UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

Quarterly Report Under Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For Quarter Ended ~~September~~June 30, ~~2003~~2004

Commission file Number 0-11538

Overseas Partners Ltd.

(Exact name of registrant as specified in its charter)

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

Cumberland House, One Victoria Street, Hamilton HM 11, Bermuda

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (441) 295-0788

N/A

Former name, former address and former fiscal year, if changed since last report

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, and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨

Common Stock, par value $.10 per share

(Title of Class)

118,~~816~~769,~~666~~846 Shares

Outstanding at ~~November~~ 10August 9, 2004 ~~2003~~

PART I. FINANCIAL INFORMATION

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	September 30,2003			December 31,2002
	June 30,2004			December 31,2003
	(Unaudited)
ASSETS:
Investments:
Trading, at fair value –
Trading, at fair value – Equity securities (cost: 2004 – $357,759, 2003 – $357,759)	$	476,098		$	472,298
Equity securities (cost: 2003 – $450,193, 2002 – $450,193)	$	563,726		$	524,752
Available-for-sale, at fair value – Debt securities (amortized cost: 2004 – $110,099, 2003 – $234,650)		109,908			234,645
Available-for-sale, at fair value –
Restricted debt securities (amortized cost: 2004 – $248,140, 2003 – $449,546)		247,365			456,552
Debt securities (amortized cost: 2003 – $214,770, 2002 – $153,096)		214,902			154,389
Equity securities (cost: 2004 – $1,064, 2003 – $1,064)		1,454			2,447
Restricted debt securities (amortized cost: 2003 – $706,447, 2002 – $599,749)		742,455			634,378
		834,825			1,165,942
Equity securities (cost: 2003 – $85,548, 2002 – $280,191)		105,552			294,901
Cash and cash equivalents		139,328			264,764
		1,626,635			1,608,420
Restricted cash and cash equivalents		61,782			95,208
Cash and cash equivalents		179,638			492,158
Reinsurance balances receivable		8,374			16,487
Restricted cash and cash equivalents		170,057			355,388
Funds withheld		8,934			242,635
Reinsurance balances receivable		71,104			360,749
Paid losses recoverable from reinsurers		25,650			26,279
Funds withheld		179,960			270,518
Unpaid losses and loss expenses recoverable from reinsurers		36,315			63,598
Losses and loss expenses recoverable		89,517			114,620
Deferred acquisition costs		5			106
Deferred acquisition costs		6,835			20,681
Assets relating to subsidiary held for sale		230,460			255,541
Unearned premiums ceded		5			2,065
Real estate and leasing:
Finance lease		40,528			41,239
Other assets
Investment in and advances to affiliate		7,260			22,111
Investment in private equity funds, at cost		21,597			22,628
Investment in private equity funds, at cost		21,931			18,745
Investment in affiliate		—			5,000
Goodwill		3,333			3,333
Other		7,557			29,939
Insurance licenses		—			5,813
Total assets	$	1,374,827		$	2,188,127
Other		28,613			23,526
Total assets	$	2,425,416		$	3,339,366
LIABILITIES AND MEMBERS’ EQUITY:
Liabilities:
Accrued losses and loss expenses	$	1376,~~133,288~~652		$	1913,~~510,570~~711
Unearned premiums		373,~~109~~422			~~182~~8,~~851~~782
Reinsurance balances payable		~~109~~61,~~406~~108			~~298~~59,~~386~~933
Accounts payable and other liabilities		5227,~~768~~234			3825,~~467~~659
Deferred income taxes		248			705
Liabilities relating to subsidiary held for sale		188,418			182,155
Long-term debt		98,598			100,322
Distribution payable		—			296,924
Total liabilities	$	1656,~~431,417~~834		$	21,~~131~~487,~~301~~164
Commitments and contingencies		—			—
Preference Stock, par value $0.10 per share; authorized 200 million shares; none issued		—			—
Members’ equity:
Common Stock, par value $0.10 per share; authorized 900 million shares; issued 127.5 million shares; outstanding 118,816,666 shares		12,750			12,750
Common Stock, par value $0.10 per share; authorized 900 million shares; issued 127.5 million; outstanding 118,769,846 shares (2003: 118,769,846 shares)		12,750			12,750
Contributed surplus		37,650			37,650
Retained earnings		1827,~~069,120~~327			1800,~~289,475~~695
Treasury stock (2003 – 8,683,334 shares, 2002 – 8,644,658 shares), at cost		(158,363	)		(158,047	)
Treasury stock (2004 – 8,730,154 shares, 2003 – 8,730,154 shares), at cost		(158,755	)		(158,755	)
Deferred compensation		~~(70~~—	)		(~~310~~34	)
Accumulated other comprehensive income		32,912			26,547
Accumulated other comprehensive (loss) income		(979	)		8,657
Total members’ equity		~~993~~717,~~999~~993			1700,~~208,065~~963
Total liabilities and members’ equity	$	21,~~425~~374,~~416~~827		$	32,~~339~~188,~~366~~127
Net book value per share	$	86.3705		$	105.1690

See condensed notes to unaudited consolidated financial statements.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	2004			2003			2004			2003
REVENUES:
Gross reinsurance premiums written	$	(~~66,493~~116	)	$	~~(175,304~~229	)	$	~~(39~~3,~~672~~297	)	$	~~509~~(9,~~279~~948	)
Reinsurance premiums ceded		(224,200	)		~~476~~(94	)		(~~394~~4,321	)		(~~83,943~~333	)
Reinsurance premiums written		(664,~~515~~316	)		~~(174,828~~135	)		(401,~~066~~024	)		~~425~~(10,~~336~~281	)
Change in unearned premiums		991,~~640~~505			~~242~~4,~~508~~266			~~141~~4,~~460~~903			~~(31~~24,~~597~~140	)
Reinsurance premiums earned		33(2,~~125~~811	)		674,~~680~~401			~~101~~3,~~394~~879			~~393~~13,~~739~~859
Commission and fee income		~~(410~~—	)		~~2,685~~7			(~~165~~2	)		6,245
Operating lease with UPS		—			—			—			3,645
Finance lease		—			825			—			1,655
Finance lease		821			839			2,476			2,531
Interest		6,244			7,413			13,785			16,154
Hotel		—			—			—			37,222
Realized (loss) gain on securities		(143	)		27,255			2,775			17,476
Office building		—			3,751			—			39,605
Unrealized (loss) gain on trading securities		(3,409	)		22,820			3,797			32,538
Gain on sales of real estate assets		—			34,211			—			140,203
Amortization of fixed income securities		(1,830	)		(378	)		(4,171	)		(367	)
Interest		8,791			12,962			27,937			39,905
Dividends		27			623			185			1,522
Realized gain (loss) on securities		1,351			(180,524	)		19,734			(172,412	)
		(1,922	)		62,966			20,248			83,082
Unrealized gain (loss) on trading securities		6,442			(1,977	)		38,980			(1,406	)
Amortization of fixed income securities		(1,980	)		(484	)		(3,539	)		5,440
Dividends		498			1,014			2,020			3,279
		48,638			(59,843	)		188,837			497,996
EXPENSES:
Reinsurance losses and loss expenses		45(38,~~888~~296	)		~~110~~8,~~303~~636			~~100~~(43,~~760~~404	)		~~359~~13,~~082~~357
Reinsurance commissions, taxes and other expenses		51,~~717~~933			151,~~358~~165			356,~~946~~498			~~124~~11,~~097~~900
Depreciation expense		—			514			—			9,037
Real estate and leasing operating expenses		—			347			—			482
Real estate and leasing operating expenses		185			2,558			666			51,871
Interest expense		—			2,332			—			4,675
Interest expense		2,321			3,029			6,996			104,263
Investment expenses		438			2,573			1,046			3,419
Minority interest in earnings		—			205			—			2,025
Other operating expenses		2,348			2,318			5,588			5,329
Investment expenses		1,051			680			4,656			3,586
		(33,577	)		17,371			(30,272	)		39,162
Impairment of intangible assets		—			—			5,813			2,484
Income from continuing operations before income taxes		31,655			45,595			50,520			43,920
Other operating expenses		12,312			4,052			20,148			21,083
Income taxes		107			350			184			(913	)
		67,474			136,699			174,985			677,528
Net income from continuing operations		31,762			45,945			50,704			43,007
(Loss) income before income taxes		(18,836	)		(196,542	)		13,852			(179,532	)
Discontinued operations:
Income taxes		3,520			(14,310	)		3,504			(31,279	)
Net loss from subsidiary held for sale, net of taxes		(24,514	)		(9,952	)		(24,072	)		(10,335	)
Net (loss) income	$	(15,316	)	$	(210,852	)	$	17,356		$	(210,811	)
Net income	$	7,248		$	35,993		$	26,632		$	32,672
Basic and diluted net (loss) income per share	$	(0.13	)	$	(1.77	)	$	0.15		$	(1.77	)
EARNINGS PER SHARE
Weighted average number of shares outstanding		118,818			118,870			118,833			119,004
Income from continuing operations	$	0.27		$	0.38		$	0.42		$	0.36
Loss from discontinued operations		(0.21	)		(0.08	)		(0.20	)		(0.09	)
Basic and diluted net income per share	$	0.06		$	0.30		$	0.22		$	0.27
Weighted average number of shares outstanding		118,769			118,827			118,769			118,841

See condensed notes to unaudited consolidated financial statements.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	2004			2003			2004			2003
Net (loss) income	$	(15,316	)	$	(210,852	)	$	17,356		$	(210,811	)
Net income	$	7,248		$	35,993		$	26,632		$	32,672
Other comprehensive income:
Other comprehensive (loss) income:
Net unrealized holding gains (losses) on available-for-sale securities		1,600			(65,682	)		25,786			(114,062	)
Net unrealized holding (losses) gains on available-for-sale securities		(9,027	)		36,665			(6,359	)		24,284
Less: reclassification adjustment for (gains) losses included in net income		(1,351	)		180,606			(19,734	)		205,410
Less: reclassification adjustment for losses (gains) included in net income		143			(27,255	)		(2,775	)		(17,476	)
Other comprehensive income before income tax		249			114,924			6,052			91,348
Other comprehensive (loss) income of continuing operations		(8,884	)		9,410			(9,134	)		6,808
Income tax (payable) receivable related to other comprehensive income items		(39	)		279			313			(1,528	)
Net unrealized holding losses on available-for-sale securities of subsidiary held for sale, net of tax		(671	)		(244	)		(502	)		(653	)
Other comprehensive income		210			115,203			6,365			89,820
Other comprehensive (loss) income		(9,555	)		9,166			(9,636	)		6,155
Comprehensive (loss) income	$	(152,~~106~~307	)	$	~~(95~~45,~~649~~159	)	$	2316,~~721~~996		$	~~(120~~38,~~991~~827	)

See condensed notes to unaudited consolidated financial statements.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

~~Nine~~Six Months Ended ~~September~~ June 30, ~~2003~~2004 and ~~2002~~2003

(In thousands)

(Unaudited)

	PreferenceStock		Common Stock			Treasury Stock					DeferredCompensation			ContributedSurplus		RetainedEarnings			AccumulatedOtherComprehensive(Loss) Income			TotalMembers’Equity
	Preference Stock		Common Stock			Treasury Stock					Deferred Compensation			Contributed Surplus		Retained Earnings			Accumulated OtherComprehensiveIncome (Loss)			Total Members’ Equity
			Shares	Amount		Shares		Amount
Balance, January 1, 2002	$	—	127,500	$	12,750	(8,406	)	$	(155,406	)	$	(3,115	)	$	37,650	$	1,506,066		$	(79,024	)	$	1,318,921
Net loss		—	—		—	—			—			—			—		(210,811	)		—			(210,811	)
Restricted shares forfeited		—	—		—	(1	)		(19	)		19			—		—			—			—
Purchase of shares		—	—		—	(238	)		(2,622	)		—			—		—			—			(2,622	)
Amortization of restricted common stock compensation		—	—		—	—			—			2,540			—		—			—			2,540
Net unrealized gain on available-for-sale securities, net of tax		—	—		—	—			—			—			—		—			89,820			89,820
Balance, September 30, 2002	$	—	127,500	$	12,750	(8,645	)	$	(158,047	)	$	(556	)	$	37,650	$	1,295,255		$	10,796		$	1,197,848
Balance, January 1, 2003	$	—	127,500	$	12,750	(8,645	)	$	(158,047	)	$	(310	)	$	37,650	$	1,289,475		$	26,547		$	1,208,065
Net income		—	—		—	—			—			—			—		1732,~~356~~672			—			1732,~~356~~672
Purchase of shares		—	—		—	(3834	)		(~~316~~282	)		—			—		—			—			(~~316~~282	)
Liquidating distribution paid ($2.00 per share)		—	—		—	—			—			—			—		(237,711	)		—			(237,711	)
Distribution declared ($2.00 per share)		—	—		—	—			—			—			—		(237,711	)		—			(237,711	)
Amortization of restricted common stock compensation		—	—		—	—			—			~~240~~202			—		—			—			~~240~~202
Net unrealized gain on available-for-sale securities, net of tax		—	—		—	—			—			—			—		—			6,365			6,365
Net unrealized loss on available-for-sale securities, net of tax		—	—		—	—			—			—			—		—			6,155			6,155
Balance, September 30, 2003	$	—	127,500	$	12,750	(8,683	)	$	(158,363	)	$	(70	)	$	37,650	$	1,069,120		$	32,912		$	993,999
Balance, June 30, 2003	$	—	127,500	$	12,750	(8,679	)	$	(158,329	)	$	(108	)	$	37,650	$	1,084,436		$	32,702		$	1,009,101
Balance, January 1, 2004	$	—	127,500	$	12,750	(8,730	)	$	(158,755	)	$	(34	)	$	37,650	$	800,695		$	8,657		$	700,963
Net income		—	—		—	—			—			—			—		26,632			—			26,632
Amortization of restricted common stock compensation		—	—		—	—			—			34			—		—			—			34
Net unrealized loss on available-for-sale securities, net of tax		—	—		—	—			—			—			—		—			(9,636	)		(9,636	)
Balance, June 30, 2004	$	—	127,500	$	12,750	(8,730	)	$	(158,755	)	$	—		$	37,650	$	827,327		$	(979	)	$	717,993

See condensed notes to unaudited consolidated financial statements.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S.$ in thousands)

(Unaudited)

	Nine Months EndedSeptember 30,
	Six Months Ended June 30,
	2003			2002
	2004			2003
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)	$	17,356		$	(210,811	)
Net income	$	26,632		$	32,672
Adjustments to reconcile net income to net cash expended by operating activities:
Deferred income taxes		1,466			(12,874	)
Loss from subsidiary held for sale		242			10,335
Depreciation expense		—			9,037
Loss on sale of subsidiary		23,830			—
Minority interest in earnings		—			2,025
Realized gain on securities		(2,775	)		(17,476	)
Realized (gain) loss on securities		(19,734	)		172,412
Unrealized gain on trading securities		(3,797	)		(32,538	)
Unrealized (gain) loss on trading securities		(38,980	)		1,406
Amortization of fixed income securities		2,509			367
Amortization of fixed income securities		3,539			(5,440	)
Amortization of restricted common stock compensation		34			202
Amortization of restricted common stock compensation		240			2,540
Other		(374	)		58
Gain on sales of real estate assets		—			(140,203	)
Premium on debt repurchase		—			78,001
Other		711			(1,149	)
Changes in assets and liabilities:
Reinsurance balances receivable		~~289~~8,~~645~~113			~~(23~~72,~~891~~041	)
Losses and loss expenses recoverable		2527,~~103~~912			—18,072
Funds withheld		90233,~~558~~701			~~(112~~15,~~702~~799	)
Deferred acquisition costs		~~13,846~~101			134,~~772~~137
Unearned premiums ceded		~~2,060~~—			~~(69~~1,~~359~~392	)
Other assets		1028,~~781~~413			30(3,~~096~~634	)
Accrued losses and loss expenses		(~~377~~537,~~282~~059	)		(60213,~~178~~250	)
Unearned premiums		(~~145~~5,~~742~~360	)		99(24,~~570~~860	)
Reinsurance balances payable		~~(188~~1,~~980~~175	)		~~106~~(82,~~517~~419	)
Accounts payable and other liabilities		141,~~840~~575			~~(22,729~~141	)
Proceeds from sale of trading investments		—			3,689
Net cash flow expended by operating activities of continuing operations		(195,128	)		(218,961	)
Purchase of trading investments		—			(1,346	)
Net cash flow expended by operating activities		(300,573	)		(141,617	)
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of available-for-sale investments		~~829~~694,~~042~~230			1553,~~620,453~~144
Purchase of available-for-sale investments		(~~786~~368,~~569~~011	)		(1370,~~194,260~~185	)
Proceeds from maturities of held-to-maturity investments		—			11,270
Net movement in restricted cash and cash equivalents		33,426			178,268
Purchase of held-to-maturity investments		—			(84,192	)
Net cash flow generated by investing activities of continuing operations		359,645			361,227
Net movement in restricted cash and cash equivalents		185,331			(359,000	)
Net cash outflow from sale of Overseas Partners Cat Ltd.		—			(38,632	)
Net proceeds from sales of real estate assets		—			372,567
Additions to real estate and leasing assets		—			(11,517	)
Net cash flow generated by investing activities		227,804			316,689
CASH FLOW FROM FINANCING ACTIVITIES:
Purchases of treasury stock		~~(316~~—	)		(~~2,622~~282	)
Repayment and repurchase of debt		~~(1,724~~—	)		(~~251~~1,~~920~~138	)
Liquidating distribution		(~~237~~296,~~711~~924	)		—(237,711	)
Distributions to minority interest		—			(2,215	)
Net cash flow expended by financing activities of continuing operations		(296,924	)		(239,131	)
Net cash flow expended by financing activities		(239,751	)		(256,757	)
CASH FLOW FROM DISCONTINUED OPERATIONS
Net decrease in cash and cash equivalents		(312,520	)		(81,685	)
Distribution from subsidiary held for sale		6,971			—
Net decrease in cash and cash equivalents		(125,436	)		(96,865	)
Cash and cash equivalents:
Beginning of period		~~492~~264,~~158~~764			~~485~~385,~~902~~350
End of period	$	~~179~~139,~~638~~328		$	~~404~~288,~~217~~485
Supplemental disclosures of cash flow information:
Cash paid during the period:
U.S. income taxes	$	~~3,479~~—		$	372,~~715~~315
Interest	$	~~5,144~~—		$	244,~~528~~675
Assignment of debt in partial consideration for sale of office building	$	—		$	281,301

See condensed notes to unaudited consolidated financial statements.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2003~~ 2004

(Unaudited)

1. GENERAL

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Overseas Partners Ltd. and its subsidiaries (collectively OPL or the Company). OPL iswas engaged in the property, casualty and finite risk reinsurance business and in the real estate and leasing business. On February 13, 2002 the Board of Directors of OPL announced its decision to restructure OPL and cause its operations to begin an orderly runoff. OPL and its reinsurance subsidiaries have discontinued writing new business. OPL has ~~continued~~disposed ~~to dispose~~ of all its real estate assets such that asthe ofCompany ~~September~~is ~~30,~~no ~~2003~~longer ~~OPL~~engaged ~~has~~in ~~only~~the ~~one~~real estate ~~remaining~~and ~~leased~~leasing ~~asset~~business.

The decision to put the reinsurance operations into runoff has significantly changed the ongoing results of OPL’s operations and the associated cash flows and will continue to do so. There has been no new business written;, therefore the cash received from premiums has significantly decreased. The ~~Company~~commutation ~~has~~and ~~become~~novation ~~cash~~of ~~flow negative~~reinsurance inprograms ~~its~~has ~~reinsurance~~significantly ~~operations~~accelerated loss payments and ~~expects~~will ~~this~~continue to ~~continue~~result in negative cash flows in the future. Nevertheless, OPL management believes that the Company’s current cash holdings and future sales and maturities of investments are adequate sources of liquidity for the future payment of claims and operating expenses.

The results of operations for the three and ~~nine~~six-month periods ended ~~September~~June 30, ~~2003~~2004 and ~~2002~~2003 are not necessarily indicative of the results to be expected for the full year.

2. SIGNIFICANT ACCOUNTING POLICIES

The interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by generally accepted accounting principles for complete financial statements are not included herein. The interim financial statements should be read in conjunction with the Overseas Partners Ltd. Annual Report on Form 10-K for the fiscal year ended December 31, ~~2002~~2003.

Interim financial statements are subject to possible adjustments in connection with the annual audit of the Company’s financial statements for the full year; in the Company’s opinion, all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature.

Except as described above, the financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All activity is recorded in U.S. dollars. Inter-company balances and transactions have been eliminated in consolidation.

~~Investments~~In ~~classified~~December as2003, ~~available-for-sale~~the ~~are~~Financial ~~reviewed periodically~~Accounting toStandards ~~determine~~Board if(“FASB”) ~~they~~revised ~~have~~Interpretation ~~sustained~~46, an“Consolidation ~~impairment~~of inVariable ~~value~~Interest ~~that~~Entities” (“FIN is46R”). ~~considered~~FIN to46R berequires ~~other~~the ~~than~~primary ~~temporary.~~beneficiary ~~The~~of ~~identification~~a ofvariable ~~potentially~~interest ~~impaired~~entity ~~investments~~(“VIE”) ~~and~~to include the ~~assessment~~assets, liabilities and results of ~~whether~~the ~~any~~activities ~~decline~~of the VIE in ~~value~~its isconsolidated ~~other~~financial ~~than~~statements, ~~temporary~~as well as ~~involves~~disclosure ~~significant~~of ~~management~~information ~~judgment.~~about Ifthe ~~investments~~assets ~~are~~and ~~determined~~liabilities, toand bethe ~~impaired~~nature, ~~the~~purpose ~~cost~~and ~~basis~~activities of consolidated VIEs. In addition, FIN 46R requires disclosure of information about the ~~investment~~nature, ispurpose ~~written~~and ~~down~~activities toon ~~fair~~unconsolidated ~~value~~VIEs atin which the ~~balance~~Company ~~sheet~~holds ~~date~~a ~~and~~significant variable interest. For the purposes of FIN 46R OPL is a ~~corresponding~~nonpublic ~~realized~~entity ~~loss~~and therefore FIN 46R is ~~charged~~effective toimmediately ~~the~~for ~~income~~any ~~statement~~interests in VIEs acquired after December 31, 2003 and effective January 1, 2005 for all ~~the~~VIEs ~~period~~acquired inbefore ~~which~~December it31, 2003. The Company is ~~determined~~still evaluating the impact of FIN 46R on its financial statements related to VIEs acquired prior to December 31, 2003.

In ~~January~~March ~~2003~~2004, the ~~Financial Accounting~~Emerging ~~Standards~~Issues ~~Board~~Task Force (“~~FASB~~EITF”) ~~issued~~reached ~~Interpretation~~consensus ~~46,~~on the guidance provided in EITF Issue No. 03-1, “~~Consolidation~~The Meaning of ~~Variable~~Other-Than-Temporary ~~Interest~~Impairment ~~Entities~~and its Application to Certain Investments” (“~~FIN~~EITF 4603-1”). ~~FIN~~as 46applicable ~~requires~~to debt and equity securities that are within the ~~primary~~scope ~~beneficiary~~of Statement of aFinancial ~~variable~~Accounting ~~interest~~Standards ~~entity~~No. 115 (“~~VIE”)~~Accounting tofor ~~include the~~Certain ~~assets,~~Investments ~~liabilities~~in Debt and ~~results~~Equity ofSecurities”. An investment is impaired if the ~~activities~~fair value of the ~~VIE~~investment inis less than its ~~consolidated~~cost ~~financial~~including ~~statements,~~adjustments asfor ~~well~~amortization asand ~~disclosure~~accretion. ofEITF ~~information~~03-1 ~~about~~outlines ~~the~~that ~~assets~~an impairment ~~and~~would ~~liabilities,~~be ~~and~~considered other-than-temporary unless a) the ~~nature,~~investor ~~purpose~~has the ability and ~~activities~~intent ofto ~~consolidated~~hold ~~VIEs.~~an ~~In addition,~~investment ~~FIN~~for 46a ~~requires~~reasonable ~~disclosure~~period of ~~information~~time ~~about~~sufficient for the ~~nature,~~recovery ~~purpose~~of ~~and~~the ~~activities~~fair onvalue ~~unconsolidated~~up ~~VIEs~~to in(or ~~which~~beyond) the ~~Company~~cost ~~holds~~of athe ~~significant~~investment and ~~variable~~b) ~~interest.~~evidence ~~For~~indicating that the ~~purposes~~cost of ~~FIN~~the 46investment ~~OPL~~ is recoverable within a ~~nonpublic~~reasonable ~~entity~~period of time outweighs evidence to the contrary. The investor should consider its cash or working capital needs to assess its intent and ~~therefore~~ability ~~FIN~~to 46hold isan ~~effective~~investment ~~immediately~~for a reasonable period of time for ~~any~~the ~~interests~~recovery inof ~~VIEs~~fair ~~acquired~~value ~~after~~up ~~January~~to 31or beyond the cost of the investment. Although not presumptive, ~~2003~~a ~~and~~pattern ~~effective~~of atselling investments prior to the ~~end~~forecasted recovery of ~~2004~~fair ~~for~~value ~~all~~may ~~VIEs~~call ~~acquired~~into ~~before~~question the ~~February~~investor’s 1intent. In addition, ~~2003~~the severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary. ~~The~~This ~~Company~~new ~~did~~guidance ~~not~~for ~~acquire~~determining ~~any~~whether ~~VIEs~~impairment ~~subsequent~~is other-than-temporary tois ~~January~~effective 31for reporting periods beginning after June 15, ~~2003~~2004. ~~and~~The Company is ~~still~~ currently evaluating the impact of ~~FIN~~the 46new accounting guidance on its ~~financial~~process ~~statements~~for ~~related~~determining towhether ~~VIEs~~other-than-temporary ~~acquired~~declines ~~prior~~exist within its debt portfolio. Adoption of this standard may accelerate the timing of losses from declines in value due to ~~February~~interest 1rates; however, ~~2003~~it is not anticipated to have a significant impact on equity as fluctuations in market value of available-for-sale securities are already reflected in Accumulated Other Comprehensive Income.

During the second quarter of 2003, the Company elected to adopt the fair value based employee stock-based compensation expense recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”) prospectively. The Company previously applied the intrinsic value based expense recognition provisions set forth in APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123 states that the adoption of the fair value based method is a change to a preferable method of accounting. The adoption of the fair value based method had no effect on net income for the three and nine-month periods ended September 30, 2003 as no stock-based compensation awards were made in 2003. The adoption of SFAS 123 in the current year is applied only to awards granted subsequent to January 1, 2003. As a result of OPL’s decision to runoff its operations, it is unlikely that any further stock-based compensation awards will be made.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2003~~2004

(Unaudited)

3. TAXES

OPL and certain of its subsidiaries are incorporated under the laws of the Islands of Bermuda. OPL believes that neither it nor its Bermuda subsidiaries carry on business through a permanent establishment in the United States. Therefore, it does not expect itself or its Bermuda subsidiaries to be subject to United States income taxes. Under current Bermuda law, OPL and its Bermuda subsidiaries are not obligated to pay any tax in Bermuda based upon income or capital gains.

AsCertain ~~previously~~of ~~reported, the United States Internal Revenue Service (“IRS”) challenged~~ OPL’s ~~position~~subsidiaries ~~regarding~~are ~~United~~incorporated ~~States federal income taxes and asserted that OPL was liable to pay such taxes for various years. The IRS based its challenges on the assertion that OPL was engaged~~ in ~~a U.S. business with respect to two lines of business: (1)~~ the ~~reinsurance of certain shipper’s risk coverage for~~ United ~~Parcel~~States, ~~Service~~including ofOverseas ~~America,~~Partners ~~Inc.~~US ~~(“UPS”)~~Reinsurance ~~customers~~Company ~~and~~ (2)OPUS ~~the reinsurance of certain workers’ compensation coverage for UPS~~Re). ~~Those~~These ~~issues~~subsidiaries ~~were~~are ~~before~~subject ~~the~~to United States ~~Tax~~income ~~Court for the 1988 through 1990 tax years, before the IRS Appellate Division for the 1991 through 1994 tax years~~ and ~~under~~other ~~IRS examination for years after 1994~~taxes.

~~In the first quarter of 2003, OPL and the IRS reached a settlement with respect to the shipper’s risk program for all years from 1988 through 1999 (when that program was terminated)~~4. ~~More~~SALE ~~specifically,~~OF ~~OPL~~OVERSEAS ~~and~~PARTNERS ~~the~~US ~~IRS~~REINSURANCE ~~agreed~~COMPANY that there is no adjustment to OPL’s income deriving from or relating to premiums earned in connection with the shipper’s risk program. Separately, in the third quarter of 2003, there was a favorable resolution of the workers’ compensation reinsurance issue for all years from 1988 through 1999, as reflected in a stipulated decision filed in the United States Tax Court and IRS action to close out the appeals and examination cases, all without adjustment.

~~Certain~~In ofMay ~~OPL’s~~2004, ~~subsidiaries~~the ~~are~~Company ~~incorporated~~committed into ~~the~~offer ~~United~~for ~~States~~sale its wholly owned subsidiary, ~~including~~OPUS ~~Overseas~~Re and ~~Partners~~commenced ~~Capital~~a ~~Corp~~process to find a buyer. ~~(OPCC)~~In ~~and~~accordance ~~Overseas~~with ~~Partners~~Statement USof ~~Reinsurance~~Financial ~~Company~~ Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (~~OPUS~~“SFAS Re144”)., ~~These~~as ~~subsidiaries~~of ~~are~~June ~~subject~~30, to2004 ~~United~~OPUS ~~States~~Re ~~income~~was classified ~~and~~as ~~other~~held ~~taxes~~for sale.

In July 2004 OPL and Odyssey Re Holdings Corp. (“OdysseyRe”) entered into a definitive stock purchase agreement, pursuant to which OdysseyRe will purchase 100% of the outstanding shares of OPUS Re. The completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals. OPL expects the closing of the transaction will occur during the fourth quarter of 2004. The purchase price of approximately $43 million generates a loss on sale of approximately $23.8 million.

In accordance with SFAS 144 all assets pertaining to OPUS Re have been recorded as a single line item “Assets relating to subsidiary held for sale” and similarly all liabilities have been recorded as a single line item “Liabilities relating to subsidiary held for sale”. The net operating results of OPUS Re have been recorded as discontinued operations in the statement of income. The financial statements for prior periods presented have been restated on a consistent basis.

Summary financial information about the Company’s discontinued operations is presented in the following tables:


	Three months ended June 30,						Six months ended June 30,
(In thousands)	2004			2003			2004			2003
REVENUES
Premiums earned	$	4,012		$	19,657		$	12,066		$	39,771
Investment income		641			815			1,463			2,708

	$	4,653		$	20,472		$	13,529		$	42,479

NET LOSS
Income (loss) from subsidiary held for sale	$	317		$	(10,309	)	$	927		$	(11,232	)
Loss on sale of subsidiary		(23,830	)		—			(23,830	)		—
Income taxes relating to subsidiary held for sale		(1,001	)		357			(1,169	)		897

Net loss from subsidiary held for sale	$	(24,514	)	$	(9,952	)	$	(24,072	)	$	(10,335	)

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2003~~2004

(Unaudited)

4. ~~BUSINESS~~SALE ~~SEGMENTS~~OF OVERSEAS PARTNERS US REINSURANCE COMPANY (continued)

The ~~Company’s~~major ~~operations~~classes are presently conducted through two segments—reinsurance and real estate and leasing. The reinsurance segment is managed from the Bermuda and Philadelphia offices (through United States subsidiaries) and includes the runoff of ~~accident~~assets ~~& health, agricultural, aviation, casualty, professional liability, property, workers’ compensation~~ and ~~finite~~liabilities ~~risk~~relating ~~business.~~to ~~Real estate~~OPUS ~~and~~Re ~~leasing activities are owned and managed through United States subsidiaries of OPCC, a wholly-owned subsidiary of OPL. There~~ were ~~no inter-segment revenues earned for the three-month periods ended September 30, 2003 and 2002. Inter-segment expenses, such~~ as ~~corporate~~follows: ~~overhead, were allocated based on estimated utilization for the three and nine-month periods ended September 30, 2003 and 2002.~~

The accounting policies of the segments are the same as those described in the summary of significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002. Income before income taxes by segment consists of revenues less expenses related to the respective segment’s operations. The reinsurance segment maintains a portfolio of cash and liquid investments to support its reserves for accrued losses and loss expenses and unearned premiums as well as its capital requirements. At September 30, 2003 the portfolio included $798.1 million (at December 31, 2002, $875.5 million) of cash and investments that are restricted and are used to collateralize obligations to our cedants. Investments relating to real estate and leasing of $114.4 million are restricted and used to collateralize long-term debt originally issued in connection with the purchase of assets held for leasing. Summary financial information about the Company’s segments is presented in the following tables:


(In thousands)	June 30, 2004		December 31, 2003
ASSETS
Cash and investments	$	205,033	$	218,884
Reinsurance balances receivable		7,293		13,730
Funds withheld		9,873		10,010
Other assets		8,261		12,917

Assets relating to subsidiary held for sale		230,460		255,541

LIABILITIES
Accrued losses and loss expenses		152,664		164,993
Unearned premiums		1,776		12,963
Reinsurance balances payable		9,162		1,718
Accounts payable and other accruals		986		2,481
Provision for loss on sale of subsidiary		23,830		—

Liabilities relating to subsidiary held for sale		188,418		182,155

Net assets relating to subsidiary held for sale	$	42,042	$	73,386

	Three months endedSeptember 30,						Nine months endedSeptember 30,
(In thousands)	2003			2002			2003			2002
REVENUES
Reinsurance:
Premiums earned	$	33,125		$	67,680		$	101,394		$	393,739
Commission and fee income		(410	)		2,685			(165	)		6,245
Investment income (loss)		13,494			(170,923	)		80,385			(171,866	)
		46,209			(100,558	)		181,614			228,118
Real estate and leasing:
Rentals		821			4,590			2,476			83,003
Gain on sale of assets		—			34,211			—			140,203
Investment income		1,608			1,914			4,747			46,672
		2,429			40,715			7,223			269,878
Consolidated		48,638			(59,843	)		188,837			497,996
NET (LOSS) INCOME BEFORE TAXES
Reinsurance		(6,447	)		(226,899	)		40,252			(258,647	)
Real estate and leasing		(77	)		34,409			(439	)		102,682
Other operating expenses		(12,312	)		(4,052	)		(25,961	)		(23,567	)
Consolidated	$	(18,836	)	$	(196,542	)	$	13,852		$	(179,532	)

(In thousands)	September 30,2003		December 31,2002
ASSETS
Reinsurance
Cash and investments	$	1,855,685	$	2,312,821
Other		401,335		839,865
		2,257,020		3,152,686
Real estate and leasing
Cash and investments		120,645		143,145
Other		47,751		43,535
		168,396		186,680
Consolidated	$	2,425,416	$	3,339,366

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2003~~2004

(Unaudited)

45. BUSINESS SEGMENTS ~~(continued)~~

~~Substantially~~In ~~all~~the ofpast, the Company’s ~~long~~operations have been conducted through two segments -~~lived~~ reinsurance ~~assets,~~and ~~interest~~real ~~expense~~estate and ~~income~~leasing. ~~tax~~The ~~expense~~reinsurance ~~relate~~segment tois ~~the Company’s~~managed ~~real~~from ~~estate~~the Bermuda and ~~leasing~~Philadelphia ~~operations.~~offices ~~During~~and includes the ~~nine~~runoff ~~months~~of ~~ended~~accident ~~September~~& 30health, ~~2003~~agricultural, ~~the~~aviation, ~~Company~~casualty, ~~recorded~~professional anliability, ~~asset~~property, ~~impairment~~workers’ compensation ~~provision~~and offinite $5risk business.8 ~~million~~Real ~~against~~estate ~~the~~and ~~capitalized~~leasing ~~cost~~activities were owned and managed through United States subsidiaries of ~~insurance~~Overseas ~~licenses~~Partners Capital Corp. (OPCC), a wholly-owned bysubsidiary ~~OPUS~~of ReOPL. ~~following~~During anthe fourth quarter of 2003 we ~~interim~~sold ~~review~~our infinal ~~accordance~~remaining ~~with~~leased ~~Statement~~asset ofand ~~Financial~~the ~~Accounting~~Company ~~Standards~~is ~~No.~~therefore ~~142.~~no ~~Goodwill~~longer ofengaged $3in the real estate and leasing business.3 ~~million~~On ~~relating~~December 31, 2003 OPCC was dissolved and all remaining assets and liabilities distributed to OPL. There were no inter-segment revenues earned for the ~~Company’s~~six-month ~~22%~~period ~~ownership~~ended ofJune a30, ~~Florida~~2003. ~~based~~Corporate ~~workers’~~expenses ~~compensation~~were ~~insurance~~allocated ~~company~~to issegments based on estimated utilization for the ~~only~~six-month ~~remaining intangible~~periods ~~asset~~ended June 30, 2004 and 2003.

~~For~~The accounting policies of the ~~three-~~segments ~~and~~are ~~nine-month~~the ~~periods~~same ~~ended~~as ~~September~~those ~~30,~~described in the summary of ~~2003~~significant ~~and~~accounting ~~2002~~policies ~~reinsurance~~disclosed ~~revenues~~in ~~were~~the ~~derived~~Company’s ~~primarily~~Annual ~~from~~Report ~~sources~~on ~~located~~Form in10-K for the ~~United~~fiscal ~~States~~year ended December 31, 2003. ~~All~~Income ofbefore ~~the~~income ~~Company’s~~taxes ~~leasing~~by ~~and~~segment ~~real~~consists ~~estate~~of revenues ~~are~~less ~~generated~~expenses inrelated to the ~~United~~respective ~~States~~segment’s operations. ~~For~~The ~~the~~reinsurance ~~three-~~segment maintains a portfolio of cash and ~~nine-month~~liquid ~~periods~~investments ~~ended~~to ~~September 30,~~support ~~2003~~its ~~and~~reserves ~~2002,~~for ~~all~~accrued oflosses ~~the~~and ~~Company’s~~loss ~~long-lived~~expenses ~~assets~~and ~~were~~unearned ~~located~~premiums inas ~~the~~well ~~United~~as ~~States~~its capital requirements.

5Following the decision to classify OPUS Re as held for sale, the results of OPUS Re are no longer included in the results of the reinsurance segment. ~~STATUTORY~~The ~~FINANCIAL~~summary ~~INFORMATION~~financial information for prior periods has been restated on a consistent basis.

Summary financial information about the Company’s segments is presented in the following tables:


	Three months ended June 30,						Six months ended June 30,
(In thousands)	2004			2003			2004			2003
REVENUES
Reinsurance:
Premiums earned	$	(2,811	)	$	4,401		$	3,879		$	13,859
Commission and fee income		—			7			(2	)		245
Investment income		889			56,254			16,371			64,183

		(1,922	)		60,662			20,248			78,287

Real estate and leasing:
Rentals		—			825			—			1,655
Investment income		—			1,479			—			3,140

		—			2,304			—			4,795

Consolidated	$	(1,922	)	$	62,966		$	20,248		$	83,082

NET INCOME FROM CONTINUING OPERATIONS BEFORE TAXES
Reinsurance	$	34,003		$	48,288		$	56,108		$	49,611
Real estate and leasing		—			(375	)		—			(362	)

Other operating expenses		(2,348	)		(2,318	)		(5,588	)		(5,329	)

Consolidated	$	31,655		$	45,595		$	50,520		$	43,920


(In thousands)	June 30, 2004		December 31, 2003
ASSETS
Reinsurance
Cash and investments	$	1,035,935	$	1,525,914
Other		108,432		406,672
Assets relating to subsidiary held for sale		230,460		255,541

Consolidated	$	1,374,827	$	2,188,127

For the three- and six-month periods ended June 30, 2004 and 2003 premiums earned were derived primarily from sources located in the United States. Before the Company disposed of its principal leasing and real estate assets, all of the Company’s revenues in that segment were generated in the United States.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2004

(Unaudited)

6. STATUTORY FINANCIAL INFORMATION

OPL’s ability to repurchase shares, pay dividends, or make other distributions to shareowners is subject to certain regulatory restrictions including the following:

1. In Bermuda, the Bermuda Insurance Act of 1978, amendments thereto and related Regulations (the “Act”) requires each of OPL and its Bermuda based reinsurance subsidiaries to maintain a minimum solvency margin determined as the greater of 15% of accrued losses and loss expenses (net of reinsurance recoverables) or a given fraction of net premiums written. OPL, Overseas Partners Re Ltd. (OPRe) and Overseas Partners Assurance Ltd. (OPAL) were all in compliance with these requirements for the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 and ~~2002~~the year ended December 31, 2003.

2. The Act also requires each of OPL and its Bermuda based reinsurance subsidiaries to maintain a minimum liquidity ratio whereby the value of their relevant assets (consisting mainly of cash, investments, receivables and other liquid assets) is not less than 75% of the amount of their relevant liabilities (consisting mainly of accrued losses and loss expenses, unearned premiums, reinsurance balances payable and other accounts payable). Investments in and advances to subsidiaries are not included in the definition of relevant assets for purposes of this test. OPL, OPRe and OPAL met these requirements for the ~~nine~~six months ended ~~September~~June 30, 2004 and the year ended December 31, 2003.

3. Dividend payments by OPL’s United States based reinsurance subsidiary OPUS Re are limited by statutory regulations. The dividend restrictions are generally based on net investment income, statutory net income and on certain levels of policyholders’ surplus as determined under statutory accounting practices. The maximum amount of dividends out of unassigned surplus that may be paid by OPUS Re without prior approval of the Delaware Insurance Commissioner is limited to the greater of (i) 10% of OPUS Re’s surplus as regards policyholders as shown in the preceding year’s annual statement or (ii) net income, excluding realized capital gains, as shown in the preceding year’s annual statement. As such, the maximum allowable dividend payable by OPUS Re in ~~2003~~2004 iswould be $nil unless regulatory authority approval is obtained. On May 14, 2004 OPUS Re received approval from the Delaware Insurance Commissioner to permit the payment of a distribution of $7.0 million. This distribution was paid on June 11, 2004.

4. OPUS Re is also subject to certain Risk-Based Capital (“RBC”) requirements as specified by the National Association of Insurance Commissioners. Under those requirements, the amount of capital and surplus maintained by an insurance company is to be determined based on the various risk factors related to it. If a company’s RBC is below a specified level, the company may be required to implement various corrective ~~action~~actions, and if RBC is less than other, lower levels, the ~~Company~~company is subject to regulatory action, including voluntary or mandatory control by the insurance ~~regulator~~regulators of its state of domicile. At ~~September~~June 30, ~~2003~~2004 and December 31, ~~2002~~2003, OPUS Re’s RBC requirements exceeded the level at which any corrective action would be required.

As a holding company, a significant proportion of OPL’s assets relate to its investments in subsidiaries. As such, OPL’s ability to make future distributions is heavily dependent upon it receiving distributions from its subsidiaries. The Act prohibits OPL, OPRe and OPAL from distributing more than 15% of the prior year’s statutory capital unless specific approval is obtained from the Bermuda Monetary Authority. In addition to the requirements of the Act, the Bermuda Monetary Authority has requested that all distributions from OPL, OPRe and OPAL be pre-approved by the Bermuda Monetary Authority. In addition to the regulatory restrictions, each subsidiary needs to consider, inter alia, the potential for future adverse development in the settlement of reinsurance liabilities, the risk of investment losses, ongoing operating expenses, and the availability of unrestricted liquid assets prior to making such distributions. On November 25, 2003 OPL received approval from the Bermuda Monetary Authority to permit the payment of a distribution to shareowners of $2.50 per share. This $296.9 million distribution was paid to shareowners on January 5, 2004. On August 4, 2004, following approval from the Bermuda Monetary Authority, the Board of Directors of OPL declared a distribution to shareowners of $2 per share or $237.5 million and this amount will be paid to shareowners on August 31, 2004.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2003~~2004

(Unaudited)

57. ~~STATUTORY~~CONTINGENCIES ~~FINANCIAL INFORMATION (continued)~~

5.On AsNovember ~~a holding company~~19, a1999 ~~significant~~and ~~proportion~~January of27, 2000 OPL’s ~~assets~~was ~~relate~~named toas ~~its~~a ~~investments~~defendant in ~~subsidiaries.~~two Asclass ~~such~~action lawsuits, ~~OPL’s~~filed ~~ability~~on tobehalf ~~make~~of ~~future~~customers ~~distributions~~of isUPS, ~~heavily~~in Montgomery ~~dependent~~County, ~~upon~~Ohio itCourt ~~receiving~~and ~~distributions~~Butler ~~from~~County, ~~its~~Ohio ~~subsidiaries~~Court, respectively. The ~~Act~~lawsuits ~~prohibits~~allege, ~~OPL~~among other things, ~~OPRe~~that ~~and~~UPS ~~OPAL~~told ~~from~~its ~~distributing~~customers ~~more~~that ~~than~~they ~~15%~~were purchasing insurance for coverage of ~~the~~loss ~~prior~~or ~~year’s~~damage ~~statutory~~to ~~capital~~goods ~~unless~~shipped ~~specific~~by ~~approval~~UPS. isThe ~~obtained~~lawsuits further ~~from~~allege that UPS wrongfully enriched itself with the ~~Bermuda~~monies ~~Monetary~~paid ~~Authority.~~by Inits ~~addition~~customers to ~~the~~purchase ~~requirements~~such ofinsurance. ~~the~~The ~~Act~~November 19, 1999 and January 27, 2000 actions were removed to federal court and thereafter transferred to the ~~Bermuda~~United ~~Monetary~~States District ~~Authority~~Court ~~has~~for ~~requested~~the ~~that~~Southern ~~all~~District ~~distributions~~of ~~from~~New ~~OPL,~~York ~~OPRe~~(the “Court”) and ~~OPAL~~consolidated bein ~~pre~~a multi-~~approved~~district bylitigation ~~the~~for ~~Bermuda~~pretrial ~~Monetary~~discovery ~~Authority~~purposes with other actions asserting claims against UPS. InPlaintiffs ~~addition~~subsequently amended those claims against all defendants to ~~the~~join ~~regulatory~~a ~~restrictions,~~Racketeer ~~each~~Influenced ~~subsidiary~~and ~~needs~~Corrupt toOrganizations ~~consider,~~(“RICO”) ~~inter~~claim ~~alia~~as well. On August 7, 2000, the ~~potential~~Company ~~for~~and ~~future~~its ~~adverse~~wholly ~~development~~owned subsidiary, OPCC, were added as defendants in a third class action lawsuit, also consolidated in the ~~settlement~~multi-district litigation, which alleges violations of ~~reinsurance~~United ~~liabilities~~States ~~prior~~antitrust tolaws, ~~making~~and ~~such~~state ~~distributions~~unfair trade practice and consumer protection laws. OnThe ~~March~~allegations ~~26,~~in ~~2003~~the ~~OPL~~lawsuits ~~received~~are ~~approval~~drawn from an opinion by the ~~Bermuda~~United States ~~Monetary~~Tax ~~Authority~~Court tothat ~~permit~~found that the ~~payment~~insurance ofprogram, aas ~~distribution~~offered tothrough ~~shareowners~~UPS, ofby $2domestic ~~per~~insurance ~~share.~~companies, ~~This~~and ~~$237~~ultimately reinsured by OPL, should not be recognized for federal income tax purposes.7 ~~million~~In ~~distribution~~June 2001, the Tax Court opinion was reversed ~~paid~~by tothe ~~shareowners~~United onStates ~~April~~Court 9,of ~~2003~~Appeals for the Eleventh Circuit.

6. CONTINGENCIES

On November 19, 1999 and January 27, 2000 OPL was named as a defendant in two class action lawsuits, filed on behalf of customers of UPS, in Montgomery County, Ohio Court and Butler County, Ohio Court, respectively. The lawsuits allege, among other things, that UPS told its customers that they were purchasing insurance for coverage of loss or damage to goods shipped by UPS. The lawsuits further allege that UPS wrongfully enriched itself with the monies paid by its customers to purchase such insurance. The November 19, 1999 and January 27, 2000 actions were removed to federal court and thereafter transferred to the United States District Court for the Southern District of New York (the “Court”) and consolidated in a multi-district litigation for pretrial discovery purposes with other actions asserting claims against UPS. Plaintiffs subsequently amended those claims against all defendants to join a Racketeer Influenced and Corrupt Organizations (“RICO”) claim as well. On August 7, 2000, the Company and its wholly owned subsidiary, OPCC, were added as defendants in a third class action lawsuit, also consolidated in the multi-district litigation, which alleges violations of United States antitrust laws and state unfair trade practice and consumer protection laws. The allegations in the lawsuits are drawn from an opinion by the United States Tax Court that found that the insurance program, as offered through UPS by domestic insurance companies, and ultimately reinsured by OPL, should not be recognized for federal income tax purposes. In June 2001, the Tax Court opinion was reversed by the United States Court of Appeals for the Eleventh Circuit.

The Company filed or joined in motions to dismiss all of the consolidated actions on a number of grounds, including that the antitrust claim fails to state a claim upon which relief can be granted, and that the remaining claims are preempted by federal law. In orders dated July 30, 2002, the Court granted in part and denied in part the motions to dismiss. Pursuant to the Court’s orders, the claims remaining against the Company are RICO, antitrust, and common law interference with contract claims. On November 8, 2002, the parties presented to the Court a stipulation and proposed order certifying a nationwide class with respect to certain of the claims brought by the plaintiffs, including the RICO and interference with contract claims against the Company. The Court approved the stipulation and proposed order. The stipulation does not certify the antitrust claims brought against the Company. Discovery has commenced.

During October 2003 the parties reached a tentative settlement with respect to all claims brought by the various plaintiffs. The settlement agreement iswas inexecuted ~~the~~on ~~process~~December of31, ~~being documented~~2003 and ~~will~~on beJuly ~~subject~~30, to2004 the Court ~~approval~~approved the settlement. ~~Assuming~~The ~~that~~final judgment and order approving the ~~parties~~settlement ~~are~~and ~~able~~dismissing tothe ~~agree~~claims with prejudice was entered on ~~the~~August ~~documentation~~6, 2004. Unless an appeal of the final ~~settlement,~~judgment and ~~that~~order itof dismissal is ~~subsequently~~taken, ~~approved~~the bysettlement will be deemed effective on September 8, 2004 pursuant to the ~~Court~~parties’ agreement. Assuming that there are no successful appeals, the Company expects that it would incur additional costs of approximately $10 million in connection with the settlement, and this amount ~~has~~was ~~been~~ accrued in the financial statements ~~for~~during the ~~period~~year ended ~~September~~December 3031, 2003. However, there can be no assurance that ~~the~~there ~~agreement~~ will not be ~~finalized~~a orsuccessful ~~that~~appeal of the ~~Court~~final ~~will~~judgment ~~approve the~~and ~~agreement~~order.

The Company believes that it has meritorious defenses to all claims asserted against it and in the event ~~that~~of ~~the~~a ~~settlement~~successful isappeal ~~not~~of ~~finalized~~the ~~and~~final ~~approved~~judgment byand ~~the~~order ~~Court~~ the Company intends to defend all claims vigorously. There can be no assurance, however, that an adverse determination of the lawsuits ~~would~~ would not have a material effect on the Company.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Transacted in U.S. Dollars)

The following is a discussion and analysis of our results of operations, financial condition, liquidity, and capital resources as of and for the three and ~~nine-~~six months ended ~~September~~June 30, ~~2003~~2004 and ~~2002~~2003. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. Due to the runoff status of the Company, our results are likely to vary significantly from period to period. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements of the Company for the year ended December 31, ~~2002~~2003 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2002~~2003.

RESULTS OF OPERATIONS

~~Three~~Runoff ~~Months~~Activities ~~Ended~~for ~~September~~the ~~30,~~six ~~2003~~months ~~and~~ended ~~2002~~June 30, 2004

~~Reinsurance~~The results for the six months ended June 30, 2004 reflect a number of significant transactions that were effected in accordance with our runoff goals and objectives. In particular, the Company:

	Three months endedSeptember 30,
(In thousands)	2003			2002
Gross premiums written	$	(66,493	)	$	(175,304	)
Premiums ceded		(22	)		476
Net premiums written		(66,515	)		(174,828	)
Change in unearned premiums		99,640			242,508
Premiums earned		33,125			67,680
Commission and fee income		(410	)		2,685
		32,715			70,365
Losses and loss expenses		(45,888	)		(110,303	)
Commissions, taxes and underwriting expenses		(5,717	)		(15,358	)
		(51,605	)		(125,661	)
Underwriting loss		(18,890	)		(55,296	)
Investment income (loss), net of expenses		12,443			(171,603	)
Reinsurance loss	$	(6,447	)	$	(226,899	)

•

Commuted or otherwise settled a number of reinsurance contracts, contributing to a reduction in reinsurance liabilities of approximately $540 million and net savings compared to carried reserves of approximately $46 million. These included the commutation of a workers’ compensation contract that accounted for in excess of 20% of the Company’s accrued losses and loss expenses. The commutations reduce our exposure to future adverse claims experience while also releasing capital for distribution to shareowners;

•

Entered into a definitive stock purchase agreement to sell OPUS Re. The sale reduces gross loss reserves by approximately $153 million and also enables additional capital to be released for distribution to shareowners;

•

Entered into an agreement to sell the Company’s investments in private equity funds for an amount slightly in excess of book value. We expect this transaction to close during the third quarter of 2004 and we will record the gain on sale at that time. In addition to the small gain, the sale eliminates the Company’s future funding commitments to the private equity funds of approximately $37 million;

•

Sold its 22% investment in a Florida based workers’ compensation insurance company for $5 million, equal to the carrying value of the investment.

Three Months Ended June 30, 2004 and 2003

Summary of results:


	Three months ended June 30,
(In thousands except for per share amounts)	2004			2003
NET INCOME BEFORE TAXES
Reinsurance segment	$	34,003		$	48,288
Real estate and leasing segment		—			(375	)
Other operating expenses		(2,348	)		(2,318	)

Net income before taxes from continuing operations		31,655			45,595
Income taxes		107			350

Net income from continuing operations		31,762			45,945

Net loss from subsidiary held for sale		(24,514	)		(9,952	)

Net income	$	7,248		$	35,993

Basic and diluted net income per share	$	0.06		$	0.30

The reinsurance segment generated $34.0 million of net income for the three months ended June 30, 2004 primarily due to net savings of approximately $36 million generated through commutations, which was partially offset by the internal costs of runoff. For the three months ended June 30, 2003 the reinsurance segment generated $48.3 million of net income, primarily due to gains on the sales of our S&P 500 equity portfolio and positive returns from our investment in a multi-manager fund.

During the fourth quarter of 2003 we sold our final remaining leased asset and the Company is therefore no longer engaged in the real estate and leasing business.

Other operating expenses of $2.3 million for both the three months ended June 30, 2004 and June 30, 2003 consist of corporate expenses not allocated to operating segments including payroll, insurance, shareowner costs and rent.

During the three months ended June 30, 2004 OPL has classified the operations of OPUS Re as held for sale. On July 2, 2004, OPL and OdysseyRe entered into a definitive stock purchase agreement, pursuant to which OdysseyRe will purchase OPUS Re from OPL. The completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals. The sale is expected to generate a loss of approximately $23.8 million and this loss has been recognized in the three months ended June 30, 2004. OPL expects the closing of the transaction will occur during the fourth quarter of 2004. Until the closing of the transaction OPL remains exposed to loss through potential increases in OPUS Re’s reserves for accrued losses and loss expenses.

For the three months ended June 30, 2004 OPUS Re generated a net loss of $24.5 million including operating income of $0.3 million, the loss on sale of $23.8 million and a tax charge of $1.0 million primarily due to a valuation allowance against deferred tax assets. For the three months ended June 30, 2003 OPUS Re generated a net loss of $10.0 million primarily due to an asset impairment charge of $5.8 million to write-down the capitalized cost of insurance licenses and future lease costs of $2.5 million relating to OPUS Re’s Philadelphia office space.

Basic and diluted net income per share was $0.06 for the three months ended June 30, 2004 consisting of $0.27 per share of income from continuing operations offset by a loss of $0.21 per share from the discontinued operations of OPUS Re. For the same period in 2003 basic and diluted net income per share was $0.30 consisting of $0.38 per share of income from continuing operations offset by a loss of $0.08 per share from discontinued operations.

A more detailed discussion of our operating results for the reinsurance segment for the three-month periods ended June 30, 2004 and 2003 is set out below.

Reinsurance Segment:


	Three months ended June 30,
(In thousands)	2004			2003
Gross premiums written	$	(116	)	$	229
Premiums ceded		(4,200	)		(94	)

Net premiums written		(4,316	)		135
Change in unearned premiums		1,505			4,266

Premiums earned		(2,811	)		4,401
Commission and fee income		—			7

		(2,811	)		4,408

Losses and loss expenses		38,296			(8,636	)
Commissions, taxes and other expenses		(1,933	)		(1,165	)

		36,363			(9,801	)

Underwriting income (loss)		33,552			(5,393	)

Investment income, net of expenses		451			53,681

Reinsurance income	$	34,003		$	48,288

Due to the pending sale of OPUS Re, and in accordance with SFAS 144, the reinsurance segment results have been restated to exclude the results of OPUS Re’s operations. Our results for comparative periods have also been restated to reflect the same presentation.

Underwriting

OnAs ~~February~~a ~~13,~~result ~~2002~~of the ~~Board of Directors of OPL announced its decision to restructure OPL and cause its Bermuda based~~ reinsurance operations ~~to begin an orderly runoff. During the second quarter~~ of ~~2002 we made~~ the ~~decision~~Company tobeing ~~place~~in ~~our United States subsidiary~~runoff, ~~OPUS~~premiums ~~Re,~~written ~~into runoff~~ and toearned ~~cease~~are ~~writing~~minimal ~~any~~and ~~further~~will ~~reinsurance business~~remain insignificant in ~~that~~future ~~subsidiary~~periods. ~~These~~Premiums ~~decisions~~ceded ~~mean~~of ~~that~~$4.2 ~~OPL~~million ~~will~~for ~~not~~the ~~write~~three ~~any~~months ~~new~~ended ~~reinsurance~~June ~~business.~~30, ~~Premiums~~2004 ~~will~~are ~~continue~~primarily due to beadditional ~~earned~~premiums onrelating ~~business written prior~~ to the ~~runoff~~Company’s ~~decisions~~aviation ~~including~~excess ~~some~~of ~~treaties~~loss ~~written~~reinsurance ~~on a multi-year basis~~program.

~~Prior~~For to the ~~runoff~~three ~~decision~~months ended June 30, 2004, the Company ~~focused~~generated onnet aunderwriting ~~small~~income ~~number~~of $33.6 million, which is primarily due to net savings of ~~specialized~~approximately ~~products including~~$36 ~~finite~~million ~~risk~~from commutations, ~~accident~~partially &offset ~~health~~by ~~and~~loss ~~property~~adjustment ~~catastrophe~~expenses inof ~~Bermuda~~$1.9 million, consisting largely of letter of credit fees and ~~working~~internal ~~layer~~costs ~~casualty~~of inrunoff. The commutations included a workers’ compensation contract, with recorded loss reserves of approximately $198 million, where reinsurance had been provided to a reinsurer that had commenced arbitration to rescind its own reinsurance contract with the ~~United~~primary ~~States~~carrier. ~~through~~The ~~OPUS~~commutation Reallowed the Company to generate savings compared to booked reserves and eliminated the risk of further losses that may have arisen from an unfavorable arbitration decision in the underlying contract.

~~Following~~The ~~the~~Company ~~decision~~is toengaged ~~place~~in ~~the~~several ~~Company~~ongoing ~~into~~disputes ~~runoff,~~with weceding ~~have~~companies, ~~completed~~including ~~the~~arbitration ~~early~~and ~~commutation~~litigation ~~(i.e.~~that ~~negotiated~~have arisen ~~settlement~~in ~~and~~the ~~cancellation)~~ordinary ~~and~~course ~~novation~~of (ibusiness.e. ~~transfer of~~The ~~our~~Company ~~rights~~continues ~~and~~to ~~obligations~~reserve tofor ~~another~~losses ~~reinsurer)~~and ofloss ~~several~~expenses ~~reinsurance~~on ~~programs,~~all ~~which~~disputed ~~had~~contracts ~~significant~~without ~~exposure~~regard to ~~future~~any ~~loss~~possibility ~~and~~of /a orfavorable ~~cash~~outcome. ~~flow~~The ~~needs.~~uncertainty ~~Loss~~surrounding ~~reserve~~such ~~settlements~~estimates is increased by the fact that ~~are~~the ~~structured~~Company asmay ~~commutations~~not ~~are~~have ~~recorded~~received ascurrent anloss ~~increase~~information ~~or decrease~~from inthe ~~incurred~~ceding ~~claims~~company ~~whereas~~during the ~~commutation~~period of ~~unexpired~~the ~~risks~~dispute and ~~novations~~may ~~are~~not ~~recorded~~have ashad athe ~~return~~opportunity ofto ~~the~~audit ~~original~~or ~~premium~~otherwise ~~income~~review ~~and~~the ~~attendant~~reliability ~~claims~~of ~~and~~such ~~expenses.~~reported information.

~~During~~For the three months ended ~~September~~June 30, 2003 ~~there~~we ~~was~~experienced ~~negative~~a ~~gross~~net ~~written~~underwriting loss ~~premium~~ of $~~66.~~5.4 million. This underwriting loss was primarily due to ~~the cancellation~~loss ofadjustment ~~one of the Company’s finite reinsurance agreements where $74.5 million of written and unearned premiums were returned~~expenses, ~~partially~~comprising ~~offset~~largely bylegal ~~increased premium estimates on other contracts. Premiums written for the three months ended September 30~~fees, ~~2002~~letter of ~~negative~~credit ~~$175.3~~fees ~~million reflected the effect of commutations~~ and ~~novations~~internal ~~including~~costs ~~the novation to other reinsurers~~ of ~~two~~runoff ~~finite risk contracts that had original gross written premium estimates~~ of approximately $~~144.~~3.1 million.

Reinsurance: ~~(continued)~~Investment Income

Premiums earned for the three months ended September 30, 2003 decreased to $33.1 million compared to $67.7 million for the three months ended September 30, 2002. This decrease was due to the runoff of our reinsurance operations. Premiums earned will continue to decrease in future periods.


	Three months ended June 30, 2004									Three months ended June 30, 2003
(In thousands)	Income (Loss)			Other Comprehensive Loss			Total Return			Income (Loss)			Other Comprehensive Income (Loss)			Total Return
Equities
Available-for-sale	$	7		$	(444	)	$	(437	)	$	27,411		$	6,847		$	34,258
Trading		(2,513	)		—			(2,513	)		24,073			—			24,073
Debt securities		3,217			(8,440	)		(5,223	)		5,087			2,607			7,694
Other		178			—			178			(317	)		(44	)		(361	)
Expenses		(438	)		—			(438	)		(2,573	)		—			(2,573	)

	$	451		$	(8,884	)	$	(8,433	)	$	53,681		$	9,410		$	63,091

~~Commission~~The ~~and~~Company’s ~~fee~~reinsurance investments ~~income~~are ~~decreased~~classified toas ~~negative~~either ~~$0.4~~trading ~~million~~or available-for-sale. ~~the~~The ~~three~~trading ~~months~~portfolio ~~ended~~is ~~September~~recorded ~~30,~~at ~~2003~~fair ~~compared~~value with ~~$2.7~~unrealized ~~million~~gains ~~for the~~and ~~corresponding~~losses ~~period~~recorded in ~~2002~~net income. ~~This~~The ~~decrease~~available-for-sale portfolio is ~~due~~recorded toat afair ~~decrease~~value inwith ~~fees~~unrealized gains ~~earned~~and onlosses ~~our~~recorded ~~finite~~in ~~risk~~members’ ~~contracts~~equity ~~that were not accounted for~~ as ~~reinsurance~~other ascomprehensive ~~they~~income. doDespite ~~not satisfy~~ the ~~risk~~different ~~transfer~~accounting ~~criteria~~treatment of ~~Statement~~the oftrading ~~Financial~~and ~~Accounting Standards~~available-for-sale ~~No.~~portfolios, ~~113.~~we ~~These~~manage ~~fees~~the ~~decreased~~Company’s ~~due~~cash toand ~~the~~investments ~~effects~~in oftotal ~~commutations~~ and ~~novations~~do ~~following~~not ~~the~~place significant ~~decision~~importance toon ~~put~~whether ~~our~~the ~~reinsurance~~return ~~operations~~is ~~into~~recognized ~~runoff.~~in Itnet isincome ~~expected~~or ~~that~~as ~~commission~~other ~~and~~comprehensive ~~fee~~ income. Therefore, this discussion will befocus ~~negligible~~on inthe ~~future~~total ~~periods~~investment return.

~~Commissions,~~Our ~~taxes~~reinsurance ~~and~~portfolio ~~underwriting~~generated ~~expenses~~a ~~for~~negative ~~the~~return ~~three~~of ~~months ended September 30, 2003 decreased by~~ $98.~~6 million to $5.7 million from $15.~~4 million for the three months ended ~~September~~June 30, ~~2002.~~2004 ~~This~~compared ~~decrease was partially due~~ to ~~the~~a ~~reduction~~total inreturn ~~premiums~~of $63.1 ~~earned~~million infor the three months ended ~~September~~June 30, 2003. ~~and~~The ~~also due~~reduced toreturn ain ~~decrease~~2004 inwas ~~the~~primarily ~~estimate~~due ofto ~~commissions~~the ~~for~~net ~~one~~effect of: ~~our workers’ compensation programs.~~

~~For~~• ~~the~~Our ~~three~~S&P ~~months~~500 ~~ended~~equity ~~September~~portfolio ~~30,~~was sold during 2003, wein ~~experienced~~line awith ~~net~~our ~~underwriting~~strategy ~~loss~~of reducing our exposure to equity price risk due to the runoff of our reinsurance operations, generating a gain of $1833.92 million, ~~which~~for isthe ~~primarily~~three ~~due~~months ~~to:~~ended June 30, 2003;

• AnOur ~~increase~~investment in ~~estimated~~a ~~ultimate~~Bermuda ~~losses~~based oflife ~~approximately~~reinsurer ~~$15~~generating ~~million~~a onnegative ~~two~~return ~~workers’~~of ~~compensation programs~~$0.4 ~~The~~million ~~change~~for inthe ~~estimates~~three ~~follows~~months anended ~~independent~~June ~~actuarial~~30, ~~evaluation~~2004 ~~completed~~compared into ~~the~~a ~~third~~positive ~~quarter~~return of ~~2003~~$1.2 ~~and~~million ~~reflects~~for ~~adverse~~the ~~trending~~three ofmonths ~~medical~~ended ~~expenses~~June ~~associated~~30, ~~with workers’ compensation claims in California~~2003;

• ~~Loss~~Our ~~adjustment~~trading ~~expenses~~equities generating a negative return of $2.5 million for the three months ended June 30, ~~comprising~~2004 ~~largely~~compared ~~legal~~to ~~fees~~a ~~and~~positive ~~internal~~return ~~costs~~of $24.1 million for the three months ended June 30, 2003. Our trading equities are investments in a multi-manager fund that follows a combination of ~~runoff~~fixed income strategies. The fund lost 0.7% for the three months ended June 30, 2004 compared with generating 4.3% for the three months ended June 30, 2003. The variance was primarily due to the comparative performance of the fund’s high-yield bond portfolio;

~~For~~• A downturn in the U.S. fixed income markets such that our debt securities generated losses of $5.2 million for the three months ended ~~September~~June 30, ~~2002,~~2004 wecompared ~~experienced~~to a ~~net~~return ~~underwriting loss~~ of $557.37 million. ~~This~~for ~~underwriting~~the ~~loss~~three ~~was~~months ~~primarily due~~ended ~~to:~~June 30, 2003.

•Investment expenses ~~Incurred~~for ~~losses~~the ofthree months ended June 30, 2004 decreased to $290.94 million asfrom a$2.6 ~~result~~million offor ~~credit~~the ~~default~~three ~~events~~months onended aJune ~~multi~~30, 2003, partially due to reduction in assets invested. Investment expenses for the three months ended June 30, 2003 included the write-~~year~~off ~~financial~~of ~~lines~~previously ~~program;~~capitalized management fees relating to our investment in private equity funds reflecting an impairment in the carrying value of the funds.

•Six ~~Incurred~~Months ~~losses~~Ended ofJune ~~$10.8~~30, ~~million~~2004 ~~reflecting~~and ~~the~~2003 ~~cost of commutations of three of our satellite programs;~~

•Summary ~~Internal runoff costs~~ of ~~$5.5~~results: ~~million;~~

• OPUS Re casualty business, and other long tail programs, where losses and expenses are projected to exceed premiums written, but we expect to generate profits through future investment income.


	Six months ended June 30,
(In thousands except for per share amounts)	2004			2003
NET INCOME BEFORE TAXES
Reinsurance segment	$	56,108		$	49,611
Real estate and leasing segment		—			(362	)
Other operating expenses		(5,588	)		(5,329	)

Net income before taxes from continuing operations		50,520			43,920
Income taxes		184			(913	)

Net income from continuing operations		50,704			43,007

Net loss from subsidiary held for sale		(24,072	)		(10,335	)

Net income	$	26,632		$	32,672

Basic and diluted net income per share	$	0.22		$	0.27

The Company’s ~~provided retrocessional~~ reinsurance segment togenerated a$56.1 ~~reinsurer~~million ~~that~~of ~~has~~net ~~commenced~~income anfor ~~arbitration~~the tosix ~~rescind~~months ~~its~~ended ~~own~~June ~~reinsurance~~30, ~~contract~~2004 ~~with~~primarily ~~the~~due ~~primary~~to ~~carrier,~~net ~~principally~~savings onof ~~the~~approximately ~~grounds~~$46 ~~that~~million ~~the~~generated ~~primary~~through ~~carrier~~commutations ~~did~~and ~~not~~$15.3 ~~fully~~million ~~disclose~~of ~~the~~reinsurance ~~risks~~investment toincome, bepartially ~~covered~~offset by the ~~reinsurance~~ ~~contract.~~internal ~~That~~costs ~~contract~~of ~~is expected to be unprofitable~~runoff. ~~Thus,~~For if the ~~reinsurer~~six ~~succeeds~~months inended ~~the~~June ~~arbitration~~30, it2003 ~~will be relieved of any obligation to pay losses under its contract and therefore would not cede to~~ the ~~Company~~reinsurance ~~any~~segment ~~share~~generated ~~of those losses~~$49. ~~The~~6 ~~arbitration~~million isof atnet ~~an early stage and is not scheduled for completion until December 2004 at the earliest. As such~~income, itprimarily isdue ~~too early~~ to ~~determine whether the arbitration decision is likely to be in the reinsurer’s favor and therefore benefit OPL as its retrocessionaire~~$60.8 ~~The~~million ~~Company~~of ~~continues~~reinsurance toinvestment ~~reserve~~income ~~for~~offset ~~losses~~by ~~and~~legal ~~loss~~ expenses ~~without~~and ~~regard to any possibility that~~ the ~~reinsurer’s~~internal ~~contract~~costs ~~will be rescinded. However, such reserves are necessarily estimates and may vary~~of ~~significantly as claims are settled~~runoff.

~~The~~During ~~Company~~the isfourth ~~engaged~~quarter inof ~~several~~2003 ~~other ongoing~~we ~~disputes,~~sold ~~including~~our ~~arbitration~~final ~~and~~remaining ~~litigation~~leased asset ~~that~~and ~~have arisen in~~ the ~~ordinary course of business. The~~ Company ~~continues~~is totherefore ~~reserve~~no ~~for~~longer ~~losses~~engaged ~~and~~in ~~loss expenses based on~~ the ~~terms~~real ofestate ~~contractual~~and ~~arrangements~~leasing ~~currently in force~~business.

~~Reinsurance~~Other ~~Investment~~operating ~~Income~~expenses ~~(Loss)~~of $5.6 million for the three months ended June 30, 2004 and $5.3 million for the three months ended June 30, 2003 consist of corporate expenses not allocated to operating segments including payroll, insurance, shareowner costs and rent.

	Three months endedSeptember 30, 2003									Three months endedSeptember 30, 2002
(In thousands)	Income(Loss)			OtherComprehensiveIncome (Loss)			TotalReturn			(Loss) Income			OtherComprehensive(Loss) Income		TotalReturn
Equities
Available-for-sale	$	336		$	2,166		$	2,502		$	(185,220	)	$	105,291	$	(79,929	)
Trading		7,607			—			7,607			(863	)		—		(863	)
Fixed income		6,585			(1,983	)		4,602			11,736			9,712		21,448
Other		(1,034	)		27			(1,007	)		3,424			172		3,596
Expenses		(1,051	)		—			(1,051	)		(680	)		—		(680	)
	$	12,443		$	210		$	12,653		$	(171,603	)	$	115,175	$	(56,428	)

During the six months ended June 30, 2004 OPL has classified the operations of OPUS Re as held for sale. The sale of OPUS Re is expected to generate a loss of approximately $23.8 million and this loss has been recognized in the six months ended June 30, 2004.

AsFor ~~discussed~~the ~~below~~six inmonths ~~the~~ended ~~Liquidity and~~June ~~Capital~~30, ~~Resources~~2004 ~~section,~~OPUS ~~the~~Re ~~asset~~generated ~~allocation~~a net loss of ~~our~~$24.1 ~~reinsurance~~million including ~~investment~~operating ~~portfolio~~income ~~changed~~of ~~significantly~~$0.9 ~~since~~million, the ~~decision~~loss toon ~~put~~sale ~~the~~of ~~reinsurance~~$23.8 ~~operations~~million ~~into~~and ~~runoff~~a intax ~~February~~charge ~~2002~~of $1.2 ~~The~~million ~~revised~~primarily ~~asset~~due ~~allocation~~to ~~reflects~~a ~~our~~valuation ~~lower~~allowance ~~risk tolerance~~against ~~and~~deferred ~~provides~~tax ~~more~~assets. ~~short-term~~For ~~liquidity~~the tosix ~~cover~~months ~~loss~~ended ~~payments,~~June ~~commutations~~30, ~~novations~~2003 ~~and~~OPUS ~~potential~~Re ~~shareowner~~generated ~~distributions~~a loss of $10.3 ~~However,~~million ~~there~~primarily ~~may~~due ~~still~~to bean ~~periods~~asset inimpairment ~~which~~charge of $5.8 million to write-down the ~~Company~~capitalized ~~records~~cost anof ~~investment~~insurance ~~loss~~licenses asand afuture ~~result~~lease costs of ~~the~~$2.5 ~~continued volatility~~million inrelating ~~worldwide~~to ~~equity~~OPUS ~~and~~Re’s ~~bond~~Philadelphia ~~markets~~office space.

~~The~~Basic ~~Company’s reinsurance~~and ~~investments~~diluted ~~are~~net ~~classified~~income asper ~~either~~share ~~trading~~was or$0.22 ~~available-~~for~~-sale~~ the six months ended June 30, 2004 consisting of $0.42 ~~The~~per ~~trading~~share ~~portfolio~~of isincome ~~recorded~~from atcontinuing ~~fair~~operations ~~value~~offset ~~with~~by ~~unrealized~~a ~~gains~~loss ~~and~~of ~~losses~~$0.20 ~~recorded~~per share from the discontinued operations of OPUS Re. For the same period in 2003 basic and diluted net income per share was $0.27 ~~The~~consisting ~~available-for-sale~~of ~~portfolio~~$0.36 isper share ~~recorded~~of atincome ~~fair~~from ~~value~~continuing ~~with unrealized~~operations ~~gains~~offset ~~and~~by ~~losses~~a ~~recorded~~loss inof ~~members’~~$0.09 ~~equity~~per asshare ~~other~~from ~~comprehensive~~discontinued ~~income~~operations.

~~Our~~A ~~reinsurance~~more ~~portfolio~~detailed ~~generated~~discussion ~~income~~ of ~~$12.7~~our ~~million~~operating results for the ~~three~~reinsurance ~~months~~segment ~~ended~~for ~~September 30, 2003. This consisted of net income of $12.4 million recorded in income and a change in net unrealized gains of $0.2 million that was recorded in other comprehensive income. For~~ the ~~three~~six-month ~~months~~periods ended ~~September~~June 30, ~~2002~~2004 ~~our reinsurance portfolio generated a total negative return of $56.4 million consisting of net loss of $171.6 million~~ and a2003 ~~change~~is inset ~~net unrealized~~out ~~gains of $115~~below.2 ~~million that was recorded in other comprehensive income.~~

~~For~~Reinsurance ~~the~~Segment: three months ended September 30, 2003 our available-for-sale equity portfolio generated a gain of 2.2%, or $2.5 million, consisting of income of $0.3 million and a change in net unrealized gains of $2.2 million that was recorded in other comprehensive income. During the three months ended September 30, 2002, our available-for-sale equity portfolio generated a loss of $79.9 million, consisting of a loss of $185.2 million and a change in net unrealized gains of $105.3 million that were recorded in other comprehensive income. These results included the effects of the write down in the cost basis of equity investments in certain stocks in our S&P 500 portfolio where the decline in value was considered other than temporary. In accordance with Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, such a write-down is recognized as a realized loss in the income statement, even though there were no sales of the securities. For the three months ended September 30, 2003 and the three months ended September 30, 2002 the amount of the write-down was $0.1 million and $177.5 million, respectively. Apart from our investment in a Bermuda-based life reinsurer, our available-for-sale equity portfolio tracks the S&P 500 index. During the three months ended September 30, 2003, our S&P 500 equity portfolio generated a gain of 2.5% or $2.7 million, consisting of income of $0.3 million and a change in net unrealized gains of $2.3 million that was recorded in other comprehensive income.

Our trading equities are investments in multi-manager funds, which follow primarily a combination of fixed income strategies, and generated a gain of 1.2%, or $7.6 million for the three months ended September 30, 2003 compared to a loss of $0.9 million for the three months ended September 30, 2002. The gains were primarily due to increases in the value of the strategic income fund’s high-yield bond portfolio and convertible bond portfolio. We record unrealized gains and losses on our multi-manager funds in income.


	Six months ended June 30,
(In thousands)	2004			2003
Gross premiums written	$	3,297		$	(9,948	)
Premiums ceded		(4,321	)		(333	)

Net premiums written		(1,024	)		(10,281	)
Change in unearned premiums		4,903			24,140

Premiums earned		3,879			13,859
Commission and fee income		(2	)		245

		3,877			14,104

Losses and loss expenses		43,404			(13,357	)
Commissions, taxes and underwriting expenses		(6,498	)		(11,900	)

		36,906			(25,257	)

Underwriting income		40,783			(11,153	)

Investment income, net of expenses		15,325			60,764

Reinsurance income	$	56,108		$	49,611

~~For~~Due to the ~~three~~pending ~~months~~sale ~~ended September 30, 2003 our fixed income portfolios generated a gain~~ of ~~1.0%,~~OPUS ~~or $4.6 million~~Re, ~~consisting of $6.6 million that was recorded in~~ ~~income~~ and ~~net unrealized losses of $2.0 million recorded~~ in ~~other~~accordance ~~comprehensive~~with ~~income.~~SFAS ~~For~~144, the ~~three~~reinsurance ~~months~~segment ~~ended~~results ~~September~~have ~~30,~~been ~~2002~~restated ~~our~~to ~~fixed~~exclude ~~income~~the ~~portfolios~~results ~~generated a gain~~ of ~~2.6%,~~OPUS orRe’s ~~$21~~operations.4 ~~million,~~Our ~~consisting~~results offor ~~$11.7~~comparative ~~million~~periods ~~that~~have ~~was recorded~~also inbeen ~~income~~restated ~~and~~to ~~net~~reflect ~~unrealized~~the ~~gains~~same ~~of $9~~presentation.7 ~~million recorded in other comprehensive income.~~

Cash and cash equivalents earn short-term money market rates, which equated to an annualized return of 1.1% for the three months ended September 30, 2003 compared to 1.8% for the comparable period in 2002. Other investment income reflects interest expense of $1.4 million on unpaid balances relating to one of our finite risk contracts. This contract was commuted and all obligations settled in full during the third quarter of 2003.

Reinsurance: (continued)

Investment expenses for the three months ended September 30, 2003 were $1.1 million compared to $0.7 million for the three months ended September 30, 2002. The increase was primarily due to management fees relating to our investment in private equity funds. During the three months ended September 30, 2002 these fees were capitalized but have subsequently been expensed as we no longer believe that they are recoverable.

Real Estate and Leasing:

	Three months endedSeptember 30,
(In thousands)	2003			2002
REVENUE:
Office building	$	—		$	3,751
Leasing		821			839
Gain on sale of assets		—			34,211
		821			38,801
EXPENSES:
Operating expenses		(185	)		(2,558	)
Interest expense		(2,321	)		(3,029	)
Depreciation expense		—			(514	)
Minority interest in earnings		—			(205	)
		(2,506	)		(6,306	)
Operating (loss) income		(1,685	)		32,495
Investment income:
Amortization of zero-coupon notes		1,462			1,447
Other		146			467
Investment income		1,608			1,914
Real estate and leasing loss	$	(77	)	$	34,409

Office building revenue for the three months ended September 30, 2003 was $nil due to the sale of our two-thirds partnership interest in the Copley Place retail center and office complex, located in Boston, on July 19, 2002.

Leasing revenue of $0.8 million for the three months ended September 30, 2003 related to a finance lease with the Kmart Corporation of a regional distribution facility in Manteno, Illinois.

On January 22, 2002 the Kmart Corporation and 37 of its United States subsidiaries filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code. On April 22, 2003 a judge approved Kmart Corporation’s bankruptcy exit plan with an effective date of May 5, 2003. As part of the exit plan Kmart Corporation assumed the lease on the Manteno distribution facility with the original lease terms intact. To date the Kmart Corporation has not defaulted on any of its lease payments. However, there can be no assurance that it will not default on its future payments. We are currently having discussions with an interested party regarding the sale of the facility and expect to complete the sale by the end of 2003. Given the uncertainties associated with Kmart Corporation’s financial position we expect to realize a pre-tax loss of approximately $10.4 million on the sale of the facility which will be recognized in the period in which the asset is sold.

For the three months ended September 30, 2003 operating expenses, interest expense and depreciation expense decreased to $0.2 million, $2.3 million and $nil, respectively, compared to $2.6 million, $3.0 million and $0.5 million, respectively, for the three months ended September 30, 2002. These decreases were primarily due to the sale of Copley Place in July 2002. Interest expense includes $1.9 million in interest on long-term debt due for repayment in 2012 and 2019. Investment income includes $1.5 million earned on assets collateralizing our obligations under such long-term debt. On October 6, 2003 100% of this long-term debt was repurchased for a total premium to par of $35.9 million. The corresponding release of security resulted in the sale of zero-coupon notes with an amortized cost of $91.5 million generating a $20.9 million gain on sale. This debt repurchase and corresponding sale of collateral will be recorded in the Company’s results in the fourth quarter of 2003.

Net (loss) income:

	Three months endedSeptember 30,
(In thousands)	2003			2002
NET LOSS BEFORE TAXES
Reinsurance	$	(6,447	)	$	(226,899	)
Real estate and leasing		(77	)		34,409
Other operating expenses		(12,312	)		(4,052	)
Consolidated net loss before taxes		(18,836	)		(196,542	)
Income taxes		3,520			(14,310	)
Net loss	$	(15,316	)	$	(210,852	)

The net loss for the three months ended September 30, 2003 was $15.3 million compared to net loss of $210.9 million for the same period in 2002. The decrease in net loss was primarily due to an increase in reinsurance investment income of $184.0 million and a reduction in underwriting losses compared to the three months ended September 30, 2002. The increase in reinsurance investment income was primarily due to an other-than-temporary impairment charge of $177.5 million recorded in our equity portfolio during the three months ended September 30, 2002. This was partially offset by a reduction in real estate and leasing income of $34.4 million compared to the three months ended September 30, 2002, as a result of the gain on sale of Copley Place. For the three months ended September 30, 2003 operating expenses include settlement costs of $10 million to settle the class action lawsuit as discussed in note 6 to the Unaudited Consolidated Financial Statements. For the three months ended September 30, 2003 there was a tax credit of $3.5 million compared to a tax charge of $14.3 million for the same period in 2002. The tax credit for the three months ended September 30, 2003 reflects a decrease in estimated state taxes due on the sales of assets in 2002. The tax charge for the three months ended September 30, 2002 was primarily due to the gain on sale of Copley Place. Basic and diluted net loss per share was $0.13 for the three months ended September 30, 2003 compared to a net loss per share of $1.77 for the same period in 2002.

Nine Months Ended September 30, 2003 and 2002

Reinsurance:

	Nine months endedSeptember 30,
(In thousands)	2003			2002
Gross premiums written	$	(39,672	)	$	509,279
Premiums ceded		(394	)		(83,943	)
Net premiums written		(40,066	)		425,336
Change in unearned premiums		141,460			(31,597	)
Premiums earned		101,394			393,739
Commission and fee income		(165	)		6,245
		101,229			399,984
Losses and loss expenses		(100,760	)		(359,082	)
Commissions, taxes and underwriting expenses		(35,946	)		(124,097	)
		(136,706	)		(483,179	)
Underwriting loss		(35,477	)		(83,195	)
Investment income (loss), net of expenses		75,729			(175,452	)
Reinsurance income (loss)	$	40,252		$	(258,647	)

Underwriting

Gross premiums written for the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 of ~~negative~~ $393.7 3 million ~~was~~were ~~primarily~~ due to changes in the ~~cancellation~~estimates of ~~one~~ultimate ofwritten premium while the ~~Company’s~~gross ~~finite~~premiums ~~reinsurance~~written ~~agreements~~for ~~where~~the ~~$74.5~~six ~~million~~months ofended ~~written~~June ~~and~~30, ~~unearned~~2003 ~~premiums~~of ~~were~~negative ~~returned~~$9.9 ~~This~~million ~~was~~were ~~partially~~a ~~offset~~result byof ~~$33.9~~novations ~~million~~and changes in the estimates of ~~premiums~~ultimate written bypremium. ~~OPUS~~Premiums ~~Re primarily~~ceded ~~relating~~of to$4.3 ~~multi-year~~million ~~accident~~for &the ~~health~~six ~~treaties~~months ~~that~~ended June ~~OPUS~~30, Re2004 ~~had~~are ~~committed~~primarily due to ~~write~~additional ~~prior~~premiums relating to the ~~decision~~Company’s toaviation ~~place~~excess ~~OPUS~~of Reloss ~~into~~reinsurance ~~runoff~~program.

~~Reinsurance:~~Premiums ~~(continued)~~earned for the six months ended June 30, 2004 decreased to $3.9 million compared to $13.9 million for the six months ended June 30, 2003. This decrease is a result of the runoff of the reinsurance operations of the Company. Premiums earned will continue to decrease in future periods.

For the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 ~~premiums~~we ~~ceded~~generated ~~decreased~~net tounderwriting income of $040.48 million, ~~compared~~which is primarily due to net savings of approximately $~~83.9~~46 million ~~for~~generated through commutations, including the ~~nine~~commutation ~~months~~of ~~ended~~one ~~September~~of ~~30,~~the ~~2002~~Company’s large workers’ compensation contracts. ~~Premium~~The ~~ceded~~commutation ~~for~~savings ~~the~~were ~~nine~~partially ~~months~~offset ~~ended~~by ~~September~~loss 30adjustment expenses of $4.6 million, ~~2002~~consisting ~~primarily~~largely ~~related~~of ~~to:~~legal fees, letter of credit fees and internal costs of runoff.

•For ~~$77.4~~the ~~million~~six ofmonths ~~property~~ended June ~~catastrophe~~30, ~~premiums~~2003 ~~ceded~~we toexperienced ~~Renaissance~~a ~~Reinsurance~~net ~~Ltd.~~underwriting ~~including~~loss of $5011.92 million. asThis aunderwriting ~~result~~loss ofwas aprimarily ~~100%~~due ~~quota~~to ~~share~~loss ofadjustment ~~the~~expenses, ~~in-force~~comprising ~~property~~largely ~~catastrophe~~legal ~~business~~fees, ~~that~~letter ~~became~~of ~~effective~~credit onfees ~~February~~and ~~15,~~internal ~~2002;~~costs of runoff.

•Reinsurance ~~$3.4~~Investment ~~million~~Income of premiums ceded relating to our purchase of several layers of excess of loss protection for our aviation book of business. The reinsurance protection provides coverage of $12.0 million in excess of $3.0 million for a single loss event for losses occurring up until August 2003.

Premiums earned for the nine months ended September 30, 2003 decreased to $101.4 million compared to $393.7 million for the nine months ended September 30, 2002. This decrease is a result of the reinsurance operations of the Company being runoff.


	Six months ended June 30, 2004									Six months ended June 30, 2003
(In thousands)	Income			Other Comprehensive Loss			Total Return			Income			Other Comprehensive Income (Loss)			Total Return
Equities
Available-for-sale	$	7		$	(993	)	$	(986	)	$	20,024		$	3,127		$	23,151
Trading		5,698			—			5,698			34,898			—			34,898
Debt securities		10,192			(8,141	)		2,051			8,346			3,847			12,193
Other		474			—			474			915			(107	)		808
Expenses		(1,046	)		—			(1,046	)		(3,419	)		—			(3,419	)

	$	15,325		$	(9,134	)	$	6,191		$	60,764		$	6,867		$	67,631

~~Commission~~The ~~and~~Company’s ~~fee~~reinsurance investments ~~income~~are ~~decreased~~classified toas ~~negative~~either ~~$0.2~~trading ~~million~~or available-for-sale. ~~the~~The ~~nine~~trading ~~months~~portfolio ~~ended~~is ~~September~~recorded ~~30,~~at ~~2003~~fair ~~compared~~value with ~~$6.2~~unrealized ~~million~~gains ~~for~~and ~~the~~losses ~~corresponding~~recorded ~~period~~ in ~~2002~~net income. ~~This~~The ~~decrease~~available-for-sale portfolio is ~~due~~recorded toat afair ~~decrease~~value inwith ~~the fees earned on our finite~~unrealized ~~risk~~gains ~~contracts~~and ~~that~~losses ~~were~~recorded ~~not~~in ~~accounted~~members’ ~~for~~equity as ~~reinsurance~~other ascomprehensive ~~they~~income. doDespite ~~not satisfy~~ the ~~risk~~different ~~transfer~~accounting ~~criteria~~treatment of ~~Statement~~the oftrading ~~Financial~~and ~~Accounting~~available-for-sale ~~Standards~~portfolios, ~~No.~~we ~~113.~~manage ~~The~~the ~~fees~~Company’s ~~decreased~~cash asand ainvestments ~~result~~in oftotal ~~commutations~~ and ~~novations~~do ~~following~~not ~~the decision~~place tosignificant ~~put~~importance ~~our~~on ~~reinsurance~~whether ~~operations~~the ~~into~~return ~~runoff.~~is Itrecognized isin ~~expected~~net ~~that~~income ~~commissions~~or ~~and~~as ~~fee~~other comprehensive income. Therefore, this discussion will befocus ~~negligible~~on inthe ~~future~~total ~~periods~~investment return.

~~Commissions,~~Our ~~taxes~~reinsurance ~~and~~portfolio ~~underwriting~~generated ~~expenses~~a ~~for~~total ~~the~~return ~~nine~~of ~~months ended September 30, 2003 decreased by~~ $886.2 million ~~from $124.1 million~~ for the ~~nine~~six months ended ~~September~~ June 30, ~~2002.~~2004 ~~The~~compared ~~decrease was primarily related~~ to ~~the~~a ~~decrease~~total inreturn ~~premiums earned and changes in the mix~~ of ~~premiums earned. In addition~~ $967.76 million offor the ~~decrease~~six ~~was~~months ~~due~~ended toJune a30, ~~reduction~~2003. inThe ~~internal~~comparative ~~expenses,~~performance was primarily asdue ato ~~result of~~ the ~~decision~~ tonet ~~put~~effect ~~our~~of: ~~reinsurance operations into runoff.~~

~~For~~• ~~the~~Our ~~nine~~S&P ~~months ended~~500 ~~September~~equity ~~30,~~portfolio was sold during 2003 wein ~~experienced~~line awith ~~net~~our ~~underwriting~~strategy ~~loss~~of reducing our exposure to equity price risk due to the runoff of our reinsurance operations, generating a gain of $3525.51 million. ~~The~~for ~~underwriting~~the ~~loss~~six ismonths ~~primarily~~ended ~~due~~June ~~to:~~30, 2003;

• AnOur ~~increase~~investment in ~~estimated~~a ~~ultimate~~Bermuda ~~losses~~based oflife ~~approximately~~reinsurer ~~$15~~generating ~~million~~a onnegative ~~two~~return ~~workers’~~of ~~compensation programs~~$1.0 ~~The~~million ~~change~~for inthe ~~estimates~~six ~~follows~~months anended ~~independent~~June ~~actuarial~~30, ~~evaluation~~2004 ~~completed~~compared into ~~the~~a ~~third~~negative ~~quarter~~return of ~~2003~~$1.9 ~~and~~million ~~reflects~~for ~~adverse~~the ~~trending~~six ofmonths ~~medical~~ended ~~expenses~~June ~~associated~~30, ~~with workers’ compensation claims in California~~2003;

• ~~Loss~~Our ~~adjustment~~trading ~~expenses~~equities generating a positive return of $125.87 million for the six months ended June 30, ~~comprising~~2004 ~~largely~~compared ~~legal~~to ~~fees~~a ~~and~~positive ~~internal~~return ~~costs~~of $34.9 million for the six months ended June 30, 2003. Our trading equities are investments in a multi-manager fund that follows a combination of ~~runoff~~fixed income strategies. The fund earned 0.8% for the six months ended June 30, 2004 compared with earning 6.9% for the six months ended June 30, 2003. The variance was primarily due to the fund’s high-yield bond portfolio and convertible securities components returning respectively 2.1% and 1.7% during the six months ended June 30, 2004 compared to 11.8% and 11.0% for the same period in 2003;

• ~~OPUS~~A Redownturn ~~casualty~~in ~~business,~~the ~~where~~U.S. ~~losses~~fixed ~~and~~income ~~expenses~~markets ~~are~~such ~~projected~~that toour ~~exceed~~debt ~~premiums~~securities ~~written,~~generated ~~but~~a wereturn ~~expect~~of $2.1 million for the six months ended June 30, 2004 compared to ~~generate~~a ~~profits~~return ~~through~~of ~~future~~$12.2 ~~investment~~million ~~income~~for the six months ended June 30, 2003.

~~For~~Investment expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2004 wedecreased ~~experienced~~to ~~a net~~$1.0 ~~underwriting~~million ~~loss~~from of $833.24 million. ~~This~~for ~~underwriting~~the ~~loss~~six months ended June 30, 2003. This was ~~primarily~~partially due to: a reduction in assets invested although investment expenses for the six months ended June 30, 2003 included the write-off of previously capitalized management fees relating to our investment in private equity funds, reflecting an impairment in the carrying value of the funds.

• Incurred losses of $29.9 million as a result of credit default events on a multi-year financial lines program.

• Incurred losses of $10.8 million reflecting the cost of commutations of three of our satellite programs.

• Internal underwriting expenses and runoff costs of $22.5 million.

• OPUS Re casualty business, and other long tail programs, where losses and expenses are projected to exceed premiums written, but we expect to generate profits through future investment income.

Reinsurance Investment Income (Loss)

	Nine months endedSeptember 30, 2003									Nine months endedSeptember 30, 2002
(In thousands)	Income (Loss)			OtherComprehensiveIncome (Loss)			TotalReturn			(Loss) Income			OtherComprehensiveIncome (Loss)			TotalReturn
Equities
Available-for-sale	$	20,360		$	5,293		$	25,653		$	(204,761	)	$	67,684		$	(137,077	)
Trading		42,505			—			42,505			591			—			591
Fixed income		17,394			1,211			18,605			23,712			21,597			45,309
Other		126			(79	)		47			8,592			(12	)		8,580
Expenses		(4,656	)		—			(4,656	)		(3,586	)		—			(3,586	)
	$	75,729		$	6,425		$	82,154		$	(175,452	)	$	89,269		$	(86,183	)

Our reinsurance portfolio generated income of $82.2 million for the nine months ended September 30, 2003. This consisted of net income of $75.7 million and a change in net unrealized gains of $6.4 million that was recorded in other comprehensive income compared to a net loss of $175.5 million and a change in net unrealized gains of $89.3 million for the nine months ended September 30, 2002. These results included the effects of the write down in the cost basis of equity investments in certain stocks in our S&P 500 portfolio where the decline in value was considered other than temporary. In accordance with Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, such a write-down is recognized as a realized loss in the income statement, even though there were no sales of the securities. For the nine months ended September 30, 2003 and the nine months ended September 30, 2002 the amount of the write-down was $8.0 million and $177.5 million, respectively.

For the nine months ended September 30, 2003 our available-for-sale equity portfolio generated a gain of 13.5%, or $25.7 million, consisting of income of $20.4 million and a change in net unrealized gains of $5.3 million that was recorded in other comprehensive income. Our available-for-sale equity portfolio includes an investment in a Bermuda based life reinsurer, which generated a negative total return of $2.1 million for the nine months ended September 30, 2003 compared to a negative total return of $38.3 million for the corresponding period in 2002. The rest of our available-for-sale equity portfolio closely tracks the S&P 500 index. During the nine months ended September 30, 2002, our equity portfolio generated a negative return of 34.6% or $137.1 million, consisting of a loss of $204.8 million that was recorded in income and a change in net unrealized gains of $67.7 million that was recorded in other comprehensive income.

Our trading equities are investments in multi-manager funds, which follow primarily a combination of fixed income strategies, and gained $42.5 million for the nine months ended September 30, 2003 compared to a gain of $0.6 million for the nine months ended September 30, 2002. The gains were primarily due to increases in the value of the strategic income fund’s high-yield bond portfolio and convertible bond portfolio. We record unrealized gains and losses on our multi-manager funds in income.

For the nine months ended September 30, 2003 our fixed income portfolios generated a gain of 2.8%, or $18.6 million, consisting of income of $17.4 million and a change in net unrealized gains of $1.2 million recorded in other comprehensive income. For the nine months ended September 30, 2002 our fixed income portfolios generated a gain of 5.4%, or $45.3 million, consisting of income of $23.7 million and a change in net unrealized gains of $21.6 million recorded in other comprehensive income.

Cash and cash equivalents earn short-term money market rates, which equated to an annualized return of 1.3% for the nine months ended September 30, 2003 compared to 1.8% for the comparable period in 2002.

Investment expenses for the nine months ended September 30, 2003 were $4.7 million compared to $3.6 million for the nine months ended September 30, 2002. The increase was due to the write-off of previously capitalized management fees relating to our investment in private equity funds reflecting an impairment in the carrying value of the funds.

Real Estate and Leasing:

	Nine months endedSeptember 30,
(In thousands)	2003			2002
REVENUE:
Office buildings	$	—		$	39,605
Hotel		—			37,222
Leasing		2,476			6,176
Gain on sale of assets		—			140,203
		2,476			223,206
EXPENSES:
Operating expenses		(666	)		(51,871	)
Interest expense		(6,996	)		(26,262	)
Premium on debt repurchase		—			(78,001	)
Depreciation		—			(9,037	)
Minority interest in earnings		—			(2,025	)
		(7,662	)		(167,196	)
Operating (loss) income		(5,186	)		56,010
Investment income:
Amortization of zero-coupon notes		4,469			10,371
Gain on sale of zero-coupon notes		—			34,803
Other		278			1,498
Investment income		4,747			46,672
Real estate and leasing (loss) income	$	(439	)	$	102,682

For the nine months ended September 30, 2003 office building revenue was $nil due to the sale of our two-thirds partnership interest in the Copley Place retail center and office complex, located in Boston, on July 19, 2002.

For the nine months ended September 30, 2003 hotel revenue was $nil due to the sale of the Marriott Copley Hotel on June 13, 2002. The Marriott Copley Hotel generated hotel revenues of $37.2 million for the nine months ended September 30, 2002. The hotel was sold for net cash proceeds of $111.6 million resulting in a pre-tax gain on sale of $58.9 million. The purchaser of the property assumed the associated existing debt of $96.9 million.

Leasing revenue decreased by $3.7 million in the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002. The decrease was mainly attributable to the sale of a data processing facility to UPS and the termination of the lease by UPS in January 2002. UPS had an option to purchase the building in which the data processing facility is located at the higher of fair market value or a settlement value, as defined in the lease agreement, prevailing at that time. On September 21, 2001 UPS notified the Company of its election to terminate the data processing facility lease and its election to exercise its option to purchase the building. On January 31, 2002 UPS purchased the building for $127.9 million, equal to the settlement value, and also purchased the land on which the building is located for $13.6 million, resulting in a total pre-tax gain on sale of $47.1 million.

The $2.5 million of leasing revenue for the nine months ended September 30, 2003 relates to a finance lease with the Kmart Corporation. As noted above upon its exit from bankruptcy proceedings on May 5, 2003, Kmart Corporation assumed the lease on the Manteno distribution facility with the original lease terms intact. To date the Kmart Corporation has not defaulted on any of its lease payments. However, there can be no assurance that it will not default on its future payments.

For the nine months ended September 30, 2003 operating expenses, interest expense and depreciation expense decreased to $0.7 million, $7.0 million and $nil, respectively, compared to $51.9 million, $26.3 million and $9.0 million, respectively, for the nine months ended September 30, 2002. These decreases were primarily due to the sales of the Marriott Copley Hotel in June 2002 and Copley Place in July 2002 and the repurchase of $170 million of debt in June 2002.

In 1989 a subsidiary of OPCC acquired five 757 aircraft and a data processing facility. The acquisition of the aircraft and the facility were financed by two series of privately placed, fixed rate, non-callable bonds issued by OPL Funding Corp. (“OPL Funding”), incorporated in Delaware as a special purpose subsidiary of Overseas Capital Co. One series (“Series A Bonds”), in the principal amount of $171.6 million, was due in 2012; the other (“Series B Bonds”), in the principal amount of $73.4 million, was due in 2019. Overseas Partners Credit, Inc., a special purpose subsidiary of OPL incorporated in the Cayman Islands, guaranteed the principal of these bonds and pledged zero-coupon treasury notes as security for the guarantee.

Real Estate and Leasing: (continued)

During June 2002 we approached and obtained the consent of all the bondholders to amend the Trust Indenture for the Series A Bonds and Series B Bonds to permit the repurchase and cancellation of the bonds. The terms of the repurchase and cancellation required the Company to pay an amount equivalent to the fair value of the collateral securities (relating to both principal and interest) to the bondholders along with a corresponding release of security. On June 27, 2002 OPL Funding completed the repurchase and cancellation of $111.6 million of our Series A Bonds and $58.4 million of our Series B Bonds for a total premium of $76.9 million over par. The corresponding release of security resulted in the sale of zero-coupon notes with an amortized cost of $211.5 million generating a $34.8 million gain on sale.

On October 6, 2003 OPL Funding completed the repurchase and cancellation of $60.0 million of Series A Bonds and $15.0 million of Series B Bonds for a total premium of $35.9 million. The corresponding release of security resulted in the sale of zero-coupon notes with an amortized cost of $91.5 million generating a $20.9 million gain on sale. The debt repurchase and corresponding sale of collateral will be recorded in the Company’s results in the fourth quarter of 2003.

Net income:

	Nine months endedSeptember 30,
(In thousands)	2003			2002
NET INCOME BEFORE TAXES
Reinsurance	$	40,252		$	(258,647	)
Real estate and leasing		(439	)		102,682
Other operating expenses		(25,961	)		(23,567	)
Consolidated net income before taxes		13,852			(179,532	)
Income taxes		3,504			(31,279	)
Net income (loss)	$	17,356		$	(210,811	)

Net income for the nine months ended September 30, 2003 was $17.4 million compared to net loss of $210.8 million for the corresponding period in 2002. This increase in net income was due primarily to the swing in reinsurance investment income from a loss of $175.5 million in the nine months ended September 30, 2002 to a gain of $75.7 million in the nine months ended September 30, 2003. The increase in reinsurance investment income was due to $27.7 million of net realized gains on sales of our S&P 500 portfolio and income of $42.5 million from our multi-manager funds during the nine months ended September 30, 2003 and the other-than-temporary impairment charge of $177.5 million recorded in our equity portfolio during the nine months ended September 30, 2002. This was partially offset by a decrease in real estate and leasing income of $103.1 million primarily due to the gains on sales of real estate assets during the nine months ended September 30, 2002. Other operating expenses increased by $2.4 million due to the net effect of the class action lawsuit settlement costs of $10 million and an asset impairment charge of $5.8 million to write-down the capitalized cost of insurance licenses owned by OPUS Re during the nine months ended September 30, 2003 and severance payments and a goodwill write-off of $2.5 million during the nine months ended September 30, 2002. The tax credit for the nine months ended September 30, 2003 was $3.5 million compared to a charge of $31.3 million for the same period in 2002. The tax credit for the nine months ended September 30, 2003 reflects a decrease in estimated state taxes due on the sales of assets in 2002. The tax charge of $31.3 million for the nine months ended September 30, 2002 was primarily due to the tax on the gains on sales of real estate assets. Net income per share was $0.15 for the nine months ended September 30, 2003 compared to net loss per share of $1.77 for the corresponding period in 2002.

Liquidity and Capital Resources

	Nine months endedSeptember 30,
(In thousands)	2003			2002
CASH FLOWS
Operating activities	$	(300,573	)	$	(141,617	)
Investing activities		227,804			316,689
Financing activities		(239,751	)		(256,757	)
Net decrease in cash and cash equivalents	$	(312,520	)	$	(81,685	)

Sources of capital and liquidity

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the short-term and long-term cash requirements of its business operations. Prior to going into runoff, our reinsurance operations had historically provided significant liquidity in that premiums were received in advance, generally substantially in advance, of the time claims were paid. However, since placing our reinsurance operations into runoff, claim payments have significantly exceeded premium receipts and this is likely to continue in future periods. The Company will continue to accelerate loss payments through commutations and novations of the remaining reinsurance contracts and this will result in continued negative cash flow. There is significant uncertainty regarding the timing of cash payments due to the uncertain number and timing of commutations and novations. Without the completion of commutations and novations, loss payments are expected to continue for at least the next twenty years.

In the normal course of reinsurance business, OPL’s bankers have issued letters of credit totaling $152.6 million as of June 30, 2004 to collateralize the Company’s accrued losses and unearned premium obligations to certain reinsureds. Following OPL’s decision to cease writing new business and to runoff our reinsurance operations, the banks required that our letter of credit facilities be fully secured by a portion of the Company’s investment portfolio of at least equivalent value. At June 30, 2004 the Company had $309.1 million of cash and investments collateralizing our $274.7 million letter of credit facilities.

At June 30, 2004 the reinsurance segment had $1.0 billion of cash and highly liquid investments. We believe that our current cash holdings and future sales and maturities of investments are adequate sources of liquidity for the future payment of claims and operating expenses. Further we expect that the amount of required collateral for our letter of credit facilities will decrease commensurate with the payment of our accrued loss and loss expense liabilities.

Following the Board of Directors February 13, 2002 announcement about its decision to restructure OPL and cause its operations to begin an orderly runoff, the Company is seeking to provide shareowners with both near term and longer-term liquidity. However, due to the regulated nature of the reinsurance business and other business reasons, it could take many years to complete the runoff of OPL’s businesses and fully return share capital to shareowners. As a holding company, a substantial proportion of OPL’s assets relate to its investments in subsidiaries. As such, OPL’s ability to make future distributions to shareowners is largely dependent upon it receiving distributions from its subsidiaries. Insurance regulation in Bermuda requires that OPL, OPRe and OPAL each maintain minimum capital and liquidity requirements and also prohibits such entities from distributing more than 15% of their prior year’s statutory capital unless specific approval is obtained from the Bermuda Monetary Authority. In addition to existing regulatory requirements, the Bermuda Monetary Authority has requested that it pre-approve all distributions from OPAL, OPRe and OPL. Dividend payments by OPL’s United States based reinsurance subsidiary OPUS Re are also limited by applicable law and OPUS Re requires regulatory approval to pay a dividend. See Note 6 to the Unaudited Consolidated Financial Statements for further information on the restrictions on distributions.

As discussed in Note 4 to the Unaudited Consolidated Financial Statements OPL has entered into a definitive stock purchase agreement to sell OPUS Re. The completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals. OPL expects the closing of the transaction will occur during the fourth quarter of 2004. OPL received a $7 million pre-closing distribution from OPUS Re in June 2004 and will receive additional proceeds of approximately $43 million, before deducting transaction costs, when the transaction closes. Total proceeds of approximately $50 million will become available for distribution to OPL’s shareowners if approved by the Bermuda Monetary Authority.

On November 25, 2003 OPL received approval from the Bermuda Monetary Authority to permit the payment of a distribution to shareowners of $2.50 per share or $296.9 million. This distribution was paid to shareowners on January 5, 2004. On August 4, 2004, following approval from the Bermuda Monetary Authority, the Board of Directors of OPL declared a distribution to shareowners of $2 per share or $237.5 million and this amount will be paid to shareowners on August 31, 2004.

Cash and cash equivalents decreased due to the following:


	Six months ended June 30,
(In thousands)	2004			2003
CASH FLOWS
Operating activities	$	(195,128	)	$	(218,961	)
Investing activities		359,645			361,227
Financing activities		(296,924	)		(239,131	)
Distribution from subsidiary held for sale		6,971			—

Net decrease in cash and cash equivalents	$	(125,436	)	$	(96,865	)

Operating activities

OnSince ~~February 13, 2002 the Board of Directors of~~ OPL’s ~~announced its decision to restructure OPL and cause its~~ reinsurance operations towent ~~begin~~into ~~an orderly~~ runoff. ~~Since~~in ~~this~~February ~~announcement~~2002 no new reinsurance contracts have been written and there has therefore been a significant reduction in the cash generated from reinsurance operations. Claim payments have exceeded premium receipts and this is likely to continue in future periods. The Company will continue to accelerate loss payments through commutations and novations of the remaining reinsurance contracts and this will further increase the negative cash flow.

~~Reinsurance~~During ~~operations used $310.4 million for~~ the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004, ~~compared~~funds towithheld, ~~using~~accrued ~~$130.2~~losses ~~million~~and ~~for~~loss ~~the~~expenses ~~nine~~and ~~months~~reinsurance ~~ended~~balances ~~September~~receivable 30decreased by $233.7 million, ~~2002~~$537.1 ~~This~~and ~~significant~~$8.1 ~~increase~~million inrespectively. ~~cash~~These ~~used~~decreases iswere primarily ~~due~~a toresult ~~the effect~~ of ~~increased loss payments, particularly due to~~ the commutation and novation of several reinsurance contracts,. ~~and~~We aanticipate ~~reduction~~that inthese ~~premium~~balances ~~receipts~~will ascontinue ato ~~result~~decrease ofas the runoff of OPL’s reinsurance operations progresses.

~~During~~Reinsurance underwriting operations used $223.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2003 reinsurance balances~~ ~~receivable,~~2004 ~~funds~~compared ~~withheld,~~to ~~accrued~~using ~~losses and loss expenses and reinsurance balances payable decreased by~~ $~~289~~219.63 million, ~~$90.6~~for ~~million,~~the ~~$377.3~~six ~~million~~months ~~and~~ended ~~$189.0~~June ~~million~~30, ~~respectively~~2003. These ~~decreases~~cash outflows were primarily adue ~~result~~to ~~of the~~ commutation and novation ~~of several reinsurance contracts~~payments. ~~We anticipate that these balances will continue to decrease as the runoff of OPL’s reinsurance operations progresses.~~

~~Real~~During ~~estate~~the ~~operations~~six ~~used~~months ended June 30, 2004 we received tax refunds of $519.75 million ~~for~~relating ~~the~~to ~~nine~~our ~~months~~real ~~ended~~estate ~~September~~operations. ~~30,~~Real ~~2003~~estate ~~compared~~operations toused ~~using~~ $417.64 million for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003. The net cash outflow was primarily due to payments of tax, and interest payments on the ~~remaining~~ debt ~~and~~that ~~reduced~~was ~~cashflows~~subsequently ~~following~~repurchased ~~the~~in ~~sale~~October ~~of the Copley Marriott Hotel and the sale of Copley Place~~2003.

We received $2314.70 million of interest and dividends during the ~~nine~~six months ended ~~September~~ June 30, ~~2003~~2004 ~~compared~~and to $4914.0 million for the ~~nine~~six months ended June ~~September~~ 30, ~~2002~~2003.

During the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 we used $85.36 million for the payment of other operating expenses compared to using $215.13 million for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003. ~~The reduced outflow was primarily a result of the reduction in expenses following the runoff decision and severance payments made during the nine months ended September 30, 2002.~~

Investing activities

Following our ~~February~~decision ~~13, 2002 announcement~~ to go into runoff, our investment objective has been and will continue to be more focused on capital preservation and short- to medium-term liquidity, as opposed to long-term return. Consequently, we have been reducing the duration of our investment portfolio and increasing our short-term investment positions to ensure that we will have sufficient cash available to meet claims obligations as they fall due and to mitigate our exposure to investment losses in the event of interest rate increases. We will continue to review our asset allocation as our runoff progresses. Despite these actions there may still be periods in which the Company records an investment loss as a result of the continued volatility in ~~worldwide~~ bond and equity markets.

During the ~~nine~~ six months ended ~~September~~June 30, ~~2003~~2004, we purchased $~~786~~368.60 million and sold $~~829~~694.02 million of available-for-sale investments compared to $~~1,194~~370.32 million and $~~1,620~~553.51 million, respectively for the ~~nine months~~six ~~ended September 30, 2002. During the nine~~ months ended ~~September~~June 30, 2003, sales from our available-for-sale investment portfolios exceeded purchases primarily due to the sale of part of the Company’s S&P 500 portfolios in order to reduce the Company’s exposure to equity price risk. During the ~~nine~~six months ended ~~September~~ June 30, ~~2002~~2004, sales from our available-for-sale investment portfolios exceeded purchases by $~~426~~326.2 million. This was ~~primarily~~in ~~due~~order to fund the ~~sale~~Company’s ofdistribution ~~our~~to ~~global bond~~shareowners ~~portfolios~~ and ~~the~~commutation ~~sale~~and ofnovation ~~one of our S&P 500 portfolios~~payments.

Investing activities: (continued)

Following our decision to runoff our reinsurance operations, our banks required that our letter of credit facilities be fully secured by a portion of the Company’s investment portfolio of at least equivalent value. The letters of credit have been used to collateralize the unearned premium and accrued loss and loss expense obligations of the Company to our cedants. At September 30, 2003 the Company had $798.1 million of assets collateralizing obligations to our cedants, of which $170.1 million was restricted cash and cash equivalents. The collateral includes $197.5 million held in trust accounts.

During the nine months ending September 30, 2002 our real estate investing activities produced net cash inflow of $361.1 million, which primarily related to the sale of the data processing facility and the land on which it is located, the Marriott Copley Hotel and Copley Place. The purchase of the data processing facility by the Company was originally financed, in 1989, by issuing Series B Bonds. From the sale proceeds of the data processing facility we purchased $84.2 million of restricted investments to collateralize our interest obligations on the Series B Bonds. During the nine months ended September 30, 2002 we also completed the repurchase and cancellation of $170 million of Series A Bonds and Series B Bonds. This resulted in the release and sale of zero-coupon notes previously held as collateral to guarantee the repayment of these bonds.

On October 6, 2003 we completed the repurchase and cancellation of the remaining $60.0 million of our Series A Bonds and $15.0 million of our Series B Bonds for a total premium of $35.9 million. The corresponding release of security resulted in the sale of zero-coupon notes with an amortized cost of $91.5 million generating a $20.9 million gain on sale. The debt repurchase and corresponding sale of collateral will be recorded in the Company’s results in the fourth quarter of 2003.

Financing activities

~~During~~As a result of the ~~nine~~decision ~~months~~to ~~ended~~restructure ~~September~~OPL 30and cause its operations to begin an orderly runoff, ~~2003~~we amended our dividend policy. It is unlikely that the Company ~~repaid~~will $1pay ordinary dividends in the future.7 ~~million~~We ofexpect ~~debt~~that ~~relating~~all future returns of capital to our shareowners will be in the ~~finance~~form ~~lease~~of ~~with~~liquidating ~~Kmart Corporation.~~distributions, ~~During~~giving due consideration to the ~~corresponding~~Company’s ~~period~~required incapital levels ~~2002~~to support the ~~company~~runoff ~~paid~~of ~~$251.9~~our ~~million~~accrued toloss ~~repay~~and loss expense liabilities, our contingent liabilities, ongoing operating expenses, regulatory requirements and ~~repurchase~~availability ~~debt~~of unrestricted liquid assets. On November 25, ~~primarily~~2003, ~~due~~OPL received approval from the Bermuda Monetary Authority to permit the ~~repurchase~~payment ~~and~~of ~~cancellation~~a distribution to shareowners of ~~Series~~$2.50 Aper ~~Bonds~~share. This distribution was paid to shareowners on January 5, 2004 and ~~Series~~resulted Bin ~~Bonds~~a cash outflow of $296.9 million.

On August 84, ~~2001~~2004, ~~the~~following ~~Company~~approval ~~announced~~from the ~~suspension~~Bermuda ofMonetary Authority, the ~~repurchase~~Board of Directors ~~shares~~ of ~~the Company’s~~OPL ~~Common~~declared ~~Stock,~~a ~~effective~~distribution ~~immediately. This was necessitated by the need~~ to ~~demonstrate~~shareowners toof ~~the~~$2 ~~Company’s~~per ~~customers,~~share ~~insurance~~or ~~regulators~~$237.5 million and ~~rating~~this ~~agencies~~amount ~~that~~will itbe ispaid ~~able~~ to ~~maintain~~shareowners aon ~~strong~~August ~~and~~31, ~~stable capital base~~2004. ~~During~~The ~~the nine~~timing ~~months ended September 30, 2003~~ and ~~September~~amount ~~30, 2002 the Company repurchased $0.3 million and $2.6 million~~ of ~~shares,~~any ~~respectively.~~further ~~These~~distributions ~~shares~~is ~~were~~dependent ~~purchased~~on ~~from~~OPL’s ~~employees~~ability ~~who had exercised a put-option~~ to ~~sell their shares upon~~obtain ~~termination~~specific ofapproval ~~their~~from ~~employment with~~ the ~~Company,~~Bermuda ~~following~~Monetary ~~our February 13, 2002 announcement to go into runoff~~Authority.

As a result of the decision to restructure OPL and cause its operations to begin an orderly runoff, we amended our dividend policy. Our historical dividend policy relied on the highly profitable and predictable cash flow characteristics of the shipper’s risk program. It is unlikely that the Company will pay ordinary dividends in the future.

We expect that all future returns of capital to our shareowners will be in the form of liquidating distributions, giving due consideration to the Company’s required capital levels to support the runoff of our accrued loss and loss expense liabilities, our contingent liabilities, regulatory requirements and availability of unrestricted liquid assets. On March 26, 2003 OPL received approval from the Bermuda Monetary Authority to permit the payment of a distribution to shareowners of $2 per share. This distribution was paid to shareowners on April 9, 2003 and resulted in a cash outflow of $237.7 million. The timing and amount of any future distributions is dependent on OPL’s ability to obtain specific approval from the Bermuda Monetary Authority.

Sources of capital and liquidity

Sources of capital and liquidity (continued)

The Company has historically obtained unsecured letter of credit facilities from banks to conduct its reinsurance business. The letters of credit have been used to collateralize the unearned premium and accrued loss and loss expense obligations of the Company to our cedants. Following our decision to cease writing new business and to run off our reinsurance operations, the banks required that these facilities be fully secured by a portion of the Company’s investment portfolio of at least equivalent value. At September 30, 2003 the Company had $798.1 million of cash and investments collateralizing obligations to our cedants, including $197.5 million held in trust accounts.

At September 30, 2003 the reinsurance segment had $1.9 billion of cash and highly liquid investments. We believe that our current cash holdings and future sales and maturities of investments are adequate sources of liquidity for the future payment of claims and operating expenses. Further we expect that the amount of required collateral for our letter of credit facilities will decrease commensurate with the payment of our accrued loss and loss expense liabilities.

As a holding company, a substantial proportion of OPL’s assets relate to its investments in subsidiaries. As such, OPL’s ability to make future distributions to shareowners is largely dependent upon it receiving distributions from its subsidiaries. Insurance regulation in Bermuda requires that OPL, OPRe and OPAL each maintain minimum capital and liquidity requirements and also prohibits such entities from distributing more than 15% of their prior year’s statutory capital unless specific approval is obtained from the Bermuda Monetary Authority. In addition to existing regulatory requirements, the Bermuda Monetary Authority has requested that it pre-approve all distributions from OPAL, OPRe and OPL. Dividend payments by OPL’s United States based reinsurance subsidiary OPUS Re are also limited by applicable law and OPUS Re requires regulatory approval to pay a dividend. See Note 5 to the Unaudited Consolidated Financial Statements for further information on the restrictions on distributions.

Following the Board of Directors February 13, 2002 announcement of its decision to restructure OPL and cause its operations to begin an orderly runoff, the Company will seek to provide shareowners with both near term and longer-term liquidity. However, due to the regulated nature of the reinsurance business and other business reasons, it could take many years to complete the runoff of OPL’s businesses and fully return share capital. On March 26, 2003 OPL received approval from the Bermuda Monetary Authority to permit the payment of a distribution to shareowners of $2 per share. This distribution was paid to shareowners on April 9, 2003.

Credit Risk

Credit risk represents the loss that would occur if a counterparty or issuer failed to perform its contractual obligations. Certain policies and procedures have been established to protect the Company against such losses from its investments or receivables. Controlling duration of the investment portfolio by limiting tracking error to known benchmarks, placing limits on exposure to any one counterparty and mandating minimum credit ratings all serve to control the credit exposure associated with the Company’s financial instruments.

InThe ~~addition, the~~ Company’s ~~finite~~is ~~reinsurance business~~also ~~includes~~exposed ato ~~financial~~credit ~~guarantee~~risk ~~contract~~on ~~that~~losses ~~exposes~~recoverable ~~the~~from ~~Company~~reinsurers toand ~~underwriting~~premiums ~~loss~~receivable infrom ~~the~~cedants. ~~event~~The ofCompany ~~credit~~mitigated ~~defaults.~~this ~~This~~risk ~~policy~~by isdiversifying ~~due~~its assumed toand ~~expire~~ceded bybusiness ~~the~~with ~~end~~a number of ~~2003.~~different ~~The~~counterparties ~~Company~~and ~~controls~~mandating ~~this~~minimum ~~exposure to~~ credit ~~risk~~ratings byfor ~~establishing~~each ~~limits on~~reinsurer at the ~~amount~~time of ~~risk~~placement toand ~~any~~contractual ~~one~~features ~~underlying~~that ~~credit~~permit ~~and~~the ~~through~~right ~~aggregate~~of ~~limits~~offset. inThe ~~the~~Company ~~reinsurance~~continues ~~contract~~to monitor financial stability on a regular basis.

The Company is also exposed to credit risk on losses recoverable from reinsurers and premiums receivable from cedants. The Company mitigated this risk by diversifying its assumed and ceded business with a number of different counterparties and mandating minimum credit ratings for each reinsurer at the time of placement and contractual features that permit the right of offset.

Inflation

Inflation, including inflation in damage awards and costs, can substantially increase the ultimate cost of claims in certain types of insurance. This is because the actual payment of claims may take place a number of years after the provisions for losses are reflected in the financial statements. We will, however, earn income on the funds retained for a period of time until eventual payment of a claim. Our investments are not significantly affected by inflation as the liquidity of our portfolio permits us to respond quickly to changing market conditions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~The~~There has been no material change in the Company’s market risks in 2004. The Company’s exposures to market risks are disclosed in detail in the Overseas Partners Ltd. Annual Report on Form 10-K for the fiscal year ended December 31, ~~2002. During the nine months ended September 30,~~ 2003 ~~the Company has reduced the exposure to equity price risk through the sale of part of our S&P 500 portfolios~~. ~~There may still be periods in which the Company records an investment loss as a result of the continued volatility in worldwide bond and equity markets.~~

Item 4. Controls and Procedures

As of ~~the~~June ~~end~~30, ~~of the period covered by this Quarterly Report on Form 10-Q~~2004, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the President & Chief Executive Officer and the Chief Accounting Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the President & Chief Executive Officer and the Chief Accounting Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. No change in the Company’s internal control over financial reporting occurred during the Company’s most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Safe Harbor Disclosure

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Some of the statements contained in this Securities and Exchange Commission filing contain forward-looking information. Forward-looking statements are statements other than historical information or statements of current condition. Some forward looking statements can be identified by the use of such words as “expect,” “believe,” “goal,” “plan,” “intend,” “estimate,” “may” and “will” or similar words. These forward-looking statements relate to our plans and objectives for future operations including our growth and operating strategy, our implementation of new products and new reinsurance programs, trends in our industry and our policy on future dividends.

You should be aware that these statements are subject to risks, uncertainties and other factors, that could cause the actual results to differ materially from those suggested by the forward-looking statements. Accordingly, there can be no assurance that those indicated results will be realized. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are:

• ~~the~~The uncertainties of the reserving process, including the potential for increases in the reserves for accrued losses and loss expenses of OPUS Re prior to completion of the proposed sale;

• ~~the~~The uncertainties surrounding the estimates of losses incurred as a result of the terrorist attacks on the World Trade Center and the related events of September 11, 2001;

• ~~future~~Future losses on unexpired policies, including launch and in-orbit satellite exposures through to ~~2007,~~2009 ~~a financial guaranty program that expires in 2003~~ and a residual value reinsurance program where the Company is exposed to losses until 2013;

• ~~our~~Our ability to collect reinsurance recoverables, particularly given the increased credit risk following the terrorist attacks on the World Trade Center and the related events of September 11, 2001;

• ~~the~~Loss ~~occurrence~~ of ~~catastrophic~~the ~~events~~services ~~with~~of aany ~~frequency~~of orthe ~~severity~~Company’s ~~exceeding~~remaining ~~our~~executive ~~estimates~~officers;

• ~~loss~~Uncertainties ofrelating ~~the~~to ~~services~~government ofand ~~any~~regulatory ofpolicies ~~the~~(such ~~Company’s~~as ~~remaining~~subjecting ~~executive~~us ~~officers~~to taxation in certain jurisdictions);

• ~~uncertainties~~Losses ~~relating~~due to ~~government~~interest ~~and~~rate ~~regulatory policies (such as subjecting us to taxation in certain jurisdictions)~~fluctuations;

• Losses arising from the sale of any of our reinsurance subsidiaries, including the potential for further losses ~~due~~from toOPUS ~~interest~~Re ~~rate~~in ~~fluctuations~~the event that the proposed sale is not completed;

• ~~losses~~Losses arising from our investments in private equity funds in the ~~sale~~event ofthat ~~any~~the ofproposed ~~our~~sale ~~reinsurance~~is ~~subsidiaries~~not completed;

• ~~volatility~~Volatility in U.S. financial markets which could affect our investment portfolio~~, and~~;

• ~~the~~Adverse ~~resolution~~outcomes offrom any current, pending ~~litigation.~~or future state or federal tax audits; and

•	The resolution of other pending litigation.

We do not undertake any duty to update these forward-looking statements in any manner.

OVERSEAS PARTNERS LTD. AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See ~~Notes~~Note 37 ~~and~~to 6the Condensed Notes to the Unaudited Consolidated Financial Statements for discussions of legal proceedings to which OPL is a party.

Item 6. Exhibits and Reports on Form 8-K

Exhibits:

31	(a)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
10(a)		Settlement Agreement by and between United States Life Insurance Company and OPRe dated June 3, 2004.
31	(b)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
10(b)		Stock Purchase Agreement by and between OPL, Overseas Partners US Holding Company, OPUS Re and OdysseyRe, dated July 2, 2004.
32			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
31(a)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b) Reports on Form 8-K: ~~No reports on Form 8-K were filed during the quarter ended September 30, 2003.~~

On July 2, 2004, OPL filed a report on Form 8-K containing the following information:

Item 2 – Acquisition or disposition of assets. OPL announced that it had entered into a definitive stock purchase agreement with OdysseyRe, pursuant to which OdysseyRe will purchase from OPL 100% of the outstanding shares of OPL’s wholly owned subsidiary, OPUS Re.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized.

Date: November 10, 2003			OVERSEAS PARTNERS LTD.
Date: August 9, 2004	OVERSEAS PARTNERS LTD.
	By:	/s/ Mark R. Bridges	~~By:~~	~~/s/ Mark R. Bridges~~
			Mark R. Bridges President and Chief Executive Officer
		Mark R. Bridges
			By:	/s/ Chris Fleming
		President and Chief Executive Officer
			Chris Fleming Chief Accounting Officer
	By:	/s/ Chris Fleming
		Chris Fleming
		Chief Accounting Officer

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