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

 	 	 	
þ	 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	For the Quarterly Period Ended June 30, 2008	
OR	
o	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	For the Transition Period From            to           	

001-33289
Commission File Number

ENSTAR GROUP LIMITED
(Exact name of registrant as specified in its charter)

 	 	 	
Bermuda	 	N/A	
 	 	 	
(State or other jurisdiction
of incorporation or organization)	 	(I.R.S. Employer
Identification No.)	

P.O. Box HM 2267
Windsor Place, 3rd Floor
18 Queen Street
Hamilton HM JX
Bermuda
(Address of principal executive office, including zip code)

(441) 292-3645
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ      No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	 	Accelerated filer o	 	Non-accelerated filer o
(Do not check if a smaller reporting company)	 	Smaller reporting company  o	
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o      No  þ
 
As of August 7, 2008, the registrant had outstanding 13,317,246 ordinary shares, par value $1.00 per share.

 
 
TABLE OF CONTENTS

 	 	 	 	Page	
 	 	 	 	 	 	 	 	 	
PART I — FINANCIAL INFORMATION	
 	Item 1.	 	 	Financial Statements:	 	 	1	 	
 	 	 	 	  Condensed Consolidated Balance Sheets, as of June 30, 2008 and December 31, 2007 (Unaudited)	 	 	1	 	
 	 	 	 	  Condensed Consolidated Statements of Earnings, for the Three and Six Month Periods Ended June 30, 2008 and 2007 (Unaudited)	 	 	2	 	
 	 	 	 	  Condensed Consolidated Statements of Comprehensive Income, for the Three and Six Month Periods Ended June 30, 2008 and 2007 (Unaudited)	 	 	3	 	
 	 	 	 	  Condensed Consolidated Statements of Changes in Shareholders’ Equity, for the Six Month Periods Ended June 30, 2008 and 2007 (Unaudited)	 	 	4	 	
 	 	 	 	  Condensed Consolidated Statements of Cash Flows, for the Six Month Periods Ended June 30, 2008 and 2007 (Unaudited)	 	 	5	 	
 	 	 	 	  Notes to Condensed Consolidated Financial Statements (Unaudited)	 	 	6	 	
 	 	 	 	  Report of the Independent Registered Public Accounting Firm	 	 	26	 	
 	Item 2.	 	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	27	 	
 	Item 3.	 	 	Quantitative and Qualitative Disclosures About Market Risk	 	 	44	 	
 	Item 4.	 	 	Controls and Procedures	 	 	44	 	
PART II — OTHER INFORMATION	
 	Item 1.	 	 	Legal Proceedings	 	 	45	 	
 	Item 1A.	 	 	Risk Factors	 	 	45	 	
 	Item 4.	 	 	Submission of Matters to a Vote of Security Holders	 	 	46	 	
 	Item 6.	 	 	Exhibits	 	 	60	 	
 EX-15.1	
 EX-31.1	
 EX-31.2	
 EX-32.1	
 EX-32.2	

Table of Contents
 	 	
Item 1.  	FINANCIAL STATEMENTS	
 
ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2008 and December 31, 2007

 	 	June 30,
	 	 	December 31,
	 	
 	 	2008	 	 	2007	 	
 	 	(expressed in thousands of U.S. dollars, except share data)	 	
 	 	 	 	 	 	 	 	 	
ASSETS	
Short-term investments, available for sale, at fair value (amortized cost: 2008 — $38,210; 2007 — $15,480)	 	$	38,944	 	 	$	15,480	 	
Fixed maturities, available for sale, at fair value (amortized cost: 2008 — $478,195; 2007 — $7,006)	 	 	474,565	 	 	 	6,878	 	
Fixed maturities, held to maturity, at amortized cost (fair value: 2008 — $110,483; 2007 — $210,998)	 	 	110,562	 	 	 	211,015	 	
Fixed maturities, trading, at fair value (amortized cost: 2008 — $111,698; 2007 — $318,199)	 	 	112,536	 	 	 	323,623	 	
Equities, trading, at fair value (cost: 2008 — $5,096; 2007 — $5,087)	 	 	4,610	 	 	 	4,900	 	
Other investments, at fair value	 	 	141,328	 	 	 	75,300	 	
 	 	 	 	 	 	 	 	 	
Total investments	 	 	882,545	 	 	 	637,196	 	
Cash and cash equivalents	 	 	1,484,950	 	 	 	995,237	 	
Restricted cash and cash equivalents	 	 	385,081	 	 	 	168,096	 	
Accrued interest receivable	 	 	16,146	 	 	 	7,200	 	
Accounts receivable, net	 	 	38,292	 	 	 	25,379	 	
Income taxes recoverable	 	 	—	 	 	 	658	 	
Reinsurance balances receivable	 	 	597,522	 	 	 	465,277	 	
Investment in partly-owned company	 	 	21,431	 	 	 	—	 	
Goodwill	 	 	21,222	 	 	 	21,222	 	
Other assets	 	 	96,731	 	 	 	96,878	 	
 	 	 	 	 	 	 	 	 	
TOTAL ASSETS	 	$	3,543,920	 	 	$	2,417,143	 	

LIABILITIES	
Losses and loss adjustment expenses	 	$	2,311,590	 	 	$	1,591,449	 	
Reinsurance balances payable	 	 	155,219	 	 	 	189,870	 	
Accounts payable and accrued liabilities	 	 	20,729	 	 	 	21,383	 	
Income taxes payable	 	 	11,293	 	 	 	—	 	
Loans payable	 	 	326,443	 	 	 	60,227	 	
Other liabilities	 	 	67,610	 	 	 	40,178	 	
 	 	 	 	 	 	 	 	 	
TOTAL LIABILITIES	 	 	2,892,884	 	 	 	1,903,107	 	
 	 	 	 	 	 	 	 	 	
MINORITY INTEREST	 	 	174,405	 	 	 	63,437	 	
 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Share capital	 	 	 	 	 	 	 	 	
Authorized issued and fully paid, par value $1 each (Authorized 2008: 156,000,000; 2007: 156,000,000)	 	 	 	 	 	 	 	 	
Ordinary shares (issued and outstanding 2008: 11,960,559; 2007: 11,920,377)	 	 	11,961	 	 	 	11,920	 	
Non-voting convertible ordinary shares (issued 2008: 2,972,892; 2007: 2,972,892)	 	 	2,973	 	 	 	2,973	 	
Treasury stock at cost (non-voting convertible ordinary shares 2008: 2,972,892; 2007: 2,972,892)	 	 	(421,559	)	 	 	(421,559	)	
Additional paid-in capital	 	 	593,983	 	 	 	590,934	 	
Accumulated other comprehensive income	 	 	6,117	 	 	 	6,035	 	
Retained earnings	 	 	283,156	 	 	 	260,296	 	
 	 	 	 	 	 	 	 	 	
TOTAL SHAREHOLDERS’ EQUITY	 	 	476,631	 	 	 	450,599	 	
 	 	 	 	 	 	 	 	 	
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	 	$	3,543,920	 	 	$	2,417,143	 	

See accompanying notes to the unaudited condensed consolidated financial statements
1

Table of Contents
ENSTAR GROUP LIMITED
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Six-Month Periods Ended June 30, 2008 and 2007

 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(expressed in thousands of U.S. dollars,
	 	
 	 	except share and per share data)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	3,578	 	 	$	3,826	 	 	$	9,633	 	 	$	8,487	 	
Net investment income	 	 	21,219	 	 	 	16,976	 	 	 	21,809	 	 	 	34,756	 	
Net realized gains (losses)	 	 	1,014	 	 	 	(132	)	 	 	(70	)	 	 	439	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	25,811	 	 	 	20,670	 	 	 	31,372	 	 	 	43,682	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (reduction) increase in loss and loss adjustment expense liabilities	 	 	(25,483	)	 	 	(805	)	 	 	(24,798	)	 	 	1,705	 	
Salaries and benefits	 	 	13,947	 	 	 	10,360	 	 	 	25,304	 	 	 	23,162	 	
General and administrative expenses	 	 	13,972	 	 	 	7,915	 	 	 	25,883	 	 	 	13,588	 	
Interest expense	 	 	7,643	 	 	 	1,307	 	 	 	10,958	 	 	 	2,325	 	
Net foreign exchange gain	 	 	(4,935	)	 	 	(3,069	)	 	 	(6,270	)	 	 	(3,015	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	5,144	 	 	 	15,708	 	 	 	31,077	 	 	 	37,765	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST	 	 	20,667	 	 	 	4,962	 	 	 	295	 	 	 	5,917	 	
INCOME TAXES	 	 	(3,193	)	 	 	8,109	 	 	 	(2,954	)	 	 	7,093	 	
MINORITY INTEREST	 	 	(6,301	)	 	 	(2,167	)	 	 	(9,677	)	 	 	(4,415	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN	 	 	11,173	 	 	 	10,904	 	 	 	(12,336	)	 	 	8,595	 	
Extraordinary gain — Negative goodwill (net of minority interest of $15,084 and $nil, respectively)	 	 	—	 	 	 	—	 	 	 	35,196	 	 	 	15,683	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET EARNINGS	 	$	11,173	 	 	$	10,904	 	 	$	22,860	 	 	$	24,278	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PER SHARE DATA:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per share before extraordinary gain — basic	 	$	0.93	 	 	$	0.92	 	 	$	(1.03	)	 	$	0.74	 	
Extraordinary gain per share — basic	 	 	—	 	 	 	—	 	 	 	2.95	 	 	 	1.36	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	$	0.93	 	 	$	0.92	 	 	$	1.92	 	 	$	2.10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share before extraordinary gain — diluted	 	$	0.91	 	 	$	0.89	 	 	$	(1.03	)	 	$	0.73	 	
Extraordinary gain per share — diluted	 	 	—	 	 	 	—	 	 	 	2.95	 	 	 	1.33	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	$	0.91	 	 	$	0.89	 	 	$	1.92	 	 	$	2.06	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average ordinary shares outstanding — basic	 	 	11,959,125	 	 	 	11,916,013	 	 	 	11,943,330	 	 	 	11,540,318	 	
Weighted average ordinary shares outstanding — diluted	 	 	12,238,356	 	 	 	12,204,562	 	 	 	11,943,330	 	 	 	11,817,225	 	
 
See accompanying notes to the unaudited condensed consolidated financial statements
2

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ENSTAR GROUP LIMITED
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six-Month Periods Ended June 30, 2008 and 2007

 	 	Three Months
	 	 	Six Months
	 	
 	 	Ended	 	 	Ended	 	
 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(expressed in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET EARNINGS	 	$	11,173	 	 	$	10,904	 	 	$	22,860	 	 	$	24,278	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized holding (losses) gains on investments arising during the period	 	 	(8,291	)	 	 	(176	)	 	 	(7,723	)	 	 	395	 	
Reclassification adjustment for net realized (gains) losses included in net earnings	 	 	(1,014	)	 	 	132	 	 	 	70	 	 	 	(439	)	
Currency translation adjustment	 	 	9,637	 	 	 	46	 	 	 	7,735	 	 	 	686	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive (loss) income:	 	 	332	 	 	 	2	 	 	 	82	 	 	 	642	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COMPREHENSIVE INCOME	 	$	11,505	 	 	$	10,906	 	 	$	22,942	 	 	$	24,920	 	

See accompanying notes to the unaudited condensed consolidated financial statements
3

Table of Contents
ENSTAR GROUP LIMITED
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
For the Six-Month Periods Ended June 30, 2008 and 2007

 	 	2008	 	 	2007	 	
 	 	(expressed in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	
Share capital — ordinary shares	 	 	 	 	 	 	 	 	
Balance, beginning of period	 	$	11,920	 	 	$	19	 	
Conversion of shares	 	 	—	 	 	 	6,029	 	
Issue of shares	 	 	2	 	 	 	5,775	 	
Shares repurchased	 	 	—	 	 	 	(7	)	
Share awards granted/vested	 	 	39	 	 	 	104	 	
 	 	 	 	 	 	 	 	 	
Balance, end of period	 	$	11,961	 	 	$	11,920	 	
 	 	 	 	 	 	 	 	 	
Share capital — non-voting convertible ordinary shares	 	 	 	 	 	 	 	 	
Balance, beginning of period	 	$	2,973	 	 	$	—	 	
Conversion of shares	 	 	—	 	 	 	2,973	 	
 	 	 	 	 	 	 	 	 	
Balance, end of period	 	$	2,973	 	 	$	2,973	 	
 	 	 	 	 	 	 	 	 	
Treasury stock	 	 	 	 	 	 	 	 	
Balance, beginning of period	 	$	(421,559	)	 	$	—	 	
Shares acquired, at cost	 	 	—	 	 	 	(421,559	)	
 	 	 	 	 	 	 	 	 	
Balance, end of period	 	$	(421,559	)	 	$	(421,559	)	
 	 	 	 	 	 	 	 	 	
Additional paid-in capital	 	 	 	 	 	 	 	 	
Balance, beginning of period	 	$	590,934	 	 	$	111,371	 	
Share awards granted/vested	 	 	2,746	 	 	 	3,665	 	
Shares repurchased	 	 	—	 	 	 	(16,755	)	
Issue of shares	 	 	—	 	 	 	490,269	 	
Amortization of share awards	 	 	303	 	 	 	1,954	 	
 	 	 	 	 	 	 	 	 	
Balance, end of period	 	$	593,983	 	 	$	590,504	 	
 	 	 	 	 	 	 	 	 	
Accumulated other comprehensive income	 	 	 	 	 	 	 	 	
Balance, beginning of period	 	$	6,035	 	 	$	4,565	 	
Other comprehensive income	 	 	82	 	 	 	642	 	
 	 	 	 	 	 	 	 	 	
Balance, end of period	 	$	6,117	 	 	$	5,207	 	
 	 	 	 	 	 	 	 	 	
Retained earnings	 	 	 	 	 	 	 	 	
Balance, beginning of period	 	$	260,296	 	 	$	202,655	 	
Adjustment to initially apply FIN 48	 	 	—	 	 	 	4,858	 	
 	 	 	 	 	 	 	 	 	
Adjusted balance, beginning of period	 	 	260,296	 	 	 	207,513	 	
Conversion of shares	 	 	—	 	 	 	(9,002	)	
Net earnings	 	 	22,860	 	 	 	24,278	 	
 	 	 	 	 	 	 	 	 	
Balance, end of period	 	$	283,156	 	 	$	222,789	 	

See accompanying notes to the unaudited condensed consolidated financial statements
4

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ENSTAR GROUP LIMITED
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six-Month Periods Ended June 30, 2008 and 2007

 	 	2008	 	 	2007	 	
 	 	(expressed in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	
OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	
Net earnings	 	$	22,860	 	 	$	24,278	 	
Adjustments to reconcile net earnings to cash flows provided by operating activities:	 	 	 	 	 	 	 	 	
Minority interest	 	 	9,677	 	 	 	4,415	 	
Negative goodwill	 	 	(35,196	)	 	 	(15,683	)	
Share-based compensation expense	 	 	303	 	 	 	1,954	 	
Net realized and unrealized investment loss (gain)	 	 	70	 	 	 	(439	)	
Share of net loss from other investments	 	 	21,871	 	 	 	—	 	
Other items	 	 	4,767	 	 	 	897	 	
Depreciation and amortization	 	 	405	 	 	 	320	 	
Amortization of bond premiums or discounts	 	 	2,898	 	 	 	(104	)	
Net movement of trading securities	 	 	211,045	 	 	 	133,227	 	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Reinsurance balances receivable	 	 	(53,093	)	 	 	66,151	 	
Other assets	 	 	15,922	 	 	 	484	 	
Losses and loss adjustment expenses	 	 	167,936	 	 	 	(24,276	)	
Reinsurance balances payable	 	 	(58,270	)	 	 	(39,783	)	
Accounts payable and accrued liabilities	 	 	(9,163	)	 	 	(15,387	)	
Other liabilities	 	 	32,241	 	 	 	89	 	
 	 	 	 	 	 	 	 	 	
Net cash flows provided by operating activities	 	 	334,273	 	 	 	136,143	 	
 	 	 	 	 	 	 	 	 	
INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	
Acquisitions, net of cash acquired	 	 	7,066	 	 	 	29,651	 	
Purchase of available-for-sale securities	 	 	(188,755	)	 	 	(52,148	)	
Sales and maturities of available-for-sale securities	 	 	155,339	 	 	 	147,073	 	
Purchase of held-to-maturity securities	 	 	—	 	 	 	(2,476	)	
Maturity of held-to-maturity securities	 	 	117,039	 	 	 	77,492	 	
Movement in restricted cash and cash equivalents	 	 	(216,984	)	 	 	(69,334	)	
Funding of other investments	 	 	(48,753	)	 	 	(267	)	
Purchase of investment in partly-owned company	 	 	(21,431	)	 	 	—	 	
Other investing activities	 	 	(290	)	 	 	(453	)	
 	 	 	 	 	 	 	 	 	
Net cash flows (used in) provided by investing activities	 	 	(196,769	)	 	 	129,538	 	
 	 	 	 	 	 	 	 	 	
FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	
Contribution to surplus of subsidiary by minority interest	 	 	86,209	 	 	 	—	 	
Receipt of loans	 	 	306,755	 	 	 	26,825	 	
Repayment of loans	 	 	(59,000	)	 	 	(2,571	)	
Repurchase of shares	 	 	—	 	 	 	(16,762	)	
 	 	 	 	 	 	 	 	 	
Net cash flows provided by financing activities	 	 	333,964	 	 	 	7,492	 	
 	 	 	 	 	 	 	 	 	
TRANSLATION ADJUSTMENT	 	 	18,245	 	 	 	130	 	
 	 	 	 	 	 	 	 	 	
NET INCREASE IN CASH AND CASH EQUIVALENTS	 	 	489,713	 	 	 	273,303	 	
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	 	 	995,237	 	 	 	450,817	 	
 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS, END OF PERIOD	 	$	1,484,950	 	 	$	724,120	 	

 	
 	
Supplemental Cash Flow Information	 	 	 	 	 	 	 	 	
Income taxes paid	 	$	3,714	 	 	$	2,598	 	
Interest paid	 	$	6,432	 	 	$	2,571	 	
 
See accompanying notes to the unaudited condensed consolidated financial statements
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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and December 31, 2007
(Expressed in thousands of U.S. Dollars, except per share amounts)
(unaudited)

1.  	BASIS OF PREPARATION AND CONSOLIDATION	
 
Our condensed consolidated financial statements have not been audited. These statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position and results of operations as at the end of and for the periods presented. Results of operations for subsidiaries acquired are included from the dates of their acquisition by the Company. Intercompany transactions are eliminated on consolidation. The results of operations for any interim period are not necessarily indicative of the results for a full year. All significant inter-company accounts and transactions have been eliminated. In these notes, the terms “we,” “us,” “our,” or “the Company” refer to Enstar Group Limited and its direct and indirect subsidiaries. The following information is unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007.
 
Significant Accounting Policies
 
Retroactive reinsurance contracts — Premiums on ceded retroactive contracts are earned upon inception of the contract with corresponding reinsurance recoverable established for the amount of reserves ceded. The initial gain, if applicable, is deferred and amortized into income over an actuarially determined expected payout period.
 
Investment in partly-owned company — An investment in a partly-owned company, in which the Company has significant influence, is carried on the equity basis whereby the investment is initially recorded at cost and adjusted to reflect the Company’s share of after-tax earnings or losses and unrealized investment gains or losses and reduced by dividends received.
 
Adoption of New Accounting Standards
 
The terms “FAS” and “FASB” used in these notes refer to Statements of Financial Accounting Standards issued by the United States Financial Accounting Standards Board.
 
We adopted FAS 157, “Fair Value Measurements” (“FAS 157”), effective January 1, 2008. Under this standard, fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, we use various valuation approaches, including market and income approaches. FAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

 	• 	Level 1— Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.	
 
Assets and liabilities utilizing Level 1 inputs include exchange-listed equity securities that are actively traded.

 	• 	Level 2— Valuations based on quoted prices in markets that are not active or for which significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

1.  	BASIS OF PREPARATION AND CONSOLIDATION — (cont’d)	

Assets and liabilities utilizing Level 2 inputs include: exchange-listed equity securities that are not actively traded; U.S. government and agency securities; non-U.S. government obligations; corporate and municipal bonds; mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”).

 	• 	Level 3— Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our own assumptions about assumptions that market participants might use.	
 
Assets and liabilities utilizing Level 3 inputs include: hedge funds with partial transparency, and credit funds and short duration high yield funds that are traded in less liquid markets.
 
The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors, including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between levels.
 
The adoption of FAS 157 did not result in any cumulative-effect adjustment to our beginning retained earnings at January 1, 2008, or any material impact on our results of operations, financial position or liquidity. In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”), which permits a one-year deferral of the application of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Accordingly, we have also adopted FSP FAS 157-2 effective January 1, 2008, and FAS 157 will not be applied to our goodwill and other intangible assets measured annually for impairment testing purposes only. We will adopt FAS 157 for non-financial assets and non-financial liabilities on January 1, 2009. The Company is currently evaluating the related provisions of FAS 157 and their potential impact on future financial statements.
 
In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”). This standard permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for many financial instruments and certain other items including insurance contracts. An entity electing the fair value option would be required to recognize changes in fair value in earnings and provide disclosure that will assist investors and other users of financial information to more easily understand the effect of the company’s choice to use fair value on its earnings. Further, the entity is required to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. This standard does not eliminate the disclosure requirements about fair value measurements included in FAS 157 and FAS No. 107, “Disclosures about Fair Value of Financial Instruments.” The adoption of FAS 159 did not impact retained earnings as of January 1, 2008 because the Company did not make any elections.
 
Accounting Standards Not Yet Adopted
 
In December 2007, the FASB issued FAS No. 141(R) “Business Combinations” (“FAS 141(R)”). FAS 141(R) replaces FAS No. 141 “Business Combinations” (“FAS 141”) but retains the fundamental requirements in FAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. FAS 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. FAS 141(R) also requires acquisition-related costs to be recognized separately from the
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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

1.  	BASIS OF PREPARATION AND CONSOLIDATION — (cont’d)	
 
acquisition, recognize assets acquired and liabilities assumed arising from contractual contingencies at their acquisition-date fair values and recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. FAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (January 1, 2009 for calendar year-end companies). The Company is currently evaluating the provisions of FAS 141(R) and its potential impact on future financial statements.
 
In December 2007, the FASB issued FAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“FAS 160”). FAS 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. FAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest that should be reported as equity in the consolidated financial statements. FAS 160 requires consolidated net income to be reported at the amounts that include the amounts attributable to both the parent and the noncontrolling interest. This statement also establishes a method of accounting for changes in a parent’s ownership interest in a subsidiary that does result in deconsolidation. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (January 1, 2009 for calendar year-end companies). The presentation and disclosure of FAS 160 shall be applied retrospectively for all periods presented. The Company is currently evaluating the provisions of FAS 160 and its potential impact on future financial statements.
 
In March 2008, the FASB issued FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“FAS 161”). FAS 161 expands the disclosure requirements of FAS 133 and requires the reporting entity to provide enhanced disclosures about the objectives and strategies for using derivative instruments, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and credit-risk related contingent features in derivative agreements. FAS 161 will be effective for fiscal years beginning after November 15, 2008 (January 1, 2009 for calendar year-end companies), and interim periods within those fiscal years. The Company is currently evaluating the provisions of FAS 161 and its potential impact on future financial statements.

2.  	ACQUISITIONS	
 
On February 29, 2008, the Company completed the acquisition of Guildhall Insurance Company Limited (“Guildhall”), a reinsurance company based in the U.K., for total consideration of £33.4 million (approximately $65.9 million). The purchase price was financed by the drawdown of approximately £16.5 million (approximately $32.5 million) from a facility loan agreement with a London-based bank; approximately £5.0 million (approximately $10.0 million) from J.C. Flowers II L.P. (the “Flowers Fund”), by way of non-voting equity participation; and the balance of approximately £11.9 million (approximately $23.5 million) from available cash on hand. The Flowers Fund is a private investment fund advised by J.C. Flowers & Co. LLC. J. Christopher Flowers, a member of the Company’s board of directors and one of its largest shareholders, is the founder and Managing Member of J.C. Flowers & Co. LLC. John J. Oros, the Company’s Executive Chairman and a member of its board of directors, is a Managing Director of J.C. Flowers & Co. LLC. Mr. Oros splits his time between J.C. Flowers & Co. LLC and the Company.
 
The acquisition has been accounted for using the purchase method of accounting, which requires that the acquirer record the assets and liabilities acquired at their estimated fair value.
 
8

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  	ACQUISITIONS — (cont’d)	

Purchase price	 	$	65,571	 	
Direct costs of acquisition	 	 	303	 	
 	 	 	 	 	
Total purchase price	 	$	65,874	 	
 	 	 	 	 	
Net assets acquired at fair value	 	$	65,874	 	

The following summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition:

Cash, restricted cash and investments	 	$	108,994	 	
Reinsurance balances receivable	 	 	33,298	 	
Accounts receivable	 	 	4,631	 	
Losses and loss adjustment expenses	 	 	(79,107	)	
Accounts payable	 	 	(1,942	)	
 	 	 	 	 	
Net assets acquired at fair value	 	$	65,874	 	

On March 5, 2008, the Company completed the acquisition from AMP Limited (“AMP”) of AMP’s Australian-based closed reinsurance and insurance operations (“Gordian”). The purchase price, including acquisition expenses, was approximately AU$436.9 million (approximately $405.4 million) and was financed by AU$301.0 million (approximately $276.5 million), including an arrangement fee of AU$4.5 million (approximately $4.2 million), from bank financing provided jointly by a London-based bank and a German bank; approximately AU$41.6 million (approximately $39.5 million) from the Flowers Fund, by way of non-voting equity participation; and approximately AU$98.7 million (approximately $93.6 million) from available cash on hand.
 
The acquisition has been accounted for using the purchase method of accounting, which requires that the acquirer record the assets and liabilities acquired at their estimated fair value.

Purchase price	 	$	401,086	 	
Direct costs of acquisition	 	 	4,326	 	
 	 	 	 	 	
Total purchase price	 	$	405,412	 	
 	 	 	 	 	
Net assets acquired at fair value	 	$	455,692	 	
 	 	 	 	 	
Excess of net assets over purchase price	 	$	50,280	 	
Less minority interest share of negative goodwill	 	 	(15,084	)	
 	 	 	 	 	
Negative goodwill	 	$	35,196	 	

The negative goodwill arose primarily as a result of income earned by Gordian between the date of the balance sheet on which the agreed purchase price was based, June 30, 2007, and the date the acquisition closed, March 5, 2008, and the desire of the vendors to achieve a substantial reduction in regulatory capital requirements and therefore to dispose of Gordian at a discount to fair value.
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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  	ACQUISITIONS — (cont’d)	
 
The following summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of the acquisition:

Cash, restricted cash and investments	 	$	872,755	 	
Reinsurance balances receivable	 	 	99,645	 	
Accounts receivable	 	 	31,253	 	
Losses and loss adjustment expenses	 	 	(509,638	)	
Insurance and reinsurance balances payable	 	 	(22,660	)	
Accounts payable	 	 	(15,663	)	
 	 	 	 	 	
Net assets acquired at fair value	 	$	455,692	 	

The fair values of reinsurance assets and liabilities acquired are derived from probability weighted ranges of the associated projected cash flows, based on actuarially prepared information and management’s run-off strategy. Any amendment to the fair values resulting from changes in such information or strategy will be recognized when they occur.
 
The following proforma condensed combined income statement for the six months ended June 30, 2008 combines the historical consolidated statements of income of the Company with those of Gordian, which was acquired in the first quarter of 2008, giving effect to the business combinations and related transactions as if they had occurred on January 1, 2008.

 	 	 	 	 	 	 	 	 	 	 	Enstar
	 	
 	 	Enstar
	 	 	 	 	 	 	 	 	Group
	 	
 	 	Group
	 	 	 	 	 	Proforma
	 	 	Limited
	 	
Six Months Ended June 30, 2008:	 	Limited	 	 	Gordian	 	 	Adjustment	 	 	Proforma	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income	 	$	19,612	 	 	$	18,532	 	 	$	(5,194	)(a)	 	$	32,950	 	
Total expenses	 	 	(48,882	)	 	 	33,518	 	 	 	(7,619	)(b)	 	 	(22,983	)	
Minority interest	 	 	(1,694	)	 	 	(15,615	)	 	 	3,844	(c)	 	 	(13,465	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) earnings before extraordinary gain	 	 	(30,964	)	 	 	36,435	 	 	 	(8,969	)	 	 	(3,498	)	
Extraordinary gain	 	 	35,196	 	 	 	—	 	 	 	—	 	 	 	35,196	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	4,232	 	 	$	36,435	 	 	$	(8,969	)	 	$	31,698	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) per ordinary share before extraordinary gain — basic and diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(0.29	)	
Extraordinary gain — basic and diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2.95	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per ordinary share — basic and diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	$	2.66	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  	ACQUISITIONS — (cont’d)	
 
Notes to the Six Months Ended June 30, 2008 Pro Forma Condensed Combined Income Statements:

Income:	 	 	 	 	
(a) Adjustment to conform the accounting policy for investments to that of the Company	 	$	(5,194	)	
Expenses:	 	 	 	 	
(b)(i) Adjustment to interest expense to reflect the financing costs of the acquisition for the period	 	 	(3,965	)	
(ii) Adjustment to recognize amortization of fair value adjustments	 	 	(5,212	)	
(iii) Adjustment to income taxes for pro forma adjustments	 	 	1,558	 	
 	 	 	 	 	
 	 	 	(7,619	)	
(c) Reflect minority interest’s share of net pro forma income statement adjustments	 	 	3,844	 	
 
The following proforma condensed combined income statement for the three and six months ended June 30, 2007 combines the historical consolidated statements of income of the Company with those of The Enstar Group, Inc. (“EGI”), BH Acquisition Ltd. (“BH”) and Inter-Ocean Holdings, Ltd. (“Inter-Ocean”), each of which was acquired in the first quarter of 2007, and Gordian, which was acquired in the first quarter of 2008, giving effect to the business combinations and related transactions as if they had occurred on January 1, 2007.

 	 	 	 	 	 	 	 	 	 	 	Enstar
	 	
 	 	 	 	 	 	 	 	 	 	 	Group
	 	
 	 	Enstar
	 	 	 	 	 	Proforma
	 	 	Limited-
	 	
Three Months Ended June 30, 2007:	 	Group	 	 	Gordian	 	 	Adjustment	 	 	Proforma	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income	 	$	18,761	 	 	$	17,962	 	 	$	5,831	(a)	 	$	42,554	 	
Total expenses	 	 	(6,598	)	 	 	35,185	 	 	 	(12,613	)(b)	 	 	15,974	 	
Minority interest	 	 	(2,167	)	 	 	(15,944	)	 	 	2,035	(c)	 	 	(16,076	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	9,996	 	 	$	37,203	 	 	$	(4,747	)	 	$	42,452	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per ordinary share — basic	 	 	 	 	 	 	 	 	 	 	 	 	 	$	3.56	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per ordinary share — diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	$	3.48	 	

Notes to the Three Months Ended June 30, 2007 Pro Forma Condensed Combined Income Statements:

Income:	 	 	 	 	
(a) Adjustment to conform the accounting policy for investments to that of the Company	 	$	5,831	 	
Expenses:	 	 	 	 	
(b)(i) Adjustment to interest expense to reflect the financing costs of the acquisition for the period	 	 	(5,506	)	
(ii) Adjustment to recognize amortization of fair value adjustments recorded at date of acquisition	 	 	(5,357	)	
(iii) Adjustment to income taxes for pro forma adjustments	 	 	(1,750	)	
 	 	 	 	 	
 	 	 	(12,613	)	
(c) Reflect minority interest’s share of net proforma income statement adjustments	 	 	2,035	 	
 
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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  	ACQUISITIONS — (cont’d)	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Enstar
	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Group
	 	
 	 	Enstar
	 	 	 	 	 	 	 	 	 	 	 	Proforma
	 	 	 	 	 	 	 	 	Proforma
	 	 	Limited-
	 	
Six Months Ended June 30, 2007:	 	Group	 	 	BH	 	 	EGI	 	 	Inter-Ocean	 	 	Adjustment	 	 	Sub-total	 	 	Gordian	 	 	Adjustment	 	 	Proforma	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income	 	$	38,769	 	 	$	2,819	 	 	$	2,280	 	 	$	1,837	 	 	$	(2,400	)(b)	 	$	43,305	 	 	$	36,356	 	 	$	2,229	(a)	 	$	81,890	 	
Total expenses	 	 	(37,578	)	 	 	(1,547	)	 	 	907	 	 	 	(244	)	 	 	1,980	(d)	 	 	(36,482	)	 	 	36,724	 	 	 	(21,071	)(c)	 	 	(20,829	)	
Minority interest	 	 	(4,415	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4,415	)	 	 	(21,924	)	 	 	5,653	(e)	 	 	(20,686	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) earnings before extraordinary gain	 	 	(3,224	)	 	 	1,272	 	 	 	3,187	 	 	 	1,593	 	 	 	(420	)	 	 	2,408	 	 	 	51,156	 	 	 	(13,189	)	 	 	40,375	 	
Extraordinary gain	 	 	15,683	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	15,683	 	 	 	—	 	 	 	—	 	 	 	15,683	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	12,459	 	 	$	1,272	 	 	$	3,187	 	 	$	1,593	 	 	$	(420	)	 	$	18,091	 	 	$	51,156	 	 	$	(13,189	)	 	$	56,058	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per ordinary share before extraordinary gain — basic	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	3.50	 	
Extraordinary gain — basic	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.36	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per ordinary share — basic	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4.86	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per ordinary share before extraordinary gain — diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	3.42	 	
Extraordinary gain — diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.33	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per ordinary share — diluted	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4.75	 	

Notes to the Six Months Ended June 30, 2007 Pro Forma Condensed Combined Income Statements:

Income:	 	 	 	 	
(a) Adjustment to conform the accounting policy for investments to that of the Company	 	$	2,229	 	
(b) Elimination of fees earned by Enstar prior to acquisition	 	 	(2,400	)	
Expenses:	 	 	 	 	
(c) (i) Adjustment to interest expense to reflect the financing costs of the acquisition for the period	 	 	(10,521	)	
(ii) Adjustment to recognize amortization of fair value adjustments recorded at date of acquisition	 	 	(9,881	)	
(iii) Adjustment to income taxes for pro forma adjustments	 	 	(669	)	
 	 	 	 	 	
 	 	 	(21,071	)	
(d) Elimination of fees paid prior to acquisition	 	 	1,980	 	
(e) Reflect minority interest’s share of net proforma income statement adjustments	 	 	5,653	 	
 
On June 16, 2006, an indirect subsidiary of the Company, Virginia Holdings Ltd., entered into a definitive agreement with Dukes Place Holdings, L.P., a portfolio company of GSC European Mezzanine Fund II, L.P., for the purchase of 44.4% of the outstanding capital stock of Stonewall Acquisition Corporation. Stonewall Acquisition Corporation is the parent of two Rhode Island-domiciled insurers, Stonewall Insurance Company and Seaton Insurance Company, both of which are in run-off. The purchase price was $20.4 million. On May 27, 2008, the Rhode Island Department of Business Regulation issued an order approving the proposed acquisition. The acquisition was completed on June 13, 2008 and was funded from available cash on hand.
12

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  	ACQUISITIONS — (cont’d)	
 
The acquisition has been accounted for using the purchase method of accounting, which requires that the acquirer record the assets and liabilities acquired at their estimated fair value. The following represents the Company’s 44.4% share:

Purchase price	 	$	20,444	 	
Direct costs of acquisition	 	 	987	 	
 	 	 	 	 	
Total purchase price	 	$	21,431	 	
 	 	 	 	 	
Net assets acquired at fair value	 	$	21,431	 	

The following summarizes the Company’s 44.4% share of the estimated fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

Cash and investments	 	$	58,121	 	
Reinsurance balances receivable	 	 	187,964	 	
Losses and loss adjustment expenses	 	 	(217,044	)	
Reinsurance balances payable	 	 	(3,049	)	
Accounts payable and accrued liabilities	 	 	(4,561	)	
 	 	 	 	 	
Net assets acquired at fair value	 	$	21,431	 	

The Company is in the process of finalizing its purchase price allocation, which is expected to be completed next quarter, and as a result the allocation of the purchase price may be subject to change.
 
On June 20, 2008, the Company, through its wholly-owned subsidiary Enstar Acquisitions Limited, or EAL, announced a firm intention to make an offer to all of the shareholders of Goshawk Insurance Holdings Plc, or Goshawk, at 5.2 pence (approximately $0.103) for each share (the “Offer”). Goshawk owns Rosemont Reinsurance Limited, a Bermuda-based reinsurer that wrote primarily property and marine business, which was placed into run-off in October 2005. On July 14, 2008, the Offer was sent to Goshawk’s shareholders. Shareholders have until August 19, 2008 to accept the Offer. The Offer values Goshawk at approximately £45.7 million (approximately $87.5 million) in the aggregate. As at August 7, 2008, shareholders representing approximately 83.0% of Goshawk had either sold their shares to EAL or had accepted the Offer. It is anticipated that further acceptances will be forthcoming during the remaining period of the Offer. The Offer is conditioned on obtaining a third party consent and regulatory approval, and receipt of valid acceptances of the Offer of at least 90% of Goshawk shares carrying voting rights.
 
The Company intends to finance approximately 50% of the acquisition price using a $45.0 million credit facility provided by a London-based bank, a contribution of 12.5% of the acquisition price from the Flowers Fund, by way of non-voting equity participation, and the remainder from available cash on hand. The interest rate on the credit facility is 2.25% above LIBOR and the facility is payable within three years and will be secured by a first charge over the Company’s shares in Goshawk.
 
On July 2, 2008, the Company entered into a definitive agreement with British Nuclear Fuels plc, for the purchase of all of the outstanding capital stock of Electricity Producers Insurance Company (Bermuda) Limited, or EPIC, for total consideration of approximately £35.0 million (approximately $68.1 million). The purchase price will be financed by approximately $34.0 million from a credit facility provided by a London-based bank; approximately $10.2 million from the Flowers Fund, by way of non-voting equity participation, and the remainder from available cash on hand. Following approval of the transaction by the Bermudian regulatory authorities on August 5, 2008, the Company expects the transaction to close no later than August 14, 2008. The interest on the
13

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.  	ACQUISITIONS — (cont’d)	
 
bank loan is LIBOR plus 2.25%. The facility is repayable within four years and will be secured by a first charge over the Company’s shares in EPIC.

3.  	SIGNIFICANT NEW BUSINESS	
 
In December 2007, the Company, in conjunction with JCF FPK I L.P. (“JCF FPK”) and a newly-hired executive management team, formed U.K.-based Shelbourne Group Limited (“Shelbourne”) to invest in Reinsurance to Close or “RITC” transactions (the transferring of liabilities from one Lloyd’s Syndicate to another) with Lloyd’s of London insurance and reinsurance syndicates in run-off. JCF FPK is a joint investment program between Fox-Pitt, Kelton, Cochran, Caronia & Waller (“FPK”) and the Flowers Fund. Shelbourne is a holding company of a Lloyd’s Managing Agency, Shelbourne Syndicate Services Limited. The Company owns 50.1% of Shelbourne, which in turn owns 100% of Shelbourne Syndicate Services Limited, the Managing Agency for Lloyd’s Syndicate 2008, a syndicate approved by Lloyd’s of London on December 16, 2007 to undertake RITC transactions with Lloyd’s syndicates in run-off. In February 2008, Lloyd’s Syndicate 2008 entered into RITC agreements with four Lloyd’s syndicates with total gross insurance reserves of approximately $471.2 million.
 
On February 29, 2008, the Company funded its capital commitment of approximately £36.0 million (approximately $72.0 million) by way of a letter of credit issued by a London-based bank to Lloyd’s Syndicate 2008. The letter of credit was secured by a parental guarantee from the Company in the amount of £12.0 million (approximately $24.0 million); approximately £11.0 million (approximately $22.0 million) from the Flowers Fund (acting in its own capacity and not through JCF FPK), by way of a non-voting equity participation; and approximately £13.0 million (approximately $26.0 million) from available cash on hand. JCF FPK’s capital commitment to Lloyd’s Syndicate 2008 is approximately £14.0 million (approximately $28.0 million).
 
The Flowers Fund is a private investment fund advised by J.C. Flowers & Co. LLC. J. Christopher Flowers, a member of the Company’s board of directors and one of its largest shareholders, is the founder and Managing Member of J.C. Flowers & Co. LLC. John J. Oros, the Company’s Executive Chairman and a member of its board of directors, is a Managing Director of J.C. Flowers & Co LLC. Mr. Oros splits his time between J.C. Flowers & Co. LLC and the Company. An affiliate of the Flowers Fund controls approximately 41% of FPK.
14

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.  	INVESTMENTS	
 
Available-for-sale
 
The amortized cost and estimated fair value of investments in debt securities classified as available-for-sale are as follows:

 	 	 	 	 	Gross
	 	 	Gross
	 	 	 	 	
 	 	 	 	 	Unrealized
	 	 	Unrealized
	 	 	 	 	
 	 	Amortized
	 	 	Holding
	 	 	Holding
	 	 	Fair
	 	
 	 	Cost	 	 	Gains	 	 	Losses	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at June 30, 2008	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Treasury and Agency securities	 	$	106,472	 	 	$	285	 	 	$	(1,251	)	 	$	105,506	 	
Non-U.S. Government securities	 	 	196,209	 	 	 	2,298	 	 	 	(2,555	)	 	 	195,952	 	
Corporate debt securities	 	 	168,932	 	 	 	2	 	 	 	(2,409	)	 	 	166,525	 	
Other debt securities	 	 	6,582	 	 	 	—	 	 	 	—	 	 	 	6,582	 	
Short term investments	 	 	38,210	 	 	 	746	 	 	 	(12	)	 	 	38,944	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	516,405	 	 	$	3,331	 	 	$	(6,227	)	 	$	513,509	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2007	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	 	$	757	 	 	$	42	 	 	$	(170	)	 	$	629	 	
Other debt securities	 	 	6,249	 	 	 	—	 	 	 	—	 	 	 	6,249	 	
Short term investments	 	 	15,480	 	 	 	—	 	 	 	—	 	 	 	15,480	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	22,486	 	 	$	42	 	 	$	(170	)	 	$	22,358	 	

The gross unrealized losses on available-for-sale debt securities as at June 30 were split as follows:

 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	
Due within one year	 	$	172	 	 	$	—	 	
After 1 through 5 years	 	 	3,675	 	 	 	—	 	
After 5 through 10 years	 	 	1,924	 	 	 	—	 	
After 10 years	 	 	456	 	 	 	170	 	
 	 	 	 	 	 	 	 	 	
 	 	$	6,227	 	 	$	170	 	

As at June 30, 2008 the number of securities classified as available-for-sale in an unrealized loss position was 152, with a fair value of $430.9 million. None of these securities has been in an unrealized loss position for 12 months or longer.
15

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.  	INVESTMENTS — (cont’d)	
 
Held-to-maturity
 
The amortized cost and estimated fair value of investments in debt securities classified as held-to-maturity are as follows:

 	 	 	 	 	Gross
	 	 	Gross
	 	 	 	 	
 	 	 	 	 	Unrealized
	 	 	Unrealized
	 	 	 	 	
 	 	Amortized
	 	 	Holding
	 	 	Holding
	 	 	Fair
	 	
 	 	Cost	 	 	Gains	 	 	Losses	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at June 30, 2008	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Treasury and Agency securities	 	$	52,439	 	 	$	834	 	 	$	(247	)	 	$	53,026	 	
Non-U.S. Government securities	 	 	2,760	 	 	 	—	 	 	 	(4	)	 	 	2,756	 	
Corporate debt securities	 	 	55,363	 	 	 	175	 	 	 	(837	)	 	 	54,701	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	110,562	 	 	$	1,009	 	 	$	(1,088	)	 	$	110,483	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As at December 31, 2007	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Treasury and Agency securities	 	$	132,332	 	 	$	816	 	 	$	(314	)	 	$	132,834	 	
Non-U.S. Government securities	 	 	2,534	 	 	 	—	 	 	 	(12	)	 	 	2,522	 	
Corporate debt securities	 	 	76,149	 	 	 	159	 	 	 	(666	)	 	 	75,642	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	211,015	 	 	$	975	 	 	$	(992	)	 	$	210,998	 	

The gross unrealized losses on held-to-maturity debt securities as at June 30 were split as follows:

 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	
Due within one year	 	$	78	 	 	$	161	 	
After 1 through 5 years	 	 	213	 	 	 	217	 	
After 5 through 10 years	 	 	86	 	 	 	13	 	
After 10 years	 	 	711	 	 	 	601	 	
 	 	 	 	 	 	 	 	 	
 	 	$	1,088	 	 	$	992	 	

As at June 30, 2008, the number of securities classified as held-to-maturity in an unrealized loss position was 36 with a fair value of $33.7 million. Of these securities, the number of securities that have been in an unrealized loss position for 12 months or longer was 32 with a fair value of $20.0 million. As of June 30, 2008, none of these securities were considered to be other than temporarily impaired. The Company has the intent and ability to hold these securities until their maturities. The unrealized losses from these securities were not a result of credit, collateral or structural issues.
 
The amortized cost and estimated fair values as at June 30, 2008 of debt securities classified as held-to-maturity by contractual maturity are shown below.

 	 	Amortized
	 	 	Fair
	 	
 	 	Cost	 	 	Value	 	
 	 	 	 	 	 	 	 	 	
Due within one year	 	$	51,803	 	 	$	51,951	 	
After 1 through 5 years	 	 	50,763	 	 	 	51,213	 	
After 5 through 10 years	 	 	1,906	 	 	 	1,820	 	
After 10 years	 	 	6,090	 	 	 	5,499	 	
 	 	 	 	 	 	 	 	 	
 	 	$	110,562	 	 	$	110,483	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.  	INVESTMENTS — (cont’d)	
 
Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Trading
 
The estimated fair value of investments in debt securities and short-term investments classified as trading securities as of June 30 was as follows:

 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	
U.S. Treasury and Agency securities	 	$	73,412	 	 	$	237,943	 	
Non-U.S. Government securities	 	 	—	 	 	 	3,244	 	
Corporate debt securities	 	 	39,124	 	 	 	82,436	 	
 	 	 	 	 	 	 	 	 	
 	 	$	112,536	 	 	$	323,623	 	

Other Investments
 
As at June 30, 2008 and December 31, 2007, the Company had $141.3 million and $75.3 million, respectively, of other investments recorded in limited partnerships, limited liability companies and equity funds. These other investments represented 5.1% and 4.2% of total investments and cash and cash equivalents as at June 30, 2008 and December 31, 2007, respectively. All of the Company’s other investments relating to its investments in limited partnerships and limited liability companies are subject to restrictions on redemptions and sales which are determined by the governing documents and limit the Company’s ability to liquidate these investments in the short term. Due to a lag in the valuations reported by the managers, the Company records changes in the investment value with up to a three-month lag. These investments are accounted for under the equity method. As at June 30, 2008 and December 31, 2007, the Company had unfunded capital commitments relating to its other investments of $27.7 million and $74.6 million, respectively. As at June 30, 2008, 69.0% of the other investments are with a related party.
 
In accordance with FAS 157, the Company has categorized its investments held at June 30, 2008 between levels as follows:

 	 	 	 	 	 	 	 	 	 	 	Total Fair
	 	
 	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed maturities - available for sale	 	$	—	 	 	$	513,509	 	 	$	—	 	 	$	513,509	 	
Fixed maturities - trading	 	 	—	 	 	 	111,485	 	 	 	1,051	 	 	 	112,536	 	
Equity securities	 	 	4,610	 	 	 	—	 	 	 	—	 	 	 	4,610	 	
Other investments	 	 	—	 	 	 	—	 	 	 	141,328	 	 	 	141,328	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total investments	 	$	4,610	 	 	$	624,994	 	 	$	142,379	 	 	$	771,983	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.  	INVESTMENTS — (cont’d)	
 
The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the quarter ended June 30, 2008:

 	 	Fixed
	 	 	 	 	 	 	 	 	 	 	
 	 	Maturity
	 	 	Equity
	 	 	Other
	 	 	 	 	
 	 	Investments	 	 	Securities	 	 	Investments	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Level 3 investments as of April 1, 2008	 	$	1,051	 	 	$	—	 	 	$	105,391	 	 	$	106,442	 	
Net purchases (sales and distributions)	 	 	—	 	 	 	—	 	 	 	28,507	 	 	 	28,507	 	
Total realized and unrealized losses	 	 	—	 	 	 	—	 	 	 	7,430	 	 	 	7,430	 	
Net transfers in and/or (out) of Level 3	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Level 3 investments as of June 30, 2008	 	$	1,051	 	 	$	—	 	 	$	141,328	 	 	$	142,379	 	

The amount of total losses for the six-month period included in earnings attributable to the fair value of changes in assets still held at the reporting date was $21.9 million.
 
The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs during the six-months ended June 30, 2008:

 	 	Fixed
	 	 	 	 	 	 	 	 	 	 	
 	 	Maturity
	 	 	Equity
	 	 	Other
	 	 	 	 	
 	 	Investments	 	 	Securities	 	 	Investments	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Level 3 investments as of January 1, 2008	 	$	1,051	 	 	$	—	 	 	$	75,300	 	 	$	76,351	 	
Net purchases (sales and distributions)	 	 	—	 	 	 	—	 	 	 	83,968	 	 	 	83,968	 	
Total realized and unrealized losses	 	 	—	 	 	 	—	 	 	 	(17,940	)	 	 	(17,940	)	
Net transfers in and/or (out) of Level 3	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Level 3 investments as of June 30, 2008	 	$	1,051	 	 	$	—	 	 	$	141,328	 	 	$	142,379	 	

 	 	
5.  	LOANS PAYABLE	
 
On May 8, 2008, the Company fully repaid the outstanding principal and accrued interest on the loan used to partially finance the acquisition of Brampton Insurance Company Limited totaling $19.9 million.

6.  	EMPLOYEE BENEFITS	
 
Our share-based compensation plans provide for the grant of various awards to our employees and to members of the board of directors. These are described in Note 12 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2007. The information below includes both the employee and director components of our share-based compensation.

(a) 	Employee share plans	

 	 	 	 	 	Weighted
	 	
 	 	 	 	 	Average Fair
	 	
 	 	Number of
	 	 	Value of
	 	
 	 	Shares	 	 	the Award per Share	 	
 	 	 	 	 	 	 	 	 	
Nonvested — January 1, 2008	 	 	25,862	 	 	$	122.42	 	
Granted	 	 	28,069	 	 	 	95.11	 	
Vested	 	 	(40,182	)	 	 	100.97	 	
 	 	 	 	 	 	 	 	 	
Nonvested — June 30, 2008	 	 	13,749	 	 	 	87.50	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6.  	EMPLOYEE BENEFITS — (cont’d)	

i) 	2004 - 2005 employee share plan	
 
Compensation costs of $0.1 million and $0.3 million relating to the issuance of share-awards to employees of the Company in 2004 and 2005 have been recognized in the Company’s statement of earnings for the three and six months ended June 30, 2008, respectively, as compared to $0.2 million and $2.0 million for the three and six months ended June 30, 2007, respectively.
 
The determination of the share-award expenses was based on the fair-market value per common share of EGI as of the grant date and is recognized over the vesting period.
 
As of June 30, 2008, total unrecognized compensation costs related to the non-vested share awards amounted to $0.3 million. These costs are expected to be recognized over a weighted average period of 0.66 years.

ii) 	2006-2010 Annual Incentive Plan and 2006 Equity Incentive Plan	
 
For the six months ended June 30, 2008 and 2007, 27,140 and 38,387 shares were awarded to directors, officers and employees under the 2006 Equity Incentive Plan. The total value of the award for the six months ended June 30, 2008 was $2.6 million and was charged against the 2006-2010 Annual Incentive Plan accrual established for the year ended December 31, 2007. The total value of the award for the six months ended June 30, 2007 was $3.8 million of which $0.5 million was charged as an expense for the six months ended June 30, 2007 and $3.3 million was charged against the 2006-2010 Annual Incentive Plan accrual established for the year ended December 31, 2006.
 
The accrued expense relating to the 2006-2010 Annual Incentive Plan for the three and six months ended June 30, 2008 was $2.0 million and $4.0 million, respectively, as compared to $1.9 million and $4.3 million for the three and six months ended June 30, 2007, respectively.

iii) 	Enstar Group Limited Employee Share Purchase Plan	
 
On February 26, 2008, the Company’s board of directors approved the Amended and Restated Enstar Group Limited Employee Share Purchase Plan (“the Plan”), and subsequently, on June 11, 2008, the Company’s shareholders approved the Plan at the Annual General Meeting.
 
Compensation costs of approximately $0.1 million relating to the shares issued have been recognized in the Company’s statement of earnings for the three and six-months ended June 30, 2008. As at June 30, 2008, 929 shares have been issued to employees under the Plan.

(b) 	Options	

 	 	 	 	 	Weighted
	 	 	 	 	
 	 	 	 	 	Average
	 	 	Intrinsic
	 	
 	 	Number of
	 	 	Exercise
	 	 	Value of
	 	
 	 	Shares	 	 	Price	 	 	Shares	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding — January 1, 2008	 	 	490,371	 	 	$	25.40	 	 	 	—	 	
Granted	 	 	—	 	 	 	—	 	 	 	—	 	
Exercised	 	 	—	 	 	 	—	 	 	 	—	 	
Forfeited	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding — June 30, 2008	 	 	490,371	 	 	$	25.40	 	 	$	30,452	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6.  	EMPLOYEE BENEFITS — (cont’d)	
 
Stock options outstanding and exercisable as of June 30, 2008 were as follows:

Ranges of
	 	 	 	 	 	Weighted Average
	
Exercise
	 	Number of
	 	Weighted Average
	 	Remaining
	
Prices	 	Options	 	Exercise Price	 	Contractual Life	
 	 	 	 	 	 	 	 	 	 	 	 	 	
$10 - 20	 	 	323,645	 	 	$	17.20	 	 	 	2.6 years	 	
$40 - 60	 	 	166,726	 	 	 	41.32	 	 	 	5.2 years	 	

(c) 	Deferred Compensation and Stock Plan for Non-Employee Directors	
 
EGI, prior to its merger with a subsidiary of the Company (the “Merger”), had in place a Deferred Compensation and Stock Plan for Non-Employee Directors which permitted non-employee directors to receive all or a portion of their retainer and meeting fees in common stock and to defer all or a portion of their retainer and meeting fees in stock units. Upon completion of the Merger, each stock unit was converted from a right to receive a share of EGI common stock into a right to receive an Enstar Group Limited ordinary share. No additional amounts will be deferred under the plan.
 
On June 5, 2007, the Compensation Committee of the board of directors of the Company approved the Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors (the “EGL Deferred Compensation Plan”)
 
The EGL Deferred Compensation Plan became effective immediately. The EGL Deferred Compensation Plan provides each member of the Company’s board of directors who is not an officer or employee of the Company or any of its subsidiaries (each, a “Non-Employee Director”) with the opportunity to elect (i) to receive all or a portion of his or her compensation for services as a director in the form of the Company’s ordinary shares instead of cash and (ii) to defer receipt of all or a portion of such compensation until retirement or termination.
 
Non-Employee Directors electing to receive compensation in the form of ordinary shares will receive whole ordinary shares (with any fractional shares payable in cash) as of the date compensation would otherwise have been payable. Non-Employee Directors electing to defer compensation will have such compensation converted into share units payable as a lump sum distribution after the director’s “separation from service” as defined under Section 409A of the Internal Revenue Code of 1986, as amended. The lump sum share unit distribution will be made in the form of ordinary shares, with fractional shares paid in cash.
 
For the six months ended June 30, 2008 and 2007, 1,987 and Nil share units, respectively, were credited to the accounts of Non-Employee Directors under the plan.
20

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.  	EARNINGS PER SHARE	
 
The following tables set forth the comparison of basic and diluted earnings per share for the three and six-month periods ended June 30, 2008 and 2007.

 	 	Three Months
	 	 	Three Months
	 	
 	 	Ended
	 	 	Ended
	 	
 	 	June 30,
	 	 	June 30,
	 	
 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	 	 	 	 	 	 	
Earnings before extraordinary gain	 	$	11,173	 	 	$	10,904	 	
Weighted average shares outstanding — basic	 	 	11,959,125	 	 	 	11,916,013	 	
 	 	 	 	 	 	 	 	 	
Earnings per share before extraordinary gain — basic	 	$	0.93	 	 	$	0.92	 	

 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	 	 	 	 	 	 	 	
Earnings before extraordinary gain	 	$	11,173	 	 	$	10,904	 	
Weighted average shares outstanding — basic	 	 	11,959,125	 	 	 	11,916,013	 	
Share equivalents:	 	 	 	 	 	 	 	 	
Unvested Shares	 	 	14,548	 	 	 	30,242	 	
Options	 	 	261,550	 	 	 	258,307	 	
Restricted share units	 	 	3,133	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding — diluted	 	 	12,238,356	 	 	 	12,204,562	 	
 	 	 	 	 	 	 	 	 	
Earnings per share before extraordinary gain — diluted	 	$	0.91	 	 	$	0.89	 	

 	 	 	 	 	 	 	 	 	
 	 	Six Months
	 	 	Six Months
	 	
 	 	Ended	 	 	Ended	 	
 	 	June 30,
	 	 	June 30,
	 	
 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	
Basic earnings per share	 	 	 	 	 	 	 	 	
(Loss) earnings before extraordinary gain	 	$	(12,336	)	 	$	8,595	 	
Weighted average shares outstanding — basic	 	 	11,943,330	 	 	 	11,540,318	 	
 	 	 	 	 	 	 	 	 	
(Loss) earnings per share before extraordinary gain — basic	 	$	(1.03	)	 	$	0.74	 	
 	 	 	 	 	 	 	 	 	
Diluted earnings per share	 	 	 	 	 	 	 	 	
(Loss) earnings before extraordinary gain	 	$	(12,336	)	 	$	8,595	 	
Weighted average shares outstanding — basic	 	 	11,943,330	 	 	 	11,540,318	 	
Share equivalents:	 	 	 	 	 	 	 	 	
Unvested Shares	 	 	—	 	 	 	61,096	 	
Options	 	 	—	 	 	 	215,811	 	
Restricted share units	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding — diluted	 	 	11,943,330	 	 	 	11,817,225	 	
 	 	 	 	 	 	 	 	 	
(Loss) earnings per share before extraordinary gain — diluted	 	$	(1.03	)	 	$	0.73	 	

21

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.  	EARNINGS PER SHARE — (cont’d)	
 
The following securities have not been included in the computation of diluted earnings per share for the six months ended June 30, 2008 because to do so would have been anti-dilutive for the period presented.

 	 	Six Months
	 	
 	 	Ended	 	
 	 	June 30,
	 	
Share equivalents	 	2008	 	
 	 	 	 	 	
Unvested Shares	 	 	20,205	 	
Options	 	 	257,859	 	
Restricted share units	 	 	2,637	 	
 	 	 	 	 	
Total	 	 	280,701	 	

The weighted average ordinary shares outstanding shown for the six months ended June 30, 2007 reflect the conversion of Class A, B, C and D shares to ordinary shares on January 31, 2007, as part of the recapitalization completed in connection with the Merger, as if the conversion occurred on January 1, 2007. For the three and six months ended June 30, 2007, the ordinary shares issued to acquire EGI are reflected in the calculation of the weighted average ordinary shares outstanding from January 31, 2007, the date of issue.
 
In July 2008, the Company completed the sale to the public of 1,372,028 newly-issued ordinary shares, inclusive of the underwriters’ over-allotment. The shares were priced at $87.50 per share and the Company received net proceeds of approximately $116.8 million, after underwriting fees and other expenses of approximately $3.3 million.

8.  	COMMITMENTS AND CONTINGENCIES	
 
As at June 30, 2008, the Company has guaranteed the obligations of two of its subsidiaries in respect of letters of credit issued on their behalf by London-based banks in the amount of £19.5 million (approximately $38.7 million) in respect of capital commitments to Lloyds Syndicate 2008 and insurance contract requirements of one of the subsidiaries. The guarantees will be triggered should losses incurred by the subsidiaries exceed available cash on hand resulting in the letters of credit being drawn. As at June 30, 2008, the Company has not recorded any liabilities associated with the guarantees.

9.  	RELATED PARTY TRANSACTIONS	
 
The Company has entered into certain transactions with companies and partnerships that are affiliated with J. Christopher Flowers and John J. Oros. Messrs Flowers and Oros are members of the Company’s board of directors and Mr. Flowers is one of the largest shareholders of Enstar.
 
The Company had, as of June 30, 2008 and December 31, 2007, investments in entities affiliated with Mr. Flowers with a total value of $97.5 million and $71.6 million, respectively, and outstanding commitments to entities managed by Mr. Flowers, for the same periods, of $21.4 million and $76.3 million, respectively. The Company’s outstanding commitments may be drawn down over approximately the next six years. Subsequent to June 30, 2008, the Company funded $14.4 million of its remaining outstanding capital commitments of $21.4 million to entities affiliated with Mr. Flowers.
 
Related party investments associated with Messrs. Flowers and Oros, as at June 30, 2008, accounted for 77.3% of the total unfunded capital commitments of the Company, 68.9% of the total amount of investments classified as other investments by the Company and 100% of the total decrease in fair value of other investments for the six months ended June 30, 2008 by the Company.
 
In July 2008, FPK acted as lead managing underwriter in the Company’s sale to the public of 1,372,028 ordinary shares, inclusive of the underwriters’ over-allotment, at a public offering price of $87.50 per share (the
22

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
“Offering”). The underwriters purchased the shares at a 2% discount to the public offering price. The Company received net proceeds of approximately $116.8 million in the Offering. An affiliate of the Flowers Fund controls approximately 41% of FPK. In addition, the Flowers Fund and certain of its affiliated investment partnerships purchased 285,714 ordinary shares with a value of approximately $25 million in the Offering at the public offering price.

10.  	SEGMENT INFORMATION	
 
The determination of reportable segments is based on how senior management monitors the Company’s operations. The Company measures the results of its operations under two major business categories: reinsurance and consulting.
 
Consulting fees for the reinsurance segment are intercompany fees paid to the consulting segment. Salary and benefits for the reinsurance segment relate to the discretionary bonus expense on the net income after taxes of the reinsurance segment.

 	 	Three Months Ended June 30, 2008	 	
 	 	Reinsurance	 	 	Consulting	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	(9,037	)	 	$	12,615	 	 	$	3,578	 	
Net investment income	 	 	19,512	 	 	 	1,707	 	 	 	21,219	 	
Net realized gain	 	 	1,014	 	 	 	—	 	 	 	1,014	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	11,489	 	 	 	14,322	 	 	 	25,811	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net decrease in loss and loss adjustment expense liabilities	 	 	(25,483	)	 	 	—	 	 	 	(25,483	)	
Salaries and benefits	 	 	5,172	 	 	 	8,775	 	 	 	13,947	 	
General and administrative expenses	 	 	8,968	 	 	 	5,004	 	 	 	13,972	 	
Interest expense	 	 	7,643	 	 	 	—	 	 	 	7,643	 	
Net foreign exchange gain	 	 	(4,932	)	 	 	(3	)	 	 	(4,935	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(8,632	)	 	 	13,776	 	 	 	5,144	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income taxes and minority interest	 	 	20,121	 	 	 	546	 	 	 	20,667	 	
Income taxes	 	 	(3,186	)	 	 	(7	)	 	 	(3,193	)	
Minority interest	 	 	(6,301	)	 	 	—	 	 	 	(6,301	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	10,634	 	 	$	539	 	 	$	11,173	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.  	SEGMENT INFORMATION — (cont’d)	

 	 	Three Months Ended June 30, 2007	 	
 	 	Reinsurance	 	 	Consulting	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	(6,653	)	 	$	10,479	 	 	$	3,826	 	
Net investment income	 	 	16,198	 	 	 	778	 	 	 	16,976	 	
Net realized loss	 	 	(132	)	 	 	—	 	 	 	(132	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	9,413	 	 	 	11,257	 	 	 	20,670	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase in loss and loss adjustment expense liabilities	 	 	(805	)	 	 	—	 	 	 	(805	)	
Salaries and benefits	 	 	2,239	 	 	 	8,121	 	 	 	10,360	 	
General and administrative expenses	 	 	2,698	 	 	 	5,217	 	 	 	7,915	 	
Interest expense	 	 	1,307	 	 	 	—	 	 	 	1,307	 	
Net foreign exchange (gain) loss	 	 	(3,095	)	 	 	26	 	 	 	(3,069	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	2,344	 	 	 	13,364	 	 	 	15,708	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes and minority interest	 	 	7,069	 	 	 	(2,107	)	 	 	4,962	 	
Income taxes	 	 	7,934	 	 	 	175	 	 	 	8,109	 	
Minority interest	 	 	(2,167	)	 	 	—	 	 	 	(2,167	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	12,836	 	 	$	(1,932	)	 	$	10,904	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30, 2008	 	
 	 	Reinsurance	 	 	Consulting	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	(16,285	)	 	$	25,918	 	 	$	9,633	 	
Net investment income (loss)	 	 	25,010	 	 	 	(3,201	)	 	 	21,809	 	
Net realized (loss)	 	 	(70	)	 	 	—	 	 	 	(70	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	8,655	 	 	 	22,717	 	 	 	31,372	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net decrease in loss and loss adjustment expense liabilities	 	 	(24,798	)	 	 	—	 	 	 	(24,798	)	
Salaries and benefits	 	 	7,234	 	 	 	18,070	 	 	 	25,304	 	
General and administrative expenses	 	 	17,257	 	 	 	8,626	 	 	 	25,883	 	
Interest expense	 	 	10,958	 	 	 	—	 	 	 	10,958	 	
Net foreign exchange gain	 	 	(5,895	)	 	 	(375	)	 	 	(6,270	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	4,756	 	 	 	26,321	 	 	 	31,077	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes and minority interest	 	 	3,899	 	 	 	(3,604	)	 	 	295	 	
Income taxes	 	 	(4,747	)	 	 	1,793	 	 	 	(2,954	)	
Minority interest	 	 	(9,677	)	 	 	—	 	 	 	(9,677	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before extraordinary gain	 	 	(10,525	)	 	 	(1,811	)	 	 	(12,336	)	
Extraordinary gain	 	 	35,196	 	 	 	—	 	 	 	35,196	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	24,671	 	 	$	(1,811	)	 	$	22,860	 	

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ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.  	SEGMENT INFORMATION — (cont’d)	

 	 	Six Months Ended June 30, 2007	 	
 	 	Reinsurance	 	 	Consulting	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	(12,851	)	 	$	21,338	 	 	$	8,487	 	
Net investment income	 	 	33,285	 	 	 	1,471	 	 	 	34,756	 	
Net realized gains	 	 	439	 	 	 	—	 	 	 	439	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	20,873	 	 	 	22,809	 	 	 	43,682	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase in loss and loss adjustment expense liabilities	 	 	1,705	 	 	 	—	 	 	 	1,705	 	
Salaries and benefits	 	 	5,103	 	 	 	18,059	 	 	 	23,162	 	
General and administrative expenses	 	 	5,003	 	 	 	8,585	 	 	 	13,588	 	
Interest expense	 	 	2,325	 	 	 	—	 	 	 	2,325	 	
Net foreign exchange (gain) loss	 	 	(3,088	)	 	 	73	 	 	 	(3,015	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	11,048	 	 	 	26,717	 	 	 	37,765	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes and minority interest	 	 	9,825	 	 	 	(3,908	)	 	 	5,917	 	
Income taxes	 	 	7,826	 	 	 	(733	)	 	 	7,093	 	
Minority interest	 	 	(4,415	)	 	 	—	 	 	 	(4,415	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss) before extraordinary gain	 	 	13,236	 	 	 	(4,641	)	 	 	8,595	 	
Extraordinary gain	 	 	15,683	 	 	 	—	 	 	 	15,683	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	28,919	 	 	$	(4,641	)	 	$	24,278	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders
of Enstar Group Limited
 
We have reviewed the accompanying condensed consolidated balance sheet of Enstar Group Limited and subsidiaries (the “Company”) as of June 30, 2008, the related condensed consolidated statements of earnings and comprehensive income for the three-month and six-month periods ended June 30, 2008 and June 30, 2007, and changes in shareholders’ equity and cash flows for the six-month periods ended June 30, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.
 
We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
 
We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Enstar Group Limited and subsidiaries as of December 31, 2007, and the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 29, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2007 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
 
/s/  Deloitte & Touche
 
Hamilton, Bermuda
August 11, 2008
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Item 2.  	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	
 
The following is a discussion and analysis of our results of operations for the three and six months ended June 30, 2008 and 2007. This discussion and analysis should be read in conjunction with the attached unaudited consolidated financial statements and notes thereto and the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
 
Business Overview
 
Enstar Group Limited was formed in August 2001 under the laws of Bermuda to acquire and manage insurance and reinsurance companies in run-off, and to provide management, consulting and other services to the insurance and reinsurance industry.
 
Since our formation we, through our subsidiaries, have acquired a number of insurance and reinsurance companies and are now administering those businesses in run-off. We derive our net earnings from the ownership and management of these companies primarily by settling insurance and reinsurance claims below the recorded loss reserves and from returns on the portfolio of investments retained to pay future claims. In addition, we have formed other businesses that provide management and consultancy services, claims inspection services and reinsurance collection services to our affiliates and third-party clients for both fixed and success-based fees.
 
Recent Transactions
 
In July 2008, we completed the sale to the public of 1,372,028 newly-issued ordinary shares, inclusive of the underwriters’ over-allotment, or the Offering. The shares were priced at $87.50 per share and we received net proceeds of approximately $116.8 million, after underwriting fees and other expenses of approximately $3.3 million. Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC, or FPK, served as lead managing underwriter in the Offering. J.C. Flowers II, L.P., or the Flowers Fund, and certain of its affiliated investment partnerships purchased 285,714 ordinary shares with a value of approximately $25 million in the Offering at the public offering price.
 
On July 2, 2008, we entered into a definitive agreement with British Nuclear Fuels plc, for the purchase of all of the outstanding capital stock of Electricity Producers Insurance Company (Bermuda) Limited, or EPIC, for total consideration of approximately £35.0 million (approximately $68.1 million). The purchase price will be financed by approximately $34.0 million from a credit facility provided by a London-based bank; approximately $10.2 million from the Flowers Fund by way of non-voting equity participation, and the remainder from available cash on hand. Following approval of the transaction by the Bermudian regulatory authorities on August 5, 2008, we expect the transaction to close no later than August 14, 2008. The interest on the bank loan is LIBOR plus 2.25%. The facility is repayable within four years and will be secured by a first charge over our shares in EPIC.
 
The Flowers Fund is a private investment fund advised by J.C. Flowers & Co. LLC. J. Christopher Flowers, a member of our board of directors and one of our largest shareholders, is the founder and Managing Member of J.C. Flowers & Co. LLC. John J. Oros, our Executive Chairman and a member of our board of directors, is a Managing Director of J.C. Flowers & Co LLC. Mr. Oros splits his time between J.C. Flowers & Co. LLC and us. In addition, an affiliate of the Flowers Fund controls approximately 41% of FPK.
 
On June 20, 2008, we, through our wholly-owned subsidiary Enstar Acquisitions Limited, or EAL, announced a firm intention to make an offer to all of the shareholders of Goshawk Insurance Holdings Plc, or Goshawk, at 5.2 pence (approximately $0.103) for each share, or the Offer. Goshawk owns Rosemont Reinsurance Limited, a Bermuda-based reinsurer that wrote primarily property and marine business, which was placed into run-off in October 2005. On July 14, 2008, the Offer was sent to Goshawk’s shareholders. Shareholders have until August 19, 2008 to accept the Offer. The Offer values Goshawk at approximately £45.7 million (approximately $87.5 million) in the aggregate. As of August 7, 2008, shareholders representing approximately 83.0% of Goshawk had either sold their shares to EAL or had accepted the Offer. It is anticipated that further acceptances will be forthcoming during the remaining period of the Offer. The Offer is conditioned on obtaining a third party consent and regulatory approval, and receipt of valid acceptances of the Offer of at least 90% of Goshawk shares carrying voting rights.
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We intend to finance approximately 50% of the acquisition price using a $45.0 million credit facility provided by a London-based bank, a contribution of 12.5% of the acquisition price from the Flowers Fund, by way of non-voting equity participation, and the remainder from available cash on hand. Each of the financing elements will be reduced pro rata in the event the final acceptance level of Offer is less than 100%. The interest rate on the credit facility is 2.25% above LIBOR and the facility is payable within three years and will be secured by a first charge over our shares in Goshawk.
 
On June 16, 2006, our indirect subsidiary, Virginia Holdings Ltd., entered into a definitive agreement with Dukes Place Holdings, L.P., a portfolio company of GSC European Mezzanine Fund II, L.P., for the purchase of 44.4% of the outstanding capital stock of Stonewall Acquisition Corporation. Stonewall Acquisition Corporation is the parent of two Rhode Island-domiciled insurers, Stonewall Insurance Company and Seaton Insurance Company, both of which are in run-off. The purchase price was $20.4 million. On May 27, 2008, the Rhode Island Department of Business Regulation issued an order approving the proposed acquisition. The acquisition was completed on June 13, 2008 and was funded from available cash on hand.
 
On March 5, 2008, we completed the previously announced acquisition of AMP Limited’s, or AMP’s, Australian-based closed reinsurance and insurance operations, or Gordian. The purchase price, including acquisition expenses, of AU$436.9 million (approximately $405.4 million) was financed by approximately AU$301 million (approximately $276.5 million), including an arrangement fee of AU$4.5 million (approximately $4.2 million), from bank financing provided jointly by a London-based bank and a German bank in which the Flowers Fund is a significant shareholder of the German bank; approximately AU$41.6 million (approximately $39.5 million) from the Flowers Fund, by way of non-voting equity participation; and approximately AU$98.7 million (approximately $93.6 million) from available cash on hand.
 
On February 29, 2008, we completed the previously announced acquisition of Guildhall Insurance Company Limited, or Guildhall, a U.K.-based insurance and reinsurance company that has been in run-off since 1986. The purchase price, including acquisition expenses, of approximately £33.4 million (approximately $65.9 million) was financed by the drawdown of approximately £16.5 million (approximately $32.5 million) from a U.S. dollar facility loan agreement with a London-based bank; approximately £5.0 million (approximately $10.0 million) from the Flowers Fund, by way of non-voting equity participation; and approximately £11.9 million (approximately $23.5 million) from available cash on hand.
 
In December 2007, we, in conjunction with JCF FPK I L.P., or JCF FPK, and a newly-hired executive management team formed Shelbourne Group Limited, or Shelbourne, to invest in Reinsurance to Close or “RITC” transactions (the transferring of liabilities from one Lloyd’s Syndicate to another) with Lloyd’s of London insurance and reinsurance syndicates in run-off. JCF FPK is a joint investment program between FPK and the Flowers Fund. Shelbourne is a holding company of a Lloyd’s Managing Agency, Shelbourne Syndicate Services Limited. We own 50.1% of Shelbourne, which in turn owns 100% of Shelbourne Syndicate Services Limited, the Managing Agency for Lloyd’s Syndicate 2008, a syndicate approved by Lloyd’s of London on December 16, 2007 to undertake RITC transactions with Lloyd’s syndicates in run-off. In February 2008, Lloyd’s Syndicate 2008 entered into RITC agreements with four Lloyd’s syndicates with total gross insurance reserves of approximately $471.2 million.
 
On February 29, 2008, we funded our capital commitment of approximately £36.0 million (approximately $72.0 million) by way of a letter of credit issued by a London-based bank to Lloyd’s Syndicate 2008. The letter of credit was secured by a parental guarantee from us in the amount of £12.0 million (approximately $24.0 million); approximately £11.0 million (approximately $22.0 million) from the Flowers Fund (acting in its own capacity and not through JCF FPK), by way of a non-voting equity participation; and approximately £13.0 million (approximately $26.0 million) from available cash on hand. JCF FPK’s capital commitment to Lloyd’s Syndicate 2008 is approximately £14.0 million (approximately $28.0 million).
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Results of Operations
 
The following table sets forth our selected consolidated statement of operations data for each of the periods indicated.

 	 	 	 	 	Six Months Ended
	 	
 	 	Three Months Ended June 30,	 	 	June 30,	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	3,578	 	 	$	3,826	 	 	$	9,633	 	 	$	8,487	 	
Net investment income	 	 	21,219	 	 	 	16,976	 	 	 	21,809	 	 	 	34,756	 	
Net realized gains (losses)	 	 	1,014	 	 	 	(132	)	 	 	(70	)	 	 	439	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	25,811	 	 	 	20,670	 	 	 	31,372	 	 	 	43,682	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (reduction) increase in loss and loss adjustment expense liabilities	 	 	(25,483	)	 	 	(805	)	 	 	(24,798	)	 	 	1,705	 	
Salaries and benefits	 	 	13,947	 	 	 	10,360	 	 	 	25,304	 	 	 	23,162	 	
General and administrative expenses	 	 	13,972	 	 	 	7,915	 	 	 	25,883	 	 	 	13,588	 	
Interest expense	 	 	7,643	 	 	 	1,307	 	 	 	10,958	 	 	 	2,325	 	
Net foreign exchange gain	 	 	(4,935	)	 	 	(3,069	)	 	 	(6,270	)	 	 	(3,015	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	5,144	 	 	 	15,708	 	 	 	31,077	 	 	 	37,765	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income taxes and minority interest	 	 	20,667	 	 	 	4,962	 	 	 	295	 	 	 	5,917	 	
Income taxes	 	 	(3,193	)	 	 	8,109	 	 	 	(2,954	)	 	 	7,093	 	
Minority interest	 	 	(6,301	)	 	 	(2,167	)	 	 	(9,677	)	 	 	(4,415	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before extraordinary gain	 	 	11,173	 	 	 	10,904	 	 	 	(12,336	)	 	 	8,595	 	
Extraordinary gain — Negative goodwill (2008: net of minority interest)	 	 	—	 	 	 	—	 	 	 	35,196	 	 	 	15,683	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET EARNINGS	 	$	11,173	 	 	$	10,904	 	 	$	22,860	 	 	$	24,278	 	

Comparison of Three Months Ended June 30, 2008 and 2007
 
We reported consolidated net earnings of approximately $11.2 million for the three months ended June 30, 2008 compared to approximately $10.9 million for the same period in 2007. The increased income of approximately $0.3 million was primarily a result of the following:
 
(i) increase in net investment income, net of realized gains (losses), of $5.4 million, primarily due to additional investment income earned in the quarter as a result of increased cash and investments balances relating to acquisitions completed in the first quarter of 2008; and
 
(ii) increase in the reduction in loss and loss adjustment expense liabilities of $24.7 million primarily due to reduction in estimates of net ultimate losses related to one of our subsidiaries as a result of net favorable incurred loss development and related reductions in IBNR reserves; partially offset by
 
(iii) an increase in salary and general administrative expenses of $9.6 million primarily due to costs incurred in respect of acquisitions completed in the first quarter of 2008;
 
(iv) increased interest expense of $6.3 million attributable to an increase in bank borrowings used in the funding of the acquisitions subsequent to June 30, 2007, primarily in relation to the Gordian and Guildhall acquisitions;
 
(v) an increase in minority interest of $4.1 million primarily attributable to the minority economic interest held by third parties in the earnings of Guildhall, Gordian and Shelbourne; and
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(vi) an increase in income tax expense of $11.3 million relating primarily to the increased tax liability of $6.3 million on the results of our subsidiaries in tax paying jurisdictions and lower recoveries of $5.0 million in respect of amounts relating to the expiry of the statute of limitations on certain of our previously recorded uncertain tax liabilities required by FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, ” or FIN 48.
 
Consulting Fees:

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	12,615	 	 	$	10,479	 	 	$	2,136	 	
Reinsurance	 	 	(9,037	)	 	 	(6,653	)	 	 	(2,384	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	3,578	 	 	$	3,826	 	 	$	(248	)	

We earned consulting fees of approximately $3.6 million and $3.8 million for the three months ended June 30, 2008 and 2007, respectively.
 
Internal management fees of $9.0 million and $6.7 million were paid in the three months ended June 30, 2008 and 2007, respectively, by our reinsurance companies to our consulting companies. The increase in fees paid by the reinsurance segment was due primarily to the fees paid by reinsurance companies that were acquired subsequent to June 30, 2007.
 
Net Investment Income and Net Realized Gains/(Losses):

 	 	Three Months Ended June 30,	 	
 	 	 	 	 	 	 	 	Net Realized
	 	 	 	 	
 	 	Net Investment Income	 	 	 	 	 	Gains/(Losses)	 	 	 	 	
 	 	2008	 	 	2007	 	 	Variance	 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	1,707	 	 	$	778	 	 	$	929	 	 	$	0	 	 	$	0	 	 	$	0	 	
Reinsurance	 	 	19,512	 	 	 	16,198	 	 	 	3,314	 	 	 	1,014	 	 	 	(132	)	 	 	1,146	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	21,219	 	 	$	16,976	 	 	$	4,243	 	 	$	1,014	 	 	$	(132	)	 	$	1,146	 	

Net investment income for the three months ended June 30, 2008 increased by $4.2 million to $21.2 million, as compared to $17.0 million for the three-months ended June 30, 2007. The increase in net investment income was primarily attributable to the increase in average cash and investment balances from $1,470.3 million to $2,522.1 million for the three months ended June 30, 2007 and 2008, respectively, along with a net increase in the fair value of our private equity investments, which is included in investment income. The increase in average cash and investment balances was primarily attributable to cash and investment portfolios of reinsurance companies acquired subsequent to June 30, 2007.
 
Net realized gains (losses) for the three months ended June 30, 2008 and 2007 were $1.0 million and $(0.1) million, respectively. Based on our current investment strategy, we do not expect net realized gains and losses to be significant in the foreseeable future.
 
The average return on the cash and fixed maturities investments for the three month period ended June 30, 2008 was 2.88%, as compared to the average return of 4.58% for the three-month period ended June 30, 2007. The decrease in yield was primarily the result of decreasing U.S. interest rates — the U.S. Federal Funds Rate decreased from an average of 5.25% to an average of 2.08% for the three months ended June 30, 2007 and June 30, 2008, respectively. In respect of our fixed income investments as of June 30, 2008, 74.3% had a Standard & Poor’s credit rating of AAA.
 
Fair Value Measurements
 
On January 1, 2008, we adopted FAS 157, “Fair Value Measurements,” or FAS 157, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly
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transaction between market participants at the measurement date. See Note 1 of our Unaudited Condensed Consolidated Financial Statements for a further discussion of this new standard.
 
The following is a summary of valuation techniques or models we use to measure fair value by asset and liability classes, which have not changed significantly since December 31, 2007.
 
Fixed Maturity Investments
 
Our fixed maturity portfolio is managed by three investment advisors. Through these third parties, we use nationally recognized pricing services, including pricing vendors, index providers and broker-dealers to estimate fair value measurements for all of our fixed maturity investments. These pricing services include Lehman Index, Reuters Pricing Service, FT Interactive Data and others.
 
The pricing service uses market quotations for securities (e.g., public common and preferred securities) that have quoted prices in active markets. When quoted market prices are unavailable, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing.
 
With the exception of one security held within our trading portfolio, the fair value estimates of our fixed maturity investments are based on observable market data. We have therefore included these as Level 2 investments within the fair value hierarchy. The one security in our trading portfolio that does not have observable inputs has been included as a Level 3 investment within the fair value hierarchy.
 
To validate the techniques or models used by the pricing services, we compare the fair value estimates to our knowledge of the current market and will challenge any prices deemed not to be representative of fair value.
 
Further, on a quarterly basis, we evaluate whether the fair value of a fixed maturity security is other-than-temporarily impaired when its fair value is below amortized cost. To make this assessment we consider several factors including (i) the time period during which there has been a decline below cost, (ii) the extent of the decline below cost, (iii) our intent and ability to hold the security, (iv) the potential for the security to recover in value, (v) an analysis of the financial condition of the issuer, and (vi) an analysis of the collateral structure and credit support of the security, if applicable. If we conclude a security is other-than-temporarily impaired, we write down the amortized cost of the security to fair value, with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations.
 
Equity securities
 
Our equity securities are managed by an external advisor. Through this third party, we use nationally recognized pricing services, including pricing vendors, index providers and broker-dealers to estimate fair value measurements for all of our equity securities. These pricing services include FT Interactive Data and others.
 
We have categorized all of our equity securities as Level 1 investments as they are based on quoted prices in active markets for identical assets or liabilities.
 
Other Investments
 
For our investments in limited partnerships, limited liability companies and equity funds, we measure fair value by obtaining the most recently published net asset value as advised by the external fund manager or third party administrator. The financial statements of each fund generally are provided to us on a quarterly basis, using fair value measurement for the underlying investments. For all public companies within the funds we have valued the investments based on the latest share price. Affirmative Investment LLC’s value is based on the market value of the shares of Affirmative Insurance Holdings, Inc.
 
All of our other investments relating to our investments in limited partnerships and limited liability companies are subject to restrictions on redemptions and sales which are determined by the governing documents and limit our ability to liquidate those investments in the short term. We have classified our other investments as Level 3 investments as they reflect our own assumptions about valuations that market participants might use.
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For the three months ended June 30, 2008, we incurred a $7.4 million gain in fair value on our other investments. This unrealized gain was included in our net investment income.
 
The following table summarizes all of our financial assets and liabilities measured at fair value at June 30, 2008, by FAS 157 hierarchy:

 	 	Quoted Prices in
	 	 	Significant
	 	 	Significant
	 	 	 	 	
 	 	Active Markets for
	 	 	Other Observable
	 	 	Unobservable
	 	 	 	 	
 	 	Identical Assets
	 	 	Inputs
	 	 	Inputs
	 	 	Total Fair
	 	
 	 	(Level 1)	 	 	(Level 2)	 	 	(Level 3)	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed maturity investments	 	$	—	 	 	$	624,994	 	 	$	1,051	 	 	$	626,045	 	
Equity securities	 	 	4,610	 	 	 	—	 	 	 	—	 	 	 	4,610	 	
Other investments	 	 	—	 	 	 	—	 	 	 	141,328	 	 	 	141,328	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	4,610	 	 	$	624,994	 	 	$	142,379	 	 	$	771,983	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As a percentage of total assets	 	 	0.1	%	 	 	17.6	%	 	 	4.0	%	 	 	21.8	%	
 
Net Reduction in Loss and Loss Adjustment Expense Liabilities:
 
The net reduction in loss and loss adjustment expense liabilities for the three months ended June 30, 2008 and 2007 was $25.5 million and $0.8 million, respectively. The change in the three months ended June 30, 2008 is primarily attributable to a reduction in the estimates of net ultimate losses of $25.2 million and a reduction in estimates of loss adjustment expense liabilities of $12.2 million, relating to 2008 run-off activity, partially offset by the amortization, over the estimated payout period, of fair value adjustments relating to companies acquired amounting to $11.8 million.
 
The reduction in estimates of net ultimate losses of $25.2 million for the three months ended June 30, 2008 was primarily attributable to the reduction in estimates of net ultimate losses of $25.5 million related to one of our subsidiaries which was comprised of net favorable incurred loss development of $12.1 million and related reductions in IBNR reserves of $13.4 million. The net favorable incurred loss development of $12.1 million, whereby net advised case and LAE reserves of $21.2 million were settled for net paid losses of $9.1 million, arose from the settlement of non-commuted losses during the period below carried reserves and three commutations of assumed and ceded exposures at less than case and LAE reserves. The net reduction in the estimate of the subsidiary’s IBNR loss and loss adjustment expense liabilities of $13.4 million is a result of an independent actuarial review and the application of our reserving methodologies to the reduced case and LAE reserves. During the three months ended June 30, 2008, another of our reinsurance subsidiaries commuted its largest exposure, which was fully reinsured by a single reinsurer with a AA- rating from Standard & Poors. The subsidiary paid net claims of $221.2 million and reduced net IBNR loss reserves by the same amount.
 
The following table shows the components of the movement in net reduction in loss and loss adjustment expense liabilities for the three months ended June 30, 2008 and 2007.

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	
Net Losses Paid	 	$	(260,866	)	 	$	(13,179	)	
Net Change in Case and LAE Reserves	 	 	43,985	 	 	 	6,399	 	
Net Change in IBNR	 	 	242,364	 	 	 	7,585	 	
 	 	 	 	 	 	 	 	 	
Net Reduction in Loss and Loss Adjustment Expense Liabilities	 	$	25,483	 	 	$	805	 	

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The table below provides a reconciliation of the beginning and ending reserves for losses and loss adjustment expenses for the three months ended June 30, 2008 and 2007. Losses incurred and paid are reflected net of reinsurance recoverables.

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	
Balance as of April 1	 	$	2,700,687	 	 	$	1,622,061	 	
Less: Reinsurance Recoverables	 	 	662,929	 	 	 	316,487	 	
 	 	 	 	 	 	 	 	 	
 	 	 	2,037,758	 	 	 	1,305,574	 	
Incurred Related to Prior Years	 	 	(25,483	)	 	 	(805	)	
Paids Related to Prior Years	 	 	(260,866	)	 	 	(13,179	)	
Effect of Exchange Rate Movement	 	 	31,106	 	 	 	7,531	 	
Acquired on Acquisition of Subsidiaries	 	 	—	 	 	 	11,029	 	
 	 	 	 	 	 	 	 	 	
Net Balance as of June 30	 	 	1,782,515	 	 	 	1,310,150	 	
Plus: Reinsurance Recoverables	 	 	529,075	 	 	 	317,126	 	
 	 	 	 	 	 	 	 	 	
Balance as of June 30	 	$	2,311,590	 	 	$	1,627,276	 	

Salaries and Benefits:

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	8,775	 	 	$	8,121	 	 	$	(654	)	
Reinsurance	 	 	5,172	 	 	 	2,239	 	 	 	(2,933	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	13,947	 	 	$	10,360	 	 	$	(3,587	)	

Salaries and benefits, which include expenses relating to our discretionary bonus and employee share plans, were $13.9 million and $10.4 million for the three month periods ended June 30, 2008 and 2007, respectively. The increase of $2.9 million in the reinsurance segment was primarily attributable to $3.2 million of salary costs of staff directly employed by reinsurance companies that were newly acquired in 2008. The increase in salaries and benefits for the consulting segment was due primarily to the growth in staff numbers in the segment from 203, as of June 30, 2007, to 212, as of June 30, 2008. In total, we have 245 staff members as of June 30, 2008.
 
We expect that staff costs will continue to increase moderately during 2008 as we continue to grow and add staff. Bonus accrual expenses will be variable and dependent on our overall profitability.
 
General and Administrative Expenses:

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	5,004	 	 	$	5,217	 	 	$	213	 	
Reinsurance	 	 	8,968	 	 	 	2,698	 	 	 	(6,270	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	13,972	 	 	$	7,915	 	 	$	(6,057	)	

General and administrative expenses attributable to the reinsurance segment increased by $6.3 million during the three months ended June 30, 2008, as compared to the three months ended June 30, 2007. The increased costs for the current quarter related primarily to additional general and administrative expenses incurred in relation to companies that we acquired in the first quarter of 2008.
 
Excluding the expenses relating to the new acquisitions completed in the first quarter of 2008, the overall general and administrative expenses were in line with those incurred during the same period in 2007.
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Interest Expense:

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	—	 	 	$	—	 	 	$	—	 	
Reinsurance	 	 	7,643	 	 	 	1,307	 	 	 	(6,336	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	7,643	 	 	$	1,307	 	 	$	(6,336	)	

Interest expense of $7.6 million and $1.3 million was recorded for the quarters ended June 30, 2008 and 2007, respectively. The increase in interest expense is attributable to an increase in bank borrowings used in the funding of the acquisitions subsequent to June 30, 2007, primarily in relation to the Gordian and Guildhall acquisitions.
 
Foreign Exchange Gain/(Loss):

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	3	 	 	$	(26	)	 	$	29	 	
Reinsurance	 	 	4,932	 	 	 	3,095	 	 	 	1,837	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	4,935	 	 	$	3,069	 	 	$	1,866	 	

We recorded a foreign exchange gain of $4.9 million for the three month period ended June 30, 2008, as compared to a foreign exchange gain of $3.1 million for the same period in 2007. For the three months ended June 30, 2008, the foreign exchange gain arose primarily as a result of the holding of surplus net Australian dollars in the reinsurance segment at a time when the currency has been appreciating against the U.S. Dollar.
 
The gain for the three-month period ended June 30, 2007 arose primarily as a result of the holding of surplus net Canadian and Australian dollars, as required by local regulatory obligations, in the reinsurance segment at a time when these currencies were appreciating against the U.S. Dollar.
 
Income Tax (Expense)/Recovery:

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	(7	)	 	$	175	 	 	$	(182	)	
Reinsurance	 	 	(3,186	)	 	 	7,934	 	 	 	(11,120	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(3,193	)	 	$	8,109	 	 	$	(11,302	)	

We recorded an income tax (expense)/recovery of $(3.2) million and $8.1 million for the three months ended June 30, 2008 and 2007, respectively. During the quarters ended June 30, 2008 and 2007, the statute of limitations expired on certain previously recorded uncertain tax liabilities. In accordance with FIN 48 those liabilities were reversed with the corresponding adjustment being made to income tax recovery in the income statement. The benefit of the expiration of the statute of limitations on uncertain tax liabilities resulted in a recovery by us for the quarters ended June 30, 2008 and 2007 of $3.5 million and $8.5 million, respectively.
 
During the three months ended June 30, 2008, we incurred net income tax expense related to those subsidiaries operating in taxable jurisdictions of $6.7 million.
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Minority Interest:

 	 	Three Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	—	 	 	$	—	 	 	$	—	 	
Reinsurance	 	 	(6,301	)	 	 	(2,167	)	 	 	(4,134	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(6,301	)	 	$	(2,167	)	 	$	(4,134	)	

We recorded a minority interest in earnings of $6.3 million and $2.2 million for the three months ended June 30, 2008 and 2007, respectively. The total for the three months ended June 30, 2008 relates to the minority economic interest held by third parties in the earnings of Gordian, Guildhall, Shelbourne and Hillcot Holdings Limited, or Hillcot. For the same period in 2007, the minority interest was in respect of Hillcot only.
 
Comparison of Six Months Ended June 30, 2008 and 2007
 
We reported consolidated net earnings of approximately $22.9 million for the six months ended June 30, 2008 compared to approximately $24.3 million for the same period in 2007. Included as part of net earnings for 2008 and 2007 are extraordinary gains relating to negative goodwill of $35.2 (net of minority interest of $15.1 million) and $15.7 million, respectively. For the six months ended June 30, 2008, we reported net (loss) before extraordinary gains of approximately $(12.3) million compared to net earnings before extraordinary gains of approximately $8.6 million for the same period in 2007. The decrease in income, before extraordinary gain, of approximately $20.9 million was primarily a result of the following:
 
(i) an increase in salary and general administrative expenses of $14.4 million primarily due to costs incurred in respect of acquisitions completed in 2008;
 
(ii) decrease in net investment income, net of realized gains, of $13.5 million, primarily due to write-downs of $22.7 million in respect of adjustments to the fair values of our investments classified as other investments offset by increased investment income earned in the period primarily as a result of increased cash and investments balances relating to acquisitions completed in 2008;
 
(iii) increased interest expense of $8.6 million attributable to an increase in bank borrowings used in the funding of the acquisitions subsequent to June 30, 2007, primarily in relation to the Gordian and Guildhall acquisitions;
 
(iv) an increase in minority interest of $5.3 million primarily attributable to the minority economic interest held by third parties in the earnings of Gordian, Guildhall and Shelbourne; and
 
(v) a decrease in income tax recovery of $10.1 million relating primarily to the increased tax liability of $5.1 million on the results of our subsidiaries in tax paying jurisdictions along with lower recoveries of $5.0 million relating to the expiry of the statute of limitations on certain of our previously recorded uncertain tax liabilities required by FIN 48; partially offset by
 
(vi) increased reduction in loss and loss adjustment expense liabilities of $26.5 million primarily due to a reduction in the estimates of net ultimate losses related to one of our subsidiaries as a result of net favorable incurred loss development and related reductions in IBNR reserves; and
 
(vii) increased foreign exchange gains of $3.3 million.
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Consulting Fees:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	25,918	 	 	$	21,338	 	 	$	4,580	 	
Reinsurance	 	 	(16,285	)	 	 	(12,851	)	 	 	(3,434	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	9,633	 	 	$	8,487	 	 	$	1,146	 	

We earned consulting fees of approximately $9.6 million and $8.5 million for the six months ended June 30, 2008 and 2007, respectively. The increase in consulting fees of $1.1 million relates primarily to fee income earned from new consulting arrangements entered into subsequent to June 30, 2007.
 
Internal management fees of $16.3 million and $12.9 million were paid in the six months ended June 30, 2008 and 2007, respectively, by our reinsurance companies to our consulting companies. The increase in fees paid by the reinsurance segment was due primarily to the fees paid by reinsurance companies that were acquired subsequent to June 30, 2007.
 
Net Investment Income and Net Realized (Losses) Gains:

 	 	Six Months Ended June 30,	 	
 	 	Net Investment Income	 	 	 	 	 	Net Realized (Losses) Gains	 	 	 	 	
 	 	2008	 	 	2007	 	 	Variance	 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	(3,201	)	 	$	1,471	 	 	$	(4,672	)	 	$	0	 	 	$	0	 	 	$	0	 	
Reinsurance	 	 	25,010	 	 	 	33,285	 	 	 	(8,275	)	 	 	(70	)	 	 	439	 	 	 	(509	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	21,809	 	 	$	34,756	 	 	$	(12,947	)	 	$	(70	)	 	$	439	 	 	$	(509	)	

Net investment income for the six-months ended June 30, 2008 decreased by $12.9 million to $21.8 million, as compared to $34.8 million for the six-months ended June 30, 2007. The decrease was primarily attributable to cumulative write-downs of approximately $22.7 million in the fair value of our investments in New NIB Partners L.P., or New NIB, the Flowers Fund and Affirmative Investment LLC offset by increased investment income earned as a result of an increase in average cash and investment balances as a result of the acquisitions completed by us in the first quarter of 2008. The write-downs arose primarily due to sub-prime and structured credit related exposures held within various of the limited partnership portfolio investments.
 
The average return on the cash and fixed maturities investments for the six-month period ended June 30, 2008 was 4.10%, as compared to the average return of 4.89% for the six-month period ended June 30, 2007. The decrease in yield was primarily the result of decreasing U.S. interest rates — the U.S. Federal Funds Rate has decreased from an average of 5.25% to an average of 2.66% for the six months ended June 30, 2007 and June 30, 2008, respectively. In respect of our fixed income investments as of June 30, 2008, 74.3% had a Standard & Poor’s credit rating of AAA.
 
Net realized (losses) gains for the six months ended June 30, 2008 and 2007 were $(0.1) million and $0.4 million, respectively. Based on our current investment strategy, we do not expect net realized gains and losses to be significant in the foreseeable future.
 
Fair Value Measurements
 
On January 1, 2008, we adopted FAS 157, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. See Note 1 of our Unaudited Condensed Consolidated Financial Statements for a further discussion of this new standard.
 
For the six months ended June 30, 2008, we incurred a $22.7 million loss in fair value on our other investments. This unrealized loss was included in our net investment income.
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The following table summarizes all of our financial assets and liabilities measured at fair value at June 30, 2008, by FAS 157 hierarchy:

 	 	Quoted Prices in
	 	 	Significant
	 	 	Significant
	 	 	 	 	
 	 	Active Markets for
	 	 	Other Observable
	 	 	Unobservable
	 	 	 	 	
 	 	Identical Assets
	 	 	Inputs
	 	 	Inputs
	 	 	Total Fair
	 	
 	 	(Level 1)	 	 	(Level 2)	 	 	(Level 3)	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed maturity investments	 	$	—	 	 	$	624,994	 	 	$	1,051	 	 	$	626,045	 	
Equity securities	 	 	4,610	 	 	 	—	 	 	 	—	 	 	 	4,610	 	
Other investments	 	 	—	 	 	 	—	 	 	 	141,328	 	 	 	141,328	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	4,610	 	 	$	624,994	 	 	$	142,379	 	 	$	771,983	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As a percentage of total assets	 	 	0.1	%	 	 	17.6	%	 	 	4.0	%	 	 	21.8	%	
 
Net (Reduction) Increase in Loss and Loss Adjustment Expense Liabilities:
 
The net (reduction) increase in loss and loss adjustment expense liabilities for the six months ended June 30, 2008 and 2007 was $(24.8) million and $1.7 million, respectively. The change in the period is primarily attributable to a reduction in the estimates of net ultimate losses of $23.9 million, a reduction in estimates of loss adjustment expense liabilities of $19.3 million, relating to 2008 run-off activity, partially offset by the amortization, over the estimated payout period, of fair value adjustments relating to companies acquired amounting to $18.4 million.
 
The reduction in estimates of net ultimate losses of $23.9 million for the six months ended June 30, 2008 was primarily attributable to the reduction in estimates of net ultimate losses of $25.5 million related to one of our subsidiaries which was comprised of net favorable incurred loss development of $12.1 million and related reductions in IBNR reserves of $13.4 million. The net favorable incurred loss development of $12.1 million, whereby net advised case and LAE reserves of $21.2 million were settled for net paid losses of $9.1 million, arose from the settlement of non-commuted losses during the period below carried reserves and approximately 3 commutations of assumed and ceded exposures at less than case and LAE reserves. The net reduction in the estimate of the subsidiary’s IBNR loss and loss adjustment expense liabilities of $13.4 million is a result of an independent actuarial review and the application of our reserving methodologies to the reduced case and LAE reserves. During the six months ended June 30, 2008, another of our reinsurance subsidiaries commuted its largest exposure, which was fully reinsured by a single reinsurer with an AA- rating from Standard & Poor’s. The subsidiary paid net claims of $221.2 million and reduced net IBNR loss reserves by the same amount.
 
The following table shows the components of the movement in net reduction in loss and loss adjustment expense liabilities for the six months ended June 30, 2008 and 2007:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	
Net Losses Paid	 	$	(257,491	)	 	$	(12,656	)	
Net Change in Case and LAE Reserves	 	 	39,443	 	 	 	(1,768	)	
Net Change in IBNR	 	 	242,846	 	 	 	12,719	 	
 	 	 	 	 	 	 	 	 	
Net Reduction in Loss and Loss Adjustment Expense Liabilities	 	$	24,798	 	 	$	(1,705	)	

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The table below provides a reconciliation of the beginning and ending reserves for losses and loss adjustment expenses for the six months ended June 30, 2008 and 2007. Losses incurred and paid are reflected net of reinsurance recoverables.

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	
Balance as of January 1	 	$	1,591,449	 	 	$	1,214,419	 	
Less: Reinsurance Recoverables	 	 	427,964	 	 	 	342,160	 	
 	 	 	 	 	 	 	 	 	
 	 	 	1,163,485	 	 	 	872,259	 	
Incurred Related to Prior Years	 	 	(24,798	)	 	 	1,705	 	
Paids Related to Prior Years	 	 	(257,491	)	 	 	(12,656	)	
Effect of Exchange Rate Movement	 	 	40,519	 	 	 	8,892	 	
Retroactive Reinsurance Contracts Assumed	 	 	394,913	 	 	 	—	 	
Acquired on Acquisition of Subsidiaries	 	 	465,887	 	 	 	439,950	 	
 	 	 	 	 	 	 	 	 	
Net Balance as of June 30	 	 	1,782,515	 	 	 	1,310,150	 	
Plus: Reinsurance Recoverables	 	 	529,075	 	 	 	317,126	 	
 	 	 	 	 	 	 	 	 	
Balance as of June 30	 	$	2,311,590	 	 	$	1,627,276	 	

Salaries and Benefits:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	18,070	 	 	$	18,059	 	 	$	(11	)	
Reinsurance	 	 	7,234	 	 	 	5,103	 	 	 	(2,131	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	25,304	 	 	$	23,162	 	 	$	(2,142	)	

Salaries and benefits, which include expenses relating to our discretionary bonus and employee share plans, were $25.3 million and $23.2 million for the six month periods ended June 30, 2008 and 2007, respectively. The increase in the reinsurance segment was primarily attributable to salary costs of staff directly employed by reinsurance companies that were newly acquired in 2008.
 
We expect that staff costs will continue to increase moderately during 2008 as we continue to grow and add staff. Bonus accrual expenses will be variable and dependent on our overall profitability.
 
General and Administrative Expenses:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	8,626	 	 	$	8,585	 	 	$	(41	)	
Reinsurance	 	 	17,257	 	 	 	5,003	 	 	 	(12,254	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	25,883	 	 	$	13,588	 	 	$	(12,295	)	

General and administrative expenses attributable to the reinsurance segment increased by $12.3 million during the six months ended June 30, 2008, as compared to the six months ended June 30, 2007. The increased costs for the period related primarily to additional general and administrative expenses incurred in relation to companies that we acquired in 2008.
 
Excluding the expenses relating to the new acquisitions completed in the first quarter of 2008, the overall general and administrative expenses were in line with those incurred during the same period in 2007.
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Interest Expense:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	—	 	 	$	—	 	 	$	—	 	
Reinsurance	 	 	10,958	 	 	 	2,325	 	 	 	(8,633	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	10,958	 	 	$	2,325	 	 	$	(8,633	)	

Interest expense of $11.0 million and $2.3 million was recorded for the six months ended June 30, 2008 and 2007, respectively. The increase in interest expense is attributable to an increase in bank borrowings used in the funding of the acquisitions subsequent to June 30, 2007, primarily in relation to the Gordian and Guildhall acquisitions.
 
Foreign Exchange Gain/(Loss):

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	375	 	 	$	(73	)	 	$	448	 	
Reinsurance	 	 	5,895	 	 	 	3,088	 	 	 	2,807	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	6,270	 	 	$	3,015	 	 	$	3,255	 	

We recorded a foreign exchange gain of $6.3 million for the six month period ended June 30, 2008, as compared to a foreign exchange gain of $3.0 million for the same period in 2007. For the six months ended June 30, 2008, the foreign exchange gain arose primarily as a result of the holding of surplus net Australian dollars and Euros in the reinsurance segment at a time when these currencies have been appreciating against the U.S. Dollar.
 
For the six months ended June 30, 2007, the foreign exchange gain arose primarily as a result of the holding of surplus of British Pounds and the holding by Cavell Holdings Limited (U.K.), or Cavell, of surplus net Canadian and Australian dollars, as required by local regulatory obligations, and Euros in the reinsurance segment at a time when these currencies were appreciating against the U.S. Dollar.
 
Income Tax (Expense)/Recovery:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	1,793	 	 	$	(733	)	 	$	2,526	 	
Reinsurance	 	 	(4,747	)	 	 	7,826	 	 	 	(12,573	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(2,954	)	 	$	7,093	 	 	$	(10,047	)	

We recorded income tax (expense)/recovery of $(3.0) million and $7.1 million for the six months ended June 30, 2008 and 2007, respectively. Income tax recovery (expense) of $1.8 million and $(0.7) million were recorded in the consulting segment for the six months ended June 30, 2008 and 2007, respectively. The variance between the two periods arose because for the six-months ended June 30, 2008 we recorded tax recoveries on losses incurred by our U.S. operations.
 
Income tax (expense)/recovery of $(4.8) million and $7.8 million were recorded in the reinsurance segment for the six months ended June 30, 2008 and 2007, respectively. During the period ended June 30, 2008, we incurred net income tax expense related to those subsidiaries operating in taxable jurisdictions of $8.3 million.
 
In addition, during the quarters ended June 30, 2008 and 2007, the statute of limitations expired on certain previously recorded uncertain tax liabilities. The benefit was $3.5 million and $8.5 million, respectively.
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Minority Interest:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	—	 	 	$	—	 	 	$	—	 	
Reinsurance	 	 	(9,677	)	 	 	(4,415	)	 	 	(5,262	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(9,677	)	 	$	(4,415	)	 	$	(5,262	)	

We recorded a minority interest in earnings of $9.7 million and $4.4 million for the six months ended June 30, 2008 and 2007. The total for the six months ended June 30, 2008 relates to the minority economic interest held by third parties in the earnings of Gordian, Guildhall, Shelbourne and Hillcot. For the same period in 2007, the minority interest was in respect of Hillcot only.
 
Negative Goodwill:

 	 	Six Months Ended June 30,	 	
 	 	2008	 	 	2007	 	 	Variance	 	
 	 	(in thousands of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting	 	$	—	 	 	$	—	 	 	$	—	 	
Reinsurance	 	 	35,196	 	 	 	15,683	 	 	 	19,513	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	35,196	 	 	$	15,683	 	 	$	19,513	 	

Negative goodwill of $35.2 million and $15.7 million was recorded for the six months ended June 30, 2008 and 2007, respectively. For the six months ended June 30, 2008 the negative goodwill of $35.2 million (net of minority interest of $15.1 million) was earned in connection with our acquisition of Gordian and represents the excess of the cumulative fair value of net assets acquired of $455.7 million over the cost of $405.4 million. This excess has, in accordance with SFAS 141 “Business Combinations,” been recognized as an extraordinary gain in 2008. The negative goodwill arose primarily as a result of the income earned by Gordian between the date of the balance sheet on which the agreed purchase price was based, June 30, 2007, and the date the acquisition closed, March 5, 2008.
 
For the six months ended June 30, 2007 the negative goodwill of $15.7 million was earned in connection with our acquisition of Inter-Ocean and represents the excess of the cumulative fair value of net assets acquired of $73.2 million over the cost of $57.5 million. The negative goodwill arose primarily as a result of the strategic desire of the vendors to achieve an exit from such operations and therefore to dispose of the companies at a discount to fair value.
 
Liquidity and Capital Resources
 
As we are a holding company and have no substantial operations of our own, our assets consist primarily of our investments in subsidiaries. The potential sources of our cash flows consist of capital raising by us, as well as dividends, advances and loans from our subsidiary companies.
 
Our future cash flows depend upon the availability of dividends or other statutorily permissible payments from our subsidiaries. The ability to pay dividends and make other distributions is limited by the applicable laws and regulations of the jurisdictions in which our insurance and reinsurance subsidiaries operate, including Bermuda, the United States, the United Kingdom, Australia and Europe, which subject our subsidiaries to significant regulatory restrictions. These laws and regulations require, among other things, certain of our insurance and reinsurance subsidiaries to maintain minimum solvency requirements and limit the amount of dividends and other payments that these subsidiaries can pay to us, which in turn may limit our ability to pay dividends and make other payments.
 
Our capital management strategy is to preserve sufficient capital to enable us to make future acquisitions while maintaining a conservative investment strategy. We believe that restrictions on liquidity resulting from restrictions on the payments of dividends by our subsidiary companies will not have a material impact on our ability to meet our cash obligations.
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Our sources of funds primarily consist of the cash and investment portfolios acquired on the completion of the acquisition of an insurance or reinsurance company in run-off. These acquired cash and investment balances are classified as cash provided by investing activities. We expect to use these funds acquired, together with collections from reinsurance debtors, consulting income, investment income and proceeds from sales and redemption of investments, to pay losses and loss expenses, salaries and benefits and general and administrative expenses, with the remainder used for acquisitions, additional investments and, in the past, for dividend payments to shareholders. We expect that our reinsurance segment will have a net use of cash from operations as total net claim settlements and operating expenses will generally be in excess of investment income earned. We expect that our consulting segment operating cash flows will generally be breakeven. We expect our operating cash flows, together with our existing capital base and cash and investments acquired on the acquisition of our insurance and reinsurance subsidiaries, to be sufficient to meet cash requirements and to operate our business. We currently do not intend to pay cash dividends on our ordinary shares.
 
Operating
 
Net cash provided by our operating activities for the six months ended June 30, 2008 was $334.2 million compared to $136.1 million for the six months ended June 30, 2007. This increase in cash flows is attributable to net assets assumed on retro-active reinsurance contracts, relating to the Shelbourne business, and the net sales of trading security investments held by us, partially offset by higher general and administrative and interest expenses, for the six months ended June 30, 2008 as compared to the same period in 2007.
 
Investing
 
Investing cash flows consist primarily of cash acquired, net of costs of acquisitions, along with net proceeds on the sale and purchase of investments. Net cash (used in) provided by investing activities was $(196.7) million during the six months ended June 30, 2008 compared to $129.5 million during the six months ended June 30, 2007. The decrease in the cash flows was primarily due to net purchases of available for sale securities, an increase in our restricted cash, the funding of other investments and the purchase of our equity interest in Stonewall Acquisition Corporation during the six months ended June 30, 2008 as compared to the same period of 2007.
 
Financing
 
Net cash provided by financing activities was $334.0 million for the six months ended June 30, 2008 compared to $7.5 million during the six months ended June 30, 2007. Cash provided by financing activities in 2008 was primarily attributable to the combination of the receipt of bank loans, net of repayments, and capital contributions by minority interest shareholders relating to the purchase of Guildhall, Gordian and the financing of Shelbourne.
 
Long-Term Debt
 
On February 18, 2008, we fully repaid the outstanding principal and accrued interest on the loans used to partially finance the acquisitions of Cavell, Marlon Insurance Company Limited and Marlon Management Services Limited totaling $40.5 million.
 
In February 2008, a wholly-owned subsidiary of Enstar, Cumberland Holdings Limited, or Cumberland, entered into a term facility agreement jointly with a London-based bank and a German bank, or the Cumberland Facility. On March 4, 2008, we drew down AU$215.0 million (approximately $197.5 million) from the Facility A Commitment, or Facility A, and AU$86.0 million (approximately $79.0 million) from the Facility B Commitment, or Facility B, to partially fund the Gordian acquisition.

 	• 	The interest rate on Facility A is LIBOR plus 2%. Facility A is repayable in five years and is secured by a first charge over Cumberland’s shares in Gordian. Facility A contains various financial and business covenants, including limitations on liens on the stock of restricted subsidiaries, restrictions as to the disposition of the stock of restricted subsidiaries and limitations on mergers and consolidations. As of June 30, 2008, all of the financial covenants relating to Facility A were met.	

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 	• 	The interest rate on Facility B is LIBOR plus 2.75%. Facility B is repayable in six years and is secured by a first charge over Cumberland’s shares in Gordian. Facility B contains various financial and business covenants, including limitations on liens on the stock of restricted subsidiaries, restrictions as to the disposition of the stock of restricted subsidiaries and limitations on mergers and consolidations. As of June 30, 2008, all of the financial covenants relating to Facility B were met.	
 
In February 2008, a wholly-owned subsidiary of Enstar, Rombalds Limited, or Rombalds, entered into a term facility agreement, or the Rombalds Facility, with a London-based bank. On February 28, 2008, we drew down approximately $32.5 million from the Rombalds Facility to partially fund the acquisition of Guildhall. The interest rate on the Rombalds Facility is LIBOR plus 2%. The facility is repayable in five years and is secured by a first charge over Rombalds’ shares in Guildhall. The Rombalds Facility contains various financial and business covenants, including limitations on liens on the stock of restricted subsidiaries, restrictions as to the disposition of the stock of restricted subsidiaries and limitations on mergers and consolidations. As of June 30, 2008, all of the financial covenants relating to the Rombalds Facility were met.
 
On May 8, 2008, we fully repaid outstanding principal and accrued interest on the loan used to partially finance the acquisition of Brampton Insurance Company Limited totaling $19.9 million.
 
Aggregate Contractual Obligations
 
The following table shows our aggregate contractual obligations by time period remaining to due date as at June 30, 2008:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	More
	 	
 	 	 	 	 	Less Than
	 	 	1-3
	 	 	3-5
	 	 	Than
	 	
Payments due by period:	 	Total	 	 	1 Year	 	 	Years	 	 	Years	 	 	5 Years	 	
 	 	(in millions of U.S. dollars)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contractual Obligations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment commitments	 	$	27.7	 	 	$	23.2	 	 	$	1.8	 	 	$	1.8	 	 	$	1.0	 	
Operating lease obligations	 	 	9.9	 	 	 	2.6	 	 	 	4.4	 	 	 	2.0	 	 	 	0.9	 	
Loan repayments	 	 	324.2	 	 	 	—	 	 	 	—	 	 	 	238.0	 	 	 	86.2	 	
Gross reserves for losses and loss expenses	 	 	2,311.6	 	 	 	265.9	 	 	 	698.0	 	 	 	456.5	 	 	 	891.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	2,673.4	 	 	$	291.7	 	 	$	704.2	 	 	$	698.3	 	 	$	979.3	 	

The amounts included in gross reserves for losses and loss adjustment expenses reflect the estimated timing of expected loss payments on known claims and anticipated future claims. Both the amount and timing of cash flows are uncertain and do not have contractual payout terms. For a discussion of these uncertainties, see our Management’s Discussion and Analysis of Results of Operations and Financial Condition contained in our Annual Report on Form 10-K for the year ended December 31, 2007.
 
We have an accrued liability of approximately $8.5 million for unrecognized tax benefits as of June 30, 2008. We are not able to make reasonably reliable estimates of the period in which any cash settlements that may arise with any of the respective tax authorities would be made. Therefore the liability for unrecognized tax benefits is not included in the table above.
 
Commitments and Contingencies
 
As at June 30, 2008, we guaranteed the obligations of two of our subsidiaries in respect of letters of credit issued on their behalf by London-based banks in the amount of £19.5 million (approximately $38.7 million) in respect of capital commitments to Lloyd’s Syndicate 2008 and insurance contract requirements of one of the subsidiaries. The guarantees will be triggered should losses incurred by the subsidiaries exceed available cash on hand resulting in the letters of credit being drawn. As at June 30, 2008, we have not recorded any liabilities associated with the guarantees.
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Critical Accounting Estimates
 
Our critical accounting estimates are discussed in Management’s Discussion and Analysis of Results of Operations and Financial Condition contained in our Annual Report on Form 10-K for the year ended December 31, 2007.
 
Off-Balance Sheet and Special Purpose Entity Arrangements
 
At June 30, 2008, we have not entered into any off-balance sheet arrangements.
 
Cautionary Statement Regarding Forward-Looking Statements
 
This quarterly report contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to our financial condition, results of operations, business strategies, operating efficiencies, competitive positions, growth opportunities, plans and objectives of our management, as well as the markets for our ordinary shares and the insurance and reinsurance sectors in general. Statements that include words such as “estimate,” “project,” “plan,” “intend,” “expect,” “anticipate,” “believe,” “would,” “should,” “could,” “seek,” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. All forward-looking statements are necessarily estimates or expectations, and not statements of historical fact, reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in and incorporated by reference in this quarterly report.
 
Factors that could cause actual results to differ materially from those suggested by the forward-looking statements include:

 	• 	risks associated with implementing our business strategies and initiatives;	
 	 	 	
 	• 	the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time;	
 	 	 	
 	• 	risks relating to the availability and collectibility of our reinsurance;	
 	 	 	
 	• 	tax, regulatory or legal restrictions or limitations applicable to us or the insurance and reinsurance business generally;	
 	 	 	
 	• 	increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;	
 	 	 	
 	• 	emerging claim and coverage issues;	
 	 	 	
 	• 	lengthy and unpredictable litigation affecting assessment of losses and/or coverage issues;	
 	 	 	
 	• 	loss of key personnel;	
 	 	 	
 	• 	changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at management’s discretion;	
 	 	 	
 	• 	operational risks, including system or human failures;	
 	 	 	
 	• 	risks that we may require additional capital in the future which may not be available or may be available only on unfavorable terms;	
 	 	 	
 	• 	the risk that ongoing or future industry regulatory developments will disrupt our business, or mandate changes in industry practices in ways that increase our costs, decrease our revenues or require us to alter aspects of the way we do business;	
 	 	 	
 	• 	changes in Bermuda law or regulation or the political stability of Bermuda;	

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 	• 	changes in regulations or tax laws applicable to us or our subsidiaries, or the risk that we or one of our non-U.S. subsidiaries become subject to significant, or significantly increased, income taxes in the United States or elsewhere;	
 	 	 	
 	• 	losses due to foreign currency exchange rate fluctuations;	
 	 	 	
 	• 	changes in accounting policies or practices; and	
 	 	 	
 	• 	changes in economic conditions, including interest rates, inflation, currency exchange rates, equity markets and credit conditions which could affect our investment portfolio.	
 
The factors listed above should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and Risk Factors that are included in our Registration Statement on Form S-3, filed with the SEC on June 5, 2008, as amended June 26, 2008, as well as in the other materials filed and to be filed with the SEC. We undertake no obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise.

Item 3.  	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	
 
There have been no material changes in our market risk exposures since March 31, 2008. Please refer to Item 3 of Part I of our Quarterly Report on Form 10-Q for the three months ended March 31, 2008, filed with the Securities and Exchange Commission on May 12, 2008, for our quantitative and qualitative disclosures about market risk.

Item 4.  	CONTROLS AND PROCEDURES	
 
Evaluation of Disclosure Controls and Procedures
 
Our management performed an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2008. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Controls
 
On June 3, 2008, our management concluded that the proforma condensed combined income statement for the three-month period ended March 31, 2008 included in “Note 2 — Acquisitions” to our Unaudited Condensed Combined Financial Statements for the three-month period ended March 31, 2008 in our Quarterly Report on Form 10-Q contained an error. Accordingly, on June 5, 2008, we filed an Amended Quarterly Report on Form 10-Q to correct that error. See “Note 11 — Restatement” to the Unaudited Condensed Combined Financial Statements included in the Amended Quarterly Report on Form 10-Q filed June 5, 2008. The error did not impact our revenue, net earnings or shareholders’ equity.
 
The preparation of the proforma condensed combined income statement for the three-month period ended March 31, 2008 in “Note 2 — Acquisitions” required us to disclose operating results of an acquired business for the three-month period ended March 31, 2008 that we acquired on March 5, 2008. Specifically, the error originated in a spreadsheet prepared by financial personnel at our principal office that was not adequately reviewed. Management concluded that the error resulted from a deficiency in the operating effectiveness of our internal control over financial reporting related to the preparation and review of proforma financial information disclosed in connection with significant business acquisitions. This deficiency constituted a material weakness in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
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To address this material weakness, we have extended existing control procedures applicable to the use of certain spreadsheets to cover in all instances spreadsheets used to prepare proforma financial information. These existing control procedures require concurring review of certain spreadsheets by a senior member of the finance department at our principal office. As a result of the implementation of these procedures, our management believes that the material weakness identified has been resolved.
 
PART II — OTHER INFORMATION

Item 1.  	LEGAL PROCEEDINGS	
 
We are, from time to time, involved in various legal proceedings in the ordinary course of business, including litigation regarding claims. We do not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on our business, results of operations or financial condition. Nevertheless, we cannot assure you that lawsuits, arbitrations or other litigation will not have a material adverse effect on our business, financial condition or results of operations. We anticipate that, similar to the rest of the insurance and reinsurance industry, we will continue to be subject to litigation and arbitration proceedings in the ordinary course of business, including litigation generally related to the scope of coverage with respect to asbestos and environmental claims. There can be no assurance that any such future litigation will not have a material adverse effect on our business, financial condition or results of operations.
 
In April 2008, we, our subsidiary Enstar US, Inc., or Enstar US, Dukes Place Limited and certain affiliates of Dukes Place, or, collectively, Dukes Place, were named as defendants in a lawsuit filed in the United States District Court for the Southern District of New York by National Indemnity Company, or NICO, an indirect subsidiary of Berkshire Hathaway. The complaint alleges, among other things, that Dukes Place, we and Enstar US: (i) interfered with the rights of NICO as reinsurer under reinsurance agreements entered into between NICO and each of Stonewall and Seaton, two Rhode Island domiciled insurers that are indirect subsidiaries of Dukes Place, and (ii) breached certain duties owed to NICO under management agreements between Enstar US and each of Stonewall and Seaton. The suit was filed shortly after Virginia Holdings Ltd., our indirect subsidiary, or Virginia, completed a hearing before the Rhode Island Department of Business Regulation as part of Virginia’s application to buy a 44.4% interest in the insurers from Dukes Place. Virginia completed that acquisition on June 13, 2008. The suit does not seek a stated amount of damages. Our management believes the claims in the suit are without merit and will not have a material impact on us or our subsidiaries. On July 23, 2008, we and Enstar US filed a motion to dismiss Count I (relating to breach of fiduciary duty), Count III (relating to breach of contract) and Count V (relating to inducing breach of contract), in each case for failure to state a claim upon which relief can be granted. We do not anticipate a ruling on the motion before mid-September 2008. Our management intends to vigorously defend both us and Enstar US against the claims.

Item 1A.  	RISK FACTORS	
 
Our results of operations and financial condition are subject to numerous risks and uncertainties described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on February 29, 2008. While we believe that, as except as set forth below, the risk factors included in our Annual Report on Form 10-K have not materially changed, the prospectus relating to the Offering (filed with the SEC on June 26, 2008) updates certain of the previously disclosed risk factors.
 
Insurance laws and regulations restrict our ability to operate, and any failure to comply with these laws and regulations, or any investigations by government authorities, may have a material adverse effect on our business.
 
We are subject to extensive regulation under insurance laws of a number of jurisdictions, and compliance with legal and regulatory requirements is expensive. These laws limit the amount of dividends that can be paid to us by our insurance and reinsurance subsidiaries, prescribe solvency standards that they must meet and maintain, impose restrictions on the amount and type of investments that they can hold to meet solvency requirements and require them to maintain reserves. Failure to comply with these laws may subject our subsidiaries to fines and penalties and
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restrict them from conducting business. The application of these laws may affect our liquidity and ability to pay dividends on our ordinary shares and may restrict our ability to expand our business operations through acquisitions. At December 31, 2007, the required statutory capital and surplus of our insurance and reinsurance companies amounted to $88.0 million compared to the actual statutory capital and surplus of $483.8 million. As of December 31, 2007, $55.5 million of our total investments of $637.2 million were not admissible for statutory solvency purposes.
 
The insurance industry has experienced substantial volatility as a result of current investigations, litigation and regulatory activity by various insurance, governmental and enforcement authorities, including the U.S. Securities and Exchange Commission concerning certain practices within the insurance industry. These practices include the sale and purchase of finite reinsurance or other non-traditional or loss mitigation insurance products and the accounting treatment for those products. Insurance and reinsurance companies that we have acquired, or may acquire in the future, may have been or may become involved in these investigations and have lawsuits filed against them. Our involvement in any investigations and related lawsuits would cause us to incur legal costs and, if we were found to have violated any laws, we could be required to pay fines and damages, perhaps in material amounts.
 
Our consulting business generates a significant amount of our total income, and the failure to develop new consulting relationships could materially adversely affect our results of operations and financial condition.
 
A significant amount of our existing consulting business is dependent on a relatively small number of our clients. While our senior management team has industry relationships that we believe will allow us to successfully identify and enter into agreements with new clients for our consulting business, we cannot assure you that we will be successful in entering into such agreements. A material reduction in consulting fees paid by one or more of our clients or the failure to identify new clients for our consulting services could have a material adverse effect on our business, financial condition and results of operations.

Item 4.  	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	
 
The following matters were submitted to a vote of shareholders at our Annual General Meeting of Shareholders on June 11, 2008:
 
1. Election of the following nominees to serve as Class II Directors of our Board of Directors.

 	 	 	 	 	 	Votes
	
Nominee	 	Votes For	 	Votes Against	 	Abstained	
 	 	 	 	 	 	 	 	 	 	 	 	 	
T. Whit Armstrong	 	 	9,230,961	 	 	 	25,704	 	 	 	1,150	 	
John J. Oros	 	 	9,072,125	 	 	 	183,663	 	 	 	1,127	 	
 
2. Ratification of the selection of Deloitte & Touche, Hamilton, Bermuda, to act as our independent registered public accounting firm for the fiscal year ending December 31, 2008 and authorization of our Board of Directors, acting through the Audit Committee, to approve the fees for the independent registered public accounting firm.

 	 	 	 	Votes
	
Votes For	 	Votes Against	 	Abstained	
 	 	 	 	 	 	 	 	 	 	 	
 	9,243,877	 	 	 	5,554	 	 	 	7,484	 	
 
3. Approval of Enstar Group Limited Employee Share Purchase Plan.

 	 	 	 	Votes
	
Votes For	 	Votes Against	 	Abstained	
 	 	 	 	 	 	 	 	 	 	 	
 	9,219,685	 	 	 	30,015	 	 	 	7,215	 	
 
4. Election of directors of each of our subsidiaries identified in Proposal Number Four in the Proxy Statement, filed with the SEC on April 29, 2008 (nominees for the respective subsidiaries and the results of voting are set forth below).
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1.  	ENSTAR LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Elizabeth Dasilva	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Michael Smellie	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	

2.  	ENSTAR (EU) HOLDINGS LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
David Hackett	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	
Alan Turner	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	

3.  	ENSTAR BROKERS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Elizabeth Dasilva	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

4.  	ENSTAR (EU) LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
David Hackett	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	
Alan Turner	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Steve Aldous	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Duncan McLaughlin	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Derek Reid	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
David Grisley	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
David Atkins	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	

5.  	CASTLEWOOD (BERMUDA) LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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6.  	CRANMORE ADJUSTERS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
David Hackett	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	
Alan Turner	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Steve Norrington	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Phil Cooper	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Mark Wood	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
David Ellis	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	

7.  	BANTRY HOLDINGS LTD.	

Nominees:	 	For	 	Against	 	Abstain	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Duncan Scott	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Adrian Kimberley	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	

8.  	BLACKROCK HOLDINGS LTD.	

Nominees:	 	For	 	Against	 	Abstain	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Duncan Scott	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

9.  	KENMARE HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Dominic F. Silvester	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

10.  	KINSALE BROKERS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Phil Hernon	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Steve Western	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Alan Turner	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Steve Norrington	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	
Derek Reid	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	

11.  	REGIS AGENCIES LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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12.  	FITZWILLIAM (SAC) INSURANCE LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

13.  	REVIR LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Elizabeth Dasilva	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’ Shea	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	

14.  	RIVER THAMES INSURANCE COMPANY	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	
Steve Aldous	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Max Lewis	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	

15.  	OVERSEAS REINSURANCE COMPANY LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

16.  	HUDSON REINSURANCE COMPANY LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Duncan Scott	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

17.  	CAVELL HOLDINGS LIMITED (U.K.)	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,332	 	 	 	6,103	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Derek Reid	 	 	9,198,331	 	 	 	6,103	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,331	 	 	 	6,103	 	 	 	52,481	 	

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18.  	HARPER HOLDINGS SARL	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Nicholas A. Packer	 	 	9,198,332	 	 	 	6,091	 	 	 	52,492	 	
Claudine Schinker	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
Christian Christensen	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
 
19 DENMAN HOLDINGS LIMITED

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
John J. Oros	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Cameron Leamy	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Kenneth Thomson	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

20.  	HARPER INSURANCE LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Michael Handler	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Florian von Meiss	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Stefan Wehrenburg	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

21.  	HARPER FINANCING LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Derek Reid	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
Brian Walker	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
Alan Turner	 	 	9,198,332	 	 	 	6,091	 	 	 	52,492	 	
Gareth Nokes	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	

22.  	ENSTAR (US) INC.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cheryl D. Davis	 	 	9,198,169	 	 	 	6,266	 	 	 	52,480	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Karl Wall	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	
Donna Stolz	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	

23.  	ENSTAR HOLDINGS (US) INC.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cheryl D. Davis	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Karl Wall	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	
Donna Stolz	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	

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24.  	CRANMORE (US) INC.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cheryl D. Davis	 	 	9,198,169	 	 	 	6,266	 	 	 	52,480	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Karl Wall	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Donna Stolz	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

25.  	ENSTAR INVESTMENTS, INC.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cheryl D. Davis	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Karl Wall	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Donna Stolz	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

26.  	LONGMYND INSURANCE COMPANY LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

27.  	MERCANTILE INDEMNITY COMPANY LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Derek Reid	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

28.  	FIELDMILL INSURANCE COMPANY LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Steve Aldous	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
Alan Turner	 	 	9,198,332	 	 	 	6,091	 	 	 	52,492	 	
Gareth Nokes	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
C. Paul Thomas	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	
Tom Nichols	 	 	9,198,331	 	 	 	6,091	 	 	 	52,493	 	

29.  	VIRGINIA HOLDINGS LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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30.  	UNIONE ITALIANA (UK) REINSURANCE COMPANY	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Derek Reid	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

31.  	CAVELL INSURANCE COMPANY LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Derek Reid	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Darren Truman	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

32.  	OCEANIA HOLDINGS LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

33.  	CIRRUS RE COMPANY A/S	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Jan Endressen	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

34.  	INTER-OCEAN HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Orla Gregory	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

35.  	ENSTAR USA, INC.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Cheryl D. Davis	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Karl Wall	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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36.  	INTER-OCEAN SERVICES LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Orla Gregory	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,168	 	 	 	6,266	 	 	 	52,481	 	

37.  	INTER-OCEAN CREDIT PRODUCTS LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Orla Gregory	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

38.  	HILLCOT UNDERWRITING MANAGEMENT	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

39.  	INTER-OCEAN REINSURANCE COMPANY LTD	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Orla Gregory	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

40.  	INTER-OCEAN REINSURANCE (IRELAND) LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Orla Gregory	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Kevin O’Connor	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

41.  	ENSTAR FINANCIAL SERVICES, INC.	

Nominees:	 	For	 	Against	 	Abstain	
 	 	 	 	 	 	 	 	 	 	 	 	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Cheryl D. Davis	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

42.  	HILLCOT HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Albert Maass	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Jiro Kasahara	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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43.  	HILLCOT REINSURANCE LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Max Lewis	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Albert Maass	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

44.  	BRAMPTON INSURANCE COMPANY LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Alan Turner	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Max Lewis	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Albert Maass	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

45.  	ENSTAR GROUP OPERATIONS, INC.	

Nominees:	 	For	 	Against	 	Abstain	
 	 	 	 	 	 	 	 	 	 	 	 	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Cheryl D. Davis	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

46.  	B.H. ACQUISITION LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Adrian Kimberley	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

47.  	BRITTANY INSURANCE COMPANY LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Duncan Scott	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

48.  	PAGET HOLDINGS GMBH	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

54

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49.  	COMPAGNIE EUROPEENE D’ASSURANCES INDUSTRIELLES SA	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
John J. Oros	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Dominic F. Silvester	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

50.  	FLATTS LIMITED	

Nominees:	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

51.  	GUILDHALL INSURANCE COMPANY LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

52.  	MARLON INSURANCE LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Anthony Bamber	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Nigel Hall	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

53.  	MARLON MANAGEMENT SERVICES	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Steve Aldous	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Anthony Bamber	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Nigel Hall	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
C. Paul Thomas	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Alan Turner	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

54.  	ROMBALDS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Derek Reid	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Gareth Nokes	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Alan Turner	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	

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55.  	TATE & LYLE RE LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

56.  	SUN GULF HOLDINGS INC.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
John J. Oros	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Karl Wall	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Cheryl D. Davis	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Donna Stolz	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

57.  	CUMBERLAND HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

58.  	COMOX HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

59.  	COURTENAY HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Adrian Kimberley	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
David Rocke	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

60.  	SHELBOURNE GROUP LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
John J. Oros	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Greg Curl	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
George Cochran	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Timothy Hanford	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
James Lewisohn	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Adrian Ryan	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
Sean Dalton	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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61.  	ENSTAR AUSTRALIA HOLDINGS PTY LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Gary Potts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Kenny Roberts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Bruce Bollum	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

62.  	AG AUSTRALIA HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Michael Kinahan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steven Given	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Sandra O’Sullivan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

63.  	SHELLY BAY HOLDINGS LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Michael Kinahan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steven Given	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Sandra O’Sullivan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

64.  	HARRINGTON SOUND LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Michael Kinahan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steven Given	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Sandra O’Sullivan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

65.  	CHURCH BAY LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Gary Potts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Kerry Roberts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Bruce Bollum	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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66.  	TGI AUSTRALIA LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Gary Potts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Kerry Roberts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Bruce Bollum	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	

67.  	GORDIAN RUNOFF LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Gary Potts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Kerry Roberts	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Bruce Bollum	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

68.  	GORDIAN RUN-OFF (UK) LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Tom Nichols	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Alan Turner	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	
Gareth Nokes	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	

69.  	ENSTAR AUSTRALIA LIMITED	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Michael Kinahan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steven Given	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Sandra O’Sullivan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Orla Gregory	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

70.  	COBALT SOLUTIONS SERVICES LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Paul J. O’Shea	 	 	9,198,344	 	 	 	6,091	 	 	 	52,480	 	
Nicholas A. Packer	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Michael Kinahan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Steven Given	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	
Sandra O’Sullivan	 	 	9,198,156	 	 	 	6,278	 	 	 	52,481	 	

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71.  	SHELBOURNE SYNDICATE SERVICES LTD.	

Nominees:	 	For	 	 	Against	 	 	Abstain	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Sean Dalton	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Andrew Elliot	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
George Cochran	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Timothy Hanford	 	 	9,198,156	 	 	 	6,091	 	 	 	52,668	 	
Nicholas A. Packer	 	 	9,198,157	 	 	 	6,091	 	 	 	52,667	 	

72.  	SGL NO. 1 LIMITED	

Nominees:	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Richard J. Harris	 	 	9,198,343	 	 	 	6,091	 	 	 	52,481	 	
Timothy Hanford	 	 	9,198,157	 	 	 	6,278	 	 	 	52,480	 	
 
As described in our Proxy Statement, filed with the SEC on April 29, 2008, broker non-votes are counted towards the presence of a quorum, but are not counted as votes in the election of any director or for any other proposal.
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Item 6.  	EXHIBITS	

 	10	.1	 	Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-3 (No. 333-151461) initially filed with the Securities and Exchange Commission on June 5, 2008).	
 	15	.1*	 	Deloitte & Touche Letter Regarding Unaudited Interim Financial Information.	
 	31	.1*	 	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	31	.2*	 	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	32	.1**	 	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	32	.2**	 	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	

 	 	 	
*	 	Filed herewith	
 	 	 	
**	 	Furnished herewith	

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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 11, 2008.
 
ENSTAR GROUP LIMITED

 	By: 	/s/  Richard J. Harris	
Richard J. Harris
Chief Financial Officer, Authorized Signatory and
Principal Accounting and Financial Officer
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EXHIBIT INDEX

Exhibit
	 	 	
No.	 	Description	
 	 	 	 	 	
 	10	.1	 	Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-3 (No. 333-151461) initially filed with the Securities and Exchange Commission on June 5, 2008).	
 	15	.1*	 	Deloitte & Touche Letter Regarding Unaudited Interim Financial Information.	
 	31	.1*	 	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	31	.2*	 	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	32	.1**	 	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	32	.2**	 	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	

 	 	 	
*	 	Filed herewith	
 	 	 	
**	 	Furnished herewith	

62

EXHIBIT 15.1
 
Enstar Group Limited
3rd Floor, Windsor Place
18 Queen Street
Hamilton HM JX, Bermuda
 
We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited condensed consolidated interim financial information of Enstar Group Limited and subsidiaries for the three and six-month periods ended June 30, 2008 and 2007 as indicated in our report dated August 11, 2008. As indicated in our report, because we did not perform an audit, we expressed no opinion on that information.
 
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 is incorporated by reference in Registration Statement Nos. 333-149551, 333-148863, 333-148862 and 333-141793 of Enstar Group Limited on Forms S-8.
 
We also are aware that the aforementioned reports, pursuant to Rule 436(c) under the Securities Act of 1933, are not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
 
/s/ Deloitte & Touche
 
Hamilton, Bermuda
August 11, 2008

EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dominic F. Silvester, certify that:
 	1.	 	I have reviewed this Quarterly Report on Form 10-Q of Enstar Group Limited;	
 	 	 	 	
 	2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	 	 	
 	3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	 	 	
 	4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a.	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	 	
 	b.	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	 	
 	c.	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	 	
 	d.	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a.	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	 	
 	b.	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Dated: August 11, 2008

 	/s/ Dominic F. Silvester  	 	
 	Dominic F. Silvester 	 	
 	Chief Executive Officer 	 	

 	 	 	 	 	
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Richard J. Harris, certify that:
 	1.	 	I have reviewed this Quarterly Report on Form 10-Q of Enstar Group Limited;	
 	 	 	 	
 	2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	 	 	
 	3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	 	 	
 	4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a.	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	 	
 	b.	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	 	
 	c.	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	 	
 	d.	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a.	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	 	
 	b.	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Dated: August 11, 2008

 	/s/ Richard J. Harris  	 	
 	Richard J. Harris 	 	
 	Chief Financial Officer 	 	

 	 	 	 	 	
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
     In connection with the Quarterly Report of Enstar Group Limited (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dominic F. Silvester, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 	(1)	 	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 	 	 	 	
 	(2)	 	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Dated: August 11, 2008

 	/s/ Dominic F. Silvester  	 	
 	Dominic F. Silvester 	 	
 	Chief Executive Officer 	 	

 	 	 	 	 	
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
     In connection with the Quarterly Report of Enstar Group Limited (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard J. Harris, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 	(1)	 	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 	 	 	 	
 	(2)	 	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Dated: August 11, 2008

 	/s/ Richard J. Harris  	 	
 	Richard J. Harris 	 	
 	Chief Financial Officer