in effect that has replaced such statute,
and any reference in these Bye-laws to a provision of the
Exchange Act or a rule or regulation promulgated thereunder
means such provision, rule or regulation as amended from time
to time or any provision of a federal law, or any federal rule
or regulation, from time to time in effect that has replaced
such provision, rule or regulation;

(o) "Fair Market Value" means, with respect to a repurchase of any
shares of the Company in accordance with these Bye-laws, (i)
if such shares are listed on a securities exchange (or quoted
in a securities quotation system), the average closing sale
price of such shares on such exchange (or in such quotation
system), or, if such shares are listed on (or quoted in) more
than one exchange (or quotation system), the average closing
sale price of the shares on the principal securities exchange
(or quotation system) on which such shares are then traded,
or, if such shares are not then listed on a securities
exchange (or quotation system) but are traded in the
over-the-counter market, the average of the latest bid and
asked quotations for such shares in such market, in each case
for the last five trading days immediately preceding the day
on which notice of the repurchase of such

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<PAGE> 9
shares is sent pursuant to these Bye-laws or (ii) if no such
closing sales prices or quotations are available because such
shares are not publicly traded or otherwise, the fair value of
such shares as determined by one independent nationally
recognized investment banking firm chosen by the Company and
reasonably satisfactory to the Member whose shares are to be
so repurchased by the Company, provided that the calculation
of the Fair Market Value of the shares made by such appointed
investment banking firm (i) shall not include any discount
relating to the absence of a public trading market for, or any
transfer restrictions on, such shares, and (ii) such
calculation shall be final and the fees and expenses stemming
from such calculation shall be borne by the Company or its
assignee, as the case may be;

(p) "Formula" has the meaning ascribed thereto in Bye-law 52;

(q) "general meeting" means a meeting of the Members of the
Company;

(r) "Member" means the person registered in the Register of
Members as the holder of shares in the Company and, when two
or more persons are so registered as joint holders of shares,
means the person whose name stands first in the Register of
Members as one of such joint holders or all of such persons as
the context so requires;

(s) "notice" means written notice as further defined in these
Bye-laws unless otherwise specifically stated;

(t) "Officer" means any person appointed by the Board to hold an
office in the Company;

(u) "Person" means any individual, company, corporation, firm,
partnership, trust or any other business, entity or person,
whether or not recognized as constituting a separate legal
entity;

(v) "Preferred Shares" means the preferred shares, of the Company
and includes a fraction of a Preferred Share;

(w) "Register of Directors and Officers" means the Register of
Directors and Officers referred to in Bye-law 29;

(x) "Register of Members" means the Register of Members referred
to in Bye-law 59;

(y) "Secretary" means the person appointed to perform any or all
the duties of secretary of the Company and includes any deputy
or assistant secretary;

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<PAGE> 10
(z) "Securities Act" means the United States Securities Act of
1933 as amended from time to time or any federal statute from
time to time in effect which has replaced such statute, and
any reference in these Bye-laws to a provision of the
Securities Act or a rule or regulation promulgated thereunder
means such provision, rule or regulation as amended from time
to time or any provision of a federal law, or any federal rule
or regulation, from time to time in effect that has replaced
such provision, rule or regulation;

(aa) "share" means a share of any class of shares in the capital of
the Company (including, where the context so admits, Common
Shares) and includes a fraction of a share;

(bb) "subsidiary", with respect to any Person, means a company,
more than fifty percent (50%) (or, in the case of a wholly
owned subsidiary, one hundred percent (100%)) of the
outstanding Voting Shares of which are owned, directly or
indirectly, by such Person or by one or more other
subsidiaries of such Person, or any such Person and one or
more other subsidiaries;

(cc) "10% Shareholder" means a Person who owns, in the aggregate,
(i) directly, (ii) with respect to Persons who are United
States Persons, by application of the attribution and
constructive ownership rules of Sections 958(a) and 958(b) of
the Code or (iii) beneficially, directly or indirectly, within
the meaning of Section 13(d)(3) of the Exchange Act, issued
Common Shares of the Company representing ten percent (10%) or
more of the total combined voting rights attaching to the
issued Common Shares and the issued shares of any other class
or classes of shares of the Company;

(dd) "Unadjusted Basis", when used with respect to the aggregate
voting rights held by any Member, refers to the determination
of such rights without reference to the provisions relating to
the adjustment of voting rights contained in Bye-law 52;

(ee) "United States" means the United States of America and
dependent territories or any part thereof;

(ff) "United States 25% Shareholder" means a United States Person
who owns, directly or by application of the attribution and
constructive ownership rules of Sections 958(a) and 958(b) of
the Code, issued shares representing either (i) more than
twenty-five percent (25%) of the total combined voting rights
attaching to the issued Common Shares and the issued shares of
any other class or classes of shares of the Company or (ii)
more than twenty-five percent (25%) of the total combined
value of the issued Common

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<PAGE> 11
Shares and any other issued shares of the Company, in each
case determined pursuant to Section 957 of the Code;

(gg) "United States Person" means (i) an individual who is a
citizen or resident of the United States, (ii) a corporation
or partnership that is, as to the United States, a domestic
corporation or partnership and (iii) an estate or trust that
is subject to United States Federal income tax on its income
regardless of its source; and

(hh) "Voting Share" of any Person means any share in such Person
conferring voting rights on the holder thereof (other than
such voting rights as would exist solely in relation to a
proposal to alter or vary the rights attaching to such shares
solely upon the future occurrence of a contingency or voting
rights attaching solely by virtue of the provisions of the
Act).

(2) In these Bye-laws, where not inconsistent with the context:

(a) words denoting the plural number include the singular number
and vice versa;

(b) words denoting the masculine gender include the feminine
gender;

(d) the word:

(i) "may" shall be construed as permissive;

(ii) "shall" shall be construed as imperative; and

(e) unless otherwise provided herein words or expressions defined
in the Act shall bear the same meaning in these Bye-laws.

(3) Expressions referring to writing or written shall, unless the contrary
intention appears, include facsimile, printing, lithography, photography and
other modes of representing words in a visible form.

(4) Headings used in these Bye-laws are for convenience only and are not
to be used or relied upon in the construction hereof.

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<PAGE> 12
BOARD OF DIRECTORS

2. Board of Directors
The business of the Company shall be managed and conducted by the Board.

3. Management of the Company

(1) In managing the business of the Company, the Board may exercise all
such powers of the Company as are not, by statute or by these Bye-laws, required
to be exercised by the Company in general meeting subject, nevertheless, to
these Bye-laws, the provisions of any statute, and to such regulations as may be
prescribed by the Company in general meeting.

(2) No regulation or alteration to these Bye-laws made by the Company in
general meeting shall invalidate any prior act of the Board which would have
been valid if that regulation or alteration had not been made.

(3) The Board may procure that the Company pays to Members or third
parties all expenses incurred in promoting and incorporating the Company.

4. Power to appoint chief executive officer

The Board may from time to time appoint one or more Persons to the office
of chief executive officer of the Company who shall, subject to the control of
the Board, supervise and administer all of the general business and affairs of
the Company.

5. Power to appoint manager

The Board may appoint a Person to act as manager of the Company's day to
day business, who may but need not be its chief executive officer, and may
entrust to and confer upon such manager such powers and duties as it deems
appropriate for the transaction or conduct of such business.

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<PAGE> 13
6. Power to authorise specific actions

The Board may from time to time and at any time authorise any Director,
Officer or other Person or body of Persons to act on behalf of the Company for
any specific purpose and in connection therewith to execute any agreement,
document or instrument on behalf of the Company.

7. Power to appoint attorney

The Board may from time to time and at any time by power of attorney
appoint any company, firm, Person or body of Persons, whether nominated directly
or indirectly by the Board, to be an attorney of the Company for such purposes
and with such powers, authorities and discretions (not exceeding those vested in
or exercisable by the Board) and for such period and subject to such conditions
as they may think fit and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such attorney as
the Board may think fit and may also authorise any such attorney to sub-delegate
all or any of the powers, authorities and discretions so vested in the attorney.
Such attorney may, if so authorised under the seal of the Company, execute any
deed or instrument under their personal seal with the same effect as the
affixation of the seal of the Company.

8. Power to appoint and dismiss employees

The Board may appoint, suspend or remove any officer, manager, secretary,
clerk, agent or employee of the Company and may fix their remuneration and
determine their duties.

9. Power to borrow and charge property

The Board may exercise all the powers of the Company to borrow money and
to mortgage or charge its undertaking, property and uncalled capital, or any
part thereof, and may issue debentures, debenture stock and other securities
whether outright or as security for any debt, liability or obligation of the
Company or any third party.

10. Power to purchase shares of the Company

(1) Exercise of Power to Repurchase Shares of the Company

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<PAGE> 14
The Board may exercise all the powers of the Company to purchase all
or any part of its own shares pursuant to Sections 42 and 42A of the Act or to
discontinue the Company to a named country or jurisdiction outside Bermuda
pursuant to Section 132G of the Act.

(2) Unilateral Repurchase Right

Subject to Section 42A of the Act, if the Board in its absolute and
unfettered discretion, on behalf of the Company, determines that share ownership
by any Member may result in adverse tax, regulatory or legal consequences to the
Company, any of its subsidiaries or any of the Members, the Company will have
the option, but not the obligation, to repurchase all or part of the shares held
by such Member (to the extent the Board, in the reasonable exercise of its
discretion, determines it is necessary to avoid or cure such adverse
consequences) for immediately available funds in an amount equal to the Fair
Market Value of such shares on the date the Company sends the Repurchase Notice
referred to below (the "Repurchase Price"); provided, that the Board will use
reasonable efforts to exercise this option equally among similarly situated
Members (to the extent possible under the circumstances). In that event, the
Company will also be entitled to assign its repurchase right to a third party or
parties including one or more of the other Members, with the consent of such
assignee. Each Member shall be bound by the determination by the Company to
repurchase or assign its right to repurchase such Member's shares and, if so
required by the Company, shall sell the number of shares that the Company
requires it to sell.

In the event that the Company or its assignee(s) determines to repurchase
any such shares, the Company shall provide each Member concerned with written
notice of such determination (a "Repurchase Notice") at least seven (7) calendar
days prior to such repurchase or such shorter period as each such Member may
authorize, specifying the date on which any such shares are to be repurchased
and the Repurchase Price. The Company may revoke the Repurchase Notice at any
time before it (or its assignee(s)) pays for the shares. Neither the Company nor
its assignee(s) shall be obliged to give general notice to the Members of any
intention to purchase or the conclusion of any purchase of shares. Payment of
the Repurchase Price by the Company or its assignee(s) shall be by wire transfer
or certified check and made

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<PAGE> 15
at a closing to be held no less than seven (7) calendar days after receipt of
the Repurchase Notice by the Member.

(3) Restrictions on repurchases

If the Company redeems or purchases shares pursuant to this Bye-law
10, it shall do so only in a manner the Board believes would not result, upon
consummation of such redemption or purchase, in the number of total Controlled
Shares of any Person, as a percentage of the shares of the Company, increasing
to ten percent (10%) or any higher percentage on an Unadjusted Basis.

11. Election of Directors

(1) The Board shall consist of a maximum of fourteen (14) Directors,
unless otherwise set by the Members, each having one vote, who shall be elected,
except in the case of casual vacancy, by the Members in the manner set forth in
paragraph (2) of this Bye-law 11 at the annual general meeting or any special
general meeting called for the purpose and who shall hold office for the term
set forth in paragraph (3) of this Bye-law 11.

(2) No person other than a Director retiring at the meeting shall, unless
recommended by the Directors for election, be eligible for election as a
Director at any general meeting unless not less than 120 days before the date
appointed for the meeting there shall have been lodged at the Company notice in
writing signed by Members holding 5% of the outstanding shares entitled to vote
at the meeting for which such notice is given of his intention to propose such
person for election and also notice in writing signed by the person to be
proposed of his willingness to be elected.

(3) The Board shall be divided into three classes of directors, each class
to have approximately the same number of directors as determined by the Board.
The initial term of the first class of directors shall expire at the first
annual meeting of the Company's shareholders following the completion of the
initial public offering of the Company's Common Shares. The initial term of the
second class of directors shall expire at the second annual meeting following
the completion of the initial public offering of the Company's Common Shares.
The initial term

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<PAGE> 16
of the third class of directors shall expire at the third annual meeting
following the completion of the initial public offering of the Company's Common
Shares. Following their initial terms, all classes of directors shall be elected
to three-year terms.

12. Defects in appointment of Directors

All acts done bona fide by any meeting of the Board or by a committee of
the Board or by any person acting as a Director shall, notwithstanding that it
be afterwards discovered that there was some defect in the appointment of any
Director or person acting as aforesaid, or that they or any of them were
disqualified, be as valid as if every person had been duly appointed and was
qualified to be a Director.

13. Alternate Directors

(1) Each Director may appoint an Alternate Director and such appointment
shall become effective upon the Secretary receiving written notice of such
appointment. Any person so appointed shall have all the rights and powers of the
Director or Directors for whom such person is appointed in the alternate,
provided that such person shall not be counted more than once in determining
whether or not a quorum is present. Any director may, upon notice to the
Secretary, remove or replace his or her alternate with or without cause.

(2) An Alternate Director shall be entitled to receive notice of all
meetings of the Board and to attend and vote at any such meeting at which a
Director for whom such Alternate Director was appointed in the alternative is
not personally present and generally to perform at such meeting all the
functions of such Director for whom such Alternate Director was appointed.

(3) An Alternate Director shall cease to be such if the Director for whom
such Alternate Director was appointed ceases for any reason to be a Director but
may be re-appointed by the Board as alternate to the person appointed to fill
the vacancy in accordance with these Bye-laws.

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<PAGE> 17
14. Removal of Directors

(1) Subject to any provision to the contrary in these Bye-laws, the
Members may, at any special general meeting convened for that purpose and held
in accordance with these Bye-laws, remove any Director provided that the notice
of any such meeting convened for the purpose of removing a Director shall
contain a statement of the intention so to do and be served on such Director not
less than 14 days before the meeting and at such meeting such Director shall be
entitled to be heard on the motion for such Director's removal.

(2) A vacancy on the Board created by the removal of a Director under the
provisions of subparagraph (1) of this Bye-law may be filled by the Members at
the meeting at which such Director is removed. A Director so appointed shall
hold office until the next annual general meeting or until such Director's
successor is elected or appointed or such Director's office is otherwise vacated
and, in the absence of such election or appointment, the Board may fill any such
vacancy in accordance with Bye-law 15.

15. Vacancies on the Board

(1) The Board shall have the power from time to time and at any time to
appoint any person as a Director to fill a vacancy on the Board occurring as the
result of the death, disability, disqualification or resignation of any Director
or if such Director's office is otherwise vacated. A Director so appointed by
the Board shall hold office until the next succeeding annual general meeting, at
which the Members vote on the election of such Director for the balance of the
term of such vacant Board position, or until such Director's successor is
elected or appointed or such Director's office is otherwise vacated.

(2) The Board may act notwithstanding any vacancy in its number but, if
and so long as its number is reduced below the number fixed by these Bye-laws,
or such greater number as may have been determined by the Members, as the quorum
necessary for the transaction of business at meetings of the Board, the
continuing Directors or Director may act only for the purpose of (i) summoning a
general meeting of the Company or (ii) preserving the assets of the Company.

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<PAGE> 18
(3) The office of Director shall be vacated if the Director:

(a) is removed from office pursuant to these Bye-laws or is
prohibited from being a Director by law;

(b) is or becomes bankrupt or makes any arrangement or composition
with his creditors generally;

(d) resigns his or her office by notice in writing to the Company.

16. Notice of meetings of the Board

(1) The Chairman or Deputy Chairman, or any two (2) Directors may, and the
Secretary on the requisition of the Chairman or Deputy Chairman, or any two (2)
Directors shall, at any time summon a meeting of the Board by at least three (3)
Business Days' notice to each Director and Alternate Director, unless such
Director or Alternate Director consents to shorter notice.

(2) Notice of a meeting of the Board shall specify the general nature of
the business to be considered at such meeting and shall be deemed to be duly
given to a Director if it is given to such Director in person or otherwise
communicated or sent to such Director by registered mail, courier service,
cable, telex, telecopier, facsimile or other mode of representing words in a
legible and non-transitory form at such Director's last known address or any
other address given by such Director to the Company for this purpose. If such
notice is sent by next-day courier, cable, telex, telecopier or facsimile, it
shall be deemed to have been given the Business Day following the sending
thereof and, if by registered mail, three (3) Business Days following the
sending thereof.

(3) Meetings of the Directors may be held within or outside of Bermuda.

17. Quorum at meetings of the Board

The quorum necessary for the transaction of business at a meeting of the
Board shall be a majority of the Directors then in office, present in person or
represented by proxy.

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18. Meetings of the Board

(1) The Board may meet for the transaction of business, adjourn and
otherwise regulate its meetings as it sees fit.

(2) Directors may participate in any meeting of the Board by means of such
telephone, electronic or other communication facilities as permit all persons
participating in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.

(3) A resolution put to the vote at a duly constituted meeting of the
Board at which a quorum is present and acting throughout shall be carried by the
affirmative votes of a majority of the votes cast and in the case of an equality
of votes, the resolution shall fail.

19. Unanimous written resolutions

A resolution in writing signed by all the Directors which may be in
counterparts, shall be as valid as if it had been passed at a meeting of the
Board duly called and constituted, such resolution to be effective on the date
on which the last Director signs the resolution. For the purposes of this
Bye-law only, "Director" shall not include an Alternate Director.

20. Contracts and disclosure of Directors' interests

(1) Any Director, or any Director's firm, partner or any company with whom
any Director is associated, may act in a professional capacity for the Company
and such Director or such Director's firm, partner or such company shall be
entitled to remuneration for professional services as if such Director were not
a Director, provided that nothing herein contained shall authorise a Director or
Director's firm, partner or such company to act as Auditor of the Company.

(2) A Director who is directly or indirectly interested in a contract or
proposed contract or arrangement with the Company shall declare the nature of
such interest as required by the Act.

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<PAGE> 20
(3) Following a declaration being made pursuant to this Bye-law, and
unless disqualified by the chairman of the relevant Board meeting, a Director
may vote in respect of any contract or proposed contract or arrangement in which
such Director is interested and may be counted in the quorum at such meeting.

21. Remuneration of Directors

(1) The remuneration, (if any) of the Directors shall be determined by the
Board of Directors of the Company and shall be deemed to accrue from day to day.
The Directors may also be paid all travel, hotel and other expenses properly
incurred by them in attending and returning from meetings of the Board, any
committee appointed by the Board, general meetings of the Company, or in
connection with the business of the Company or their duties as Directors
generally.

(2) A Director may hold any other office or place of profit under the
Company (other than the office of Auditor) in conjunction with his office of
Director for such period and on such terms as to remuneration and otherwise as
the Directors may determine.

22. Other interests of Directors

A Director may be or become a director or other officer of or otherwise
interested in any company promoted by the Company or in which the Company may be
interested as member or otherwise, and no such Director shall be accountable to
the Company for any remuneration or other benefits received by him as a director
or officer of, or from his interest in, such other company. The Board may also
cause the voting power conferred by the shares in any other company held or
owned by the Company to be exercised in such manner in all respects as the Board
thinks fit, including the exercise thereof in favour of any resolution
appointing the Directors or any of them to be directors or officers of such
other company, or voting or providing for the payment of remuneration to the
directors or officers of such other company.

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<PAGE> 21
COMMITTEES

23. Power to delegate to a committee

Subject to the Act, the Board may delegate any of its powers to a
committee appointed by the Board which may consist partly or entirely of
non-Directors, and every such committee shall conform to such directions as the
Board shall impose on them.

OFFICERS

24. Officers of the Company

The Officers of the Company shall consist of a Chief Executive Officer, a
Chairman, a Deputy Chairman, a Secretary and such additional Officers as the
Board may from time to time determine all of whom shall be deemed to be Officers
for the purposes of these Bye-laws.

25. Appointment of Officers

(1) The Board shall, as soon as possible after each annual general meeting
elect one of its number to be Chairman of the Company and another of its number
to be Deputy Chairman.

(2) The Secretary, the Chief Executive Officer and any additional Officers
shall be appointed by the Board from time to time.

26. Remuneration of Officers

The Officers shall receive such remuneration as the Board may from time to
time determine.

27. Duties of Officers

The Officers shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to them by
the Board from time to time.

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<PAGE> 22
28. Chairman of meetings

The Chairman shall act as chairman at all meetings of the Members and of
the Board at which such person is present. In his absence the Deputy Chairman,
if present, shall act as chairman and in the absence of both of them a chairman
shall be appointed or elected by those present at the meeting and entitled to
vote.

29. Register of Directors and Officers

(1) The Board shall cause to be kept in one or more books at its
registered office a Register of Directors and Officers and shall enter therein
the following particulars with respect to each Director and the Chairman, Deputy
Chairman, provided each such person is a Director, and the Chief Executive
Officer and Secretary, that is to say:

(a) first name and surname; and

(b) address.

(2) The Board shall, within the period of fourteen days from the
occurrence of -

(a) any change among its Directors and in the Chairman, Deputy
Chairman, Chief Executive Officer or Secretary; or

(b) any change in the particulars contained in the Register of
Directors and Officers,

cause to be entered on the Register of Directors and Officers the particulars of
such change and the date on which such change occurred.

(3) The Register of Directors and Officers shall be open to inspection at
the office of the Company on every Business Day, subject to such reasonable
restrictions as the Board may impose, so that not less than two hours in each
Business Day be allowed for such inspection.

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<PAGE> 23
MINUTES

30. Obligations of Board to keep minutes

The Board shall cause minutes to be duly entered in books provided for the
purpose:-

(a) of all elections and appointments of Officers;

(b) of the names of the Directors present at each meeting of the
Board and of any committee appointed by the Board; and

(c) of all resolutions and proceedings of general meetings of the
Members, meetings of the Board, meetings of managers and
meetings of committees appointed by the Board.

INDEMNITY

31. Indemnification of Directors and Officers of the Company

(a) The Directors, Secretary and other Officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them, and their
heirs, executors and administrators, shall be indemnified and secured harmless
out of the assets of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their heirs, executors
or administrators, shall or may incur or sustain by or by reason of any act
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts, including without
limitation any acts taken with regard to subsidiaries of the Company, and none
of them shall be answerable for the acts, receipts, neglects or defaults of the
others of them or for joining in any receipts for the sake of conformity, or for
the acts of or the solvency or honesty of any bankers or other persons with whom
any moneys or effects belonging to the Company shall or may be lodged or
deposited for safe custody, or for insufficiency or deficiency of any security
upon which any moneys of or belonging to the Company shall be placed out on or
invested, or for any other loss, misfortune or damage which may happen in the
execution of their respective offices or trusts, or in relation thereto,
PROVIDED THAT this indemnity shall not extend to any matter in respect of any
fraud or dishonesty which may attach to any of said persons.

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(b) Any person claiming indemnification within the scope of Bye-law 31(a)
shall be entitled to advances from the Company for payment of the expenses of
defending actions against such person in the manner and to the full extent
permissible under Bermuda law, provided that should he be found guilty of a
criminal or other offence for which he cannot by law be indemnified he shall
reimburse the Company the funds advanced.

(c) On the request of any person requesting indemnification under Bye-law
31(a), the Board or a committee thereof shall determine whether such
indemnification is permissible or such determination shall be made by
independent legal counsel if the Board or committee so directs or if the Board
or committee is not empowered by statute to make such determination.

(d) No amendment or repeal of any provision of this Bye-law 31 shall
alter, to the detriment of such person, the right of such person to the
advancement of expenses or indemnification related to a claim based on an act or
failure to act which took place prior to such amendment, repeal or termination.

32. Waiver of claim by Member

Each Member agrees to waive any claim or right of action such Member might
have, whether individually or by or in the right of the Company, against any
Director or Officer on account of any action taken by such Director or Officer,
or the failure of such Director or Officer to take any action in the performance
of his duties with or for the Company, PROVIDED THAT such waiver shall not
extend to any matter in respect of any fraud or dishonesty which may attach to
such Director or Officer.

MEETINGS

33. Notice of annual general meeting

The annual general meeting of the Company shall be held in each year at
such time and place as the Chairman or any two Directors or any Director and the
Secretary or the Board shall appoint. At least ten days' written notice of such
meeting shall be given to each Member stating

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the date, place and time at which the meeting is to be held, that the election
of Directors will take place thereat, and as far as practicable, the other
business to be conducted at the meeting.

34. Notice of special general meeting

The Chairman or any two Directors or any Director and the Secretary or the
Board may convene a special general meeting of the Company whenever in their
judgment such a meeting is necessary, upon not less than ten days' written
notice which shall state the time, place and the general nature of the business
to be considered at the meeting.

35. Accidental omission of notice of general meeting

The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a general meeting by, any person entitled to receive
notice shall not invalidate the proceedings at that meeting.

36. Meeting called on requisition of Members

Notwithstanding anything herein, the Board shall, on the requisition of
Members holding at the date of the deposit of the requisition not less than
one-tenth of such of the paid-up share capital of the Company as at the date of
the deposit carries the right to vote at general meetings of the Company,
forthwith proceed to convene a special general meeting of the Company and the
provisions of section 74 of the Act shall apply.

37. Short notice

A general meeting of the Company shall, notwithstanding that it is called
by shorter notice than that specified in these Bye-laws, be deemed to have been
properly called if it is so agreed by (i) all the Members entitled to attend and
vote thereat in the case of an annual general meeting; and (ii) by a majority in
number of the Members having the right to attend and vote at the meeting, being
a majority together holding not less than 95% in nominal value of the shares
giving a right to attend and vote thereat in the case of a special general
meeting.

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38. Postponement of Meetings

The Board may postpone any general meeting called in accordance with the
provisions of these Bye-laws (other than a meeting requisitioned under Bye-law
36) provided that notice of postponement is given to each Member before the time
for such meeting. Fresh notice of the date, time and place for the postponed
meeting shall be given to each Member in accordance with the provisions of these
Bye-laws.

39. Quorum For General Meeting

At any general meeting of the Company two or more persons present in
person and representing in person or by proxy in excess of 50% (on an Unadjusted
Basis) of the total issued and outstanding Common Shares throughout the meeting
shall form a quorum for the transaction of business; provided, that if the
Company shall at any time have only one Member, one Member present in person or
by proxy shall constitute a quorum. If within half an hour from the time
appointed for the meeting a quorum is not present, the meeting shall stand
adjourned to the same day two (2) weeks later, at the same time and place or to
such other day, time or place as the Chairman (if there be one) or failing him
the Deputy Chairman or any Director in attendance may determine. Unless the
meeting is adjourned to a specific date and time, fresh notice of the date, time
and place for the adjourned meeting shall be given to each Member in accordance
with the provisions of these Bye-laws.

40. Adjournment of meetings

The chairman of a general meeting may, with or without the consent of the
Members at any general meeting at which a quorum is present (and shall if so
directed), adjourn the meeting. Unless the meeting is adjourned to a specific
date and time, fresh notice of the date, time and place for the resumption of
the adjourned meeting shall be given to each Member in accordance with the
provisions of these Bye-laws.

41. Attendance at meetings

Unless the Board determines otherwise, Members may participate in any
general meeting by means of such telephone, electronic or other communication
facilities as permit all persons

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participating in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.

42. Written resolutions

(1) Subject to subparagraph (6), anything which may be done by resolution
of the Company in general meeting or by resolution of a meeting of any class of
the Members of the Company, may, without a meeting and without any previous
notice being required, be done by resolution in writing signed by, or, in the
case of a Member that is a corporation whether or not a company within the
meaning of the Act, on behalf of, all the Members who at the date of the
resolution would be entitled to attend the meeting and vote on the resolution.

(2) A resolution in writing may be signed by, or, in the case of a Member
that is a corporation whether or not a company within the meaning of the Act, on
behalf of, all the Members, or any class thereof, in as many counterparts as may
be necessary.

(3) For the purposes of this Bye-law, the date of the resolution is the
date when the resolution is signed by, or, in the case of a Member that is a
corporation whether or not a company within the meaning of the Act, on behalf
of, the last Member to sign and any reference in any Bye-law to the date of
passing of a resolution is, in relation to a resolution made in accordance with
this Bye-law, a reference to such date.

(4) A resolution in writing made in accordance with this Bye-law is as
valid as if it had been passed by the Company in general meeting or by a meeting
of the relevant class of Members, as the case may be, and any reference in any
Bye-law to a meeting at which a resolution is passed or to Members voting in
favour of a resolution shall be construed accordingly.

(5) A resolution in writing made in accordance with this Bye-law shall
constitute minutes for the purposes of sections 81 and 82 of the Act.

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(6) This Bye-law shall not apply to:

(a) a resolution passed pursuant to section 89(5) of the Act; or

(b) a resolution passed for the purpose of removing a Director
before the expiration of his term of office under these
Bye-laws.

43. Attendance of Directors

The Directors of the Company shall be entitled to receive notice of and to
attend and be heard at any general meeting.

44. Voting at meetings

Subject to the provisions of the Act and these Bye-laws, any question
proposed for the consideration of the Members at any general meeting, including
but not limited to the approval of an amalgamation pursuant to Section 104 of
the Act, shall be decided by the affirmative votes of a majority of the votes
cast in accordance with the provisions of these Bye-laws and in the case of an
equality of votes the resolution shall fail.

45. Voting on show of hands

At any general meeting a resolution put to the vote of the meeting shall,
in the first instance, be voted upon by a show of hands and, subject to any
rights or restrictions for the time being lawfully attached to any class of
shares and subject to the provisions of these Bye-laws, every Member present in
person and every person holding a valid proxy at such meeting shall be entitled
to one vote and shall cast such vote by raising his or her hand.

46. Decision of chairman

At any general meeting a declaration by the chairman of the meeting that a
question proposed for consideration has, on a show of hands, been carried, or
carried unanimously, or by a particular majority, or lost, or an entry to that
effect in a book containing the minutes of the proceedings of the Company shall,
subject to the provisions of these Bye-laws, be conclusive evidence of that
fact.

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47. Demand for a poll

(1) Notwithstanding the provisions of the immediately preceding two
Bye-laws, at any general meeting of the Company, in respect of any question
proposed for the consideration of the Members (whether before or on the
declaration of the result of a show of hands as provided for in these Bye-laws),
a poll may be demanded by any of the following persons: -

(a) the chairman of such meeting; or

(b) at least two Members present in person or represented by
proxy; or

(c) any Member or Members present in person or represented by
proxy and holding between them not less than one-tenth of the
total voting rights of all the Members having the right to
vote at such meeting; or

(d) any Member or Members present in person or represented by
proxy holding Common Shares on which an aggregate sum has been
paid up equal to not less than one-tenth of the total sum paid
up on all Common Shares.

(2) Where, in accordance with the provisions of paragraph (1) of this
Bye-law, a poll is demanded, subject to any rights or restrictions for the time
being lawfully attached to any class of shares, including any limitation on the
voting power of any Controlled Shares pursuant to Bye-law 52, every Person
present at such meeting shall have one vote for each share of which such Person
is the holder or for which such person holds a proxy and such vote shall be
counted in the manner set out in paragraph (4) of this Bye-law or in the case of
a general meeting at which one or more Members are present by telephone in such
manner as the chairman of the meeting may direct and the result of such poll
shall be deemed to be the resolution of the meeting at which the poll was
demanded and shall replace any previous resolution upon the same matter which
has been the subject of a show of hands.

(3) A poll demanded in accordance with the provisions of paragraph (1) of
this Bye-law, for the purpose of electing a chairman or on a question of
adjournment, shall be taken forthwith and a poll demanded on any other question
shall be taken in such manner and at such time and place as the chairman may
direct and any business other than that upon which a poll has been demanded may
be proceeded with pending the taking of the poll.

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(4) Where a vote is taken by poll each person present and entitled to vote
shall be furnished with a ballot paper on which such person shall record his or
her vote in such manner as shall be determined at the meeting having regard to
the nature of the question on which the vote is taken, and each ballot paper
shall be signed or initialled or otherwise marked so as to identify the voter
and the registered holder in the case of a proxy. At the conclusion of the poll
the ballot papers shall be examined and counted by a committee of not less than
two Members or proxy holders appointed by the chairman for the purpose and the
result of the poll shall be declared by the chairman.

48. Seniority of joint holders voting

In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the votes
of the other joint holders, and for this purpose seniority shall be determined
by the order in which the names stand in the Register of Members.

49. Instrument of proxy

The instrument appointing a proxy shall be in writing in the form, or as
near thereto as circumstances admit, a Form "A" in the Schedule hereto, under
the hand of the appointor or of his attorney duly authorised in writing, or if
the appointor is a corporation, either under its seal, or under the hand of a
duly authorised officer or attorney. The decision of the chairman of any general
meeting as to the validity of any instrument of proxy shall be final.

50. Representation of corporations at meetings

A corporation which is a Member may by written instrument authorise such
person as it thinks fit to act as its representative at any meeting of the
Members and the person so authorised shall be entitled to exercise the same
powers on behalf of the corporation which such person represents as that
corporation could exercise if it were an individual Member. Notwithstanding the
foregoing, the chairman of the meeting may accept such assurances as he or she
thinks fit as to the right of any person to attend and vote at general meetings
on behalf of a corporation which is a Member.

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SHARE CAPITAL AND SHARES

51. Rights of shares

(1) The share capital of the Company shall initially be divided into two
classes of shares consisting of (i) 100,000,000 Common Shares and (ii)
50,000,000 Preferred Shares.

(2) The holders of Common Shares shall, subject to the provisions of these
Bye-laws:

(a) be entitled to one vote per Common Share or, in the case of
Controlled Shares, if applicable, a fraction of a vote per
Controlled Share as determined pursuant to Bye-law 52;

(b) be entitled to such dividends as the Board may from time to
time declare;

(c) in the event of a liquidation, winding-up or dissolution of
the Company, whether voluntary or involuntary or for the
purpose of a reorganisation or otherwise or upon any
distribution of capital, be entitled to share equally and
ratably in the assets of the Company, if any, remaining after
the payment of all debts and liabilities of the Company and
the liquidation preference of any outstanding Preferred
Shares; and

(d) generally be entitled to enjoy all of the rights attaching to
shares.

(3) The Board is authorised, subject to limitations prescribed by law, to
issue the Preferred Shares in series, to establish from time to time the number
of Preferred Shares to be included in each such series, and to fix the
designation, powers, preferences and rights to the Preferred Shares of each such
series and the qualifications, limitations or restrictions thereof. The terms of
any series of Preferred Shares shall be set forth in a Certificate of
Designation in the minutes of the Board.

The authority of the Board with respect to each series of Preferred Shares
shall include, but not be limited to, determination of the following:

(a) the number of Preferred Shares constituting that series and
the distinctive designation of that series;

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(b) the rate of dividend, and whether (and if so, on what terms
and conditions) dividends shall be cumulative (and if so,
whether unpaid dividends shall compound or accrue interest) or
shall be payable in preference or in any other relation to the
dividends payable on any other class or classes of shares or
any other series of the Preferred Shares;

(c) whether that series shall have voting rights in addition to
the voting rights provided by law and, if so, the terms and
extent of such voting rights, provided that if the Preferred
Shares shall have voting rights, such Preferred Shares shall
be included in the number of Controlled Shares held by any
Person;

(d) the par value of the Preferred Shares;

(e) whether the Preferred Shares may be redeemed and, if so, the
terms and conditions on which they may be redeemed (including,
without limitation, the dates upon or after which they may be
redeemed and the price or prices at which they may be
redeemed, which price or prices may be different in different
circumstances or at different redemption dates);

(f) whether the Preferred Shares shall be issued with the
privilege of conversion or exchange and, if so, the terms and
conditions of such conversion or exchange (including, without
limitation the price or prices or the rate or rates of
conversion or exchange or any terms for adjustment thereof);

(g) the amounts, if any, payable upon the Preferred Shares in the
event of voluntary liquidation, dissolution or winding up of
the Company in preference of shares of any other class or
series and whether the Preferred Shares shall be entitled to
participate generally in distributions on the Common Shares
under such circumstances;

(h) the amounts, if any, payable upon the Preferred Shares in the
event of involuntary liquidation, dissolution or winding up of
the Company in preference of shares of any other class or
series and whether the Preferred Shares shall be entitled to
participate generally in distributions on the Common Shares
under such circumstances;

(i) sinking fund provisions, if any, for the redemption or
purchase of the Preferred Shares (the term "sinking fund"
being understood to include any similar fund, however
designated); and

(j) any other relative rights, preferences, limitations and powers
of that series.

52. Limitation on voting rights of Controlled Shares

(1) Subject to any rights or restrictions for the time being attached to
any class or classes of shares, on a poll at a general meeting every Member of
record present in person or

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by proxy shall have one vote for each Common Share and such voting rights, if
any, for each Preferred Share registered in his name in the register; PROVIDED,
however, that, subject to the following provisions of this Bye-law 52, if and
for so long as the number of issued Controlled Shares of any Person would
constitute ten percent (10%) or more of the total combined voting rights
attaching to the issued shares of the Company (calculated after giving effect to
any prior reduction in voting rights attaching to Controlled Shares of other
Persons as provided in this Bye-law 52), each such issued Controlled Share,
regardless of the identity of the registered holder thereof, shall confer only a
fraction of a vote as determined by the following formula (the "Formula"):

(T - C) Divided By (9.1 x C)

Where: "T" is the aggregate number of votes conferred by all the issued
shares immediately prior to that application of the Formula with
respect to any particular Member, adjusted to take into account any
prior reduction taken with respect to any other Member pursuant to
Bye-law 52(4) as at the same date;

"C" is the number of issued Controlled Shares attributable to such
Person.

(2) The Directors may, by notice in writing, require any Member to provide
within not less than ten (10) Business Days, complete and accurate information
to the registered office or such other place as the Directors may designate in
respect of any or all of the following matters:

(a) the number of shares in which such Member is legally or
beneficially interested;

(b) the Persons who are beneficially interested in shares in
respect of which such Member is the registered holder;

(c) the relationship, association or affiliation of such Member
with any other Member or Person whether by means of common
control or ownership or otherwise; or

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(d) any other facts or matters which the Directors may consider
relevant to the determination of the number of Controlled
Shares attributable to any Person.

(3) If any Member does not respond to any notice given pursuant to Bye-law
52(2) above within the time specified therein or the Directors shall have reason
to believe that any information provided in relation thereto is incomplete or
inaccurate, the Directors may determine that the votes attaching to any Common
Shares registered in the name of such Member shall be disregarded for all
purposes until such time as a response (or additional response) to such notice
reasonably satisfactory to the Directors has been received as specified therein.

(4) The Formula shall be applied successively as many times as may be
necessary to ensure that no Person shall be a 10% Shareholder at any time. For
the purposes of determining the votes exercisable by Members as at any date, the
Formula shall be applied to the shares of each Member in declining order based
on the respective numbers of total Controlled Shares attributable to each
Member. Thus, the Formula will be applied first to the votes of shares held by
the Member to whom the largest number of total Controlled Shares is attributable
and thereafter sequentially with respect to the Member with the next largest
number of total Controlled Shares. In each case, calculations are made on the
basis of the aggregate number of votes conferred by the issued Common Shares as
of such date, as reduced by the application of the Formula to any issued Common
Shares of any Member with a larger number of total Controlled Shares as of such
date.

(5) Notwithstanding the provisions of paragraphs (1) and (2) of this
Bye-law 52 above, having applied the provisions thereof as best as they consider
reasonably practicable, the Directors may make such final adjustments to the
aggregate number of votes attaching to the Controlled Shares of any Member that
they consider fair and reasonable in all the circumstances to ensure that no
Person shall be a 10% Shareholder at any time.

(6) Notwithstanding anything in these Bye-laws, this bye-law shall not
apply for so long as the Company shall have only one Member.

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53. Power to issue shares

(1) Subject to the provisions of these Bye-laws and to any rights
attaching to issued shares of the Company, the unissued shares of the Company
(whether forming part of the original share capital or any increased share
capital) shall be at the disposal of the Board, which may issue, offer, allot,
exchange or otherwise dispose of shares or options, warrants or other rights to
purchase shares or securities convertible into or exchangeable for shares
(including any employee benefit plan providing for the issuance of shares or
options or rights in respect thereof), at such times, for such consideration and
on such terms and conditions as it may determine (including, without limitation,
such preferred or other special rights or restrictions with respect to dividend,
voting, liquidation or other rights of the shares as may be determined by the
Board).

(2) Notwithstanding the foregoing provisions of this Bye-law, the Company
shall not issue any shares in a manner that the Board believes would cause, by
reason of such issuance, the total Controlled Shares of any Person to equal or
exceed ten percent (10%) of the issued shares of the Company.

Notwithstanding the foregoing provisions of this Bye-law, the restrictions
of this Bye-law 53(2) shall not apply to any issuance of shares to a person
acting as an underwriter in the ordinary course of its business, purchasing such
shares pursuant to a purchase agreement to which the Company is a party, for
resale.

(3) The Board shall, in connection with the issue of any share, have the
power to pay such commission and brokerage as may be permitted by law.

(4) The Company shall not give, whether directly or indirectly, whether by
means of loan, guarantee, provision of security or otherwise, any financial
assistance for the purpose of or in connection with a purchase or subscription
made or to be made by any person of or for any shares in the Company, but
nothing in this Bye-law shall prohibit transactions permitted pursuant to
Sections 39A, 39B, and 39C of the Act.

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54. Variation of rights and alteration of share capital

(1) While the share capital is divided into different classes of shares,
the rights attached to any class (unless otherwise provided by the terms of
issue of the shares of that class) may, whether or not the Company is being
wound-up, be varied with the consent in writing of the holders of three-fourths
of the issued shares of that class or with the sanction of a resolution passed
by a majority of the votes cast at a separate general meeting of the holders of
the shares of the class in accordance with Section 47(7) of the Act. The rights
conferred upon the holders of the shares of any class issued with preferred or
other rights shall not, unless otherwise expressly provided by the terms of
issue of the shares of that class, be deemed to be varied by the creation or
issue of further shares ranking pari passu therewith.

(2) The Company may from time to time by resolution of the Members change
the currency denomination of, increase, alter or reduce its share capital in
accordance with the provisions of Sections 45 and 46 of the Act. Where, on any
alteration of share capital, fractions of shares or some other difficulty would
arise, the Board may deal with or resolve the same in such manner as it thinks
fit including, without limiting the generality of the foregoing, the issue to
Members, as appropriate, of fractions of shares and/or arranging for the sale or
transfer of the fractions of shares of Members.

55. Registered holder of shares

(1) The Company shall be entitled to treat the registered holder of any
share as the absolute owner thereof and accordingly shall not be bound to
recognise any equitable or other claim to, or interest in, such share on the
part of any other person.

(2) Any dividend, interest or other moneys payable in cash in respect of
shares may be paid by cheque or draft sent through the post directed to the
Member at such Member's address in the Register of Members or, in the case of
joint holders, to such address of the holder first named in the Register of
Members, or to such person and to such address as the holder or joint holders
may in writing direct. If two or more persons are registered as joint holders of
any shares any one can give an effectual receipt for any dividend paid in
respect of such shares.

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56. Death of a joint holder

Where two or more persons are registered as joint holders of a share or
shares then in the event of the death of any joint holder or holders the
remaining joint holder or holders shall be absolutely entitled to the said share
or shares and the Company shall recognise no claim in respect of the estate of
any joint holder except in the case of the last survivor of such joint holders.

57. Share certificates

(1) Every Member shall be entitled to a certificate under the seal of the
Company (or a facsimile thereof) specifying the number and, where appropriate,
the class of shares held by such Member and whether the same are fully paid up
and, if not, how much has been paid thereon. The Board may by resolution
determine, either generally or in a particular case, that any or all signatures
on certificates may be printed thereon or affixed by mechanical means.

(2) The Company shall be under no obligation to complete and deliver a
share certificate unless specifically called upon to do so by the person to whom
such shares have been allotted.

(3) If any such certificate shall be proved to the satisfaction of the
Board to have been worn out, lost, mislaid or destroyed the Board may cause a
new certificate to be issued and request an indemnity for the lost certificate
if they see fit.

58. Calls on shares

The Board may from time to time make such calls as it thinks fit upon the
Members in respect of any monies unpaid on the shares allotted to or held by
such Members.

59. Contents of Register of Members

The Board shall cause to be kept in one or more books a Register of
Members and shall enter therein the following particulars:

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(a) the name and address of each Member, the number and, where
appropriate, the class of shares held by such Member and the
amount paid or agreed to be considered as paid on such shares;

(b) the date on which each person was entered in the Register of
Members;

(d) the country where such Member is resident.

60. Inspection of Register of Members

The Register of Members shall be open to inspection at the registered
office of the Company on every Business Day, subject to such reasonable
restrictions as the Board may impose, so that not less than two hours in each
business day be allowed for inspection. The Register of Members may, after
notice has been given by advertisement in an appointed newspaper to that effect,
be closed for any time or times not exceeding in the whole thirty days in each
year.

61. Reserved

TRANSFER OF SHARES

62. Instrument of transfer

(1) An instrument of transfer shall be in the form or as near thereto as
circumstances admit of Form "B" in the Schedule hereto or in such other common
form as the Board or any transfer agent appointed from time to time accepts.
Such instrument of transfer shall be signed by or on behalf of the transferor
and transferee provided that, in the case of a fully paid share, the Board may
accept the instrument signed by or on behalf of the transferor alone. The
transferor shall be deemed to remain the

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holder of such share until the same has been transferred to the transferee in
the Register of Members.

(2) The Board may refuse to recognise any instrument of transfer unless it
is accompanied by the certificate in respect of the shares to which it relates
and by such other evidence as the Board may reasonably require to show the right
of the transferor to make the transfer.

63. Restriction on transfer

(1) Subject to the Act, this Bye-law 63 and such other of the restrictions
contained in these Bye-laws and elsewhere as may be applicable, and except, in
the case of any shares other than the Common Shares, as may otherwise be
provided by the terms of issuance thereof, any Member may sell, assign, transfer
or otherwise dispose of shares of the Company at the time owned by it and, upon
receipt of a duly executed form of transfer in writing, the Directors shall
procure the timely registration of the same. If the Directors refuse to register
a transfer for any reason they shall notify the proposed transferor and
transferee within thirty days of such refusal.

(2) Except with respect to transfers of the Company's shares executed on
the Nasdaq National Market, the Directors shall decline to register a transfer
of shares if the Directors have reason to believe that the effect of such
transfer would be to increase the number of total Controlled Shares of any
Person to ten percent (10%) or any higher percentage of the shares of the
Company on an Unadjusted Basis.

(3) Except with respect to transfers of the Company's shares executed on
the Nasdaq National Market, the Directors may, in their absolute and unfettered
discretion, decline to register the transfer of any shares if the Directors have
reason to believe (i) that such transfer may expose the Company, any subsidiary
thereof, any Member or any Person ceding insurance to the Company or any such
subsidiary to adverse tax or regulatory treatment in any jurisdiction or (ii)
that registration of such transfer under the Securities Act or under any blue
sky or other United States state securities laws or under the laws of any other
jurisdiction is required and such registration has not been duly effected
(PROVIDED, however, that in this case (ii) the Directors shall be entitled to
request and rely on an opinion of counsel to the transferor or the

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<PAGE> 40
transferee, in form and substance satisfactory to the Directors, that no such
approval or consent is required and no such violation would occur, and the
Directors shall not be obligated to register any transfer absent the receipt of
such an opinion).

(4) Without limiting the foregoing, the Board shall decline to approve or
register a transfer of shares unless all applicable consents, authorisations,
permissions or approvals of any governmental body or agency in Bermuda, the
United States or any other applicable jurisdiction required to be obtained prior
to such transfer shall have been obtained.

(5) The registration of transfers may be suspended at such time and for
such periods as the Directors may from time to time determine; PROVIDED that
such registration shall not be suspended for more than forty-five days in any
period of three hundred and sixty five (365) consecutive days.

(6) The Directors may require any Member, or any Person proposing to
acquire shares of the Company, to certify or otherwise provide information in
writing as to such matters as the Directors may request for the purpose of
giving effect to Bye-laws 10(2), 10(3), 53(2), 63(2) and 63(3), including as to
such Person's status as a United States Person, its Controlled Shares and other
matters of the kind contemplated by Bye-law 52(2). Such request shall be made by
written notice and the certification or other information requested shall be
provided to such place and within such period (not less than ten (10) Business
Days after such notice is given unless the Directors and such Member or proposed
acquiror otherwise agree) as the Directors may designate in such request. If any
Member or proposed acquiror does not respond to any such request by the
Directors as requested, or if the Directors have reason to believe that any
certification or other information provided pursuant to any such request is
inaccurate or incomplete, the Directors may decline to register any transfer or
to effect any issuance or purchase of shares to which such request relates.

(7) With respect to a transfer of the Company's shares executed on the
Nasdaq National Market, if the Directors have reason to believe that the effect
of such transfer would be to increase the total number of Controlled Shares of
any Person to ten percent (10%) or any higher percentage of the shares of the
Company on an Unadjusted Basis, the Directors may, in their absolute and
unfettered discretion, within ten business days of learning of such transfer,
cause a notice to be delivered to such Person demanding that such Person
surrender to an agent designated by the Directors certificates representing the
shares and any dividends or distributions that the Person has received as a
result of owning the shares. Such a Person who has resold the shares before
receiving such notice will be required to transfer to the agent the proceeds of
the sale, to the extent such proceeds exceed the amount that the transferee paid
for the shares, together with any dividends or distributions that the transferee
received from the Company. As soon as practicable after receiving the shares and
any dividends or distributions that the transferee received, the agent will use
its best efforts to sell such shares and any non-cash dividends or distributions
in an arm's-length transaction on the Nasdaq National Market. After applying the
proceeds from such sale toward reimbursing the transferee for the price paid for
the shares, the agent will pay any remaining proceeds and any cash dividends and
distributions to organizations described in Section 501(c)(3) of the United
States Internal Revenue Code of 1986, as amended, that the Directors designate.
The proceeds of any such sale by the Agent or the surrender of dividends or
distributions will not inure to the benefit of the Company or the agent, but
such amounts may be used to reimburse expenses incurred by the agent in
performing its duties.

(8) With respect to a transfer of the Company's shares executed on the
Nasdaq National Market, if the Directors have reason to believe that such
transfer may expose the Company, any subsidiary thereof, any Member or any
Person ceding insurance to the Company or any such subsidiary to adverse tax or
regulatory treatment in any jurisdiction, the Directors may, in their absolute
and unfettered discretion, within ten business days of learning of such
transfer, cause a notice to be delivered to such person demanding that such
Person surrender to an agent designated by the directors certificates
representing the shares and any dividends or distributions that the Person has
received as a result of owning the shares. A Person who has resold the shares
before receiving such notice will be required to transfer to the agent the
proceeds of the sale, to the extent such proceeds exceed the amount that the
Person paid for the shares, together with any dividends or distributions that
the Person received from the Company. As soon as practicable after receiving
the shares and any dividends or distributions that the Person received, the
agent will use its best efforts to sell such shares and any non-cash dividends
or distributions in an arm's-length transaction on the Nasdaq National Market.
After applying the proceeds from such sale toward reimbursing the Person for
the price paid for the shares, the agent will pay any remaining proceeds and
any cash dividends and distributions to organizations described in Section
501(c)(3) of the United States Internal Revenue Code of 1986, as amended, that
the Directors designate. The proceeds of any such sale by the agent or the
surrender of dividends or distributions will not inure to the benefit of the
Company or the agent, but such amounts may be used to reimburse expenses
incurred by the agent in performing its duties.

64. Transfers by joint holders

The joint holders of any share or shares may transfer such share or shares
to one or more of such joint holders, and the surviving holder or holders of any
share or shares previously held

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<PAGE> 41
by them jointly with a deceased Member may transfer any such share or shares to
the executors or administrators of such deceased Member.

65. Lien on Shares

(1) The Company shall have a first and paramount lien and charge on all
shares (whether fully paid-up or not) registered in the name of a Member
(whether solely or jointly with others) for all debts, liabilities or
engagements to or with the Company (whether presently payable or not) by such
Member or his estate, either alone or jointly with any other Person, whether a
Member or not, but the Directors may at any time declare any share to be wholly
or in part exempt from the provisions of this Bye-law. The registration of a
transfer of any such share shall operate as a waiver of the Company's lien (if
any) thereon. The Company's lien (if any) on a share shall extend to all
dividends or other monies payable in respect thereof.

(2) The Company may sell, in such manner as the Directors think fit, any
shares on which the Company has a lien, but no sale shall be made unless a sum
in respect of which the lien exists is then presently payable, nor until the
expiration of fourteen days after a notice in writing stating and demanding
payment of such part of the amount in respect of which the lien exists as is
presently payable, has been given to the relevant Member, or the Person, of
which the Company has notice, entitled thereto by reason of such Member's death
or bankruptcy. Effective upon such sale, any certificate representing such
shares prior to such sale shall become null and void, whether or not it was
actually delivered to the Company.

(3) To give effect to any such sale the Directors may authorize some
Person to transfer the shares sold to the purchaser thereof. The purchaser shall
be registered as the holder of the shares comprised in any such transfer, and he
shall not be bound to see to the application of the purchase money, nor shall
his title to the shares be affected by any irregularity or invalidity in the
proceedings in reference to the sale.

(4) The proceeds of such sale shall be received by the Company and applied
in payment of such part of the amount in respect of which the lien exists as is
presently payable and the residue, if any, shall (subject to a like lien for
sums not presently payable as existed

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<PAGE> 42
upon the shares before the sale) be paid to the Person entitled to the shares at
the date of the sale.

TRANSMISSION OF SHARES

66. Registration on bankruptcy

Any person becoming entitled to a share in consequence of the bankruptcy
of any Member may be registered as a Member upon such evidence as the Board may
deem sufficient or may elect to nominate some person to be registered as a
transferee of such share, and in such case the person becoming entitled shall
execute in favour of such nominee an instrument of transfer in the form, or as
near thereto as circumstances admit, of Form "B" in the Schedule hereto or in
such other common form as the Board or any transfer agent appointed from time
to time accepts. On the presentation thereof to the Board, accompanied by such
evidence as the Board may require to prove the title of the transferor, the
transferee shall be registered as a Member but the Board shall, in either case,
have the same right to decline or suspend registration as it would have had in
the case of a transfer of the share by that Member before such Member's
bankruptcy.

DIVIDENDS AND OTHER DISTRIBUTIONS

67. Declaration of dividends by the Board

Subject to any rights or restrictions at the time lawfully attached to any
class of shares and subject to these Bye-laws, the Board may, in accordance with
Section 54 of the Act, declare a dividend to be paid to the Members, in
proportion to the number of shares held by them, and such dividend may be paid
in cash or wholly or partly in specie in which case the Board may fix the value
for distribution in specie of any assets.

68. Other distributions

The Board may declare and make such other distributions (in cash or in
specie) to the Members as may be lawfully made out of the assets of the Company.

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<PAGE> 43
69. Reserve fund

The Board may from time to time before declaring a dividend set aside, out
of the surplus or profits of the Company, such sum as it thinks proper as a
reserve fund to be used to meet contingencies or for equalising dividends or for
any other special purpose.

70. Deduction of amounts due to the Company

The Board may deduct from the dividends or distributions payable to any
Member all monies due from such Member to the Company on account of calls or
otherwise.

71. Unclaimed dividends

Any dividend unclaimed for a period of six (6) years from the date of
declaration of such dividend shall be forfeited and shall revert to the Company
and the payment by the Board of any unclaimed dividend, interest or other sum
payable on or in respect of the share into a separate account shall not
constitute the Company a trustee in respect thereof.

72. Interest on dividend

No dividend or distribution shall bear interest against the Company.

73. Issue of bonus shares

Subject to Bye-law 53(2), the Board may resolve to capitalise any part of
the amount for the time being standing to the credit of any of the Company's
share premium or other reserve accounts or to the credit of the profit and loss
account or otherwise available for distribution by applying such sum in paying
up unissued shares to be allotted as fully paid bonus shares pro rata to the
Members.

ACCOUNTS AND FINANCIAL STATEMENTS

74. Records of account

The Board shall cause to be kept proper records of account with respect to
all transactions of the Company and in particular with respect to:

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<PAGE> 44
(a) all sums of money received and expended by the Company and the
matters in respect of which the receipt and expenditure
relates;

(b) all sales and purchases of goods by the Company; and

Such records of account shall be kept at the registered office of the
Company or, subject to Section 83 (2) of the Act, at such other place as the
Board thinks fit and shall be available for inspection by the Directors during
normal business hours.

75. Financial year end

The financial year end of the Company may be determined by resolution of
the Board and failing such resolution shall be 31st December in each year.

76. Financial statements

Subject to any rights to waive laying of accounts pursuant to Section 88
of the Act, financial statements as required by the Act shall be laid before the
Members in general meeting.

AUDIT

77. Appointment of Auditor

Subject to Section 88 of the Act, at the annual general meeting or at a
subsequent special general meeting in each year, an independent representative
of the Members shall be appointed by them as Auditor of the accounts of the
Company. Such Auditor may be a Member but no Director, Officer or employee of
the Company shall, during his or her continuance in office, be eligible to act
as an Auditor of the Company.

78. Remuneration of Auditor

The remuneration of the Auditor shall be fixed by the Company in general
meeting or in such manner as the Members may determine.

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<PAGE> 45
79. Vacation of office of Auditor

If the office of Auditor becomes vacant by the resignation or death of the
Auditor, or by the Auditor becoming incapable of acting by reason of illness or
other disability at a time when the Auditor's services are required, the Board
shall, as soon as practicable, convene a special general meeting to fill the
vacancy thereby created.

80. Access to books of the Company

The Auditor shall at all reasonable times have access to all books kept by
the Company and to all accounts and vouchers relating thereto, and the Auditor
may call on the Directors or Officers of the Company for any information in
their possession relating to the books or affairs of the Company.

81. Report of the Auditor

(1) Subject to any rights to waive laying of accounts or appointment of an
Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be
audited at least once in every year.

(2) The financial statements provided for by these Bye-laws shall be
audited by the Auditor in accordance with generally accepted auditing standards.
The Auditor shall make a written report thereon in accordance with generally
accepted auditing standards and the report of the Auditor shall be submitted to
the Members in general meeting.

(3) The generally accepted auditing standards referred to in paragraph (2)
of this Bye-law shall be those of the United States of America and the financial
statements and the report of the Auditor shall disclose this fact.

82. Record dates

Notwithstanding any other provision of these Bye-laws the Company or the
Directors may fix any date as the date for:

(a) determining the Members entitled to receive any dividend,
distribution, allotment or issue and such record date may be
on, or at any time not

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<PAGE> 46
more than 30 days before or after, any date on which such
dividend, distribution, allotment or issue is declared, paid
or made;

(b) determining the Members entitled to receive notice of and to
vote at any general meeting of the Company.

NOTICES

83. Notices to Members of the Company

A notice may be given by the Company to any member either by delivering it
to such Member in person or by sending it to such Member's address in the
Register of Members or to such other address given for the purpose. For the
purposes of this Bye-law, a notice may be sent by mail, courier service, cable,
telex, telecopier, facsimile or other mode of representing words in a legible
and non-transitory form.

84. Notices to joint Members

Any notice required to be given to a Member shall, with respect to any
shares held jointly by two or more persons, be given to whichever of such
persons is named first in the Register of Members and notice so given shall be
sufficient notice to all the holders of such shares.

85. Service and delivery of notice

Any notice shall be deemed to have been served at the time when the same
would be delivered in the ordinary course of transmission and, in proving such
service, it shall be sufficient to prove that the notice was properly addressed
and prepaid, if posted, and the time when it was posted, delivered to the
courier or to the cable company or transmitted by telex, facsimile or other
method as the case may be.

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<PAGE> 47
SEAL OF THE COMPANY

86. The Seal

The seal of the Company shall be in such form as the Board may from time
to time determine. The Board may adopt one or more duplicate seals for use
outside Bermuda.

87. Manner in which seal is to be affixed

The seal of the Company shall not be affixed to any instrument except
attested by the signature of a Director and the Secretary or any two Directors,
or some other person appointed by the Board for the purpose, provided that any
Director, or Officer, may affix the seal of the Company attested by such
Director or Officer's signature only to any authenticated copies of these
Bye-laws, the incorporating documents of the Company, the minutes of any
meetings or any other documents required to be authenticated by such Director or
Officer.

88. Determination to wind up Company

The Company may be wound up voluntarily by resolution of the Members.

WINDING-UP

89. Winding-up/distribution by liquidator

If the Company shall be wound up the liquidator may, with the sanction of
a resolution of the Members, divide amongst the Members in specie or in kind the
whole or any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and may, for such purpose, set such value as
he or she deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the Members or
different classes of Members. The liquidator may, with the like sanction, vest
the whole or any part of such assets in trustees upon such trusts for the
benefit of the Members as the liquidator shall think fit, but so that no Member
shall be compelled to accept any shares or other securities or assets whereon
there is any liability.

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<PAGE> 48
ALTERATION OF BYE-LAWS

90. Alteration of Bye-laws

No Bye-law shall be rescinded, altered or amended and no new Bye-law shall
be made until the same has been approved by a resolution of the Board and by a
resolution of the Members.

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<PAGE> 49
SCHEDULE - FORM A
(Bye-law 49)

PROXY

I/We

the holder(s) of share(s) in the above-named company hereby appoint
________________________ or failing him/her _______________________________ or
failing him/her ____________________________ as my/our proxy to vote on my/our
behalf at the general meeting of the Company to be held on the day of
, 19 , and at any adjournment thereof.

Dated this day of , 19

*GIVEN under the seal of the Company
*Signed by the above-named

____________________________________

____________________________________
Witness

*Delete as applicable.

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<PAGE> 50

SCHEDULE - FORM B
(Bye-law 62)

TRANSFER OF A SHARE OR SHARES

FOR VALUE RECEIVED .............................................[amount]

............................................................[transferor]

hereby sell assign and transfer unto........................[transferee]

of ............................................................[address]

......................................................[number of shares]

shares of .............................................[name of Company]

Dated ....................

...........................
(Transferor)

In the presence of:

..........................
(Witness)

............................
(Transferree)

In the presence of:

..........................
(Witness)

-44-

<PAGE> 1

Exhibit 4.3

Form of Class B Warrant

Class B Warrants have been agreed to be purchased by the following entities in
substantially the form attached hereto for a number of Common Shares equal to
the number set forth next to their names:

Name Common Shares
- ---- -------------
<S> <C>

EXEL Limited 100,000
Risk Capital Reinsurance Company 100,000
Insurance Partners, L.P. 80,586
The Prudential Insurance
Company of America 72,500
Insurance Partners Offshore
(Bermuda), L.P. 44,414
</TABLE>

<PAGE> 2

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW, AND THEY MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND THE
OTHER RESTRICTIONS ON TRANSFER SET FORTH HEREIN.

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

Date: __, 1998

CLASS B WARRANT
TO PURCHASE COMMON SHARES OF
ANNUITY AND LIFE RE (HOLDINGS), LTD.

Void after 5:00 P.M. (United States Eastern Time),
___________, 2008, as provided herein.

THIS CERTIFIES that, for value received, _______________ (the
"Warrant Holder"), or registered assigns, is entitled to purchase from ANNUITY
AND LIFE RE (HOLDINGS), LTD. (the "Company"), a Bermuda corporation, upon the
satisfaction of the conditions stated herein and during the period (subject to
Section 2 hereof) from and after March __, 1999 to 5:00 p.m. (United States
Eastern Time) on March __, 2008, __________ fully paid and nonassessable common
shares, par value $1.00 per share (the "Common Shares"), subject to adjustment
as provided herein, at a per share purchase price equal to $15.00; provided,
however, that if on March __, 2008, the Company is then required, pursuant to
an effective request therefor under the Registration Rights Agreement (as
defined herein), or is in the process of effecting a registration under the
Securities Act of 1933, as amended (the "1933 Act") for a public offering in
which Warrant Shares (as defined herein) are entitled to be included as
provided in the Registration Rights Agreement, or if the Company is in default
of any such obligations to register the sale of such shares, the right to
exercise this Warrant shall continue until 5:00 p.m. (United States Eastern
Time) on the 30th day following the date on which such registration shall have
become effective or on the 30th day following the date all such defaults shall
have been cured, whichever is the later date.

<PAGE> 3
1. Definitions. For the purpose of this Warrant:

(a) "Capital Stock" shall mean the Company's
Common Shares and any other shares of any class, or series within a class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings or assets of the Company without limit as to amount or
percentage.

(b) "Extraordinary Cash Dividend" shall mean,
with respect to any consecutive 12-month period, the amount, if any, by which
the aggregate amount of all cash and non-cash dividends or distributions on
any Capital Stock occurring in such 12-month period (or, if such Capital Stock
was not outstanding at the commencement of such 12-month period, occurring in
such shorter period during which such Capital Stock was outstanding) exceeds
on a per share basis 5% of the average of the daily Market Prices per share of
such Capital Stock over such 12-month period (or such shorter period during
which such Capital Stock was outstanding); provided that, for purposes of the
foregoing definition, the amount of cash and non-cash dividends paid on a per
share basis will be appropriately adjusted to reflect the occurrence during
such period of any stock dividend or distribution of shares of capital stock
of the Company or any subdivision, split, combination or reclassification of
shares of such Capital Stock.

(c) "Market Price" shall mean, per Common Share on
any date specified herein: (a) the closing price per share of the Common Shares
on such date published in The Wall Street Journal or, if no such closing price
on such date is published in The Wall Street Journal, the average of the closing
bid and asked prices on such date, as officially reported on the principal
national securities exchange on which the Common Shares are then listed or
admitted to trading; or (b) if the Common Shares are not then listed or admitted
to trading on any national securities exchange but is designated as a national
market system security by the NASD, the last trading price of the Common Shares
on such date; or (c) if there shall have been no trading on such date or if the
Common Shares are not so designated, the average of the reported closing bid and
asked prices of the Common Shares, on such date as shown by the Nasdaq National
Market or other over-the-counter market and reported by any member firm of the
New York Stock Exchange selected by the Company; or (d) if none of (a), (b) or
(c) is applicable, a market price per share determined in such reasonable manner
as may be prescribed by the Company's Board of Directors.

(d) "Pro Rata Repurchase" shall mean any purchase
of Common Shares by the Company or by any of its subsidiaries whether for cash,
shares of capital stock of the Company, other securities of the Company,
evidences of indebtedness of the Company or any other person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a subsidiary of the Company), or any
combination thereof, which purchase is subject to Section 13(e) of the
Securities Exchange Act of 1934, as amended, or is made pursuant to an offer
made available to all holders of Common Shares.

(e) "Warrants" shall mean the original Warrant to
purchase Common Shares of the Company issued by the Company pursuant hereto and
any and all Warrants which are issued in exchange or substitution for any
outstanding Warrant pursuant to the terms of the Warrant.

(f) "Warrant Price" shall mean the price per
share at which Common Shares of the Company are purchasable hereunder, as such
price may be adjusted from time to time hereunder.

(g) "Warrant Shares" shall mean the Common
Shares purchasable upon exercise of Warrants.

(h) "Additional Shares of Capital Stock" shall
mean all shares of Capital Stock issued by the Company, except:

(i) Common Shares issuable upon
exercise of the Warrant;

(ii) Common Shares outstanding on
the date hereof, including all Common Shares issued to the Warrant Holder and
certain other investors on the date hereof;

(iii) Common Shares issued pursuant
to the initial public offering of the Company's Common Shares (the "IPO");

(iv) Common Shares issuable upon the
exercise of options and warrants which are outstanding on the date hereof; and

(v) Options to purchase Common
Shares granted by the Company as an incentive for performance to the Company's
officers, directors, employees and consultants after the date hereof, the
Common Shares issuable upon the exercise of such options, and the Common Shares
awarded to such persons as share grants by the Company as incentive for
performance after the date hereof.

(i) "Registration Rights Agreement" shall mean
the agreement so entitled, dated __, 1998, between the Company and the
Warrant Holder providing for the registration of the Warrant Shares in certain
events.

-2-
<PAGE> 4

(i) "Base Price" shall mean the greater of (x) the
Warrant Price, as adjusted from time to time as provided herein, or (y) the
Market Price as of the trading day last prior to the date on which the Base
Price is determined for purposes of this Warrant.

2. Exercise of Warrants.

(a) This Warrant may be exercised at any time or
from time to time on or after (i) March __, 1999 for up to one-third of the
number of Warrant Shares provided for on page 1 hereof, (ii) March __, 2000 for
up to an additional one-third of the number of Warrant Shares provided for on
page 1 hereof, and (iii) March __, 2001 for up to an additional one-third of
the number of Warrant Shares provided for on page 1 hereof, in each case
subject to adjustment as provided in Section 6. Subject to the foregoing, this
Warrant may be exercised at any time or from time to time in whole or in part
(but not as to fractional shares) prior to 5:00 p.m. United States Eastern Time
on March __, 2008 (subject to extension as provided above), at which time this
Warrant and all of the Warrant Holder's rights hereunder shall terminate,
except as expressly provided herein. Notwithstanding the foregoing, upon a
Change in Control of the Company (as defined below) this Warrant shall become
immediately exercisable for the full number of Warrant Shares provided for on
page 1 hereof. For purposes of this Section 2(a), a "Change in Control" of the
Company shall be deemed to have occurred if:

(i) Any person, including a group
of persons acting in concert, becomes the beneficial owner of shares of the
Company having 50 percent or more of the total number of votes that may be cast
for the election of directors of the Company;

(ii) There occurs any cash tender or
exchange offer for shares of the Company, merger or other business combination,
or any combination of the foregoing transactions, and as a result of or in
connection with any such event, persons who were directors of the Company
before the event shall cease to constitute a majority of the board of directors
of the Company or any successor to the Company; or

(iii) The sale, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company.

(b) This Warrant may be exercised at the time(s)
or upon the occurrence of the event(s) specified in Subsection

-3-
<PAGE> 5
2(a) hereof by the surrender of this Warrant, with the Purchase Agreement
attached hereto as Rider A properly completed and duly executed, at the
principal office of the Company at Victoria Hall, Victoria Street, Hamilton, HM
FX, Bermuda, or such other location which shall at that time be the principal
office of the Company and of which the Company shall have notified the Warrant
Holder in writing (the "Principal Office"), or at the office of its stock
transfer agent, and upon payment to the Company of the Warrant Price for the
Warrant Shares to be purchased upon such exercise. The person entitled to the
Warrant Shares so purchased shall be treated for all purposes as the holder of
such shares as of the close of business on the date of exercise and
certificates for the shares so purchased shall be delivered to the person so
entitled within a reasonable time, not exceeding thirty (30) days, after such
exercise. Certificates representing the Warrant Shares issued upon exercise of
this Warrant shall bear a legend referring to the restrictions on transfer set
forth herein. Unless this Warrant has expired, a new Warrant of like tenor and
for such number of Common Shares as the holder of this Warrant shall direct,
representing in the aggregate the right to purchase the number of Common Shares
with respect to which this Warrant shall not have been exercised, shall also be
issued to the holder of this Warrant within such time.

(c) The Warrant Price shall be payable (i) in cash
or its equivalent, (ii) in Common Shares newly acquired upon exercise of this
Warrant, (iii) by surrendering to the Company the right to purchase a number of
Warrant Shares equal to the product obtained by multiplying the number of
Warrant Shares to be purchased (including the Warrant Shares to be surrendered)
by a fraction, the numerator of which is the Warrant Price and the denominator
of which is the Market Price of the Common Shares, or (iv) in any combination
of (i), (ii) and (iii). In the event the Warrant Price is paid, in whole or
in part, with Common Shares, the portion of the Warrant Price so paid shall be
equal to the Market Price of the Common Shares.

-4-
<PAGE> 6
3. Exchange. This Warrant is exchangeable, upon its
surrender by the Warrant Holder to the Company at its Principal Office, or to
the Company's stock transfer agent at its office, for new Warrants of like
tenor registered in the Warrant Holder's name and representing in the aggregate
the right to purchase the same number of Common Shares purchasable hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of Common Shares as shall be designated by the Warrant Holder at
the time of such surrender.

4. Transfer. Subject to restrictions on transfer set
forth in Section 11, this Warrant is transferable, in whole or in part, by the
holder thereof at the Principal Office of the Company or at the office of its
stock transfer agent, in person or by duly authorized attorney, upon
presentation of this Warrant properly endorsed for transfer, the Assignment
attached hereto as Rider A duly executed, and funds sufficient to pay any
transfer tax (the "Transfer Documents"). Within a reasonable time after
receiving the Transfer Documents, not exceeding thirty (30) days, the Company
shall execute and deliver a new Warrant in the name of the assignee named in
the Assignment and this Warrant shall be cancelled. Each holder of this
Warrant, by holding it, agrees that this Warrant, when endorsed in blank, may
be deemed negotiable, and that, when this Warrant shall have been so endorsed,
the holder of this Warrant may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner of this Warrant for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer of this Warrant on the books of the Company, any notice to
the contrary notwithstanding.

5. Certain Covenants of the Company. The Company
covenants and agrees that all Common Shares which may be issued upon the
exercise of this Warrant, will, upon issuance, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of Common Shares to provide for the exercise of
the rights represented by this Warrant. The Company will, at the time of each
exercise of this Warrant, upon request of the holder thereof, acknowledge in
writing its continuing obligation to afford such holder all rights (including,
without limitation, any rights to registration under the Registration Rights
Agreement) to which such holder shall be entitled after the exercise hereof in
accordance with the terms hereof, but the failure to make any such request, or
the failure of the Company to give such acknowledgement shall not affect the
continuing obligations of the Company in respect of such rights.

-5-
<PAGE> 7
6. Adjustment of Purchase Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:

(a) Reclassification, Consolidation or Merger. At
any time while this Warrant remains outstanding and unexpired, in case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination of outstanding securities issuable upon the exercise
of this Warrant) or in case of any consolidation or merger of the Company with
or into another corporation (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination of outstanding securities issuable upon the exercise
of this Warrant), the Company, or such successor corporation, as the case may
be, shall, without payment of any additional consideration therefor, execute a
new Warrant providing that the Warrant Holder shall have the right to exercise
such new Warrant (upon terms not less favorable to the Warrant Holder than
those then applicable to this Warrant) and to receive upon such exercise, in
lieu of each Common Share theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation or merger, by the
holder of one Common Share issuable upon exercise of this Warrant had it been
exercised immediately prior to such reclassification, change, consolidation or
merger. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 6. Notwithstanding the foregoing, in the case of any transaction which
pursuant to this Section 6(a) would result in the execution and delivery by the
Company of a new Warrant to the Warrant Holder, and in which the holders of
Common Shares are entitled only to receive money or other property exclusive of
securities, then in lieu of such new Warrant being exercisable as provided
above, the Warrant Holder shall have the right, at its sole option, to require
the Company to purchase this Warrant (without prior exercise by the Warrant
Holder) at its fair value as of the day before such transaction became publicly
known, as determined by an unaffiliated internationally recognized accounting
firm or investment bank selected by the Warrant Holder and reasonably
acceptable to the Company. Any purchase and sale of the Warrant pursuant to
the immediately preceding sentence shall be consummated as provided in Section
2(b), mutatis mutandis. The provisions of this Subsection 6(a) shall similarly
apply to successive reclassifications, changes, consolidations, mergers, sales
and transfers.

-6-
<PAGE> 8
(b) Subdivision or Combination of Shares. If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its Capital Stock, the Warrant Price shall be
proportionately reduced, in case of subdivision of such shares, as of the
effective date of such subdivision, or, if the Company shall take a record of
holders of its Capital Stock for the purpose of so subdividing, as of such
record date, whichever is earlier, or shall be proportionately increased, in
the case of combination of such shares, as of the effective date of such
combination, or, if the Company shall take a record of holders of its Capital
Stock for the purpose of so combining, as of such record date, whichever is
earlier.

(c) Certain Dividends, Distributions and
Repurchases. If the Company at any time while this Warrant remains outstanding
and unexpired shall:

(i) Stock Dividends. Pay a
dividend in shares of, or make other distribution of shares of, its Capital
Stock, then the Warrant Price shall be adjusted, as of the date the Company
shall take a record of the holders of its Capital Stock for the purpose of
receiving such dividend or other distribution (or if no such record is taken,
as of the date of such payment or other distribution), to that price determined
by multiplying the Warrant Price in effect immediately prior to such payment or
other distribution by a fraction (a) the numerator of which shall be the total
number of shares of Capital Stock outstanding immediately prior to such
dividend or distribution, and (b) the denominator of which shall be the total
number of shares of Capital Stock outstanding immediately after such dividend
or distribution; or

(ii) Liquidating Dividends, Etc. Pay
or make an Extraordinary Cash Dividend or make a distribution of its assets to
the holders of its Capital Stock as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law, the Warrant Holder shall
be entitled to receive upon the exercise hereof, in addition to the number of
Common Shares receivable thereupon, and without payment of any additional
consideration therefor, a sum equal to the amount of such assets or cash as
would have been payable to him as owner of that number of Common Shares
receivable by exercise of the Warrant had he been the holder of record of such
Common Shares on the record date for such distribution, or if no such record is
taken, as of the date of such dividend or distribution, and an appropriate
provision therefor shall be made a part of any such dividend or distribution; or

(iii) In case the Company or any
subsidiary thereof shall, make a Pro Rata Repurchase, the Warrant Price shall be
adjusted by dividing the Warrant Price in effect immediately prior to such
action by a fraction (which in no event shall be less than one), the numerator
of which shall be the product of (i) the number of Common Shares outstanding
immediately before such Pro Rata Repurchase minus the number of Common Shares
repurchased in such Pro Rata Repurchase and (ii) the Market Price as of the day
immediately preceding the first public announcement by the Company of the intent
to effect such Pro Rata Repurchase, and the denominator of which shall be (i)
the product of (x) the number of Common Shares outstanding immediately before
such Pro Rata Repurchase and (y) the Market Price as of the day immediately
preceding the first public announcement by the Company of the intent to effect
such Pro Rata Repurchase minus (ii) the aggregate purchase price of the Pro Rata
Repurchase.

(d) Issuance of Additional Shares of Capital
Stock. If the Company at any time while the Warrant remains outstanding and
unexpired shall issue any Additional Shares of Capital Stock (otherwise than as
provided in the foregoing subsections (a) through (c) above) at a price per
share less, or

-7-
<PAGE> 9
for other consideration lower, than the Base Price, or without consideration,
then upon such issuance the Warrant Price shall be adjusted to that price
determined by multiplying the Warrant Price by a fraction (a) the numerator of
which shall be the number of shares of Capital Stock outstanding immediately
prior to the issuance of such Additional Shares of Capital Stock plus the
number of shares of Capital Stock which the aggregate consideration for the
total number of such Additional Shares of Capital Stock so issued would
purchase at the Base Price, and (b) the denominator of which shall be the
number of shares of Capital Stock outstanding immediately prior to the issuance
of such Additional Shares of Capital Stock plus the number of such Additional
Shares of Capital Stock so issued. The provisions of this subsection 6(d)
shall not apply under any of the circumstances for which an adjustment is
provided in subsections 6(a), 6(b), or 6(c). No adjustment of the Warrant
Price shall be made under this subsection 6(d) upon the issuance of any
Additional Shares of Capital Stock which are issued pursuant to the exercise of
any warrants, options or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any convertible securities
if any such adjustments shall previously have been made upon the issuance of
any such warrants, options or other rights or upon the issuance of any
convertible securities (or upon the issuance of any warrants, options or any
rights therefor) pursuant to subsections 6(e) or 6(f) hereof.

(e) Issuance of Warrants, Options or Other
Rights. In case the Company shall issue any warrants, options or other rights
to subscribe for or purchase any Additional Shares of Capital Stock and the
price per share for which Additional Shares of Capital Stock may at any time
thereafter be issuable pursuant to such warrants, options or other rights shall
be less than the Base Price, then upon such issuance the Warrant Price shall be
adjusted as provided in subsection 6(d) hereof on the basis that the aggregate
consideration for the Additional Shares of Capital Stock issuable pursuant to
such warrants, options or other rights, shall be deemed to be the consideration
received by the Company for the issuance of such warrants, options, or other
rights plus the minimum consideration to be received by the Company for the
issuance of Additional Shares of Capital Stock pursuant to such warrants,
options, or other rights.

(f) Issuance of Convertible Securities. In case
the Company shall issue any convertible securities and the consideration per
share for which Additional Shares of Capital Stock may at any time thereafter
be issuable pursuant to the terms of such convertible securities shall be less
than the Base Price, then upon such issuance the Warrant Price shall be
adjusted as provided in subsection 6(d) hereof on the basis that (i) the
maximum number of Additional Shares of Capital Stock necessary to effect the
conversion or exchange of all such convertible

-8-
<PAGE> 10
securities shall be deemed to have been issued as of the date of issuance of
such convertible securities, and (ii) the aggregate consideration for such
maximum number of Additional Shares of Capital Stock shall be deemed to be the
minimum consideration received by the Company for the issuance of such
Additional Shares of Capital Stock pursuant to the terms of such convertible
securities. No adjustment of the Warrant Price shall be made under this
subsection upon the issuance of any convertible securities which are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any such adjustment shall previously have been made upon
the issuance of such warrants or other rights pursuant to subsection 6(e)
hereof.

(g) Adjustment of Number of Shares. Upon each
adjustment in the Warrant Price pursuant to any provision of this Section 6,
the number of Common Shares purchasable hereunder at the Warrant Price shall be
adjusted, to the nearest one hundredth of a whole share, to the product
obtained by multiplying such number of Common Shares purchasable immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.

(h) Other Provisions Applicable to Adjustments
Under this Section. The following provisions will be applicable to the making
of adjustments in the Warrant Price hereinabove provided in this Section 6:

(i) Computation of Consideration.
To the extent that any Additional Shares of Capital Stock or any convertible
securities or any warrants, options or other rights to subscribe for or
purchase any Additional Shares of Capital Stock or any convertible securities
shall be issued for a cash consideration, the consideration received by the
Company therefor shall be deemed to be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Capital Stock or convertible
securities are offered by the Company for subscription, the subscription price,
or, if such Additional Shares of Capital Stock or convertible securities are
sold to underwriters or dealers for public offering without a subscription
offering, or through underwriters or dealers for public offering without a
subscription offering, the initial public offering price, in any such case
disregarding any amounts paid or incurred by the Company for and in the
underwriting of, or otherwise in connection with the issue thereof. To the
extent that such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the Company's Board of Directors. The
consideration for

-9-
<PAGE> 11
any Additional Shares of Capital Stock issuable pursuant to any warrants,
options or other rights to subscribe for or purchase the same shall be the
consideration received by the Company for issuing such warrants, options or
other rights, plus the additional consideration payable to the Company upon the
exercise of such warrants, options or other rights. The consideration for any
Additional Shares of Capital Stock issuable pursuant to the terms of any
convertible securities shall be the consideration paid or payable to the
Company in respect of the subscription for or purchase of such convertible
securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange in such convertible
securities. In case of the issuance at any time of any Additional Shares of
Capital Stock or convertible securities in payment or satisfaction of any
dividends in a fixed amount, the Company shall be deemed to have received for
such Additional Shares of Capital Stock or convertible securities a
consideration equal to the amount of such dividend so paid or satisfied.

(ii) Readjustment of Warrant Price.
Upon the expiration of the right to convert or exchange any convertible
securities, or upon the expiration of any rights, options or warrants, the
issuance of which convertible securities, rights, options or warrants effected
an adjustment in the Warrant Price, if any such convertible securities shall
not have been converted or exchanged, or if any such rights, options or
warrants shall not have been exercised, the number of shares of Capital Stock
deemed to be issued and outstanding by reason of the fact that they were
issuable upon conversion or exchange of any such convertible securities or upon
exercise of any such rights, options, or warrants shall no longer be computed
as set forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any other
adjustments in the Warrant Price made pursuant to the provisions of this
Section 6 after the issuance of such convertible securities, rights, options or
warrants) had the adjustment of the Warrant Price made upon the issuance or
sale of such convertible securities or issuance of rights, options or warrants
been made on the basis of the issuance only of the number of Additional Shares
of Capital Stock actually issued upon conversion or exchange of such
convertible securities, or upon the exercise of such rights, options or
warrants, and thereupon only the number of Additional Shares of Capital Stock
actually so issued shall be deemed to have been issued and only the
consideration actually received by the Company (computed as in subsection
(h)(i) hereof) shall be deemed to have been received by the Company.

(iii) Treasury Shares. The number of
shares of Capital Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for the account of the
Company or any subsidiary of the Company.

-10-
<PAGE> 12
(iv) Other Action Affecting Capital
Stock. In case after the date hereof the Company shall take any action
affecting the Capital Stock, other than an action described in any of the
foregoing subsection (a) to (f) hereof, inclusive, which in the opinion of the
Company's Board of Directors would have a materially adverse effect upon the
rights of the holders of the Warrant, the Warrant Price shall be adjusted in
such manner and at such time as the Board of Directors on the advice of the
Company's independent public accountants may in good faith determine to be
equitable in the circumstances.

(v) Limitation or Adjustment of
Warrant Price. Notwithstanding any other provision of this Warrant, no
adjustment of the Warrant Price shall be made which would reduce such Warrant
Price below the par value of the Warrant Shares.

(vi) No Impairment. The Company
will not, by amendment of its constitutive documents or through any
consolidation, merger, reorganization, transfer of assets, dissolution,
securities issuance or any other action, avoid or seek to avoid the observance
or performance of the terms of this Warrant, or to deprive the holder hereof of
the intended benefits hereof, and will at all times in good faith take such
actions (or refrain therefrom) as shall be necessary or appropriate to effect
the intended purposes and benefits of this Warrant. Without limiting the
generality of the foregoing, the Company will not permit the par value of the
Warrant Shares to exceed the Warrant Price. The Company will not amend any
material term of any outstanding security convertible into, or exercisable or
exchangeable for, Common Shares unless it also offers to make substantially the
same amendment to the terms hereof.

7. Notice of Adjustments. Whenever the Warrant Price or
the number of Common Shares purchasable under the terms of this Warrant at that
Warrant Price shall be adjusted pursuant to Section 6 hereof, the Company shall
prepare a certificate signed by its President or a Vice President and by its
Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Warrant Price and number of Common
Shares purchasable at that Warrant Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed
(by first class and postage prepaid) to the registered holder of this Warrant.

In the event the Company shall, at a time when this Warrant is
exercisable, take any action which pursuant to Section 6 may result in an
adjustment of any of the Warrant Price or the number of Common Shares
purchasable at that Warrant Price upon exercise of this Warrant, the Company
will give to the registered holder of this Warrant at such holder's last
address known to the Company written notice of such action ten (10) days in
advance of

-11-
<PAGE> 13
its effective date in order to afford to such holder of this Warrant an
opportunity to exercise this Warrant and to purchase Common Shares prior to
such action becoming effective.

8. Payment of Taxes. All Common Shares issued upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable,
and the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for Common Shares in any
name other than that of the registered holder of the Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any share certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no tax or other charge is due.

9. Fractional Shares. No fractional Common Shares will
be issued in connection with any purchase hereunder but in lieu of such
fractional shares, the Company shall make a cash refund therefor equal in
amount to the product of the applicable fraction multiplied by the Market
Price as of the date of such exercise.

10. Loss, Theft, Destruction or Mutilation. Upon receipt
by the Company of evidence reasonably satisfactory to it that this Warrant has
been mutilated, destroyed, lost or stolen, and in the case of a destroyed, lost
or stolen Warrant, a bond of indemnity reasonably satisfactory to the Company,
or in the case of a mutilated Warrant, upon surrender and cancellation of this
Warrant, the Company will execute and deliver in the Warrant Holder's name, in
exchange and substitution for the Warrant so mutilated, destroyed, lost or
stolen, a new Warrant of like tenor substantially in the form hereof with
appropriate insertions and variations.

11. Securities Laws Representations and Warranties;
Transfer to Comply with Securities Laws.

(a) The Warrant Holder, by acceptance of this
Warrant, acknowledges that the transfer of this Warrant and the Warrant Shares
is subject to the provisions of the Securities Purchase Agreement, dated
__________, 1998, between the Company and the initial purchaser of the
Warrants.

(b) The certificate representing any Warrant
Shares acquired upon exercise of this Warrant, and any Common Shares or other
securities issued in respect of such Warrant Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall be
stamped or

-12-
<PAGE> 14
otherwise imprinted with the following legend (unless such a legend is no
longer required under the 1933 Act):

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT. IN ADDITION, THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN A
WARRANT OF THE COMPANY DATED _________, 1998."

(c) The Company shall not be required to register
the transfer of this Warrant or any Warrant Shares on the books of the Company
unless the Company shall have been provided with an opinion of counsel
satisfactory to it or no-action letters from the Securities and Exchange
Commission and the appropriate state regulatory agencies prior to such transfer
to the effect that registration under the 1933 Act and any applicable state
securities law is not required in connection with the transaction resulting in
such transfer; provided, however, that no such opinion of counsel or no-action
letter shall be necessary in order to effectuate a transfer in accordance with
the provisions of Rule 144(k) promulgated under the 1933 Act. Each Warrant or
certificate for Warrant Shares issued upon any transfer as above provided shall
bear the restrictive legend set forth in Subsection 11(e) above, except that
such restrictive legend shall not be required if the opinion of counsel
satisfactory to the Company or no-action letters referred to above are to the
further effect that such legend is not required in order to establish
compliance with the provisions of the 1933 Act and any applicable state
securities law, or if the transfer is made in accordance with the provisions of
Rule 144(k) under the 1933 Act. The cost of obtaining any legal opinion or
no-action letter required under this Section shall be borne by the Warrant
Holder.

12. Survival. The provisions of Section 11 shall survive
any expiration, cancellation or exercise of this Warrant.

13. Headings. The descriptive headings of the several
sections of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

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<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal, attested by its
duly authorized officer, on the date of this Warrant.

ANNUITY AND LIFE RE (HOLDINGS), LTD.

By:
---------------------------------
Lawrence S. Doyle, President
and Chief Executive Officer

Attest:
-----------------------------

ACCEPTED, ACKNOWLEDGED
AND AGREED

By:
------------------------
Attest:
--------------------

-14-
<PAGE> 16
Rider A

PURCHASE AGREEMENT

Date:
---------------------
TO:

The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby agrees to purchase _________________ Common Shares
covered by such Warrant, and makes payment herewith in full therefor at the
price per share provided by this Warrant.

Signature:
--------------------------------

Address:
----------------------------------

* * * *

ASSIGNMENT

For Value Received, ________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
within Warrant, with respect to the number of Common Shares covered by such
Warrant, to:

NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------

Dated: Signature:
--------------------------------

Address:
----------------------------------

<PAGE> 1
EXHIBIT 5.1
Opinion

March 18, 1998

Annuity and Life Re (Holdings), Ltd.
Victoria Hall
Victoria Street
Hamilton
Bermuda

Dear Sirs:

RE: REGISTRATION STATEMENT ON FORM S-1

We have acted as special legal counsel to Annuity and Life Re (Holdings), Ltd.,
a Bermuda corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Form S-1 No. 333-43301, including amendment Nos. 1, 2 and 3, under the
Securities Act of 1933, as amended (the "Registration Statement"), related to
the offering of 16,750,000 common shares (the "Common Shares") of Annuity and
Life Re (Holdings), Ltd. (the "Offering").
c
As such counsel, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Registration Statement (but not any of
the schedules or exhibits attached thereto), the Memorandum of Association and
Bye-Laws of the Company as well as resolutions of the Company's Board of
Directors. We have also examined originals, or copies certified to our
satisfaction, of such corporate records of the Company and other instruments,
certificates of appropriate public officials and certificates of officers and
representatives of the Company and other documents as we have deemed necessary
as a basis for the opinions hereinafter expressed. In such examination, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity with the originals of all documents submitted to us as copies, the
genuineness of all signatures and the legal capacity of natural persons.

Cont.../

<PAGE> 2

Annuity and Life Re (Holdings), Ltd.
Page 2
March 18, 1998

On the basis of the foregoing, we are of the opinion that:

1. The discussions set forth in the prospectus contained in the Registration
Statement under the headings "ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS," "BUSINESS -- Regulation --
Bermuda", "CERTAIN TAX CONSIDERATIONS - Taxation of the Company and Annuity
Reassurance - Bermuda" and "CERTAIN TAX CONSIDERATIONS - Taxation of
Shareholders - Bermuda" accurately reflect our opinion as to such matters.

2. The authorised capital of the Company established under its Memorandum of
Association is US$150,000,000. The issue of the Common Shares pursuant to
the Offering has been duly authorised and when the Common Shares have been
issued and paid for as contemplated in the Registration Statement the
Common Shares will be validly issued, fully paid and non-assessable
(meaning that no further sums are payable with respect to the holding of
such Common Shares now or in the future).

We are members of the bar of Bermuda, and we have made no investigation of and
express no opinion in relation to the laws of any jurisdiction other than
Bermuda. This opinion is to be governed by and construed in accordance with the
laws of Bermuda and is limited to and is given on the basis of the current law
and practice in Bermuda.

We consent to the filing of this opinion as an exhibit to the Registration
Statement. We also consent to the reference made to us under the captions
"Enforceability of Civil Liabilities" and "Certain Tax Considerations" in the
prospectus contained in the Registration Statement.

Yours faithfully

/s/ Conyers Dill & Pearman

<PAGE> 1

Exhibit 8.2
Opinion

March 19, 1998

Annuity and Life Re (Holdings), Ltd.
Victoria Hall, Victoria Street
P.O. Box HM1262
Hamilton, HM FX, Bermuda

RE: Annuity and Life Re (Holdings), Ltd.
Registration Statement on Form S-1

Gentlemen:

As your counsel, we have assisted in certain aspects of the preparation
and filing with the Securities and Exchange Commission (the "SEC"), under the
Securities Act of 1933, as amended (the "Act"), of the Registration Statement on
Form S-1 (No. 333-43301) (the "Registration Statement") of Annuity and Life Re
(Holdings), Ltd. (the "Company") and the Prospectus contained therein relating
to the proposed offering of 16,750,000 shares of the Company's Common Stock.

We have made such examinations as we have deemed relevant and necessary as
a basis for the opinion hereinafter expressed. In such examinations, we have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as conformed or photostatic copies.

Based on and subject to the assumptions and limitations contained herein,
we are of the opinion that the statements as to United States Federal income
tax law set forth under the headings "Risk Factors -- United States Federal
Income Tax Risks" and "Certain Tax Considerations" in the Registration
Statement are accurate in all material respects. This opinion is based upon
provisions of the Internal Revenue Code of 1986, as amended, applicable
Treasury Department regulations in effect as of the date hereof, current
published administrative positions of the Internal Revenue Service contained in
revenue rulings and procedures, and judicial decisions.

This opinion represents our best legal judgment, but has no binding effect
or official status of any kind, and no

<PAGE> 2

Annuity and Life Re (Holdings), Ltd.
March 19, 1998
Page 2

assurance can be given that contrary positions may not be taken by the Internal
Revenue Service or a court concerning the issues. As noted in the Prospectus,
the statements therein as to the Company's beliefs and conclusions as to the
application of such tax law to the Company and its operations represent the
views of the Company's management as to the application of such law and do not
represent our legal opinion. We also express no opinion as to any tax
consequences under any foreign, state or local laws. In issuing our opinion, we
have relied solely upon existing provisions of the Code, existing proposed
regulations thereunder, and current administrative positions and judicial
decision. Such laws, regulations, administrative positions and judicial
decisions are subject to change at any time. Also, future changes in Federal
income tax laws and the interpretation thereof can have retroactive effect. Any
such changes could affect the validity of the opinion set forth above.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the Prospectus
under the headings "Risk Factors -- United States Federal Income Tax Risks,"
"Certain Tax Considerations" and "Legal Matters." This does not constitute a
consent under Section 7 of the Act, and in consenting to such references to our
firm we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
Section 7 or under the rules and regulations of the SEC issued thereunder.

Very truly yours,

/s/ Drinker Biddle & Reath LLP

WMG:SDDH

<PAGE> 1
Exhibit 10.12
Form of Securities
Purchase Agreement

Common Shares of the Company have been agreed to be purchased by the following
entities in substantially the form attached hereto in amounts equal to the
numbers set forth next to their names:

<TABLE>
<CAPTION>
Name Common Shares
- ---- -------------
<S> <C>
EXEL Limited 1,418,440
Risk Capital Reinsurance Company 1,418,440
Insurance Partners, L.P. 1,143,065
The Prudential Insurance Company of America 1,028,369
Insurance Partners Offshore (Bermuda), L.P. 629,985
</TABLE>
<PAGE> 2

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

SECURITIES PURCHASE AGREEMENT

between

[Purchaser]

and

ANNUITY AND LIFE RE (HOLDINGS), LTD.

March __, 1998
<PAGE> 3
TABLE OF CONTENTS

PAGE

SECTION 1. AUTHORIZATION OF SECURITIES .................................. 1

SECTION 2. PURCHASE AND SALE OF SECURITIES .............................. 1

2.1. Issuance of Securities ....................................... 1
2.2. Closing of Issuance .......................................... 2

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................ 2

3.1. Corporate Organization ....................................... 2
3.2. Subsidiaries ................................................. 2
3.3. Capitalization ............................................... 3
3.4. Corporate Proceedings, etc ................................... 4
3.5. Consents and Approvals ....................................... 4
3.6. Absence of Defaults, Conflicts, etc .......................... 4
3.7. Financial Statements ......................................... 5
3.8. Absence of Certain Developments .............................. 5
3.9. Compliance with Law .......................................... 5
3.10. Litigation ................................................... 6
3.11. Material Contracts ........................................... 6
3.12. Absence of Undisclosed Liabilities ........................... 6
3.13. Employees .................................................... 7
3.14. Tax Matters .................................................. 7
3.15. Employee Benefit Plans ....................................... 7
<PAGE> 4
3.16. Patents, Licenses, etc ....................................... 8
3.17. Insurance .................................................... 9
3.18. Transactions with Related Parties ............................ 9
3.19. Private Offering ............................................. 9
3.20. Brokerage .................................................... 10
3.21. Illegal or Unauthorized Payments; Political Contributions .... 10
3.22. Material Facts ............................................... 10
3.23. Foreign Assets Control Regulations, etc ...................... 11

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR ............... 11

SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES .......................... 12

5.1. Resale of Securities ......................................... 12
5.2. Covenants Pending Closing .................................... 12
5.3. Further Assurance ............................................ 13

SECTION 6. INVESTOR'S CLOSING CONDITIONS ................................ 13

6.1. Representations and Warranties ............................... 13
6.2. Compliance with Agreement .................................... 13
6.3. Officer's Certificate ........................................ 13
6.4. Delivery of Shares and Warrants .............................. 13
6.5. Injunction ................................................... 13
6.6. Counsel's Opinions ........................................... 14
6.7. Consummation of Public Offering .............................. 16
6.8. Purchase by Other Investors .................................. 17
<PAGE> 5
6.9. Registration Rights Agreement ................................ 17
6.10. Process Agent ................................................ 17
6.11. Proceedings .................................................. 17

SECTION 7. COMPANY CLOSING CONDITIONS ................................... 17

7.1. Representations and Warranties ............................... 17
7.2. Compliance with Agreement .................................... 17
7.3. Injunction ................................................... 18
7.4. Consummation of Public Offering .............................. 18

SECTION 8. LIMITATION ON DISPOSITION .................................... 18

SECTION 9. COVENANTS .................................................... 18

9.1. Financial and Business Information ........................... 18
9.2. Inspection ................................................... 20
9.3. Keeping of Books ............................................. 20
9.4. Lost, etc. Certificates Evidencing Shares (or Shares of Common
Stock); Exchange ............................................. 20
9.5. Review of Documents .......................................... 21
9.6. Confidential Information ..................................... 21

SECTION 10. INTERPRETATION OF THIS AGREEMENT ............................. 21

10.1. Terms Defined ................................................ 21
10.2. Directly or Indirectly ....................................... 23
10.3. Section Headings ............................................. 23

SECTION 11. MISCELLANEOUS ................................................ 23

11.1. Notices ...................................................... 23
<PAGE> 6
11.2. Expenses and Taxes ........................................... 23
11.3. Reproduction of Documents .................................... 24
11.4. Termination and Survival ..................................... 24
11.5. Successors and Assigns ....................................... 25
11.6. Entire Agreement; Amendment and Waiver ....................... 25
11.7. Severability ................................................. 25
11.8. Governing Law; Submission to Jurisdiction .................... 25
11.9. Counterparts ................................................. 27
<PAGE> 7
EXHIBIT A Class B Warrant
EXHIBIT B Registration Rights Agreement

Schedule 2.1 Investors
Schedule 3.1(a) Memorandum of Association
Schedule 3.1(b) Bye-Laws
Schedule 3.1(c) Contemplated Business
Schedule 3.3 Warrants, Options and Convertible Securities
Schedule 3.7 Financial Statements
Schedule 3.8 Certain Developments
Schedule 3.11 Material Contracts
Schedule 3.12 Certain Liabilities
Schedule 3.13 For Cause Employees
Schedule 3.15 Employee Benefit Arrangements
Schedule 3.16 Intellectual Property
Schedule 3.18 Transactions with Related Parties
<PAGE> 8
ANNUITY AND LIFE RE (HOLDINGS), LTD.

SECURITIES PURCHASE AGREEMENT

Dated as of March __, 1998

To the Investor executing
this Agreement on the
signature page hereof

Ladies and Gentlemen:

ANNUITY AND LIFE RE (HOLDINGS), LTD., a Bermuda corporation (the
"Company"), hereby agrees with you (the "Investor") as follows:

SECTION 1. AUTHORIZATION OF SECURITIES

The Company has duly authorized the issuance, sale and delivery of
its common shares, par value $1.00 per share (the "Common Shares") and its Class
B Warrants to purchase its Common Shares, the form of which is attached hereto
as Exhibit A (the "Class B Warrants").

SECTION 2. PURCHASE AND SALE OF SECURITIES

2.1. Issuance of Securities

Subject to the terms and conditions set forth in this Agreement and
in reliance upon the Company's and the Investor's representations set forth
below, on the Closing Date (as defined below) the Company shall sell to the
Investor, and the Investor shall purchase from the Company, the number of Common
Shares (the "Shares") and Class B Warrants (the "Warrants"), and at the
aggregate cash purchase price (the "Purchase Price"), set forth opposite its
name on Schedule 2.1. Such sale and purchase shall be effected on the Closing
Date by the Company executing and delivering to the Investor, duly registered in
its name (or that of its nominee), a duly executed stock certificate and warrant
certificate evidencing the Shares and the Warrants being purchased by it,
against delivery by the Investor to the Company of the Purchase Price by wire
transfer of immediately available funds to such account as the Company shall
designate, not less than three Business Days prior to the Closing Date. The
Company is entering into securities purchase agreements (the "Other Agreements")
substantially in the form of this Agreement with the other investors listed on
Schedule 2.1 ("Other Investors" and, collectively with the Investor, the
"Investors"). The Company's
<PAGE> 9
agreements with each of the Investors are separate agreements, and the sales to
each of the Investors are separate sales.

2.2. Closing of Issuance

The closing of such sale and purchase (the "Closing") shall take
place at 10:00 A.M., New York City time, on the IPO Closing Date or such other
date as the Investor and the Company agree in writing (the "Closing Date"), at
the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, New
York, or such other location as the Investor and the Company shall mutually
select.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investor that:

3.1. Corporate Organization

(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Bermuda. True and complete copies of the
Memorandum of Association, Bye-Laws and other constitutive documents as amended
through the date hereof (collectively, the "Organizational Documents") have been
attached as Schedule 3.1(a) and Schedule 3.1(b) respectively.

(b) The Company has all requisite power and authority and has all
necessary approvals, licenses, permits and authorization to own its properties
and to carry on its business as presently contemplated to be conducted as
described in Schedule 3.1(c). The Company has all requisite power and authority
to execute and deliver the Transaction Documents and to perform its obligations
hereunder and thereunder.

(c) The Company has filed all necessary documents to qualify to do
business as a foreign corporation in, and the Company is in good standing under
the laws of, each jurisdiction in which the conduct of the Company's business as
presently contemplated as described in Schedule 3.1(c) or the nature of the
property owned by it or proposed to be owned requires such qualification, except
where the failure to so qualify would not have a material adverse effect on the
business, properties, prospects, profits or condition (financial or otherwise)
of the Company and its subsidiaries taken as a whole (a "Material Adverse
Effect").

3.2. Subsidiaries

Except for Annuity Life Reassurance Ltd., the Company has no
subsidiaries and no interests or investments in any partnership, trust or other
entity or organization. Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its properties and to conduct its business as presently
contemplated as
<PAGE> 10
described in Schedule 3.1(c) and is duly registered, qualified and authorized to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or the nature of its properties requires such
registration, qualification or authorization, except where the failure to be so
registered, qualified and authorized would not have a Material Adverse Effect;
all of the issued and outstanding capital stock of each subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable, and is owned of
record and beneficially by the Company free and clear of any mortgage, pledge,
lien, encumbrance, security interest, claim or equity.

3.3. Capitalization

(a) On the Closing Date (i) the authorized capital stock of the
Company will consist of 100,000,000 Common Shares, par value $1.00 per share and
50,000,000 preferred shares, par value $1.00 per share, and (ii) the issued and
outstanding shares of capital stock of the Company will consist of Common Shares
which will, to the best knowledge of the Company, be held beneficially by the
persons and in the amounts set forth in Schedule 3.3.

(b) All the outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and non-assessable, and were
issued in accordance with the registration or qualification requirements of the
Securities Act and any other relevant securities laws or pursuant to valid
exemptions therefrom. The Company has authorized (or as of the Closing Date will
have authorized) the issuance, sale and delivery of the Shares and Warrants in
accordance with this Agreement and, subject to the issuance of the Warrants, the
Company has reserved (or as of the Closing Date will have reserved) for issuance
Common Shares initially issuable upon conversion of the Warrants. Upon issuance,
sale and delivery as contemplated by this Agreement, the Shares will be duly
authorized, validly issued, fully paid and non-assessable shares of the Company,
free of all preemptive or similar rights, and entitled to the rights described
in the Organizational Documents and in Schedule 3.3. Upon their issuance in
accordance with the terms of the Warrants, the Common Shares issuable upon
exercise of the Warrants will be duly authorized, validly issued, fully paid and
non-assessable Common Shares of the Company, free of all preemptive or similar
rights.
<PAGE> 11
(c) Except for the rights which attach to the warrants, options and
convertible securities which are listed on Schedule 3.3 hereto and to the
Warrants referred to herein and in the Other Agreements, on the Closing Date
there will be no Common Shares or any other equity security of the Company
issuable upon conversion or exchange or exercise of any security of the Company
nor will there be any rights, options or warrants outstanding or other
agreements to acquire any Common Shares nor will the Company be contractually
obligated to purchase, redeem or otherwise acquire any of its outstanding
shares. No shareholder of the Company is entitled to any preemptive or similar
rights to subscribe for shares of capital stock of the Company.

3.4. Corporate Proceedings, etc.

The Company has duly authorized the execution, delivery, and
performance of the Transaction Documents and each of the transactions and
agreements contemplated hereby and thereby. No other corporate action (including
shareholder approval) is necessary to authorize such execution, delivery and
performance of the Transaction Documents, and upon such execution and delivery
each of the Transaction Documents shall constitute the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and general principles of equity.

3.5. Consents and Approvals

The execution and delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby and thereby do not require the Company or any of its subsidiaries to
obtain any consent, approval or action of, or make any filing with or give any
notice to, any corporation, person or firm or any public, governmental or
judicial authority (except for filings in connection with the Public Offering,
all of which shall have been duly made as of the Closing Date).

3.6. Absence of Defaults, Conflicts, etc.

The execution and delivery of the Transaction Documents do not, and
the fulfillment of the terms hereof and thereof by the Company, and the issuance
of the Shares and Warrants (and the issuance of Common Shares issuable upon
exercise of the Warrants) will not, result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or permit the
acceleration of rights under or termination of, any Material Contract (as
defined in Section 3.11) or the Organizational Documents, or any order, rule or
regulation of any court or federal, state or foreign regulatory board or body or
administrative agency having jurisdiction over the Company or any of its
subsidiaries or over their respective properties or businesses. No event has
occurred and no condition exists which, upon notice or the passage of time (or
both), would constitute a default under any such Material Contract or in any

<PAGE> 12
license, permit or authorization to which the Company or any subsidiary is a
party or by which any of them may be bound.

3.7. Financial Statements

The audited balance sheet of the Company as at December 22, 1997 set
forth in Schedule 3.7, fairly presents the financial position of the Company as
at the date thereof. Such balance sheet, including the schedules and notes
thereto, was prepared in accordance with GAAP.

3.8. Absence of Certain Developments

Since December 22, 1997, except as described in Schedule 3.8, there
has been no (i) material adverse change in the condition, financial or
otherwise, of the Company and its subsidiaries taken as a whole or in their
assets, liabilities, properties, or business or prospects, (ii) declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of the Company, (iii) issuance of capital stock (other than
pursuant to the exercise of options, warrants, or convertible securities
outstanding on the date hereof or as contemplated by this Agreement and the
Other Agreements) or options, warrants or rights to acquire capital stock (other
than the rights granted to the Investors hereunder and under the Company's Stock
Option Plan, the Other Agreements), (iv) material loss, destruction or damage to
any property of the Company or any subsidiary, whether or not insured, (v)
acceleration or prepayment of any indebtedness for borrowed money or the
refunding of any such indebtedness, (vi) labor trouble involving the Company or
any subsidiary or any material change in their personnel or the terms and
conditions of employment, (vii) waiver of any valuable right, (viii) loan or
extension of credit to any officer or employee of the Company or any subsidiary
or (ix) acquisition or disposition of any material assets (or any contract or
arrangement therefor), or any other material transaction by the Company or any
subsidiary otherwise than for fair value in the ordinary course of business.

3.9. Compliance with Law

(a) Neither the Company nor any of its subsidiaries is in material
violation of any laws, ordinances, governmental rules or regulations to which it
is subject, including without limitation laws or regulations relating to the
environment or to occupational health and safety, and no material expenditures
are or will be required in order to cause its currently contemplated operations
or properties to comply with any such law, ordinances, governmental rules or
regulations.
<PAGE> 13

(b) The Company and its subsidiaries have all licenses, permits
(other than certain employee work permits), franchises or other governmental
authorizations necessary to the ownership of their property or to the conduct of
their respective businesses as presently contemplated as described in Schedule
3.1(c) (including, without limitation, such licenses and permissions in Bermuda
which are necessary to carry on the business of a reinsurer), all to the extent
necessary to avoid a Material Adverse Effect. Neither the Company nor any
subsidiary has finally been denied any application for any such licenses,
permits, franchises or other governmental authorizations necessary to its
business.

3.10. Litigation

There is no legal action, suit, arbitration or other legal,
administrative or other governmental investigation, inquiry or proceeding
(whether federal, state, local or foreign) pending or, to the best of the
Company's knowledge, threatened against or affecting the Company or any
subsidiary or any of their respective properties, assets or presently
contemplated businesses. Neither the Company nor any subsidiary is subject to
any order, writ, judgment, injunction, decree, determination or award of any
court or of any governmental agency or instrumentality (whether federal, state,
local or foreign).

3.11. Material Contracts

Schedule 3.11 sets forth a true and complete list of each material
contract, agreement, instrument, commitment and other arrangement to which the
Company or any subsidiary is a party or otherwise relating to or affecting any
of their respective assets, including without limitation: employment, severance
or consulting agreements; loan, credit or security agreements; joint venture
agreements and distribution agreements (each, a "Material Contract"). Each
Material Contract is valid, binding and enforceable against the Company or such
subsidiary and, to the Company's best knowledge, the other parties thereto, in
accordance with its terms, and in full force and effect on the date hereof.

3.12. Absence of Undisclosed Liabilities

Except as disclosed in Schedule 3.12, neither the Company nor any of
its subsidiaries has any debt, obligation or liability (whether accrued,
absolute, contingent, liquidated or otherwise, whether due or to become due,
whether or not known to the Company) arising out of any transaction entered into
at or prior to the Closing, or any act or omission at or prior to the Closing,
or any state of facts existing at or prior to the Closing, including taxes with
respect to or based upon the transactions or events occurring at or prior to the
Closing, and including, without
<PAGE> 14
limitation, unfunded past service liabilities under any pension, profit sharing
or similar plan, except current liabilities incurred and obligations under
agreements entered into, in the usual and ordinary course of business, none of
which (individually or in the aggregate) would have a Material Adverse Effect.

3.13. Employees
<PAGE> 15

(a) The Company and its subsidiaries are in full compliance with all
laws regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of social security and other taxes (except that certain
employees may be required to obtain work permits under Bermuda law).

(b) Except as set forth on Schedule 3.13, the employment of all
Persons and officers employed by the Company or any of its subsidiaries is
terminable at will without any penalty or severance obligation of any kind on
the part of the employer. All sums due for employee compensation and benefits
and all vacation time owing to any employees of the Company or any of its
subsidiaries have been duly and adequately accrued on the accounting records of
the Company and its subsidiaries.

(c) To the best knowledge of the Company none of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted.

(d) To the best knowledge of the Company no officer or key employee,
nor any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing (other than temporary employees who are also
employees of Inter-Atlantic Capital Partners, Inc. or Conyers Dill & Pearman).

3.14. Tax Matters

There are no taxes due and payable by the Company or any of its
subsidiaries which have not been paid. The provisions for taxes on the audited
balance sheet described in Section 3.7 has been established in accordance with
GAAP. The Company and its subsidiaries have duly filed all tax returns required
to have been filed by it. Neither the Company nor any of its subsidiaries has
been subject to a tax audit of any kind.

3.15. Employee Benefit Plans

The Company and its subsidiaries have no employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974)
covering former and current employees of the Company or any of its

<PAGE> 16
subsidiaries, or under which the Company or any of its subsidiaries has any
obligation or liability. Schedule 3.15 lists all material plans, contracts,
bonuses, commissions, profit-sharing, savings, stock options, insurance,
deferred compensation, or other similar fringe or employee benefits covering
former or current employees of the Company or any of its subsidiaries or under
which the Company or any of its subsidiaries has any obligation or liability
(each, a "Benefit Arrangement"). True and complete copies of all Benefit
Arrangements have been provided or made available to the Investor prior to the
date hereof. The Benefit Arrangements are and have been administered in
substantial compliance with their terms and with the requirements of applicable
law.

3.16. Patents, Licenses, etc.

Except as provided on Schedule 3.16, the Company or one of its
subsidiaries owns, free and clear of all encumbrances, restrictions, liens,
security interests and charges, and have good and marketable title to, or hold
adequate licenses or otherwise possess all such rights as are necessary to use
all patents (and applications therefor), patent disclosures, trademarks, service
marks, trade names, copyrights (and applications therefor), inventions,
discoveries, processes, know-how, scientific, technical, engineering and
marketing data, computer software, formulae and techniques used or proposed to
be used, in or necessary for the conduct of its business as now conducted or as
proposed to be conducted (collectively, "Intellectual Property").

Neither the Company nor any of its subsidiaries has received notice
nor otherwise has reason to know of any conflict or alleged conflict with the
rights of others pertaining to the Intellectual Property described in this
Section 3.16. The Company's business, as presently conducted and as proposed to
be conducted, does not infringe upon or violate any patent rights or trade
secrets of others. The Company and its subsidiaries have the unrestricted right
to use, free and clear of any rights or claims of others, all trade secrets,
processes, customer lists and other rights incident to their respective
businesses as now conducted or as proposed to be conducted.

Except as provided for on Schedule 3.16, neither the Company nor any
of its subsidiaries is currently obligated or under any existing liability to
make royalty or other payments to any owner of, licensor of, or other claimant
to, any patent, trademark, service names, trade names, copyrights, or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business as now conducted or as proposed to be conducted, or
otherwise. To the Company's best knowledge, no employee of the Company or any of
its subsidiaries has violated any employment agreement or proprietary
information agreement which he had with a previous employer or any patent
<PAGE> 17
policy of such employer, or is a party to or threatened by any litigation
concerning any patents, trademarks, trade secrets, service names, trade names,
copyrights, licenses and the like.

3.17. Insurance

The Company and its subsidiaries and their respective properties are
insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and businesses
of the Company and its subsidiaries. The Company maintains (or as of the Closing
Date will maintain) directors and officers insurance (in customary form) in
amounts not less than $10,000,000.

3.18. Transactions with Related Parties

Except as disclosed on Schedule 3.18, neither the Company nor any
subsidiary is a party to any agreement with any of the Company's directors,
officers or shareholders (other than shareholders which become such as a result
of the Public Offering and other than the Investors) or any Affiliate or family
member of any of the foregoing under which it: (i) leases any real or personal
property (either to or from such Person), (ii) licenses technology (either to or
from such Person), (iii) is obligated to purchase any tangible or intangible
asset from or sell such asset to such Person, (iv) purchases products or
services from such Person or (v) has borrowed money from or loaned money to such
Person. Except as set forth in Schedule 3.18, neither the Company nor any
subsidiary employs as an employee or engages as a consultant any family member
of any of the Company's directors, officers or shareholders. To the best
knowledge of the Company, there exist no agreements among shareholders of the
Company to act in concert with respect to their voting or holding of Company
securities.

3.19. Private Offering

Neither the Company nor anyone acting on its behalf, directly or
indirectly, has sold or has offered any of the Shares or Warrants (or any
similar security) for sale to, or solicited offers to buy from, or otherwise
approached or negotiated with respect thereto with, any prospective purchaser,
other than the Investors and not more than 10 other institutional investors,
each of which was offered such securities for purposes of investment. Neither
the Company nor anyone acting on its behalf shall offer the Shares or Warrants
(or any similar security) for issue or sale to, or solicit any offer to acquire
any of the same from, anyone so as to bring the issuance and sale of such Shares
or Warrants or Common Shares issuable upon exercise of the Warrants, or any part
thereof, within the provisions of Section 5 of the Securities Act or in
violation of the provisions of any securities or Blue Sky law of any applicable
jurisdiction. Based upon the representations of the Investors set forth in
Section 4 hereof and of the Other Agreements, the offer, issuance and sale of
the Shares and the Warrants and the issuance of the Common Shares issuable upon
exercise of the Warrants are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all other applicable
securities laws.

3.20. Brokerage
<PAGE> 18
There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of the Company and the
Company agrees to indemnify and hold the Investor harmless against any costs
(including, without limitation, reasonable attorneys fees and disbursements for
the defense of any such claims) or damages incurred as a result of any such
claim.

3.21. Illegal or Unauthorized Payments; Political Contributions

Neither the Company or any of its subsidiaries nor, to the best of
the Company's knowledge (after reasonable inquiry of its officers and
directors), any of the officers, directors, employees, agents or other
representatives of the Company or any of its subsidiaries or any other business
entity or enterprise with which the Company or any subsidiary is or has been
affiliated or associated, has, directly or indirectly, made or authorized any
payment, contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (a) as a kickback or bribe to any Person or (b)
to any political organization, or the holder of or any aspirant to any elective
or appointive public office except for personal political contributions not
involving the direct or indirect use of funds of the Company or any of its
subsidiaries.

3.22. Material Facts

This Agreement, the schedules hereto and the other agreements,
documents, certificates or written statements furnished or to be furnished to
the Investor through the Closing Date by or on behalf of the Company in
connection with the transactions contemplated hereby taken as a whole, do not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein or herein, in
light of the circumstances in which they were made, not misleading. There is no
fact which is known to the Company and which has not been disclosed herein or
otherwise by the Company to the Investor which may materially adversely affect
the business, properties, assets or condition, financial or otherwise, or
prospects of the Company and its subsidiaries taken as a whole.

3.23. Foreign Assets Control Regulations, etc.

Neither the sale of the Shares and Warrants by the Company hereunder
nor its use of the proceeds thereof will violate the Trading with the Enemy Act,
as amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

The Investor represents and warrants to the Company as follows:

(a) It is acquiring the Shares and Warrants (and will acquire the
Common Shares issuable upon conversion of the Warrants) for its own account for
investment and not with a view towards the distribution thereof, nor with any
present intention of distributing the Shares or Warrants (or the Common Shares
acquired upon exercise of the Shares), but subject, nevertheless, to any
requirement of law that the disposition of the Investor's property shall at all
times be within the Investor's control, and without prejudice to the Investor's
right at all times to sell or otherwise dispose of all or any part of such
securities under a registration under the Securities Act or under an exemption
from said registration available under the Securities Act to the extent
permitted by the Transaction Documents.
<PAGE> 19
(b) It is either (x) a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act or (y) an "accredited investor"
within the meaning of Rule 501(a)(3) under the Securities Act.

(c) It has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its investment
in the Company as contemplated by this Agreement, and is able to bear the
economic risk of such investment for an indefinite period of time. It has been
furnished access to such information and documents as it has requested and has
been afforded an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the purchase of the Shares and Warrants contemplated hereby.

(d) It has all requisite power and authority to execute this
Agreement and the Registration Rights Agreement, to perform its obligations
hereunder and thereunder and to acquire and hold the Shares and Warrants.

SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES

5.1. Resale of Securities
<PAGE> 20

(a) The Investor covenants that it will not sell or otherwise
transfer the Shares or Warrants (or any Common Shares acquired upon exercise of
the Warrants) except pursuant to an effective registration under the Securities
Act or in a transaction which, in the opinion of counsel (which may be in-house
counsel to the Investor), qualifies as an exempt transaction under the
Securities Act and the rules and regulations promulgated thereunder and subject
to the provisions of the Transaction Documents.

(b) The certificates evidencing the Shares and Warrants and Common
Shares issuable upon exercise of the Warrants will bear the following legend
reflecting the foregoing restrictions on the transfer of such securities:

"The securities evidenced hereby have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be transferred except pursuant to an effective
registration under the Act or in a transaction which, in the opinion
of counsel, qualifies as an exempt transaction under the Act and the
rules and regulations promulgated thereunder. The transfer of such
securities is also subject to certain limitations on transfer as set
forth in certain agreements between the Company and certain
institutional investors in the Company, copies of which are
available upon request of the Company."

5.2. Covenants Pending Closing

Pending the Closing the Company will not, without the Investor's
prior written consent, take any action which would result in any of the
representations or warranties contained in this Agreement not being true in all
material respects at and as of the time immediately after such action, or in any
of the covenants contained in this Agreement becoming incapable of performance
in all material respects. The Company will promptly advise the Investor in
writing of any action or event of which it becomes aware which has the effect of
making incorrect any of such representations or warranties in any material
respect or which has the effect of rendering any of such covenants incapable of
performance.

5.3. Further Assurance

Each of the parties shall execute such documents and other papers
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby. Each
such party shall use its reasonable efforts to fulfill or obtain the fulfillment
of the conditions to the Closing as promptly as practicable.

SECTION 6. INVESTOR'S CLOSING CONDITIONS

The obligation of the Investor to purchase and pay for the Shares
and Warrants on the Closing Date, as provided in Section 2 hereof, shall be
subject to the performance by the Company of its agreements theretofore to be
performed hereunder and to the satisfaction, prior thereto or concurrently
therewith, of the following further conditions:

6.1. Representations and Warranties

The representations and warranties of the Company contained in this
Agreement shall be true in all material respects on and as of the Closing Date
as though such warranties and representations were made at and as of such date,
except as otherwise affected by the transactions contemplated hereby.

6.2. Compliance with Agreement
<PAGE> 21
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in this
Agreement which are required to be performed or complied with by the Company
prior to or on the Closing Date.

6.3. Officer's Certificate

The Investor shall have received a certificate, dated the Closing
Date, signed by each of the President and the Chief Operating Officer of the
Company, certifying that the conditions specified in the foregoing Sections 6.1
and 6.2 hereof have been fulfilled.

6.4. Delivery of Shares and Warrants

The Company shall have delivered to the Investor the certificates
evidencing the Shares and Warrants being purchased by it hereunder as provided
in Section 2.1.

6.5. Injunction

There shall be no injunction, writ, preliminary restraining order or
any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or any of them not be consummated as
herein provided.

6.6. Counsel's Opinions

The Investors shall have received (x) from the Company's counsel
delivering opinions to the Underwriters in connection with the Public Offering
on the IPO Closing Date, copies of such opinions together with letters from such
counsel allowing the Investor to rely thereon and (x) opinions, dated the
Closing Date, from counsel for the Company substantially to the effect that:

(i) Each of the Company and its subsidiaries is duly organized and
validly existing in good standing under the laws of Bermuda, has the
all requisite power and authority and has all necessary approvals,
licenses, permits and authorization to own its properties and to
carry on its business as proposed to be conducted as contemplated by
the Registration Statement. The Company has all requisite power and
authority to execute and deliver the Transaction Documents and to
perform its obligations thereunder.

(ii) Each of the Company and its subsidiaries are duly qualified as
a foreign corporation in every jurisdiction in which such
qualification is necessary, except where the failure to so qualify
would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.

(iii) Section 3.3(a) of this Agreement accurately reflects the share
records of the Company as to its authorized and issued capital stock
and the Company has duly
<PAGE> 22
reserved for issuance such number of Common Shares initially
issuable upon exercise of the Warrants.

(iv) Except for the rights which attach to the Warrants and to the
warrants, options and convertible securities listed on Schedule 3.3
hereto, to the best knowledge of such counsel, there are no Common
Shares issuable upon conversion or exchange or exercise of any
security of the Company nor are there any rights, options or
warrants outstanding or other agreements to acquire Common Shares
from the Company nor is the Company contractually obligated to
purchase, redeem or otherwise acquire any of its outstanding shares.
Except as disclosed in Schedule 3.3, no shareholder of the Company
is entitled to any preemptive right or other similar right to
subscribe for shares of capital stock of the Company provided by
statute or the Organizational Documents or, to the best knowledge of
such counsel, by any other agreement or instrument.

(v) All the outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and non-assessable.
When issued in accordance with the terms of this Agreement, the
Shares will be (and upon their issuance the Common Shares issuable
upon exercise of the Warrants will be) (x) duly authorized, validly
issued, fully paid and non-assessable Common shares of the Company,
free of all preemptive or similar rights provided by statute or the
Organizational Documents or, to the best knowledge of such counsel,
any other agreement or instrument, and (y) entitled to the rights
described in Schedule 3.3.

(vi) The Company has duly authorized the execution, delivery, and
performance of the Transaction Documents and each of the
transactions and agreements contemplated thereby, and no other
corporate action is
<PAGE> 23
necessary to authorize such execution, delivery or performance. The
Transaction Documents have been duly executed and delivered on
behalf of the Company and constitute the valid and binding
obligation of the Company, enforceable against the Company in
accordance with their terms, except as such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights and general principles of equity.

(vii) The execution and delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations
thereunder and the consummation by the Company of the transactions
contemplated thereby do not require the Company to obtain any
consent, approval or action of, or make any filing with or give any
notice to, any corporation, person or firm or any public,
governmental or judicial authority except such as have been duly
obtained or made, as the case may be, and are in full force and
effect.

(viii) The execution and delivery of the Transaction Documents do
not, and the fulfillment of the terms hereof and thereof by the
Company and the issuance of Common Shares upon conversion of the
Warrants as herein contemplated will not, (A) result in a breach of
any of the terms, conditions or provisions of, or constitute a
default under, any material indenture, mortgage, deed of trust,
credit agreement, note or other evidence of indebtedness, or other
material agreement to which the Company or any of its subsidiaries
is a party and which is listed on Schedule 3.11, (B) violate the
Organizational Documents, or any law, rule or regulation known to
such counsel of any court or other regulatory board or body or
administrative agency having jurisdiction
<PAGE> 24
over the Company or over its properties or businesses or (C)
conflict with or constitute a default under any judgment, writ,
decree or order known to such counsel to be applicable by its terms
to the Company or any of its subsidiaries.

(ix) To the best knowledge of such counsel, there is no action,
suit, investigation or proceeding pending or threatened, against the
Company or any of its properties or assets by or before any court,
arbitrator or governmental body, department, commission, board,
bureau, agency or instrumentality, which questions the validity of
the Transaction Documents, the Shares or the Warrants or any action
taken or to be taken pursuant hereto or thereto.

(x) The issuance and sale of the Shares and Warrants do not (and the
issuance of Common Shares issuable upon exercise of the Warrants
will not) require registration under Section 5 of the Securities Act
or qualification under any state securities or Blue Sky laws.

(xi) The choice of New York law and the submission by the Company to
the jurisdiction of New York State courts and federal courts sitting
in New York as provided in Section 11.8 are valid and enforceable
in New York and in Bermuda.

6.7. Consummation of Public Offering

The Company shall have consummated the Public Offering as
contemplated by the Registration Statement at a price to the public of at least
$15.00 per share and shall have received not less than $150,000,000 in net
proceeds (after underwriting discounts and commissions) which shall not in any
event exceed 6% therefrom (the "Public Offering Proceeds"). The Public Offering
Proceeds shall exceed Other Sale Proceeds by the ratio of at least 2.5 to 1.0.
"Other Sale Proceeds" means the net proceeds to the company from (x) the sale of
the Shares and Warrants hereunder and under the Other Agreements any (y) all
other sales of Common Shares (except to the underwriters in the Public Offering)
and securities convertible into, or exchangeable or exercisable for, Common
Shares (herein called "Other Sales"). The Company agrees that on and prior to
the Closing Date it will not make or agree to make Other Sales on terms more
favorable to the purchasers involved in such Other Sales than the terms of the
Agreement relating to the Shares and Warrants unless such more favorable terms
are also extended to the Investor.

6.8. Purchase by Other Investors

Each of the Other Investors shall have purchased the Shares and
Warrants to be purchased by it under the Other Agreements and the Company shall
have received payment of the Purchase Price under such Other Agreements.

6.9. Registration Rights Agreement

The Company and each of the other parties thereto shall have
executed the Registration Rights Agreement, the form of which is attached as
Exhibit B hereto (the "Registration Rights Agreement").

6.10. Process Agent
<PAGE> 25
The Investor shall have received a copy of the acceptance by CT
Corporation System of its appointment under the provisions of Section 11.8(d).

6.11. Proceedings

The Investor shall have received copies of all documents or other
evidence which it and its special counsel, Willkie Farr & Gallagher, may
reasonably request in connection with the transactions contemplated hereby and
of all records of corporate proceedings in connection therewith.

SECTION 7. COMPANY CLOSING CONDITIONS

The obligation of the Company to issue and deliver the Shares and
Warrants on the Closing Date, as provided in Section 2 hereof, shall be subject
to the performance by the Investor of its agreements theretofore to be performed
hereunder and to the satisfaction, prior thereto or concurrently therewith, of
the following further conditions:

7.1. Representations and Warranties

The representations and warranties of the Investor contained in this
Agreement shall be true on and as of the Closing Date as though such warranties
and representations were made at and as of such date, except as otherwise
affected by the transactions contemplated hereby.

7.2. Compliance with Agreement

The Investor shall have performed and complied with all agreements,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by it prior to or on the Closing Date.

7.3. Injunction

7.4. Consummation of Public Offering.

SECTION 8. LIMITATION ON DISPOSITION

The Investor will not, without the consent of the Company, sell,
transfer or otherwise dispose of the Shares or Warrants for a period of one year
after the Closing Date except (i) to one or more of its Affiliates, or (ii) to
any institutional investor purchasing all of the Shares and Warrants then held
by the Investor (or if not all such Shares and Warrants, Shares and/or Warrants
representing at least 1,000,000 Common Shares (assuming exercise of the
Warrants)); provided that any such transferee shall agree to be bound by the
provisions of this Section 8.

SECTION 9. COVENANTS

9.1. Financial and Business Information

From and after the date hereof, the Company shall deliver to each of
the Investors so long as such Investor owns beneficially (within the meaning of
Rule 13d-3 under the Exchange Act) any Shares or Warrants or Common Shares
issuable upon exercise of the Warrants:

(a) Quarterly Statements - as soon as practicable, and in any event
within 45 days after the close of each of the first three fiscal quarters of
each fiscal year of the Company in the case of quarterly statements, a
consolidated balance sheet,
<PAGE> 26
statement of income and statement of cash flows of the Company and any
subsidiaries as at the close of such month or quarter and covering operations
for such month or quarter, as the case may be, and the portion of the Company's
fiscal year ending on the last day of such month or quarter, all in reasonable
detail and prepared in accordance with GAAP, subject to audit and year-end
adjustments, setting forth in each case in comparative form the figures for the
comparable period of the previous fiscal year.

(b) Annual Statements - as soon as practicable after the end of each
fiscal year of the Company, and in any event within 90 days thereafter,
duplicate copies of:

(1) consolidated balance sheet of the Company and any subsidiaries
at the end of such year; and

(2) consolidated statements of income, stockholders' equity and cash
flows of the Company and any subsidiaries for such year, setting forth in
each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by an opinion thereon of
independent certified public accountants of recognized national standing
selected by the Company, which opinion shall state that such financial
statements fairly present the financial position of the Company and any
subsidiaries on a consolidated basis and have been prepared in accordance
with GAAP (except for changes in application in which such accountants
concur) and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances.

(c) Audit Reports - promptly upon receipt thereof, one copy of each
other financial report and internal control letter submitted to the Company or
any subsidiary by independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company or any subsidiary.

(d) Other Reports - promptly upon their becoming available, one copy
of each financial statement, report, notice or proxy statement sent by the
Company to shareholders generally, of each financial statement, report, notice
or proxy statement filed by the Company or any of its subsidiaries with the SEC
or any successor agency, if applicable, of each regular or periodic report and
any registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Company or any subsidiary
with, or received by such Person in connection therewith from, any domestic or
foreign securities exchange, the SEC or any successor agency or any foreign
regulatory authority performing functions similar to the SEC, of any press
release issued by the Company or any subsidiary, and of any material of any
nature whatsoever prepared by the SEC or any successor agency thereto or any
state blue sky
<PAGE> 27
or securities law commission which relates to or affects in any way the Company
or any subsidiary.

(e) Requested Information - with reasonable promptness, the Company
shall furnish each of the Investors with such other data and information as from
time to time may be reasonably requested.

9.2. Inspection

As long as an Investor owns beneficially (within the meaning of Rule
13d-3 under the Exchange Act) at least two percent (2%) of the outstanding
Common Shares, the Company shall permit such Investor, its nominee, assignee,
and its representative during normal business hours and upon reasonable advance
notice to visit and inspect any of the properties of the Company and its
subsidiaries, to examine all its books of account, records, reports and other
papers not contractually required of the Company to be confidential or secret,
to make copies and extracts therefrom, and to discuss its affairs, finances and
accounts with its officers, directors, key employees and independent public
accountants or any of them (and by this provision the Company authorizes said
accountants to discuss with such Investor, its nominees, assignees and
representatives the finances and affairs of the Company and any subsidiaries),
all at such reasonable times and as often as may be reasonably requested.

9.3. Keeping of Books

The Company will keep proper books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets and business of the Company and its subsidiaries in accordance with GAAP.

9.4. Lost, etc. Certificates Evidencing Shares (or Shares of
Common Stock); Exchange

Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of any certificate evidencing
any Shares or Warrants (or Common Shares issuable upon exercise of the Warrants)
owned by one of the Investors, and (in the case of loss, theft or destruction)
of an unsecured indemnity satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of such certificate, if mutilated, the Company will make and
deliver in lieu of such certificate a new certificate of like tenor and for the
number of shares evidenced by such certificate which remain outstanding. Such
Investor's agreement of indemnity shall constitute indemnity satisfactory to the
Company for purposes of this Section 9.4. Upon surrender of any certificate
representing any Shares (or Common Shares issuable upon exercise of the
Warrants) for exchange at the office of the Company, the Company at its expense
will cause to be issued in exchange therefor new certificates in such
denomination or denominations as may be requested for the same aggregate number
of Shares, Warrants or Common Shares, as the case may be, represented by the
certificate so surrendered and registered as such holder may request. The
Company will also pay the cost of all deliveries of certificates for such
securities to the office of such Investor (including the cost of insurance
against loss or theft in an amount satisfactory to the holders) upon any
exchange provided for in this Section 9.4.

9.5. Review of Documents

The Investor shall have the right to review and approve all
statements or disclosures (in the Registration Statement or in press releases or
elsewhere) made by the Company in relation to the Investor's investment in and
relationship to the Company.

9.6. Confidential Information
<PAGE> 28
The Investor acknowledges that its receipt of material non-public
information as a consequence of its exercise of its rights under Sections 9.1
and 9.2 may obligate it not to trade in securities of the Company which it may
hold so long as such information is not publicly disclosed by the Company.

SECTION 10. INTERPRETATION OF THIS AGREEMENT

10.1. Terms Defined

As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:

Affiliate: means any Person or entity, directly or indirectly,
controlling, controlled by or under common control with such Person or entity.

Business Day: shall mean a day other than a Saturday, Sunday or
other day on which banks in New York, New York and Hamilton, Bermuda are not
required or authorized by law to close.

Closing: shall have the meaning set forth in Section 2.2.

Closing Date: shall have the meaning set forth in Section 2.2.

Common Shares: shall have the meaning set forth in Section 1.

Exchange Act: shall mean the Securities Exchange Act of 1934, as
amended.

GAAP: at any time shall mean United States generally accepted
accounting principles at the time in effect.

Intellectual Property: shall have the meaning set forth in
Section 3.16.

Investor: shall mean the Person executing this Agreement on the
signature page hereof and its successors and assigns as the holder of Shares,
Warrants or Common Shares issuable upon exercise of the Warrants.

IPO Closing Date: shall mean the date of the consummation of the
Public Offering.

Material Adverse Effect: shall have the meaning set forth in
Section 3.1(c).
<PAGE> 29
Material Contract: shall have the meaning set forth in Section
3.11.

Other Agreements: shall have the meaning set forth in Section
2.1.

Organizational Documents: shall have the meaning set forth in
Section 3.1(a).

Person: shall mean an individual, partnership, joint-stock
company, corporation, limited liability company, trust or unincorporated
organization, and a government or agency or political subdivision thereof.

Public Offering: shall mean the sale by the Company of its
Common Shares to the underwriters as contemplated by the Registration
Statement.

Registration Rights Agreement: shall have the meaning set forth
in Section 6.9.

Registration Statement: shall mean the Registration Statement
filed by the Company with the SEC on Form S-1 (No.333-43301) on December 24,
1997, as amended, in the form it becomes effective under the Securities Act.

SEC: shall mean the Securities and Exchange Commission.

Securities Act: shall mean the Securities Act of 1933, as
amended.

Shares: shall have the meaning set forth in Section 2.1.

subsidiary: shall mean a corporation of which a Person owns,
directly or indirectly, more than 50% of the Voting Stock.

Transaction Documents: shall mean this Agreement, the Other
Agreements, the Class B Warrants and the Registration Rights Agreement.

Voting Stock: shall mean securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
<PAGE> 30
Warrants: shall have the meaning set forth in Section 2.1.

10.2. Directly or Indirectly

Where any provision in this Agreement refers to action to be taken
by any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person.

10.3. Section Headings

The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof.

SECTION 11. MISCELLANEOUS

11.1. Notices

(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid:

(1) if to the Investor, at: the address specified in Schedule
2.1, or at such other address as the Investor may have furnished
the Company in writing, or

(2) if to the Company, at: Victoria Hall, Victoria Street,
P.O. Box HM1262, Hamilton, HM FX, Bermuda (facsimile: ( )
- ), marked for the attention of ___________, or at such other
address as it may have furnished the Investor in writing.

(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and if
mailed by registered or certified mail, on the third business day after the date
of such mailing.

11.2. Expenses and Taxes
<PAGE> 31
(a) Whether or not the issue and sale of the Shares and Warrants
contemplated hereby are consummated, the Company will pay all costs and expenses
(including attorneys' fees and disbursements of counsel) incurred by the
Investor in connection with such issue and sale and all costs and expenses
(including attorneys' fees and disbursements of counsel) incurred by the
Investor in connection with any amendments, waivers or consents under or in
respect of the Transaction Documents (whether or not such amendment, waiver or
consent becomes effective). In addition, the Company will pay the Investor the
costs and expenses (including attorneys' fees and disbursements) incurred by it
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under the Transaction Documents or in responding to any subpoena or
other legal process or informal investigative demand (which investigative demand
shall have been issued by a governmental agency or official) issued in
connection with the Transaction Documents or the Investor's investment in the
Company.

(b) The Company will pay, and save and hold the Investor harmless
from, any and all claims arising out of or relating to the transactions
contemplated by the Transaction Documents or the performance thereof and all
liabilities (including interest and penalties) with respect to, or resulting
from any delay or failure in paying, stamp and other taxes (other than income
taxes), if any, which may be payable or determined to be payable on the
execution and delivery or acquisition of the Shares or Warrants or the Common
Shares issuable upon exercise of the Warrants.

11.3. Reproduction of Documents

This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications which may hereafter
be executed, (b) documents received by the Investors on the Closing Date (except
for certificates evidencing the Shares themselves), and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Investors, may be reproduced by the Investors by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and either Investor may destroy any original document so reproduced. All
parties hereto agree and stipulate that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by an Investor in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.

11.4. Termination and Survival

Unless the Closing has occurred prior thereto, this Agreement and,
except as herein provided, all the rights of the parties hereto, shall terminate
on June 30, 1998 (unless such date is extended by mutual written consent).
Notwithstanding the foregoing, Section 11.2 hereof shall survive the termination
of this Agreement. All warranties,
<PAGE> 32
representations, and covenants made by the Investor and the Company herein or in
any certificate or other instrument delivered by the Investor or the Company
under this Agreement shall be considered to have been relied upon by the Company
or the Investor, as the case may be, regardless of any investigation made by the
Investor and shall survive all deliveries to the Investor of the Shares, or
payment to the Company for such Shares and Warrants, regardless of any
investigation made by the Company or the Investor, as the case may be, or on the
Company's or the Investor's behalf. All statements in any such certificate or
other instrument shall constitute warranties and representation by the Company
hereunder, except that the Investor shall not be required to purchase Shares or
Warrants from any Person other than the Company.

11.5. Successors and Assigns

This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties.

11.6. Entire Agreement; Amendment and Waiver

This Agreement and the agreements attached as Exhibits hereto
constitute the entire understandings of the parties hereto and supersede all
prior agreements or understandings with respect to the subject matter hereof
among such parties. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and the Investor.

11.7. Severability

In the event that any part or parts of this Agreement shall be held
illegal or unenforceable by any court or administrative body of competent
jurisdiction, such determination shall not affect the remaining provisions of
this Agreement which shall remain in full force and effect.

11.8. Governing Law; Submission to Jurisdiction
<PAGE> 33
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.

(b) Each of the Company and the Investor (each a "Party")
irrevocably submits to the non-exclusive in personam jurisdiction of any New
York State or United States federal court sitting in the Borough of Manhattan,
The City of New York, over any suit, action or proceeding arising out of or
relating to the Transaction Documents. To the full extent it may effectively do
so under applicable law, each Party irrevocably waives and agrees not to
assert, by way of motion, as a defense or otherwise, any claim that it is not
subject to the in personam jurisdiction of any such court, any objection that it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.

(c) Each Party agrees, to the full extent it may effectively do so
under applicable law, that a final judgment in any suit, action or proceeding of
the nature referred to in paragraph (b) of this Section 11.8 brought in any such
court shall be conclusive and binding upon such Party, subject to rights of
appeal and may be enforced in the courts of the United States or the State of
New York (or any other courts to the jurisdiction of which such Party is or may
be subject) by a suit upon such judgment.

(d) Each Party consents to process being served in any suit, action
or proceeding of the nature referred to in paragraph (b) of this Section 11.8 by
mailing a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to the address of such Party specified in Section 11.1 or at
such other address of which the other Party shall then have been notified
pursuant to said Section. Without limiting the foregoing, the Company hereby
appoints, in the case of any such suit, action or proceeding brought in the
courts of or in the State of New York, CT Corporation, 1633 Broadway, New York,
NY 10019, to receive, for it and on its behalf, service of process in the State
of New York with respect thereto. Each Party agrees that such service upon
receipt by it or its agent, as the case may be, (i) shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding and (ii) shall, to the full extent permitted by applicable law, be
taken
<PAGE> 34

and held to be valid personal service upon and personal delivery to such Party.
Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or Bermuda
Post or any reputable commercial delivery service.

(e) Nothing in this Section 11.8 shall affect the right of any Party
to serve process in any manner permitted by law, or limit any right that such
Party may have to bring proceedings against the other Party in the courts of any
appropriate jurisdiction or to enforce in any lawful manner a judgment obtained
in one jurisdiction in any other jurisdiction.

(f) Each Party waives trial by jury in any action brought on or with
respect to the Transaction Documents or any other document executed in
connection therewith.

11.9. Counterparts

This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.
<PAGE> 35
If you are in agreement with the foregoing please so indicate by
executing the acceptance set forth below and return a copy of this Agreement to
the Company, whereupon this Agreement shall be a binding agreement between us.

Very truly yours,

ANNUITY AND LIFE RE
(HOLDINGS), LTD.

By:__________________________________
Name:
Title:

The foregoing Agreement is hereby accepted:

[Investor]

By:
Name:
Title:

<PAGE> 1
Exhibit 10.13

Form of Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT dated March ___, 1998, among ANNUITY
AND LIFE RE (HOLDINGS), LTD., a Bermuda corporation (the "Company"), and
[Purchaser] (the "Initial Holder").

The Company has issued its common shares, par value $1.00 per share
("Common Shares") and its Class B Warrants to purchase Common Shares (the
"Warrants") to the Initial Holder pursuant to the terms of that certain
Securities Purchase Agreements, between the Company and the Initial Holder dated
as of March 4, 1998 (the "Securities Purchase Agreement"). Pursuant to the
Securities Purchase Agreement, the Company has agreed to register such shares
for sale under the Securities Act of 1933, as amended, as more specifically
provided below.

NOW, THEREFORE, in consideration of the completion of the
transactions contemplated by the Securities Purchase Agreement and of the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows, intending to be legally bound.

Section 1. Definitions. As used in this Agreement, the following
terms have the following meanings:

"Business Day": any day on which the Company's Common Shares are
available for trading on the principal stock exchange or market upon which they
are traded.

"Closing Date": the date on which is consummated the transactions
contemplated by the Securities Purchase Agreement.

"Common Shares": the Company's Common Shares, par value $1.00 per
share.

"Exchange Act": the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.

"Holders": the Initial Holder and the permitted successors or
assignees of the Initial Holder, for so long as (and to the extent that) such
Persons own or have the right to acquire any Registrable Securities.

"Holder Agreements": This Agreement and any other Agreement between
the Company and one of the Other Investors which is substantially similar to
this Agreement.

<PAGE> 2

"Other Investors": The Persons (other than the Company) which are
parties to Securities Purchase Agreements in substantially the form entered into
between the Company and the Holder on March 4, 1998.

"Person": an individual, a partnership (general or limited),
corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.

"Registrable Securities": (1) the Common Shares issued pursuant to
the terms of the Securities Purchase Agreement; (2) the Common Shares issued or
issuable pursuant to the Warrants issued pursuant to the terms of the Securities
Purchase Agreement, and (3) any additional Common Shares or other equity
securities of the Company issued or issuable in respect of such Common Shares
(or other equity securities issued in respect thereof) by way of a stock
dividend or stock split, in connection with a combination, exchange,
reorganization, recapitalization or reclassification of Company securities, or
pursuant to a merger, division, consolidation or other similar business
transaction or combination involving the Company; provided that as to any
particular Registrable Securities, such securities shall cease to constitute
Registrable Securities (a) when a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of thereunder, (b) when such securities
shall have been disposed of pursuant to Rule 144 (or any successor provision to
such Rule) under the Securities Act, or (c) when such securities shall have
ceased to be outstanding.

"Registration Expenses": all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (a) the fees,
disbursements and expenses of the Company's counsel, accountants, and experts in
connection with the registration under the Securities Act of Registrable
Securities; (b) all expenses in connection with the preparation, printing and
filing of the registration statement, any preliminary prospectus or final
prospectus, any other offering document and amendments and supplements thereto,
and the mailing and delivering of copies thereof to underwriters and dealers, if
any; (c) the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements, and any other documents in connection with the offering,
sale or delivery of Registrable Securities to be disposed of; (d) the fees and
expenses incurred in connection with the listing of Registrable Securities on
each securities exchange on which Company securities of the same class are then
listed or with the Nasdaq National Market System; (e) the fees and expenses, not
to exceed $25,000, of a single counsel retained by any and all Persons
participating in a registration pursuant to a Holder Agreement, (f) any
underwriters' discounts or compensation, brokers' commissions or similar selling
expenses attributable to the sale of Registrable Securities; (g) any SEC or blue
sky registration or filing fees attributable to Registrable Securities or
transfer taxes applicable to Registrable Securities, (h) any other expenses in
connection with the qualification of Registrable

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<PAGE> 3

Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
and (i) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Securities to be disposed of.

"Registration Statement": a registration statement under the
Securities Act filed by the Company pursuant to this Agreement, including all
amendments thereto, all preliminary and final prospectuses included therein and
all exhibits thereto.

"SEC": the United States Securities and Exchange Commission, or such
other federal agency at the time having the principal responsibility for
administering the Securities Act.

"Securities Act": the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.

"Warrant": the Class B Warrants of the Company.

Section 2. Underwritten Demand Registration.

(a) At any time on or after the first anniversary of the Closing
Date, and before the tenth anniversary of the Closing Date the Holder or Holders
of thirty (30) percent or more of the Registrable Securities may (by written
notice delivered to the Company) require registration of all or any portion of
such Registrable Securities for sale in an underwritten public offering. In each
such case, such notice shall specify the number of Registrable Securities for
which such underwritten offering is to be made. Within ten Business Days after
its receipt of any such notice, the Company shall give written notice of such
request to all other Holders, and all such Holders shall have the right to have
any or all Registrable Securities owned by them included in the requested
underwritten offering as they shall specify in a written notice received by the
Company within ten Business Days after the Company's notice is given. Within ten
Business Days after the expiration of such ten Business Day period, the Company
shall notify all Holders requesting inclusion of Registrable Securities in the
proposed underwriting of (1) the aggregate number of Registrable Securities
proposed to be included by all Holders in the offering, and (2) the proposed
commencement date of the offering, which shall be a date not more than thirty
days after the Company gives such notice. The managing underwriter for such
offering shall be chosen by the Holders of a majority of the Registrable
Securities being included therein and shall be satisfactory to the Company.

(b) If any request for an underwriting shall have been made pursuant
to subsection (a), the Company shall, at the request of the managing underwriter
for such offering, prepare and file a Registration Statement with the SEC as
promptly as reasonably practicable, but in any event within 45 days after the
managing underwriter's request therefor.

(c) The Company shall not have any obligation to permit or
participate in more than two underwritten public offerings pursuant to this
Section, or to file a Registration Statement pursuant to this Section with
respect to less than thirty (30) percent of the Registrable Securities.

(d) The Company shall have the right to defer the filing or
effectiveness of a Registration Statement relating to any registration requested
under this Section for a reasonable

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<PAGE> 4

period of time not to exceed 180 days if (1) the Company is, at such time,
working on an underwritten public offering of its securities for the account of
the Company and is advised by its managing underwriter that such offering would
in its opinion be materially adversely affected by such filing; or (2) the
Company in good faith determines that any such filing or the offering of any
Registrable Securities would (A) materially impede, delay or interfere with any
proposed financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or (B)
require the disclosure of material non-public information, the disclosure of
which would materially and adversely affect the Company.

(e) The Company shall have no obligation to file a Registration
Statement pursuant to this Section earlier than 180 days after the effective
date of a prior registration statement of the Company covering an underwritten
public offering for the account of the Company the effective date of which is
after the first anniversary of the Closing Date if (1) the Company shall have
offered pursuant to Section 4 to include the Holders' Registrable Securities in
such Registration Statement; (2) the Holders shall not have elected to include
in such Registration Statement at least thirty (30) percent of the Registrable
Securities; and (3) no Registrable Securities requested to be included in such
registration statement shall have been excluded therefrom pursuant to Section
4(c).

(f) The Holders of a majority of Registrable Securities requested
to be included in any offering pursuant to this Section may elect by written
notice to the Company not to proceed with the offering, in which case the
Company shall not be obligated to proceed with such offering. If the Holders so
elect, the Holders that shall have requested Registrable Securities to be
included in the offering shall pay all Registration Expenses incurred by the
Company in connection with such offering prior to receipt of such notice.

(g) Neither the Company nor any other Person shall be entitled to
include any securities held by it in any underwritten offering pursuant to this
Section, unless all Registrable Securities for which inclusion has been
requested are also included.

(h) No registration of Registrable Securities under this Section
shall relieve the Company of its obligation to effect registrations of
Registrable Securities pursuant to Sections 3 and 4.

Section 3. Shelf Registrations.

(a) At any time on or after the first anniversary of the Closing
Date, and before the tenth anniversary of the Closing Date, the Holder or
Holders of thirty (30) percent or more of the Registrable Securities may (by
written notice to the Company) require registration of all or any portion of
such Registrable Securities for sale in open market transactions or negotiated
block trades. Within ten Business Days after its receipt of such notice, the
Company shall give written notice of such request to all other Holders, and all
such Holders shall have the right to have any or all Registrable Securities
owned by them included in the requested registration as they shall specify in a
written notice received by the Company within ten Business Days after the
Company's notice is given. Within ten Business Days after the expiration of such
ten Business Day period, the Company shall notify all Holders requesting
inclusion of Registrable Securities in the requested registration of the
aggregate number of Registrable Securities proposed to be included by all
Holders in this registration.

(b) If any request for registration shall have been made pursuant to
subsection (a) the Company shall prepare and file a Registration Statement with
the SEC as promptly as reasonably practicable, but in any event within 45 days
after the expiration of the ten Business Day period within which the Holders
may request inclusion in the registration.

(c) The Company shall have no obligation to file a Registration
Statement pursuant to this Section earlier than 180 days after the effective
date of any earlier Registration Statement filed pursuant to this Section.

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<PAGE> 5

(d) The Holders of a majority of Registrable Securities requested
to be included in any registration pursuant to this Section may elect by written
notice to the Company not to proceed with such registration, in which case the
Company will not be obligated to proceed therewith. If the Holders so elect, the
Holders that shall have requested Registrable Securities to be included in the
registration shall pay all Registration Expenses incurred by the Company in
connection with such offering prior to receipt of such notice.

(e) No registration of Registrable Securities under this Section
shall relieve the Company of its obligation to effect registrations of
Registrable Securities under Sections 2 and 4.

Section 4. Incidental Registration.

(a) From and after the first anniversary of the Closing Date, and
before the tenth anniversary of the Closing Date, if the Company proposes, other
than pursuant to Section 2 or 3 of this Agreement, to file a Registration
Statement under the Securities Act to register any of its Common Shares for
public sale under the Securities Act (whether proposed to be offered for sale by
the Company or by any other Person), it will give prompt written notice (which
notice shall specify the intended method or methods of disposition) to the
Holders of its intention to do so, and upon the written request of any Holder
delivered to the Company within ten Business Days after any such notice (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Holder), the Company will use commercially reasonable
efforts to include in such Registration Statement all Registrable Securities
which the Company has been so requested to register by the Holders.

(b) If at any time prior to the effective date of any Registration
Statement described in subsection (a), the Company shall determine for any
reason not to proceed with such registration, the Company may, at its election,
give written notice of such determination to the Holders requesting registration
and thereupon the Company shall be relieved of its obligation to register such
Registrable Securities in connection with such registration.

(c) The Company will not be required to effect any registration of
Registrable Securities pursuant to this Section in connection with an offering
of securities solely for the account of the Company if the Company shall have
been advised in writing (with a copy to the Holders requesting registration) by
a nationally recognized investment banking firm (which may be the managing
underwriter for the offering) selected by the Company that, in such firm's
opinion, registration of Registrable Securities and of any other securities
requested to be included in such registration by Persons having rights to
include securities therein at that time may interfere with an orderly sale and
distribution of the securities being sold by the Company in such offering or
adversely affect the price of such securities; but if an offering of less than
all of the Registrable Securities requested to be registered by the Holders and
other securities requested to be included in such registration by such other
Persons would not, in the opinion of such firm, adversely affect the
distribution or price of the securities to be sold by the Company in the
offering, the aggregate number of Registrable Securities requested to be
included in such offering by the Holders shall be reduced pro rata in accordance
with the proportion that the number of shares proposed to be included in such
registration by the Holders

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<PAGE> 6

bears to the number of shares proposed to be included in such registration by
the Holders and all other such Persons.

(d) The Company shall not be required to give notice of, or effect
any registration of Registrable Securities under this Section incidental to, the
registration of any of its securities in connection with mergers,
consolidations, acquisitions, exchange offers, subscription offers, dividend
reinvestment plans or stock options or other employee benefit or compensation
plans.

(e) No registration of Registrable Securities effected under this
Section shall relieve the Company of its obligations to effect registrations of
Registrable Securities pursuant to Sections 2 and 3.

Section 5. Holdbacks and Other Transfer Restrictions.

(a) No Holder shall, if requested by the managing underwriter in an
underwritten offering: (1) that includes such Holder's Registrable Securities,
effect any public sale or distribution of securities of the Company of the same
class as the securities included in such Registration Statement (or convertible
into such class), including a sale pursuant to Rule 144(k) under the Securities
Act effect (except as part of such underwritten registration) any public sale or
distribution of securities of the Company of the same class as the securities
included in such Registration Statement (or convertible into such class),
including a sale pursuant to Rule 144(k) under the Securities Act during the ten
day period prior to, and during the 180-day period beginning on the closing date
of each underwritten offering made pursuant to such registration statement, to
the extent timely notified in writing by the Company or the managing
underwriter; and (2) in the event of an offering for the account of the Company,
to the extent Holder does not elect (or is not permitted under Section 4(c))
to sell such securities in connection with such offering, effect any public sale
or distribution of securities of the Company of the same class as the securities
included in such Registration Statement (or convertible into such class),
including a sale pursuant to Rule 144(k) under the Securities Act during the
period of distribution of the Company's securities in such offering and during
the period in which the underwriting syndicate, if any, participates in the
aftermarket. In any such case the Company shall require the managing underwriter
to notify the Company and the Company, in turn, shall notify all Holders of
Registrable Securities included in the offering promptly after such
participation ceases. If the Company or such managing underwriter so requests,
each Holder shall enter into an agreement reflecting such restrictions.

(b) No Holder shall, during any period in which any of its
Registrable Securities are included in any effective Registration Statement, (1)
effect any stabilization transactions or engage in any stabilization activity in
connection with the Common Shares or other equity securities of the Company in
contravention of Regulation M under the Exchange Act; (2) permit any Affiliated
Purchaser (as that term is defined in Rule 100(b) of Regulation M under the
Exchange Act) to bid for or purchase for any account in which such Holder has a
beneficial interest, or attempt to induce any other person to purchase, any
Common Shares or Registrable Securities

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<PAGE> 7

in contravention of Regulation M under the Exchange Act; or (3) offer or agree
to pay, directly or indirectly, to anyone any compensation for soliciting
another to purchase, or for purchasing (other than for such Holder's own
account), any securities of the Company on a national securities exchange in
contravention of Regulation M under the Exchange Act.

(c) Each Holder shall, in the case of a registration including
Registrable Securities to be offered by it for sale through brokers
transactions, furnish each broker through whom such Holder offers Registrable
Securities such number of copies of the prospectus as the broker may require and
otherwise comply with the prospectus delivery requirements under the Securities
Act.

Section 6. Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to effect a registration of
Registrable Securities:

(a) The Company will use commercially reasonable efforts to prepare
and file with the SEC, within the time periods specified herein, a Registration
Statement on Form S-3 or its equivalent (or on such other registration form
available to the Company that permits the greatest extent of incorporation by
reference of materials filed by the Company, under the Exchange Act), and will
use commercially reasonable efforts to cause such registration statement to
become effective as promptly as practicable thereafter and to remain effective
under the Securities Act until (1) the earlier of such time as all securities
covered thereby have been disposed of pursuant to such Registration Statement or
180 days after such Registration Statement becomes effective, in the case of
registrations pursuant to Section 2, or (2) 90 days after such Registration
Statement becomes effective, in the case of registrations pursuant to Section 3,
in every case as any such period may be extended pursuant to subsection (h) or
Section 8.

(b) The Company will prepare and file with the SEC such amendments,
post-effective amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for such period of time required by subsection
(a), as such period may be extended pursuant to subsection (h) or Section 8.

(c) The Company will comply in all material respects with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the period during which
any such Registration Statement is required to be effective.

(d) The Company will furnish to any Holder and any underwriter of
Registrable Securities (1) such number of copies (including manually executed
and conformed copies) of such Registration Statement and of each amendment
thereof and supplement thereto (including all annexes, appendices, schedules and
exhibits), (2) such number of copies of the prospectus used in connection with
such Registration Statement (including each preliminary prospectus, any summary

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<PAGE> 8

prospectus and the final prospectus and including prospectus supplements), and
(3) such number of copies of other documents, in each case as the Holder or such
underwriter may reasonably request.

(e) The Company will use commercially reasonable efforts to register
or qualify all Registrable Securities covered by such Registration Statement
under the securities or "blue sky" laws of states of the United States and any
other jurisdiction as any Holder or any underwriter shall reasonably request,
and do any and all other acts and things which may be reasonably requested by
such Holder or such underwriter to consummate the offering and disposition of
Registrable Securities in such jurisdictions; but the Company shall not be
required to qualify generally to do business as a foreign corporation or as a
dealer in securities, subject itself to taxation, or consent to general service
of process in any jurisdiction wherein it is not then so qualified or subject.

(f) The Company will use, as soon as practicable after the
effectiveness of the Registration Statement, commercially reasonable efforts to
cause the Registrable Securities covered by such Registration Statement to be
registered with, or approved by, such other United States and Bermuda public,
governmental or regulatory authorities, if any, as may be required in connection
with the disposition of such Registrable Securities.

(g) The Company will use commercially reasonable efforts to list the
Registrable Securities covered by such Registration Statement on any securities
exchange (or if applicable, the Nasdaq National Market System) on which any
securities of the Company are then listed, if the listing of such Registrable
Securities is then permitted under the applicable rules of such exchange (or if
applicable, the Nasdaq National Market System).

(h) The Company will notify each Holder as promptly as practicable
and, if requested by any Holder, confirm such notification in writing, (1) when
a prospectus or any prospectus supplement has been filed with the SEC, and when
a Registration Statement or any post-effective amendment thereto has been filed
with and declared effective by the SEC, (2) of the issuance by the SEC of any
stop order or the coming to its knowledge of the initiation of any proceedings
for that purpose, (3) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (4) of the occurrence of any event which requires
the making of any changes to a Registration Statement or related prospectus so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (and the Company shall promptly prepare and furnish to each
Holder a reasonable number of copies of a supplemented or amended prospectus
such that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading), and (5) of the Company's determination that the
filing of a post-effective amendment to a Registration Statement shall be
necessary or appropriate. Upon the receipt of any notice from the Company of the
occurrence of any event of

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<PAGE> 9

the kind described in clause (4), the Holders shall forthwith discontinue any
offer and disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until all Holders shall have
received copies of a supplemented or amended prospectus which is no longer
defective and, if so directed by the Company, shall deliver to the Company all
copies (other than permanent file copies) of the defective prospectus covering
such Registrable Securities which are then in the Holders' possession. If the
Company shall provide any notice of the type referred to in the preceding
sentence, the period during which the Registration Statement is required by
subsection (a) to be effective shall be extended by the number of days from and
including the date such notice is provided, to and including the date when the
Holders shall have received copies of the corrected prospectus.

(i) The Company will enter into such agreements and take such other
appropriate actions as are customary and reasonably necessary to expedite or
facilitate the disposition of such Registrable Securities (including, without
limitation, making its management available to the extent reasonably requested
by the Holders to participate in marketing presentations to potential investors
in connection with any underwritten offering), and in that regard, will deliver
to the Holders such documents and certificates as may be reasonably requested by
the Holders of a majority of the Registrable Securities being sold or, as
applicable, the managing underwriters, to evidence the Company's compliance with
this Agreement, including, in the case of any underwritten offering, using
commercially reasonable efforts to cause its independent accountants to deliver
to the managing underwriters an accountants' comfort letter substantially
similar to that in scope delivered in an underwritten public offering and
covering audited and interim financial statements included in the registration
statement, or if such letter can not be obtained through the exercise of
commercially reasonable efforts, cause its independent accountants to deliver to
the managing underwriters a comfort letter based on negotiated procedures
providing comfort with respect to the Company's financial statements included or
incorporated by reference in the registration statement at the highest level
permitted to be given by such accountants under the then applicable standards of
the American Institute of Certified Public Accountants with respect to such
Registration Statement.

Section 7. Underwriting.

(a) If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a registration under Section 2, the
Company will enter into and perform its obligations under an underwriting
agreement with the underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, customary provisions
relating to indemnities and contribution and the provision of opinions of
counsel and accountants' comfort letters. If Registrable Securities are to be
distributed by such underwriters on behalf of any Holder, such Holder shall also
be a party to any such underwriting agreement.

(b) If any registration pursuant to Section 4 shall involve an
underwritten offering, the Company may require Registrable Securities requested
to be registered pursuant to Section 4 to be included in such underwriting on
the same terms and conditions as shall be

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<PAGE> 10

applicable to the securities being sold through underwriters under such
registration. In such case, each Holder requesting registration shall be a party
to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Holders requesting registration and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, provisions relating to indemnities and contribution (it being
understood that each Holder shall not be required to make any representation
concerning the Company or its business or to indemnify or contribute for any
liabilities losses or expenses related to any omission or misstatements in any
registration statement or prospectus except to the extent based upon
information provided in writing by the Holder expressly for use therein).

(c) In any offering of Registrable Securities pursuant to a
registration hereunder, each Holder requesting registration shall also enter
into such additional or other agreements as may be customary in such
transactions, which agreements may contain, among other provisions, such
representations and warranties as the Company or the underwriters of such
offering may reasonably request (including, without limitation, those concerning
such Holder, its Registrable Securities, such Holder's intended plan of
distribution and any other information supplied by it to the Company for use in
such registration statement), and customary provisions relating to indemnities
and contribution (it being understood that each Holder shall not be required to
make any representation concerning the Company or its business or to indemnify
or contribute for any liabilities losses or expenses related to any omission or
misstatements in any registration statement or prospectus except to the extent
based upon information provided in writing by the Holder expressly for use
therein).

Section 8. Information Blackout.

(a) At any time when a Registration Statement is effective, upon
written notice from the Company to the Holders that the Company has determined
in good faith that sale of Registrable Securities pursuant to the Registration
Statement would require disclosure of non-public material information, the
disclosure of which would have a material adverse effect on the Company, all
Holders shall suspend sales of Registrable Securities pursuant to such
Registration Statement until the earlier of (1) 20 days after the Company
notifies the Holders of such good faith determination, and (2) such time as the
Company notifies the Holders that such material information has been disclosed
to the public or has ceased to be material or that sales pursuant to such
Registration Statement may otherwise be resumed (the number of days from such
suspension of sales by the Holders until the day when such sales may be resumed
hereunder is hereinafter called a "Sales Blackout Period").

(b) The time period set forth in Section 6(a)(1) or (2) shall be
extended for a number of days equal to the number of days in the Sales Blackout
Period.

Section 9. Rule 144. The Company shall take all actions reasonably
necessary to comply with the filing requirements described in Rule 144(c)(1)
under the Securities Act so as to enable the Holders to sell Registrable
Securities without registration under the Securities Act. Upon the written
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with the filing requirements under such
Rule 144(c)(1).

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<PAGE> 11
Section 10. Preparation; Reasonable Investigation; Information. In
connection with the preparation and filing of each Registration Statement
registering Registrable Securities under the Securities Act, (a) the Company
will give the Holders and the underwriters, if any, and their respective counsel
and accountants, drafts of such registration statement for their review and
comment prior to filing and (during normal business hours and subject to such
reasonable limitations as the Company may impose to prevent disruption of its
business) such reasonable and customary access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the reasonable opinion of the Holders of a majority of
the Registrable Securities being registered and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act and (b) as a condition precedent to including any Registrable
Securities of any Holder in any such registration, the Company may require such
Holder to furnish the Company such information regarding such Holder and the
distribution of such securities as the Company may from time to time reasonably
request in writing or as shall be required by law or the SEC in connection with
any registration.

Section 11. Indemnification and Contribution.

(a) In the case of each offering of Registrable Securities made
pursuant to this Agreement, the Company shall, to the extent permitted by
applicable law, indemnify and hold harmless each Holder, its officers and
directors, each underwriter of Registrable Securities so offered and each
Person, if any, who controls any of the foregoing persons within the meaning of
the Securities Act ("Holder Indemnitees"), from and against any and all claims,
liabilities, losses, damages, expenses and judgments, joint or several, to which
they or any of them may become subject, including any amount paid in settlement
of any litigation commenced or threatened, and shall promptly reimburse them, as
and when incurred, for any legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
such losses, claims, damages, liabilities or actions shall arise out of, or
shall be based upon, any violation or alleged violation by the Company of the
Securities Act, any blue sky laws, securities laws or other applicable laws of
any state or county in which the Registrable Securities are offered, and
relating to action taken or action or inaction required of the Company in
connection with such offering, or shall arise out of, or shall be based upon,
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (or in any preliminary or final prospectus included
therein) relating to the offering and sale of such Registrable Securities, or
any amendment thereof or supplement thereto, or in any document incorporated by
reference therein, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; but the Company shall not be liable to any Holder
Indemnitee in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement, or any omission or alleged omission, if such statement
or omission shall have been made in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of such Holder
specifically for use in the preparation of the Registration Statement (or in any
preliminary

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<PAGE> 12

or final prospectus included therein), or any amendment thereof or supplement
thereto. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Holder and shall survive the transfer
of such securities. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Holder Indemnitee.

(b) In the case of each offering of Registrable Securities made
pursuant to this Agreement, each Holder, shall, to the extent permitted by
applicable law, indemnify and hold harmless the Company, its officers and
directors and each person, if any, who controls any of the foregoing within the
meaning of the Securities Act (the "Company Indemnitees"), from and against any
and all claims, liabilities, losses, damages, expenses and judgments, joint or
several, to which they or any of them may become subject, including any amount
paid in settlement of any litigation commenced or threatened, and shall promptly
reimburse them, as and when incurred, for any legal or other expenses incurred
by them in connection with investigating any claims and defending any actions,
insofar as any such losses, claims, damages, liabilities or actions shall arise
out of, or shall be based upon, any violation by such Holder of the Securities
Act, any blue sky laws, securities laws or other applicable laws of any state or
country in which the Registrable Securities are offered and relating to action
taken or action or inaction required of such Holder in connection with such
offering, or shall arise out of, or shall be based upon, any untrue statement of
a material fact contained in the Registration Statement (or in any preliminary
or final prospectus included therein) relating to the offering and sale of such
Registrable Securities or any amendment thereof or supplement thereto, or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but in each case only
to the extent that such untrue statement is contained in, or such fact is
omitted from, information furnished in writing to the Company by or on behalf of
such Holder specifically for use in the preparation of such Registration
Statement (or in any preliminary or final prospectus included therein). Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Company Indemnitee. In no event shall the liability
of a Holder hereunder or under Section 11(d) be greater in amount than the
dollar amount of the net proceeds received by it upon the sale of Registrable
Securities pursuant to such offering. The foregoing indemnity is in addition
to any liability which Holder may otherwise have to any Company Indemnitee.

(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 11, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing, but the failure
to give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party. In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and shall pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying

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<PAGE> 13

party shall pay as incurred the fees and expenses of the counsel retained by the
indemnified party in the event (1) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (2) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate firm
for all such indemnified parties. Such firm shall be designated in writing by
the Holders of a majority of the Registrable Securities disposed under the
applicable Registration Statements in the case of Holder Indemnitees and by the
Company in the case of Company Indemnitees. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgement for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested the indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by this Section, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without the indemnifying party's written consent if (i) such
settlement is entered into more than thirty (30) days after receipt by the
indemnifying party of the aforesaid request, and (ii) the indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
consent of the indemnified party, which consent shall not be unreasonably
withheld, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation or which requires action other than the payment of
money by the indemnifying party.

(d) If the indemnification provided for in this Section 11 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) in respect of any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) referred to therein, or if the
indemnified party failed to give the notice required under subsection (c) and
the indemnified party is actually prejudiced by such failure, then each
indemnifying party shall, to the extent permitted by applicable law, contribute
to the amount paid or payable by the indemnified party as a result of such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) in such proportion as is appropriate to reflect not only both the
relative benefits received by such party (as compared to the benefits received
by all other parties) from the offering in respect of which indemnity is sought,
but also the relative fault of all parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by a party shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by it bear to the total amounts received by
each other party. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

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<PAGE> 14

(e) Notwithstanding any other provision of this Section 11, the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement of any material fact contained in any
such registration statement, preliminary prospectus, final prospectus or
summary prospectus contained therein or any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading in
a prospectus or prospectus supplement, if such untrue statement or omission is
completely corrected in an amendment or supplement to such prospectus or
prospectus supplement, the seller of the Registrable Securities has an
obligation under the Securities Act to deliver a prospectus or prospectus
supplement in connection with such sale of Registrable Securities and the
seller of Registrable Securities thereafter fails to deliver such prospectus or
prospectus supplement as so amended or supplemented prior to or concurrently
with the sale of Registrable Securities to the person asserting such loss,
claim, damage or liability after the Company has furnished such seller with a
sufficient number of copies of the same.

Section 12. Expenses. In connection with any registration under this
Agreement the Company shall pay all Registration Expenses (to the extent not
borne by underwriters or others), except as provided in Section 2(f) or 3(d),
and each Holder shall pay its pro rata share of the items described in clause
(i) of the definition of "Registration Expenses" in Section 1.

Section 13. Notices. Except as otherwise provided below, whenever it
is provided in this Agreement that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon any of the parties hereto, or whenever any of the parties hereto, wishes to
provide to or serve upon the other party any other communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be delivered in
person or sent by telecopy, as follows: (a) if to a Holder, at the most current
address given by such Holder to the Company by means of a notice given in
accordance with the provisions of this Section 13, and with respect to all other
holders is as set forth in the register for the Registrable Securities; and (b)
if to the Company, initially at the Company's principal address and thereafter
at such other address, notice of which is given in accordance with the
provisions of this Section 13. The furnishing of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval, declaration or other communication
hereunder shall be deemed to have been duly furnished or served on the party to
which it is addressed, in the case of delivery in person or by telecopy, on the
date when sent (with receipt personally acknowledged in the case of telecopied
notice), and in all other cases, five business days after it is sent. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.

Section 14. Entire Agreement. This Agreement represents the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with respect to such
subject matter; and this Agreement can be amended, supplemented or changed, and
any provision hereof can be waived or a departure from any provision hereof can
be consented to, only by a written instrument making specific reference to this
Agreement signed by the Company and the Holders of a majority of the
Registrable Securities then outstanding, but if by less than all Holders, then
only to the extent such amendment, supplement or change does not adversely
affect the rights of any Holder which is not a party thereto.

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<PAGE> 15

Section 15. Headings. The section headings contained in this
Agreement are for general reference purposes only and shall not affect in any
manner the meaning, interpretation or construction of the terms or other
provisions of this Agreement.

Section 16. Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of New York applicable to
contracts to be made, executed, delivered and performed wholly within such state
and, in any case, without regard to the conflicts of law principles of such
state.

Section 17. Severability. If any provision of this Agreement shall
be held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.

Section 18. No Waiver. The failure of any party at any time or times
to require performance of any provision hereof shall not affect the right at a
later time to enforce the same. No waiver by any party of any condition, and no
breach of any provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.

Section 19. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same original instrument. Not all
parties need sign the same counterpart. Delivery by facsimile of a signature
page to this Agreement shall have the same effect or delivery of an original
executed counterpart.

Section 20. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; but nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of applicable law. If any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registerable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such

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<PAGE> 16

Holder shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement, and such Holder shall be entitled to receive
the benefits hereof.

IN WITNESS WHEREOF, this Agreement has been executed and delivered
as of the date first above written.

ANNUITY AND LIFE RE (HOLDINGS), LTD.

By
----------------------------------------
Lawrence S. Doyle
President and Chief Executive Officer

[PURCHASER]

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

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<PAGE> 1
Exhibit 10.16
Employment Agreement
of Richard Tucker

EMPLOYMENT AGREEMENT

THIS AGREEMENT, dated as of March 5, 1998 by and between Annuity and
Life Re (Holdings), Ltd., a Bermudian corporation (the "Company"), Annuity and
Life Reassurance, Ltd., a subsidiary of the Company organized under the laws of
Bermuda to engage in worldwide life and annuity reinsurance (the "Operating
Company"), and Richard Tucker (hereinafter called the "Employee").

W I T N E S S E T H:

WHEREAS, the Company is contemplating an initial public offering or
a private placement of its Common Shares in excess of $100 million (the "IPO");
and

WHEREAS, the Company and the Operating Company desire that the
Employee serve as Vice President of the Company and Senior Vice President of the
Operating Company and the Employee is willing to serve in such capacities; and

WHEREAS, if the IPO has not been completed prior to August 31, 1998,
both Company and the Employee desire the option to terminate this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the parties hereto agree as
follows:

Section: 1. Employment.

Effective as of March 15, 1998, the Company and the Operating
Company will employ the Employee and the Employee will perform services for the
Company and the Operating Company on the terms and conditions set forth in this
Agreement and for the period ("Term of Employment") specified in Section 3
hereof. This Agreement may be terminated at any time during its initial term or
during any renewal term solely in accordance with the terms and conditions of
Section 11 hereof.

Section: 2. Duties.

The Employee, during the Term of Employment, shall serve the Company
as a Vice President. The Employee shall also serve as a Senior Vice President of
the Operating Company. The Employee shall be based at the Operating Company's
headquarters in Bermuda, other than for periodic travel in the ordinary course
of business. The Employee shall have such duties and responsibilities as are
assigned to him by the Boards of Directors of the Company and the Operating
Company commensurate with his positions
<PAGE> 2
as Vice President and Annuity Underwriter of the Company and the
Operating Company.

The Employee shall perform his duties hereunder faithfully and to
the best of his abilities and in furtherance of the business of the Company, and
shall devote his full business time, energy, attention and skill to the business
of the Company and to the promotion of its interests except as otherwise agreed
by the Company.

The Employee warrants and represents that he is free to enter into
this Agreement and is not restricted by any prior or existing agreement and the
Company and the Operating Company may rely on such representation in entering
into this Agreement.

Section: 3. Term of Employment.

The initial Term of Employment of this Agreement shall be the period
commencing on March 15, 1998 and ending on the third anniversary of the IPO. At
the end of the initial Term of Employment, and on each anniversary thereof, the
Term of Employment shall automatically be extended for one additional year,
unless the Company or the Employee shall have given written notice to the other
that it does not wish to extend this Agreement at least three months in advance.
If the Employee does not wish to continue employment with the Company and the
Operating Company for family reasons after the end of the initial Term of
Employment, the Company will pay reasonable relocation expenses to the United
States for the Employee if the Employee wishes to be employed in the Unites
States, subject to Section 13.

Section: 4. Salary.

The Employee shall receive, as compensation for his duties and
obligations to the Company and the Operating Company, a salary at the annual
rate of $165,000, payable in substantially equal installments in accordance with
the Operating Company's payroll practice. It is agreed between the parties that
the Company shall review the base annual salary annually and in light of such
review may, in the discretion of the Board of Directors of the Company (but
shall not be obligated to), increase such base annual salary taking into account
any change in the Employee's then responsibilities, increases in the cost of
living, performance by the Employee, and other pertinent factors.

Section: 5. Bonus.

During the Term of Employment, the Employee shall, subject to and
effective upon the consummation of the IPO, participate in the Company's
Incentive Compensation Plan, a summary of which is attached hereto as Exhibit A,
and will be

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<PAGE> 3
eligible for an annual cash bonus of up to two times his annual salary based on
performance targets as determined in accordance with the terms of the Plan.

Section: 6. Options.

(a) Initial Options. The Company shall grant to the Employee,
subject to and effective as of the consummation of the IPO, options (the
"Initial Options") to purchase at a price per share equal to the price per share
in the IPO, ordinary shares issued in the IPO (the "Ordinary Shares") equal to
an aggregate value of $1.0 million (valued at the IPO per share price). Thirty
three and one-thirds percent (33 1/3%) of the Initial Options shall become
exercisable after the first anniversary of the IPO, 33 1/3% of the Initial
Options shall become exercisable after the second anniversary of the IPO, and an
additional 33 1/3% of the Initial Options shall become exercisable after the
third anniversary thereof. In addition, no Initial Option may be exercised after
the earlier of (A) the date that is (i) ninety (90) days following the
termination of the Employee's employment for any reason other than death,
disability or Serious Cause (as defined in Section 11), or (ii) six (6) months
after the termination of the Employee's employment by reason of death or
disability or (iii) the date upon which the Employee's employment is terminated
for Serious Cause; or (B) the tenth anniversary of the IPO date.

The consideration for the Ordinary Shares purchased upon exercise of
the Initial Options may be paid in cash or by any other method permitted by the
terms of the Company's Initial Option Plan. The issuance of any Ordinary Shares
pursuant to the Initial Options shall in all events be subject to all applicable
securities laws and the Employee shall enter into any agreement reasonably
requested by the Company in order to ensure that all such issuances are in full
compliance therewith. The Employee shall not have any of the rights and
privileges of a shareholder of the Company with respect to the Ordinary Shares
issuable upon any exercise of Initial Options unless and until his name is
entered into the register of members of the Company in respect of such Ordinary
Shares. If there is any change in the number or nature of outstanding shares of
the Company's capital stock by reason of a share dividend, recapitalization,
merger, consolidation, scheme of arrangement, share split, combination or
exchange, share repurchase or otherwise, which in any such case has a dilutive
or anti-dilutive effect on the Ordinary Shares, the number of Ordinary Shares
subject to each outstanding Initial Option, the exercise price thereof and/or
other terms thereof shall be appropriately adjusted by the Board of Directors of
the Company (or any committee thereof), whose determination shall be conclusive,
so as to restore the option holder to his rights thereunder.

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<PAGE> 4
(b) Other Options. During the Term of Employment, the Employee
shall, subject to the consummation of the IPO, be eligible to be granted options
(in addition to the Initial Options) to purchase Ordinary Shares at such price
and subject to such terms as provided by the Company's Initial Stock Option
Plan, in the sole discretion of the Board of Directors of the Company.

Section: 7. Employee Benefits.

During the Term of Employment the Employee shall, subject to the
consummation of the IPO, be entitled to participate in all employee benefit
programs of the Company, as such programs may be in effect from time to time,
including without limitation, pension and other retirement plans, profit sharing
plans, group life insurance, accidental death and dismemberment insurance,
hospitalization, surgical and major medical coverage, sick leave (including
salary continuation arrangements), long term disability, holidays and vacations.

Section: 8. Business Expenses.

All reasonable travel and other expenses incidental to the rendering
of services by the Employee hereunder shall be paid by the Company and if
expenses are paid in the first instance by the Employee, the Company will
reimburse him therefor upon presentation of proper invoices; subject in each
case to compliance with the Company's reasonable reimbursement policies and
procedures.

Section: 9. Housing and Travel Expenses.

Effective upon consummation of the IPO, the Company shall provide to
the Employee the sum of $9,667.00 monthly as an allowance to cover the expenses
of housing and the cost of living in Bermuda and for personal travel for the
Employee and his family.

Section: 10. Vacations and Sick Leave.

The Employee shall be entitled to reasonable vacation and reasonable
sick leave each year (beginning with 1998), in accordance with policies of the
Company, as determined by the Board of Directors, provided, however, that the
Employee shall be entitled to a minimum of 4 weeks vacation per year.

Section: 11. Termination.

(a) In the event of Serious Cause, as defined below, the Company may
terminate the Employee's employment and the Term of Employment upon written
notice of such termination stating the Serious Cause upon which the Company
relies for its termination.

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<PAGE> 5
The Employee's employment and the Term of Employment shall be terminated
effective as of the date specified in such notice, which shall in no event be
earlier than the effective date of such notice as provided in Section 20.

"Serious Cause" shall mean (i) the willful and continued failure by
the Employee to perform substantially his duties hereunder, other than by
reasons of health, after written demand for substantial performance is delivered
by the Company that identifies the manner in which the Company believes the
Employee has not substantially performed his duties, (ii) the Employee shall
have been indicted by any federal, state or local authority in any jurisdiction
for, or shall have pleaded guilty or nolo contendere to, an act constituting a
felony, (iii) the Employee shall have habitually abused any substance (such as
narcotics or alcohol), or (iv) the Employee shall have (A) engaged in acts of
fraud, material dishonesty or gross misconduct in connection with the business
of the Company or (B) committed a material breach of this Agreement.

(b) The Employee may terminate his employment and the Term of his
Employment in the event of Good Reason, as defined below, upon 30 days' prior
written notice of such termination stating the Good Reason upon which the
Employee relies for his termination. The Employee's employment and the Term of
Employment shall be terminated effective as of the date specified in such
notice, which in no event shall be earlier than the effective date of such
notice as provided in Section 20.

"Good Reason" shall mean (i) a substantial reduction in the
Employee's salary or benefits, (ii) the demotion of the Employee, (iii) a
material reduction of the Employee's duties or responsibilities hereunder, (iv)
a material breach of this Agreement by the Company, or (v) the occurrence of any
action taken by the Company that would constitute a constructive termination of
the Employee's employment.

(c) In the event of termination of the Employee's employment and the
Term of Employment by the Company for Serious Cause or by the Employee without
Good Reason, the Employee shall forfeit all bonus amounts for the then current
fiscal year, and the Company shall be liable to the Employee only for (i) any
accrued but unpaid salary, (ii) any accrued but unpaid bonus from a prior fiscal
year, and (iii) reimbursement of business expenses incurred prior to the date of
termination.

(d) In the event of the death, retirement or disability of the
Employee, the Employee's employment and Term of Employment shall be terminated
as of the date of such death, retirement or disability and the Company shall pay
the Employee, or the Employee's estate or legal representative, as appropriate,
(i) any accrued but unpaid salary, (ii) any earned but unpaid

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<PAGE> 6
bonus from a prior fiscal year, (iii) reimbursement of business expenses
incurred prior to the date of termination, (iv) travel and housing allowances
under Section 9 for six months after the date of termination, and (v) reasonable
relocation expenses from Bermuda to the United States. The date of the
Employee's disability shall be deemed to be the last day of the sixth month
during which the Employee has been unable to carry out his position as provided
below.

"Disability" shall mean the Employee's inability, for reasons of
health, to carry out the functions of his position for a total of 6 months
during any 12 month period of this Agreement. "Retirement" shall mean retirement
from employment upon attaining age 65 or such earlier age agreed to by the
Company.

In addition, in such event, if the Company's Ordinary Shares are not
then publicly traded, the Company shall have the right to call any or all of the
Ordinary Shares of the Company owned by the Employee within six (6) months of
death, retirement or disability, and the Employee, the Employee's estate or
legal representative, whichever is appropriate, shall have the right to put any
or all of the Employee's Ordinary Shares to the Company within twelve (12)
months after death or within six (6) months after retirement or disability. The
price at which such put or call is exercisable shall be equal to the appraised
value, in each case measured as of the date of termination.

(e) If the Company should (i) terminate the Term of Employment and
the Employee's employment herein without Serious Cause; or (ii) if the Employee
should terminate the Term of Employment and his employment hereunder for Good
Reason, the Company shall continue to pay the Employee his base salary for a
period of one year from such termination. In addition, the Employee shall be
entitled to (A) any accrued but unpaid salary, (B) any earned but unpaid bonus
from a prior fiscal year, (C) reimbursement of business expenses incurred prior
to the date of termination, and (D) travel and housing allowances under Section
9 for six months after the date of termination, and (E) reasonable relocation
expenses from Bermuda to the United States.

(f) In the event of the liquidation of the Company or in the event
that the Board of Directors elects to discontinue permanently operating the
Company, the Term of Employment and the Employee's employment herein shall be
terminated as of the date of such liquidation or discontinuance and the Company
shall pay the Employee (i) any accrued but unpaid salary, (ii) any earned but
unpaid bonus from a prior fiscal year, (iii) unreimbursed business expenses
incurred prior to the date of termination, (iv) travel and housing allowances
under Section 9 for two months after the date of termination, and (v) reasonable
relocation expenses from Bermuda to the United States. In addition, the

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<PAGE> 7
Employee shall be entitled to receive one year's base salary from the date on
which the Employee's employment is terminated.

(g) Notwithstanding any other provision of this Agreement, if the
IPO has not been consummated by August 31, 1998, either the Employee or Company
may terminate the Employee's employment and the Term of Employment upon 30 days'
written notice, in which event the Company shall be liable to the Employee only
for such amounts as would be payable upon a termination described in Section
11(c).

Section: 12. Change of Control.

(a) Notwithstanding any other provision contained herein, the
Employee's Initial Options and other options issued under the Company's share
option plans that are not then exercisable shall become exercisable (and be
deemed to be vested) on the date on which a Change of Control of the Company
occurs. In addition, restricted Ordinary Shares granted under any of the
Company's share option plans shall immediately vest upon a Change of Control of
the Company.

(b) If (i) the employment of the Employee is terminated by the
Company (or successor thereto) without Serious Cause or (ii) the Employee
terminates employment with the Company (or successor thereto) for Good Reason or
because of the failure of a successor to the Company to expressly assume and
agree to perform this Agreement, within the period commencing on the date that a
Change of Control is formally proposed to the Company's Board of Directors and
ending on the first anniversary of the date on which such Change of Control
occurs, then the Employee shall be entitled to receive (in lieu of the benefits
described in Section 11): (1) any accrued but unpaid salary, (2) a lump sum
payment equal to two times such Employee's annual base salary as of the date of
termination, (3) any accrued but unpaid bonus from a prior fiscal year, (4)
reimbursement of business expenses incurred prior to the date of termination,
(5) travel and housing allowances under Section 9 for one year following the
date of termination, (6) reasonable relocation expenses from Bermuda to the
United States, together with (7) a gross-up of any income taxes payable by the
Employee by reason of such payments occurring in connection with a change of
control.

The Employee shall not be entitled to any benefits or other
entitlements under this section unless a Change of Control actually occurs.

(c) A "Change of Control" of the Company shall be deemed to have
occurred if, following consummation of the IPO (i) any "person" (as such term is
defined in Section 3(a)(9) and as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), excluding the Company or
any of its

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<PAGE> 8
subsidiaries, a trustee or any fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a
corporation owned, directly or indirectly, by shareholders of the Company in
substantially the same proportion as their ownership of the Company, is or
becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities
("Voting Securities"); (ii) during any period of not more than two years,
individuals who constitute the Board of Directors of the Company (the "Board")
as of the beginning of the period and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i) or (iii) of this sentence) whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at such time or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; (iii) the shareholders of the Company approve a merger,
consolidation or reorganization or a court of competent jurisdiction approves a
scheme of arrangement of the Company, other than a merger, consolidation,
reorganization or scheme of arrangement which would result in the Voting
Securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 50% of the combined voting power of
the Voting Securities of the Company or such surviving entity outstanding
immediately after such merger, consolidation, reorganization or scheme of
arrangement; or (iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or any agreement for the sale of substantially all of
the Company's assets.

(d) The provisions of this Section 12 shall only apply following the
consummation of an IPO.

Section: 13. Agreement Not to Compete.

(a) The Employee hereby covenants and agrees that at no time during
the Term of Employment nor for a period of (i) one year immediately following
the termination of the Employee's employment by the Company without Serious
Cause or by the Employee for Good Reason or (ii) two years following the
termination of the Employee's employment for any other reason, will he for
himself or on behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial interest in (except
as provided in the next sentence) any entity engaged in any business

-8-
<PAGE> 9
directly competitive to the business engaged in by the Company or the Operating
Company at the time of such termination of employment. Notwithstanding the
preceding sentence, the Employee shall not be prohibited from owning less than
one (1%) percent of any publicly traded corporation, whether or not such
corporation is in competition with the Company or the Operating Company.
Additionally, the Employee will not become employed by any nonUnited States
entity engaged in a directly competitive business. Furthermore, the employee
will not enter into competition with the Company or Operating Company for a
period of two years following termination. For purposes of this Employment
Agreement, "competition" will mean soliciting business from any clients of the
Company and/or Operating Company. Clients of the Company and/or Operating
Company are those companies for whom the Company and/or Operating Company has
reinsured business during the Employee's period of employment under this
agreement.

(b) The Employee hereby covenants and agrees that, at all times
during the Term of Employment and for a period of two years immediately
following the termination thereof, the Employee shall not directly or indirectly
employ or seek to employ any person or entity employed at that time by the
Company or any of its subsidiaries, or otherwise encourage or entice such person
or entity to leave such employment.

(c) This Section 13 shall be null and void if the Board of Directors
elects to discontinue permanently Company operations or if the IPO has not been
consummated by August 31, 1998.

Section: 14. Confidential Information.

(a) The Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to the Company or any affiliate
of the Company, including, without limitation, customer lists, client lists,
trade secrets, pricing policies and other business affairs of the Company and
any affiliate of the Company learned by him from the Company or any such
affiliate or otherwise before or after the date of this Agreement, and not to
disclose any such confidential matter to anyone outside the Company or any of
its affiliates, whether during or after his period of service with the Company,
except as may be required in the course of a legal or governmental proceeding.
Upon request by the Company, the Employee agrees to deliver promptly to the
Company upon termination of his services for the Company, or at any time
thereafter as the Company may request, all Company or affiliate memoranda,
notes, records, reports, manuals, drawings, designs, computer files in any media
and other documents (and all copies thereof) relating to the Company's or any
affiliate's business and all property of the Company or any affiliate associated
therewith, which he may then possess or have under his control.

-9-
<PAGE> 10
Section: 15. Remedy.

(a) Should the Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Sections 13 or 14 hereof, it is agreed
that the Company shall be entitled to full injunctive relief, to be issued by
any competent court of equity, enjoining and restraining the Employee and each
and every other person, firm, organization, association, or corporation
concerned therein, from the continuance of such violative acts. The foregoing
remedy available to the Company shall not be deemed to limit or prevent the
exercise by the Company of any or all further rights and remedies which may be
available to the Company hereunder or at law or in equity.

(b) The Employee acknowledges and agrees that the covenants
contained in this Agreement are fair and reasonable in light of the
consideration paid hereunder, and the invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof. If any provision hereof is
determined to be invalid or unenforceable by a court of competent jurisdiction,
the Employee shall negotiate in good faith to provide Company with protection as
nearly equivalent to that found to be invalid or unenforceable and if any such
provision shall be so determined to be invalid or unenforceable by reason of the
duration or geographical scope of the covenants contained therein, such duration
or geographical scope, or both, shall be considered to be reduced to a duration
or geographical scope to the extent necessary to cure such invalidity.

Section: 16. Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of the
Employee, his heirs, executors, administrators and beneficiaries, and the
Company, the Operating Company and their successors and assigns.

Section: 17. Governing Law.

This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to rules
relating to conflicts of law.

Section: 18. Entire Agreement.

This Agreement constitutes the full and complete understanding and
agreement of the parties and supersedes all prior understandings and agreements
as to employment of the Employee. This Agreement cannot be amended, changed,
modified or terminated without the written consent of the parties hereto.

-10-
<PAGE> 11
Section: 19. Waiver of Breach.

The waiver by either party of a breach of any term of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach thereof.

Section: 20. Notices.

Any notice, report, request or other communication given under this
Agreement shall be written and shall be effective upon delivery when delivered
personally, by Federal Express or by fax.

Unless otherwise notified by any of the parties, notices shall be
sent to the parties as follows:

To Employee: Richard Tucker
91 Bellevue Avenue
Upper Montclair, NJ 07043

With a
Copy to: Ira B. Marcus, Esquire
(which copy shall Dunetz, Marcus, Brady
not constitute & Weinstein, LLC
notice) 354 Eisenhower Parkway
Livingston, NJ 07039

To the
Company: Annuity and Life Reassurance, Ltd.
Victoria Hall, Victoria Street
P.O. Box HM1262
Hamilton, HM FX, Bermuda

Section: 21. Severability.

If any one or more of the provisions contained in this Agreement
shall be invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.

Section: 22. Counterparts.

This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as on the day and year first above written.

/s/ Richard Tucker
-----------------------------------
Richard Tucker

Annuity and Life Re (Holdings), Ltd.

By: /s/ Lawrence S. Doyle
---------------------------------
Lawrence S. Doyle, President

Annuity and Life Reassurance, Ltd.

By: /s/ Lawrence S. Doyle
----------------------------------
Lawrence S. Doyle, President

-12-
<PAGE> 13
Exhibit A

Initial Cash Bonus Plan

20% of the Company's consolidated pretax earnings from normal
operations in excess of a benchmark return on equity (such benchmark is expected
to be set at approximately 8%), as determined by the Board of Directors in
accordance with Generally Accepted Accounting Principles, consistently applied,
shall be available for all senior executives. All determinations by the Board of
Directors shall be final and conclusive for all purposes of the Plan.

<PAGE> 1
Exhibit 10.18
Letter Agreement

[Annuity and Life Re (Holdings), Ltd. letterhead]

March 19, 1998

Insurance Partners, L.P.
201 Main Street
Fort Worth, TX 76012

Insurance Partners Offshore (Bermuda), L.P.
41 Cedar Avenue
P.O. Box HM 1179
Hamilton, Bermuda HM EX

Re: Securities Purchase Agreement
-----------------------------

Gentlemen:

Reference is made to the Securities Purchase Agreements dated as of
March 19, 1998 (the "Agreements"), between Insurance Partners, L.P. and Annuity
and Life Re (Holdings), Ltd. (the "Company") and between Insurance Partners
Offshore (Bermuda), L.P. and the Company. All capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Agreements.

In connection with the Agreements, Insurance Partners, L.P., Insurance
Partners Offshore (Bermuda), L.P. and the Company hereby agree and acknowledge
that, for so long as Insurance Partners, L.P. and Insurance Partners Offshore
(Bermuda), L.P. collectively beneficially own at least 500,000 Common Shares of
the Company (including for this purpose shares issuable pursuant to the Class B
Warrants held by Insurance Partners, L.P. and Insurance Partners Offshore
(Bermuda), L.P.), Insurance Partners, L.P. and Insurance Partners Offshore
(Bermuda), L.P. shall jointly have the right to designate one individual for
election to the board of directors of the Company. Upon timely receipt by the
Company of the written exercise of such right by Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P., the Company shall cause such
individual to be nominated for election as a director of the Company at the next
annual general meeting of the Company (provided no person previously selected by
Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P. is a
member of a class of directors of the Company not standing for election at such
meeting). In consideration of such right, and for so long as any person selected
by Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P. is a
director (and during any period after such person's designation by Insurance
Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P. but before his or
her election), Insurance Partners, L.P. and Insurance Partners Offshore
(Bermuda), L.P. shall not vote or permit any of the shares of the Company
beneficially owned by them to be voted for any other nominee for election as a
director of the Company.

<PAGE> 2
Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P.
may assign their rights hereunder to any transferee of the required minimum
number of shares referred to above or agree to exercise such right at the
direction of any other person, provided that they have received the prior
written consent of the Company, such written consent not to be unreasonably
withheld. Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda),
L.P. further agree that it shall be reasonable for the Company to withhold such
prior written consent in situations including, but not limited to, those in
which Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P.
agree to assign their right to or to act at the direction of Lincoln National
Corporation, Transamerica Occidental Life Insurance Company, Reinsurance Group
of America Inc., General Re Corp., Life Re Corp., Employers Reassurance
Corporation, Swiss Reinsurance or Munich Reinsurance, or situations in which
Insurance Partners, L.P. and Insurance Partners Offshore (Bermuda), L.P. agree
to assign their right to or to act at the direction of an entity where such
assignment or act would result in any person owning, directly or indirectly, or
being considered to own, 10% or more of the total combined voting power of all
classes of stock of the Company under the "controlled foreign corporation"
rules of the United States Internal Revenue Code. As a condition of any such
assignment or agreement to act at the direction of any other person, such
assignee or other person shall execute an agreement indicating its intention to
be bound by the terms of this letter.

Very truly yours,

ANNUITY AND LIFE RE (HOLDINGS), LTD.

By: /s/ Lawrence S. Doyle
--------------------------------
Lawrence S. Doyle
President and
Chief Executive Officer

Acknowledged by:

INSURANCE PARTNERS, L.P.

By: Insurance GenPar, L.P.,
its general partner

By: Insurance GenPar MGP, L.P.,
its general partner

By: Insurance GenPar MGP, Inc.,
its general partner

By: ---------------------------------
Name:
Title:

INSURANCE PARTNERS OFFSHORE
(BERMUDA), L.P.

By: Insurance GenPar (Bermuda), L.P.,
its general partner

By: Insurance GenPar (Bermuda) MGP, L.P.,
its general partner

By: Insurance GenPar (Bermuda) MGP, Ltd.,
its general partner

By: ---------------------------------
Name:
Title:

<PAGE> 1
Exhibit 10.19
Letter Agreement

[Letterhead of Annuity and Life Re (Holdings), Ltd.]

March 19, 1998

[Purchaser]

Re: Securities Purchase Agreement

Gentlemen:

Reference is made to the Securities Purchase Agreement (the "Agreement")
dated as of March , 1998 between [Purchaser] and Annuity and Life Re
(Holdings), Ltd. (the "Company"). All capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Agreement.

Very truly yours,

ANNUITY AND LIFE RE (HOLDINGS), LTD.

/s/ Lawrence S. Doyle
--------------------------------------
Lawrence S. Doyle
President and Chief Executive Officer

<PAGE> 1
Exhibit 10.20
Letter Agreement

ANNUITY AND LIFE RE (HOLDINGS), LTD.

March 19, 1998

Insurance Partners, L.P.
201 Main Street
Fort Worth, TX 76012

Re: Securities Purchase Agreement

Gentlemen:

Reference is made to the Securities Purchase Agreement (the "Agreement")
dated as of March 19, 1998 between Insurance Partners, L.P. and Annuity and Life
Re (Holdings), Ltd. (the "Company"). All capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Agreement.

For good and valuable consideration, the receipt of which is hereby
acknowledged, the Company, intending to be legally bound, hereby agrees as
follows: the obligation of Purchaser to purchase and pay for the Company's
Common Shares and Warrants on the Closing Date shall be subject to (a) the
condition that the total number of Common Shares of the Company outstanding
immediately following the consummation of the Public Offering and any concurrent
private placement of the Company's Common Shares (including the sale of Common
Shares to Purchaser) not exceed 25.5 million Common Shares; and (b) the
condition that the person designated by Purchaser and Insurance Partners
Offshore (Bermuda), L.P. pursuant to their joint right under that certain letter
agreement among them and the Company dated March 19, 1998, shall have been
elected as a director of the Company, provided that such person is reasonably
satisfactory to the Board of Directors of the Company.

Very truly yours,

ANNUITY AND LIFE RE (HOLDINGS), LTD.

/s/ Lawrence S. Doyle
-------------------------------------
Lawrence S. Doyle
President and Chief Executive Officer

<PAGE> 1
Exhibit 10.21
Letter Agreement

Annuity and Life Re (Holdings), Ltd.

March 19, 1998

Insurance Partners Offshore (Bermuda), L.P.
41 Cedar Avenue
P.O. Box HM 1179
Hamilton, Bermuda HM EX

Re: Securities Purchase Agreement

Gentlemen:

Reference is made to the Securities Purchase Agreement (the "Agreement")
dated as of March 19, 1998 between Insurance Partners Offshore (Bermuda), L.P.
and Annuity and Life Re (Holdings), Ltd. (the "Company"). All capitalized terms
used but not defined herein shall have the meanings ascribed to such terms in
the Agreement.

For good and valuable consideration, the receipt of which is hereby
acknowledged, the Company, intending to be legally bound, hereby agrees as
follows: the obligation of Purchaser to purchase and pay for the Company's
Common Shares and Warrants on the Closing Date shall be subject to (a) the
condition that the total number of Common Shares of the Company outstanding
immediately following the consummation of the Public Offering and any
concurrent private placement of the Company's Common Shares (including the sale
of Common Shares to Purchaser) not exceed 25.5 million Common Shares; and (b)
the condition that the person designated by Purchaser and Insurance Partners,
L.P. pursuant to their joint right under that certain letter agreement among
them and the Company dated March 19, 1998, shall have been elected as a
director of the Company, provided that such person is reasonably satisfactory
to the Board of Directors of the Company.

Very truly yours,

ANNUITY AND LIFE RE (HOLDINGS), LTD.

/s/ Lawrence S. Doyle
------------------------------------
Lawrence S. Doyle
President and Chief Executive Officer

<PAGE> 1

Exhibit 23.3

Consent of
KPMG Peat Marwick

The Board of Directors and Shareholders
Annuity and Life Re (Holdings), Ltd.

We consent to the use of our report included herein and to the reference to our
firm in the prospectus, under the heading "Experts".

/s/ KPMG Peat Marwick
- ---------------------
Chartered Accountants
Hamilton, Bermuda
March 19, 1998

<PAGE> 1
EXHIBIT 24.3
POWERS OF ATTORNEY

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below hereby constitutes and appoints Lawrence S. Doyle as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to the Registration Statement on Form S-1 of Annuity and Life
Re (Holdings), Ltd., and to file the same with all exhibits thereto and other
documents in connection therewith, or in connection with the registration of the
common shares of Annuity and Life Re (Holdings), Ltd. under the Securities
Exchange Act of 1934, as amended, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary in connection with
such matters, as fully and to all intents and purposes as he might or could do
in person, and hereby ratifying and confirming all that said attorney-in-fact
and agent or his substitutes may do or cause to be done by virtue hereof.

Dated: March 16, 1998 /s/ ROBERT CLEMENTS
-----------------------------
Robert Clements

<PAGE> 2
POWER OF ATTORNEY

Dated: March 16, 1998 /s/ BRIAN M. O'HARA
-----------------------------
Brian M. O'Hara

<PAGE> 3

POWER OF ATTORNEY

Dated: March 16, 1998 /s/ JERRY S. ROSENBLOOM
-----------------------------
Jerry S. Rosenbloom