ESG Re Limited

    Condensed Consolidated Balance Sheets

    (U.S. dollars in thousands except share and per share data)

 
 
                                                   March 31, December
                                                     2003       31,
                                                  (unaudited)  2002
                                                  --------------------
                                                    U.S. dollars in
                                                    thousands except
                                                    shares and share
                                                          data
ASSETS
Investments                                          $72,056  $82,325
Cash and cash equivalents                             26,567   13,653
Other investments                                      4,093    7,446
                                                  --------------------
Total investments and cash                           102,716  103,424
Accrued investment income                                977      826
Management fees receivable                               468      697
Reinsurance balances receivable                      144,935  180,173
Reinsurance recoverable on incurred losses            13,988   36,685
Funds retained by ceding companies                    29,345   27,661
Prepaid reinsurance premiums                             246       26
Deferred acquisition costs                            27,869   35,723
Fair value of Foreign currency forward contracts          --    1,796
Other assets                                           8,294    8,567
Cash and cash equivalents held in a fiduciary
 capacity                                              1,570    1,320
                                                  --------------------
TOTAL ASSETS                                        $330,408 $396,898
                                                  --------------------
 
 
LIABILITIES
Unpaid losses and loss expenses                     $132,800 $162,676
Unearned premiums                                     54,593   78,371
Acquisition costs payable                             25,413   37,065
Reinsurance balances payable                          59,950   51,434
Fair value of foreign currency forward contracts         473       --
Payable for Securities purchased                       2,308    4,367
Accrued expenses, accounts payable, and other
 liabilities                                          10,153   14,991
Fiduciary liabilities                                  1,570    1,320
                                                  --------------------
Total liabilities                                    287,260  350,224
                                                  --------------------
 
 
SHAREHOLDERS' EQUITY
Common shares, par value $1 per share; 100,000,000
 shares authorized; 11,100,678 shares issued and
 outstanding for 2003 and 11,100,678 shares issued
 and outstanding for 2002                             11,101   11,101
Additional paid-in capital                           208,756  208,721
Foreign currency translation adjustments              (2,437)  (2,305)
Unrealized gains/(losses) on securities                1,617    3,255
                                                  --------------------
Accumulated other comprehensive income                  (820)     950
                                                  --------------------
Retained deficit                                    (175,889)(174,098)
                                                  --------------------
Total shareholders' equity                            43,148   46,674
                                                  --------------------
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          $330,408 $396,898
                                                  --------------------



    ESG RE LIMITED

    Condensed Consolidated Statements of Operations

    (U.S. dollars in thousands except share and per share data)

    (Unaudited)

 
                                                 Three Months Ended
                                               March 31,   March 31,
                                                  2003     2002 (as
                                                            restated)
                                              ------------------------
REVENUES
Net premiums written                              $(7,978)    $25,907
Change in unearned premiums                        24,089      13,031
                                              ------------------------
 
Net premiums earned                                16,111      38,938
Management fee revenue                                362         507
Net investment income                                 970       1,848
Net realized investment gain (loss)                   798      (1,077)
                                              ------------------------
                                                   18,241      40,216
                                              ------------------------
EXPENSES
Losses and loss expenses                            7,422      25,286
Acquisition costs                                   6,166      13,214
Administrative expenses                             6,444       7,245
                                              ------------------------
                                                   20,032      45,745
                                              ------------------------
 
NET LOSS BEFORE TAXES                              (1,791)     (5,529)
Income tax expense                                     --          --
                                              ------------------------
 
NET LOSS AFTER TAXES                              $(1,791)    $(5,529)
                                              ========================
 
PER SHARE DATA
Basic net loss per share                           $(0.16)     $(0.47)
Diluted net loss per share                         $(0.16)     $(0.47)
                                              ========================
 
Weighted average shares outstanding
    Basic                                      11,100,678  11,831,068
    Diluted                                    11,100,678  11,831,068
                                              ========================



    ESG RE LIMITED

    Product Mix (Gross Written Premium)

    ESG Reinsurance Segment

    The distribution of gross premiums written, by line of business after excluding the write down of estimated premiums in the quarter ended March 31, 2003, for the three months ended March 31, 2003 and 2002 and for the year ended December 31, 2002 was as follows:

 
                           Three months   Three months      Year ended
                                   ended          ended  December 31,
                              March 31,  March 31, 2002           2002
                                    2003
----------------------------------------------------------------------
Medical                             0.0%          60.3%          82.5%
Personal Accident                  67.5%          38.3%          15.9%
Credit                             26.0%         (1.0)%         (1.4)%
Life                                2.0%           1.1%           0.7%
Other                               4.5%           1.3%           2.3%
-------------------------------------------------------
 
Total                             100.0%        100.0 %        100.0 %
----------------------------------------------------------------------



    ESG Direct Segment

    The distribution of gross premiums written by line of business for the three months ended March 31, 2003 and 2002 and for the year ended December 31, 2002 was as follows:

 
                       Three months    Three months         Year ended
                               ended           ended December 31, 2002
                      March 31, 2003  March 31, 2002
----------------------------------------------------------------------
 
Personal Accident              57.8%           85.1%             83.3%
Credit                         42.2%           14.9%             16.7%
----------------------------------------------------------------------
 
Total                         100.0%          100.0%            100.0%
----------------------------------------------------------------------



    Geographic Mix (Gross Written Premium)

    The distribution of gross premiums written, by geographic region, after excluding the write down of estimated premiums in the quarter ended March 31, 2003, for the three months ended March 31, 2003 and 2002 and for the year ended December 31, 2002 was as follows:

    ESG Reinsurance

 
               Three months ended Three months ended        Year ended
                   March 31, 2003     March 31, 2002 December 31, 2002
----------------------------------------------------------------------
Western Europe              76.8%              18.4%              4.2%
North America                0.6%              62.1%             62.4%
Latin America               16.1%              17.5%              4.9%
Asia                         6.5%               0.1%                -
Other                        0.0%               1.9%             28.5%
----------------------------------------------------------------------
 
Total                      100.0%            100.0 %           100.0 %
----------------------------------------------------------------------



    ESG Direct

 
              Three months ended  Three months ended        Year ended
                  March 31, 2003      March 31, 2002 December 31, 2002
----------------------------------------------------------------------
Western Europe             42.2%               14.9%             16.7%
Asia                       57.8%               85.1%             83.3%
----------------------------------------------------------------------
 
Total                    100.0 %              100.0%           100.0 %
----------------------------------------------------------------------



    Historic Development of the Portfolio;

    Technical Result by Business Segment by Underwriting Year

    The technical profit by business segment underwriting year for the financial years ended December 31, 1998 through 2002 and for the quarter ended March 31, 2003 are as follows;

    Reinsurance Segment

 
Technical Results ($'m)               Underwriting Year
Financial Year ended     1997   1998  1999  2000 2001 2002 2003 Total
                        ----------------------------------------------
                   1998   n/a   10.8     -     -    -    -    -  10.8
                   1999   n/a  (11.2) (5.0)    -    -    -    - (16.2)
                   2000   n/a  (18.1) (6.6) (6.8)   -    -    - (31.5)
                   2001   n/a    0.3  (7.9)  3.5  2.1    -    -  (2.0)
                   2002  (1.7)  (9.3)(12.8)  0.2  1.9  4.6    - (17.1)
                   2003   0.0    2.3   1.0  (0.3)(1.8) 0.5  0.2   1.9
                        ----------------------------------------------
Total                    (1.7) (25.2)(31.3) (3.4) 2.2  5.1  0.2 (54.1)



    Direct Segment

 
Technical Results ($'m)               Underwriting Year
Financial Year ended        1999    2000    2001    2002  2003  Total
                        ----------------------------------------------
                   1999      0.0       -       -       -     -      -
                   2000      0.2     2.1       -       -     -    2.3
                   2001      0.1     0.3     4.4       -     -    4.8
                   2002     (0.2)    0.3     0.5     0.1     -    0.7
                   2003      0.0    (0.1)   (0.7)    0.3   1.1    0.6
                        ----------------------------------------------
Total                        0.1     2.6     4.2     0.4   1.1    8.4



    Loss & Acquisition Ratios by Underwriting Year

    The loss and acquisition cost ratios by underwriting year for the financial years ended December 31, 1998 through 2002 and for the quarter ended March 31, 2003 are as follows:

 
L&A Ratio (%)                            Underwriting Year
                                1998   1999   2000   2001  2002  2003
                             -----------------------------------------
L&A at 31 Dec. 1998               89%     -      -      -     -     -
L&A at 31 Dec. 1999              102%   102%     -      -     -     -
L&A at 31 Dec. 2000              110%   105%   104%     -     -     -
L&A at 31 Dec. 2001              112%   107%   100%    76%    -     -
L&A at 31 Dec. 2002              119%   112%   101%    88%   72%    -
L&A at 31 Mar 2003               118%   112%   101%    90%   75%   66%



    Loss & Acquisition Ratios by Business Segment by Underwriting Year

    The loss and acquisition cost ratios by business segment by underwriting year for the financial years ended December 31, 1998 through 2002 and for the quarter ended March 31, 2003 are as follows;

    Reinsurance Segment

 
L&A Ratio (%)                           Underwriting Year
                               1998   1999  2000   2001   2002   2003
                           -------------------------------------------
L&A at 31 Dec. 1998              89%     -     -      -      -      -
L&A at 31 Dec. 1999             102%   102%    -      -      -      -
L&A at 31 Dec. 2000             110%   104%  107%     -      -      -
L&A at 31 Dec. 2001             112%   107%  102%    92%     -      -
L&A at 31 Dec. 2002             119%   112%  102%    95%    90%     -
L&A at 31 Mar. 2003             118%   112%  102%    97%    90%    93%



    Direct Segment

 
L&A Ratio (%)                           Underwriting Year
                               1999    2000     2001    2002     2003
                           -------------------------------------------
L&A at 31 Dec. 1999              86%      -        -       -        -
L&A at 31 Dec. 2000              46%     58%       -       -        -
L&A at 31 Dec. 2001              42%     53%      74%      -        -
L&A at 31 Dec. 2002              37%     43%      52%     49%       -
L&A at 31 Mar. 2003              37%     44%      53%     49%      65%



    ESG RE LIMITED

    Reinsurance Operating Ratios (Net Earned Premium)

    The key operating ratios for the Reinsurance Segment for the three months ended March 31, 2003 and 2002 are as follows;

 
Three months ended                  Personal
March 31, 2003              Medical Accident Credit Life  Other Total
----------------------------------------------------------------------
 
Loss ratio                    409.4%  (16.1)%  n/m  63.4%  98.8% 52.0%
Acquisition expense ratio    (55.5)%    44.5%  n/m  11.9%   8.3% 27.2%
----------------------------------------------------------------------
Loss and Acquisition
Expense Ratio                 353.9%    28.4%  n/m  75.3% 107.1% 79.2%
----------------------------------------------------------------------
Operating expense ratio                                          34.7%
                                                                ------
Combined ratio                                                  113.9%
                                                                ======



 
Three months ended                Personal
March 31, 2002            Medical Accident Credit  Life  Other  Total
----------------------------------------------------------------------
 
Loss Ratio                   77.0%    60.7%  35.2%   n/m  16.0%  73.5%
Acquisition expense Ratio    28.2%    33.1%  37.5%   n/m  31.8%  29.7%
----------------------------------------------------------------------
Loss and Acquisition
Expense Ratio               105.2%    93.8%  72.7%   n/m  47.8% 103.2%
----------------------------------------------------------------------
Operating expense Ratio                                          13.8%
                                                               -------
Combined Ratio                                                  117.0%
                                                               =======



    ESG RE LIMITED

    Direct Marketing Operating Ratios (Net Earned Premium)

    The key operating ratios for the Direct Marketing segment for the three months ended March 31, 2003 and 2002 are as follows;

 
Three months ended                  Personal
March 31, 2003                      Accident      Credit      Total
----------------------------------------------------------------------
Loss Ratio                                32.4%      117.3%      38.2%
Acquisition expense Ratio                 55.4%       19.7%      53.0%
----------------------------------------------------------------------
Loss and Acquisition
Expense Ratio                             87.8%      137.0%      91.2%
----------------------------------------------------------------------
Operating expense Ratio                                          45.6%
                                                           -----------
Combined Ratio                                                  136.8%
                                                           ===========



 
Three months ended                 Personal
March 31, 2002                     Accident     Credit       Total
----------------------------------------------------------------------
Loss Ratio                                9.4%      12.4%         9.6%
Acquisition expense Ratio                61.8%      54.3%        61.3%
----------------------------------------------------------------------
Loss and Acquisition
Expense Ratio                            71.2%      66.7%        70.9%
----------------------------------------------------------------------
Operating expense Ratio                                          47.7%
                                                         -------------
Combined Ratio                                                  118.6%
                                                         =============



    ESG RE LIMITED

    Fixed Maturity Investment Portfolio at March 31, 2003

 
                                                              Average
U.S. dollars in thousands               Fair  Duration Market  Credit
                                        Value  (Years)  Yield  Rating
----------------------------------------------------------------------
Corporate securities                    7,989      1.7    2.5%  AAA
U.S. treasury securities and
 obligations of U.S. government                                 AAA
 corporations and agencies             27,929      1.6    1.4%
Mortgage & Asset backed securities      5,729      1.6    7.4%  AAA
Obligations of states and political
 subdivisions                           7,674      2.0    3.6%  AAA
Foreign currency debt securities       22,735      3.3    4.2%  AAA
----------------------------------------------------------------------
 
Total                                  72,056      2.1    3.1%
----------------------------------------------------------------------