Enstar Group LTD - Quarter Report: 2009 March (Form 10-Q)

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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 March 31, 2009
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, 3^rd 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

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 May 6, 2009, the registrant had outstanding 13,450,634 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 March 31, 2009 and December 31, 2008 (Unaudited)		1
	Condensed Consolidated Statements of Earnings for the Three-Month Periods Ended March 31, 2009 and 2008 (Unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the Three-Month Periods Ended March 31, 2009 and 2008 (Unaudited)		3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three-Month Periods Ended March 31, 2009 and 2008		4
	Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2009 and 2008 (Unaudited)		5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)		6
	Report of Independent Registered Public Accounting Firm		20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29
Item 4.	Controls and Procedures		29

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		30
Item 1A.	Risk Factors		30
Item 6.	Exhibits		31
Signatures			32
Exhibit 10.1
Exhibit 15.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.1


Item 1.	*FINANCIAL STATEMENTS*

ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2009 and December 31, 2008


	March 31,			December 31,
	2009			2008
	(expressed in thousands of U.S. dollars, except share data)

ASSETS
Short-term investments, available-for-sale, at fair value (amortized cost: 2009 — $504,374; 2008 — $406,712)	$	504,214		$	406,712
Fixed maturities, available-for-sale, at fair value (amortized cost: 2009 — $118,320; 2008 — $103,452)		116,147			104,797
Fixed maturities, held-to-maturity, at amortized cost (fair value: 2009 — $673,067; 2008 — $598,686)		664,978			586,716
Fixed maturities, trading, at fair value (amortized cost: 2009 — $108,646; 2008 — $110,453)		112,500			115,846
Equities, trading, at fair value (cost: 2009 — $13,736; 2008 — $5,087)		9,568			3,747
Other investments, at fair value (cost: 2009 — $158,557; 2008 — $147,652)		69,566			60,237

Total investments		1,476,973			1,278,055
Cash and cash equivalents		1,564,053			1,866,546
Restricted cash and cash equivalents		415,812			343,327
Accrued interest receivable		19,217			21,277
Accounts receivable, net		16,225			15,992
Income taxes recoverable		711			—
Reinsurance balances receivable		726,257			672,696
Investment in partly owned company		21,119			20,850
Goodwill		21,222			21,222
Other assets		109,420			118,186

TOTAL ASSETS	$	4,371,009		$	4,358,151


LIABILITIES
Losses and loss adjustment expenses	$	2,797,827		$	2,798,287
Reinsurance balances payable		208,563			179,917
Accounts payable and accrued liabilities		27,132			39,340
Income taxes payable		14,456			19,034
Loans payable		392,684			391,534
Other liabilities		69,766			58,808

TOTAL LIABILITIES		3,510,428			3,486,920


SHAREHOLDERS’ EQUITY
Share capital
Authorized issued and fully paid, par value $1 each (authorized 2009:
156,000,000; 2008: 156,000,000)
Ordinary shares (issued and outstanding 2009: 13,450,901; 2008: 13,334,353)		13,451			13,334
Non-voting convertible ordinary shares (issued 2009: 2,972,892; 2008: 2,972,892)		2,973			2,973
Treasury shares at cost (non-voting convertible ordinary shares 2009: 2,972,892; 2008: 2,972,892)		(421,559	)		(421,559	)
Additional paid-in capital		713,459			709,485
Accumulated other comprehensive loss		(39,375	)		(30,871	)
Retained earnings		353,378			341,847

Total Enstar Group Limited Shareholders’ Equity		622,327			615,209
Noncontrolling interest		238,254			256,022

TOTAL SHAREHOLDERS’ EQUITY		860,581			871,231

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,371,009		$	4,358,151

See accompanying notes to the unaudited condensed consolidated financial statements

ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Three-Month Periods Ended March 31, 2009 and 2008


	Three Months Ended
	March 31,
	2009			2008
	(expressed in thousands of U.S. dollars, except share and
	per share data)

INCOME
Consulting fees	$	3,336		$	6,055
Net investment income		17,309			590
Net realized losses		(6,010	)		(1,084	)

		14,635			5,561

EXPENSES
Net (decrease) increase in loss and loss adjustment expense liabilities		(26,679	)		685
Salaries and benefits		12,417			11,357
General and administrative expenses		12,382			11,911
Interest expense		4,965			3,315
Net foreign exchange loss (gain)		1,598			(1,335	)

		4,683			25,933

EARNINGS (LOSS) BEFORE INCOME TAXES AND SHARE OF NET EARNINGS OF PARTLY OWNED COMPANY		9,952			(20,372	)
INCOME TAXES		618			239
SHARE OF NET EARNINGS OF PARTLY OWNED COMPANY		269			—

EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN		10,839			(20,133	)
Extraordinary gain — Negative goodwill		—			50,280

NET EARNINGS		10,839			30,147
Less: Net loss (earnings) attributable to noncontrolling interests (including share of extraordinary gain of $nil and $15,084, respectively)		692			(18,460	)

NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	11,531		$	11,687

EARNINGS PER SHARE — BASIC:
Earnings (loss) before extraordinary gain attributable to Enstar Group Limited ordinary shareholders	$	0.86		$	(1.97	)
Extraordinary gain attributable to Enstar Group Limited ordinary shareholders		—			2.95

Net earnings attributable to Enstar Group Limited ordinary shareholders	$	0.86		$	0.98

EARNINGS PER SHARE — DILUTED:
Earnings (loss) before extraordinary gain attributable to Enstar Group Limited ordinary shareholders	$	0.84		$	(1.97	)
Extraordinary gain attributable to Enstar Group Limited ordinary shareholders		—			2.95

Net earnings attributable to Enstar Group Limited ordinary shareholders	$	0.84		$	0.98

Weighted average shares outstanding — basic		13,363,507			11,927,542
Weighted average shares outstanding — diluted		13,699,419			11,927,542
AMOUNTS ATTRIBUTABLE TO ENSTAR GROUP LIMITED ORDINARY SHAREHOLDERS:
Earnings (loss) before extraordinary gain	$	11,531		$	(23,509	)
Extraordinary gain		—			35,196

Net earnings	$	11,531		$	11,687

See accompanying notes to the unaudited condensed consolidated financial statements

ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three-Month Periods Ended March 31, 2009 and 2008


	Three Months Ended
	March 31,
	2009			2008
	(expressed in thousands of U.S. dollars)

NET EARNINGS	$	10,839		$	30,147

Other comprehensive loss:
Unrealized holding (losses) gains on investments arising during the period		(7,849	)		568
Reclassification adjustment for net realized losses included in net earnings		6,010			1,084
Currency translation adjustment		(3,982	)		(1,902	)

Total other comprehensive loss		(5,821	)		(250	)

Comprehensive income		5,018			29,897
Less comprehensive income attributable to noncontrolling interests		(1,994	)		(18,460	)

COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	3,024		$	11,437

See accompanying notes to the unaudited condensed consolidated financial statements

ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
For the Three-Month Periods Ended March 31, 2009 and 2008


	Three Months Ended
	March 31,
	2009			2008
	(expressed in thousands of U.S. dollars)

Share Capital — Ordinary Shares
Balance, beginning of period	$	13,334		$	11,920
Shares issued		117			28

Balance, end of period	$	13,451		$	11,948

Share Capital — Non-Voting Convertible Ordinary Shares
Balance, beginning and end of period	$	2,973		$	2,973

Treasury Shares
Balance, beginning and end of period	$	(421,559	)	$	(421,559	)

Additional Paid-in Capital
Balance, beginning of period	$	709,485		$	590,934
Shares issued		3,974			2,562
Amortization of share awards		—			216

Balance, end of period	$	713,459		$	593,712

Accumulated Other Comprehensive (Loss) Income
Balance, beginning of period	$	(30,871	)	$	6,035
Other comprehensive (loss)		(8,504	)		(250	)

Balance, end of period	$	(39,375	)	$	5,785

Retained Earnings
Balance, beginning of period	$	341,847		$	260,296
Net earnings		11,531			11,687

Balance, end of period	$	353,378		$	271,983

Noncontrolling Interest
Balance, beginning of period	$	256,022		$	63,437
(Return) contribution of capital		(18,783	)		86,209
Dividends paid		(979	)		—
Net earnings (loss)		(692	)		18,460
Other comprehensive income		2,686			—

Balance, end of period	$	238,254		$	168,106

See accompanying notes to the unaudited condensed consolidated financial statements

ENSTAR GROUP LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three-Month Periods Ended March 31, 2009 and 2008


	Three Months Ended March 31,
	2009			2008
	(expressed in thousands of U.S. dollars)

OPERATING ACTIVITIES:
Net earnings	$	10,839		$	30,147
Adjustments to reconcile net earnings to cash flows provided by operating activities:
Negative goodwill		—			(50,280	)
Share of undistributed net (earnings) of partly owned company		(269	)		—
Share-based compensation expense		—			216
Net realized and unrealized investment loss		6,010			1,084
Share of net loss from other investments		2,100			26,510
Other items		5,550			1,723
Depreciation and amortization		210			191
Amortization of bond premiums and discounts		2,513			(148	)
Net movement of trading securities		3,302			(4,202	)
Changes in assets and liabilities:
Reinsurance balances receivable		(50,686	)		(160,775	)
Other assets		8,685			(33,814	)
Losses and loss adjustment expenses		(7,876	)		520,829
Reinsurance balances payable		28,967			14,419
Accounts payable and accrued liabilities		(8,532	)		(4,198	)
Other liabilities		2,273			32,686

Net cash flows provided by operating activities		3,086			374,388

INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		8,504			7,067
Purchase of available-for-sale securities		(218,353	)		(163,267	)
Sales and maturities of available-for-sale securities		96,757			21,089
Purchase of held-to-maturity securities		(118,897	)		—
Maturity of held-to-maturity securities		36,581			61,682
Movement in restricted cash and cash equivalents		(72,485	)		(149,595	)
Funding of other investments		(14,728	)		(20,090	)
Other investing activities		(477	)		(37	)

Net cash flows used in investing activities		(283,098	)		(243,151	)

FINANCING ACTIVITIES:
Proceeds from exercise of stock options		650			—
Distribution of capital to noncontrolling interest		(19,759	)		—
Contribution to surplus of subsidiary by noncontrolling interest		—			86,209
Receipt of loans		—			307,813
Repayment of loans		—			(39,800	)

Net cash flows (used in) provided by financing activities		(19,109	)		354,222

TRANSLATION ADJUSTMENT		(3,372	)		(1	)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(302,493	)		485,458
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,866,546			995,237

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,564,053		$	1,480,695




Supplement Cash Flow Information
Net income taxes (paid)	$	(5,322	)	$	(1,037	)
Interest paid	$	(3,235	)	$	(1,609	)

See accompanying notes to the unaudited condensed consolidated financial statements

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009 and December 31, 2008
(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, 2008.

Adoption of New Accounting Standards

The term “FAS” used in these notes refers to Statements of Financial Accounting Standards issued by the United States Financial Accounting Standards Board (“FASB”).

The Company adopted FAS No. 141(R), “Business Combinations” (“FAS 141(R)”), effective January 1, 2009. 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 the Company to recognize acquisition-related costs separately from the 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. The adoption of FAS 141(R) did not have a material impact on the consolidated financial statements.

The Company adopted FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“FAS 160”), effective January 1, 2009. 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 results in deconsolidation. The presentation and disclosure of FAS 160 have been applied retrospectively for all periods presented. The adoption of FAS 160 resulted in reclassification of noncontrolling interest in the amounts of $238.3 million and $256.0 million to shareholders’ equity as at March 31, 2009 and December 31, 2008, respectively.

The Company adopted FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“FAS 161”), effective January 1, 2009. 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. The adoption of FAS 161 did not have a material impact on the consolidated financial statements.

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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

Recently Issued Accounting Standards Not Yet Adopted

On April 9, 2009, the FASB issued the following three Staff Positions (“FSPs”):


	•	FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly” (“FSP FAS 157-4”). This FSP supercedes FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.” FSP FAS 157-4 provides additional guidance on: 1) estimating fair value when the volume and level of activity for an asset or liability have significantly decreased in relation to the normal market activity for the asset or liability, and 2) identifying transactions that are not orderly. FSP FAS 157-4 must be applied prospectively and retrospective application is not permitted. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 subject to also early adoption of FSP FAS 115-2 and FAS 124-2 (as defined below).

	•	FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”(“FSP FAS 115-2 and FAS 124-2”). This FSP provides new guidance on the recognition and presentation of other-than-temporary impairments (“OTTI”) for available-for-sale and held-to-maturity fixed maturities (equities are excluded). An impaired security is not recognized as an impairment if management does not intend to sell the impaired security and it is more likely than not it will not be required to sell the security before the recovery of its amortized cost basis. If management concludes a security is other-than-temporarily impaired, the FSP requires that the difference between the fair value and the amortized cost of the security be presented as an OTTI charge in the Consolidated Statements of Operations, with an offset for any noncredit-related loss component of the OTTI charge to be recognized in other comprehensive income. Accordingly, only the credit loss component of the OTTI amount will have an impact on the Company’s results of operations. The FSP also requires extensive new interim and annual disclosure for both fixed maturities and equities to provide further disaggregated information as well as information about how the credit loss component of the OTTI charge was determined and requires a roll forward of such amount for each reporting period. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 subject to also early adoption of FSP FAS 157-4.

	•	FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). This FSP extends the disclosure requirements under FAS 107, “Disclosures about Fair Value of Financial Instruments,” to interim financial statements and amends APB Opinion 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods. This FSP is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 also subject to early adoption of FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2.

The Company is presently evaluating the impact of the adoption of these FSPs on its results of operations and financial position.

On April 1, 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). This FSP amends the guidance in FAS 141(R) by requiring that assets acquired or liabilities assumed in a business combination that arise from contingencies be recognized at fair value only if fair value can be reasonably estimated; otherwise the asset or liability should generally be recognized in accordance with FAS 5, “Accounting for Contingencies,” and FASB Interpretation 14, “Reasonable Estimation of the Amount of Loss.” This FSP removes the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date. FSP FAS 141(R)-1 is effective for assets and liabilities arising from contingencies in business combinations for which the acquisition date is on or after December 15, 2008. The

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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

Company does not anticipate this adoption will have a material impact to its results of operations, financial condition and liquidity.


2.	ACQUISITIONS

Constellation Reinsurance

On January 31, 2009, the Company, through its indirect subsidiary, Sun Gulf Holdings Inc., completed the acquisition of all of the outstanding capital stock of Constellation Reinsurance Company Limited (“Constellation”) for a total purchase price of approximately $2.5 million. Constellation is a New York domiciled reinsurer that is in run-off. The acquisition was funded from available cash on hand.

The purchase price and fair value of the assets acquired in the Constellation acquisition were as follows:


Total purchase price	$	2,500

Net assets acquired at fair value	$	2,500

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	$	11,254
Reinsurance balances receivable		3,374
Losses and loss adjustment expenses		(12,128	)

Net assets acquired at fair value	$	2,500

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2.	ACQUISITIONS — (cont’d)

Pro Formas, for the Three Months Ended March 31, 2008

The following pro forma condensed combined income statement for the three months ended March 31, 2008 combines the historical consolidated statements of earnings of the Company with those of AMP Limited’s Australian-based closed reinsurance and insurance operations (“Gordian”) and Unionamerica Holdings Limited (“UAH”), which were acquired in the first and fourth quarters of 2008, respectively, giving effect to the business combinations and related transactions as if they had occurred on January 1, 2008.


													Enstar
	Enstar												Group
	Group									Pro forma			Limited
Three Months Ended March 31, 2008	Limited			Gordian			UAH			Adjustments			Pro forma

Total income	$	(1,748	)	$	14,082		$	6,952		$	(5,194	)(a)	$	14,092
Total expenses		(22,886	)		15,860			(44,381	)		(17,109	)(b)		(68,516	)

(Loss) earnings before extraordinary gain		(24,634	)		29,942			(37,429	)		(22,303	)		(54,424	)
Extraordinary gain		50,280			—			—			—			50,280

Earnings (loss) before extraordinary gain		25,646			29,942			(37,429	)		(22,303	)		(4,144	)
Noncontrolling interest (including share of extraordinary gain of $15,084)		(17,110	)		(8,982	)		11,229			6,691	(c)		(8,172	)

Net earnings (loss) attributable to Enstar Group Limited	$	8,536		$	20,960		$	(26,200	)	$	(15,612	)	$	(12,316	)

Earnings per ordinary share attributable to Enstar Group Limited before extraordinary gain — basic and diluted													$	(3.98	)
Extraordinary gain attributable to Enstar Group Limited — basic and diluted														2.95

Net earnings per ordinary share attributable to Enstar Group Limited — basic and diluted													$	(1.03	)

Notes to the Pro Forma Condensed Combined Income Statements for the Three Months Ended March 31, 2008:


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 acquisitions for the period		(7,834	)
(ii) Adjustment to recognize amortization of fair value adjustments recorded at dates of acquisition		(11,994	)
(iii) Adjustment to income taxes for pro forma adjustments		2,719

		(17,109	)
(c) Reflects noncontrolling interest’s share of net pro forma income statement adjustments		6,691


3.	SIGNIFICANT NEW BUSINESS

The Company owns 50.1% of Shelbourne Group Limited (“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 Reinsurance to Close (“RITC”) transactions with Lloyd’s

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	SIGNIFICANT NEW BUSINESS — (cont’d)

syndicates in run-off. In February 2009, Lloyd’s Syndicate 2008 entered into a RITC agreement with a Lloyd’s syndicate with total gross insurance reserves of approximately $67.0 million.

JCF FPK I L.P. (“JCF FPK”), a joint investment program between J.C. Flowers II L.P. (the “Flowers Fund”) and Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC (“FPK”), owns 49.9% of Shelbourne. 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. An affiliate of the Flowers Fund controls approximately 41% of FPK. In addition, in July 2008, FPK acted as lead managing underwriter in the Company’s public share offering.


4.	RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and cash equivalents were $415.8 million and $343.3 million as of March 31, 2009 and December 31, 2008, respectively. The restricted cash and cash equivalents are used as collateral against letters of credit and as guarantee under trust agreements. Letters of credit are issued to ceding insurers as security for the obligations of insurance subsidiaries under reinsurance agreements with those ceding insurers.


5.	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 March 31, 2009
U.S. Treasury and Agency securities	$	45,858	$	1,559	$	—		$	47,417
Non-U.S. Government securities		1,894		33		—			1,927
Corporate debt securities		64,440		616		(4,381	)		60,675
Other debt securities		6,128		—		—			6,128
Short term investments		504,374		479		(639	)		504,214

	$	622,694	$	2,687	$	(5,020	)	$	620,361

As at December 31, 2008
U.S. Treasury and Agency securities	$	25,089	$	2,197	$	—		$	27,286
Non-U.S. Government securities		917		32		—			949
Corporate debt securities		71,024		955		(1,839	)		70,140
Other debt securities		6,422		—		—			6,422
Short term investments		406,712		—		—			406,712

	$	510,164	$	3,184	$	(1,839	)	$	511,509

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	INVESTMENTS — (cont’d)

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


	March 31,			December 31,
	2009			2008

Due within one year	$	(2,133	)	$	(16	)
After 1 through 5 years		(1,520	)		(1,401	)
After 5 through 10 years		(1,036	)		(55	)
After 10 years		(331	)		(367	)

	$	(5,020	)	$	(1,839	)

As at March 31, 2009 and December 31, 2008, the number of securities classified as available-for-sale in an unrealized loss position was 107 and 30, respectively, with a fair value of $256.4 million and $21.7 million. Of these securities, as at March 31, 2009, the number of securities that had been in an unrealized loss position for 12 months or longer was 17 with a fair value of $13.2 million.

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 March 31, 2009
U.S. Treasury and Agency securities	$	97,778	$	2,764	$	(231	)	$	100,311
Non-U.S. Government securities		165,223		7,967		(162	)		173,028
Corporate debt securities		401,977		3,800		(6,049	)		399,728

	$	664,978	$	14,531	$	(6,442	)	$	673,067

As at December 31, 2008
U.S. Treasury and Agency securities	$	119,981	$	3,200	$	(192	)	$	122,989
Non-U.S. Government securities		156,620		9,465		—			166,085
Corporate debt securities		310,115		2,750		(3,253	)		309,612

	$	586,716	$	15,415	$	(3,445	)	$	598,686

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


	March 31,			December 31,
	2009			2008

Due within one year	$	(332	)	$	(77	)
After 1 through 5 years		(3,601	)		(1,171	)
After 5 through 10 years		(1,697	)		(1,444	)
After 10 years		(812	)		(753	)

	$	(6,442	)	$	(3,445	)

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	INVESTMENTS — (cont’d)

As at March 31, 2009 and December 31, 2008, the number of securities classified as held-to-maturity in an unrealized loss position was 101 and 38, respectively, with a fair value of $214.6 million and $53.8 million. Of these securities, as at March 31, 2009, the number of securities that have been in an unrealized loss position for 12 months or longer was 9 with a fair value of $8.2 million. As of March 31, 2009, 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 March 31, 2009 of debt securities classified as held-to-maturity by contractual maturity are shown below.


	Amortized		Fair
	Cost		Value

Due within one year	$	107,159	$	107,568
After 1 through 5 years		487,572		494,090
After 5 through 10 years		54,710		56,259
After 10 years		15,537		15,150

	$	664,978	$	673,067

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 were as follows:


	March 31,		December 31,
	2009		2008

U.S. Treasury and Agency securities	$	71,354	$	84,351
Corporate debt securities		41,146		31,495
Equities		9,568		3,747

	$	122,068	$	119,593

Other Investments

At March 31, 2009 and December 31, 2008, the Company had $69.6 million and $60.2 million, respectively, of other investments recorded in limited partnerships, limited liability companies and equity funds. These other investments represented 2% and 1.7% of total investments and cash and cash equivalents at March 31, 2009 and December 31, 2008, respectively. All of the Company’s investments in limited partnerships and limited liability companies that are categorized as other investments 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 March 31, 2009 and December 31, 2008, the Company had unfunded capital commitments relating to its other investments of $102.1 million and $108.0 million, respectively. As at March 31, 2009 and December 31, 2008, the Company had 94.7% and 90.6%, respectively, of other investments with a related party.

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	INVESTMENTS — (cont’d)

Fair Value of Financial Instruments

In accordance with FAS No. 157, “Fair Value Measurements” (“FAS 157”), the Company has categorized its investments between levels as follows:


	March 31, 2009
	Quoted Prices in
	Active Markets		Significant Other		Significant
	for Identical Assets		Observable Inputs		Unobservable Inputs		Total Fair
	(Level 1)		(Level 2)		(Level 3)		Value

Fixed maturities — available-for-sale	$	—	$	620,361	$	—	$	620,361
Fixed maturities — trading		—		112,216		284		112,500
Equity securities		3,506		3,971		2,091		9,568
Other investments		—		—		69,566		69,566

Total investments	$	3,506	$	736,548	$	71,941	$	811,995


	December 31, 2008
							Total Fair
	Level 1		Level 2		Level 3		Value

Fixed maturities — available-for-sale	$	—	$	511,509	$	—	$	511,509
Fixed maturities — trading		—		115,494		352		115,846
Equity securities		3,747		—		—		3,747
Other investments		—		—		60,237		60,237

Total investments	$	3,747	$	627,003	$	60,589	$	691,339

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:


	Three Months Ended March 31, 2009
	Fixed
	Maturity			Other			Equity
	Investments			Investments			Securities		Total

Level 3 investments as of January 1, 2009	$	352		$	60,237		$	—	$	60,589
Net purchases (sales and distributions)		—			12,628			2,006		14,634
Total realized and unrealized losses		(68	)		(3,299	)		85		(3,282	)
Net transfers in and/or (out) of Level 3		—			—			—		—

Level 3 investments as of March 31, 2009	$	284		$	69,566		$	2,091	$	71,941

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	INVESTMENTS — (cont’d)


	Three Months Ended March 31, 2008
	Fixed
	Maturity		Other			Equity
	Investments		Investments			Securities		Total

Level 3 investments as of January 1, 2008	$	1,051	$	75,300		$	—	$	76,351
Net purchases (sales and distributions)		—		55,461			—		55,461
Total realized and unrealized losses		—		(25,370	)		—		(25,370	)
Net transfers in and/or (out) of Level 3		—		—			—		—

Level 3 investments as of March 31, 2008	$	1,051	$	105,391		$	—	$	106,442

The amount of total losses for the period included in earnings attributable to the fair value of changes in assets still held at March 31, 2009 and 2008 was $1.9 million and $26.5 million, respectively.

Restricted Investments

The Company is required to maintain investments on deposit with various regulatory authorities to support its insurance and reinsurance operations. The investments on deposit are available to settle insurance and reinsurance liabilities. The Company also utilizes trust accounts to collateralize business with its insurance and reinsurance counterparties. These trust accounts generally take the place of letter of credit requirements. The investments in trust as collateral are primarily highly rated fixed maturity securities. The carrying value of our restricted investments was as follows:


	March 31,		December 31,
	2009		2008

Assets used for collateral in trust for third-party agreements	$	244,669	$	297,491
Deposits with U.S. regulatory authorities		11,743		11,751

	$	256,412	$	309,242


6.	LOANS PAYABLE

On April 4, 2009, the Company repaid AU$80.7 million (approximately $56.7 million) of the outstanding principal of the Facility A commitment pursuant to the term facility agreement of the Company’s wholly-owned subsidiary, Cumberland Holdings Limited.


7.	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, 2008. The information below includes both the employee and director components of our share-based compensation.

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	EMPLOYEE BENEFITS — (cont’d)


*(a)*	*Employee share plans*

Employee stock awards for the three months ended March 31, 2009 are summarized as follows:


				Weighted
				Average Fair
	Number of			Value of
	Shares			the Award

Nonvested — January 1, 2009		13,749		$	813
Granted		66,091			3,384
Vested		(66,091	)		(3,384	)

Nonvested — March 31, 2009		13,749		$	774

On May 23, 2006, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with The Enstar Group, Inc. (“EGI”) and a recapitalization agreement. These agreements provided for the cancellation of the then current annual incentive compensation plan and replaced it with a new annual incentive compensation plan.


i)	2004-2005 Employee Share Plan

As a result of the execution of these agreements, the accounting treatment for share-based awards under the Company’s employee share plan changed from book value to fair value. The determination of the share-award expenses was based on the fair-market value per share of EGI common stock as of the grant date and is recognized over the vesting period.

Compensation costs of $nil and $0.2 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 months ended March 31, 2009 and 2008, respectively.


ii)	2006-2010 Annual Incentive Plan and 2006 Equity Incentive Plan

For the three months ended March 31, 2009 and 2008, 64,572 and 27,140 shares were awarded to officers and employees under the 2006 Equity Incentive Plan. The total value of the award for the three months ended March 31, 2009 and 2008 was $3.3 million and $2.6 million, respectively, and was charged against the 2006-2010 Annual Incentive Plan accrual established for the years ended December 31, 2008 and 2007, respectively.

The accrued expense relating to the 2006-2010 Annual Incentive Plan for the three months ended March 31, 2009 and 2008 was $2.0 million and $2.1 million, respectively.

iii) Enstar Group Limited Employee Share Purchase Plan

Compensation costs of less than $0.1 million and $Nil relating to the shares issued under the Employee Share Purchase Plan (the “Plan”) have been recognized in the Company’s statement of earnings for the three months ended March 31, 2009 and 2008, respectively. As at March 31, 2009, 4,214 shares have been issued to employees under the Plan.

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	EMPLOYEE BENEFITS — (cont’d)


*(b)*	*Options*


				Weighted
				Average		Intrinsic
	Number of			Exercise		Value of
	Shares			Price		Shares

Outstanding — January 1, 2009		490,371		$	25.40	$	16,545
Granted		—			—		—
Exercised		(50,000	)		13.00		(1,538	)
Forfeited		—			—		—

Outstanding — March 31, 2009		440,371		$	26.81	$	12,996

Stock options outstanding and exercisable as of March 31, 2009 were as follows:

Ranges of

Weighted Average

Exercise

Number of

Weighted Average

Remaining

Prices

Options

Exercise Price

Contractual Life

$10 - $20

273,645

17.97

2.0 years

$40 - $60

166,726

41.32

4.4 years


*(c)*	*Deferred Compensation and Stock Plan for Non-Employee Directors*

For the three months ended March 31, 2009 and 2008, 1,651 and 994 restricted share units, respectively, were credited to the accounts of Non-Employee Directors under the Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors.

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


8.	EARNINGS PER SHARE

The following table sets forth the comparison of basic and diluted earnings per share of amounts attributable to the Company’s ordinary shareholders for the three-month periods ended March 31, 2009 and 2008.


	Three Months		Three Months
	Ended		Ended
	March 31,		March 31,
	2009		2008

Basic earnings per share
Net earnings (loss) attributable to Enstar Group Limited before extraordinary gain	$	11,531	$	(23,509	)
Weighted average shares outstanding — basic		13,363,507		11,927,542

Earnings (loss) per share attributable to Enstar Group Limited before extraordinary gain — basic	$	0.86	$	(1.97	)

Diluted earnings per share
Net earnings (loss) attributable to Enstar Group Limited before extraordinary gain	$	11,531	$	(23,509	)
Weighted average shares outstanding — basic		13,363,507		11,927,542
Share equivalents:
Unvested shares		13,749		—
Options		314,734		—
Restricted share units		7,429		—

Weighted average shares outstanding — diluted		13,699,419		11,927,542

Earnings (loss) per share attributable to Enstar Group Limited before extraordinary gain — diluted	$	0.84	$	(1.97	)

The following securities have not been included in the computation of diluted earnings per share for the three-month period ended March 31, 2008 because to do so would have been anti-dilutive.


Share equivalents:	2008

Unvested shares		25,862
Options		262,440
Restricted share units		2,141

Total		290,443


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. Mr. Flowers is a member of the Company’s board of directors and is one of the Company’s largest shareholders. Mr. Oros is the Company’s Executive Chairman and a member of the board of directors.


	•	During the quarter, the Company funded an additional $5.9 million of its outstanding capital commitment to entities affiliated with Messrs. Flowers and Oros. The Company had, as of March 31, 2009 and December 31, 2008, investments in entities affiliated with Messrs. Flowers and Oros with a total value of $65.9 million and $54.5 million, respectively, and outstanding commitments to entities managed by Messrs. Flowers and Oros,

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	RELATED PARTY TRANSACTIONS — (cont’d)

for the same periods, of $98 million and $104.0 million, respectively. The Company’s outstanding commitments may be drawn down over approximately the next five years.


	•	On January 16, 2009, the Company committed to invest approximately $8.7 million in JCF III Co-invest I L.P., an entity affiliated with Messrs. Flowers and Oros, in connection with its investment in certain of the operations, assets and liabilities of IndyMac Bank, F.S.B.

As at March 31, 2009, the related party investments associated with Messrs. Flowers and Oros accounted for 96% of the total unfunded capital commitments of the Company, 94.7% of the total amount of investments classified as Other Investments by the Company, and 100% of the total write-downs in the quarter by the Company.


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 March 31, 2009
	Reinsurance			Consulting			Total

Consulting fees	$	(7,996	)	$	11,332		$	3,336
Net investment income		17,097			212			17,309
Net realized losses		(6,010	)		—			(6,010	)

		3,091			11,544			14,635

Net decrease in loss and loss adjustment expense liabilities		(26,679	)		—			(26,679	)
Salaries and benefits		3,466			8,951			12,417
General and administrative expenses		8,057			4,325			12,382
Interest expense		4,965			—			4,965
Net foreign exchange loss		1,309			289			1,598

		(8,882	)		13,565			4,683

Earnings (loss) before income taxes and share of net earnings of partly owned company		11,973			(2,021	)		9,952
Income taxes		125			493			618
Share of net earnings of partly owned company		269			—			269

Net earnings (loss)		12,367			(1,528	)		10,839
Less: Net earnings attributable to noncontrolling interest		692			—			692

Net earnings (loss) attributable to Enstar Group Limited	$	13,059		$	(1,528	)	$	11,531

ENSTAR GROUP LIMITED

NOTES TO THE UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


10.	SEGMENT INFORMATION — (cont’d)


	Three Months Ended March 31, 2008
	Reinsurance			Consulting			Total

Consulting fees	$	(7,248	)	$	13,303		$	6,055
Net investment income (loss)		5,498			(4,908	)		590
Net realized loss		(1,084	)		—			(1,084	)

		(2,834	)		8,395			5,561

Net increase in loss and loss adjustment expense liabilities		685			—			685
Salaries and benefits		2,062			9,295			11,357
General and administrative expenses		8,289			3,622			11,911
Interest expense		3,315			—			3,315
Net foreign exchange gain		(963	)		(372	)		(1,335	)

		13,388			12,545			25,933

Loss before income taxes		(16,222	)		(4,150	)		(20,372	)
Income taxes		(1,561	)		1,800			239

Loss before extraordinary gain		(17,783	)		(2,350	)		(20,133	)
Extraordinary gain		50,280			—			50,280

Net earnings (loss)		32,497			(2,350	)		30,147
Less: Net earnings attributable to noncontrolling interest		(18,460	)		—			(18,460	)

Net earnings (loss) attributable to Enstar Group Limited	$	14,037		$	(2,350	)	$	11,687

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 March 31, 2009, and the related condensed consolidated statements of earnings and comprehensive income, changes in shareholders’ equity and cash flows for the three-month periods ended March 31, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the 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 the 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 the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Enstar Group Limited and subsidiaries as of December 31, 2008, and the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended prior to retrospective adjustment for the adoption of FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” (not presented herein); and in our report dated March 4, 2009, we expressed an unqualified opinion on those consolidated financial statements. We have also audited the adjustments that were applied to retrospectively adjust the December 31, 2008 consolidated financial statements of Enstar Group Limited and subsidiaries (not presented herein). In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008 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

May 8, 2009


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 months ended March 31, 2009 and 2008. This discussion and analysis should be read in conjunction with the attached unaudited condensed 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, 2008.

Business Overview

Enstar Group Limited, or Enstar, 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 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

On January 31, 2009, we, through our indirect subsidiary, Sun Gulf Holdings Inc., completed the acquisition of all of the outstanding capital stock of Constellation Reinsurance Company Limited, or Constellation, for a total purchase price of approximately $2.5 million. Constellation is a New York domiciled reinsurer that is in run-off. The acquisition was funded from available cash on hand.

We own 50.1% of Shelbourne Group Limited, 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 Reinsurance to Close or “RITC” transactions (the transferring of liabilities from one Lloyd’s Syndicate to another) with Lloyd’s syndicates in run-off. In February 2009, Lloyd’s Syndicate 2008 entered into a RITC agreement with a Lloyd’s syndicate with total gross insurance reserves of approximately $67.0 million. JCF FPK I L.P., or JCF FPK, a joint investment program between J.C. Flowers II L.P., or the Flowers Fund, and Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC, or FPK, owns 49.9% of Shelbourne Group Limited.

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. In July 2008, FPK acted as lead managing underwriter in our public share offering. An affiliate of the Flowers Fund controls approximately 41% of FPK.

Results of Operations

The following table sets forth our selected consolidated statement of operations data for each of the periods indicated.


	Three Months Ended March 31,
	2009			2008

INCOME
Consulting fees	$	3,336		$	6,055
Net investment income		17,309			590
Net realized losses		(6,010	)		(1,084	)

		14,635			5,561

EXPENSES
Net (decrease) increase in loss and loss adjustment expense liabilities		(26,679	)		685
Salaries and benefits		12,417			11,357
General and administrative expenses		12,382			11,911
Interest expense		4,965			3,315
Net foreign exchange loss (gain)		1,598			(1,335	)

		4,683			25,933

Earnings (Loss) before income taxes and share of net earnings of partly owned company		9,952			(20,372	)
Income taxes		618			239
Share of net earnings of partly owned company		269			—

Earnings (Loss) before extraordinary gain		10,839			(20,133	)
Extraordinary gain — negative goodwill		—			50,280

NET EARNINGS		10,839			30,147
Less: Net loss (earnings) attributable to noncontrolling interest		692			(18,460	)

NET EARNINGS ATTRIBUTABLE TO ENSTAR GROUP LIMITED	$	11,531		$	11,687

Comparison of the Three Months Ended March 31, 2009 and 2008

We reported consolidated net earnings attributable to Enstar Group Limited of approximately $11.5 million for the three months ended March 31, 2009 as compared to approximately $11.7 million for the same period in 2008. Included as part of net earnings for 2008 are extraordinary gains related to negative goodwill of $50.3 million (inclusive of the noncontrolling interest’s share of extraordinary gain of $15.1 million). The increase in earnings, before extraordinary item and net earnings attributable to noncontrolling interest, of approximately $31.0 million was primarily a result of the following:

(i) an increase in investment income (net of realized losses) of $11.8 million, primarily due to an overall increase in cash and investments as a result of acquisitions that we completed during 2008; and

(ii) an increase in the net decrease in loss and loss adjustment expense liabilities of $27.4 million; partially offset by

(iii) net increase in foreign exchange loss of $2.9 million;

(iv) increased interest expense of $1.7 million due to increased bank borrowings; and

(v) decreased consulting fee income of $2.7 million.

Consulting Fees:


	Three Months Ended March 31,
	2009			2008			Variance
	(in thousands of U.S. dollars)

Consulting	$	11,332		$	13,303		$	(1,971	)
Reinsurance		(7,996	)		(7,248	)		(748	)

Total	$	3,336		$	6,055		$	(2,719	)

We earned consulting fees of approximately $3.3 million and $6.1 million for the three months ended March 31, 2009 and 2008, respectively. The decrease in consulting fees primarily relates to decreased incentive fees earned from third party agreements.

Internal management fees of $8.0 million and $7.2 million were paid in the three months ended March 31, 2009 and 2008, respectively, by our reinsurance companies to our consulting companies. The increase in internal fees paid to the consulting segment was due primarily to fees paid by reinsurance companies that we acquired subsequent to March 31, 2008.

Net Investment Income and Net Realized Gains/(Losses):


	Three Months Ended March 31,
	Net Investment Income							Net Realized Gains/(Losses)
	2009		2008			Variance		2009			2008			Variance
	(in thousands of U.S. dollars)

Consulting	$	212	$	(4,908	)	$	5,120	$	—		$	—		$	—
Reinsurance		17,097		5,498			11,599		(6,010	)		(1,084	)		(4,926	)

Total	$	17,309	$	590		$	16,719	$	(6,010	)	$	(1,084	)	$	(4,926	)

Net investment income for the three months ended March 31, 2009 increased by $16.7 million to $17.3 million, as compared to $0.6 million for the same period in 2008. The increase was primarily attributable to the combination of the following items:


	(i)	decrease from $26.2 million to $2.0 million in writedowns in the fair value of our investments in New NIB Partners L.P., the Flowers Fund, Affirmative Investment LLC and GSC European Mezzanine Fund II, LP for the quarters ended March 31, 2008 and 2009, respectively; partially offset by

	(ii)	lower investment income from fixed maturities and cash and cash equivalents, reflecting the impact of lower global short-term and intermediate interest rates — the average U.S. Federal Funds Rate has decreased from 3.24% for the three months ended March 31, 2008 to 0.25% for the three months ended March 31, 2009.

The average return on the cash and fixed maturities investments for the three months ended March 31, 2009 was 1.72%, as compared to the average return of 3.24% for the three months ended March 31, 2008. In respect of our fixed income investments, 76.4% and 91.0% had a Standard & Poor’s credit rating of AA or higher for the three months ended March 31, 2009 and 2008, respectively.

Net realized losses for the three months ended March 31, 2009 and 2008 were $6.0 million and $1.1 million, respectively. The net realized loss for the three months ended March 31, 2009 primarily arose as a result of us transferring approximately $10.0 million of investments that were classified as available-for-sale fixed maturities and approximately $2.0 million of other investments that were classified as other to equities and we wrote down the value of those securities by approximately $5.4 million to reflect their current market values.

Fair Value Measurements

The following table summarizes all of our financial assets and liabilities measured at fair value by FAS No. 157, “Fair Value Measurements,” or FAS 157, heirarchy.


	March 31, 2009
	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	$	—		$	732,577		$	284		$	732,861
Equity securities		3,506			3,971			2,091			9,568
Other investments		—			—			69,566			69,566

Total	$	3,506		$	736,548		$	71,941		$	811,995

As a percentage of total assets ($4.4 billion, as at March 31, 2009)		0.1	%		16.9	%		1.6	%		18.6	%

Net (Decrease) Increase in Loss and Loss Adjustment Expense Liabilities:

The net (decrease) increase in loss and loss adjustment expense liabilities for the three months ended March 31, 2009 and 2008 was $(26.7) million and $0.7 million, respectively. The net decrease in loss and loss adjustment expense liabilities for the three months ended March 31, 2009 of $26.7 million was attributable to a reduction in estimates of net ultimate losses of $29.9 million, a reduction in aggregate provisions for bad debts of $9.7 million and a reduction in estimates of loss adjustment expense liabilities of $10.1 million, relating to 2009 run-off activity, partially offset by the amortization, over the estimated payout period, of fair value adjustments relating to companies acquired amounting to $23.0 million. The reduction in estimates of net ultimate losses of $29.9 million primarily related to a reduction in Incurred But Not Reported (IBNR) loss reserves. Subsequent to the period end, claims liabilities of certain policyholders within a number of our insurance subsidiaries were agreed at levels that required a reassessment of IBNR loss reserves for those subsidiaries. The reduction in aggregate provisions for bad debts of $9.7 million resulted from the collection of certain reinsurance balances receivable against which bad debt provisions had been provided.

For the three months ended March 31, 2008, the net increase in loss and loss adjustment expense liabilities of $0.7 million was attributable to an increase in bad debt provisions of $1.3 million, the amortization, over the estimated payout period, of fair value adjustments relating to companies acquired amounting to $6.5 million, partially offset by the reduction in estimates of loss adjustment expense liabilities of $7.1 million, to reflect 2008 run-off activity.

The following table shows the components of the movement in the net increase in loss and loss adjustment expense liabilities for the three months ended March 31, 2009 and 2008.


	Three Months Ended March 31,
	2009			2008
	(in thousands of U.S. dollars)

Net Losses Paid	$	12,372		$	(3,375	)
Net Change in Case and LAE Reserves		(15,306	)		4,542
Net Change in IBNR		(23,745	)		(482	)

Net (Decrease) Increase in Loss and Loss Adjustment
Expense Liabilities	$	(26,679	)	$	685

The table below provides a reconciliation of the beginning and ending reserves for loss and loss adjustment expenses for the three months ended March 31, 2009 and March 31, 2008. Losses incurred and paid are reflected net of reinsurance recoverables.


	Three Months Ended March 31,
	2009			2008
	(in thousands of U.S. dollars)

Balance as of January 1,	$	2,798,287		$	1,591,449
Less: Reinsurance recoverables		394,575			427,964

		2,403,712			1,163,485
Incurred Related to Prior Years		(26,679	)		685
Paids Related to Prior Years		(12,372	)		3,375
Effect of Exchange Rate Movement		(6,650	)		9,413
Retroactive Reinsurance Contracts Assumed		48,818			394,913
Acquired on Acquisition of Subsidiaries		11,383			465,887

Net balance as at March 31	$	2,418,212		$	2,037,758
Plus: Reinsurance recoverables		379,615			662,929

Balance as at March 31,	$	2,797,827		$	2,700,687

Salaries and Benefits:


	Three Months Ended March 31,
	2009		2008		Variance
	(in thousands of U.S. dollars)

Consulting	$	8,951	$	9,295	$	344
Reinsurance		3,466		2,062		(1,404	)

Total	$	12,417	$	11,357	$	(1,060	)

Salaries and benefits, which include expenses relating to our discretionary bonus and employee share plans, were $12.4 million and $11.4 million for the three months ended March 31, 2009 and 2008, respectively. The increase in salaries and benefits is primarily attributable to increased staff costs due to an increase in staff numbers from 253 as at March 31, 2008 to 284 as at March 31, 2009.

Expenses relating to our discretionary bonus plan will be variable and dependent on our overall profitability.

General and Administrative Expenses:


	Three Months Ended March 31,
	2009		2008		Variance
	(in thousands of U.S. dollars)

Consulting	$	4,325	$	3,622	$	(703	)
Reinsurance		8,057		8,289		232

Total	$	12,382	$	11,911	$	(471	)

General and administrative expenses attributable to the consulting segment increased by $0.7 million during the three months ended March 31, 2009, as compared to the three months ended March 31, 2008.

General and administrative expenses attributable to the reinsurance segment decreased by $0.2 million during the three months ended March 31, 2009, as compared to the three months ended March 31, 2008. For the quarter ended March 31, 2008, we incurred approximately $4.5 million of bank loan structure fees incurred in respect of acquisitions we completed during the quarter — for the three months ended March 31, 2009 we did not incur any similar fees. The reduced expenses were partially offset by increased costs associated with new companies acquired subsequent to March 31, 2008.

Interest Expense:


	Three Months Ended March 31,
	2009		2008		Variance
	(in thousands of U.S. dollars)

Consulting	$	—	$	—	$	—
Reinsurance		4,965		3,315		(1,650	)

Total	$	4,965	$	3,315	$	(1,650	)

Interest expense of $5.0 million and $3.3 million was recorded for the three months ended March 31, 2009 and 2008, respectively. The increase in interest expense is attributable to the increase in bank borrowings used in the funding of acquisitions during 2008, primarily in relation to Goshawk Insurance Holdings Plc, or Goshawk, AMP Limited’s Australian-based closed reinsurance and insurance operations, or Gordian, and Unionamerica Holdings Limited or Unionamerica.

Negative Goodwill:


	Three Months Ended March 31
	2009		2008		Variance
	(in thousands of U.S. dollars)

Consulting	$	—	$	—	$	—
Reinsurance		—		50,280		(50,280	)

Total	$	—	$	50,280	$	(50,280	)

Negative goodwill of $nil and $50.3 million, was recorded for the three months ended March 31, 2009 and 2008, respectively. For the three months ended March 31, 2008 the negative goodwill of $50.3 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 was, in accordance with FAS No. 141 “Business Combinations,” 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, 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.

Noncontrolling Interest


	Three Months Ended March 31
	2009		2008			Variance
	(in thousands of U.S. dollars)

Consulting	$	—	$	—		$	—
Reinsurance		692		(18,460	)		19,152

Total	$	692	$	(18,460	)	$	19,152

We recorded a noncontrolling interest in earnings of $0.7 million and $(18.5) million for the three months ended March 31, 2009 and 2008, respectively. The decrease for the quarter ended March 31, 2009 in noncontrolling interest was primarily due to the noncontrolling interest’s share of the negative goodwill relating to the Gordian acquisition in the first quarter of 2008.

Liquidity and Capital Resources

On April 4, 2009, we repaid AU$80.7 million (approximately $56.7 million) of the outstanding principal of the Facility A commitment pursuant to the term facility agreement of our wholly-owned subsidiary, Cumberland Holdings Limited. Other than this repayment, which occurred subsequent to the three month period ended March 31, 2009, there have been no material changes in our liquidity position or capital resource requirements

since December 31, 2008. For more information refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 5, 2009.

With respect to the three month periods ended March 31, 2009 and 2008, net cash provided by our operating activities was $3.1 million and $374.4 million, respectively. The decrease in cash flows was primarily attributable to net assets assumed on retro-active reinsurance contracts during the three months ended March 31, 2008, which did not recur in 2009.

Net cash used in investing activities for the three months ended March 31, 2009 was $(283.1) million compared to $(243.2) million for the three months ended March 31, 2008. The decrease in the cash flows was primarily due to an increase in net purchases of investments, offset partially by an increase in cash provided by the sales and maturities of available-for-sale securities.

Net cash (used in) provided by financing activities for the three months ended March 31, 2009 and 2008 was $(19.1) million and $354.2 million, respectively. The decrease in cash flows was primarily attributable to the receipt of bank loans and capital contributions by noncontrolling interest shareholders, relating to the purchase of Guildhall Insurance Company Limited, Gordian, and the financing of Shelbourne Group Limited, during the three months ended March 31, 2008, which did not recur in 2009.

Commitments and Contingencies

There have been no other material changes in our commitments or contingencies since December 31, 2008. For more information refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Commitments and Contingencies” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 5, 2009.

Critical Accounting Estimates

Our critical accounting estimates are discussed in “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Critical Accounting Policies” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 5, 2009.

Off-Balance Sheet and Special Purpose Entity Arrangements

At March 31, 2009, we have not entered into any off-balance sheet arrangements, as defined by Item 303(a)(4) of Regulation S-K.

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 collectability of our reinsurance;

	•	changes in economic conditions, including interest rates, inflation, currency exchange rates, equity markets and credit conditions including current market conditions and the instability in the global credit markets, which could affect our investment portfolio, our ability to finance future acquisitions and our profitability;

	•	losses due to foreign currency exchange rate fluctuations;

	•	tax, regulatory or legal restrictions or limitations applicable to us or the insurance and reinsurance business generally;

	•	increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;

	•	emerging claim and coverage issues;

	•	lengthy and unpredictable litigation affecting assessment of losses and/or coverage issues;

	•	loss of key personnel;

	•	changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at management’s discretion;

	•	operational risks, including system or human failures;

	•	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;

	•	changes in tax laws or regulations applicable to us or our subsidiaries, or the risk that we or one of our non-U.S. subsidiaries become subject to significant, or significantly increased, income taxes in the United States or elsewhere; and

	•	changes in accounting policies or practices.

The factors listed above should be not construed as exhaustive and should be read in conjunction with the other cautionary statements and Risk Factors that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission, or SEC, on March 5, 2009, as well as in the 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 December 31, 2008. For more information refer to “Quantitative and Qualitative Disclosures about Market Risk” included in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 5, 2009.


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 March 31, 2009. 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 our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

Our management has performed an evaluation, with the participation of our Chief Executive Officer and our Chief Financial Officer, of changes in our internal control over financial reporting that occurred during the three months ended March 31, 2009. Based upon that evaluation there were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 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 and our U.S. legal counsel believe 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. Subsequently, the parties entered into a Stipulation and Order filed with the Court on October 7, 2008, by which (i) NICO agreed to dismiss Count V of its Complaint with prejudice, (ii) the defendants agreed to withdraw their motion to dismiss Counts I and III without prejudice, reserving all of their rights and defenses to challenge these claims on the merits, and (iii) NICO agreed to extend the defendants’ time to file an answer and counterclaim. On November 5, 2008, we, Enstar US and Dukes Place filed an answer to NICO’s complaint and Dukes Place asserted certain counterclaims against NICO. On January 12, 2009, NICO filed a motion to dismiss certain of the counterclaims, along with a motion for summary judgment addressed to the counterclaims. We, Enstar US and Dukes Place filed papers in opposition to NICO’s motion on February 23, 2009, and NICO filed reply briefs in support of its motion on March 23, 2009. The Court has advised that it will decide these motions on submission without hearing any oral arguments. 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 “Risk Factors” included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the SEC on March 5, 2009. The risk factors identified therein have not materially changed.


Item 6.	*EXHIBITS*


Exhibit
No.			Description

	10	.1*†	The Enstar Group, Inc. Deferred Compensation and Stock Plan for Non-Employee Directors, as amended.
	15	.1*	Deloitte & Touche Letter Regarding Unaudited Interim Financial Information.
	31	.1*	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2*	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith

**		Furnished herewith

†		Denotes management contract or compensatory arrangement

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 May 8, 2009.

ENSTAR GROUP LIMITED


	By:	/s/ Richard J. Harris

Richard J. Harris,

Chief Financial Officer, Authorized Signatory and

Principal Accounting and Financial Officer

EXHIBIT INDEX


Exhibit
No.			Description

	10	.1*†	The Enstar Group, Inc. Deferred Compensation and Stock Plan for Non-Employee Directors, as amended.
	15	.1*	Deloitte & Touche Letter Regarding Unaudited Interim Financial Information.
	31	.1*	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2*	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith

**		Furnished herewith

†		Denotes management contract or compensatory arrangement

Enstar Group LTD - Quarter Report: 2009 March (Form 10-Q)

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