SCOTTISH ANNUITY & LIFE HOLDINGS LTD, S-1/A, 1998-11-19

SCOTTISH ANNUITY & LIFE HOLDINGS LTD
S-1/A, 1998-11-19
LIFE INSURANCE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1998
REGISTRATION STATEMENT NO. 333-57227
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 7
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<TABLE>
<S> <C> <C>
CAYMAN ISLANDS 6311 NOT APPLICABLE
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION CODE IDENTIFICATION NUMBER)
ORGANIZATION) NUMBER)
</TABLE>

UGLAND HOUSE P.O. BOX 10657APO CT CORPORATION SYSTEM 1633 BROADWAY NEW
GEORGE TOWN, GRAND CAYMAN YORK, NEW YORK 10019 (212) 664-1666
CAYMAN ISLANDS, BRITISH WEST INDIES (Name, address, including zip code, and
(345) 949-2800 telephone number, including area code,
(Address, including zip code, and of agent for service)
telephone number, including area code,
of Registrant's principal executive
offices)

COPIES TO:
ROBERT L. ESTEP, ESQ. HENRY SMITH, ESQ. CRAIG B. BROD, ESQ.
JONES, DAY, REAVIS & MAPLES AND CALDER CLEARY, GOTTLIEB, STEEN &
POGUE P.O. BOX 309, UGLAND HAMILTON
2300 TRAMMELL CROW CENTER HOUSE GEORGE TOWN, GRAND ONE LIBERTY PLAZA
2001 ROSS AVENUE CAYMAN NEW YORK, NEW YORK 10006
DALLAS, TEXAS 75201 CAYMAN ISLANDS, BWI (212) 225-2000
(214) 220-3939 (345) 949-8066

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

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. [_]

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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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 NOVEMBER 19, 1998
PROSPECTUS
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16,750,000 Shares

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

Ordinary Shares

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All of the 16,750,000 ordinary shares, par value $0.01 per share (the "Ordinary
Shares"), offered hereby (the "Offering") are being sold by Scottish Annuity &
Life Holdings, Ltd., a Cayman Islands company (the "Company"). Prior to the
Offering, the Company has not conducted any business and there has been no
public market for the Ordinary Shares. The initial public offering price will
be $15.00 per Ordinary Share.

In transactions directly with the Company, two shareholders of the Company (the
"Shareholder Investors") and Maverick Fund USA, Ltd., Maverick Fund, L.D.C. and
Maverick Fund II, Ltd. (collectively, the "Non-Shareholder Investors," and
together with the Shareholder Investors, the "Direct Investors") have agreed to
purchase for investment an aggregate of 1,418,440 Ordinary Shares and Class A
Warrants exercisable for an aggregate of 400,000 Ordinary Shares. The aggregate
purchase price of $20.0 million to be paid by the Direct Investors is based on
a price of $14.10 (the initial public offering price per Ordinary Share less
the underwriting discounts and commissions in the Offering) for (i) one
Ordinary Share and (ii) the right to purchase 0.282 of an Ordinary Share under
the Class A Warrants. Such purchases by the Direct Investors (the "Direct
Sales") will be consummated simultaneously with the consummation of the
Offering. The closing of the Offering made hereby is conditioned upon the
closing of the Direct Sales.

The Ordinary Shares have been approved for quotation in The Nasdaq Stock
Market's National Market (the "Nasdaq National Market") under the symbol
"SCTLF," subject to official notice of issuance.

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

SEE "RISK FACTORS" ON PAGES 9 TO 20 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
ORDINARY SHARES OFFERED HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THESECURITIES
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.

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<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)(4)
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<S> <C> <C> <C>
Per Ordinary Share....................... $ $ $
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Total(3)................................$ $ $
</TABLE>
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(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."
(2) Before deducting certain advisory fees and Offering expenses payable by the
Company estimated to be $2.7 million. See "Underwriting."
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 2,512,500 additional Ordinary Shares on the same
terms and conditions as set forth above. If all such additional Ordinary
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 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."

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The Ordinary 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 Ordinary 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.

PRUDENTIAL SECURITIES INCORPORATED
CIBC OPPENHEIMER
ING BARING FURMAN SELZ LLC
WARBURG DILLON READ LLC

, 1998
<PAGE>

ENFORCEABILITY OF CIVIL LIABILITIES
UNDER UNITED STATES FEDERAL SECURITIES LAWS

The Company is organized pursuant to the laws of the Cayman Islands. 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,
Scottish Annuity & Life Insurance Company (Cayman) Ltd., the Company's only
subsidiary, through which the Company expects to conduct all its operations,
is also a Cayman Islands company. 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 Ordinary 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 Maples and Calder, its Cayman Islands
counsel, that there is doubt as to whether the courts of the Cayman Islands
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 the Cayman Islands against the Company or
such persons predicated solely upon United States federal securities laws. The
Company has also been advised by Maples and Calder that there is no treaty in
effect between the United States and the Cayman Islands providing for such
enforcement, and there are grounds upon which the Cayman Islands 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 the Cayman Islands courts as contrary to that nation's public policy.

THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER, INVITATION OR SOLICITATION TO
ANY MEMBER OF THE PUBLIC IN THE CAYMAN ISLANDS TO SUBSCRIBE FOR ANY OF THE
ORDINARY SHARES.

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

2
<PAGE>

ADDITIONAL INFORMATION

The Company has filed a Registration Statement on Form S-1, of which this
Prospectus is a part (the "Registration Statement"), with the United States
Securities and Exchange Commission (the "Commission") under the Securities
Act, with respect to the Ordinary Shares offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the Ordinary Shares offered hereby, reference is made to the Registration
Statement, including the exhibits filed therewith. Statements made in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete, and, in each instance, reference is made to the copy
of such document filed as an exhibit to the Registration Statement. 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 Securities Exchange Act of 1934,
as amended (the "Exchange Act") and, in accordance therewith, will file
reports, proxy and information statements and other information with the
Commission. The Registration Statement, and the exhibits 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 section
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 materials 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 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.

3
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the balance sheet,
including the notes thereto, included elsewhere in this Prospectus. Unless the
context otherwise requires, references herein to the "Company" mean Scottish
Annuity & Life Holdings, Ltd., a Cayman Islands company ("Holdings"), together
with its wholly-owned subsidiary, Scottish Annuity & Life Insurance Company
(Cayman) Ltd., a Cayman Islands insurance company ("Scottish Insurance"),
through which Holdings expects to conduct all of its operations. Holdings and
Scottish Insurance were incorporated on May 12, 1998 and June 3, 1998,
respectively, in the Cayman Islands and neither has any operating history.
Scottish Insurance was licensed in the Cayman Islands on July 8, 1998 as an
unrestricted Class B insurer, which license authorizes it to write variable
life insurance and annuity and life reinsurance. See "Glossary of Selected Life
Insurance and Annuity Terms" for definitions of certain terms used in this
Prospectus. In this Prospectus, amounts are expressed in United States dollars
and the balance sheet contained herein has been prepared in accordance with
United States generally accepted accounting principles ("GAAP"). Unless
otherwise noted, this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised.

THE COMPANY

Holdings and Scottish Insurance were recently formed as offshore companies
principally to provide customized variable life insurance products to high net
worth individuals and families and reinsurance of in-force blocks of fixed
annuities and similar contracts to insurers no longer actively offering such
products or otherwise seeking to more efficiently manage capital allocated to
existing businesses. In addition to its primary focus, the Company may reinsure
in-force blocks of other types of annuity contracts and life insurance
products. The Company believes that the favorable regulatory environment in
which it will operate, its planned low cost operating strategy and the absence
of a corporate level tax in the Cayman Islands will enable it to become a
leading offshore provider of variable life insurance and fixed annuity
reinsurance products in its target markets.

The Company's variable life insurance business seeks to respond to what the
Company believes are increasing demands of high net worth individuals and
families (generally individuals and families with a liquid net worth in excess
of $10.0 million) for customized life insurance products that can be utilized
as part of sophisticated estate planning strategies. The Company's variable
life insurance products offer both a specified death benefit as well as a cash
value component which is placed in a separate account and invested on behalf of
the policyholder by a money manager. Because of the Company's domicile and
target customers, the Company can offer policies that permit private
independent money managers to manage a policy's separate account utilizing
investment strategies not typically available in policies issued to the general
public. The Company will also seek to leverage its expertise with respect to
variable life insurance products by offering structured life insurance
products, such as corporate-owned life insurance ("COLI"), which target the
deferred compensation market.

The Company's reinsurance business seeks to focus on what the Company
believes are meaningful opportunities to reinsure lines of business that are
subject to significant reserve or risk capital requirements under rating agency
requirements and applicable accounting standards. The Company believes that, in
response to heightened regulatory and rating agency scrutiny, insurers are
increasingly seeking reinsurance of in-force blocks of annuity and life
insurance business as a means to improve earnings or risk-based capital or
other financial ratios. The Company's reinsurance business will target
insurance companies that have discontinued writing such business or that seek
relief from the reserve and capital requirements associated with such business.
The Company's reinsurance activities will focus principally on opportunities in
the U.S., although the Company also expects to target opportunities in the
United Kingdom, Western Europe, Canada and Australia.

4
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The principal focus of the Company's reinsurance activities will be on blocks
of in-force fixed annuity contracts such as structured settlements, single
premium deferred annuities, immediate annuities and similar contracts. The
Company intends to focus on the reinsurance of these annuities because it
believes that the reserve and capital requirements associated with fixed
annuities has made reinsurance of such annuities an attractive option for
issuers and reinsurers of those products and because the market for such
reinsurance is not currently well-developed. In addition, the Company expects
that it may also reinsure various forms of life insurance products, including
universal, variable and whole life insurance, and variable annuity contracts if
and when attractive opportunities become available. The Company believes that
reinsurance of these products will enable it to more effectively capitalize on
potential relationships with other insurers and reinsurers.

BUSINESS STRATEGY

In order to achieve its objective to become a leading offshore provider of
variable life insurance and fixed annuity reinsurance products in its target
markets, the Company intends to utilize a business strategy with the following
principal components:

LEVERAGE MANAGEMENT EXPERTISE

The Company was organized by the management and shareholders of The Scottish
Annuity Company (Cayman) Ltd. ("Scottish Annuity"). In 1994, the Company's
Chief Executive Officer and President, Michael C. French founded Scottish
Annuity, a privately held Cayman Islands insurance company, to provide to high
net worth individuals and families variable annuity contracts that have the
same cash value management features, and the same target market, as the
Company's variable life insurance policies. In addition, Mr. French was a
founder of Maverick Capital, Ltd. ("Maverick"), an investment management
company organized in 1993 with approximately $2.5 billion of assets under
management as of October 1, 1998. Since 1995, Michelle L. Boucher, the
Company's Senior Vice President, Chief Financial Officer and Secretary, has
been Manager of Finance and Administration for Scottish Annuity. The Company
intends to draw on Mr. French's and Ms. Boucher's experience in developing
Scottish Annuity's variable annuity products and business to develop the
Company's variable life insurance products and business. Also, the Company
intends to build on the relationships with potential clients as well as with
financial advisors, investment managers, private bankers, attorneys and other
intermediaries and referral sources that Mr. French and Ms. Boucher have
developed with Scottish Annuity. Henryk Sulikowski, the Company's Senior Vice
President and Chief Insurance Officer, has over 17 years experience in the
insurance and reinsurance industry. Prior to joining the Company, Mr.
Sulikowski was a Director of Swiss Re New Markets Corporation ("Swiss Re New
Markets"), responsible for developing, structuring and marketing annuity and
life reinsurance transactions. Prior to his tenure with Swiss Re New Markets,
Mr. Sulikowski was Vice President in charge of annuity and life financial
reinsurance activities at Cologne Life Reinsurance Company ("Cologne Re"). Mr.
Sulikowski has been an associate of the Society of Actuaries since 1986 and a
member of the American Academy of Actuaries since 1987. The Company intends to
draw on Mr. Sulikowski's experience and relationships with international
insurance brokers, insurance consultants, members of the actuarial profession
and senior insurance company executives to implement its reinsurance business
plan. See "Management--Executive Officers and Directors."

UTILIZE THIRD PARTY SERVICE PROVIDERS

5
<PAGE>

International Risk Management Group, Inc. ("IRMG"), an affiliate of Swiss
Reinsurance, to act as the Company's licensed insurance manager in the Cayman
Islands and to provide to the Company certain additional administrative
services. In management's opinion based on representations of IRM Cayman, IRMG
is the largest independent captive insurance manager in the world today,
operating out of 20 offices in North America, Europe, Australia, Africa and
Asia. In addition, the Company has retained Milliman & Robertson, a leading
actuarial consulting firm, to provide from time to time certain actuarial
services, including pricing and reinsurance analysis. The Company has also
retained Pacific Investment Management Company ("PIMCO"), General Re-New
England Asset Management, Inc. ("General Re") and The Prudential Investment
Corporation ("Prudential Investment") to manage the Company's investment
portfolio consistent with the investment guidelines established by the Company
(the "Investment Guidelines"). The Company has also retained Westport Worldwide
Partners (Bermuda), Ltd. ("Westport"), a developer and administrator of
insurance products for international insurance brokers, insurance companies and
corporations and an affiliate of Westport Worldwide, to provide non-exclusive
distribution services to its variable life insurance business, as well as
certain related administrative services from time to time, including monitoring
tax law compliance and preparing policy illustrations. See "Business--
Administration and Consulting Services," and "--Investment Portfolio--
Investment Managers."

BUILD ON SIGNIFICANT CAPITAL BASE

Upon consummation of the Offering, the Company will have an equity
capitalization of approximately $254.3 million. The Company believes that this
level of capitalization will demonstrate a strong financial position and a high
level of commitment to potential clients and the variable life insurance and
reinsurance marketplace and is necessary in establishing it as a competitive
insurance company. The Company does not anticipate that it will incur any
material indebtedness in the ordinary course of its business other than
possibly obtaining letters of credit in connection with its reinsurance
contracts. The Company should also benefit from the fact that, as a recently
formed entity, its capital is presently unencumbered by issues such as reserve
adequacy, unrealized losses in its investment portfolio and uncollectible
reinsurance. In part because of the Company's expected capitalization following
the Offering, Duff & Phelps Credit Rating Co. ("Duff & Phelps") has assigned
Scottish Insurance a preliminary claims-paying ability rating of "A" and A.M.
Best Company ("A.M. Best") has assigned Scottish Insurance a preliminary Best
Rating of "A-" (Excellent). Duff & Phelps assigns an "A" rating to companies
that it characterizes as having, in its opinion, high claims-paying ability,
average protection factors and an expectation of variability in risk over time
due to economic or underwriting conditions. 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. The
ratings assigned to Scottish Insurance by Duff & Phelps and A.M. Best are
contingent on the Company raising gross proceeds of $200.0 million in the
Offering. Each rating represents the respective rating agency's opinion of the
Company's ability to meet its obligations to its policyholders.

APPLY PRUDENT RISK MANAGEMENT POLICY

The principal risk associated with the Company's variable life insurance
policies is mortality risk. Mortality risk tends to be more stable when spread
across large numbers of insureds. The Company's variable life insurance
policies are expected to be placed with a relatively small number of high net
worth policyholders and to provide substantial death benefits given expected
initial premiums of at least $1.0 million for single premium policies and
$500,000 for multiple premium policies. As a consequence, the Company's
associated mortality risk exposure is likely to be greater in the aggregate,
and its probability of loss less predictable, than an insurer with a broader
risk pool. As a result, the Company intends to allocate a significant portion
of its capital, in addition to any policy reserves required under GAAP and any
additional Cayman Islands regulatory requirements, to cover possible volatility
in mortality experience. The Company's current Underwriting Guidelines limit
the maximum aggregate net amount at risk the Company will initially assume on
any one life to $500,000. In order to comply with this guideline, the Company
intends to reinsure any liability for amounts in excess of $500,000 per
insured.

6
<PAGE>

The principal risk associated with the Company's fixed annuity reinsurance
activities is investment risk. Specifically, the Company is subject to (i)
asset value risk, which is the risk that invested assets supporting the
reinsured business will decrease in value, (ii) reinvestment risk, which is the
risk that interest rates will decline and funds reinvested will earn less than
is necessary to match anticipated liabilities, and (iii) disintermediation
risk, which is the risk that the Company may have to sell assets at a loss to
provide for policyholder withdrawals or to satisfy liabilities not otherwise
properly matched. As part of its reinsurance activities, the Company may also
reinsure in-force blocks of life insurance. The principal risk associated with
the reinsurance of life insurance is mortality risk. The Company believes that
one of the benefits to it resulting from the reinsurance of life insurance
policies covering broad pools of insureds is that the Company's mortality risk
on such reinsurance will be spread over a larger insured population than will
be the case with respect to its variable life insurance policies. To the extent
the Company reinsures variable annuity contracts, the principal risk reinsured
will be surrender risk, a risk which is also associated with the reinsurance of
fixed annuities and life insurance. An additional risk associated with the
Company's reinsurance business is the risk that the ceding insurer will be
unable to pay amounts due the Company because of its own financial
difficulties. The Company believes this risk can be mitigated by conducting an
appropriate financial due diligence review of each cedent.

The Company will establish policy reserves and allocate risk capital in
accordance with actuarial standards of practice, GAAP accounting requirements
and any additional Cayman Islands regulatory requirements in an effort to
reflect the level of investment, mortality, surrender and other risks
associated with the annuities and life insurance it will reinsure.

EMPLOY PROFESSIONAL INVESTMENT STRATEGY

The Company will seek to generate attractive levels of investment income
through a professionally managed fixed income investment portfolio. The Company
has entered into an investment advisory agreement with PIMCO, which is
anticipated to manage initially approximately 50% of the Company's investment
portfolio. The Company has also retained General Re and Prudential Investment
(together with PIMCO, the "Investment Managers") to each manage a portion of
the other 50% of the Company's investment portfolio. The Company may also
retain other investment managers from time to time. Each Investment Manager
will have discretionary authority over the portion of the Company's investment
portfolio allocated to it, subject to the Investment Guidelines. The Company's
investment portfolio (exclusive of assets transferred and invested as part of
any coinsurance transaction) will principally consist of fixed income
securities with a weighted average investment rating of "A." Consistent with
the Investment Guidelines, no more than 15% of the Company's investment
portfolio will be invested in below investment grade fixed income securities.

DIRECT SALES

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

The Company's principal executive office is located at Ugland House (P.O. Box
10657APO), George Town, Grand Cayman, Cayman Islands, British West Indies, and
its telephone number is (345) 949-2800.

7
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
Ordinary Shares Offered Hereby.................. 16,750,000 Ordinary Shares
Ordinary Shares Offered in the Direct Sales(1).. 1,418,440 Ordinary Shares
Ordinary Shares to be Outstanding after the
Offering and the Direct Sales(2)............... 18,568,440 Ordinary Shares
Use of Proceeds................................. Substantially all of the net
proceeds will be contributed
to Scottish Insurance to
support its insurance and
reinsurance activities. See
"Use of Proceeds."
Nasdaq National Market Symbol................... SCTLF
</TABLE>
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(1) Unless otherwise noted, this Prospectus assumes that upon consummation of
the Offering the sale of 1,418,440 Ordinary Shares and Class A Warrants to
purchase an aggregate of 400,000 Ordinary Shares to the Direct Investors
in the Direct Sales has been completed.
(2) Ordinary Shares to be outstanding after the Offering and the Direct Sales
(i) includes 400,000 Ordinary Shares outstanding as of the date hereof and
(ii) excludes 2,850,000 Ordinary Shares issuable upon exercise of Class A
Warrants, 200,000 Ordinary Shares issuable upon exercise of Class B
Warrants, 1,070,000 Ordinary Shares issuable upon exercise of options
granted to management and to be granted to non-employee Directors and a
consultant of the Company upon consummation of the Offering and the Direct
Sales and 530,000 Ordinary Shares reserved for issuance upon exercise of
options that may be granted in the future pursuant to the Company's Second
Amended and Restated 1998 Stock Option Plan (the "Stock Option Plan"). In
addition, Ordinary Shares to be outstanding after the Offering and the
Direct Sales excludes up to 750,000 Ordinary Shares issuable upon exercise
of Class C Warrants, if and to the extent such warrants are issued pursuant
to the Company's agreement with Westport. See "Business--Marketing" and
"Description of Shares--Warrants--Class C Warrants." If the Underwriters'
over-allotment option is exercised in full, upon consummation of the
Offering and the Direct Sales, 21,080,940 Ordinary Shares will be
outstanding, and the number of Ordinary Shares issuable upon exercise of
options granted to management and to be granted to non-employee Directors
and a consultant of the Company upon consummation of the Offering and the
Direct Sales will increase to 1,220,000 Ordinary Shares. The number of
Ordinary Shares issuable upon exercise of the Class A Warrants, the Class B
Warrants and the Class C Warrants will not change if the Underwriters'
over-allotment option is exercised in full. The Class A Warrants, Class B
Warrants and options are not currently exercisable. See "Management--Stock
Option Plan," "Description of Shares--Warrants" and "--Options," and
"Direct Sales."

RISK FACTORS

Businesses 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 plan has not been tested and may not succeed. Investors
should consider carefully the material risk factors involved in connection with
an investment in the Ordinary Shares and the impact to investors from various
circumstances which could adversely affect the Company's business, results of
operations or financial condition. See "Risk Factors."

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RISK FACTORS

An investment in the Ordinary Shares involves a high degree of risk.
Prospective investors should consider carefully the following risk factors, in
addition to the other information set forth in this Prospectus, in connection
with an investment in the Ordinary 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 plans; (ii) the
Company's relationship with third-party service providers and clients; (iii)
the use of the net proceeds of the Offering; (iv) trends in the insurance and
reinsurance industries; (v) government regulations; (vi) trends that may
affect the Company's financial condition or results of operations; and (vii)
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 THIRD PARTY SERVICE PROVIDERS. Holdings and
Scottish Insurance were formed on May 12, 1998 and June 3, 1998, respectively,
and neither has any operating history. 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 initially intends to have only a limited
staff and to outsource many functions, including certain administrative,
regulatory, actuarial, reinsurance and underwriting functions. The Company has
retained Westport, IRM Cayman, Milliman & Robertson, PIMCO, General Re and
Prudential Investment to provide services to the Company. Scottish Insurance
will be dependent upon the quality of the services provided by such firms. The
inability of Scottish Insurance to retain qualified service providers or the
failure of such outside service providers to perform adequately their
functions could delay or prevent the Company from fully implementing its
business plan or could otherwise adversely affect the Company. Scottish
Insurance has retained Henryk Sulikowski as its Senior Vice President and
Chief Insurance Officer and intends to hire additional personnel to provide
administrative and underwriting support. Such individuals will be critical
components of the Company's operations. There can be no assurance that the
Company will be successful in attracting or employing the personnel that it is
seeking, and if it is unable to do so, such failure could delay or prevent the
Company from fully implementing its business plan. See "Business--
Administration and Consulting Services" and "Management--Executive Officers
and Directors."

ABILITY TO IMPLEMENT ITS BUSINESS PLAN.

General. The Company's business plan is focused principally on entering the
variable life insurance and fixed annuity reinsurance businesses. The
Company's ability to successfully implement this plan is dependent on, among
other things, the Company's ability to (i) in the case of its variable life
insurance business, attract clients principally through referrals by financial
advisors, investment managers, private bankers, attorneys and other
intermediaries in the United States who will not be representing the Company
and will not be compensated by the Company for any activities undertaken in
the U.S., (ii) in the case of its fixed annuity and other reinsurance
businesses, to generate business primarily through its Senior Vice President
and Chief Insurance Officer's relationships with international insurance
brokers, insurance consultants, members of the actuarial profession and senior
insurance company executives, (iii) develop and effectively implement
underwriting and investment policies appropriate for the risks associated with
its insurance and reinsurance products, (iv) maintain a competitive claims-
paying ability rating, (v) attract clients through referrals from Scottish
Annuity and (vi) effectively manage growth in the Company's businesses.

Variable Life Insurance Business. Because neither Holdings nor Scottish
Insurance will be licensed or registered to do business in any jurisdiction in
the U.S., no intermediary, whether U.S. or foreign, who provides

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referrals or otherwise directs business to the Company may represent the
Company or receive commissions or other remuneration from the Company for
activities undertaken in the U.S. As a result of such limitation, no assurance
can be given that the Company will be able to effectively implement its
insurance and reinsurance plans. The Company, however, may from time to time
provide commissions or other remuneration to non-U.S. referral sources for
activities undertaken outside the U.S. Other than in connection with certain
agreements between the Company and each of Westport and Scottish Annuity, the
Company has no current arrangements with respect to any such referral sources,
although the Company expects that such referral sources will likely be
compensated based on a percentage of the revenue derived from such referrals.
Although the Company currently has no contractual or other arrangement with
any referral source other than with Westport and Scottish Annuity, the
Company, subject to any applicable regulatory limitations, may provide
referrals to persons or entities that provide it with referrals.

Fixed Annuity Reinsurance Business. The Company's business plan provides
that Scottish Insurance will principally focus its reinsurance activities on
reinsuring blocks of in-force fixed annuities such as structured settlements,
single premium deferred annuities, immediate annuities and similar contracts
which are issued by insurers who are no longer actively writing such annuities
or similar contracts or who are seeking relief from the reserve and capital
requirements associated with such contracts. The Company believes that this
market is largely undeveloped and no assurance can be given that such market
will develop or if it develops, whether such market will be substantial enough
to support Scottish Insurance's reinsurance business, particularly to the
extent such contracts have been issued by insurers no longer actively writing
new fixed annuity contracts. Also, Scottish Insurance expects that a portion
of any block of fixed annuities that it reinsures will be surrendered or
otherwise terminated each year, a risk that Scottish Insurance will take into
account when negotiating prices for its reinsurance products. No assurance can
be given, however, that Scottish Insurance will be successful in negotiating
prices that actually take into account such risk or that as such fixed
annuities or similar contracts are surrendered, terminate or expire, Scottish
Insurance will have sufficient reinsurance business to sustain its growth or
that there will be sufficient reinsurance business in the Company's target
market to replace such fixed annuities or similar contracts. In addition, the
Company expects to seek to enter into retrocessional arrangements for certain
risks associated with its reinsurance business; however, the Company currently
does not have any such arrangements in place and no assurances can be given
that such arrangements will be available when the Company will need them and
if available, as to what terms the Company will be able to obtain under such
arrangements.

Other Reinsurance Businesses. In addition to its primary focus on the
reinsurance of fixed annuities, the Company expects that Scottish Insurance
may reinsure in-force blocks of life insurance and variable annuity contracts;
however, no assurance can be given that the Company will become aware of
attractive opportunities in these areas or if it becomes aware of such
opportunities, will be in a position to take advantage of them.

Underwriting and Investment Policies. Because of the risks associated with
its variable life insurance and reinsurance businesses (e.g., mortality,
investment and surrender risk), the Company's underwriting and investment
policies must be tailored to adequately protect the Company against such
risks. No assurance, however, can be given that the Company will be successful
in developing or implementing such policies or that such policies will be
effective.

Third Party Service Providers. No assurance can be given that third party
service providers retained by the Company will provide services in accordance
with the Company's underwriting, investment and other policies or that such
services will be performed adequately.

Maintenance of Claims-Paying Ability Rating. Insurance ratings are used by
prospective purchasers of insurance policies as well as insurers, reinsurers
and insurance and reinsurance intermediaries as an important means of
assessing the financial strength and quality of insurers and 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 claims-paying ability rating of "A"
from Duff & Phelps and a preliminary Best Rating of "A-" (Excellent) from A.M.
Best. The Duff & Phelps and A.M. Best ratings are contingent upon the Company
raising gross proceeds of at least $200.0 million in the Offering. If the

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Company fails to satisfy this condition and consequently does not receive a
final rating from Duff & Phelps and/or A.M. Best, the Company's prospects
would be adversely affected. See "Business--Competition--Ratings." In
addition, if final ratings are received, no assurance can be given that the
Company will be able to conduct its operations such that the Company will be
able to maintain its "A" claims-paying ability rating from Duff & Phelps or
its "A-" (Excellent) claims-paying ability rating from A.M. Best or, if the
Company is unable to maintain such ratings, to obtain similar claims-paying
ability ratings from other major rating agencies.

Scottish Annuity Referrals. No assurance can be given that Scottish Annuity
will provide the Company with any meaningful number of referrals or if
Scottish Annuity provides such referrals, that such referrals will result in
actual sales of the Company's variable life insurance policies.

Ability to Manage Growth. Growth in the Company's variable life insurance
and reinsurance businesses contemplated by its business plan may place
significant demands on the Company's management and its administrative and
financial resources. If the Company is unable to manage growth effectively,
the Company's business, results of operations and financial condition are
likely to be materially adversely affected.

EFFECT OF CHANGES IN U.S. TAX LAWS ON VARIABLE LIFE INSURANCE SALES. The
market for variable life insurance products in the United States is based in
large part on the favorable tax treatment these 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 variable life insurance products. The
current budget proposal submitted to the United States Congress by the Clinton
Administration includes certain provisions which, if not modified, could limit
the ability of policyholders to change private independent money managers from
time to time without triggering adverse tax consequences. If these proposed
tax changes were enacted into law, they could adversely affect the Company's
variable life insurance business. In addition, the Clinton budget proposal
contains a provision that would prevent all transfers to trusts from
qualifying for the annual present interest exclusion from the gift tax, even
if a beneficiary held a so-called "Crummey power" (or right of withdrawal). If
this proposal were enacted into law, the primary and most tax-efficient method
of funding premium payments by insurance trusts would be eliminated. Because
the Company expects that its variable life insurance will generally be
purchased by insurance trusts (or for contribution to insurance trusts) so as
to provide liquidity for estate taxes and to effect the tax-free transfer of
the proceeds from one generation to another, adoption of such proposal would
likely adversely affect sales of such policies and, as a consequence, would
likely have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, COLI products have been
affected by recent changes in their tax treatment and any additional changes
in the tax laws that reduce or eliminate any remaining favorable tax treatment
for such products would likely have a material adverse effect on the market
for such products.

REGULATION. Scottish Insurance, through which Holdings is expected to
conduct all of its business, is a Cayman Islands company licensed as an
unrestricted Class B insurer and is subject to regulation and supervision by
the Cayman Islands Monetary Authority (the "Cayman Monetary Authority").
Neither Scottish Insurance nor Holdings will be registered or licensed to do
business in any jurisdiction in the United States or any other country. The
insurance laws of each state in the United States and in most other countries
in which the Company would likely conduct business regulate the sale of
insurance and reinsurance within their jurisdiction by insurers, such as
Scottish Insurance, that 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.
Scottish Insurance is expected to conduct its business through its executive
offices in the Cayman Islands and will not maintain an office, and its
personnel will not solicit, advertise, underwrite, settle claims or conduct
other insurance activities, in the United States or, to the extent prohibited,
in any other countries. Substantially all of the Company's variable life
insurance clients are expected to be obtained through referrals by financial
advisors, investment managers, private bankers, attorneys and other
intermediaries in the United States, none of whom will be representing the
Company or may receive any commissions or other remuneration from Scottish
Insurance for activities undertaken in the U.S. Substantially all of the
Company's reinsurance business is

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expected to be generated primarily through its Chief Insurance Officer's
relationships with international insurance brokers, insurance consultants,
members of the actuarial profession and senior insurance company executives,
none of whom may receive any commissions or other remuneration from Scottish
Insurance for any activities undertaken in the U.S. In addition, all insurance
contracts of Scottish Insurance are expected to be negotiated, executed and
delivered, and all premiums are expected to be received, outside the United
States. Accordingly, the Company has received an opinion from its state
insurance regulatory counsel, The Bernstein Law Firm, that Scottish Insurance
will not be subject to the insurance laws of any state of the United States.
To the extent that the Company is subject to similar restrictions in
jurisdictions outside the U.S., the Company will develop operating guidelines
designed to facilitate the Company's compliance with such restrictions. See
"Business--Regulation." There can be no assurance, however, that inquiries or
challenges to the insurance activities of Scottish Insurance will not be
raised in the future. The Company has structured its business and expects to
conduct its operations in the manner described above in order to allow the
Company to provide its clients with variable life insurance products which
have customized features that would not typically be available from a company
subject to such laws. If the Company were to become subject to such laws, its
business, results of operations and financial condition would likely be
materially adversely affected.

From time to time, there have been congressional and other initiatives in
the United States regarding the supervision and regulation of the insurance
industry, including proposals to supervise and regulate alien insurers to a
greater extent than currently regulated. While none of these proposals has
been adopted to date on either the federal or state level, there can be no
assurance that federal or state legislation will not be enacted subjecting
Holdings or Scottish Insurance to supervision and regulation in the United
States.

In addition, 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 provide other collateral
through a funds withheld or trust arrangement. If the Company is unable to
obtain a letter of credit facility on commercially acceptable terms or is
unable to arrange for such other collateral, the Company's ability to operate
its reinsurance business will be severely limited.

RISKS ASSOCIATED WITH THE COMPANY'S PRODUCTS.

Variable Life Insurance--Mortality Risk. The principal risk associated with
the Company's variable life insurance policies will be mortality risk.
Mortality risk tends to be more stable when spread across large numbers of
insureds. The Company's variable life insurance policies are expected to be
placed with a relatively small number of high net worth policyholders and to
provide substantial death benefits given expected initial premiums of at least
$1.0 million for single premium policies and $500,000 for multiple premium
policies. As a consequence, the Company's associated mortality risk exposure
is likely to be greater in the aggregate, and its probability of loss less
predictable, than that of an insurer with a broader risk pool. As a result, no
assurance can be given that the Company's policy reserves will be adequate,
that assets will be properly matched to meet anticipated liabilities, that
assets will not need to be liquidated at substantial losses to meet such
liabilities or that, to the extent the Company seeks to reinsure such
mortality risk, such reinsurance will be available on commercially acceptable
terms or that such reinsurers will perform under their reinsurance agreements.

Fixed Annuity Reinsurance--Investment Risk. The principal risk associated
with the Company's fixed annuity reinsurance activities is investment risk.
Specifically, the Company is subject to (i) asset value risk, which is the
risk that invested assets supporting the reinsured business will decrease in
value, (ii) reinvestment risk, which is the risk that interest rates will
decline and funds reinvested will earn less than expected, and (iii)
disintermediation risk, which is the risk that the Company may have to sell
assets at a loss to provide for policyholder withdrawals. Although the Company
expects to reflect such investment risk in product pricing and in establishing
policy reserves, no assurance can be given that such reserves will be
adequate, that assets will be properly matched to meet anticipated liabilities
or that the Company's investments will provide sufficient returns to enable
the Company to satisfy its guaranteed fixed benefit obligations.

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Other Reinsurance Businesses--Mortality, Investment and Surrender Risk. The
Company expects that it will also potentially reinsure various forms of life
insurance products, including universal life insurance, variable life
insurance and traditional whole life insurance. The primary risk under life
insurance policies is mortality risk. The Company's Underwriting Guidelines
limit such risk to $500,000 per insured and the Company intends to reinsure,
or retrocede, any liability for amounts in excess of $500,000 per insured in
order to comply with such guidelines. Universal life insurance and similar
interest rate-sensitive policies provide life insurance with adjustable rates
of return based on applicable interest rates in effect from time to time. As a
consequence, the risks reinsured by the Company may also include investment
risks similar to those for fixed annuities. In addition, like annuities, life
insurance policies are subject to surrender risk. The Company may also
reinsure variable annuities. The principal risk reinsured by the Company with
respect to these annuities is surrender risk.

Reinsurance Business--Ceding Insurer Risk. An additional risk associated
with the Company's reinsurance business is the risk that the ceding insurer
will be unable to pay amounts due the Company because of its own financial
difficulties. No assurance can be given that such ceding insurers will be able
to pay amounts due to the Company or that such inability will not have a
material adverse effect on the Company's business, results of operations or
financial condition. In addition, no assurance can be given that ceding
companies will maintain appropriate interest crediting rates with respect to
fixed annuities or interest rate-sensitive life insurance policies.

RISKS ASSOCIATED WITH INVESTMENT ACTIVITIES. The Company's fixed income
investments will be subject to two primary sources of investment risk: credit
risk, relating to 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. No assurance can be given that the
Company will be able to effectively manage such risks. If the Company is
unable to effectively manage such risks or otherwise effectively manage its
investment portfolio, the Company's ability to support its variable life
insurance and reinsurance businesses, and its results of operations and
financial condition, would be adversely affected.

In addition, the Investment Guidelines permit up to 15% of the Company's
investment portfolio 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 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.

In addition, to the extent that the Company enters into a coinsurance
transaction, the Company will seek to manage the investment of the assets
transferred to it as part of such transaction in an effort to match its
anticipated reinsurance liabilities associated with such transaction. The
Company expects to invest such assets principally in fixed income and, to a
lesser extent, equity securities. The Company may invest in foreign
denominated securities to manage currency risk if the coinsurance transaction
has a foreign currency component. The Company may also enter into interest
rate swaps and other hedging transactions in an effort to manage interest rate
risks associated with such transactions. The Company's ability to structure
its investments to match its anticipated reinsurance liabilities has not been
tested. Therefore, no assurance can be given that the Company will
successfully match the structure of its investments in relation to its
anticipated reinsurance liabilities. If the Company's calculations with
respect to its 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 with the result
that reserves therefor may not be adequate, which could have an adverse effect
on the Company's business, results of operations and financial condition.

The Company has entered into investment advisory agreements with PIMCO,
General Re and Prudential Investment to manage the Company's investment
portfolio. Each Investment Manager will have discretionary

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authority over the portion of the Company's investment portfolio allocated to
it, subject to the Investment Guidelines adopted by the Company. The
performance of the Company'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 the
Company directly or indirectly holds positions could adversely affect the
Company.

QUARTERLY FLUCTUATIONS; CERTAIN ECONOMIC AND MARKET RISKS. The Company's
results of operations may also fluctuate significantly on a quarterly basis
based on changes in, among other things, (i) the capital markets, (ii) the
performance results of its investment managers or (iii) the Company's
experience under its reinsurance contracts. Furthermore, a downturn in the
economy or the capital markets could adversely affect the market for many life
insurance and annuity products. If the market for life insurance or annuity
contracts were adversely affected, it would likely depress the demand for the
Company's variable life insurance and reinsurance products, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, such a downturn could adversely affect the
value of policyholders' separate accounts related to the Company's variable
life insurance policies and the variable annuity contracts issued by Scottish
Annuity, which would reduce the amount of revenue the Company generates from
fees charged to policyholders and Scottish Annuity based on the value of such
accounts. See "Management's Discussion and Analysis of Financial Condition and
Plan of Operations--General" and "Business--Scottish Annuity Agreement."

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 could
adversely affect the Company's statement of operations and financial
condition.

IMPORTANCE OF MANAGEMENT AND KEY EMPLOYEES. The Company is highly dependent
upon its executive officers and key employees. The unexpected loss of the
services of one of these individuals, particularly Michael C. French, Chief
Executive Officer and President, Michelle L. Boucher, Senior Vice President,
Chief Financial Officer and Secretary, or Henryk Sulikowski, Senior Vice
President and Chief Insurance Officer, could have a material adverse effect on
the Company. Although the Company has employment agreements with Mr. French,
Ms. Boucher and Mr. Sulikowski, no assurance can be given that the Company
will be able to retain the services of these individuals. The Company does not
carry any key person life insurance policies for any of its executive officers
or employees. The Company's success will also be dependent on its ability to
attract and maintain a staff of qualified administrative and management
personnel and, to the extent qualified Cayman Islands citizens are not
available, the willingness and ability of non-Cayman Islands citizens to be
located in the Cayman Islands. The Company, which currently has five
employees, intends to hire additional qualified administrative and
underwriting personnel as the Company's business grows, but no assurance can
be given that the Company will be successful in attracting and hiring such
personnel.

CAYMAN ISLANDS WORK PERMITS. Under Cayman Islands immigration law, those
persons who are not Caymanians, Cayman status holders or residents with
permission to work may not engage in any gainful occupation in the Cayman
Islands without the specific permission of the appropriate Cayman Islands
government authority. Ms. Boucher is currently working as an executive of
Scottish Annuity under a validly issued work permit, which expires July 24,
1999. Ms. Boucher is seeking an amendment to such work permit to cover her
employment by Holdings and Scottish Insurance. Mr. French and Mr. Sulikowski
were issued work permits for an initial one year period commencing on October
2, 1998 and September 14, 1998, respectively. Messrs.

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French's and Sulikowski's permits may be automatically renewed for an
additional one year period upon payment of the applicable renewal fee.
Although the Company believes that Ms. Boucher's work permit will be amended,
no assurance can be given that such work permit will be amended or that any
work permits received will be renewed when they expire. See "Business--
Employees" and "Management--Executive Officers and Directors." If such work
permits are not amended or renewed, the Company may be required to make other
arrangements to permit the person affected to perform services for the Company
outside the Cayman Islands. This could involve such person or persons
establishing residency in some other location outside the United States, which
could increase the Company's administrative expenses.

DUAL MANAGEMENT DUTIES. Ms. Boucher is currently an executive officer of
Scottish Annuity and will continue to serve in such capacity following the
Offering. Ms. Boucher will also be performing services for Scottish Annuity
pursuant to the Scottish Annuity Agreement. No assurance can be given that
acting in such capacities while serving as an executive of the Company will
not adversely affect the ability of Ms. Boucher to perform her duties for the
Company. See "Business--Scottish Annuity Agreement."

COMPETITION. The life insurance and reinsurance industries are highly
competitive and most of the companies in such industries are significantly
larger and have operating histories and have access to significantly greater
financial and other resources than does the Company. The Company has no
experience competing with such companies and there can be no assurance that it
will be successful. In addition, to the extent that the Company's variable
life insurance policies provide for management of the underlying separate
accounts by private independent money managers, the Company's variable life
insurance policies compete with mutual funds and other investment and savings
vehicles. The Company will compete for customers in its market niches
primarily based on price, expertise and service, factors which may be affected
by events or conditions (e.g., changes in applicable insurance regulations or
tax laws) over which the Company has no control. In addition, competition in
the reinsurance business that the Company intends to underwrite is based on
many factors, including price, the general reputation and perceived financial
strength of the reinsurers, existing relationships with other reinsurers,
ratings assigned by independent rating agencies, reputation and experience in
structuring transactions which meet client needs and regulatory requirements.
In addition, because the Company expects to rely at least initially on a small
number of clients for both its variable life insurance and reinsurance
businesses, such businesses may be more susceptible to the adverse effects of
competition.

In addition, substantially all of the Company's variable life insurance
clients are expected to be obtained through referrals in the United States by
financial advisors, investment managers, private bankers, attorneys and other
intermediaries in the United States, while its reinsurance clients are
expected to be obtained through relationships with international insurance
brokers, insurance consultants, members of the actuarial profession and senior
insurance company executives with whom the Company's Senior Vice President and
Chief Insurance Officer has a relationship. None of these intermediaries or
other referral sources may receive any commission or other remuneration from
the Company for activities undertaken in the U.S. or any other jurisdiction
that imposes restrictions on the Company's activities similar to those which
the Company is subject to in the U.S. Accordingly, no assurance can be given
that the Company can successfully compete with the United States and foreign
insurance and reinsurance companies that directly market their products in the
United States and elsewhere.

The Company's domestic competitors are generally registered or otherwise
subject to state insurance laws in one or more jurisdictions in the U.S.
Because the Company does not intend to solicit, advertise or conduct insurance
activities in the U.S., the Company does not expect to be subject to such
laws. See "Business--Regulation." Potential clients and/or their advisors will
be able to compare the Company's products to the products of its competitors
based on publicly available information regarding such competitors' products.

INCOME TAX RISKS.

Taxation of Holdings and Scottish Insurance. Holdings and Scottish Insurance
are Cayman Islands companies and neither are expected to file United States
income tax returns. Holdings and Scottish Insurance plan to operate in such a
manner that they are not subject to United States tax (other than withholding
tax on

15
<PAGE>

certain investment income from United States sources) because they do not
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
subsequent to the Offering that Holdings and/or Scottish Insurance is engaged
in a trade or business in the United States. If Holdings were considered to be
engaged in a trade or business 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 "Material Tax
Consequences."

The United States currently imposes an excise tax on insurance and
reinsurance premiums paid to foreign insurers with respect to risks located in
the United States. In addition, Holdings 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 Holdings' business.

Controlled Foreign Corporation Rules. United States persons who may,
directly or through certain attribution rules, acquire 10% or more of the
Ordinary Shares of Holdings, 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
Scottish Insurance 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 Holdings' stock for an uninterrupted period of 30 days
or more during any year. Holdings believes that, because of the anticipated
dispersion of its share ownership among holders and because of the
restrictions in its Articles of Association on transfer, issuance or
repurchase of the voting shares of Holdings, shareholders who acquire Ordinary
Shares in the Offering will not be subject to treatment as "United States
shareholders" of a CFC. In addition, because under the Articles of Association
no single shareholder will be permitted to exercise 10% or more of the total
combined voting power of Holdings, shareholders of Holdings 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 Holdings. See "Material Tax Consequences."

Related Person Insurance Income Risks. If Scottish Insurance'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 and direct or
indirect insureds and persons related to such insureds were directly or
indirectly to own more than 20% of the voting power or value of Scottish
Insurance's capital stock, a United States person who owns Ordinary Shares in
Holdings 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 Scottish Insurance's RPII for the taxable
year, determined as if such RPII were distributed proportionately to such
United States person 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 company issuing such
policies. Scottish Insurance does not expect that it will knowingly enter into
insurance agreements in which, in the aggregate, the direct or indirect
insureds are, or are related to, owners of 20% or more of the Ordinary Shares.
Furthermore, Scottish Insurance does not currently believe that the 20% gross
insurance income threshold will be met in 1998 or any subsequent year.
However, there can be no assurance that this will be the case. Consequently,
there can be no assurance that a United States person will not be required to
include amounts in its income in respect of RPII in any taxable year. See
"Material Tax Consequences."

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 voting power or value of the
corporation's shares, any gain from

16
<PAGE>

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
the shareholder. These rules should not apply to dispositions of Ordinary
Shares because Holdings 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 Ordinary
Shares. See "Material Tax Consequences."

Passive Foreign Investment Company Risks. To avoid significant potential
adverse United States federal income tax consequences for any United States
person who owns Ordinary Shares of the Company, it is important that Holdings
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 produces 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 Holdings, through Scottish
Insurance, intends to be predominately engaged in an insurance business and
does not intend to have financial reserves in excess of the reasonable needs
of its insurance business, Holdings 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 "Material Tax Consequences."

Cayman Islands Taxes. There are no income, corporation, capital gains or
other taxes in effect in the Cayman Islands on the basis of present
legislation. In addition, Holdings and Scottish Insurance have each received
an undertaking from the Governor-in-Council of the Cayman Islands pursuant to
the provisions of the Tax Concessions Law, as amended (1995 Revision), that
until the year 2018 (i) no subsequently enacted law imposing any tax on
profits, income, gains or appreciation shall apply to Holdings or Scottish
Insurance and (ii) no such tax and no tax in the nature of an estate duty or
an inheritance tax shall be payable on any shares, debentures or other
obligations of Holdings or Scottish Insurance. There can be no assurance that
after such date Holdings or Scottish Insurance would not be subject to any
such tax.

HOLDING COMPANY STRUCTURE AND DIVIDENDS. Holdings is a holding company which
will be engaged in the variable life insurance and reinsurance business
through its ownership of Scottish Insurance. Holdings' principal source of
income will be dividends paid by Scottish Insurance. Holdings intends to begin
paying dividends on its Ordinary Shares on a quarterly basis. No dividend,
however, has been legally declared by Holdings' Board of Directors. The
declaration and payment of dividends by Holdings will be at the discretion of
its Board of Directors and will depend upon Holdings' results of operations
and cash flows, the financial position and capital requirements of Scottish
Insurance, general business conditions, legal, tax, regulatory and any
contractual restrictions on the payment of dividends and other factors the
Board of Directors deems relevant. Holdings' ability to pay dividends depends
on the ability of Scottish Insurance to pay dividends to Holdings. While
Holdings is not itself subject to any significant legal prohibitions on the
payment of dividends, Scottish Insurance is subject to Cayman Islands
regulatory constraints which affect its ability to pay dividends to Holdings.
Specifically, payment of dividends by Scottish Insurance is subject to its
need to maintain a level of capital adequate to support its variable life
insurance and reinsurance businesses and comply with restrictions under
applicable insurance regulations and Cayman Islands corporate law. Scottish
Insurance, as the holder of an unrestricted Class B insurance license, will be
required by Cayman Islands law to maintain a minimum net worth of $240,000.
Accordingly, there is no assurance that dividends will be declared or paid in
the future. See "Dividend Policy."

17
<PAGE>

LIMITATIONS ON OWNERSHIP, TRANSFERS AND VOTING RIGHTS. Except as described
below with respect to transfers of Ordinary Shares executed on the Nasdaq
National Market, under the Company's Articles of Association, the Company's
directors (or their designee) are required to decline to register any transfer
of shares of the Company, including Ordinary 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
insured or reinsured or proposing to be insured or reinsured by 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, under
any state "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 Ordinary Shares will be deemed to own such shares
for dividend, voting and reporting purposes until a transfer of such Ordinary
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 Ordinary 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
Ordinary 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 shares of the Company 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 insured or reinsured or proposing to be insured or reinsured by the
Company to adverse tax or regulatory treatment in any jurisdiction, under the
Company's Articles of Association, 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 such shares, together with any dividends or
distributions that the transferee received from the Company. As soon as
practicable after receiving such 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 to the extent tradeable as
market securities 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 such 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 Articles of Association 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 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 Ordinary
Shares. See "Description of Shares--Ordinary Shares--Restrictions on
Transfer," "--Limitations on Voting Rights" and "--Unilateral Repurchase
Right."

18
<PAGE>

ANTI-TAKEOVER EFFECTS OF ARTICLES OF ASSOCIATION AND CAYMAN ISLANDS
CONFIDENTIALITY LAWS. Holdings' Articles of Association contain certain
provisions that make more difficult the acquisition of control of Holdings by
means of a tender offer, open market purchase, a proxy fight or otherwise,
including by reason of the limitation on transfers of Ordinary Shares and
voting rights described above. While these provisions are designed to
encourage persons seeking to acquire control of Holdings to negotiate with
Holdings' Board of Directors, they could have the effect of discouraging a
prospective purchaser from making a tender offer or otherwise attempting to
obtain control of Holdings. See "Description of Shares--Antitakeover Effects
of Articles of Association." Cayman Islands law restricts disclosure of, among
other things, shareholder lists. Accordingly, such laws may make the
acquisition of control by means of a tender offer or proxy fight more
difficult.

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering and the
Direct Sales, the Company will have outstanding 18,568,440 Ordinary Shares,
Class A Warrants to purchase an aggregate of 2,850,000 Ordinary Shares, Class
B Warrants to purchase an aggregate of 200,000 Ordinary Shares, and options to
purchase an aggregate of 1,070,000 Ordinary Shares. If the Underwriters' over-
allotment option is exercised in full, 21,080,940 Ordinary Shares will be
outstanding and the number of Ordinary Shares issuable upon exercise of
outstanding options will increase to 1,220,000 Ordinary Shares. The number of
Ordinary Shares issuable upon the exercise of Class A Warrants and Class B
Warrants will not change if the Underwriters' over-allotment option is
exercised. The Class A Warrants, Class B Warrants and the options are not
currently exercisable. In addition, Class C Warrants exercisable for up to
750,000 Ordinary Shares may be issued pursuant to the Company's agreement with
Westport beginning January 1, 2000. See "Management--Stock Option Plan,"
"Description of Shares--Warrants" and "--Options," and "Direct Sales." Except
as disclosed in "Description of Shares--Restrictions on Transfer" and as
discussed below with respect to the lock-up agreements, the Ordinary Shares
sold in the Offering will be freely transferable without restriction or
further registration under the Securities Act, except for any of those
Ordinary 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 of such rule). The
400,000 Ordinary Shares currently outstanding which were issued upon formation
of the Company, the Ordinary Shares to be sold to the Direct Investors in the
Direct Sales and the Ordinary Shares underlying the Class A Warrants, Class B
Warrants, any Class C Warrants and the options are, or upon issuance will be,
"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, including such rule. The Company,
its officers, directors and shareholders, the Shareholder Investors, the Non-
Shareholder Investors and the holders of Class A and Class B Warrants have
agreed that they will not, for a period of one year from the date of this
Prospectus (or six months with respect to the Ordinary Shares and Class A
Warrants to be purchased by the Non-Shareholder Investors in the Direct
Sales), directly or indirectly, offer, sell, offer to sell, contract to sell,
pledge, transfer, assign, hypothecate, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, transfer, assignment, hypothecation, grant of any
option to purchase or other sale or disposition) of any Ordinary Shares or
other capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for, any Ordinary Shares or other capital stock of
the Company without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, and (other than with respect to
the Company and the holders of the Class B Warrants) the Company, provided
that in the case of holders of the Class B Warrants, consent to waiver of such
restrictions may be granted during such period only with respect to
transactions with certain holders of interests in the limited partnerships
holding such warrants. Such agreements do not prevent the Company from
granting options under the Stock Option Plan so long as such options do not
become exercisable until one year from the date of this Prospectus. The
Company also has agreed not to file any registration statement on Form S-8
with respect to, or otherwise register the resale with the Commission of
Ordinary Shares underlying stock options for a period of one year from the
date of this Prospectus. Prudential Securities Incorporated and the Company
may, in their sole discretion, at any time and without notice, release all or
any portion of the securities subject to such lock-up agreements, except that
in the case of holders of the Class B Warrants, such release may be granted
only with respect to transactions with certain holders of interests in the
limited partnerships holding such warrants.

19
<PAGE>

perception that such sales could occur, could adversely affect the market
price of the Ordinary 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, any Class C Warrants or options cause a large number of the Ordinary
Shares underlying such securities to be sold in the market, such sales could
have an adverse effect on the market price for the Ordinary Shares. See
"Shares Eligible for Future Sale."

SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS. The Company is a Cayman
Islands company and certain of its officers and directors are residents of
various jurisdictions outside the United States. All or a substantial portion
of the assets of such officers and directors and the Company, at any one time,
are or may be located in jurisdictions outside the United States. Although the
Company has irrevocably agreed that it may be served with process in New York,
New York with respect to actions arising out of or in connection with
violations of United States federal securities laws relating to offers and
sales of Ordinary Shares made hereby, it could be difficult for investors to
effect service of process within the United States on directors and officers
of the Company who reside outside the United States or to recover against the
Company or such directors and officers on judgments of United States courts
predicated upon the civil liability provisions of the United States federal
securities laws.

NO PRIOR PUBLIC MARKET FOR ORDINARY SHARES. Prior to the Offering, there has
been no public market for the Ordinary Shares and there can be no assurance
that an active trading market will develop after the Offering or that the
Ordinary Shares offered hereby will trade at or above the initial public
offering price. The initial public offering price may not be indicative of the
market price for the Ordinary Shares after the Offering. Application has been
made to include the Ordinary Shares being offered hereby for quotation in the
Nasdaq National Market.

DILUTION. Purchasers of Ordinary Shares in the Offering will experience
immediate and substantial dilution of approximately $1.31 per share (based
upon the initial public offering price of $15.00 per Ordinary Share) in the
net tangible book value of their Ordinary Shares from the initial public
offering price. See "Dilution."

YEAR 2000 RISK. Many existing computer programs use only two digits to
identify a year in the date field. These programs, if not corrected, could
fail or create erroneous results by or at the year 2000. This "Year 2000"
issue is believed to affect virtually all companies and organizations,
including the Company. The Company has acquired certain computer hardware and
software equipment from Scottish Annuity. Because most of the computer
hardware and software purchased from Scottish Annuity is less than two years
old, the Company believes that its exposure with respect to its own computer
systems to Year 2000-related problems is not significant. The Company has
contracted to upgrade the principal accounting software acquired from Scottish
Annuity from a DOS-based version which is not Year 2000 compliant to a Windows
NT version which is certified Year 2000 compliant by the software vendor. The
Company estimates that the total cost to upgrade this system will not exceed
$50,000 and will be completed and tested by the end of 1998. In addition, the
Company relies significantly on a number of third party service providers,
such as Westport, IRM Cayman, Milliman & Robertson, PIMCO, General Re and
Prudential Investment, each of whose respective systems the Company has
confirmed, or is in the process of confirming, are Year 2000 compliant. The
Company also intends to require that any new investment managers or other
third party service providers be or become Year 2000 compliant in a timely
manner. There can be no assurance, however, that the Company's operations will
not experience disruptions due to the failure of third parties, including
reinsurance counterparties, to become fully Year 2000 compliant in a timely
manner or that such failure will not otherwise have an adverse effect on the
Company's business, results of operations or financial condition. In the event
the Company's plans with respect to its Year 2000 readiness fail to protect
its operations from disruptions or its business, results of operations or
financial condition from adverse effect, the Company has no contingency plan
other than the replacement of existing third party service providers which are
not Year 2000 compliant with comparable third party service providers who are
Year 2000 compliant.

20
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the Ordinary Shares to be sold in the
Offering are estimated to be approximately $233.5 million ($268.9 million if
the Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions, certain advisory fees and other
estimated expenses related to the Offering. The net proceeds from the Direct
Sales will be approximately $20.0 million. The purpose of the Offering and the
Direct Sales is to enable the Company to implement its business plan to enter
into the variable life insurance and fixed annuity and other reinsurance
businesses. Substantially all of the net proceeds of the Offering and the
Direct Sales will be contributed to Scottish Insurance to support its
insurance and reinsurance activities and will be invested in accordance with
the Company's Investment Guidelines. See "Business--Investment Portfolio--
Investment Guidelines." Until so invested, the net proceeds will be invested
in short-term, investment grade, interest-bearing securities.

DIVIDEND POLICY

The Board of Directors of Holdings intends to declare and pay out of
earnings a quarterly dividend of $0.05 per Ordinary Share beginning at the end
of the first full fiscal quarter following consummation of the Offering. The
Board, however, has not declared such dividend or any other future dividend.
The declaration and payment of dividends by Holdings will be at the discretion
of its Board of Directors and will depend upon Holdings' results of operations
and cash flows, the financial position and capital requirements of Scottish
Insurance, general business conditions, legal, tax, regulatory and any
contractual restrictions on the payment of dividends and other factors the
Board of Directors deems relevant. Holdings' ability to pay dividends depends
on the ability of Scottish Insurance to pay dividends to Holdings. While
Holdings is not itself subject to any significant legal prohibitions on the
payment of dividends, Scottish Insurance is subject to Cayman Islands
regulatory constraints which affect its ability to pay dividends to Holdings.
Accordingly, there is no assurance that dividends will be declared or paid in
the future. See "Risk Factors--Holding Company Structure and Dividends,"
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations" and "Business--Regulation--Cayman Islands."

21
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of September 30, 1998 (i) on a historical basis, (ii) as adjusted
to give effect to the Pre-Offering Equity Adjustment as defined under "Certain
Relationships and Related Party Transactions--Pre-Offering Equity Adjustment"
and (iii) as further adjusted for the Offering and the Direct Sales and the
receipt of the estimated net proceeds therefrom. See "Use of Proceeds."

<TABLE>
<CAPTION>
AS FURTHER ADJUSTED
AS ADJUSTED FOR THE
FOR OFFERING
PRE-OFFERING AND THE
HISTORICAL EQUITY ADJUSTMENT(1) DIRECT SALES(2)
---------- -------------------- -------------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Preferred Shares, par
value $0.01 per share
(50,000,000 shares
authorized; no shares
outstanding historical,
as adjusted and as
further adjusted)...... $ -- $ -- $ --
Ordinary Shares, par
value $0.01 per share
(100,000,000 shares
authorized; 1,500,000
shares outstanding
historical; 400,000
outstanding as
adjusted; 18,568,440
shares outstanding as
further adjusted) (3).. 15 4 186
Additional paid-in
capital................ 887 898 254,191
Accumulated deficit..... (115) (115) (115)
----- ----- --------
Total shareholders'
equity............... 787 787 254,262
----- ----- --------
Total capitalization.... $ 787 $ 787 $254,262
===== ===== ========
</TABLE>
- --------

(1) On October 22, 1998, the Company redeemed 1,100,000 Ordinary Shares of the
1,500,000 Ordinary Shares issued upon formation of the Company.
Shareholders participating in the redemption exchanged such shares for
either Class A Warrants (exercisable for an aggregate of 900,000 Ordinary
Shares) or nominal consideration. See "Certain Relationships and Related
Party Transactions--Pre-Offering Equity Adjustment."

(2) Reflects 18,168,440 Ordinary Shares sold in the Offering and the Direct
Sales and the receipt of the estimated net proceeds therefrom.

(3) Ordinary Shares outstanding as further adjusted for the Offering and the
Direct Sales excludes 2,850,000 Ordinary Shares issuable upon exercise of
Class A Warrants, 200,000 Ordinary Shares issuable upon exercise of Class
B Warrants and 1,070,000 Ordinary Shares issuable upon exercise of options
granted to management and to be granted to non-employee Directors and a
consultant of the Company upon consummation of the Offering and the Direct
Sales and 530,000 Ordinary Shares reserved for issuance upon exercise of
options that may be granted in the future pursuant to the Stock Option
Plan. In addition, Ordinary Shares outstanding after the Offering and the
Direct Sales excludes up to 750,000 Ordinary Shares issuable upon exercise
of Class C Warrants, if and to the extent such warrants are issued
pursuant to the Company's agreement with Westport. See "Business--
Marketing" and "Description of Shares--Warrants--Class C Warrants." If the
Underwriters' over-allotment option is exercised in full, upon
consummation of the Offering and the Direct Sales, 21,080,940 Ordinary
Shares will be outstanding and the number of Ordinary Shares issuable upon
exercise of options granted to management and to be granted to non-
employee Directors and a consultant of the Company upon consummation of
the Offering and the Direct Sales will increase to 1,220,000 Ordinary
Shares. The number of Ordinary Shares issuable upon exercise of the Class
A Warrants, the Class B Warrants and the Class C 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 Shares--Warrants" and "--
Options," and "Direct Sales."

22
<PAGE>

DILUTION

Purchasers of the Ordinary Shares offered in the Offering will experience an
immediate and substantial dilution in net tangible book value of their
Ordinary 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 Ordinary Shares (after deducting underwriting discounts and commissions,
certain advisory fees and other estimated expenses related to the Offering)
will be approximately $254.3 million, or approximately $13.69 per outstanding
Ordinary Share. This represents an immediate and substantial dilution in net
tangible book value to investors purchasing Ordinary Shares in the Offering of
approximately $1.31 per Ordinary Share, without taking into account any
Ordinary Shares issuable upon exercise of the Class A Warrants, the Class B
Warrants, any Class C Warrants and options. As of September 30, 1998, the net
tangible book value of the Ordinary Shares before giving effect to the
Offering, the Direct Sales and the Pre-Offering Equity Adjustment was $(.45)
per share. After giving effect to the Pre-Offering Equity Adjustment, the net
tangible book value of the Ordinary Shares decreased to $(1.69) per share.

The following table illustrates the per outstanding Ordinary Share dilution
to investors purchasing Ordinary Shares in the Offering:

<TABLE>
<S> <C> <C>
Initial public offering price................................ $15.00
Net tangible book value as of September 30, 1998 before
giving effect to the Offering, the Direct Sales and the
Pre-Offering Equity Adjustment............................ $ (.45)
Effect of Pre-Offering Equity Adjustment.................... $(1.24)
Net tangible book value as of September 30, 1998 after
giving effect to the Pre-Offering Equity Adjustment....... $(1.69)
Increase in net tangible book value attributable to the sale
of the Ordinary Shares in the Offering and the Direct
Sales(1).................................................. $15.38
Pro forma net tangible book value upon completion of the
Offering, the Direct Sales and the Pre-Offering Equity
Adjustment(1)............................................... 13.69
------
Dilution to new investors in the Offering.................... $ 1.31
======
</TABLE>
- --------

(1) Pro forma "net tangible book value" per outstanding Ordinary Share
represents shareholders' equity (less any intangible assets of the
Company) as of September 30, 1998 divided by the number of outstanding
Ordinary Shares, including the Ordinary Shares to be issued in the
Offering and the Direct Sales after giving effect to the Pre-Offering
Equity Adjustment. Ordinary Shares outstanding after the Offering and the
Direct Sales excludes 2,850,000 Ordinary Shares issuable upon exercise of
Class A Warrants, 200,000 Ordinary Shares issuable upon exercise of the
Class B Warrants, 1,070,000 Ordinary Shares issuable upon exercise of
options granted to management and to be granted to non-employee Directors
and a consultant of the Company upon consummation of the Offering
(1,220,000 Ordinary Shares if the Underwriters' over-allotment option is
exercised in full) and 530,000 Ordinary Shares reserved for issuance upon
exercise of options that may be granted in the future pursuant to the
Stock Option Plan. In addition, Ordinary Shares outstanding after the
Offering and the Direct Sales excludes 750,000 Ordinary Shares issuable
upon exercise of Class C Warrants, if and to the extent such warrants are
issued pursuant to the Company's agreement with Westport. See "Business--
Marketing" and "Description of Shares--Warrants--Class C Warrants." The
number of Ordinary Shares issuable upon exercise of the Class A Warrants,
the Class B Warrants and Class C Warrants will not change if the
Underwriters' over-allotment option is exercised. The Class A Warrants,
Class B Warrants, and the options are not currently exercisable. The
exercise of Class A Warrants, Class B Warrants and the options granted to
management and to be granted to non-employee Directors and a consultant of
the Company upon consummation of the Offering and the Direct Sales are not
expected to be dilutive to purchasers of Ordinary Shares in the Offering
because the exercise price per share of such warrants and options is equal
to the initial public offering price. See "Management--Stock Option Plan,"
"Description of Shares--Warrants" and "--Options," and "Direct Sales."

23
<PAGE>

The following table summarizes the number of Ordinary Shares purchased from
the Company, the total consideration paid and the average price per share paid
in connection with Ordinary Shares issued prior to and in connection with the
Offering and the Direct Sales:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ----------------------- PER
AMOUNT PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Outstanding shares prior
to the Offering and
Direct Sales(1).......... 400,000 2.2% $ 500,000(2) 0.2% $ 1.25
Direct Sales.............. 1,418,440 7.6 20,000,000(3) 7.3 14.10(4)
Offering.................. 16,750,000 90.2 251,250,000 92.5 15.00
---------- ----- ------------ ----- ------
Total..................... 18,568,440 100.0% $271,750,000 100.0% $14.64
========== ===== ============ ===== ======
</TABLE>
- --------
(1) The Company issued 1,500,000 Ordinary Shares to Scottish Holdings, Ltd., a
Cayman Islands company ("SHL"), upon formation of the Company. Effective
June 24, 1998, SHL distributed such shares to its shareholders. On October
22, 1998, the Company redeemed 1,100,000 Ordinary Shares with shareholders
participating in the redemption exchanging such shares for either Class A
Warrants (exercisable for an aggregate of 900,000 Ordinary Shares) or
nominal consideration. See "Certain Relationships and Related Party
Transactions--Pre-Offering Equity Adjustment."
(2) Represents amount paid by SHL for Ordinary Shares of the Company issued
upon its formation but excludes $100,000 paid in the aggregate by Michael
C. French, Michelle L. Boucher and certain companies wholly owned by
certain shareholders of SHL for the 1,550,000 Class A Warrants issued in
connection with the formation of the Company and $302,000 paid in the
aggregate by The Roman Arch Fund L.P. and The Roman Arch Fund II L.P. for
the Class B Warrants.
(3) Represents amount paid in the aggregate for Ordinary Shares and Class A
Warrants in the Direct Sales.
(4) The average price per share is based on the number of Ordinary Shares
purchased in the Direct Sales and does not take into account the Ordinary
Shares underlying the Class A Warrants acquired in the Direct Sales.

24
<PAGE>

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

GENERAL

Holdings is an insurance holding company, the principal asset of which is
all of the shares in the capital of Scottish Insurance. Holdings and Scottish
Insurance were formed on May 12, 1998 and June 3, 1998, respectively, under
the laws of the Cayman Islands and neither has any operating history. The
Company will commence operations as soon as practicable after the Offering.
The Company intends principally to issue customized variable life insurance
policies to high net worth qualified purchasers and reinsure in-force blocks
of fixed annuity and similar contracts issued by other insurance companies. In
addition to its primary focus, the Company may reinsure in-force blocks of
other types of annuity contracts and life insurance products on an
opportunistic basis. The Company's fiscal year will end on December 31. The
Company's financial statements will be prepared in accordance with GAAP.

The cash value of each of the Company's variable life insurance policies
will be held in separate accounts managed by private independent money
managers for the respective policyholders. The Company will not provide any
investment management or advisory services. Policyholders may elect to remit
premiums to their separate account from time to time, subject to underwriting
limits and a minimum initial deposit of $1.0 million for single premium
policies or $500,000 for multiple premium policies. The cash values and the
death benefits with respect to each variable life insurance policy will
fluctuate according to the investment experience of the assets in their
respective separate account. In accordance with GAAP, variable life premiums
received by Scottish Insurance will be recorded as an increase in liabilities
for policyholders' separate accounts. The assets in the policyholders'
separate accounts are not part of the Company's general funds and are not
available to meet the general obligations of the Company. See "Business--
Regulation--Cayman Islands--Separate Accounts." The Company's reinsurance of
various types of annuity contracts and life insurance products will typically
be on a coinsurance or modified coinsurance basis, with the Company assuming
all of the liability for such contracts. However, the Company may, in certain
circumstances, require the ceding company to retain a portion of the risk
related to such contracts. Such retention by the ceding company is not
expected to exceed 10% of such risk.

Substantially all of the Company's operating revenue related to its variable
life insurance policies are expected to be derived from separate account fees
attributable to its variable life insurance. These fees, typically called
"Mortality and Expense" ("M&E") fees, are charged quarterly in advance based
on a percentage of the cash values in the separate accounts. The Company may
also charge relatively nominal set-up and supervisory fees with respect to its
variable life insurance policies. In addition, a policyholder may be charged a
fee upon a partial or total surrender of the policy. With respect to the
Company's reinsurance business, the primary source of operating profit (loss)
will be the net investment income from reserve accounts acquired from ceding
companies after deducting the interest credited to the policyholder account
values related to the underlying annuity or similar contracts and interest
rate-sensitive life insurance products. To the extent the Company reinsures
life insurance on a yearly renewable term basis, the primary source of
operating profit (loss) will be the excess of the premium income associated
with such life insurance over the claims paid with respect to such life
insurance.

In addition, the Company has entered into the Scottish Annuity Agreement
with Scottish Annuity under which the Company has agreed to provide certain
insurance administration, accounting and other services to Scottish Annuity in
return for a fee based on the value of the separate account assets of Scottish
Annuity and the referral of potential clients to Scottish Insurance. Based on
the separate account assets of Scottish Annuity at June 30, 1998, the annual
amount of such fee (assuming a twelve month period ending on such date) would
have been $871,580. See "Business--Scottish Annuity Agreement."

The Company's main operating costs will consist of employee related
expenses, professional and third party fees and travel and promotional
expenditures. Management will seek to limit personnel and other general and
administrative expenses by retaining third party service providers, including
IRM Cayman, Milliman & Robertson, PIMCO, General Re and Prudential Investment.
The Company will not employ commissioned sales or

25
<PAGE>

marketing personnel, but will rely primarily on referrals from, in the case of
its variable life insurance business, financial advisors, investment managers,
private bankers, attorneys and other intermediaries in the United States and,
in the case of its reinsurance business, international insurance brokers,
insurance consultants, members of the actuarial profession and senior
insurance company executives with whom the Company's Senior Vice President and
Chief Insurance Officer has a relationship. None of these intermediaries or
other referral sources may receive any commission or other remuneration from
the Company for activities undertaken in the U.S. or any other jurisdiction
that imposes restrictions on the Company's activities similar to those which
the Company is subject to in the U.S.

For the period from June 9, 1998 through September 30, 1998, the Company
received interest income of $5,850, which consisted of interest earned on the
Company's cash on deposit. During such period, the Company incurred expenses
of $120,731, which consisted primarily of salaries and benefits, professional
fees related to the organization of Scottish Insurance and expenses related to
the Company's recruitment of Henryk Sulikowski. Through the end of September
30, 1998, the Company recorded a net loss of $114,881, which also represented
the Company's accumulated deficit at the end of such period.

LIQUIDITY AND CAPITAL RESOURCES

Holdings is an insurance holding company which conducts its principal
operations through its subsidiary, Scottish Insurance. As a holding company,
Holdings' assets consist primarily of the capital stock of Scottish Insurance.
Accordingly, Holdings will rely primarily on cash dividends and other
permissible payments from Scottish Insurance to pay its operating expenses and
dividends. The Board of Directors of Holdings intends to declare and pay out
of earnings a quarterly dividend of $0.05 per Ordinary Share beginning at the
end of the first fiscal quarter following the consummation of the Offering. It
will be Holdings' policy to retain all earnings in excess of such quarterly
dividend to support the growth of its business. If Holdings' retained earnings
do not support the payment of such quarterly dividend, the dividend may be
reduced or eliminated. If Holdings 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 Ordinary Shares. The declaration and
payment of dividends by Holdings will be at the discretion of its Board of
Directors and will depend upon Holdings' results of operations and cash flows,
the financial condition and capital requirements of Scottish Insurance,
general business conditions, legal, tax, regulatory and any contractual
restrictions on the payment of dividends and other factors the Board of
Directors deems relevant. Although Holdings is not itself subject to any
significant legal prohibitions on the payment of dividends, Scottish Insurance
is subject to Cayman Islands regulatory constraints which affect its ability
to pay dividends to Holdings, including a minimum net worth requirement.
Accordingly, there is no assurance that dividends will be declared or paid in
the future. See "Dividend Policy" and "Business--Regulation--Cayman Islands."

The principal sources of funds for Scottish Insurance's operations are
expected to be substantially all of the net proceeds of the Offering and the
Direct Sales, M&E and certain other policy fees, premium income, net
investment income and fees received from Scottish Annuity under the Scottish
Annuity Agreement. These funds are expected to be used primarily to pay policy
benefits and operating expenses, and, subject to Cayman Islands law, to make
dividend payments to Holdings. The Company believes that the net proceeds of
the Offering will be sufficient to fund its planned growth and operating
activities for the next several years.

Policy reserves with respect to variable life insurance policies will be
calculated in an effort to meet the Company's estimated future life insurance
death benefit obligations. Policy reserves with respect to the Company's
reinsurance business will be primarily based on historical experience and
information provided by ceding companies together with the Company's estimate
of future experience with respect to the risks being reinsured.

The principal risk associated with the Company's variable life insurance
policies will be mortality risk. Mortality risk tends to be more stable when
spread across large numbers of insureds. The Company's variable life insurance
policies are expected to be placed with a relatively small number of high net
worth policyholders

26
<PAGE>

and to provide substantial death benefits given expected initial premiums of
$1.0 million for single premium policies and $500,000 for multiple premium
policies. As a consequence, the Company's associated mortality risk exposure
is likely to be greater in the aggregate, and its probability of loss less
predictable, than that of an insurer with a broader risk pool. As a result,
the Company intends to allocate a significant portion of its capital, in
addition to any policy reserves required under GAAP and any additional Cayman
Islands regulatory requirements, to cover possible volatility in mortality
experience. Furthermore, the Company intends to reinsure a significant portion
of the mortality risk associated with its variable life insurance business
with the objective of limiting the net amount at risk to $500,000 per insured.
The principal risk associated with the Company's fixed annuity reinsurance
activities is investment risk. Specifically, the Company is subject to (i)
asset value risk, which is the risk that invested assets supporting the
reinsured business will decrease in value, (ii) reinvestment risk, which is
the risk that interest rates will decline and funds reinvested will earn less
than expected, and (iii) disintermediation risk, which is the risk that the
Company may have to sell assets at a loss to provide for policyholder
withdrawals. The Company is also subject to mortality risk with respect to the
life insurance and annuity contracts it reinsures, although the Company's
exposure to such risk is expected to be more actuarially determinable in light
of the broader risk pool underlying the blocks of business expected to be
reinsured. The Company will also be subject to surrender risk with respect to
all of its insurance and reinsurance products. 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,
underwriting standards and reputation and financial strength of the cedent.
Pricing of the Company's reinsurance products will be based on the Company's
actuarial models which will incorporate a number of factors, including
assumptions for mortality and surrender risks, expenses, demographics and
investment returns. In addition, the Company will conduct a financial due
diligence review in an effort to minimize the risk that the cedent will be
unable to pay future amounts due to the Company because of financial
difficulties.

The development of policy reserves for the Company's variable life insurance
and reinsurance products will require management to make estimates and
assumptions regarding mortality, lapse, surrender, expense and investment
experience. 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. 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, a premium deficiency reserve
will be established by a charge to income.

The Company does not currently have any material commitments for any capital
expenditures over the next twelve months.

As of September 30, 1998, the Company had received an aggregate of $902,000
in connection with the issuance of 1,500,000 Ordinary Shares, Class A Warrants
to purchase an aggregate of 1,550,000 Ordinary Shares and Class B Warrants to
purchase an aggregate of 200,000 Ordinary Shares. As of September 30, 1998,
the Company had recorded deferred offering costs of $1,461,553. These costs
include $168,783 for amounts payable to Scottish Annuity for advances for
travel and other general costs. Cash used for operating activities through
September 30, 1998 amounted to $590,827, consisting principally of $1,461,553
in deferred offering costs and other assets of $158,593, offset in part by
such amounts advanced by Scottish Annuity and accounts payable and accrued
expenses of $975,417. Subsequent to September 30, 1998, the Company redeemed
1,100,000 Ordinary Shares of the 1,500,000 Ordinary Shares issued in
connection with the formation of the Company. Shareholders participating in
the redemption exchanged such shares for either Class A Warrants (exercisable
for an aggregate of 900,000 Ordinary Shares) or nominal consideration. See
"Certain Relationships and Related Party Transactions--Pre-Offering Equity
Adjustment."

The Company expects that the net proceeds of the Offering and the Direct
Sales will permit it to begin implementation of its business plan and,
together with M&E and certain other policy fees, premium income, net
investment income and fees received from Scottish Annuity under the Scottish
Annuity Agreement, will provide sufficient sources of liquidity and capital to
meet the Company's anticipated needs in the short-term and for the

27
<PAGE>

next several years. The Company does not presently anticipate that it will
incur any material indebtedness in the ordinary course of its business other
than possibly obtaining letters of credit in connection with its reinsurance
business. However, no assurance can be given that the Company will not be
required to incur indebtedness in order to implement its business strategy.

IMPACT OF INFLATION

The effects of inflation will be implicitly considered in pricing the
Company's products and in estimating the Company's underwriting reserves.

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

Under current Cayman Islands law, neither Holdings nor Scottish Insurance is
expected to be obligated to pay any taxes in the Cayman Islands on their
income. Holdings and Scottish Insurance have received an undertaking from the
Governor-in-Council of the Cayman Islands pursuant to the provisions of the
Tax Concessions Law, as amended (1995 Revision), that until the year 2018 (i)
no subsequently enacted law imposing any tax on profits, income, gains or
appreciation shall apply to Holdings or Scottish Insurance, and (ii) no such
tax and no tax in the nature of an estate duty or an inheritance tax shall be
payable on any shares, debentures or other obligations of Holdings or Scottish
Insurance. Under current law no tax will be payable on the transfer or other
disposition of the shares of Holdings. The Cayman Islands currently impose
stamp duties on certain categories of documents. However, the current
operations of Holdings do not involve the payment of stamp duties in any
material amount. The Cayman Islands currently impose an annual corporate fee
upon all exempted companies. At current rates, Holdings expects to pay a
government fee of approximately $700 per annum and Scottish Insurance expects
to pay fees (including its government fee and insurance license fee) of
approximately $6,500 per annum. Because Holdings and Scottish Insurance are
not expected to conduct business in the United States or any other
jurisdiction except the Cayman Islands, it is not expected that Holdings or
Scottish Insurance will be subject to United States taxes or taxes in other
jurisdictions outside the U.S. See "Risk Factors--Income Tax Risk."

The United States 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 Scottish Insurance is
currently 1% of its insurance and reinsurance premiums. This excise tax is
payable by the contract owner, although the Company will often file the tax
form. In addition, Holdings may be subject to withholding tax on certain
investment income from United States sources, but Holdings does not expect to
incur such withholding taxes in any material amount. See "Material Tax
Consequences."

28
<PAGE>

YEAR 2000 RISK

The Company has acquired certain computer hardware and software equipment
from Scottish Annuity. Because most of the Company's computer hardware and
software purchased from Scottish Annuity is less than two years old, the
Company believes that its exposure with respect to its own computer systems to
Year 2000-related problems is not significant. The Company has contracted to
upgrade its fund accounting software from a DOS-based version which is not
Year 2000 compliant to a Windows NT version which is certified Year 2000
compliant by the software vendor. The Company estimates that the total cost to
upgrade its system will not exceed $50,000 and will be completed and tested by
the end of 1998. In addition, the Company relies significantly on a number of
third party service providers, such as Westport, IRM Cayman, Milliman &
Robertson, PIMCO, General Re and Prudential Investment, each of whose
respective systems the Company has confirmed, or is in the process of
confirming, are Year 2000 compliant. The Company also intends to require that
any new investment managers or other third party service providers be or
become Year 2000 compliant in a timely manner. There can be no assurance,
however, that the Company's operations will not experience disruptions due to
the failure of third parties, including reinsurance counterparties, to become
fully Year 2000 compliant in a timely manner or that such failure will not
otherwise have an adverse effect on the Company's business, results of
operations or financial condition. In the event the Company's plans with
respect to its Year 2000 readiness fail to protect its operations from
disruptions or its business, results of operations or financial condition from
adverse effect, the Company has no contingency plan other than the replacement
of existing third party service providers which are not Year 2000 compliant
with comparable third party service providers who are Year 2000 compliant.

CHANGES IN ACCOUNTING STANDARDS

The Financial Accounting Standards Board's Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued in June 1998
and requires adoption no later than fiscal quarters or fiscal years beginning
after June 15, 1999. The new standard establishes accounting and reporting
standards for derivative instruments. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions
are met, a derivative may be specifically designated as (a) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security, or a foreign-currency-denominated
forecasted transaction. The Company has not yet completed its evaluation of
the effect this standard will have on the Company.

29
<PAGE>

BUSINESS

Holdings and Scottish Insurance were recently formed as offshore companies
principally to provide customized variable life insurance products to high net
worth individuals and families who are or may become U.S. taxpayers and
provide reinsurance of in-force blocks of fixed annuities and similar
contracts to insurers no longer actively offering such products or otherwise
seeking to more efficiently manage capital allocated to existing businesses.
In addition to its primary focus, the Company may reinsure in-force blocks of
other types of annuities and life insurance products. The Company believes
that the favorable regulatory environment in which it will operate, its
planned low cost operating strategy and the absence of a corporate level tax
in the Cayman Islands will enable it to become a leading offshore provider of
variable life insurance and fixed annuity reinsurance products in target
markets.

Through its variable life insurance business, the Company seeks to respond
to what it believes are increasing demands of high net worth individuals and
families for customized life insurance products that can be utilized as part
of sophisticated estate planning strategies. For the Company, high net worth
means, at a minimum, individuals or family trusts who qualify as "qualified
purchasers" within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"). The Company's variable life insurance business will,
however, generally focus on individuals and families with a liquid net worth
in excess of $10.0 million. Variable life insurance offers both a specified
death benefit as well as a cash value component which is placed in a separate
account and invested on behalf of the policyholder by a money manager. As a
Cayman Islands insurance company offering variable life insurance policies to
high net worth qualified purchasers, the Company has the flexibility to offer
policies that permit the use of private independent money managers to manage
the policy's separate account utilizing investment strategies not typically
available in variable life insurance policies issued to the general public.
The Company will also seek to leverage its expertise with respect to variable
life insurance products by offering structured life insurance products, such
as corporate-owned life insurance ("COLI"), which target the deferred
compensation market.

The Company's reinsurance business seeks to focus on what the Company
believes are meaningful opportunities to reinsure lines of business that are
subject to significant reserve or risk capital requirements under rating
agency requirements and applicable accounting standards. The Company believes
that, in response to heightened regulatory and rating agency scrutiny,
insurers are increasingly seeking reinsurance of in-force blocks of annuity
and life business as a means to improve earnings or risk-based capital or
other financial ratios. The Company's reinsurance business will target
insurance companies that have discontinued writing such business or that seek
relief from the reserve and capital requirements associated with such
business. The Company's reinsurance activities will focus principally on
opportunities in the U.S., although the Company also expects to target
opportunities in the United Kingdom, Western Europe, Canada and Australia.

The principal focus of the Company's reinsurance activities will be on
blocks of existing fixed annuity contracts such as structured settlements,
single premium deferred annuities, immediate annuities and similar contracts.
The Company intends to focus on the reinsurance of these annuities because it
believes that the reserve and capital requirements associated with fixed
annuities has made reinsurance of such annuities an attractive option for
issuers and reinsurers of these products and because the market for such
reinsurance is not currently well-developed. In addition, the Company expects
that it may also reinsure various forms of life insurance products, including
universal, variable and whole life insurance, and variable annuity contracts
if and when attractive opportunities become available. The Company believes
that reinsurance of these products will enable it to more effectively
capitalize on potential relationships with other insurers and reinsurers.

BUSINESS STRATEGY

30
<PAGE>

Leverage Management Expertise

The Company was organized by the management and shareholders of Scottish
Annuity. In 1994, the Company's Chief Executive Offer and President, Michael
C. French founded Scottish Annuity, a privately held Cayman Islands insurance
company, to provide to high net worth individuals and families variable
annuity contracts that have the same cash value management features, and same
target market, as the Company's variable life insurance policies. In addition,
Mr. French was a founder of Maverick, an investment management company
organized in 1993 with approximately $2.5 billion of assets under management
as of October 1, 1998. Since 1995, Michelle L. Boucher, the Company's Senior
Vice President, Chief Financial Officer and Secretary, has been Manager of
Finance and Administration for Scottish Annuity. The Company intends to draw
on Mr. French's and Ms. Boucher's experience in developing Scottish Annuity's
variable annuity products and business to develop the Company's variable life
insurance products and business. Also, the Company intends to build on the
relationships with potential clients as well as with financial advisors,
investment managers, private bankers, attorneys and other intermediaries and
referral sources that Mr. French and Ms. Boucher have developed with Scottish
Annuity. Henryk Sulikowski, the Company's Senior Vice President and Chief
Insurance Officer, has over 17 years experience in the insurance and
reinsurance industry. Prior to joining the Company, Mr. Sulikowski was a
Director of Swiss Re New Markets, responsible for developing, structuring and
marketing annuity and life reinsurance transactions. Prior to his tenure with
Swiss Re New Markets, Mr. Sulikowski was Vice President in charge of annuity
and life financial reinsurance activities at Cologne Re. Mr. Sulikowski has
been an associate of the Society of Actuaries since 1986 and a member of the
American Academy of Actuaries since 1987. The Company intends to draw on Mr.
Sulikowski's experience and relationships with international insurance
brokers, insurance consultants, members of the actuarial profession and senior
insurance company executives to implement its reinsurance business plan. See
"Business--Management--Executive Officers and Directors."

Utilize Third Party Service Providers

The Company believes that prospective purchasers of variable life insurance
products are price-sensitive and that insurers seeking reinsurance focus
principally on price in selecting a reinsurer. As a result, the Company is
pursuing a low cost operating strategy. In order to minimize its initial
investment in systems and personnel and to create and maintain a low cost
operating structure, the Company has entered into or expects to enter into
agreements with a number of third party service providers to provide key
services to the Company. The Company has retained IRM Cayman, a member of
IRMG, an affiliate of Swiss Reinsurance, to act as the Company's licensed
insurance manager in the Cayman Islands and to provide to the Company certain
additional administrative services. In management's opinion based on
representations of IRM Cayman, IRMG is the largest independent captive
insurance manager in the world today, operating out of 20 offices in North
America, Europe, Australia, Africa and Asia. In addition, the Company has
retained Milliman & Robertson, a leading actuarial consulting firm, to provide
from time to time certain actuarial services including pricing and reinsurance
analysis. The Company has also retained PIMCO, General Re and Prudential
Investment to manage the Company's investment portfolio consistent with its
Investment Guidelines. The Company has also retained Westport, a developer and
administrator of insurance products for international insurance brokers,
insurance companies and corporations and an affiliate of Westport Worldwide,
to provide non-exclusive distribution services for its variable life insurance
business, as well as certain related administrative services from time to
time, including monitoring tax law compliance and preparing policy
illustrations. See "Business--Administration and Consulting Services," and "--
Investment Portfolio--Investment Managers."

Build on Significant Capital Base

31
<PAGE>

adequacy, unrealized losses in its investment portfolio and uncollectible
reinsurance. In part because of the Company's expected capitalization
following the Offering, Duff & Phelps has assigned Scottish Insurance a
preliminary claims-paying ability rating of "A" and A.M. Best has assigned
Scottish Insurance a preliminary Best Rating of "A-" (Excellent). Duff &
Phelps assigns an "A" rating to companies that it characterizes as having, in
its opinion, high claims-paying ability, average protection factors and an
expectation of variability in risk over time due to economic or underwriting
conditions. 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. The ratings assigned to Scottish
Insurance by Duff & Phelps and A.M. Best are contingent on the Company raising
gross proceeds of at least $200.0 million in the Offering. Each rating
represents the respective rating agency's opinion of the Company's ability to
meet its obligations to its policyholders.

Apply Prudent Risk Management Policy

The principal risk associated with the Company's variable life insurance
policies is mortality risk. The death benefit provided to a policyholder by a
variable life insurance policy issued by the Company will vary based on the
investment return achieved on the underlying separate account by the private
independent money manager managing the account. The difference between the
value of the assets underlying a variable life insurance policy and the
policy's stated death benefit, known as the "net amount at risk," represents a
general liability of the Company. In accordance with GAAP and any additional
Cayman Islands regulatory requirements, once the Company begins to issue
variable life insurance policies, the Company will be required to establish
and record policy reserves designed to meet the Company's estimated future
life insurance death benefit obligations. Mortality risk tends to be more
stable when spread across large numbers of insureds. The Company's variable
life insurance policies are expected to be placed with a relatively small
number of high net worth policyholders and provide for substantial death
benefits given expected initial premiums of at least $1.0 million for single
premium policies and $500,000 for multiple premium policies. As a consequence,
the Company's associated mortality risk exposure is likely to be greater in
the aggregate, and its probability of loss less predictable, than that of an
insurer with a broader risk pool. As a result, the Company intends to allocate
a significant portion of its capital, in addition to any policy reserves
required under GAAP and any additional Cayman Islands regulatory requirements,
to cover possible volatility in mortality experience. The Company has adopted
Underwriting Guidelines with the objective of controlling, among other things,
the Company's mortality risk under its variable life insurance policies. The
Company's current Underwriting Guidelines limit the maximum aggregate net
amount at risk the Company will initially assume on any one life to $500,000.
In order to comply with this guideline, the Company intends to reinsure any
liability for amounts in excess of $500,000 per insured.

The principal risk associated with the Company's fixed annuity reinsurance
activities is investment risk. Specifically, the Company is subject to (i)
asset value risk, which is the risk that invested assets supporting the
reinsured business will decrease in value, (ii) reinvestment risk, which is
the risk that interest rates will decline and funds reinvested will earn less
than is necessary to match anticipated liabilities, and (iii)
disintermediation risk, which is the risk that the Company may have to sell
assets at a loss to provide for policyholder withdrawals or to satisfy
liabilities not otherwise properly matched. As part of its reinsurance
activities, the Company may also reinsure in-force blocks of life insurance.
The principal risk associated with the reinsurance of life insurance is
mortality risk. The Company believes that one of the benefits to it resulting
from the reinsurance of life insurance policies covering broad pools of
insureds is that the Company's mortality risk will be spread over a larger
insured population than will be the case with respect to its variable life
insurance policies. To the extent the Company reinsures variable annuity
contracts, the principal risk reinsured will be surrender risk, a risk which
is also associated with the reinsurance of fixed annuities and life insurance.
An additional risk associated with the Company's reinsurance business is the
risk that the ceding insurer will be unable to pay amounts due the Company
because of its own financial difficulties. The Company believes this risk can
be mitigated by conducting an appropriate financial due diligence review of
each cedent. In addition, most reinsurance agreements provide for the
reinsurer to set off amounts it owes against amounts it is due, thus lessening
the credit risk.

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Employ Professional Investment Strategy

The Company will seek to generate attractive levels of investment income
through a professionally managed fixed income investment portfolio. The
Company has entered into an investment advisory agreement with PIMCO, which is
anticipated to manage initially approximately 50% of the Company's investment
portfolio. The Company has also retained General Re and Prudential Investment
to each manage a portion of the other 50% of the Company's investment
portfolio. The Company may also retain other investment managers from time to
time. Each Investment Manager will have discretionary authority over the
portion of the Company's investment portfolio allocated to it, subject to the
Investment Guidelines. The Company's investment portfolio (exclusive of assets
transferred and invested as part of any coinsurance transaction) will
principally consist of fixed income securities with a weighted average
investment rating of "A." Consistent with the Investment Guidelines, no more
than 15% of the Company's investment portfolio will be invested in below
investment grade fixed income securities.

INDUSTRY TRENDS

The Company's business plan and product focus has been developed to respond
to certain insurance and reinsurance industry trends affecting both
policyholders and issuers of such policies.

Variable Life Insurance Market

The Company will target high net worth individuals and families for whom
existing variable life insurance products do not meet their estate planning
and investment objectives. The Company believes that such individuals and
families prefer to have the cash values included in the separate accounts
underlying their variable life insurance policies managed by private
independent money managers in order to increase the returns on such cash
values as well as to increase the death benefit provided by such policies,
which is required under the Code to increase in proportion to any increase in
such cash values. To date, the Company has received expressions of interest
from potential customers with respect to its variable life insurance products,
although no formal discussions or negotiations have occurred. See "Risk
Factors--Ability to Implement its Business Plan."

As a Cayman Islands company offering variable life insurance policies to
high net worth qualified purchasers, the Company has the flexibility to offer
policies that permit the use of private independent money managers to manage
the policy's separate accounts utilizing investment strategies not typically
available in variable life policies issued by domestic insurers to the general
public. The Company believes that the demand for such products by its target
market will increase as the "baby boomer" generation continues to age and
places greater emphasis on minimizing the impact of the current 55% federal
estate tax and/or utilizing sophisticated estate planning techniques designed
to maximize wealth transfer from generation to generation. Through the use of
the Company's variable life insurance policies and proper estate planning
(e.g., use of insurance trusts), significant policy benefits can be
transferred from one generation to the next on an estate tax-free basis. In
addition, the death benefit provided by the Company's policies can be used to
pay estate taxes and thereby avoid the necessity of liquidating other family
assets.

Under the Company's operating guidelines, its variable life insurance
policies will be offered only to "qualified purchasers" within the meaning of
the 1940 Act, that is individuals or family trusts that have over $5.0 million
in investments (which is defined under the 1940 Act to include certain
securities, real estate held for investment purposes, commodity interests and
physical commodities held for investment purposes, financial contracts entered
into for investment purposes, cash and cash equivalents). See "Glossary of
Selected Life Insurance and Annuity Terms" for a reference to the complete
definition of "qualified purchaser" under the 1940 Act. Based on an industry
source, the number of U.S. households with a net worth of $5.0 million or more

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totaled approximately 277,000 in 1997. The Company will focus primarily on the
very high end of this market (i.e., individuals and families with liquid net
worth in excess of $10.0 million). The Internal Revenue Service Statistics of
Income Bulletin, dated Winter 1997-1998, estimates that as of 1995 (the latest
year available) approximately 27,000 individuals in the U.S. had a net worth
of between $10.0 million and $20.0 million, and in excess of 12,000 had a net
worth of $20.0 million or more. The combined net worth of these two groups was
estimated at approximately $1.1 trillion.

The Company intends to leverage its expertise with respect to variable life
insurance products by offering structured life insurance products, such as
COLI, which target the deferred compensation market. The Company believes that
the principal purchasers of COLI products are Fortune 1000 companies. Recent
tax legislation has phased out the interest deduction for certain COLI policy
loans through 1998 and eliminates it thereafter. The Company does not expect
to issue any COLI products that would be affected by such legislation.

Fixed Annuity and Other Reinsurance Markets

The Company's reinsurance business will initially focus on reinsuring lines
of business that are subject to significant reserve or risk capital
requirements under rating agency requirements and applicable accounting
standards. The Company believes that insurers seeking reinsurance focus
principally on price and, to a lesser extent, on ratings, perceived financial
strength and quality of service in deciding on a reinsurer. The Company
believes the favorable regulatory environment in which it will operate, its
planned low cost operating structure and the absence of a corporate level tax
in the Cayman Islands will enable the Company to offer competitive pricing for
its reinsurance products.

The Company expects to focus its reinsurance activities on in-force blocks
of existing annuities, such as structured settlements, single premium deferred
annuities, immediate annuities and similar contracts which have been issued by
insurers that are no longer actively writing such contracts or that are
seeking relief from the reserve and capital requirements associated with such
contracts. Fixed annuity contracts often require greater commitments of
capital than other product lines, since the investment risk associated with
such contracts is borne by the insurer, not the contract holder. In developing
its business plan with respect to this niche market, the Company has analyzed
publicly available information relating to the existence and size of such
blocks of fixed annuity and other contracts. The Company has also reviewed
transactions involving blocks of fixed annuities and other contracts which
have already been consummated in order to evaluate the existing market for
such transactions, including their structure and terms. The Company has
engaged in preliminary discussions with reinsurance intermediaries regarding
potential transactions and opportunities that the Company's Senior Vice
President and Chief Insurance Officer is aware of based on his knowledge of
the industry and relationships with industry participants. Through these
efforts the Company has identified a number of potentially attractive fixed
annuity reinsurance opportunities, but no formal discussions or negotiations
regarding such opportunities have occurred to date. See "Risk Factors--Ability
to Implement its Business Plan." For a description of certain reinsurance
opportunities the Company is currently pursuing, see "Products Offered by
Scottish Insurance--Reinsurance of Fixed Annuities and Similar Contracts;
Other Reinsurance Opportunities."

The Company believes that, in the past, reinsurers have not focused on the
fixed annuity segment of the market. The Company believes, however, that there
are a number of trends affecting the insurance industry in the U.S. that are
increasing the demand for reinsurance by insurers in this market segment. The
Company believes the primary trend is heightened regulatory and rating agency
scrutiny on risk-based capital and other financial ratios and increased
interest by insurers seeking to, among other things, manage risk-based capital
and other financial ratios through reinsurance. By shifting mortality,
investment and other risks to reinsurers, direct writing insurers are able to
eliminate the assets and liabilities related to their non-core product lines
from their financial statements and release capital reserves supporting such
non-core product lines in order to pursue new business opportunities. The
Company believes that reinsurance is particularly attractive to publicly-
traded insurers that are focusing on stockholder value, stock performance and
quarterly operating results. The Company believes that one of the most
effective tools for achieving these objectives is reinsurance, particularly
where the

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reinsurer reinsures all of the risks associated with such non-core products.
The other significant trend affecting the U.S. insurance industries is the
demutualization of a significant number of insurance companies and
consolidation of such insurance industries. The Company believes that the
primary motivation to demutualize is to gain access to the capital markets. As
a result, the Company believes that newly demutualized insurance companies
will also focus on stock price and quarterly operating results and therefore
will be likely to seek to reinsure as a means to enhance their stock price and
quarterly operating results. Mutual insurance companies may also seek to
utilize reinsurance in advance of announcing a conversion to a stock company
structure in order to enhance their balance sheet in preparation for an
initial public offering. The Company expects that these trends will also
create opportunities to reinsure blocks of life insurance business or other
forms of annuities, although it believes the reinsurance market for such other
lines of business, particularly life insurance, is currently well developed
and quite competitive. See "Business--Products Offered by Scottish Insurance--
Reinsurance of Fixed Annuities and Other Contracts; Other Reinsurance
Opportunities." The Company's reinsurance activities will focus principally on
opportunities in the U.S., although the Company expects to also target
opportunities in the United Kingdom, Western Europe, Canada and Australia. The
Company believes that the insurance industries in such countries have also
been affected by certain of the trends noted above affecting U.S. insurers.

1998 PLAN OF OPERATION

The Company's plan of operation for the remainder of fiscal 1998 is to begin
full-scale implementation of its business plan, including establishing its
variable life insurance business and pursuing transactions principally
involving the reinsurance of fixed annuities. In addition to its primary
focus, the Company may also pursue from time to time transactions involving
the reinsurance of other types of annuity contracts and life insurance
products.

The Company believes that the net proceeds of the Offering and the Direct
Sales will be sufficient to satisfy its cash requirements for the next several
years and that, at a minimum, it will not be necessary during the six months
immediately following the Offering to raise additional funds to meet the
expenditures required to operate the Company's business. The Company's belief
is based on, among other things, its anticipated low-cost operating structure,
in which most costs are expected to be variable in nature based on the
Company's revenues, and its use principally of referrals rather than a
compensated distribution network to generate sales of its products.

The Company's main operating costs will consist of employee related
expenses, professional and third party fees and travel and promotional
expenditures. Over the next six to nine months, the Company anticipates that
it will hire a financial controller or other financial staff person and an
actuary as well as one or two additional administrative staff persons.

PRODUCTS OFFERED BY SCOTTISH INSURANCE

Variable Life Insurance

Variable life insurance is a "separate account" product under which the net
premiums paid, after deduction of expenses, including the costs of insurance,
are placed for the policyholder in a separate account that is not subject to
claims of the insurance company's general creditors. See "Business--
Regulation--Cayman Islands--Separate Accounts." The cash values of this
separate account are then invested for such policyholder by, in the case of
the Company's policies, a private independent money manager. The Company will
not provide any investment management or advisory services to any
policyholder. Revenues from these policies will consist of amounts assessed
during the period against policyholders' separate account balances for M&E
fees and policy administration and surrender charges. In order to qualify as
life insurance under the Code, a number of complex tests must be met by the
variable life policy. The effect of these tests is to require the death
benefit under the policy to be substantially greater than the cash value. The
difference between the cash value and the death benefit is generally referred
to as the "net amount at risk".

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Under the Code, there are two types of variable life insurance contracts,
referred to as modified endowment contracts and non-modified endowment
contracts. Modified endowment contracts typically involve the payment of a
single premium by the policy owner, while non-modified endowment contracts
typically involve the payment of multiple premiums, generally five or more.
While the death benefit for such contracts may be the same, the initial net
amount at risk for a non-modified endowment contract will be larger than the
initial net amount at risk for a modified endowment contract. For example,
under a variable life insurance policy similar to the policies expected to be
offered by the Company, a modified endowment contract with a single premium of
$10.0 million written for a 60 year old male non-smoker would have an initial
death benefit of approximately $25.3 million and a net amount at risk of
approximately $15.3 million. In contrast, a non-modified endowment contract
with the same initial death benefit would require five annual premiums, four
of approximately $2.1 million each and a final premium of approximately $1.4
million, and would result in an initial net amount at risk of $23.1 million.

The death benefits under both modified endowment contracts and non-modified
endowment contracts are not subject to federal income tax upon receipt by the
beneficiary of such death benefits. While the variable life insurance policy
is in force, the policyholder may borrow against the cash values of a non-
modified endowment contract without triggering adverse tax consequences, but
cannot do so under a modified endowment contract without being deemed to have
received a taxable distribution under the contract. Such a taxable
distribution may also cause the contract to no longer qualify as life
insurance.

Variable life insurance contracts generally have no guaranteed rate of
return on the cash values. The cash value varies based on the investment
results of the separate account managed by the policy's private independent
money manager. Because the Code requires the death benefit under a life
insurance policy to bear a specified minimum ratio to the cash value, the
death benefit under a variable policy may increase if the underlying cash
value increases in order to comply with the Code and maintain the appropriate
net amount at risk. Generally, if the cash value declines, either the policy
owner must pay in additional premiums, or the death benefit must be reduced in
order to maintain the appropriate net amount at risk.

The net amount at risk under either type of policy to be issued by the
Company will represent a general liability of the Company, and the Company
will be required to establish and record policy reserves that will be designed
to meet the Company's estimated future life insurance death benefit
obligations. The Company intends to reinsure a significant portion of its
exposure to each individual policyholder. See "--Underwriting--Variable Life
Insurance."

The Company's variable life insurance policies will be offered and sold only
to qualified purchasers under the 1940 Act, that is individuals or family
trusts that have over $5.0 million in investments (which is defined under the
1940 Act to include certain securities, real estate held for investment
purposes, commodity interests and physical commodities held for investment
purpose, financial contracts entered into for investment purposes, cash and
cash equivalents). See "Glossary of Selected Life Insurance and Annuity Terms"
for a reference to the complete definition of "qualified purchaser" under the
1940 Act.

In addition to offering variable life insurance policies to high net worth
individuals and families, the Company also expects to offer structured life
insurance products which are targeted to the deferred compensation market. In
connection with its arrangements with Westport, the Company expects to offer
variable life insurance to corporate customers in the form of corporate-owned
life insurance ("COLI"), bank-owned life insurance ("BOLI") and trust-owned
life insurance ("TOLI"). These types of policies are primarily expected to be
used in connection with certain deferred compensation and bonus plans for
executive officers and as part of "split-dollar" arrangements in which the
premiums on the life insurance policies are paid in part or in whole by the
employer. The Company may also issue variable life insurance policies in which
a large number of lives of employees are covered under a group policy that is
owned by the employer and used to fund employee benefits. Although certain
COLI products have been affected by recent changes in their tax treatment, the
Company does not intend to offer the types of COLI products that have been the
subject of such tax law changes. See "Risk Factors--Effect of Changes in U.S.
Tax Laws on Variable Life Insurance Sales."

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Reinsurance of Fixed Annuities and Similar Contracts; Other Reinsurance
Opportunities

The Company's reinsurance activities will focus principally on the
reinsurance of the obligations of insurers under fixed annuity contracts. The
Company expects to enter into reinsurance agreements with respect to cedents'
obligations under their individual and group fixed annuity products, including
structured settlements, single premium deferred annuities, immediate annuities
and similar contracts. In addition to its primary focus, the Company may
reinsure other types of annuity and life insurance products, such as
individual life insurance products, including universal, variable and whole
life insurance, and variable annuity contracts if and when attractive
opportunities become available. The Company expects to write reinsurance both
on a direct and brokered basis and to assume risks from both primary insurers
as well as reinsurers.

Reinsurance is 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. It is standard industry practice for primary 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 cedent's further liability.
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.

The Company's business plan contemplates that its reinsurance activities
will focus principally on the reinsurance of the obligations of insurers under
existing fixed annuity contracts. 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. 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 the interest
credited on annuity policies is deferred during the investment accumulation
period. General account annuities, whether in the accumulation or the payout
phase, generally have specified or minimum guaranteed performance levels and
consequently involve a greater commitment of capital than separate account
annuities. This is due to the fact that the investment risk associated with
such policies is borne by the insurer, not the policyholder and therefore is
more frequently reinsured.

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 insurer 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

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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 insurance company from loss on 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 ability to maintain profitability on such
policies.

The Company expects that it will also potentially reinsure various forms of
life insurance products, including universal, variable and whole life
insurance. The primary risk under life insurance policies is mortality risk.
The Company's Underwriting Guidelines limit such risk to $500,000 per insured
and the Company intends to reinsure, or retrocede, any liability for amounts
in excess of $500,000 per insured in order to comply with such guidelines.
Universal life insurance and similar interest rate-sensitive policies provide
life insurance with adjustable rates of return based on applicable interest
rates in effect from time to time. As a consequence, the risks reinsured by
the Company may also include investment risks similar to those for fixed
annuities. As with annuities, all life insurance policies are subject to
surrender risk.

The Company intends to write its reinsurance principally as coinsurance or
modified coinsurance, with the Company assuming all of the liability for the
reinsured contracts. Under modified coinsurance arrangements, the ceding
company retains ownership of the assets supporting the reserves, whereas in
coinsurance ownership of the assets supporting the reserves is transferred to
the reinsurer. The Company may, in certain circumstances, require the ceding
company to retain a portion of the risks related to each such contract (often
called "quota share" or "proportional reinsurance"). Such retention by the
ceding company is not expected to exceed 10% of such risk. Under a coinsurance
or modified coinsurance arrangement, the reinsurer will generally 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.
Current insurance regulations and accounting standards generally require that
all of the risks associated with the ceding company's contracts (other than
those reinsured on a yearly renewable term basis), or the portion thereof
ceded, must be transferred under the terms of a reinsurance contract in order
for the ceding company to take credit for reinsurance in its financial
statements. While reinsured life insurance and annuity contracts are long-term
policies, they may or may not involve long-term investment risk. Management
believes that a significant amount of the fixed annuity contracts and
interest-rate sensitive life insurance policies that the Company intends to
reinsure will provide for an annual (or more frequent) reset of credited
interest rates to market rates. 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.

Life reinsurance may also be written on a yearly renewable term basis. Under
a yearly renewable term structure, the reinsurer assumes only the mortality
risk associated with the underlying policies. Under the yearly renewable term
structure, premium rates are generally adjusted annually based on the age and
underwriting class of the insured and the age of the policy.

The Company executed a binder with a U.S. reinsurer on September 18, 1998 to
provide reinsurance, on a retrocession basis, for approximately 35,000 in-
force universal life insurance policies with an aggregate face value of
approximately $5.0 billion. The reinsurance will be structured on a monthly
renewable term basis with the Company reinsuring only the mortality risk under
such policies, up to $1.5 million per life. The Company intends to retrocede
risks in excess of $500,000 per life; however, the Company does not have any
retrocessional arrangements currently in place. The Company's binder is
conditioned on the consummation of the Offering.

MARKETING

The Company's marketing plan with respect to its variable life insurance
policies is to rely primarily on referrals by financial advisors, investment
managers, private bankers, attorneys and other intermediaries in the

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U.S. to generate clients. In order not to be subject to U.S. state insurance
regulation, none of these intermediaries will represent the Company or receive
any commissions or other remuneration from the Company for activities
undertaken in the U.S. Such financial advisors, investment managers, private
bankers, attorneys and other intermediaries are typically compensated by their
respective clients. In addition, representatives of the Company will
periodically attend conferences of financial advisors, investment managers and
private bankers held outside the U.S., and provide exhibits and receptions and
engage in other informational activities at the events to make potential
intermediaries aware of the Company's variable life products. Company
representatives are also expected to attend events of this type held in the
U.S., but such representatives will not be permitted to engage in any
promotional activities on behalf of the Company. The Company may also be
subject to similar restrictions on its activities in jurisdictions outside the
U.S. The Company will develop operating guidelines designed to facilitate the
Company's compliance with such restrictions as and when the Company's
operations involve any such jurisdictions.

In addition, the Company has entered into the Scottish Annuity Agreement
which provides, among other things, that Scottish Annuity will refer potential
clients to the Company as partial consideration for the Company providing
certain insurance administrative services to Scottish Annuity. The Company
believes that this referral arrangement will be advantageous to the Company
because Scottish Annuity sells customized variable annuities that have the
same cash value management features, and the same target market, as the
Company's variable life insurance policies. Scottish Annuity commenced
operations in 1994. According to information supplied by Scottish Annuity, as
of July 31, 1998, Scottish Annuity had issued 66 variable annuity contracts
which had aggregate separate account assets of $181.0 million. See "Business--
Scottish Annuity Agreement."

The Company's marketing plan with respect to its reinsurance business is to
seek to capitalize on the relationships developed by its Senior Vice President
and Chief Insurance Officer with international insurance brokers, insurance
consultants, members of the actuarial profession and senior insurance company
executives. To the extent that any such brokers, consultants or actuaries
conduct such activities in the U.S., they will not conduct such activities on
behalf of the Company or receive any commissions or other remuneration from
the Company. Given the focus of the Company's proposed reinsurance business
(i.e., blocks of in-force contracts), the Company expects to target a limited
number of potential ceding insurers that the Company believes would benefit
from its reinsurance products based on its analysis of publicly available
information and other industry data. Management believes that in selecting a
reinsurer such ceding insurers will focus principally on price and, to a
lesser extent, on ratings, perceived financial strength and quality of service
(i.e., the ability of the reinsurer to assess the insurer's products and
financial situation and tailor a reinsurance product to help the insurer
achieve its objectives). The Company believes that the favorable regulatory
environment in which it will operate, its low cost structure and the absence
of a corporate level tax in the Cayman Islands, will enable it to price its
products competitively. Moreover, the Company believes that the experience of
its Senior Vice President and Chief Insurance Officer, including his
familiarity with U.S. state insurance regulations and accounting rules, will
enable the Company to effectively and efficiently tailor reinsurance products
that satisfy the objectives of ceding insurers.

In an effort to facilitate its marketing efforts, the Company has retained
Westport, a developer and administrator of insurance products for
international insurance brokers, insurance companies and corporations and an
affiliate of Westport Worldwide, pursuant to which Westport will provide non-
exclusive distribution services with respect to the Company's variable life
insurance products, particularly COLI, BOLI and TOLI products. In addition,
Westport may provide administration services for COLI, BOLI and TOLI products
that the Company issues. See "Administration and Consulting Services--Variable
Life Insurance."

All of Westport's distribution activities will be undertaken outside the
United States and Westport will be required to comply with all of the
Company's operating guidelines. For its distribution activities, the Company
has agreed to issue to Westport Class C Warrants to purchase up to 750,000
Ordinary Shares at an exercise price equal to the price to the public in the
Offering. The Class C Warrants are issuable over a four year period on January
1, 2000 and on each anniversary thereafter (to and including January 1, 2003)
in an amount to be

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determined by a formula based on the Company's gross profits for the calendar
year preceding the relevant anniversary date from variable life insurance
policies issued by the Company to customers identified and referred by
Westport. The Class C Warrants, if issued, will have a term expiring ten years
from the date of the Offering. See "Description of Shares--Warrants--Class C
Warrants."

UNDERWRITING

Variable Life Insurance

The principal risk associated with the Company's variable life insurance
policies is mortality risk. The death benefit provided by the Company's
variable life insurance policies will vary based on the investment return of
the underlying separate account of assets invested by the policy's private
independent money manager. The difference between the value of the assets in
the underlying separate account and the policy's stated death benefit, known
as the "net amount at risk," represents a general liability of the Company. In
accordance with GAAP and any additional Cayman Islands regulatory
requirements, once the Company begins to issue variable life insurance
policies, the Company will be required to establish and record policy reserves
designed to meet the Company's estimated future life insurance death benefit
obligations. Mortality risk tends to be more stable when spread across large
numbers of insureds. The Company's variable life insurance policies are
expected to be placed with a relatively small number of high net worth
policyholders and to provide substantial death benefits given expected initial
premiums of at least $1.0 million for single premium policies and $500,000 for
multiple premium policies. As a consequence, the Company's associated
mortality risk exposure is likely to be greater in the aggregate, and its
probability of loss less predictable, than an insurer with a broader risk
pool. As a result the Company intends to allocate a significant portion of its
capital, in addition to any policy reserves required by GAAP or any additional
Cayman Islands regulatory requirements, to cover possible volatility in
mortality experience. Furthermore, pursuant to its Underwriting Guidelines,
the Company intends to reinsure a significant portion of the mortality risk
associated with its variable life insurance business with the objective of
limiting the net amount of risk to $500,000 per insured. On September 24,
1998, the Company received an expression of interest from a professional U.S.
reinsurer to provide facultative reinsurance coverage for the Company's
variable life insurance policies. Under such proposed arrangements, the
Company will reinsure, on a yearly renewable term basis, all mortality risk in
excess of its maximum retention of $500,000 per life as currently provided in
its Underwriting Guidelines. Such reinsurer currently has a "AA" claims-paying
ability rating from Standard & Poor's. The Company is pursuing additional
facultative reinsurance arrangements and may potentially enter into one or
more such arrangements in the future. The Company's Underwriting Guidelines
provide that any reinsurer to whom the Company cedes business must have a
financial strength rating of at least "A-" or higher from A.M. Best or an
equivalent rating by another major rating agency.

Reinsurance of Annuities and Life Insurance

The Company expects that it will also potentially reinsure various forms of
life insurance products, including universal, variable and whole life
insurance. The primary risk under life insurance policies is mortality risk.
The Company's Underwriting Guidelines limit such risk to $500,000 per insured
and the Company intends to reinsure, or retrocede, any liability for amounts
in excess of $500,000 per insured in order to comply with such guidelines.
Universal life insurance and similar interest-rate sensitive policies provide
life insurance with adjustable rates of return based on applicable interest
rates in effect from time to time. As a consequence, the

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risks reinsured by the Company may also include investment risks similar to
those for fixed annuities. As with annuities, all life insurance policies are
subject to surrender risk. To the extent the Company reinsures variable
annuity contracts, the principal risk reinsured will be surrender risk, a risk
which is also associated with the reinsurance of fixed annuities and life
insurance.

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, underwriting standards and reputation and financial
strength of the cedent. Pricing of the Company's reinsurance products will be
based on the Company's actuarial models which will incorporate a number of
factors, including assumptions for mortality, expenses, demographics,
persistency and investment returns. In addition, the Company will conduct a
financial due diligence review in an effort to minimize the risk that the
cedent will be unable to pay future amounts due to the Company because of its
own financial difficulties.

The Company's Underwriting Guidelines with respect to its reinsurance
business include the following policies: (i) the ceding company must, among
other things, be domiciled in the United States, United Kingdom, Western
Europe, Canada or Australia, and possess underwriting and claims practices
consistent with industry practice; (ii) the ceding company must be financially
sound in the view of the Board of Directors and must meet all of the financial
requirements to which it is subject by U.S. state regulatory authorities or
the regulatory authorities of applicable foreign jurisdictions; (iii) the
ceding company may not exercise recapture rights for a period of ten years;
and (iv) the Company's aggregate maximum net amount at risk per insured will
be limited to $500,000 after giving effect to any retrocessional arrangements.
The Company will generally assume all of the liabilities under the contracts
it will reinsure, although, in certain circumstances, the Company may require
the ceding company to retain a portion of such liabilities (typically not to
exceed 10%). The Company expects to retrocede to professional reinsurers, on a
case by case basis, certain risks associated with its reinsurance business,
although no such arrangements are currently in place.

General

Any deviation from the Company's Underwriting Guidelines with respect to its
variable life insurance policies and reinsurance products, as they may be
amended from time to time, will require the approval of the Board of
Directors. 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 for 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.

RESERVES

The Company will establish and carry policy reserves which are designed to
meet the Company's future financial 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 in accordance with GAAP
and any additional Cayman Islands regulatory requirements.

Policy reserves with respect to variable life policies will be calculated to
meet the Company's estimated future life insurance death benefit obligations.
As variable life insurance policies are issued, the Company's associated
mortality risk may tend to fluctuate more than would be expected than if the
Company had a large pool of insureds. As a result, the Company will allocate a
significant portion of its capital, in addition to any policy reserves
required under GAAP or any additional Cayman Islands regulatory requirement,
to cover possible volatility in mortality experience. For the Company's
reinsurance business, policy reserves will be primarily based on historical
experience and information provided by ceding companies together with the
Company's estimate of future experience with respect to the risks being
reinsured.

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SCOTTISH ANNUITY AGREEMENT

Pursuant to the Scottish Annuity Agreement, Scottish Insurance will provide
Scottish Annuity with a variety of insurance administration, accounting and
other services, including (i) investment fund accounting reporting for
variable annuity products, (ii) monitoring compliance with the
diversification, investor control and certain other requirements of the Code,
(iii) administrative services in the issuance by Scottish Annuity of variable
annuity products and documents related thereto, (iv) servicing of variable
annuity products after issuance by Scottish Annuity, (v) accounting for
investment, capital and income and expense activities and maintenance of
individual ledgers for investment funds in which each annuity product is
invested, (vi) preparing financial statements of Scottish Annuity, (vii)
controlling all disbursements from Scottish Annuity and authorizing such
disbursements upon instructions from Scottish Annuity, (viii) preparing tax
returns and similar filings for Scottish Annuity, (ix) preparing forms and
reports required to be filed by Scottish Annuity with Cayman Islands
governmental authorities and (x) keeping the books and records of accounts of
Scottish Annuity. These services will be provided by Scottish Insurance
personnel. Scottish Annuity personnel will conduct all other administrative
and accounting services related to its variable annuity products.

As compensation for the services rendered by Scottish Insurance during the
term of the Scottish Annuity Agreement, Scottish Annuity will pay to Scottish
Insurance quarterly, for each annuity contract issued by Scottish Annuity, an
amount equal to 0.50% per annum of the separate account value of such
contracts, except that such amount will not be less than $25,000 per year.
Management believes that such compensation is reasonable and adequately covers
the costs to be incurred by the Company in providing such services. The amount
of compensation to be received by the Company is not subject to adjustment for
any referrals by or to Scottish Annuity. In addition, Scottish Annuity will
reimburse Scottish Insurance for all out-of-pocket fees, costs and expenses
incurred or advanced by Scottish Insurance on behalf of Scottish Annuity in
connection with the Scottish Annuity Agreement.

In addition, pursuant to the Scottish Annuity Agreement (i) Scottish Annuity
will refrain from the direct or indirect offer or sale of any life insurance
products and will refer only to Scottish Insurance any opportunity or inquiry
that it may receive to issue and sell any life insurance products, and (ii)
Scottish Insurance will refrain from the direct or indirect offer or sale of
any variable annuity products and will refer only to Scottish Annuity any
opportunity or inquiry that it may receive to issue and sell any annuity
products. The Scottish Annuity Agreement provides that the foregoing
limitations do not affect the Company's ability to reinsure life insurance or
variable annuities.

The Scottish Annuity Agreement will continue in effect until December 31,
1999 and will thereafter be automatically renewed for successive one-year
periods, unless canceled by either party not less than 60 days prior to the
commencement of a renewed term. In addition, the Scottish Annuity Agreement
will terminate earlier under specified circumstances (e.g., bankruptcy or
uncured defaults under the agreement). Scottish Annuity and Scottish Insurance
have agreed to indemnify each other and their respective employees for certain
liabilities.

In addition, pursuant to separate agreements and as partial consideration
for entering into the Scottish Annuity Agreement, Scottish Insurance subleases
to Scottish Annuity a portion of its leased space at its executive offices in
the Cayman Islands and Scottish Annuity has sold certain of its computer
hardware and software to Scottish Insurance.

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ADMINISTRATION AND CONSULTING SERVICES

Variable Life Insurance

As part of its strategy to enter into the variable life insurance business,
the Company intends to develop the internal resources (i.e., the personnel and
computer software) necessary to administer and operate all aspects of such
business. The Company anticipates that it will have such capability by the end
of 1999, although no assurances can be given. While the Company is in the
process of developing such capability, the Company will utilize the services
of third party service providers to complement its own administrative staff.
The primary administrative services which the Company will initially outsource
will be monitoring tax law compliance and preparing policy illustrations. The
Company expects to use Westport and Milliman & Robertson to provide such
services each of which will or is expected to charge for its services on an
hourly basis and for its reimbursable expenses. The Company expects that with
the commencement of its operations its administration staff will be
responsible for most other administrative services related to the Company's
variable life insurance business, including (i) billing premiums, (ii)
preparing of policy account statements, (iii) processing policy loans,
(iv) processing change of policy holders and beneficiary requests and (v)
processing changes in private independent money managers and policy
surrenders. The Company may also utilize IRM Cayman from time to time to
provide certain administrative services.

Reinsurance of Fixed Annuities and Similar Contracts and Other Reinsurance
Business

The Company anticipates that it will handle all aspects of its reinsurance
activities principally through its Senior Vice President and Chief Insurance
Officer and administrative staff. It is expected that they will identify
potential blocks of business that appear to be attractive candidates for
reinsurance, conduct all related financial and product due diligence,
negotiate the relevant reinsurance agreements and monitor such reinsurance
agreements and any related investment portfolio and investment manager
performance. Under the Company's reinsurance agreements, it is expected that
the cedent will retain responsibility for handling all administrative matters
relating to the underlying life insurance policies or annuity contracts. The
Company may from time to time utilize IRM Cayman to provide support for its
reinsurance personnel.

IRM Cayman

The Company has retained IRM Cayman, a member company of IRMG, an affiliate
of Swiss Reinsurance, to act as the Company's licensed insurance manager in
the Cayman Islands and to supplement from time to time the Company's
administrative staff in the Cayman Islands. According to IRM Cayman, IRMG is
the largest independent captive insurance manager in the world today operating
out of 20 offices in North America, Europe, Australia, Africa and Asia. As the
Company's licensed insurance manager in the Cayman Islands, IRM Cayman will
prepare the Company's annual report required to be filed with the Cayman
Monetary Authority, submit any changes or amendments to the Company's business
plan required to be filed with the Cayman Monetary Authority and annually
certify as to the Company's compliance with all applicable requirements of the
Cayman Monetary Authority. IRM Cayman will also act as a co-signatory on all
contracts and bank transactions involving the Company and reconcile all of the
Company's cash accounts on a monthly basis. The Company's agreement with IRM
Cayman may be terminated by either party upon 90 days advance written notice
(or upon shorter notice in specified circumstances). The Company pays IRM
Cayman an annual retainer of $25,000, and IRM Cayman bills for its actual
services on an hourly basis and for its reimbursable expenses. Scottish
Insurance has agreed to indemnify IRM Cayman and its officers, employees and
agents against certain liabilities. IRM Cayman has provided similar services
to Scottish Annuity since it commenced operations in 1994.

Milliman & Robertson

The Company has entered into an agreement with Milliman & Robertson pursuant
to which Milliman & Robertson will provide certain actuarial services to the
Company, including pricing and reinsurance analysis, from time to time as
requested by the Company. The Company has paid Milliman & Robertson an initial
retainer of $25,000, and Milliman & Robertson bills for its actual services on
an hourly basis and for its reimbursable expenses.

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DC Planning

The Company has entered into a consulting services agreement with DC
Planning, an insurance consulting firm that develops life insurance products
and acts as a consultant on insurance matters for high net worth families,
trust companies and other fiduciaries. Under the terms of the agreement, DC
Planning will provide certain consulting services to the Company, including
with respect to the development and implementation of its business plan. DC
Planning will be paid $180,000 a year for a term of three years under the
agreement. Howard Shapiro, who will be a Director of Holdings, is the managing
partner of DC Planning. See "Certain Relationships and Related Party
Transactions."

INVESTMENT PORTFOLIO

General

The Company will seek to generate attractive levels of investment income
through a professionally managed investment portfolio. Following the Offering
and the Direct Sales, the Company will have approximately $254.3 million of
capital available for policy reserves and other corporate purposes. If the
Company is unable to effectively manage its investment portfolio and the risks
associated with such investments, the Company's ability to support its
variable life insurance and reinsurance businesses, and its results of
operations and financial condition, would be adversely affected.

Investment Guidelines

The Company's investment activities will be governed by the Investment
Guidelines as approved by the Board of Directors. The Company's investment
portfolio (exclusive of assets transferred and invested as part of any
coinsurance transaction) will principally consist of fixed income securities
with a weighted average investment 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
provide that Scottish Insurance 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, certain asset backed securities, preferred stocks,
mortgage backed securities and corporate debt securities (which may include
convertible debt securities, but may not include payment-in-kind corporate
securities), including fixed income securities that are rated below investment
grade. The Investment Guidelines also 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 of the Board of Directors. 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 and interest rate risk through interest rate swaps and
other hedging techniques.

The Company's investments in fixed income securities that are rated below
investment grade are subject to greater risks than its investments in
investment grade securities. The risk of loss of principal or interest through
default is greater with such lower-rated securities because they 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. As a result, the
Investment Guidelines provide that no more than 15% of the Company's
investment portfolio may be invested in fixed income securities that are rated
below investment grade.

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The Company will seek to manage the investment risks associated with any
coinsurance transaction it enters into by structuring its investment of the
assets transferred to it as part of such transaction in an effort to match its
anticipated reinsurance liabilities with respect to such transaction. The
Company expects to invest such assets principally in fixed income and, to a
lesser extent, equity securities. The Company may invest in foreign
denominated securities to manage currency risk if the coinsurance transaction
has a foreign currency component. The Company may also enter into interest
rate swap and other hedging transactions in an effort to manage interest rate
risks associated with such transactions. The Company's use of derivatives to
minimize interest rate risk is expected to be incidental to the Company's
overall investment of the assets transferred to it in any coinsurance
transaction. Any investment in equity securities (expected to be typically not
more than 10% of the assets transferred to it in a coinsurance transaction )
would be made in an effort to enhance the Company's overall return on such
assets. See "Risk Factors--Risks Associated with Investment Activities."

The Company's Investment Guidelines prohibit investments in (i) direct real
estate; (ii) oil and gas limited partnerships; (iii) direct commodities, (iv)
venture capital investments, including private equity or its equivalent; and
(v) U.S. 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 U.S. 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 U.S. 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.

Investment Managers

The Company has entered into investment advisory agreements with each of
PIMCO, General Re and Prudential Investment to manage the Company's fixed
income investment portfolio. The Company anticipates that PIMCO will manage
approximately 50% of the Company's investment portfolio and General Re and
Prudential Investment will each manage a portion of the other 50% of the
Company's investment portfolio.

PIMCO is one of the largest fixed income money managers in the U.S.
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. Under the agreement with PIMCO (the "PIMCO
Agreement"), the Company will pay PIMCO an annual fee equal to 0.50% of the
market value of the first $25.0 million of the Company's assets managed by
PIMCO, 0.375% on the market value of the next $25.0 million of the Company's
assets under management and 0.25% thereafter. The foregoing fees are payable
quarterly in advance based on the market value of the Company's investment
portfolio managed by PIMCO at the beginning of the billing period. The PIMCO
Agreement will continue in effect on a month to month basis and may be
terminated by either party effective at the end of the month upon 30 days
advance notice. The Company may also terminate the PIMCO Agreement effective
upon notice but will be obligated to pay the applicable fee for 30 days
thereafter.

Under the agreement with General Re (the "General Re Agreement"), the
Company will pay General Re an annual fee equal to 0.20% of the market value
of the first $50.0 million of the Company's assets under management, 0.15% of
the market value of the next $50.0 million of the Company's assets under
management and 0.12% of the market value of the Company's assets under
management in excess of $100.0 million. The foregoing fees are payable at the
end of each calendar quarter for services provided during the prior three
months. The General Re Agreement may be terminated by either party upon 30
days written notice and will remain in effect until terminated.

Under the agreement with Prudential Investment (the "Prudential Investment
Agreement"), the Company will pay Prudential Investment an annual fee equal to
0.20% of the market value of the first $50.0 million of the

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Company's assets under management and 0.15% of the market value of the
Company's assets under management in excess of $50.0 million. The foregoing
fees are payable quarterly in arrears. The Prudential Investment Agreement may
be terminated by the Company at any time and by Prudential Investment upon
forty-five days written notice and will remain in effect until terminated.

The Company expects that the Investment Managers will manage the investment
of assets transferred to the Company in any coinsurance transaction.

Investment Oversight

The Company's Board of Directors will continuously review the Company's
investment portfolio and the performance of its investment managers. The Board
of Directors can approve exceptions to the Company's Investment Guidelines and
will periodically review the Company's Investment Guidelines in light of
prevailing market conditions. The investment managers and the Company's
Investment Guidelines may change from time to time as a result of such
reviews. The Company may in the future create an investment committee of the
Board of Directors to review the Company's Investment Guidelines, investment
managers and investment performance.

COMPETITION AND RATINGS

The insurance and reinsurance industries are highly competitive and most of
the companies in such industries are significantly larger and have operating
histories and have access to significantly greater financial and other
resources than does the Company. The Company has no experience competing with
such companies and there can be no assurance that it will be successful.

To the extent that the Company's variable life insurance policies provide
for management of the underlying separate accounts by private independent
money managers, the Company's variable life insurance policies compete with
mutual funds and other investment or savings vehicles. The Company believes
that the most important competitive factor affecting the marketability of its
variable life insurance products is the degree to which it meets customer
expectations, both in terms of returns (after fees and expenses) and service.
In addition, competition in the reinsurance business that the Company intends
to underwrite is based principally on price and, to a lesser extent, ratings,
perceived financial strength and service. Because the Company expects to rely
at least initially on a small number of clients in both its variable life
insurance and reinsurance businesses, such businesses may be more susceptible
to the adverse effects of competition.

Insurance ratings are used by prospective purchasers of insurance policies
as well as insurers and reinsurance intermediaries as an important means of
assessing the financial strength and quality of insurers and 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. Duff & Phelps has
assigned Scottish Insurance a preliminary rating of "A" and A.M. Best has
assigned Scottish Insurance a preliminary Best Rating of "A-" (Excellent).
These ratings are contingent on the Company raising gross proceeds of at least
$200.0 million in the Offering. Duff & Phelps assigns an "A" rating to
companies that it characterizes as having, in its opinion, high claims paying
ability, average protection factors and an expectation of variability in risk
over time due to economic or underwriting conditions. 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.
These ratings represent each rating agency's opinion of Scottish Insurance's
ability to meet its obligations to its policyholders.

Scottish Insurance is not licensed or admitted as an insurer in any
jurisdiction other than the Cayman Islands. 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 provide other collateral through funds withheld or trust
arrangements. If the Company is unable

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to obtain a letter of credit facility on commercially acceptable terms or is
unable to arrange for such other collateral, the Company's ability to operate
its business will be severely limited.

EMPLOYEES

Cayman Islands immigration law mandates that the Company employ only
Caymanians, Cayman status holders or residents with permission to work unless
it can be determined that no such person is qualified to perform the job.
Accordingly, subject to limited exceptions, the Company must advertise in a
Cayman Islands newspaper all open job positions and interview all applicants.
If the Company determines that no Caymanian, Cayman status holder or resident
with permission to work is qualified to perform the job and the Cayman Islands
governmental authority agrees, the Company may hire a non-Caymanian upon the
Cayman Islands government's issuance of a work permit to such individual. Work
permits are generally issued for a specified period of time and must be
renewed upon expiration.

The Company will initially employ three executives and two administrative
staff persons. The two administrative staff persons are Caymanians, while Ms.
Boucher currently holds a valid work permit in connection with her employment
by Scottish Annuity, which expires July 24, 1999, and is currently seeking to
have such work permit amended to cover her employment by Holdings and Scottish
Insurance. Mr. French and Mr. Sulikowski were issued work permits for an
initial one year period commencing on October 2, 1998 and September 14, 1998,
respectively. Messrs. French's and Sulikowski's permits may be automatically
renewed for an additional one year period upon payment of the applicable
renewal fee. See "Risk Factors--Cayman Islands Work Permit." Over the next six
to nine months, the Company anticipates that it will hire a financial
controller or other financial staff person and an actuary as well as one or
two additional administrative staff persons.

PROPERTY

The Company leases approximately 1,000 square feet of office space in George
Town, Grand Cayman, Cayman Islands, British West Indies, at which the
principal offices of Holdings and Scottish Insurance are located, pursuant to
a lease with Queensgate Bank and Trust Company Limited. The lease has a one
year term which will be automatically extended annually for an additional year
unless either party gives written notice to the other at least 90 days prior
to the end of the then current term. The Company's annual rent is $12,500,
which is paid on a quarterly basis. The Company subleases a portion of its
office space to Scottish Annuity in connection with the Scottish Annuity
Agreement. See "Business--Scottish Annuity Agreement."

LEGAL PROCEEDINGS

The Company is not currently involved in any litigation or arbitration. Like
other insurance and reinsurance companies, the Company anticipates that it
will be subject to litigation and arbitration in the ordinary course of its
business.

REGULATION

Cayman Islands

The Company. The Company is a holding company owning all of the outstanding
Ordinary Shares of Scottish Life. The Company is not itself subject to
regulation by any authority in the Cayman Islands, either under insurance or
mutual funds legislation.

The Insurance Law, 1998 Revision. All persons carrying on or desiring to
carry on an insurance (including reinsurance) business in or from within the
Cayman Islands must be licensed under the Insurance Law (1998 Revision) (the
"Insurance Law"). Insurance agents, brokers and those providing insurance
management must also be licensed. Licences are granted by the Governor-in-
Council and applications are reviewed by the Cayman Monetary Authority, which
is generally responsible for the supervision and regulation of financial
services.

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Information filed with the Cayman Islands authorities pursuant to the
Insurance Law is not generally a matter of public record.

Application for an insurance license is made to the Cayman Monetary
Authority by filing certain prescribed application forms together with
supporting documentation regarding the suitability of the applicant to carry
on an insurance business. A complete business plan must be filed, and the
licensee is limited to conducting the business described in the plan. All
changes in the nature of the business to be conducted require prior approval
of the Cayman Monetary Authority. License applications must include lists of
all shareholders, directors and officers of the applicant and the Cayman
Monetary Authority must be notified of any subsequent changes therein.

Types of Licenses. There are two broad classes of insurer's license--the
Class A and the Class B license (the latter of which may be restricted or
unrestricted). The Class A license permits the holder to carry on a general
insurance business including the underwriting and reinsurance of Cayman
Islands domestic risks. Persons intending to engage in an insurance business
from within the Cayman Islands, but not to engage in the underwriting of
Cayman Islands insurance risks, may obtain a Class B license. Scottish
Insurance holds an unrestricted Class B insurance license and may therefore
carry on an insurance business from within the Cayman Islands, but may not
engage in any Cayman Islands domestic insurance business. Scottish Insurance's
business plan filed with the Cayman Monetary Authority specifically
contemplates the writing of variable life insurance policies and the
reinsurance of fixed annuities, variable annuities and life insurance.

Although information filed with the Cayman Monetary Authority pursuant to
the Insurance Law is generally not a matter of public record, the Cayman
Monetary Authority has the power to disclose information necessary to enable
foreign regulators to exercise similar functions to those exercised by the
Cayman Monetary Authority. Before doing so, the Cayman Monetary Authority is
required to satisfy itself that the regulator is subject to adequate legal
restrictions on further disclosure and may ask for a suitable undertaking in
this respect. Any such disclosure by the Cayman Monetary Authority must not
relate to customers or policyholders.

Minimum Net Worth. Scottish Insurance is currently required by the Cayman
Monetary Authority to maintain a minimum net worth of $240,000, but a higher
net worth requirement may be imposed by the Cayman Monetary Authority under
certain circumstances. Net worth is defined as the "excess of assets
(including any contingent or reserve fund secured to the satisfaction of the
Governor-in-Council) over liabilities, other than liabilities to partners or
shareholders." The initial net worth must generally consist solely of cash,
although a mix of cash, other assets, guarantees or letters of credit may be
acceptable. Scottish Insurance has initially met this requirement with cash.

Insurance Manager. Unless specifically exempted, a Cayman Islands insurance
company must engage a licensed insurance manager operating in the Cayman
Islands to provide insurance expertise and oversight. The insurance manager
must employ a person who is either qualified by examination as a fellow or
associate of the Chartered Insurance Institute of London, or who is a member
of either the Society of Chartered Property and Casualty Underwriters or the
American Society of Chartered Life Underwriters or is a person of good
standing with such insurance expertise as has been approved by the Governor-
in-Council. Such person must be a member in good standing of the applicable
professional body or of some other professional insurance association
recognized by the Cayman Monetary Authority for the purposes of the Insurance
Law and in good standing with the Cayman Monetary Authority. The insurance
manager must use its best efforts to carry on an insurance and reinsurance
business only with insurers of sound reputation and must comply with certain
reporting requirements imposed by the Cayman Monetary Authority. The insurance
manager must report to the Cayman Monetary Authority with respect to any
concerns it has with respect to any insurance companies with whom it is doing
business. Sixty days written notice must be given to the Cayman Monetary
Authority of any intention to terminate a relationship between an insurer and
a licensed insurance manger. A licensed insurance manager must furnish to the
Cayman Monetary Authority, within six months of the end of its fiscal year, a
list of all insurers for whom the insurance manager performs services and a
written confirmation indicating that the information set out in its licence
application is correct. Scottish Insurance has engaged IRM Cayman as its
licensed insurance manager in the Cayman Islands. See "Business--
Administration."

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Separate Accounts. Under the Insurance Law, Cayman Islands insurance
companies carrying on long term business (which will include the writing of
life insurance policies) shall place all receipts by such company of funds in
respect of its long-term business in a separate long-term business fund and
payments from such long-term business fund shall not be made directly or
indirectly for any purpose other than those of the insurer's long-term
business; provided, however, that such payments can be made with any surplus
disclosed on an actuarial valuation and certified by an actuary to be
distributable otherwise than to policy holders. Every Cayman Island insurance
company carrying on long-term business may establish any number of separate
accounts in respect of respective premiums paid to it to provide (i) annuities
on human life and (ii) contracts of insurance on human life, and such
respective premiums shall be kept segregated one from the other and
independent of all other funds of the Cayman Islands insurer, and,
notwithstanding the provisions of any other written law to the contrary, are
not chargeable with any liability arising from any other business of the
insurer. The scope and the validity of the Cayman Islands law regarding
separate accounts has not been tested in the courts of the Cayman Islands.

Auditors and Annual Compliance. Cayman Islands insurance companies are
required to have their financial statements audited on an annual basis.
Scottish Insurance has engaged Ernst & Young to perform its annual audit. The
auditors must file with the Cayman Monetary Authority a written statement
indicating that the insurer's financial statements have been prepared in
accordance with GAAP or a written statement indicating any deviations
therefrom. In addition, the auditors, the licensed insurance manager or
another approved person must sign and file an annual compliance certificate to
the effect that the insurer has carried on its business in accordance with the
information set out in its license application and that any changes in the
nature of the business have been approved by the Cayman Monetary Authority.
Scottish Insurance has engaged IRM Cayman to file its annual compliance
certificate.

Powers of Supervision of Investments. The Cayman Monetary Authority has the
power to prescribe that specified classes of investments made by a Cayman
Islands insurance company be approved and that any investments in such class
already made be realized within a specified period. Although no assurance can
be given as to the future, to date as far as the Company is aware, this power
has never been exercised by the Cayman Monetary Authority. The Cayman Monetary
Authority also has the power to prescribe, establish and vary required capital
and liquidity margins and ratios.

Powers of Inspection and Intervention. The Cayman Monetary Authority
conducts a general review of insurance practices in the Cayman Islands and,
among other things, may examine the affairs of any licensee for the purpose of
determining whether the provisions of the Insurance Law have been or are being
complied with, that the licensee is in a sound financial position and that it
is carrying on its business in a satisfactory manner. The Cayman Monetary
Authority may obtain access to such books, records, documents, policies,
contracts and securities, and call upon the insurance manager for such
information or explanation, as the Cayman Monetary Authority may reasonably
require for purposes of enabling the Cayman Monetary Authority to perform its
functions under the Insurance Law.

Where the Governor-in-Council is of the opinion that a licensee is carrying
on its business in a manner likely to be detrimental to the public interest or
to the interest of insurers, creditors or policyholders, or in contravention
of the Insurance Law, the Governor-in-Council may require the licensee to take
steps necessary to rectify the matter, suspend the license pending a full
inquiry into the licensee's affairs or, without compensation to the licensee,
revoke the license.

Confidentiality and the Proceeds of Criminal Conduct Law. Under the Cayman
Islands confidentiality laws, it is an offense for a person to divulge
confidential information maintained in the Cayman Islands. However, similar to
initiatives taken in major onshore financial centers, the Cayman Islands has
recently become the first offshore financial center to enact specific
legislation designed to prevent money laundering. Under the new Proceeds of
Criminal Conduct Law, professionals in the Cayman Islands may report to the
authorities in the Cayman Islands transactions they suspect may involve the
proceeds of criminal conduct.

Lease of Real Estate. Both the Company and Scottish Insurance are required
to obtain the consent of the Financial Secretary of the Cayman Islands to
enter into any leases of real estate in the Cayman Islands.

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United States and Other

Neither Holdings nor Scottish Insurance will be licensed to do business in
any jurisdiction other than the Cayman Islands. The insurance laws of each
state of the United States and of many foreign countries regulate the sale of
insurance and reinsurance within their jurisdictions by alien insurers, such
as Scottish Insurance, that are not admitted to do business within such
jurisdictions. With some exceptions, the sale of insurance within a
jurisdiction where the insurer is not admitted to do business is generally
prohibited.

Scottish Insurance is expected to conduct its insurance and reinsurance
business through its executive offices in the Cayman Islands and will not
maintain an office, and its personnel will not solicit, advertise, underwrite,
settle claims or conduct other insurance or reinsurance activities in the
United States or in any other jurisdiction where such activities are
prohibited. All of Scottish Insurance's insurance and reinsurance contracts
are expected to be negotiated, executed, and issued, and all premiums are
expected to be received, at the office of Scottish Insurance in George Town,
Grand Cayman or in such other offices outside the United States as Scottish
Insurance may establish or designate. The Company has received an opinion from
its state insurance regulatory counsel, The Bernstein Law Firm, that Scottish
Insurance will not be subject to the insurance laws of any state of the United
States.

Many states impose a premium tax (typically 2%-4% of gross premiums) on
insureds obtaining insurance from unlicensed foreign insurers, such as
Scottish Insurance. The premiums charged by Scottish Insurance do not include
any state premium tax. Each insured is responsible for determining whether it
is subject to pay such tax and for paying such taxes as may be due. In
addition, the United States 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 Scottish Insurance is 1%
of its insurance and reinsurance premiums. This excise tax is payable by the
contract owner, although the Company will often file the tax form.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The table below sets forth the names, ages and titles of the directors of
Holdings and executive officers of Holdings and Scottish Insurance. After
consummation of the Offering, the Company intends to appoint an additional
outside director who is not affiliated with the Company's shareholders or the
Underwriters.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Sam Wyly................ 64 Chairman of the Board and Director
Michael C. French....... 55 Chief Executive Officer, President and Director
Michelle L. Boucher..... 31 Senior Vice President, Chief Financial Officer and Secretary
Henryk Sulikowski....... 39 Senior Vice President and Chief Insurance Officer
Michael Austin.......... 62 Director
R. Duke Buchan III...... 35 Director
Robert M. Chmely........ 64 Director
David Matthews.......... 35 Director
Howard Shapiro.......... 52 Director
Charles J. Wyly, Jr..... 65 Director
</TABLE>

SAM WYLY was elected a director of Holdings on October 27, 1998. Mr. Wyly
was also elected Chairman of the Board of Holdings on October 27, 1998. Mr.
Wyly serves as Chairman of the Board, since 1981, of Sterling Software, Inc.,
a supplier of software products and services, which he co-founded in 1981. In
addition, Mr. Wyly currently serves as a director of Sterling Commerce, Inc.,
a provider of electronic commerce software and network services, as Chairman
of Michaels Stores, Inc., a specialty retail chain, and as a non-managing
partner of the General Partner of Maverick. In 1963, Mr. Wyly founded
University Computing Company, a computer services and software company.

MICHAEL C. FRENCH was elected a director and Holdings' Chairman of the Board
and Chief Executive Officer upon its formation. Mr. French is currently
Holdings' Chief Executive Officer and President. Mr. French was also elected
Chairman of the Board and Chief Executive Officer of Scottish Insurance upon
its formation. Mr. French is also a director of SHL, which currently owns all
of the outstanding stock of Holdings. Mr. French is a founder and a director
of Scottish Annuity and provides legal services to Scottish Annuity pursuant
to a legal services agreement, which will be terminated upon consummation of
the Offering. Mr. French serves as a consultant to the law firm of Jones, Day,
Reavis & Pogue. Mr. French was a Managing Director of Maverick from 1993 to
1996. He practiced law from 1970 to 1992 with the law firm of Jackson &
Walker, L.L.P. where he served as Chairman of the Management Committee from
1988 to 1992. Mr. French also serves as a director of Sterling Software, Inc.,
a computer software provider, and Michaels Stores, Inc., a national specialty
retail chain. He received a B.B.A. and a J.D. (cum laude) from Baylor
University.

MICHELLE L. BOUCHER was elected Holdings' Senior Vice President and Chief
Financial Officer upon its formation. Ms. Boucher was also elected as Scottish
Insurance's Senior Vice President, Chief Financial Officer and Secretary upon
its formation. Ms. Boucher is a director of Scottish Insurance. Ms. Boucher
has served as Manager of Finance and Administration and Secretary of Scottish
Annuity since July 1995. Ms. Boucher, a Canadian national, has resided in the
Cayman Islands since 1992. From April 1992 until October 1993, Ms. Boucher was
an auditor with Price Waterhouse. From October 1993 through June 1995, she was
a Senior Client Accountant in the mutual fund department of MeesPierson
(Cayman) Limited, where she was responsible for administering mutual funds,
trusts and other foreign corporate entities, including calculation of net
asset values and provision of shareholder services. Ms. Boucher is a Chartered
Accountant and holds a BMath from the University of Waterloo.

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HENRYK SULIKOWSKI became Senior Vice President and Chief Insurance Officer
of Holdings and Scottish Insurance on July 20, 1998. From February 1997 to
July 1998, Mr. Sulikowski served as a Director of Swiss Re New Markets as well
as Senior Vice President of Atlantic International Reinsurance Company
(Barbados) and a Vice President of Swiss Re Atrium Corporation, companies
which are all affiliated with Swiss Reinsurance Company. During 1995 and 1996,
Mr. Sulikowski was Vice President of Cologne Re and also served as a senior
officer of Cologne Re's Barbados subsidiary. From 1991 to 1995, Mr. Sulikowski
was employed by Guardian Life Insurance Company of America, where he served as
Assistant Vice President in the reinsurance division. Since 1991, Mr.
Sulikowski has been actively involved in regulatory affairs affecting the
insurance and reinsurance industries, both individually and through life
insurance trade associations such as the American Council of Life Insurance
("ACLI") and the National Alliance of Life Companies ("NALC"). He has served
as a member of the State Activities Task Force of the ACLI's Reinsurance
Committee and was instrumental in establishing the NALC's Reinsurance
Committee, having served as its first chairman during 1994 and 1995. Mr.
Sulikowski has been an associate of the Society of Actuaries since 1986 and a
member of the American Academy of Actuaries since 1987. He received a Bachelor
of Science Degree, with honors, from the State University of New York at Stony
Brook.

MICHAEL AUSTIN was elected a director of Holdings on October 27, 1998. Mr.
Austin retired in 1992 as the Managing Partner of the Cayman Islands office of
KPMG Peat Marwick, an international accounting and consulting firm. Mr. Austin
was a partner resident in the Cayman Islands office for over 20 years. Since
1992, Mr. Austin has been self-employed as a chartered accountant. Mr. Austin
currently serves as a Director of the Cayman Monetary Authority for a three-
year term expiring on December 31, 1999.

R. DUKE BUCHAN III was elected a director of Holdings on October 27, 1998.
Mr. Buchan has been Managing Director of Maverick, an investment management
firm, since July 1997. From 1992 until joining Maverick in 1997, he was a Vice
President in Investment Banking at Merrill Lynch, Pierce, Fenner & Smith
Incorporated in New York, specializing in corporate finance and mergers and
acquisitions in the financial services sector in the United States, Latin
America and Europe. He received a B.A. in Economics and Spanish with Honors
from the University of North Carolina and an M.B.A. from Harvard Business
School.

ROBERT M. CHMELY was elected a Director of Holdings on October 27, 1998. Mr.
Chmely has been a consultant since the beginning of 1997 when he retired from
The Prudential Insurance Company of America, where from January 1988 to his
retirement he served as Senior Vice President. From December 1995 to November
1997, Mr. Chmely was President of Prudential Asset Management Group, the
corporate pension business of The Prudential Insurance Company of America, and
from December 1994 to December 1995, he was Chief Financial Officer of
Prudential Asset Management Group. From December 1990 to December 1994, Mr.
Chmely served as Senior Managing Director of Portfolio Management at The
Prudential Insurance Company of America. He is a Fellow of the Society of
Actuaries and a Chartered Financial Analyst.

DAVID MATTHEWS was elected a director of Holdings on October 27, 1998. Mr.
Matthews has been a director, since 1991, of Intelecon Services, Inc.
("Intelecon"), a provider of audio-visual services for corporate meetings and
events, a company he co-founded, and General Manager of the Outsourcing
Department of Intelecon, since 1997. He served as Chief Financial Officer of
Intelecon from 1991 to 1997 and General Manager of the Install Department of
Intelecon from 1993 to 1996. Mr. Matthews is Sam Wyly's son-in-law.

HOWARD SHAPIRO was elected a director of Holdings on October 27, 1998.
Shapiro is the managing partner of DC Planning and has been since 1975, when
he founded DC Planning, an insurance consulting firm that develops life
insurance products and acts as a consultant on insurance matters for high net
worth families, trust companies and other fiduciaries.

CHARLES J. WYLY, JR. was elected a director of Holdings on October 27, 1998.
Mr. Wyly also serves as a director, since 1981, and Vice Chairman, since 1984,
of Sterling Software, Inc. which he co-founded in 1981. Additionally, Mr. Wyly
currently serves as Vice Chairman of Michaels Stores, Inc. and as a director
of Sterling Commerce, Inc. He served as an officer and director of University
Computing Company, from 1964 to 1975,

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<PAGE>

and President from 1969 to 1973. Mr. Wyly served as Chairman of the Board of
Earth Resources Company, an oil refining and silver mining company which he
co-founded, from 1968 to 1980. Mr. Wyly served as Vice Chairman of the Bonanza
Steakhouse, a restaurant chain, from 1967 to 1989. Mr. Wyly is Sam Wyly's
brother.

PROVISIONS GOVERNING THE COMPANY'S BOARD OF DIRECTORS

Number and Terms of Directors

The Company's Articles of Association 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. Chmely and Matthews; 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. Austin, Buchan and Shapiro; 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. French, Sam Wyly and
Charles C. Wyly, Jr. Following their initial terms, all classes of directors
shall be elected to three-year terms.

Committees of the Board

Audit Committee. The Board has established an Audit Committee, which
committee reports to the Board. The Audit Committee will review the Company's
internal administrative and accounting controls and recommend to the Board the
appointment of independent auditors. The Audit Committee will also review the
performance of corporate officers and the Company's compensation policies and
procedures, make recommendations to the Board with respect to such policies
and procedures, and may administer stock option plans and incentive
compensation plans of the Company. The Audit Committee will be comprised of a
majority of independent directors. It is expected that Messrs. Austin, Chmely
and Buchan will serve on the Audit Committee after the consummation of the
Offering.

Investment Committee. It is expected that the entire Board of Directors of
the Company will initially serve as the Investment Committee after
consummation of the Offering. The Company may in the future create an
investment committee of the Board of Directors.

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. Each non-employee Director will be granted an option to purchase
10,000 Ordinary Shares pursuant to the Stock Option Plan at or prior to the
date the Offering is consummated with an exercise price equal to the initial
public offering price. In addition, subject to certain conditions, each non-
employee Director will be granted an option to purchase 2,000 Ordinary Shares
at each successive annual general meeting after December 31, 1998 with an
exercise price equal to the fair market value of the Ordinary Shares at the
date of grant.

EMPLOYMENT AGREEMENTS

Michael C. French. Pursuant to an employment agreement with the Company, Mr.
French has agreed to serve as Chief Executive Officer and President of the
Company for an initial term ending on June 18, 2001 which term will be
automatically increased on June 18, 1999 and each anniversary thereafter for
an additional year, subject to 90 days advance notice before June 18, 1999 or
any subsequent anniversary by either the Company or Mr. French of an intention
not to renew. After the Offering, Mr. French will receive an annual salary of
$450,000 and will be eligible to participate in all employee benefit programs
sponsored by the Company. Mr. French will also be eligible to receive an
annual performance-based bonus in an amount to be determined by the Company's

53
<PAGE>

Board of Directors. Mr. French will also be entitled to a gross-up of certain
excise taxes and to the payment or reimbursement by the Company of any legal
fees or related expenses incurred by Mr. French with respect to the
interpretation, enforcement or defense of his rights under his Employment
Agreement. Upon execution of the employment agreement, Mr. French received
stock options exerciseable for 400,000 Ordinary Shares (or, if the
Underwriters' over-allotment option is exercised in full, 460,000 Ordinary
Shares). See "--Stock Option Plan."

Mr. French's Employment Agreement also provides that he will maintain in
confidence all confidential matters that relate to the Company or any
affiliate of the Company and that he will not (i) during his employment or, if
he receives severance compensation from the Company upon termination of his
employment, for one year thereafter, participate in the management of any
business enterprise that engages in substantial and direct competition with
the Company or (ii) during his employment or for one year thereafter, attempt
to influence, persuade or induce (or assist any other person in so persuading
or inducing) any employee of the Company or any subsidiary thereof to give up
employment or a business relationship with the Company or any such subsidiary.
In addition, pursuant to Mr. French's Employment Agreement, Mr. French will be
entitled to severance compensation if (i) the Company terminates his
employment in any case other than death, disability or cause or (ii) (a) Mr.
French terminates his employment upon the Company's failure to maintain him in
his office or position (or a substantially equivalent office or position) with
the Company; (b) an adverse change affecting the authorities, powers,
functions, responsibilities or duties attaching to his position with the
Company; (c) a reduction in his compensation; (d) the failure of any successor
to the Company to assume the Company's duties and obligations under Mr.
French's Employment Agreement; (e) a relocation of the principal location of
Mr. French's work in excess of 25 miles from its original location; (f) a
change in control of the Company (provided Mr. French terminates his
employment within one year of such change in control); or (g) an unremedied
breach of Mr. French's Employment Agreement by the Company or any successor.
The severance compensation that Mr. French will be entitled to upon any such
termination includes a lump sum payment equal to three times the sum of his
annual base salary and incentive compensation at the highest respective rates
in effect for any year prior to the termination and the transportation
expenses of relocating Mr. French and his family to the United States.

Michelle L. Boucher. Pursuant to an employment agreement with the Company,
Ms. Boucher has agreed to serve as Senior Vice President and Chief Financial
Officer of the Company for an initial term ending on June 18, 2001, which term
will be automatically increased on June 18, 1999 and each anniversary
thereafter for an additional year, subject to 90 days advance notice before
June 18, 1999 or any subsequent anniversary by either the Company or Ms.
Boucher of an intention not to renew. After the Offering, Ms. Boucher will
receive an annual salary of $175,000 and will be eligible to participate in
all employee benefit programs sponsored by the Company. Ms. Boucher will also
be eligible to receive an annual performance-based bonus to be determined by
the Company's Board of Directors and will receive a monthly housing and travel
allowance of $7,500. In addition, during the term of Ms. Boucher's employment,
the Company will fund a retirement account for Ms. Boucher in an amount not
less than 10% of Ms. Boucher's annual salary for each year during the term of
her employment. The Company will also pay or reimburse Ms. Boucher for any
legal fees or related expenses incurred by Ms. Boucher with respect to the
interpretation, enforcement or defense of her rights under her Employment
Agreement. Upon execution of the employment agreement, Ms. Boucher received
stock options exercisable for 200,000 Ordinary Shares (or, if the
Underwriters' over-allotment option is exercised in full, 230,000 Ordinary
Shares). See "--Stock Option Plan."

Ms. Boucher's Employment Agreement also provides that she will maintain in
confidence all confidential matters that relate to the Company or any
affiliate of the Company and that she will not (i) during her employment or,
if she receives severance compensation from the Company upon termination of
her employment, for one year thereafter, participate in the management of any
business enterprise that engages in substantial and direct competition with
the Company or (ii) during her employment or for one year thereafter, attempt
to influence, persuade or induce (or assist any other person in so persuading
or inducing) any employee of the Company or any subsidiary thereof to give up
employment or a business relationship with the Company or any such subsidiary.
Ms. Boucher will be entitled to severance compensation if (i) the Company
terminates her

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<PAGE>

employment in any case other than death, disability or cause or (ii)(a) Ms.
Boucher terminates her employment upon the Company's failure to maintain Ms.
Boucher in her office or position (or a substantially equivalent office or
position) with the Company; (b) an adverse change affecting the authorities,
powers, functions, responsibilities or duties attaching to her position with
the Company; (c) a reduction in her compensation; (d) the failure of any
successor to the Company to assume the Company's duties and obligations under
Ms. Boucher's Employment Agreement; (e) a relocation of the principal location
of Ms. Boucher's work in excess of 25 miles from its original location; (f) a
change in control of the Company (provided Ms. Boucher terminates her
employment within one year of such change in control); or (g) an unremedied
breach of Ms. Boucher's Employment Agreement by the Company or any successor.
The severance compensation that Ms. Boucher will be entitled to upon any such
termination includes a lump sum payment equal to three times the sum of her
annual base salary and incentive compensation at the highest respective rates
in effect for any year prior to the termination. Ms. Boucher will not be paid
by the Company or Scottish Annuity for any service she renders to Scottish
Annuity.

Henryk Sulikowski. Pursuant to an employment agreement with the Company, Mr.
Sulikowski has agreed to serve as Senior Vice President and Chief Insurance
Officer of the Company for an initial term ending on July 20, 2001, which term
will be automatically increased for an additional year, at the expiration of
the initial term and each anniversary thereafter, subject to 90 days advance
notice before such expiration or anniversary by either the Company or Mr.
Sulikowski of an intention not to renew. Mr. Sulikowski will receive an annual
salary of $200,000 and will be eligible to participate in all employee benefit
programs sponsored by the Company. Mr. Sulikowski will also receive a one-time
cash bonus of $75,000 at the earlier of the consummation of the Offering or
December 31, 1998. Mr. Sulikowski will also be eligible to receive an annual
performance-based bonus in an amount to be determined by the Company's Board
of Directors and will receive a monthly housing and travel allowance of
$9,000. The Company will also pay all expenses relating to the relocation of
Mr. Sulikowski and his immediate family to the Cayman Islands. In addition,
during the term of Mr. Sulikowski's employment, the Company will fund a
retirement account for Mr. Sulikowski in an amount not less than 10% of Mr.
Sulikowski's annual salary for each year during the term of his employment.
The Company will also pay or reimburse Mr. Sulikowski for any legal fees or
related expenses incurred by Mr. Sulikowski with respect to the
interpretation, enforcement or defense of his rights under his Employment
Agreement. Upon execution of the employment agreement, Mr. Sulikowski received
stock options exercisable for 300,000 Ordinary Shares (or, if the
Underwriters' over-allotment option is exercised in full, 345,000 Ordinary
Shares). See "--Stock Option Plan."

Mr. Sulikowski's Employment Agreement also provides that he will maintain in
confidence all confidential matters that relate to the Company or any
affiliate of the Company and that he will not (i) during his employment or, if
he receives severance compensation from the Company upon termination of his
employment, for one year thereafter, participate in the management of any
business enterprise that engages in substantial and direct competition with
the Company or (ii) during his employment or for one year thereafter, attempt
to influence, persuade or induce (or assist any other person in so persuading
or inducing) any employee of the Company or any subsidiary thereof to give up
employment or a business relationship with the Company or any such subsidiary.
In addition, pursuant to Mr. Sulikowski's Employment Agreement, Mr. Sulikowski
will be entitled to severance compensation (i) if the Company terminates his
employment in any case other than death, disability or cause, (ii)(a) if Mr.
Sulikowski terminates his employment upon the Company's failure to maintain
him in his office or position (or a substantially equivalent office or
position) with the Company; (b) an adverse change affecting the authorities,
powers, functions, responsibilities or duties attaching to his position with
the Company; (c) a reduction in his compensation; (d) the failure of any
successor the Company to assume the Company's duties and obligations under Mr.
Sulikowski's Employment Agreement; (e) a relocation of the principal location
of Mr. Sulikowski's work to any location other than the Cayman Islands; (f) a
change in control of the Company (provided Mr. Sulikowski terminates his
employment within one year of such change in control); or (g) an unremedied
breach of Mr. Sulikowski's Employment Agreement by the Company or any
successor, or (iii) if the Company notifies Mr. Sulikowski of its intent not
to renew the Employment Agreement at the expiration of its initial term or any
anniversary thereafter. The severance compensation that Mr. Sulikowski will be
entitled to

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upon any such termination includes a lump sum payment equal to the sum of (i)
the greater of (A) any amounts of Mr. Sulikowski's annual base salary relating
to the first three years of the term of his employment not paid prior to the
termination of his employment, and (B) his annual base salary at the highest
rate in effect for any year prior to the termination, (ii) the annual
incentive compensation at the highest rate in effect for any year prior to the
termination, and (iii) the transportation expenses for relocating Mr.
Sulikowski and his immediate family to the United States.

STOCK OPTION PLAN

The Stock Option Plan authorizes grants of nonqualified stock options to
directors, officers and other key employees of, and consultants and advisors
to, Holdings and its subsidiaries. The Stock Option Plan authorizes the
granting of stock options for up to 1,600,000 Ordinary Shares, subject to
adjustments upon the occurrence of certain events to prevent dilution. Stock
options may be exercisable for up to ten years at such exercise price
(provided the exercise price is no lower than the fair market value of the
Ordinary Shares on the date of grant) and upon such terms and conditions as
the Board of Directors or a committee thereof may determine at the time of the
grant. Unless otherwise provided in the option agreement evidencing a stock
option grant, a grant will become exercisable in three equal annual
installments commencing with the first anniversary of the date of grant. The
stock option grant may provide for the earlier exercise of the stock options
upon a change in control, and the Board of Directors may accelerate the date
on which any stock option may be exercised. The Board of Directors may amend a
stock option grant to extend the date of its expiration, waive conditions to
its exercise or reduce the exercise price. The Board of Directors may also
specify in the stock option grant that part or all of the exercise price may
be payable through deferred payment from the proceeds of the sale of some or
all of the Ordinary Shares purchased upon such exercise. As of the date of
this Prospectus, stock options have been granted under the Stock Option Plan
to Mr. French, Ms. Boucher and Mr. Sulikowski exercisable for 400,000 Ordinary
Shares, 200,000 Ordinary Shares, and 300,000 Ordinary Shares, respectively; if
the Underwriters' over-allotment option is exercised in full, Mr. French's,
Ms. Boucher's and Mr. Sulikowski's options will increase to 460,000, 230,000
and 345,000, respectively. The stock options were issued to each upon the
execution of their respective employment agreements with the Company. The
stock option agreements shall be terminated, and the stock options shall not
be exercisable, if the consummation of the Offering does not occur by December
31, 1998. Such stock options have an exercise price equal to the initial
public offering price, and, unless terminated, become exercisable in three
equal installments commencing with the first anniversary of the closing of the
Offering. Notwithstanding the foregoing, such stock options will become
immediately exercisable in full upon a change of control. Such stock options
expire on the earliest of the following dates: (i) immediately upon the
termination of employment for cause, (ii) two years after the termination of
employment resulting from death or disability, (iii) except as provided on a
case-by-case basis, sixty days after the termination of employment for any
reason other than cause, death or disability, or (iv) the tenth anniversary of
the consummation of the Offering. If such stock options are terminated as a
result of termination of employment, such stock options will be exercisable
only to the extent such stock options were exercisable on the date such
employment was terminated. At or prior to the consummation of the Offering,
the Company will grant to Howard Shapiro in his capacity as a consultant for
the Company, stock options exercisable for 100,000 Ordinary Shares (which if
the Underwriters' over allotment option is exercised in full, will increase to
115,000 Ordinary Shares). Such options will have an exercise price equal to
the initial public offering price, and will become exercisable in three equal
installments commencing with the first anniversary of the closing of the
Offering.

In addition, each person who becomes a non-employee Director, as defined in
the Stock Option Plan, at or prior to the consummation of the Offering will be
granted an option to purchase 10,000 Ordinary Shares with an exercise price
equal to the initial public offering price. Such stock options will 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 Ordinary Shares
at each successive annual general meeting after December 31, 1998. These
options will have an exercise price equal to the fair market value of the
Ordinary Shares on the date of grant and shall be immediately exercisable if
granted after the first anniversary of the consummation of the Offering. If
such options are granted prior to the first anniversary of the consummation of
the Offering, such options shall become exercisable on such anniversary.

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<PAGE>

The following table sets forth information concerning the stock options
granted or 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
ASSUMED ANNUAL RATE OF
ORDINARY SHARE PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(4)
------------------------------------------------------- --------------------------------
NUMBER OF
ORDINARY SHARES PERCENT OF TOTAL EXERCISE
UNDERLYING OPTIONS GRANTED TO PRICE EXPIRATION
NAME OPTIONS GRANTED EMPLOYEES PER SHARE DATE 5% 10%
- ---- --------------- ------------------ --------- ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael C. French....... 400,000(1) 44.5% $15.00(2) (3) $ 3,773,368 $ 9,562,455
Henryk Sulikowski....... 300,000(1) 33.3 15.00(2) (3) 2,830,026 7,171,841
Michelle L. Boucher..... 200,000(1) 22.2 15.00(2) (3) 1,886,684 4,781,227
</TABLE>
- --------
(1) If the Underwriters' over-allotment option is exercised in full, the
number of Ordinary Shares underlying Mr. French's, Mr. Sulikowski's and
Ms. Boucher's options will increase to 460,000, 345,000 and 230,000
Ordinary Shares, respectively.
(2) The initial public offering price per Ordinary Share. The stock options
become exercisable in three equal installments commencing with the first
anniversary of the consummation of the Offering.
(3) The options expire on the tenth anniversary of the consummation of the
Offering.
(4) The potential realizable value columns of the table above illustrate the
value that might be realized upon exercise of the options immediately
prior to the expiration of their terms, assuming the specified compounded
rates of appreciation of the price of the Ordinary Shares over the terms
of the options. These amounts do not take into account provisions of
certain options providing for termination of the options following
termination of employment or vesting over periods of up to three years.
The use of the assumed 5% and 10% returns is established by the Commission
and is not intended by the Company to forecast possible future
appreciation of the price of the Ordinary Shares.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of Ordinary Shares
of Holdings by all persons who are expected to beneficially own 5% or more of
the Ordinary Shares upon consummation of the Offering and by each director and
executive officer of Holdings and by all directors and executive officers as a
group.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) NUMBER OF SHARES PERCENT OF CLASS
---------------------------------------- ---------------- ----------------
<S> <C> <C>
Michael C. French(2)(5)(6)................... 152,000 *
Michelle L. Boucher(5)(6).................... 12,000 *
Henryk Sulikowski(6)......................... -- --
Michael Austin(6)............................ -- --
R. Duke Buchan(6)............................ -- --
Robert M. Chmely(6).......................... -- --
David Matthews(6)............................ -- --
Howard Shapiro(6)............................ -- --
Charles J. Wyly, Jr.(3)(6)................... 312,407 1.68%
Sam Wyly(4)(6)............................... 632,013 3.40%
All directors and executive officers as a
group (ten persons)......................... 1,108,420 5.97%
</TABLE>
- --------
*Less than 1%.
(1) The address for each beneficial owner is c/o Scottish Annuity & Life
Holdings, Ltd., Ugland House, P.O. Box 10657APO, George Town, Grand
Cayman, Cayman Islands, British West Indies.
(2) All 152,000 Ordinary Shares are beneficially owned by an irrevocable trust
of which Mr. French and certain family members are beneficiaries. Mr.
French disclaims beneficial ownership of such Ordinary Shares.
(3) All 312,407 Ordinary Shares are beneficially owned by an irrevocable trust
of which Charles J. Wyly, Jr. and certain family members are
beneficiaries. Charles J. Wyly, Jr. disclaims beneficial ownership of such
Ordinary Shares.
(4) All 632,013 Ordinary Shares are beneficially owned by an irrevocable trust
of which Sam Wyly and certain family members are beneficiaries. Sam Wyly
disclaims beneficial ownership of such Ordinary Shares.
(5) Does not include Ordinary Shares issuable upon exercise of the Class A
Warrants not exercisable within 60 days.
(6) Does not include Ordinary Shares issuable upon exercise of stock options
not exercisable within 60 days.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

SCOTTISH ANNUITY RELATIONSHIPS

The Company has entered into the Scottish Annuity Agreement with Scottish
Annuity. See "Business--Scottish Annuity Agreement" for a summary of the terms
of the Scottish Annuity Agreement. Michael C. French, Chief Executive Officer,
President and a Director of Holdings is a director of Scottish Annuity. Ms.
Boucher, Senior Vice President and Chief Financial Officer of Holdings, is the
Manager of Finance and Administration of Scottish Annuity. See "Management--
Executive Officers and Directors."

DC PLANNING RELATIONSHIPS

The Company has also entered into a consulting services agreement with DC
Planning, an insurance consulting firm that develops life insurance products
and acts as a consultant on insurance matters for high net worth families,
trust companies and other fiduciaries. Under the terms of this agreement, DC
Planning will provide certain consulting services to the Company, including
with respect to the development and implementation of its business plan. DC
Planning will be paid $180,000 a year for a term of three years under the
agreement. Howard Shapiro, who will be a Director of Holdings, is the managing
partner of DC Planning. See "Business--Administration and Consulting
Services--DC Planning." At or prior to consummation of the Offering, Mr.
Shapiro, in his capacity as a consultant for the Company, will be granted
stock options exercisable for 100,000 Ordinary Shares (up to 115,000 Ordinary
Shares if the Underwriters' over-allotment option is exercised in full). Such
options are in addition to the stock options exercisable for 10,000 Ordinary
Shares granted to Mr. Shapiro in his capacity as a non-employee director. See
"Management--Stock Option Plan."

DIRECT INVESTORS RELATIONSHIP

The Shareholder Investors, two trusts which are beneficial owners of
outstanding Ordinary Shares of the Company, have agreed to purchase Ordinary
Shares in the Direct Sales and have also received Class A Warrants in
connection with a redemption of outstanding Ordinary Shares. See "--Pre-
Offering Equity Adjustment" and "Direct Sales." One of the trusts is an
irrevocable trust of which Sam Wyly and certain family members are
beneficiaries. The other trust is an irrevocable trust of which Charles J.
Wyly, Jr. and certain family members are beneficiaries. Sam Wyly (the Chairman
of the Board and a Director of the Company) and Charles J. Wyly, Jr. (a
Director of the Company) both disclaim beneficial ownership of such Ordinary
Shares and Class A Warrants.

PRE-OFFERING EQUITY ADJUSTMENT

On October 22, 1998, the Company redeemed 1,100,000 Ordinary Shares of the
1,500,000 Ordinary Shares issued upon formation of the Company. Shareholders
participating in the redemption exchanged such shares for either Class A
Warrants (exercisable for an aggregate 900,000 Ordinary Shares) or nominal
consideration. The shareholders which received Class A Warrants in the
redemption are three irrevocable trusts of which, respectively, Sam Wyly (the
Chairman of the Board and a Director of the Company), Charles J. Wyly, Jr. (a
Director of the Company) and Michael C. French (the Chief Executive Officer,
President and a Director of the Company) and certain family members of each
are beneficiaries. These trusts received Class A Warrants to purchase an
aggregate of 466,667 Ordinary Shares, 233,333 Ordinary Shares and 200,000
Ordinary Shares, respectively. Messrs. French, Sam Wyly and Charles J. Wyly,
Jr. each disclaim beneficial ownership of such Class A Warrants. The Class A
Warrants received in the redemption are exercisable at the initial public
offering price and otherwise have the same terms as other Class A Warrants.
See "Description of Shares--Class A Warrants." The shareholders which received
nominal consideration in the redemption are two irrevocable trusts of which
Sam Wyly and certain family members are beneficiaries and a corporation
wholly-owned by Michelle L. Boucher (the Senior Vice President, Chief
Financial Officer and Secretary of the Company). See Note 8 to the
Consolidated Balance Sheet of the Company.

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<PAGE>

DESCRIPTION OF SHARES

The following summarizes certain provisions of the Memorandum of Association
(the "Memorandum") and the Articles of Association (the "Articles") of the
Company. Such summaries 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
Memorandum and the Articles, including the definitions therein of certain
terms. Copies of the Memorandum and Articles are filed as exhibits to the
Registration Statement of which this Prospectus is a part.

GENERAL

Effective immediately prior to the consummation of the Offering, the
authorized share capital of the Company will consist of 100,000,000 Ordinary
Shares, of which 400,000 Ordinary Shares were outstanding at November 15,
1998, and 50,000,000 Preferred Shares, par value $0.01 per share, none of
which were outstanding at November 15, 1998.

ORDINARY SHARES

The Ordinary Shares offered hereby, upon receipt of payment therefor, will
be validly issued, fully paid and nonassessable. There are no provisions of
Cayman Islands law, the Memorandum or the Articles which impose any limitation
on the rights of shareholders to hold or vote Ordinary Shares by reason of
them not being residents of the Cayman Islands. The Ordinary Shares will be
subject to the express terms of the Preferred Shares and any series thereof.
Holders of the Ordinary Shares have no pre-emptive, redemption, conversion or
sinking fund rights.

Dividend Rights. Holders of Ordinary Shares are entitled to receive
dividends ratably when and as declared by the Board of Directors out of funds
legally available therefor subject to prior payment of Preferred Shares or any
other class or series of shares with special rights to dividends or
distributions, if any.

Liquidation. In the event of any dissolution, liquidation or winding-up of
the Company, whether voluntary or involuntary, after there are paid or set
aside for payment to creditors and the holders of any Preferred Shares or any
other outstanding shares ranking senior to the Ordinary Shares as to
distribution on liquidation, the full amounts to which they are entitled, the
holders of the then outstanding Ordinary Shares shall be entitled to receive,
pro rata according to the number of Ordinary Shares registered in the names of
such shareholders, any remaining assets of the Company available for
distribution to its shareholders.

Voting Rights. The Articles provide that the quorum required for a general
meeting or extraordinary general meeting of the shareholders is presence in
person or by proxy of persons holding at least 50% of the issued and
outstanding voting shares entitled to vote at such meeting (without giving
effect to the limitation on voting rights described below). A quorum for
considering a "special resolution" is presence in person or by proxy of
persons holding at least 66 2/3% of the issued and outstanding voting shares
entitled to vote at such meeting. Subject to applicable law and any provision
of the Articles requiring a greater majority, the Company may from time to
time by special resolution alter or amend the Memorandum or Articles;
voluntarily liquidate, dissolve or wind-up the affairs of the Company;
increase its share capital; consolidate and divide all or any of its share
capital; subdivide the whole or any part of its share capital; reduce its
share capital, any capital redemption reserve fund, or any share premium
account; or change its name or alter its purposes.

Each holder of Ordinary Shares is entitled to one vote per share on all
matters submitted to a vote of shareholders at any such meeting (subject to
the limitation on voting rights described below). All matters, including the
election of Directors, voted upon at any duly held shareholders' meeting at
which a quorum is present will be carried by a majority of the votes cast at
the meeting by shareholders represented in person or by proxy, except (i)
approval of a merger, consolidation, amalgamation or court-sanctioned
reorganization, or the sale, lease or exchange of all or substantially all of
the assets of the Company (except in the case of a transaction between the
Company and any entity which the Company directly or indirectly controls),
which requires (in

60
<PAGE>

addition to any regulatory or court approvals) the approval of the holders of
at least 66 2/3% of the outstanding voting shares, voting together as a single
class at a duly convened meeting; (ii) approval of a special resolution which
requires the approval of at least 66 2/3% of the votes cast by such
shareholders represented in person or by proxy at a duly convened meeting;
(iii) amendment of the Articles, which requires the approval of at least 66
2/3% of the outstanding voting shares, voting together as a single class at a
duly convened meeting; and (iv) as otherwise provided in the Articles. Voting
rights with respect to the Ordinary Shares are noncumulative.

The Articles provide that, except as otherwise required by law and subject
to the terms of any class or series of shares issued by the Company having a
preference over the Ordinary Shares as to dividends or upon liquidation to
elect directors in specified circumstances, extraordinary general meetings of
the shareholders of the Company may be called only by (i) a majority of the
Board of Directors; or (ii) at the request in writing of shareholders owning
at least 50% of the outstanding shares generally entitled to vote, provided
such shareholders deposit at the registered office of the Company a notice
stating the objects of the meeting and signed by such holders.

The Articles provide that shareholders may remove one or more or all of the
Directors from office prior to the expiration of the term of such Director or
Directors, but they may do so only with cause and only by approval of a
special resolution.

Limitation on Voting Rights. Each Ordinary Share has one vote, except that
if and for so 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, 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 the 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 shares of the
Company owned by such person, whether (i) directly, indirectly or
constructively within the meaning of Section 958 of the Code, or (ii)
directly, indirectly or beneficially within the meaning of Section 13(d)
of the Exchange Act (including any shares beneficially owned by any group
of persons as so defined and including any shares that would otherwise be
excluded by the provisions of Section 13(d)(6) thereof) and the rules and
regulations thereunder, as amended from time to time (including any
shares that would otherwise be excluded by the provisions of Rule 13d-4
thereof).

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. The defined term "10% Shareholder" means a person who owns, in
aggregate, (i) directly, indirectly or constructively within the meaning of
Section 958 of the Code, or (ii) directly, indirectly or beneficially within
the meaning of Section 13(d) of the Exchange Act (including any shares
beneficially owned by any group of persons as so defined and including any
shares that would otherwise be

61
<PAGE>

excluded by the provisions of Section 13(d)(6) thereof) and the rules and
regulations thereunder, as amended from time to time (including any shares
that would otherwise by excluded by the provisions of Rule 13d-4 thereof),
issued shares of the Company representing 10% or more of the total combined
voting rights attaching to the issued shares of the Company.

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 shares in respect of which such
shareholder is the registered holder, relationships with other shareholders or
other persons 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 Articles contain several provisions
restricting the transferability of Ordinary Shares. Except as described below
with respect to transfers of Ordinary 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 Ordinary 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 Ordinary 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 insured or reinsured or proposing to be insured or
reinsured by 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.

The Company's Directors will not decline to register any transfer of
Ordinary 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 insured or reinsured or proposing to be insured or reinsured by the
Company or any such subsidiary, to adverse tax or regulatory treatment in any
jurisdiction, under the Company's Articles, 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 to the
extent tradeable as marketable securities 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.

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<PAGE>

The Directors are empowered to require any shareholder or any person proposing
to acquire shares of the Company to provide information as to such matters as
the Directors may require for the purpose of giving effect to the foregoing
restrictions on transfer, issuance and repurchase of shares. The Directors may
decline to register any transfer or to effect any issuance or repurchase of
shares if any such shareholder or proposed acquirer fails to respond to such a
request or submits incomplete or untrue information.

Maples and Calder, Cayman Islands counsel to the Company, has advised the
Company that while the precise form of the restrictions on transfers contained
in the Articles is untested, as a matter of general principle, restrictions on
transfers are enforceable under Cayman Islands law and are not uncommon. The
transferor of such Ordinary Shares will be deemed to own such Ordinary Shares
for dividend, voting and reporting purposes until a transfer of such Ordinary
Shares has been registered on the Register of Members of the Company.

The restrictions on voting, transfer and ownership of 10% or more of a class
of the Company's shares described above, as well as the provisions discussed
below under "Anti-Takeover Effects of Articles of Association," may have the
effect of discouraging an attempt to obtain control of the Company through
certain actions other than negotiating with the Board of Directors.

The Articles also provide that the Board may suspend the registration of
transfer of Ordinary Shares for such periods as the Board may determine, but
shall not suspend the registration of transfer for more than 45 days in any
year.

Lien on Shares. The Articles provide that the Company will have a first and
paramount lien on all shares (whether fully paid-up or not) registered in the
name of a shareholder for all debts, liabilities or engagements to or with the
Company (whether presently payable or not) by such shareholder or such
shareholder's estate and that upon notice, the Company may sell any shares on
which the Company has a lien to the extent any sum in respect of which the
lien exists is presently payable. Registration of a transfer of any shares
subject to the Company's lien will operate as a waiver of such lien.

Unilateral Repurchase Right. The Articles provide that if the Company's
Directors determine that beneficial ownership of the Company's issued shares
by any shareholder may result in adverse tax, regulatory or legal consequences
to the Company, any subsidiary or shareholder thereof or any person insured or
reinsured or proposing to be insured or reinsured by the Company or any such
subsidiary, they may, in their absolute discretion, repurchase all or part of
the shares held by such shareholder or direct such shareholder to sell and
transfer all or part of such shares to one or more designated third parties.
The price to be paid for such shares will be the fair market value of such
shares as determined in accordance with the Articles.

Preferred Shares

The Articles authorize the Directors to create and issue one or more class
or series of Preferred Shares and determine the rights and preferences of each
such class or series, to the extent permitted by the Articles and applicable
law. Among other rights, the Directors may determine: (i) the number of shares
of that series and the distinctive designation thereof; (ii) the voting
powers, full or limited, if any, of the shares of that series (subject to the
restrictions on voting described above); (iii) the rights in respect of
dividends on the shares of that class or series, whether dividends shall be
cumulative and, if so, from which date or dates and the relative rights or
priority, if any, of payment of dividends on shares of that class or series
and any limitations, restrictions or conditions on the payment of dividends;
(iv) the relative amounts, and the relative rights or priority, if any, of
payment in respect of shares of that class or series, which the holders of the
shares of that class or series shall be entitled to receive upon any
liquidation, dissolution or winding up of the Company; (v) the terms and
conditions (including the price or prices, which may vary under different
conditions and at different redemption dates), if any, upon which all or any
part of the shares of that class or series may be redeemed, and any
limitations, restrictions or conditions on such redemption; (vi) the terms, if
any, of any purchase, retirement or sinking fund to be provided for the shares
of that class or series; (vii) the terms, if any, upon which the shares of
that class or series shall be convertible into or exchangeable for shares of
any other class or series, or other securities, whether

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<PAGE>

or not issued by the Company; (viii) the restrictions, limitations and
conditions, if any, upon issuance of indebtedness of the Company so long as
any shares of that class or series are outstanding; (ix) restrictions on the
issuance of shares of the same series or any other series; and (x) any other
preferences and relative, participating, optional or other rights and
limitations as the Board of Directors determines which are not inconsistent
with applicable law or the Articles. The Company has no current intention to
issue any Preferred Shares.

WARRANTS

Class A Warrants. Upon completion of the Offering and the Direct Sales,
Class A Warrants to purchase an aggregate of 2,850,000 Ordinary Shares will be
outstanding. 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. 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 the tenth anniversary
of the consummation of the Offering.

The Class A Warrant holders have been granted certain registration rights
with respect to the sale of the Ordinary Shares underlying the Class A
Warrants, and have entered into lock-up agreements with the Underwriters and
the Company for a one-year period (or six months with respect to the Class A
Warrants to be received by the Non-Shareholder Investors in the Direct Sales)
from the date of this Prospectus. 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 200,000 Ordinary Shares will be
outstanding. The exercise price of the Class B Warrants is equal to the
initial public offering price, subject to adjustment as provided in the Class
B Warrants. The Class B 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 B
Warrants then outstanding will become immediately exercisable. The Class B
Warrants will expire on the fifth anniversary of the consummation of the
Offering.

The Class B Warrant holders have been granted certain registration rights
with respect to the sale of the Ordinary Shares underlying the Class B
Warrants, and have entered into lock-up agreements with the Underwriters for a
one-year period from the date of this Prospectus. See "Shares Eligible for
Future Sale" and "Underwriting."

Class C Warrants. The Company's agreement with Westport provides that the
Class C Warrants to purchase up to an aggregate of 750,000 Ordinary Shares
will be issuable to Westport annually beginning on or about January 1, 2000
and each January 1 thereafter for a four-year period. The exercise price of
the Class C Warrants will be the initial public offering price per share,
subject to the same adjustment as provided in the Class A Warrants. The number
of Class C Warrants, if any, issued to Westport will be based upon the amount
of annualized "gross profit" to the Company from the variable life insurance
policies issued by the Company during the preceding 12 calendar months (or, in
the case of the first year, from the date of the Offering to January 1, 2000)
to customers identified and referred by Westport. In general, the number of
Class C Warrants to be issued to Westport on January 1, 2000 and each
subsequent anniversary to and including January 1, 2003 shall be based on the
following formula: 25% of the annualized "gross profit" for the prior year
divided by 1/15th of the "warrant value" on the applicable anniversary date.
The warrant values will be arbitrarily determined by adding $2.50 to the
spread between the exercise price of the Class C Warrants and the market price
of the Ordinary Shares on the applicable anniversary date. By way of example,
if the gross profits to the Company for a given year is $350,000 and the
market price of the Ordinary Shares on the applicable anniversary date is $20
(solely for purposes of illustration and not as a projection as to the future
market value of the Ordinary Shares), the warrant value will equal $7.50
($2.50 plus the difference between the $20 market price and the $15 exercise
price) divided by 15, which is $.50, and, thus, the number of Class C Warrants
to be issued will be 25% of $350,000 divided by $.50, which equals 175,000
Class C Warrants. The arrangement will terminate at January

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1, 2001 if the annualized "gross profit" for business identified and referred
by Westport in the preceding two years is less than $200,000 per year, and at
January 1, 2002, if such "gross profit" for the preceding two calendar years
is less than $250,000. At any termination date the Class C Warrants not yet
issued will be canceled. "Gross profits" will be the amount of annualized
revenues (determined in accordance with GAAP) attributable to business
identified and referred by Westport, less any amortization of deferred
acquisition costs payable to third parties in connection with such business.
The Company has also agreed to grant certain registration rights to Westport
with respect to the sale of the Ordinary Shares underlying the Class C
Warrants.

OPTIONS

The Company has issued options to purchase an aggregate of 900,000 Ordinary
Shares pursuant to the Stock Option Plan and will issue an additional 170,000
options to non-employee Directors and a consultant of the Company upon
consummation of the Offering. An additional 530,000 Ordinary Shares are
reserved for issuance upon exercise of options that may be granted in the
future under the Stock Option Plan. If the Underwriters' over-allotment option
is exercised in full, the number of Ordinary Shares issuable upon the exercise
of options granted to management and options to be granted to non-employee
Directors and a consultant of the Company upon consummation of the Offering
will increase to 1,220,000 Ordinary Shares and the number of Ordinary Shares
reserved for issuance upon exercise of options that may be granted in the
future under the Stock Option Plan will decrease to 380,000. See "Management--
Stock Option Plan."

TRANSFER AGENT

The Company's registrar and transfer agent for all Ordinary Shares and
Preferred Shares is Harris Trust and Savings Bank.

DIFFERENCES IN CORPORATE LAW

The Companies Law of the Cayman Islands is modeled after that of England,
and differs in certain respects from such laws generally applicable to United
States corporations and their shareholders. Set forth below is a summary of
certain significant provisions of the Companies Law (including any
modifications adopted pursuant to the Articles) applicable to the Company
which differ from provisions generally applicable to United States
corporations and their shareholders. These statements are a brief summary of
certain significant provisions of Cayman Islands Companies Law, and as such,
do not deal with all aspects of every law that may be relevant to corporations
and their shareholders.

Interested Directors. The Articles 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. A director having an interest in a transaction
is entitled to vote in respect of such transaction provided that the nature of
the interest is disclosed at or prior to the vote on such transaction.

Mergers and Similar Arrangements. The Company may acquire the business of
another company and carry on such business when it is within the objects of
the Memorandum. Except as provided below, the approval of the holders of at
least 66 2/3% of the outstanding shares entitled to vote, voting together as a
single class, at a meeting called for such purpose is required for the Company
to (i) merge, consolidate or amalgamate with another company; (ii) reorganize
or reconstruct itself pursuant to a plan sanctioned by the Cayman Islands
courts; or (iii) sell, lease or exchange all or substantially all of its
assets. In order to merge or amalgamate with another company or to reorganize
and reconstruct itself, as a general rule, the relevant plan would need to be
approved in accordance with the provisions of the Companies Law by the holders
of not less than 75% of the votes cast at a general meeting called for that
purpose and thereafter sanctioned by the Cayman Islands court. In respect of
such a court-sanctioned reorganization, while a dissenting shareholder may
have the right to express to a Cayman Islands court his view that the
transaction sought to be approved would not provide the shareholders with the
fair value of their shares, (i) the court ordinarily would not disapprove the
transaction on that ground absent other

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evidence of fraud or bad faith; and (ii) if the transaction were approved and
consummated, the dissenting shareholder would have no rights comparable to the
appraisal rights (as here defined, rights to receive payments in cash for the
judicially determined value of their shares) ordinarily available to
dissenting shareholders of United States corporations.

Takeovers. Cayman Islands law also provides that where an offer is made by a
company for shares of another 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 dissenting shareholders to
transfer their shares on the terms of the offer. A dissenting shareholder 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 discretion to prevent the requirement of such transfer, which the
court will be unlikely to do unless there is evidence of fraud or bad faith or
collusion as between the offeror and the holders of the shares who have
accepted the offer as a means of unfairly forcing out minority shareholders.

Shareholders' Suits. With respect to shareholders' suits, the Cayman Islands
courts ordinarily would be expected to follow English precedent, which would
permit a minority shareholder to commence an action against or a derivative
action in the name of the corporation only (i) where the act complained of is
alleged to be beyond the corporate power of the corporation or illegal; (ii)
where the act complained of is alleged to constitute a fraud against the
minority perpetrated by those in control of the corporation; (iii) where the
act requires approval by a greater percentage of the corporation's
shareholders than actually approved it; or (iv) where there is an absolute
necessity to waive the general rule that a shareholder may not bring such an
action in order that there not be a denial of justice or a violation of the
corporation's memorandum of association.

Indemnification; Exculpation. Cayman Islands law permits a company's
articles of association to provide for the indemnification of officers and
directors, except to the extent that such provision may be held by the Cayman
Islands courts to be contrary to public policy (for instance, for purporting
to provide indemnification against the consequences of committing a crime). In
addition, an officer or director may not be indemnified for his own dishonesty
or wilful neglect or default.

The Articles contain provisions providing for the indemnity by the Company
of an officer, director, employee or agent of the Company, or any person
serving at the request of the Company as an officer, director, employee or
agent of any other company, for threatened, pending or contemplated actions,
suits or proceedings, whether civil, criminal, administrative or
investigative, brought against such indemnified person by reason of the fact
that such person was an officer, director, employee or agent of the Company or
serving in such requested capacity. In addition, the Board of Directors may
authorize the Company to purchase and maintain insurance on behalf of any such
person against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under the
provisions of the Articles.

The Company plans to purchase directors and officers liability insurance
from third parties for its directors and executive officers. The Company also
plans to enter into indemnity agreements with each of its executive officers
and directors.

The Articles provide that directors of the Company shall have no personal
liability to the Company or its shareholders for monetary damages for breach
of fiduciary or other duties as a director, except (i) for any breach of a
director's duty of loyalty to the Company or its shareholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) a payment of a dividend on stock of the
Company or a purchase or redemption of stock of the Company in violation of
law; or (iv) for any transaction from which a director derived an improper
personal benefit.

Inspection of Books and Records. Shareholders of a Cayman Islands
corporation have no general rights to inspect or obtain copies of the list of
shareholders or corporate records of a corporation.

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ANTI-TAKEOVER EFFECTS OF ARTICLES OF ASSOCIATION

The Articles contain certain provisions that make more difficult the
acquisition of control of the Company by means of a tender offer, open market
purchase, proxy fight or otherwise. These provisions are designed to encourage
persons seeking to acquire control of the Company to negotiate with the Board
of Directors. The Board of Directors believe that, as a general rule, the
interests of the Company's shareholders would be best served if any change in
control results from negotiations with the Board of Directors. The Board of
Directors would negotiate based upon careful consideration of the proposed
terms, such as the price to be paid to shareholders, the form of consideration
to be paid and the anticipated tax effects of the transaction. However, these
provisions could have the effect of discouraging a prospective acquiror from
making a tender offer or otherwise attempting to obtain control of the
Company. In addition, the Company's Articles of Association provide that
voting rights with respect to Ordinary Shares directly or indirectly
beneficially owned by any person or group of persons directly or indirectly
beneficially owning 10% or more of the outstanding combined voting power of
the issued shares of the Company will be limited to a voting power of less
than 10%, which significantly limits the ability of a prospective acquiror to
effect a takeover of the Company. To the extent these provisions discourage
takeover attempts, they could deprive shareholders of opportunities to realize
takeover premiums for their shares or could depress the market price of the
Ordinary Shares.

In addition to those provisions of the Articles discussed above, set forth
below is a description of other relevant provisions of the Articles. The
descriptions are intended as a summary only and are qualified in their
entirety by reference to the Articles, which are filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

No Shareholder Action by Written Consent. The Articles provide that any
action required or permitted to be taken by the shareholders of the Company
must be taken at a duly called annual general or extraordinary general meeting
of the shareholders of the Company and may not be taken by consent in writing
or otherwise. The affirmative vote of the holders of at least 66 2/3% of the
outstanding shares generally entitled to vote, voting together as a single
class, is required to amend or repeal, or adopt any provision inconsistent
with, the foregoing provisions of the Articles.

Availability of Shares for Future Issuance. The availability for issue of
shares by the Directors of the Company without further action by shareholders
(except as may be required by Nasdaq National Market requirements) could be
viewed as enabling the Board of Directors to make more difficult a change in
control of the Company, including by issuing Preferred Shares convertible into
Ordinary Shares, warrants or rights to acquire Ordinary Shares to discourage
or defeat unsolicited stock accumulation programs and acquisition proposals
and by issuing shares in a private placement or public offering to dilute or
deter stock ownership of persons seeking to obtain control of the Company. The
Company has no plans to issue any shares other than possibly pursuant to
employee benefit plans.

Shareholder Proposals. The Articles provide that if a shareholder desires to
submit a proposal for consideration at an annual general meeting or
extraordinary general meeting, or to nominate persons for election as
directors, written notice of such shareholder's intent to make such a proposal
or nomination must be given and received by the Secretary of the Company at
the principal executive offices of the Company not later than (i) with respect
to an annual general meeting, 60 days prior to the anniversary date of the
immediately preceding annual general meeting; and (ii) with respect to an
extraordinary general meeting, the close of business on the tenth day
following the date on which notice of such meeting is first sent or given to
shareholders. The notice must describe the proposal or nomination in
sufficient detail for a proposal or nomination to be summarized on the agenda
for the meeting and must set forth (i) the name and address of the
shareholder; (ii) a representation that the shareholder is a holder of record
of shares of the Company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to present such proposal or
nomination; and (iii) the class and number of shares of the Company which are
beneficially owned by the shareholder. In addition, the notice must set forth
the reasons for conducting such proposed business at the meeting and any
material interest of the shareholder in such business. In the case of a
nomination of any person for election as a director, the notice shall

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set forth: (i) the name and address of any person to be nominated; (ii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons; (iii) such other information
regarding such nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to Regulation 14A under the
Exchange Act, whether or not the Company is then subject to such Regulation;
and (iv) the consent of each nominee to serve as a director of the Company, if
so elected. The presiding officer of the annual general meeting or
extraordinary general meeting shall, if the facts warrant, refuse to
acknowledge a proposal or nomination not made in compliance with the foregoing
procedure.

The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares entitled to vote, voting together as a single class, shall be required
to amend or repeal, or adopt any provision inconsistent with, the foregoing
provision of the Articles.

The advance notice requirements regulating shareholder nominations and
proposals may have the effect of precluding a contest for the election of
directors or the introduction of a shareholder proposal if the procedures
summarized above are not followed and may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to introduce a proposal.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and the Direct Sales, the Company will have
outstanding 18,568,440 Ordinary Shares, Class A Warrants to purchase an
aggregate of 2,850,000 Ordinary Shares, Class B Warrants to purchase an
aggregate of 200,000 Ordinary Shares and options to purchase an aggregate of
1,070,000 Ordinary Shares. If the Underwriters' over-allotment option is
exercised in full, 21,080,940 Ordinary Shares will be outstanding and the
number of Ordinary Shares issuable upon exercise of outstanding options will
increase to 1,220,000 Ordinary Shares. The number of Ordinary Shares issuable
upon exercise of the Class A Warrants and Class B Warrants will not change if
the Underwriters' over-allotment option is exercised. The Class A Warrants,
Class B Warrants and the options are not currently exercisable. In addition,
Class C Warrants exercisable for up to 750,000 Ordinary Shares may be issued
pursuant to the Company's agreement with Westport beginning January 1, 2000.
See "Management -- Stock Option Plan," "Description of Shares -- Warrants" and
"--Options," and "Direct Sales." Except as disclosed in "Description of
Shares -- Restrictions on Transfer" and as discussed below with respect to the
lock-up agreements, the Ordinary Shares sold in the Offering will be freely
transferable without restriction or further registration under the Securities
Act, except for any of those Ordinary 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 of such rule). The 400,000 Ordinary Shares currently outstanding
which were issued upon formation of the Company, the Ordinary Shares to be
sold to the Direct Investors in the Direct Sales and the Ordinary Shares
underlying the Class A Warrants, Class B Warrants, any Class C Warrants and
the options are, or upon issuance will be, "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, including such rule.

The Company, its officers, directors and shareholders, the Shareholder
Investors, the Non-Shareholder Investors and the holders of the Class A
Warrants and Class B Warrants have executed agreements (the "lock-up
agreements") pursuant to which each has agreed that they will not, for a
period of one year (or six months with respect to the Ordinary Shares and the
Class A Warrants to be purchased by the Non-Shareholder Investors in the
Direct Sales) from the date of this Prospectus, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, transfer, assign, hypothecate,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, transfer, assignment,
hypothecation, grant of any option to purchase or other sale or disposition)
of any Ordinary Shares or other capital stock of the Company or any securities
convertible into, or exercisable or exchangeable for, any Ordinary Shares or
other capital stock of the Company without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, and (other
than with respect to the Company and the holders of the Class B Warrants) the
Company, provided that in the case of holders of the Class B Warrants, consent
to waiver of such restrictions may be granted during such period only with
respect to transactions with certain holders of interests in the limited
partnerships holding such warrants. Such agreements do not prevent the Company
from granting additional options under the Stock Option Plan so long as such
options do not become exercisable until one year from the date of the
Prospectus. The Company also has agreed not to file any registration statement
on Form S-8 with respect to, or otherwise register for resale with the
Commission, Ordinary Shares underlying stock options for a period of one year
from the date of this Prospectus. Prudential Securities Incorporated and the
Company may, in their sole discretion, at any time and without notice, release
all or any portion of the securities subject to such lock-up agreements,
except that in the case of holders of the Class B Warrants, such release may
be granted only with respect to transactions with certain holders of interests
in the limited partnerships holding such warrants.

Prior to the Offering, there has not been any public market for the Ordinary
Shares. No prediction can be made as to the effect, if any, future sales of
Ordinary Shares, or the availability of Ordinary Shares for future sale, will
have on the market price of the Ordinary Shares prevailing from time to time.
Sales of substantial amounts of Ordinary Shares in the public market could
adversely affect the prevailing market prices and impair the Company's ability
to raise capital through the sale of equity securities.

The holders of the Class A Warrants and the Class B Warrants have been
granted certain registration rights with respect to the sale of the Ordinary
Shares underlying such warrants, which rights are not exercisable prior

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to the first anniversary of the consummation of the Offering. The Direct
Investors with respect to the Ordinary Shares to be purchased in the Direct
Sales and the Ordinary Shares underlying Class A Warrants to be purchased in
the Direct Sales have also been granted such registration rights, which rights
are not exercisable prior to the expiration of the six months period following
the consummation of the Offering with respect to the Non-Shareholder Investors
and the first anniversary of the consummation of the Offering with respect to
the Shareholder Investors. The Company has agreed not to permit the
acceleration of the vesting of such rights to register such securities (the
"Registrable Securities") without the prior written consent of Prudential
Securities Incorporated on behalf of the Underwriters.

The holders of the Registrable Securities have the right to require the
registration under the Securities Act of all or a portion of the Registrable
Securities for sale in an underwritten public offering if, at any time on or
after the first anniversary of the consummation of the Offering (on or after
the expiration of the six month period following the consummation of the
Offering with respect to the Non-Shareholder Investors) and before the tenth
anniversary thereof (or with respect to the Class B Warrants, the fifth
anniversary thereof), holders of not less than 250,000 Ordinary Shares which
are, or would be upon exercise of Class A Warrants, Class B Warrants or other
convertible, exchangeable or exercisable securities, Registrable Securities
give written notice to the Company requesting such registration. The holders
of the Registrable Securities also have the right to require the registration
under the Securities Act of all or a portion of the Registrable Securities 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 (on or
after the expiration of the six month period following the consummation of the
Offering with respect to the Non-Shareholder Investors) and before the tenth
anniversary thereof (or with respect to the Class B Warrants, the fifth
anniversary thereof), any holder or holders of the Registrable Securities give
written notice to the Company requesting such registration. In addition, if at
any time after the first anniversary of the consummation of the Offering and
before the tenth anniversary thereof (or with respect to the Class B Warrants,
the seventh anniversary thereof), the Company proposes to file a registration
statement under the Securities Act to register any of its Ordinary Shares for
public sale under the Securities Act (whether proposed to be offered for sale
by the Company or by any other person), the holders of the Registrable
Securities have the right to request the inclusion of all or a portion of
their Ordinary Shares underlying such warrants in the registration statement,
and the Company is required to use commercially reasonable efforts to include
such shares in the registration statement.

In any such registration undertaken pursuant to the registration rights of
the holders of the Registrable Securities, the Company is required to bear all
expenses incident to the performance of its registration obligations,
including the fees and expenses of its counsel, accountants and experts
incurred in connection with such registration, printing expenses, registration
filing fees, securities exchange listing or quotation fees and other similar
registration expenses. The Company has also agreed to indemnify the holders of
the Registrable Securities and any underwriters participating in any such
registration and contribute to any losses arising out of certain liabilities
incurred in connection with such registration, including liabilities under the
Securities Act.

If the Company issues the Class C Warrants pursuant to its agreement with
Westport, the Company will grant to the holders of such Class C Warrants
registration rights on substantially similar terms as those granted to the
holders of Class A Warrants and the Class B Warrants and to the Direct
Investors.

No prediction can be made as to the effect, if any, that future sales of
Ordinary Shares, or the availability of Ordinary Shares for future sale, will
have on the market price of the Ordinary Shares prevailing from time to time.
Sales of substantial amounts of Ordinary Shares in the public market following
the Offering, or the perception that such sales could occur, could adversely
affect the market price of the Ordinary Shares and may make it more difficult
for the Company to sell its equity securities in the future at a time and 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 Ordinary
Shares underlying such securities to be sold in the market, such sales could
have an adverse effect on the market price for the Ordinary Shares.

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DIRECT SALES

In transactions directly with the Company, the Direct Investors have agreed
to purchase for investment an aggregate of 1,418,440 Ordinary Shares and Class
A Warrants exercisable for an aggregate of 400,000 Ordinary Shares. The
aggregate purchase price of $20.0 million to be paid by the Direct Investors
is based on a price of $14.10 (the initial public offering price per Ordinary
Share less the underwriting discounts and commissions in the Offering) for (i)
one Ordinary Share and (ii) the right to purchase 0.282 of an Ordinary Share
under the Class A Warrants. The Direct Sales will be consummated
simultaneously with the consummation of the Offering. The issuance of the
Ordinary Shares and the Class A 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 and compliance with the parties' respective covenants set forth in
the relevant securities purchase agreement. The Ordinary Shares and Class A
Warrants obtained by the Direct Investors in the Direct Sales are subject to
lock-up agreements for a period of one year in the case of the Shareholder
Investors and six months in the case of the Non-Shareholder Investors. The
Company has granted the Direct Investors rights to require the Company to
register the Ordinary Shares they purchase in the Direct Sales and upon
exercise of the Class A Warrants. Such rights become exercisable on the first
anniversary of the consummation of the Offering with respect to the
Shareholder Investors and on the six month anniversary of the consummation of
the Offering with respect to the Non-Shareholder Investors. The Company has
agreed not to permit the acceleration of the vesting of such rights without
the prior written consent of Prudential Securities Incorporated on behalf of
the Underwriters. See "Shares Eligible for Future Sales" and "Underwriting."

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MATERIAL TAX CONSEQUENCES

The following summary of the taxation of Holdings and Scottish Insurance and
the taxation of Holdings' shareholders is based upon current law. Legislative,
judicial or administrative changes may be forthcoming that could affect this
summary. In the opinion of Jones, Day, Reavis & Pogue, United States tax
counsel to the Company, the discussion of United States tax matters set forth
below states the material United States federal income tax considerations
relevant to an investment in the Ordinary Shares, subject to the
qualifications and assumptions set forth in such discussion. In the opinion of
Maples and Calder, Cayman Islands counsel to the Company, the discussion of
Cayman Islands tax matters set forth below states the material Cayman Islands
tax considerations relevant to an investment in the Ordinary Shares, subject
to the qualifications and assumptions set forth in such discussion. The
statements as to factual matters and 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 HOLDINGS AND SCOTTISH INSURANCE

Cayman Islands

There are no income, corporation, capital gains or other taxes in effect in
the Cayman Islands on the basis of the present legislation. Holdings and
Scottish Insurance have received an undertaking from the Governor-in-Council
of the Cayman Islands pursuant to the provisions of the Tax Concessions Law,
as amended (1995 Revision), that until the year 2018 (i) no subsequently
enacted law imposing any tax on profits, income, gains or appreciation shall
apply to Holdings or Scottish Insurance, and (ii) no such tax and no tax in
the nature of an estate duty or an inheritance tax shall be payable on any
shares, debentures or other obligations of Holdings or Scottish Insurance. No
capital or stamp duties are levied in the Cayman Islands on the issue,
transfer or redemption of Ordinary Shares. The only taxes or fees which will
be chargeable on Holdings in the Cayman Islands are (i) an annual charge
calculated on the nominal amount of the authorized share capital of Holdings,
which is currently $700 per annum and (ii) an annual licensing fee payable in
respect of Scottish Insurance's unrestricted Class B insurance license and a
government fee totaling approximately $6,500.

The Board of Directors of Holdings intend to conduct the affairs and
business of Holdings so that, save for any tax which may be withheld in
certain countries in respect of income or gains, Holdings will not be liable
to tax in any jurisdiction on the income or gains (including gains arising in
the form of discounts or premiums) derived from its investments. The
investments of Holdings will be made with a view of minimizing any such
withholding tax. However, there can be no guarantee that the tax position of
Holdings will not be challenged by the revenue authorities of one or more
countries.

The foregoing is based on current law and practice in the Cayman Islands and
is subject to changes therein.

United States

Holdings' Board of Directors has adopted operating guidelines, developed in
consultation with its United States counsel, that prescribe how Holdings and
Scottish Insurance are to conduct their businesses in a manner consistent with
their intent not to be engaged in a trade or business within the United
States. Accordingly, Holdings and Scottish Insurance 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
Holdings and/or Scottish Insurance 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. 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

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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.

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). Scottish Insurance will be subject to such taxes on
dividends from United States companies in which it makes 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 premiums paid to Scottish
Insurance is currently 1%.

Other Countries

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

TAXATION OF SHAREHOLDERS

Cayman Islands Taxation

There is no tax treaty between the Cayman Islands and the U.S. regarding
withholding. Currently, there is no Cayman Islands withholding tax on
dividends paid by Holdings or Scottish Insurance.

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 Ordinary 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 Ordinary Shares. This summary deals only with Ordinary
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 Ordinary 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 Ordinary 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 Ordinary Shares will be treated
as ordinary dividend income to the extent of Holdings' 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 "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 Holdings'
current and accumulated earnings and profits will first be applied to reduce
the holder's tax basis in the Ordinary Shares, and any amount in excess of tax
basis will be treated as gain from the sale or exchange of the Ordinary
Shares.

Classification of Holdings and Scottish Insurance as Controlled Foreign
Corporations. Under Section 951(a) of the Code, each "United States
shareholder" of a foreign corporation that is a "controlled foreign

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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 or her pro-rata share of the CFC's "subpart F income," even if
the subpart F income is not distributed. Subpart F income includes, among
other things, "insurance income," which is generally defined as income
(including premium and investment income) attributable to the issuing (or
reinsuring) of any insurance or annuity contract in connection with risks
located in, or liabilities arising out of, activities in or lives or health of
residents of a country other than the country under the laws of which the
insurance company is organized. Accordingly, it is anticipated that
substantially all of the income of Scottish Insurance 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 Scottish Insurance 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 Holdings' share ownership following the Offering
and the restrictions on transfer, issuance or repurchase of Ordinary Shares,
and because Holdings' Articles of Association provide that no single
shareholder is permitted to hold 10% or more of the total combined voting
power of Holdings, shareholders of Holdings 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
Scottish Insurance'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 Scottish Insurance's stock. Scottish Insurance 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 Scottish Insurance by
vote or value for an uninterrupted period of at least 30 days during any
taxable year. Holdings anticipates that United States persons will own
directly, indirectly or constructively, 25% or more of the stock of Scottish
Insurance by vote or value for the requisite period; accordingly, the RPII
rules of the Code will apply to Scottish Insurance unless one of several
exceptions (discussed below) applies to Scottish Insurance.

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 Scottish Insurance, (ii) RPII, determined on a gross basis, is less than
20% of Scottish Insurance's gross insurance income for the taxable year, (iii)
Scottish Insurance elects to be taxed on its RPII as if the RPII were
effectively connected with the

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<PAGE>

conduct of a United States trade or business and to waive all treaty benefits
with respect to RPII or (iv) Scottish Insurance elects to be treated as a
United States corporation. Scottish Insurance does not intend to make either
of the described elections. Thus, only exceptions (i) and (ii) may be
available.

Holdings does not expect that Scottish Insurance will knowingly enter into
variable life insurance or reinsurance arrangements in which, in the
aggregate, the direct or indirect insureds are, or are related to, owners of
20% or more of the Ordinary Shares. If this expectation is correct, exception
(i) will, and exception (ii) may, apply to Scottish Insurance. 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 Holdings (and therefore, indirectly in Scottish Insurance) 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 Scottish Insurance'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 Scottish Insurance
has earned in each taxable year, Holdings 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 Holdings and are United States
persons. Scottish Insurance 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 Holdings. In addition, Scottish
Insurance 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 Holdings or related to a shareholder during the year. For any
taxable year in which Scottish Insurance's gross RPII is 20% or more of its
gross insurance income for the year, Holdings 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 Holdings is unable to
determine whether a direct or indirect owner of shares is a United States
person, Holdings may assume that such owner is not a United States person,
thereby increasing the per share RPII amount for all United States
shareholders. Although Scottish Insurance 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 Scottish Insurance's Ordinary Shares and Scottish
Insurance'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 Ordinary Shares on the last day of that year
would be required to include in its gross income its share of Scottish
Insurance's RPII for such year, whether or not distributed. A United States
person who owns Ordinary Shares during the Company's taxable year but not on
the last day of the taxable year on which Scottish Insurance is a CFC 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
Scottish Insurance's RPII. Correspondingly, a United States person who owns
directly or indirectly, Ordinary Shares on the last day of the taxable year on
which Scottish Insurance is a CFC 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 Ordinary Shares for the entire year.

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 Holdings and Scottish Insurance 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

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<PAGE>

arrangements or otherwise." In addition, there can be no assurance that the
IRS will not challenge any determinations by Holdings or Scottish Insurance as
to the amount, if any, of RPII that should be includable in the income of a
holder of Ordinary 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 Ordinary Shares should
consult his tax advisor as to the effects of these uncertainties.

Information Reporting. Each United States person who is a direct or indirect
shareholder of the Company on the last day of Holdings' 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 Scottish
Insurance 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. Scottish Insurance 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) Scottish Insurance's gross RPII constitutes less than 20% of its
gross insurance income or (ii) less than 20% of the voting power or value of
Scottish Insurance's Ordinary Shares is owned by direct or indirect insureds
and persons related to such insureds. For any year in which Scottish
Insurance'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 Scottish Insurance's Ordinary
Shares, Holdings 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 Ordinary 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
Holdings 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 Ordinary 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 Ordinary 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 Ordinary 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 Ordinary 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 Ordinary Shares. If
the shareholder's holding period for such Ordinary 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

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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 Holdings 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 Ordinary Shares because Holdings 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 Form 5471 will apply to dispositions of Ordinary
Shares. In that event, Holdings would notify shareholders that Section 1248 of
the Code and the requirement to file Form 5471 will apply to dispositions of
Ordinary Shares. Thereafter, Holdings 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 Ordinary Shares. Holdings would attach to this
notice a copy of Form 5471 completed with all Holdings information and
instructions for completing the shareholder information.

Foreign Tax Credit. Because it is anticipated that United States persons
will own a majority of Holdings' 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 Holdings (including any gain from the sale of
Ordinary 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. Holdings 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.

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 Holdings 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 Ordinary 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 Ordinary 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.

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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 predominately 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. Scottish Insurance expects to be primarily
and predominantly engaged in an insurance business and does not expect to 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 Holdings should be deemed to own the assets and to have received
the income of Scottish Insurance directly for purposes of determining whether
Holdings 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 Holdings or
Scottish Insurance 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 Ordinary
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 Ordinary Shares to United States persons. Thus, a holder of
Ordinary 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.

United States Taxation--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, Ordinary 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 Ordinary Shares of
Holdings.

* * *

The foregoing discussion is based upon current law. The tax treatment of an
owner of Ordinary Shares, or a person treated as an owner of Ordinary 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 Ordinary Shares. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED
STATES TAX CONSEQUENCES OF OWNERSHIP AND DISPOSITION OF THE ORDINARY SHARES.

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UNDERWRITING

The underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, CIBC Oppenheimer Corp., ING Baring Furman Selz LLC
and Warburg Dillon Read LLC 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 Ordinary Shares set forth below
opposite their respective names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER ORDINARY SHARES
----------- ---------------
<S> <C>
Prudential Securities Incorporated.........................
CIBC Oppenheimer Corp. ....................................
ING Baring Furman Selz LLC.................................
Warburg Dillon Read LLC....................................
----------
Total...................................................... 16,750,000
==========
</TABLE>

The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the Ordinary Shares set forth above if any are purchased. The
closing of the Offering made hereby is conditioned upon the simultaneous
closing of the Direct Sales by the Company.

The Underwriters, through the Representatives, have advised the Company that
they propose to offer the Ordinary 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
Ordinary Share; and that such dealers may reallow a concession of $ per
Ordinary 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 an
additional 2,512,500 Ordinary 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
Ordinary 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 Ordinary 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, officers and shareholders, the Shareholder
Investors, the Non-Shareholder Investors and the holders of Class A Warrants
and Class B Warrants have executed lock-up agreements pursuant to which each
has agreed that they will not, for a period of one year (or six months with
respect to the Ordinary Shares and Class A Warrants to be purchased by the
Non-Shareholder Investors in the Direct Sales) after the date of this
Prospectus, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, transfer, assign, hypothecate, grant any option to purchase, or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, transfer, assignment, hypothecation, grant of any
option to purchase or other sale or disposition) of any Ordinary Shares or
other capital stock of the Company or any other securities convertible into,
or exercisable or exchangeable for, any Ordinary Shares or other capital stock
of the Company, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, and (other than with respect to
the Company and the holders of the Class B Warrants) the Company, provided
that in the case of holders of the Class B Warrants, consent to waiver of such
restrictions may be granted during such period only

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<PAGE>

with respect to transactions with certain holders of interests in the limited
partnerships holding such warrants. Such agreements do not prevent the Company
from granting options under the Stock Option Plan so long as such options do
not become exercisable for one year from the date of the Prospectus. The
Company also has agreed not to file any registration statement on Form S-8
with respect to, or otherwise register for resale with the Commission,
Ordinary Shares underlying stock options for a period of one year from the
date of this Prospectus. Prudential Securities Incorporated and the Company
may, in their sole discretion, at any time and without notice, release all or
any portion of the securities subject to such lock-up agreements, except that
in the case of holders of the Class B Warrants, such release may be granted
only with respect to transactions with certain holders of interests in the
limited partnerships holding such warrants.

The Company has agreed to indemnify the several Underwriters and contribute
to any 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 Ordinary
Shares. The initial public 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 and out of the net proceeds received
therefrom, the Company will pay Prudential Securities Incorporated an advisory
fee equal to $800,000 (plus reimbursement of related out-of-pocket expenses)
for investment banking and financial advisory services in connection with the
Offering. The Company has entered into an investment advisory agreement with
Prudential Investment, as one of the Investment Managers. See "Business--
Investment Managers." Prudential Securities Incorporated and Prudential
Investment are wholly owned subsidiaries of The Prudential Insurance Company
of America. The Roman Arch Fund L.P. and The Roman Arch Fund II L.P., each of
which is a limited partnership and an affiliate of Prudential Securities
Incorporated and makes investments for the benefit of limited partners who are
employees of Prudential Securities Incorporated, purchased, respectively,
120,000 and 80,000 Class B Warrants for respective aggregate purchase prices
of $181,200 and $120,800. The exercise price of the Class B Warrants is equal
to the initial public offering price, subject to adjustment as provided in the
Class B Warrants. The Class B Warrants become exercisable in three equal
annual installments commencing on the first anniversary of the consummation of
the Offering. Each of The Roman Arch Fund L.P. and The Roman Arch Fund II
L.P., as a holder of the Class B Warrants, has executed a lock-up agreement
for a period of one year after the date of this Prospectus as described above.

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 Ordinary
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 Ordinary 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 Ordinary Shares in connection with the
Offering than they are committed to purchase from the Company, and in such
case may purchase Ordinary 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 Ordinary Shares, by exercising the Underwriters' over-allotment
option referred to previously. In addition, the Representatives, on behalf of
the Underwriters, may impose "penalty bids" under contractual arrangements
with the Underwriters whereby they may reclaim from an Underwriter (or any
dealer participating in the Offering) for the account of the other
Underwriters, the selling concession with respect to Ordinary Shares that are
distributed in the Offering but subsequently purchased by the Representatives
for the account of the Underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Ordinary 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.

80
<PAGE>

LEGAL MATTERS

The validity of the Ordinary Shares under Cayman Islands law will be passed
upon for the Company by Maples and Calder, Cayman Islands. Certain matters as
to United States law in connection with the Offering will be passed upon for
the Company by Jones, Day, Reavis & Pogue, Dallas, Texas. Michael C. French,
Chief Executive Officer, President and a Director of the Company, serves as a
consultant to Jones, Day, Reavis & Pogue. Certain matters as to state
insurance regulatory laws will be passed upon for the Company by The Bernstein
Law Firm, Washington, D.C. 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.

EXPERTS

The consolidated balance sheet of the Company as of June 9, 1998, included
in this Prospectus and in the Registration Statement has been audited by Ernst
& Young, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and is included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

81
<PAGE>

GLOSSARY OF SELECTED LIFE INSURANCE AND ANNUITY 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 16 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.

Account value........................ The amount held in either the general
account or a separate account of an
insurance company to maintain
policyholder assets and support
liabilities.

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

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

Annuity.............................. A periodic payment contract purchased
from an insurance company that
typically offers tax-deferred growth
of the investment until earnings are
withdrawn.

Annuity payouts...................... An amount paid at regular intervals
under one of several plans 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.

Automatic reinsurance treaty......... Reinsurance of a specified type or
category of risk defined in a
reinsurance agreement (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. Also
known as treaty reinsurance.

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

82
<PAGE>

Broker...............................
One who negotiates contracts of
insurance or reinsurance, receiving a
commission for placement and other
services rendered, between (1) a
policy-holder and a primary insurer,
on behalf of the insured party, (2) a
primary insurer and reinsurer, on
behalf of the primary insurer, or (3)
a reinsurer and a retrocessionaire,
on behalf of the reinsurer.

Ceding............................... The reinsurance by a primary insurer
or reinsurer of all or a portion of
its risk with a reinsurer or
retrocessionaire. In doing so, the
party "cedes" business and is
referred to as the "cedent" or
"ceding" company.

A form of reinsurance with respect to
which the risk generally is reinsured
Coinsurance.......................... 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 An individual or group life insurance
("COLI")............................. 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.

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 an expectation
of variability in 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 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.

83
<PAGE>

Fixed annuities......................
General account annuities which
guarantee a contract holder that a
specific sum of money will be paid in
the future, either as a lump sum or
as periodic income.

General account...................... The main account of an insurer through
which premiums are collected and the
insurer's liabilities are incurred
where the insurer bears the relevant
risks.

Indemnity reinsurance................ An arrangement in which an insurance
company, the reinsurer, in
consideration of a premium, agrees to
indemnify another insurance or
reinsurance company, known as the
ceding company, against all or a
portion of the insurance or
reinsurance risks underwritten by the
ceding company under one or more
policies. Indemnity reinsurance does
not legally discharge the primary
insurer from its liability with
respect to its obligations to the
insured.

Modified coinsurance................. A form of reinsurance that differs
from coinsurance only in that
reserves are retained by the ceding
company while all risks remain 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.

Net amount at risk................... The difference between the cash value
of a variable life insurance policy
and the death benefit provided by
such policy.

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.

Policy............................... The printed document issued by an
insurance or reinsurance company that
states the terms of the insurance or
reinsurance contract.

Policy 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 reinsurance or insurance
it has written or reinsured.

Premiums written..................... Premiums written for a given period.

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

84
<PAGE>

Qualified purchaser..................
As defined in Section 2(a)(51) of the
1940 Act and related rules and
regulations.

Quota share reinsurance..............
A term describing all forms of
reinsurance in which the reinsurer
shares a pro-rata part of the
original premiums and losses of the
ceding company under a quota share.
(Also known as proportional
reinsurance, "pro-rata contract"
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.

The amount or portion of insurance
Retention............................ risk that a ceding insurer retains
for its own account. Any insurance
issued in excess of the retention is
reinsured. In proportional treaties,
the retention may be a percentage of
the original policy's limit.

Retrocessional reinsurance; A transaction whereby a reinsurer
Retrocessionaire..................... cedes to another reinsurer, the
retrocessionaire, all or part of the
reinsurance that the first reinsurer
has assumed. Retrocessional
reinsurance does not legally
discharge the ceding reinsurer from
its liability with respect to its
obligations to the reinsured.

A segregated account established by an
Separate account..................... insurance company to hold
policyholder or contract holder
assets and liabilities on behalf of
such policyholder or contract holder.
The funds in a separate account are
maintained separately from those in
other separate accounts and the
general account and are not subject
to the claims of the insurer's
general creditors.

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

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

Surrender charge.....................
A deferred sales charge to be applied
if an annuity or life insurance
policy is surrendered for its cash
value prior

85
<PAGE>

to a specified date. Such a charge is
intended to recover all or a portion
of the policy acquisition costs and
act as a deterrent to early surrender.

The insurer's or reinsurer's process of
Underwriting......................... 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 that an insurance or
reinsurance company can underwrite.
Reinsurance serves to increase an
insurer's underwriting capacity by
reducing its exposure from particular
risks.

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 or
policy 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.

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

Variable life insurance.............. A form of life insurance that offers
fixed or flexible premiums and a
minimum death benefit as well as
providing a return linked to an
underlying portfolio of securities
that are held in a separate account of
the insurer.

Whole life insurance................. A form of life insurance which
provides guaranteed death benefits and
a guaranteed cash value to policy
holders.

86
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

INDEX TO CONSOLIDATED BALANCE SHEET

<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheet as of June 9, 1998............................. F-3
Notes to Consolidated Balance Sheet....................................... F-4
Consolidated Balance Sheet as of September 30, 1998 (unaudited) and June
9, 1998.................................................................. F-14
Consolidated Statement of Operations and Accumulated Deficit for the
period from June 9, 1998 (date of inception) through September 30, 1998
(unaudited).............................................................. F-15
Consolidated Statement of Cash Flows for the period from June 9, 1998
(date of inception) through September 30, 1998 (unaudited)............... F-16
Notes to Consolidated Financial Statements (unaudited).................... F-17
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
Scottish Annuity & Life Holdings, Ltd.

We have audited the accompanying consolidated balance sheet of Scottish
Annuity & Life Holdings, Ltd. (the "Company") as of June 9, 1998. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.

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

In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of
Scottish Annuity & Life Holdings, Ltd. at June 9, 1998 in conformity with
accounting principles generally accepted in the United States of America.

Ernst & Young

George Town, Grand Cayman
British West Indies
October 7, 1998
Except for Notes 5, 7 and 8
as to which the date is October 26, 1998

F-2
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEET
(STATED IN UNITED STATES DOLLARS)
JUNE 9, 1998

<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and cash equivalents............................................. $600,000
--------
Total assets.......................................................... $600,000
========
SHAREHOLDER'S EQUITY
Share capital, par value $0.01 per share:
Issued and fully paid: 1,500,000 Ordinary Shares.................... $ 15,000
Additional paid in capital.......................................... 585,000
--------
Total shareholder's equity............................................ $600,000
========
</TABLE>

See accompanying notes.

F-3
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET

JUNE 9, 1998

1. ORGANIZATION

Scottish Annuity & Life Holdings, Ltd. (formerly, Scottish Life Holdings,
Ltd.) ("Holdings") was incorporated as an exempted company with limited
liability on May 12, 1998 under the laws of the Cayman Islands. Holdings has
been organized to provide customized variable life insurance policies and
reinsurance of in-force blocks of fixed annuities and similar contracts
through its wholly-owned subsidiary, Scottish Annuity & Life Insurance Company
(Cayman) Ltd. (formerly, Scottish Life Assurance (Cayman) Ltd.) ("Scottish
Insurance", and together with Holdings, the "Company"). In addition, Holdings
may reinsure in-force blocks of other types of annuity contracts and life
insurance policies through Scottish Insurance. On July 8, 1998, Scottish
Insurance received an unrestricted Class "B' insurer's license under the
insurance laws of the Cayman Islands. The Company's fiscal year end is
December 31. Holdings is planning an initial public offering of its Ordinary
Shares (the "Offering"). Prior to June 24, 1998, all Ordinary Shares of
Holdings were owned by Scottish Holdings, Ltd., a Cayman Islands company
("SHL").

The Company executed a binder with a United States reinsurer on September
18, 1998 to assume reinsurance, on a retrocession basis, for approximately
35,000 in-force universal life insurance policies with an aggregate face value
of approximately $5.0 billion. The reinsurance will be structured on a monthly
renewable term basis with the Company reinsuring only the mortality risk under
such policies, up to $1.5 million per life. The Company intends to retrocede
risks in excess of $500,000 per life. The Company's binder is conditioned on
the consummation of the Offering.

During the period from its incorporation to June 9, 1998, the Company did
not incur any income or expenses that are required to be reported in a
statement of income or a statement of cash flows under United States generally
accepted accounting principles. Therefore, the consolidated statements of
income and cash flows have not been presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying balance sheet is prepared in accordance with accounting
principles generally accepted in the United States of America 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 and reporting policies
adopted by the Company.

PREMIUM INCOME AND RELATED EXPENSES

The variable life insurance policies are considered universal life-type
contracts and, along with reinsured variable annuity contracts, will be
accounted for under Financial Accounting Standards Board's ("FASB") Statement
No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-
Duration Contracts and for Realized Gains and Losses from the Sale of
Investments." Premiums from variable life insurance policies and reinsured
variable annuity contracts will be reported as deposits to policyholders'
account balances which will be maintained in separate accounts. Revenues from
these policies will consist of amounts assessed and recognized in income on a
quarterly basis 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
and interest credited to policyholders' account balances.

Premiums from reinsured fixed annuity policies and reinsured traditional
life insurance contracts will be recognized generally as revenue when due from
policyholders. Benefits and expenses are matched with such

F-4
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998
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. Premiums from reinsurance of investment type fixed annuity
contracts will be reported as deposits. Revenues from these contracts will
consist of amounts assessed quarterly 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.

ADMINISTRATIVE SERVICES FEES

The Company charges administrative services fees to The Scottish Annuity
Company (Cayman) Ltd., a wholly owned subsidiary of SHL ("Scottish Annuity"),
quarterly in advance (see Note 7). Such fees are recognized into income
ratably.

DEFERRED POLICY ACQUISITION COSTS

For variable life insurance and reinsurance of investment type fixed annuity
contracts and reinsured variable annuity contracts, deferred policy
acquisition costs, consisting of commissions, underwriting and policy issue
expenses, 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
will be 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.

For fixed annuity reinsurance policies and reinsured traditional life
insurance contracts, deferred policy acquisition costs, consisting of ceding
commissions, will be charged to expense using assumptions consistent with
those used in computing policy reserves. Assumptions as to anticipated
premiums will be estimated at the date of the policy issuance and will be
consistently applied during the life of the policies. Deviations from
estimated experience will be reflected in earnings in the period such
deviations occur. For these policies, the amortization periods generally will
be for the estimated life of the policy.

POLICYHOLDERS' ACCOUNT BALANCES AND FUTURE POLICY BENEFITS

The development of policy reserves for the Company's policies will require
management to make estimates and assumptions regarding mortality, lapse,
expense and investment experience. 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.

Future benefit liabilities of variable life insurance policies will be
estimated using 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. Policy
reserves will be established to meet the Company's estimated future benefit
liabilities. Future benefit liabilities of reinsured traditional life
insurance contracts will be estimated using actuarial assumptions as to
mortality, morbidity, terminations, investment yields and expenses applicable
at the time the insurance contracts are made. As variable life insurance
policies are issued, the Company's associated mortality risk may tend to
fluctuate more than would be expected than if the Company had a larger pool of
insureds. The Company will allocate a portion of its capital to further
provide for potential fluctuations in volatility of mortality experience. For
the Company's reinsured fixed annuity business, such estimates will be
primarily based on historical experience and information provided by ceding
companies.

F-5
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998

When the liabilities for future policy benefits plus the present value of
expected future gross premiums for a policy are insufficient to provide for
expected future benefits and expenses for that policy, a premium deficiency
reserve will be established by a charge to income. Benefit liabilities for
fixed annuities during the accumulation period are equal to the accumulated
present value of expected future payments.

Premiums for variable life insurance policies and reinsured variable annuity
contracts will be reported as deposits to policyholders' account balances
which will be maintained in separate accounts. The funds in these separate
accounts will be managed by private independent money managers for the benefit
of such policyholders. The Company will not provide any investment management
or advisory services to any policyholder. Revenues from these contracts will
consist of amounts assessed during the period against policyholders' separate
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 policyholders'
separate account balances and interest credited to policyholders' separate
account balances.

INVESTMENTS

The Company intends to categorize all investments in marketable securities
as available-for-sale and, accordingly, such securities will be carried at
fair value. Realized gains and losses are determined on a specific
identification method. The cost of fixed income securities will be adjusted
for amortization of premiums and discounts. Realized gains and losses will be
recorded in the statement of operations and included in investment income.
Unrealized gains and losses will be reported as a separate component of
shareholder's equity. Other than temporary declines in value will be charged
to income and a new cost basis will be established for the securities.

SEPARATE ACCOUNT ASSETS AND LIABILITIES

Separate accounts will be recorded at the fair value of the underlying
investments less mortality charges, policy administration charges and
surrender charges. The funds in the separate accounts will not be part of the
Company's general funds and will not be available to meet the general
obligations of the Company.

Separate account liabilities will represent the policyholders' separate
account values. They will consist of the initial premiums paid after
consideration of net investment gains/losses attributable to each separate
account, less fees and withdrawals.

TRANSLATION OF FOREIGN CURRENCIES

The Company's functional currency is the United States dollar. Premiums
written and receivable in foreign currencies, if any, will be recorded at
exchange rates prevailing on the effective date of the contract 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.

DEFERRED OFFERING COSTS

Offering costs incurred in connection with the Offering, including certain
amounts payable for investment banking and financial advisory services, will
be deferred and deducted from the gross proceeds of the Offering. Deferred
offering costs incurred through October 7, 1998, amount to approximately
US$1.9 million.

F-6
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998
EARNINGS PER ORDINARY SHARE

The Company will calculate earnings per Ordinary Share based upon the
guidance provided in FASB 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
Ordinary Share and earnings per Ordinary Share assuming dilution.

Basic earnings per Ordinary Share will be calculated by dividing net income
attributable to holders of Ordinary Shares by the weighted average number of
Ordinary Shares outstanding during the period.

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

CONSOLIDATION

The Company's balance sheet includes the accounts of Holdings and Scottish
Insurance after the elimination of intercompany balances.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include fixed deposits with an original maturity,
when purchased, of three months or less. Cash and cash equivalents are
recorded at face value, which approximates fair value. All cash and cash
equivalents are held with a single financial institution in the Cayman
Islands. Management does not anticipate any material losses as a result of
this credit concentration.

ACCOUNTING STANDARDS

The Financial Accounting Standards Board has issued the following accounting
standard that will affect the Company.

FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998 and requires adoption no later than
fiscal quarters or fiscal years beginning after June 15, 1999. The new
standard establishes accounting and reporting standards for derivative
instruments. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction.

The Company has not yet completed its evaluation of the effect this standard
will have on the Company.

F-7
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998

3. SHAREHOLDER'S EQUITY

PREFERRED SHARES

The Company is authorized to issue 50,000,000 Preferred Shares of par value
$0.01 each. At the balance sheet date there were no Preferred Shares issued or
outstanding.

ORDINARY SHARES

The Company is authorized to issue 100,000,000 Ordinary Shares of par value
$0.01 each. At the balance sheet date 1,500,000 Ordinary Shares were
outstanding.

WARRANTS

In connection with its initial capitalization, the Company issued Class A
Warrants to purchase an aggregate of 1,550,000 Ordinary Shares to Michael C.
French, Michelle L. Boucher and certain companies wholly owned by certain
shareholders of SHL. The aggregate consideration paid for these warrants of
$100,000 is reflected as additional paid-in-capital. The Class A Warrants were
issued on June 9, 1998 at the initial stage of the development of the
Company's business plan when the feasibility of proceeding with the offering
was uncertain. Effective September 3, 1998, the Class A Warrant agreements
were superseded by Amended and Restated Class A Warrant agreements with no
material impact on the operation of the agreements. The consideration paid for
the Class A Warrants was determined to be fair value in the judgment of the
Company in light of such uncertainty. The exercise price of the Class A
Warrants will be equal to the initial public offering price per share of the
Company's Ordinary Shares. The Class A Warrants become exercisable in equal
amounts over a three year period commencing on the first anniversary of the
consummation of the Offering. The Class A Warrants will expire on the tenth
anniversary of the consummation of the Offering.

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for warrants issued to employees because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing warrants issued to
employees. Under APB 25, because the exercise price of the Class A Warrants
issued to employees equals the initial public offering price of the underlying
stock on the date of issuance, no compensation expense is recognized.

The Class B Warrants, discussed in Note 8 below, were issued on June 18,
1998 after the Company's business plan had undergone further development and
the Company was in a position to proceed with the Offering. As a result, the
Class B Warrants were issued for greater consideration. Effective September 3,
1998, the Class B Warrant agreements were superseded by Amended and Restated
Class B Warrant agreements with no material impact on the operation of the
agreements.

The Class C Warrants, discussed in Note 7 below, are issuable to Westport
Partners (Bermuda), Ltd. ("Westport") annually over the four year term of the
agreement with Westport based on the achievement of certain revenues
attributable to business identified or referred by Westport.

4. STOCK OPTION PLAN

On June 18, 1998, the Board of Directors adopted a Stock Option Plan (the
"Plan") under which it may grant, subject to certain restrictions,
nonstatutory stock options ("Options"). The aggregate number of Ordinary
Shares for which Options may be granted under the Plan is limited to 1,500,000
shares and no individual shall

F-8
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998
be granted Options for more than 1,000,000 shares under the Plan. Effective
September 2, 1998, the Amended and Restated 1998 Stock Option Plan increased
the aggregate number of Ordinary Shares for which options may be granted from
1,500,000 to 2,000,000 shares. Options may be granted to eligible employees,
non-employee Directors, advisors and consultants. Each grant will specify the
required time of continuing service by the Participant (as defined in the
Plan) with the Company or any other conditions to be satisfied before the
Option, or installments thereof will become exercisable.

The Plan will be administered by the Board of Directors. The Board of
Directors has the authority to select the parties to be granted Options and to
set the date of grant and other terms of the Options granted under the Plan.

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

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation"("FASB 123"), requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

The Company has elected to apply the fair value method of FASB 123 in
accounting for stock options granted to non-employees who provide services to
the Company.

5. TAXATION

There is presently no taxation imposed on income or capital gains by the
Government of the Cayman Islands. If any taxation were to be enacted, Holdings
and Scottish Insurance have been granted exemptions therefrom until 2018. 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.

6. STATUTORY REQUIREMENTS AND DIVIDEND RESTRICTIONS

Under the Insurance Law of the Cayman Islands (1998 Revision), Scottish
Insurance must maintain a net capital worth of US$240,000.

Holdings' ability to pay dividends depends on the ability of Scottish
Insurance to pay dividends to Holdings. While Holdings itself is not subject
to any significant legal prohibitions on the payment of the dividends,
Scottish Insurance will be subject to Cayman Islands regulatory constraints
which affect its ability to pay dividends to Holdings. Scottish Insurance is
prohibited from declaring or paying a dividend if such payment would reduce
its net capital worth below US$240,000.

7. MATERIAL AGREEMENTS

SCOTTISH ANNUITY AGREEMENT

Scottish Insurance has entered into an Insurance Administration, Services
and Referral Agreement (the "Scottish Annuity Agreement"), as amended, with
Scottish Annuity dated as of July 1, 1998, and effective October 1, 1998,
pursuant to which Scottish Insurance will provide Scottish Annuity with a
variety of insurance administration,

F-9
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998
accounting and other services, including (i) investment fund accounting
reporting for variable annuity products, (ii) monitoring compliance with the
diversification, investor control and certain other requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), (iii) administrative
services in the issuance by Scottish Annuity of variable annuity products and
documents related thereto, (iv) servicing of variable annuity products after
issuance by Scottish Annuity, (v) accounting for investment, capital and
income and expense activities and maintenance of individual ledgers for
investment funds in which each annuity product is invested, (vi) preparing
financial statements of Scottish Annuity and (vii) controlling all
disbursements from Scottish Annuity and authorizing such disbursements upon
instructions from Scottish Annuity. These services will be provided by
Scottish Insurance personnel. Scottish Annuity personnel will conduct all
other administrative and accounting services related to its variable annuity
products.

As compensation for the services rendered by Scottish Insurance during the
term of the Scottish Annuity Agreement, Scottish Annuity will pay to Scottish
Insurance an amount equal to 0.50% per annum of the separate account value of
each annuity contract issued by Scottish Annuity subject to a minimum of
U.S.$25,000 per year. In addition, Scottish Annuity will reimburse Scottish
Insurance for all out-of-pocket fees, costs and expenses incurred or advanced
by Scottish Insurance on behalf of Scottish Annuity in connection with the
Scottish Annuity Agreement.

The Scottish Annuity Agreement will continue in effect until December 31,
1999 and will thereafter be automatically renewed for successive one-year
periods, unless canceled by either party not less than 60 days prior to the
commencement of a renewed term. In addition, the Scottish Annuity Agreement
will terminate earlier under specified circumstances (e.g. bankruptcy or
uncured defaults under the agreement). Scottish Annuity and Scottish Insurance
have agreed to indemnify each other and their respective employees for certain
liabilities.

In addition, pursuant to separate agreements and as partial consideration
for entering into the Scottish Annuity Agreement, Scottish Insurance will
sublease to Scottish Annuity a portion of its leased space at its executive
offices in the Cayman Islands and Scottish Annuity has sold certain of its
computer hardware and software to Scottish Insurance.

AGREEMENT WITH IRM CAYMAN

Scottish Insurance retained IRM Cayman, a member company of International
Risk Management Group, Inc. ("IRMG"), an affiliate of Swiss Reinsurance, as of
June 30, 1998, to act as the Company's licensed insurance manager in the
Cayman Islands and to supplement from time to time the Company's
administrative staff in the Cayman Islands. As the Company's licensed
insurance manager in the Cayman Islands, IRM Cayman will prepare the Company's
annual report required to be filed with the Cayman Islands Monetary Authority,
submit any changes or amendments to the Company's business plan required to be
filed with the Cayman Islands Monetary Authority and annually certify as to
the Company's compliance with all applicable requirements of the Cayman
Islands Monetary Authority. The Company's agreement with IRM Cayman may be
terminated by either party upon 90 days advance written notice. The Company
pays IRM Cayman an annual retainer of $25,000, and IRM Cayman bills for its
actual services on an hourly basis.

F-10
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998
WESTPORT AGREEMENT

In an effort to facilitate its marketing efforts, the Company has entered
into an agreement with Westport, a developer and administrator of insurance
products for international insurance brokers, insurance companies and
corporations and an affiliate of Westport Worldwide, pursuant to which
Westport will provide non-exclusive distribution services with respect to the
Company's variable life insurance products. In addition, Westport may be
retained to provide administration services for certain variable life
insurance products that the Company issues.

All of Westport's distribution activities will be undertaken outside the
United States and Westport has agreed to comply with all of the Company's
operating guidelines. For its distribution activities, the Company will issue
to Westport up to 750,000 Class C Warrants to purchase up to 750,000 Ordinary
Shares at an exercise price equal to the initial public offering price per
Ordinary Share. The Class C Warrants are issuable over a four year period on
January 1, 2000 and on each anniversary thereafter (to and including January
1, 2003) in an amount to be determined by a formula based on the revenue for
the preceding calendar year from variable life insurance policies issued by
the Company to customers identified and referred by Westport. The Class C
Warrants, if issued, will be for a term expiring ten years from the date of
the Offering. These warrants will be accounted for under the fair value
method, when issued, in accordance with FASB 123.

MILLIMAN & ROBERTSON AGREEMENT

DC PLANNING AGREEMENT

The Company has entered into a consulting services agreement with DC
Planning subject to the consummation of the Offering. DC Planning is an
insurance consulting firm that develops life insurance products and acts as a
consultant on insurance matters for high net worth families, trust companies
and other fiduciaries. Under the terms of the agreement, DC Planning will
provide certain consulting services to the Company, including with respect to
the development and implementation of its business plan. DC Planning will be
paid $180,000 a year for a term of three years under the agreement. Howard
Shapiro, who will be a Director of Holdings, is the managing partner of DC
Planning.

PIMCO AGREEMENT

The Company has entered into an investment advisory agreement (the "PIMCO
Agreement") with Pacific Investment Management Company ("PIMCO") pursuant to
which PIMCO will manage a portion of the Company's investment portfolio. Under
the terms of the PIMCO Agreement, the Company will pay PIMCO an annual fee
equal to 0.50% of the market value of the first $25 million of the Company's
assets managed by PIMCO, 0.375% of the market value on the next $25 million of
the Company's assets under management and 0.25% thereafter. The foregoing fees
are payable quarterly in advance based on the market value of the Company's
investment portfolio managed by PIMCO at the beginning of the billing period.
The PIMCO Agreement will continue in effect on a month to month basis and may
be terminated by either party effective at the end of the month upon 30 days
advance notice. The Company may also terminate the PIMCO Agreement effective
upon notice but will be obligated to pay the applicable fee for 30 days
thereafter.

F-11
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998

GENERAL RE AGREEMENT

The Company has entered into an investment advisory agreement (the "General
Re Agreement") with General Re-New England Asset Management, Inc. ("General
Re") pursuant to which General Re will manage a portion of the Company's
investment portfolio. Under the terms of the General Re Agreement, the Company
will pay General Re an annual fee equal to 0.20% of the market value of the
first $50 million of the Company's assets under management, 0.15% on the
market value of the next $50 million of the Company's assets under management
and 0.12% on the market value of the Company's assets under management in
excess of $100 million. The foregoing fees are payable at the end of each
calendar quarter for services provided during the prior three months. The
General Re Agreement may be terminated by either party upon thirty days
written notice and will remain in effect until terminated.

PRUDENTIAL INVESTMENT AGREEMENT

The Company has entered into an investment advisory agreement (the
"Prudential Agreement") with The Prudential Investment Corporation
("Prudential") pursuant to which Prudential will manage a portion of the
Company's investment portfolio. Under the terms of the Prudential Agreement,
the Company will pay Prudential an annual fee equal to 0.20% of the market
value of the first $50 million of the Company's assets under management and
0.15% on the market value of the Company's assets in excess of $50 million
under management. The foregoing fees will be payable at the end of each
calendar quarter for services provided during the prior three months. The
Prudential Agreement may be terminated at any time by the Company or with 45
days advance notice by Prudential.

OTHER AGREEMENTS

The Company had previously entered into a series of other agreements with
respect to its planned operations. As a result of changing market conditions
certain of those agreements have been terminated and replaced with the
agreements described herein.

8. SUBSEQUENT EVENTS

The Company entered into Warrant Purchase Agreements whereby The Roman Arch
Fund L.P. and The Roman Arch Fund II L.P. purchased an aggregate of 200,000
Class B Warrants for an aggregate purchase price of $302,000. The exercise
price of the Class B Warrants will be equal to the initial public offering
price per Ordinary Share, and such Class B Warrants become exercisable in
equal amounts over a three year period commencing one year after the Offering
and expire five years after the consummation of the Offering. Management is of
the view that the agreed sale price of the Class B Warrants represented fair
value at the time of purchase. The Roman Arch Fund L.P. and The Roman Arch
Fund II L.P. are each limited partnerships and affiliates of Prudential
Securities Incorporated, one of the underwriters of the Offering, and make
investments for the benefit of limited partners who are employees of
Prudential Securities Incorporated.

The Company has agreed to pay, upon consummation of the Offering, a fee of
$800,000 (plus reimbursement of related out-of-pocket expenses) to Prudential
Securities Incorporated for investment banking and financial advisory services
in connection with the Offering.

Effective June 24, 1998, SHL transferred to its shareholders all of its
Ordinary Shares in Holdings by way of a distribution.

Effective September 9, 1998, Holdings changed its name from Scottish Life
Holdings, Ltd. to Scottish Annuity & Life Holdings, Ltd. and Scottish
Insurance changed its name from Scottish Life Assurance (Cayman) Ltd. to
Scottish Annuity & Life Insurance Company (Cayman) Ltd.

F-12
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED BALANCE SHEET--CONTINUED

JUNE 9, 1998

On October 22, 1998, two shareholders of the Company (the "Shareholder
Investors") and Maverick Fund USA, Ltd., Maverick Fund, L.D.C. and Maverick
Fund II, Ltd. (collectively, the "Non-Shareholder Investors," and together
with the Shareholder Investors, the "Direct Investors") have agreed to
purchase for investment an aggregate of 1,418,440 Ordinary Shares and Class A
Warrants exercisable for an aggregate of 400,000 Ordinary Shares. The
aggregate purchase price of $20.0 million to be paid by the Direct Investors
is based on a price of $14.10 (the initial public offering price per Ordinary
Share less the underwriting discounts and commissions in the Offering) for (i)
one Ordinary Share and (ii) the right to purchase 0.282 of an Ordinary Share
under the Class A Warrants. Such purchases by the Direct Investors will be
consummated simultaneously with the consummation of the Offering.

On October 23, 1998, in consideration of $9,677.42, Michael C. French
transferred 150,000 Class A Warrants to two investors.

On October 22, 1998, the Company paid nominal consideration and issued
900,000 Class A Warrants (see also Note 3) in order to reacquire and cancel on
a pro-rata basis, 1,100,000 of its issued and outstanding Ordinary Shares.

On October 22, 1998, the Company further amended its Stock Option Plan to
reduce the aggregate number of Ordinary Shares for which Options can be
granted from 2,000,000 to 1,600,000 shares (see also Note 4). In addition, a
provision was added relating to the granting of options to eligible non-
employee directors. As of October 22, 1998, Options for 900,000 Ordinary
Shares had been granted to Participants in the Plan. Options for an additional
170,000 Ordinary Shares will be granted to certain Participants in the Plan
prior to consummation of the Offering.

F-13
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEET
(STATED IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 9, 1998 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $600,000 $ 311,173
Deferred offering costs.............................. -- 1,461,553
Other assets......................................... -- 158,593
-------- ----------
Total assets......................................... $600,000 $1,931,319
======== ==========
LIABILITIES
Due to related party................................. $ -- $ 168,783
Accounts payable and accrued expenses................ -- 975,417
-------- ----------
Total liabilities.................................... -- 1,144,200
SHAREHOLDERS' EQUITY
Share capital, par value $0.01 per share:
Issued and fully paid: 1,500,000 Ordinary Shares... 15,000 15,000
Additional paid in capital......................... 585,000 887,000
Accumulated deficit.................................. -- (114,881)
-------- ----------
Total shareholders' equity........................... 600,000 787,119
-------- ----------
Total liabilities and shareholders' equity........... $600,000 $1,931,319
======== ==========
</TABLE>

See accompanying notes.

F-14
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
(STATED IN UNITED STATES DOLLARS)

PERIOD FROM JUNE 9, 1998 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30, 1998
------------------
(UNAUDITED)
<S> <C>
INCOME
Interest income............................................. $ 5,850
----------
EXPENSES
Salaries and benefits....................................... 68,368
Recruitment expenses........................................ 20,490
Professional fees........................................... 16,939
Miscellaneous expenses...................................... 10,930
Administrative expenses..................................... 4,004
----------
Total expenses.............................................. 120,731
----------
Net loss, being accumulated deficit at end of period........ $ (114,881)
==========
Basic and diluted loss per Ordinary Share................... $ (.08)
==========
Weighted average and diluted weighted average number of
Ordinary Shares outstanding................................ 1,500,000
==========
</TABLE>

See accompanying notes.

F-15
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(STATED IN UNITED STATES DOLLARS)

PERIOD FROM JUNE 9, 1998 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30, 1998
-------------------
(UNAUDITED)
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (114,881)
Adjustment to reconcile net loss to net cash used in
operating activities
Changes in assets and liabilities:
Deferred offering costs............................... (1,461,553)
Other assets.......................................... (158,593)
Due to related party.................................. 168,783
Accounts payable and accrued expenses................. 975,417
-----------
Net cash used in operating activities..................... (590,827)
FINANCING ACTIVITIES
Issuance of Class B Warrants.............................. 302,000
-----------
Net cash provided by financing activities................. 302,000
-----------
Net change in cash and cash equivalents................... (288,827)
Cash and cash equivalents at beginning of period.......... 600,000
-----------
Cash and cash equivalents at end of period................ $ 311,173
===========
</TABLE>

See accompanying notes.

F-16
<PAGE>

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1998 (UNAUDITED)

1. BASIS OF PRESENTATION

The unaudited consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
of America and include all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
period presented. All such adjustments are, in the opinion of management, of a
normal recurring nature. All significant intercompany balances and
transactions have been eliminated. Results of operations for the period ended
September 30, 1998 are not necessarily indicative of results to be expected
for the full year.

These unaudited consolidated financial statements and notes should be read
in conjunction with the audited consolidated balance sheet and notes of the
Company at June 9, 1998 included in pages F-1 through F-13.

2. DUE TO RELATED PARTY

Due to related party is payable on demand and non-interest bearing, and is
comprised of expenses incurred for travel and other general costs that are
payable to The Scottish Annuity Company (Cayman), Ltd., a wholly owned
subsidiary of SHL.

3. DEFERRED OFFERING COSTS

4. SHAREHOLDERS' EQUITY WARRANTS

The Company entered into Warrant Purchase Agreements whereby The Roman Arch
Fund L.P. and The Roman Arch Fund II L.P. purchased, and the Company issued,
on June 18, 1998, an aggregate of 200,000 Class B Warrants for an aggregate
purchase price of $302,000. The exercise price of the Class B Warrants will be
equal to the initial public offering price per Ordinary Share, and such Class
B Warrants become exercisable in equal amounts over a three year period
commencing one year after the Offering and expire ten years after the
consummation of the Offering. Management is of the view that the agreed sale
price of the Class B Warrants represented fair value at the time of purchase.
Effective September 3, 1998, the Class B Warrant agreements were superseded by
Amended and Restated Class B Warrant agreements with no material impact on the
operation of the agreements.

F-17
<PAGE>

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

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 BY 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 ORDINARY SHARES OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE
ORDINARY 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..................................................................... 2
Additional Information.................................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 9
Use of Proceeds........................................................... 21
Dividend Policy........................................................... 21
Capitalization............................................................ 22
Dilution.................................................................. 23
Management's Discussion and Analysis of Financial Condition and Plan
of Operations............................................................ 25
Business.................................................................. 30
Management................................................................ 51
Principal Stockholders.................................................... 58
Certain Relationships and Related Party Transactions...................... 59
Description of Shares..................................................... 60
Shares Eligible for Future Sale........................................... 69
Direct Sales.............................................................. 71
Material Tax Consequences................................................. 72
Underwriting.............................................................. 79
Legal Matters............................................................. 81
Experts................................................................... 81
Glossary of Selected Life Insurance and Annuity Terms..................... 82
Index to Consolidated Balance Sheet....................................... F-1
</TABLE>

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

16,750,000 Shares

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

Ordinary Shares

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

PROSPECTUS

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

PRUDENTIAL SECURITIES INCORPORATED

CIBC OPPENHEIMER

ING BARING FURMAN SELZ LLC

WARBURG DILLON READ LLC

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

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 Company in
connection with the issuance and distribution of the Ordinary Shares being
registered hereby. All of such expenses are estimates, other than the filing
fees payable to the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and the Nasdaq National Market.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $ 85,237
National Association of Securities Dealers, Inc. filing fee......... 29,394
Nasdaq National Market quotation fee................................ 95,000
Advisory fee........................................................ 800,000
Printing costs...................................................... 650,000
Accounting fees and expenses........................................ 175,000
Legal fees and expenses (not including Blue Sky).................... 750,000
Blue Sky fees and expenses.......................................... 2,000
Miscellaneous expenses.............................................. 113,369
----------
Total............................................................. $2,700,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Cayman Islands law permits a company's articles of association to provide
for the indemnification of officers and directors, except to the extent that
such provision may be held by the Cayman Islands courts to be contrary to
public policy (for instance, for purporting to provide indemnification against
the consequences of committing a crime). In addition, an officer or director
may not be indemnified for his own dishonesty, wilful neglect or default.

The Articles contain provisions providing for the indemnification by the
Company of an officer, director, employee or agent of the Company, or any
person serving at the request of the Company as an officer, director, employee
or agent of any other company, for threatened, pending or contemplated
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, brought against such indemnified person by reason of the fact
that such person was an officer, director, employee or agent of the Company or
serving in such capacity. In addition, the Board of Directors may authorize
the Company to purchase and maintain insurance on behalf of any such person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Company
would have the power to indemnify him against such liability under the
provisions of the Articles. The Company plans to purchase directors and
officers liability insurance from third parties for its directors and
executive officers. The Company also plans to enter into indemnity agreements
with each of its executive officers and directors.

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

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

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

(a) On June 9, 1998, the Company sold 1,500,000 Ordinary Shares to
Scottish Holdings, Ltd., for an aggregate purchase price of $500,000.

(b) On June 9, 1998, the Company sold Class A Warrants to purchase an
aggregate of 1,550,000 Ordinary Shares to Michael C. French, Michelle L.
Boucher, Audubon Asset, Limited and Soulieana Limited for an aggregate
purchase price of $100,000.

(c) On June 18, 1998, the Company sold Class B Warrants to purchase an
aggregate of 200,000 Ordinary Shares to The Roman Arch Fund L.P. and The
Roman Arch Fund II L.P. for an aggregate purchase price of $302,000.

(d) On October 22, 1998, the Company issued Class A Warrants to purchase
an aggregate of 900,000 Ordinary Shares to Audubon Asset, Limited,
Soulieana Limited and South Madison Trust in exchange for 1,045,000
Ordinary Shares.

(e) On October 27, 1998, the Company entered into securities purchase
agreements with Audubon Asset Limited, Soulieana Limited, Maverick Fund
USA, Ltd., Maverick Fund, L.D.C. and Maverick Fund II, Ltd. (the "Direct
Investors"), pursuant to which the Company will sell to the Direct
Investors an aggregate of 1,418,440 Ordinary Shares and Class A Warrants to
purchase an aggregate of 400,000 Ordinary Shares.

No underwriters were or will be involved in the foregoing sales of
securities. Such sales were or will be 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 or will be deemed restricted securities for
purposes of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits. Except as otherwise indicated, the following Exhibits are filed
herewith and made a part hereof:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement between the Company and the
Underwriters.
3.1** Memorandum of Association of the Company.
3.2** Articles of Association of the Company.
4.1** Specimen Ordinary Share Certificate.
4.2** Form of Amended and Restated Class A Warrant.
4.3** Form of Amended and Restated Class B Warrant.
4.4** Form of Securities Purchase Agreement for the Class A Warrants.
4.5** Form of Warrant Purchase Agreement for the Class B Warrants.
4.6** Form of Registration Rights Agreement for the Class A Warrants.
4.7** Form of Registration Rights Agreement for the Class B Warrants.
4.10** Form of Securities Purchase Agreement between the Company and the
Shareholder Investors
4.11** Form of Registration Rights Agreement between the Company and the
Shareholder Investors
4.12** Form of Securities Purchase Agreement between the Company and the Non-
Shareholder Investors
4.13** Form of Registration Rights Agreement between the Company and the Non-
Shareholder Investors
5.1** Opinion of Maples and Calder as to the validity of the securities
being offered.
8.1** Opinion of Maples and Calder.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
8.2** Opinion of Jones, Day, Reavis & Pogue.
10.1** Employment Agreement dated June 18, 1998 between the Company and
Michael C. French.
10.2** Employment Agreement dated June 18, 1998 between the Company and
Michelle L. Boucher.
10.3** Second Amended and Restated 1998 Stock Option Plan effective October
22, 1998.
10.4** Form of Stock Option Agreement in connection with 1998 Stock Option
Plan.
10.8** Agreement dated June 30, 1998 between the Company and International
Risk Management (Cayman) Ltd.
10.9** Amended and Restated Insurance Administration, Services and Referral
Agreement dated as of October 1, 1998 between the Company and The
Scottish Annuity Company (Cayman) Ltd.
10.10** Employment Agreement dated July 20, 1998 between the Company and
Henryk Sulikowski.
10.12** Form of Indemnification Agreement between the Company and each of its
directors and officers.
10.13** Investment Management Agreement dated October 22, 1998 between the
Company and Pacific Investment Management Company.
10.14** Investment Management Agreement dated October 22, 1998 between the
Company and General Re--New England Asset Management, Inc.
10.15** Agreement dated October 23, 1998 between the Company and Westport
Partners (Bermuda), Ltd.
10.16** Investment Management Agreement dated October 22, 1998 between the
Company and The Prudential Investment Corporation.
10.17** Form of Omnibus Registration Rights Agreement.
21.1** Subsidiaries of Registrant.
23.1** Consent of Maples and Calder (contained in Exhibit 5.1).
23.2** Consent of Jones, Day, Reavis & Pogue (contained in Exhibit 8.2).
23.3* Consent of Ernst & Young.
23.4** Consent of The Bernstein Law Firm (contained in Exhibit 99.10).
24.1** Powers of Attorney.
99.1** Consent of Michael Austin.
99.3** Consent of Howard Shapiro.
99.4** Form F-N.
99.5** Consent of Sam Wyly.
99.6** Consent of Charles J. Wyly, Jr.
99.7** Consent of David Matthews.
99.8** Consent of R. Duke Buchan III.
99.9** Consent of Robert M. Chmely.
Opinion of The Bernstein Law Firm with respect to certain state
99.10** insurance regulatory matters.
</TABLE>
- --------
* Filed herewith.

** Previously filed.

(b) Financial Statement Schedules

All financial statement schedules are omitted because they are either not
applicable or the required information is included in the balance sheet or
notes thereto appearing elsewhere in this Registration Statement.

ITEM 17. UNDERTAKINGS.

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

II-3
<PAGE>

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
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 Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, 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 a 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 purpose of determining any liability under the Securities Act
of 1933, each post-effective 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.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 7 to Registration Statement No. 333-57227 to be
signed on its behalf by the undersigned, thereunto duly authorized, in Dallas,
Texas, on November 19, 1998.

SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.

/s/ Michael C. French
By: ___________________________________
Michael C. French
Chief Executive Officer and
President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 7 to Registration Statement No. 333-57227 has been signed by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael C. French Chief Executive Officer, November 19, 1998
____________________________________ President and Director
Michael C. French (Principal Executive
Officer)
* Senior Vice President, Chief November 19, 1998
____________________________________ Financial Officer and
Michelle L. Boucher Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
* Director November 19, 1998
____________________________________
Sam Wyly
* Director November 19, 1998
____________________________________
Michael Austin
* Director November 19, 1998
____________________________________
R. Duke Buchan III
* Director November 19, 1998
____________________________________
Robert M. Chmely
* Director November 19, 1998
____________________________________
David Matthews
* Director November 19, 1998
____________________________________
Howard Shapiro
* Director November 19, 1998
____________________________________
Charles J. Wyly, Jr.
/s/ Donald J. Puglisi Authorized Representative in November 19, 1998
____________________________________ the United States
Donald J. Puglisi
</TABLE>

* The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 7 to Registration Statement No. 333-57227 pursuant to the
Powers of Attorney executed on behalf of the above-named officers and
directors and filed herewith.

/s/ Michael C. French
Michael C. French
Attorney-in-Fact

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
SEQUENTIAL
NUMBER
PAGE NO. DESCRIPTION OF DOCUMENT
---------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement between the Company and the
Underwriters.
3.1** Memorandum of Association of the Company.
3.2** Articles of Association of the Company.
4.1** Specimen Ordinary Share Certificate.
4.2** Form of Amended and Restated Class A Warrant.
4.3** Form of Amended and Restated Class B Warrant.
4.4** Form of Securities Purchase Agreement for the Class A Warrants.
4.5** Form of Warrant Purchase Agreement for the Class B Warrants.
4.6** Form of Registration Rights Agreement for the Class A Warrants.
4.7** Form of Registration Rights Agreement for the Class B Warrants.
4.10** Form of Securities Purchase Agreement between the Company and the
Shareholder Investors.
4.11** Form of Registration Rights Agreement between the Company and the
Shareholder Investors.
4.12** Form of Securities Purchase Agreement between the Company and the
Non-Shareholder Investors.
4.13** Form of Registration Rights Agreement between the Company and the
Non-Shareholder Investors.
5.1** Opinion of Maples and Calder as to the validity of the securities
being offered.
8.1** Opinion of Maples and Calder.
8.2** Opinion of Jones, Day, Reavis & Pogue.
10.1** Employment Agreement dated June 18, 1998 between the Company and
Michael C. French.
10.2** Employment Agreement dated June 18, 1998 between the Company and
Michelle L. Boucher.
10.3** Second Amended and Restated 1998 Stock Option Plan effective
October 22, 1998.
10.4** Form of Stock Option Agreement in connection with 1998 Stock Option
Plan.
10.8** Agreement dated June 30, 1998 between the Company and International
Risk Management (Cayman) Ltd.
10.9** Amended and Restated Insurance Administration, Services and
Referral Agreement dated as of October 1, 1998 between the Company
and The Scottish Annuity Company (Cayman) Ltd.
10.10** Employment Agreement dated July 20, 1998 between the Company and
Henryk Sulikowski.
10.12** Form of Indemnification Agreement between the Company and each of
its directors and officers.
10.13** Investment Management Agreement dated October 22, 1998 between the
Company and Pacific Investment Management Company.
10.14** Investment Management Agreement dated October 22, 1998 between the
Company and General Re--New England Asset Management, Inc.
10.15** Agreement dated October 23, 1998 between the Company and Westport
Partners (Bermuda), Ltd.
10.16** Investment Management Agreement dated October 22, 1998 between the
Company and Prudential Investment Corporation.
10.17** Form of Omnibus Registration Rights Agreement.
21.1** Subsidiaries of Registrant.
23.1** Consent of Maples and Calder (contained in Exhibit 5.1).
23.2** Consent of Jones, Day, Reavis & Pogue (contained in Exhibit 8.2).
23.3* Consent of Ernst & Young.
23.4** Consent of The Bernstein Law Firm (contained in Exhibit 99.10).
24.1** Powers of Attorney.
99.1** Consent of Michael Austin.

99.3** Consent of Howard Shapiro.
99.4** Form F-N.
99.5** Consent of Sam Wyly.
99.6** Consent of Charles J. Wyly, Jr.
99.7** Consent of David Matthews.
99.8** Consent of R. Duke Buchan III.
99.9** Consent of Robert M. Chmely.
99.10** Opinion of The Bernstein Law Firm with respect to certain state
insurance regulatory matters.
</TABLE>
- --------
*Filed herewith.

**Previously filed.

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated October 7, 1998 and October 26, 1998, in the
Registration Statement (Form S-1), dated June 19, 1998, and any amendments or
supplements thereto, and the related Prospectus of Scottish Annuity & Life
Holdings, Ltd.

/s/ Ernst & Young

George Town, Grand Cayman
British West Indies

November 19, 1998