UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICU T

Transcription

1 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICU T SHERRY SCHNALL, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, V. ANNUITY AND LIFE RE (HOLDINGS), LTD., XL CAPITAL, LTD., LAWRENCE S. DOYLE, FREDERICK S. HAMMER, JOHN F. BURKE, WILLIAM W. ATKIN, BRIAN O'HARA, AND MICHAEL P. ESPOSITO, JR., Civil Action No 02 CV 2133 (EBB) Defendants. STIPULATION AND AGREEMENT OF PARTIAL SETTLEMENT This Stipulation and Agreement of Partial Settlement (the "Stipulation") is submitte d pursuant to Rule 23 of the Federal Rules of Civil Procedure. Subject to the approval of th e Court, this Stipulation is entered into among Lead Plaintiffs Communications Workers o f America and Midstream Investments Ltd. on behalf of themselves and the Class (as hereinafte r defined) and Defendants Annuity and Life Re (Holdings ), Ltd. ("ANR"), XL Capital, Ltd. ("XL Capital"), and Lawrence S. Doyle ("Doyle"), Frederick S. Hammer ("Hammer"), John F. Burk e ("Burke"), William W. Atkin ("Atkin"), Brian O'Hara ("O'Hara"), and Michael P. Esposito ("Esposito") (Doyle, Hammer, Burke, Atkin, O'Hara, and Esposito are collectively referred to a s the "Individual Defendants ") (ANR, XL Capital, and the Individual Defendants are collectivel y referred to as the "Settling Defendants"), by and through their respective counsel. This settlement does not settle or release any claims of Lead Plaintiffs and the Class against KPMG i n Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG" ) The Settling Defendants and KPMG are collectively referred to hereinafter as the "Defendants."

2 WHEREAS : A. Beginning on December 4, 2002, nine class actions alleging violations of federa l securities laws - Schnall v. Annuity and Life Re (Holdings), Ltd., et al., Civil Action No. 02- CV (GLG) ; Feldbaum v. Annuity and Life Re (Holdings), Ltd., et al_, Civil Action No. 02-CV (GLG) ; Nadoff v. Annuity and Life Re (Holdings), Ltd., et al., Civil Action No. 02-CV (GLG) ; Bernard v. Annuity and Life Re (Holdings), Ltd., et al., Civil Action No. 03-CV ( DJS) ; Madsen v. Annuity and Life Re (Holdings), Ltd., et a l., Civil Action No. 02-CV (GLG) ; Bird v. Annuity and Life Re (Holdings), Ltd., et al., Civil Action No CV ( RNC) ; Hertz! v. Annuity and Life Re (Holdings ), Ltd., et al., Civil Action No. 02- CV (GLG) ; Huff v. Annuity and Life Re (Holdings), Ltd., et al., Civil Action No. 03- CV (SRU) ; and Lassoff v. Annuity and Life Re (Holdings), Ltd., et al., Civil Action No. 03-CV (SRU) - were filed in this Court and were subsequently consolidated under th e above caption, and are hereinafter referred to as the "Action." The Court appointe d Communications Workers of America and Midstream Investments Ltd. as the Lead Plaintiffs and appointed Scott + Scott, LLC and Milberg Weiss Bershad Hynes & Lerach LLP (no w known as Milberg Weiss Bershad & Schulman LLP) as Co-Lead Counsel ; B. The Consolidated Amended Class Action Complaint for Violations of Federa l Securities Laws dated July 11, 2003 (the "Complaint") filed in the Action generally alleges, among other things, that Defendants issued false and misleading press releases and othe r statements regarding ANR's financial condition during the Class Period -- March 15, through and including November 19, in a scheme to artificially inflate the value of ANR's securities ; 2

3 C. The Complaint further alleges that Lead Plaintiffs and other Class Member s purchased the common stock of ANR during the Class Period at prices artificially inflated as a result of the Defendants' dissemination of materially false and misleading statements regarding ANR in violation of Sections 10(b) and 20 (a) of the Securities Exchange Act of 1934, and Rule I Ob-5 promulgated thereunder ; D. On September 30, 2003, ANR filed its answer to the Complaint, denying an y liability to Lead Plaintiffs and the Class ; E. On October 3, 2003, Individual Defendants Burke, Hammer, and Atkin each file d a separate motion to dismiss the Complaint. In addition, XL Capital and Individual Defendants O'Hara and Esposito (the "XL Capital Defendants ") together filed a motion to dismiss on October 3, 2003 ; F. On October 23, 2003, Lead Plaintiffs filed a separate action, Civil Action No. 03- CV-1826, (the "KPMG Action") with a separate complaint against KPMG in Bermuda ("KPM G Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG "), alleging violation s of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule lob-5 promulgate d thereunder. On January 2, 2004, the Court granted Lead Plaintiffs ' motion to consolidate th e KPMG Action with the Action, without prejudice to Defendants' rights to request a separate tria l at a later and more appropriate phase of the litigation. This Settlement with the Settling Defendants does not settle any claims against KPMG or its partners, principals, employees, agents and affiliates, none of whom or which shall be released from any claims of the Lead Plaintiffs or the Class under this Settlement ; G. On October 24, 2003, Doyle filed his answer to the Complaint, denying an y liability to Lead Plaintiffs and the Class ; 3

4 H. Lead Plaintiffs sought and received permission from the Court to file a consolidated response to the motions to dismiss filed by Burke, by Hammer, and by the XL Capital Defendants. As Atkin's motion to dismiss was the only one to make substantially different arguments for dismissal, Lead Plaintiffs filed a separate response to Atkin's motion to dismiss. On November 19, 2003, Lead Plaintiffs filed these opposition papers to the motions t o dismiss ; Atkin filed his reply to Lead Plaintiffs' opposition on December 4, On December 13, 2003, the Court denied Atkin's motion to dismiss without prejudice. On January 26, 2004, Atkin filed a renewed motion to dismiss. On March 16, 2004, Lead Plaintiffs file d their opposition to Atkin's renewed motion to dismiss. Atkin filed his response on April 1, On April 15, 2004, Lead Plaintiffs sought and received permission from the Court to file a surreply to Atkin's renewed motion to dismiss. On April 19, 2004, Atkin filed a reply to the surreply ; The XL Capital Defendants filed their reply to Lead Plaintiffs' opposition on December 18, On March 9, 2004, the Court denied the XL Capital Defendants' motion t o dismiss. On April 8, 2004, the XL Capital Defendants filed their answer and cross-claim to th e Complaint. The XL Capital Defendants denied any liability to Lead Plaintiffs and the Class ; K. Hammer filed his reply to Lead Plaintiffs' opposition on December 22, On February 4, 2004, the Court denied Hammer's motion to dismiss. On February 24, 2004, Hammer filed his answer to the Complaint, denying any liability to Lead Plaintiffs and the Class ; L. Burke filed his reply to Lead Plaintiffs' opposition on December 22, On February 26, 2004, the Court denied Burke's motion to dismiss. On April 8, 2004, Burke filed his answer to the Complaint, denying any liability to Lead Plaintiffs and the Class ; 4

5 M. The Settling Defendants deny any wrongdoing whatsoever and this Stipulatio n shall in no event be construed or deemed to be evidence of or an admission or concession on th e part of any Settling Defendant with respect to any claim or of any fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that the Settling Defendants have asserted. The parties to this Stipulation recognize, however, that the litigation has been filed by Plaintiffs and defended by the Settling Defendants in good faith and with adequate basi s in fact under Federal Rule of Civil Procedure 11, that the litigation is being voluntarily settle d after advice of counsel, and that the terms of the settlement are fair, adequate and reasonable. This Stipulation shall not be construed or deemed to be a concession by any Plaintiff of an y infirmity in the claims asserted in the Action ; N. Plaintiffs' Counsel have conducted an investigation relating to the claims and th e underlying events and transactions alleged in the Complaint. Plaintiffs' Counsel have analyze d the evidence produced by ANR, including with respect to its litigated arbitration proceedin g against Transamerica Occidental Life Insurance Co., and have researched the applicable law with respect to the claims of Lead Plaintiffs and the Class against the Settling Defendants and the potential defenses thereto ; 0. With the assistance of retired United States District Judge Nicholas H. Polita n acting as a special mediator, Lead Plaintiffs, by their counsel, have conducted discussions and arm's length negotiations with counsel for certain Settling Defendants with respect to a compromise and settlement of the Action as against the Settling Defendants with a view to settling the issues in dispute and achieving the best relief possible consistent with the interests o f the Class; and

6 P. Based upon their investigation and review as set forth above, Plaintiffs' Counse l have concluded that the terms and conditions of this Stipulation are fair, reasonable and adequate to Lead Plaintiffs and the Class, and in their best interests, and have agreed to settle the claim s raised in the Action pursuant to the terms and provisions of this Stipulation, after considering (a ) the substantial benefits that Lead Plaintiffs and the members of the Class will receive fro m settlement of the Action, (b) the attendant risks of litigation, and (c) the desirability of permittin g the Settlement to be consummated as provided by the terms of this Stipulation. NOW THEREFORE, without any admission or concession on the part of Lead Plaintiffs of any lack of merit of the Action whatsoever, and without any admission or concession of any liability or wrongdoing or lack of merit in the defenses whatsoever by the Settling Defendants, i t is hereby STIPULATED AND AGREED, by and among the parties to this Stipulation, through their respective attorneys, subject to approval of the Court pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, in consideration of the benefits flowing to the parties hereto from th e Settlement, that all Settled Claims (as defined below) as against the Released Parties (as define d below) and all Settled Defendants' Claims (as defined below) shall be compromised, settled, released and dismissed with prejudice, upon and subject to the following terms and conditions : CERTAIN DEFINITION S As used in this Stipulation, the following terms shall have the following meanings : (a) "Authorized Claimant" means a Class Member who submits a timely an d valid Proof of Claim form to the Claims Administrator. (b) "Claims Administrator" means the firm of The Garden City Group, Inc., which shall administer the Settlement. 6

7 (c) "Class" and "Class Members" mean, for the purposes of this Settlement only, all persons who purchased the common stock of Annuity and Life Re (Holdings), Ltd. ("ANR") during the period between March 15, 2000 and November 19, 2002, inclusive, and were damaged thereby. Excluded from the Class are the Settling Defendants, the officers and directors of ANR and XL Capital at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which Defendants have or had a controlling interest. For purposes of this Settlement, the term "controlling interest" shall include any interest of 10% or more of the common stock of any entity. Also excluded from the Class are any putative Class Members who exclude themselves by filing a request for exclusion in accordance with the requirements set forth in the Notice. (d) "Class Period" means, for the purposes of this Settlement only, the period of time between March 15, 2000 and November 19, 2002, inclusive. (e) "Defendants" means the Settling Defendants and KPMG. (f) "Effective Date of Settlement" or "Effective Date" means the date upon which the Settlement contemplated by this Stipulation shall become effective, as set forth in 23 below. (g) "Final Order" means an order as to which there is no pending appeal, stay, motion for reconsideration or motion to vacate or similar request for relief, and as to which the period of time for a party to appeal has expired. For purposes hereof if no appeal or motion for reconsideration, to vacate, or for similar relief is filed within thirty-three (33) days after entry of the order in the District Court, the order shall be deemed to be a Final Order. (h) "Individual Defendants" means Lawrence S. Doyle (Chief Executive Officer, President, and a Director of ANR from the beginning of the Class Period until

8 approximately September 12, 2002), Frederick S. Hammer (Chairman of the Board of Directors of ANR during the Class Period, sitting variously on the Executive Committee, the Finance and Investment Committee, and the Corporate Governance Committee during the Class Period and sitting on the Transition Committee of the Board of Directors from approximately September 17, 2002 until the end of the Class Period), John F. Burke (Chief Financial Officer, Senior Vice President, Corporate Secretary, and Principal Accounting and Financial Officer of ANR from approximately September 17, 2001 until the end of the Class Period), William W. Atkin (Chief Financial Officer, Treasurer, Corporate Secretary, and Principal Accounting and Financial Officer of ANR from the beginning of the Class Period until August 31, 2001), Brian O'Hara (a Director of ANR and the President and Chief Executive Officer of XL Capital during the Class Period), and Michael P. Esposito (a Director of ANR, sitting on the Executive Committee and the Finance and Investment Committee, and the Chairman of the Board of Directors of XL Capital during the Class Period). (i) "Notice" means the Notice of Pendency of Class Action and Proposed Settlement with Certain Defendants, Motion for Attorneys' Fees and Settlement Fairness Hearing, which is to be sent to members of the Class substantially in the form attached hereto as Exhibit 1 to Exhibit A. (j) "Order and Final Judgment" means the proposed order to be entered approving the Settlement substantially in the form attached hereto as Exhibit B. (k) "Order for Notice and Hearing" means the proposed order preliminarily approving the Settlement and directing notice thereof to the Class substantially in the form attached hereto as Exhibit A.

9 (1) "Plaintiffs' Counsel" means Plaintiffs' Co-Lead Counsel and all other counsel representing Plaintiffs in the Action. (m) "Plaintiffs' Co-Lead Counsel" means the law firms of Scott + Scott, LLC and of Milberg Weiss Bershad & Schulman LLP. (n) "Proof of Claim" means the Proof of Claim and Release, which is to be sent to members of the Class substantially in the form attached hereto as Exhibit 2 to Exhibit A. (o) "Publication Notice" means the summary notice of proposed Settlement and hearing for publication substantially in the form attached as Exhibit 3 to Exhibit A. (p) "Released Parties" means any and all of the Settling Defendants, their past or present subsidiaries, parents, successors and predecessors, and all of the aforementioned entities' officers, directors, agents, employees, attorneys, advisors, insurers, and investment advisors, and any person, firm, trust, corporation, officer, director or other individual or entity i n which any Settling Defendant has a controlling interest or which is related to or affiliated with any of the Settling Defendants, and the legal representatives, heirs, successors in interest or assigns of the Settling Defendants. "Released Parties" does not include KPMG in Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG") or its partners, principals, employees, agents and affiliates. (q) "Settled Claims" means any and all claims, debts, demands, rights o r causes of action or liabilities whatsoever (including, but not limited to, any claims for damages, interest, attorneys' fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on United States federal, state, local, statutory or common law or the laws of Bermuda or any other law, rule or regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether clas s 9

10 or individual in nature, including both known claims and Unknown Claims, (i) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, or (ii) that could have been asserted in any forum by the Class Members or any of them against any of the Released Parties which arise out of or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint and relate to the purchase of shares of the common stock of Annuity and Life Re (Holdings) Ltd. ("ANR") during the Class Period. "Settled Claims" does not include any claims against KPMG in Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG") or its partners, principals, employees, agents and affiliates. (r) "Settled Defendants' Claims" means any and all claims, rights or causes of action or liabilities whatsoever, whether based on United States federal, state, local, statutory or common law or the laws of Bermuda or any other law, rule or regulation, including both known claims and Unknown Claims, that have been or could have been asserted in the Action or any forum by the Settling Defendants or any of them or the successors and assigns of any of them against any of the Lead Plaintiffs, Class Members or their attorneys, which arise out of or relate in any way to the institution, prosecution, or settlement of the Action (except for claims to enforce the Settlement). (s) "Settlement" means the settlement contemplated by this Stipulation. (t) "Settling Defendants" means ANR, XL Capital, and the Individual Defendants. (u) "Settling Defendants' Counsel" means the law firms of Day, Berry & Howard LLP and Drinker Biddle & Reath LLP on behalf of Defendant ANR, the law firms of Cahill Gordon & Reindel LLP and The Law Offices of Thomas W. Andrea, Esq. on behalf of 10

11 Defendants XL Capital, Ltd., Brian O'Hara, and Michael P. Esposito, Jr., the law firm of Cummings & Lockwood LLC on behalf of Defendant Lawrence S. Doyle, the law firms of Day, Berry & Howard LLP, Drinker Biddle & Reath LLP, and McCarter & English, LLP on behalf of Defendant Frederick S. Hammer, the law firms of Carmody & Torrance LLP, Morgan, Lewis & Bockius LLP, Day, Berry & Howard LLP, and Drinker Biddle & Reath LLP on behalf of Defendant John F. Burke, and the law firm of Pullman & Comley, LLC on behalf of Defendant William W. Atkin. (v) "Unknown Claims" means any and all Settled Claims which any Lea d Plaintiff or Class Member does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties, and any Settled Defendants' Claims which any Settling Defendant does not know or suspect to exist in his, her or its favor, which if known by him, her or it might have affected his, her or its decision(s) with respect to the Settlement. With respect to any and all Settled Claims and Settled Defendants' Claims, the parties stipulate and agree that upon the Effective Date, the Lead Plaintiffs and the Settling Defendants shall expressly waive, and each Class Member shall be deemed to have waived, and by operation of the Judgment shall have expressly waived, any and all provisions, rights and benefits conferred by any law of any state or territory of the United States or Bermuda, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542, which provides : A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Lead Plaintiffs and Settling Defendants acknowledge, and Class Members by operation of law shall be deemed to have acknowledged, that the inclusion of "Unknown Claims" in the definitio n 11

12 of Settled Claims and Settled Defendants' Claims was separately bargained for and was a ke y element of the Settlement. SCOPE AND EFFECT OF SETTLEMEN T 2. The obligations incurred pursuant to this Stipulation shall be in full and fina l disposition of the Action as against the Settling Defendants and any and all Settled Claims a s against all Released Parties and any and all Settled Defendants' Claims. 3. (a) Upon the Effective Date of this Settlement, Lead Plaintiffs and members of the Class on behalf of themselves, their heirs, executors, administrators, successors an d assigns, shall, with respect to each and every Settled Claim, release and forever discharge, an d shall forever be enjoined from prosecuting, any Settled Claims against any of the Release d Parties. (b) Upon the Effective Date of this Settlement, each of the Settlin g Defendants, on behalf of themselves and the Released Parties, shall release and forever discharg e each and every of the Settled Defendants' Claims, and shall forever be enjoined fro m prosecuting the Settled Defendants' Claims. (c) Upon the Effective Date of this Settlement, the Released Parties shal l obtain bar order protection substantially in the form appearing in the Order and Final Judgmen t annexed hereto as Exhibit B. THE SETTLEMENT CONSIDERATION 4. (a) Within three (3) business days of the execution of this Stipulation an d Agreement of Partial Settlement, the Settling Defendants shall pay $14 million (the "Cash Settlement Amount") into escrow for the benefit of Lead Plaintiffs and the Class as follows : (1 ) 12

13 $3 million from XL Capital ; (2) $2.5 million from ANR ; and (3) $8.5 million from ANR's D&O liability insurer. (b) In addition, no later than ten days before the date scheduled in the Order for Notice and Hearing for the Settlement Fairness Hearing, ANR will elect to either : (1) pay another $2.5 million in cash into escrow for the benefit of Lead Plaintiffs and the Class ; or (2) agree to issue and deliver a number of freely tradeable shares of common stock of ANR, valued 1 at $2.5 million, but representing no more than 19.9% of ANR's outstanding shares (the "Settlement Shares") for the benefit of the Class upon Plaintiffs' Co-Lead Counsel's instructions. ANR shall either register the shares of common stock to be delivered for the benefit of the Class or shall provide its counsel's opinion that the shares are exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933, 15 U.S.C. 77c(a)(10), and are therefore freely tradeable, provided that the holder of such shares is not an affiliate of ANR.. ANR agrees to issue and deliver such shares on the instructions of Plaintiffs' Co-Lead Counsel, in whole or in part and from time to time as instructed by Plaintiffs' Co-Lead Counsel. Plaintiffs' Co-Lead Counsel shall have the right to sell any and all of such shares and to deposit the proceeds into the escrow fund for the benefit of the Class. The Settlement Shares shall also be appropriately adjusted to account for any stock splits, dividends, or the issuance of shares of ANR that have not been authorized as of the date of the Settlement Fairness Hearing. As of the date of the Settlement Fairness Hearing and until the Settlement Shares are actually distributed, the Settlement Shares shall be treated the same as all other issued and outstanding shares of AN R ' The shares shall be valued using the 20-day Volume Weighted Average Price ("VWAP") reported on the Bloomberg service for ANR common stock for the 20 contiguous trading days immediately preceding, and ending at 4 :00 p.m. New York, New York time on the day before the actual date the Settlement Fairness Hearing is held. The calculation of the VWAP shall be appropriately adjusted to account for any stock splits or reverse stock splits. 13

14 common stock as of the date hereof, including in the event of any merger or sale of ANR, or sale or distribution of all or substantially all of ANR's assets, or other extraordinary event affecting the capital structure of ANR. (c) The Cash Settlement Amount and any interest earned thereon, and the Settlement Shares (if issued) or additional $2.5 million cash payment from ANR (or the proceeds of the sale of any or all of the Settlement Shares (if issued), if sold, and the interest and any dividends thereon) shall be the Gross Settlement Fund. (d) The Settling Defendants will provide reasonable cooperation to Plaintiffs ' Co-Lead Counsel for the Class' remaining claims in this Action against KPMG. Reasonable cooperation shall include the production of documents and the voluntary appearance for interview, deposition, and/or trial, on reasonable notice. Interviews and/or depositions will be conducted within the witness' jurisdiction; should a settling party be requested to appear for trial, his reasonable travel expenses will be paid by the Plaintiffs. ANR will use its best efforts to assist in obtaining the cooperation of knowledgeable former employees and directors that are released by this Settlement. Disclosures made pursuant to this paragraph shall be subject to the protective order entered in this case, as amended from time to time. 5. (a) The Gross Settlement Fund, net of any Taxes (as defined below) on the income thereof, shall be used to pay (i) the Notice and Administration Costs referred to in 7 hereof, (ii) the attorneys' fee and expense award referred to in 8 hereof, and (iii) the remaining administration expenses referred to in 9 hereof. The balance of the Gross Settlement Fund after the above payments shall be the Net Settlement Fund which shall be distributed to the Authorized Claimants as provided in hereof. Any portions of the Gross Settlement Fund required to be held in escrow hereunder prior to the Effective Date shall be held by Milberg Weiss Bersha d 14

15 & Schulman LLP as Escrow Agent for the Settlement Fund. The Gross Settlement Fund held by the Escrow Agent shall be deemed to be in the custody of the Court and shall remain subject to the jurisdiction of the Court until such time as the Net Settlement Fund shall be distributed to Authorized Claimants, or returned to the Settling Defendants pursuant to this Stipulation and/or further order of the Court. The Escrow Agent shall invest any funds in excess of $100,000 in short term United States Agency or Treasury Securities (or a mutual fund invested solely in such instruments), and shall collect and reinvest all interest accrued thereon. Any funds held in escrow in an amount of less than $100,000 may be held in an interest bearing bank account insured by the FDIC. The parties hereto agree that the Settlement Fund is intended to be a Qualified Settlement Fund within the meaning of Treasury Regulation 1.468B-1 and that the Escrow Agent, as administrator of the Settlement Fund within the meaning of Treasury Regulation 1.468B-2(k)(3), shall be responsible for filing tax returns for the Settlement Fund and paying from the Settlement Fund any Taxes owed with respect to the Settlement Fund. Counsel for Settling Defendants agree to provide promptly to the Escrow Agent the statement described in Treasury Regulation 1.468B-3(e). (b) All (i) taxes on the income of the Gross Settlement Fund and (ii) expenses and costs incurred in connection with the taxation of the Gross Settlement Fund (including, without limitation, expenses of tax attorneys and accountants) (collectively "Taxes") shall be paid out of the Gross Settlement Fund, shall be considered to be a cost of administration of the settlement and shall be timely paid by the Escrow Agent without prior Order of the Court. ADMINISTRATIO N 6. The Claims Administrator shall administer the Settlement subject to the jurisdiction of the Court. Except as stated in 14 hereof, Settling Defendants shall have n o 15

16 responsibility for the administration of the Settlement and shall have no liability to the Class in connection with such administration. ANR shall promptly provide without charge information from ANR's transfer records concerning the identity of Class Members and their transactions. 7. Plaintiffs' Co-Lead Counsel may pay from the Cash Settlement Amount, withou t further approval from the Settling Defendants or the Court, the reasonable costs and expenses up to the sum of $200,000 associated with identifying members of the Class and effecting mai l Notice and Publication Notice to the Class, and the administration of the Settlement, including without limitation, the actual costs of publication, printing and mailing the Notice, reimbursements to nominee owners for forwarding notice to their beneficial owners, and th e administrative expenses incurred and fees charged by the Claims Administrator in connection with providing notice and processing the submitted claims. ATTORNEYS' FEES AND EXPENSE S Plaintiffs' Counsel will apply to the Court for an award from the Gross Settlement Fund of attorneys' fees not to exceed one-third (33 1/3%) of the Gross Settlement Fund an d reimbursement of expenses, plus interest. Such attorneys' fees, expenses, and interest as ar e awarded by the Court shall be paid from the Gross Settlement Fund to Plaintiffs' Counse l immediately upon award, notwithstanding the existence of any timely filed objections thereto, or potential for appeal therefrom, or collateral attack on the settlement or any part thereof, subject to Plaintiffs' Counsel's obligation to make appropriate refunds or repayments to the Settlement Fund plus accrued interest at the same net rate as is earned by the Gross Settlement Fund, if and when, as a result of any appeal and/or further proceedings on remand, or successful collateral attack, the fee or cost award is reduced or reversed. 16

17 ADMINISTRATION EXPENSE S 9. Plaintiffs' Counsel will apply to the Court, on notice to Settling Defendants ' Counsel, for an order (the "Class Distribution Order") approving the Claims Administrator' s administrative determinations concerning the acceptance and rejection of the claims submitte d herein and approving any fees and expenses not previously applied for, including the fees an d expenses of the Claims Administrator, and, if the Effective Date has occurred, directing paymen t of the Net Settlement Fund to Authorized Claimants. DISTRIBUTION TO AUTHORIZED CLAIMANT S 10. The Claims Administrator shall determine each Authorized Claimant's rho rata share of the "Net Settlement Fund" based upon each Authorized Claimant's Recognized Clai m (as defined in the Plan of Allocation described in the Notice annexed hereto as Exhibit 1 to Exhibit A, or in such other Plan of Allocation as the Court approves). 11. The Plan of Allocation proposed in the Notice is not a necessary term of thi s Stipulation and it is not a condition of this Stipulation that any particular Plan of Allocation b e approved. 12. Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund based on his or her Recognized Claim compared to the total Recognized Claims of al l accepted claimants. This is not a claims-made settlement. The Settling Defendants shall not be entitled to get back any of the settlement monies once the Settlement becomes final. The Defendants shall have no involvement in reviewing or challenging claims. ADMINISTRATION OF THE SETTLEMEN T 13. Any member of the Class who does not submit a valid Proof of Claim will not b e entitled to receive any of the proceeds from the Net Settlement Amount but will otherwise b e 17

18 bound by all of the terms of this Stipulation and the Settlement, including the terms of the Judgment to be entered in the Action and the releases provided for herein, and will be barred from bringing any action against the Released Parties concerning the Settled Claims. 14. The Claims Administrator shall process the Proofs of Claim and, after entry of the Class Distribution Order, distribute the Net Settlement Fund to the Authorized Claimants. Except for their obligation to pay the Settlement Amount, and to cooperate in the production of information with respect to the identification of Class Members from ANR's shareholder transfer records, as provided herein, and to issue the Settlement Shares in accordance with the instructions to be provided by Plaintiffs' Co-Lead Counsel and/or the Claims Administrator, Settling Defendants shall have no liability, obligation or responsibility for the administration of the Settlement or disbursement of the Net Settlement Fund. Plaintiffs' Co-Lead Counsel shall have the right, but not the obligation, to advise the Claims Administrator to waive what Plaintiffs' Co-Lead Counsel deem to be formal or technical defects in any Proofs of Claim submitted in the interests of achieving substantial justice. 15. For purposes of determining the extent, if any, to which a Class Member shall be entitled to be treated as an "Authorized Claimant", the following conditions shall apply : (a) Each Class Member shall be required to submit a Proof of Claim (see attached Exhibit 2 to Exhibit A), supported by such documents as are designated therein, including proof of the transactions claimed and the losses incurred thereon, or such other documents or proof as the Claims Administrator, in its discretion may deem acceptable ; (b) All Proofs of Claim must be submitted by the date specified in the Notice unless such period is extended by Order of the Court. Any Class Member who fails to submit a. Proof of Claim by such date shall be forever barred from receiving any payment pursuant to thi s 18

19 Stipulation (unless, by Order of the Court, a later submitted Proof of Claim by such Class Member is approved), but shall in all other respects be bound by all of the terms of this Stipulation and the Settlement including the terms of the Judgment to be entered in the Action and the releases provided for herein, and will be barred from bringing any action against the Released Parties concerning the Settled Claims. Provided that it is received before the motion for the Class Distribution Order is filed, a Proof of Claim shall be deemed to have been submitted when posted, if received with a postmark indicated on the envelope and if mailed by first-class mail and addressed in accordance with the instructions thereon. In all other cases, the Proof of Claim shall be deemed to have been submitted when actually received by the Claims Administrator; (c) Each Proof of Claim shall be submitted to and reviewed by the Claims Administrator, who shall determine in accordance with this Stipulation and the approved Plan of Allocation the extent, if any, to which each claim shall be allowed, subject to review by the Court pursuant to subparagraph (e) below ; (d) Proofs of Claim that do not meet the submission requirements may b e rejected. Prior to rejection of a Proof of Claim, the Claims Administrator shall communicate with the Claimant in order to remedy the curable deficiencies in the Proofs of Claim submitted. The Claims Administrator shall notify, in a timely fashion and in writing, all Claimants whose Proofs of Claim they propose to reject in whole or in part, setting forth the reasons therefor, and shall indicate in such notice that the Claimant whose claim is to be rejected has the right to a review by the Court if the Claimant so desires and complies with the requirements of subparagraph (e) below ; 19

20 (e) If any Claimant whose claim has been rejected in whole or in part desires to contest such rejection, the Claimant must, within twenty (20) days after the date of mailing of the notice required in subparagraph (d) above, serve upon the Claims Administrator a notice and statement of reasons indicating the Claimant's grounds for contesting the rejection along with any supporting documentation, and requesting a review thereof by the Court. If a dispute concerning a claim cannot be otherwise resolved, Plaintiffs' Co-Lead Counsel shall thereafter present the request for review to the Court ; and (f) The administrative determinations of the Claims Administrator accepting and rejecting claims shall be presented to the Court, on notice to Settling Defendants' Counsel, for approval by the Court in the Class Distribution Order. 16. Each Claimant shall be deemed to have submitted to the jurisdiction of the Court with respect to the Claimant's claim, and the claim will be subject to investigation and discovery under the Federal Rules of Civil Procedure, provided that such investigation and discovery shall be limited to that Claimant's status as a Class Member and the validity and amount of th e Claimant's claim. No discovery shall be allowed on the merits of the Action or Settlement in connection with processing of the Proofs of Claim. 17. Payment pursuant to this Stipulation shall be deemed final and conclusive against all Class Members. All Class Members whose claims are not approved by the Court shall be barred from participating in distributions from the Net Settlement Fund, but otherwise shall be bound by all of the terms of this Stipulation and the Settlement, including the terms of the Judgment to be entered in the Action and the releases provided for herein, and will be barred from bringing any action against the Released Parties concerning the Settled Claims. 20

21 18. All proceedings with respect to the administration, processing and determination of claims described by 15 of this Stipulation and the determination of all controversies relating thereto, including disputed questions of law and fact with respect to the validity of claims, shall be subject to the jurisdiction of the Court. 19. The Net Settlement Fund shall be distributed to Authorized Claimants by th e Claims Administrator only after the Effective Date and after : (i) all Claims have been processed, and all Claimants whose Claims have been rejected or disallowed, in whole or in part, have been notified and provided the opportunity to be heard concerning such rejection or disallowance ; (ii) all objections with respect to all rejected or disallowed claims have been resolved by the Court, and all appeals therefrom have been resolved or the time therefor has expired ; (iii) all matters with respect to attorneys' fees, costs, and disbursements have been resolved by the Court, all appeals therefrom have been resolved or the time therefor has expired ; and (iv) all costs of administration have been paid. TERMS OF ORDER FOR NOTICE AND HEARIN G 20. Promptly after this Stipulation has been fully executed, Plaintiffs' Counsel and Settling Defendants' Counsel jointly shall apply to the Court for entry of an Order for Notice and Hearing, substantially in the form annexed hereto as Exhibit A. TERMS OF ORDER AND FINAL JUDGMEN T 21. If the Settlement contemplated by this Stipulation is approved by the Court, counsel for the parties shall request that the Court enter an Order and Final Judgment substantially in the form annexed hereto as Exhibit B. 21

22 SUPPLEMENTAL AGREEMENT 22. Simultaneously herewith, Plaintiffs' Co-Lead Counsel and Settling Defendants' Counsel are executing a "Supplemental Agreement" setting forth certain conditions under which this Stipulation may be withdrawn or terminated by Settling Defendants if potential Class Members who purchased in excess of a certain number of shares of ANR common stock traded during the Class Period exclude themselves from the Class. The Supplemental Agreement shall not be filed prior to the Settlement Fairness Hearing unless a dispute arises as to its terms. In the event of a withdrawal from this Stipulation pursuant to the Supplemental Agreement, this Stipulation shall become null and void and of no further force and effect and the provisions of 26 shall apply. Notwithstanding the foregoing, the Stipulation shall not become null and void as a result of the election by the Settling Defendants to exercise their option to withdraw from the Stipulation pursuant to the Supplemental Agreement until the conditions set forth in the Supplemental Agreement have been satisfied. EFFECTIVE DATE OF SETTLEMENT, WAIVER OR TERMINATIO N 23. The Effective Date of Settlement shall be the date when all the following shall have occurred : (a) approval by the Court of the Settlement, following notice to the Class and a hearing, as prescribed by Rule 23 of the Federal Rules of Civil Procedure ; and (b) entry by the Court of an Order and Final Judgment, substantially i n the form set forth in Exhibit B annexed hereto, and the expiration of any time for appeal or review of such Order and Final Judgment, or, if any appeal is filed and not dismissed, after such Order and Final Judgment is upheld on appeal in all material respects and is no longer subject to review upon appeal or review by writ of certiorari, or, in the event that the Court enters an order 22

23 and final judgment in form other than that provided above ("Alternative Judgment") and none of the parties hereto elect to terminate this Settlement, the date that such Alternative Judgment becomes final and no longer subject to appeal or review. 24. Settling Defendants or Plaintiffs' Co-Lead Counsel shall have the right t o terminate the Settlement and this Stipulation by providing written notice of their election to do so ("Termination Notice") to all other parties hereto within thirty (30) days of: (a) the Court's declining to enter the Order for Notice and Hearing in any material respect ; (b) the Court's refusal to approve this Stipulation or any material part of it ; (c) the Court's declining to enter the Order and Final Judgment in any material respect; (d) the date upon which the Order and Final Judgment is modified or reversed in any material respect by the Court of Appeals or the Supreme Court; or (e) the date upon which an Alternative Judgment is modified or reversed in any material respect by the Court of Appeals or the Supreme Court. 25. If ANR elects to deliver Settlement Shares in lieu of cash, and if there is any nondelivery by ANR of any of the Settlement Shares required to be delivered hereunder within ten (10) business days after Plaintiffs' Co-Lead Counsel furnishes directions for such delivery to Counsel, then, unless such non-delivery is cured within ten (10) business days, Plaintiffs' Co- Lead Counsel shall have the options to : (i) enter a consent judgment for specific performance against ANR, (ii) enter a consent judgment against ANR for $2.5 million, or (iii) enter a consent judgment against ANR for the then current market price for the number of shares not delivered. 26. Except as otherwise provided herein, in the event the Settlement is terminated, vacated, or fails to become effective for any reason, then the parties to this Stipulation shall be deemed to have reverted to their respective status in the Action as of July 19, 2004 and, except as otherwise expressly provided, the parties shall proceed in all respects as if this Stipulation an d 23

24 any related orders had not been entered, and any Settlement Shares, if issued, or proceeds thereof if the Settlement Shares have been sold, shall be returned to ANR, and any cash portion of the Settlement Amount previously paid by Settling Defendants, together with any interest earned thereon, less any Taxes due with respect to such income, and less costs of administration and notice actually incurred and paid or payable from the Settlement Amount (not to exceed $200,000 without the prior approval of Settling Defendants or the Court) shall be returned pro rata to the persons paying the same. NO ADMISSION OF WRONGDOIN G 27. This Stipulation, whether or not consummated, and any proceedings taken pursuant to it : (a) shall not be offered or received against the Settling Defendants as evidence of or construed as or deemed to be evidence of any presumption, concession, or admission by any of the Settling Defendants with respect to the truth of any fact alleged by any of the plaintiffs or the validity of any claim that has been or could have been asserted in the Action or in any litigation, or the deficiency of any defense that has been or could have been asserted in the Action or in any litigation, or of any liability, negligence, fault, or wrongdoing of the Settling Defendants ; (b) shall not be offered or received against the Settling Defendants as evidence of a presumption, concession or admission of any fault, misrepresentation or omission with respect to any statement or written document approved or made by any Settling Defendant ; (c) shall not be offered or received against the Settling Defendants as evidence of a presumption, concession or admission with respect to any liability, negligence, fault or wrongdoing, or in any way referred to for any other reason as against any of the Settling 24

25 Defendants, in any other civil, criminal or administrative action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of this Stipulation; provided, however, that if this Stipulation is approved by the Court, Settling Defendants may refer to it to effectuate the liability protection granted them hereunder ; (d) shall not be construed against the Settling Defendants as an admission or concession that the consideration to be given hereunder represents the amount which could be or would have been recovered after trial ; and (e) shall not be construed as or received in evidence as an admission, concession or presumption against Lead Plaintiffs or any of the Class Members that any of their claims are without merit, or that any defenses asserted by the Settling Defendants have any merit, or that damages recoverable under the Complaint would not have exceeded the Gross Settlement Fund. MISCELLANEOUS PROVISION S 28. All of the exhibits attached hereto are hereby incorporated by reference as though fully set forth herein. 29. Each Settling Defendant warrants as to himself or itself that, as to the payments made by or on behalf of him or it, at the time of such payment that the Settling Defendant made or caused to be made pursuant to 4 above, he or it was not insolvent nor did nor will th e payment required to be made by or on behalf of him or it render such Settling Defendant insolvent within the meaning of and/or for the purposes of the United States Bankruptcy Code, including 101 and 547 thereof, or under the laws of Bermuda. This warranty is made by each such Settling Defendant and not by such Settling Defendant's Counsel. 25

26 30. If a case is commenced in respect of any Settling Defendant (or any insurer contributing funds to the Cash Settlement Amount on behalf of any Settling Defendant) under Title 11 of the United States Code (Bankruptcy), or a trustee, receiver or conservator is appointed under any similar law, including any such laws in Bermuda, and in the event of the entry of a final order of a court of competent jurisdiction determining the transfer of consideration to the Gross Settlement Fund or any portion thereof by or on behalf of such Settling Defendant to be a preference, voidable transfer, fraudulent transfer or similar transaction and any portion thereof is required to be returned prior to any distribution to Authorized Claimants, and equivalent consideration is not promptly deposited to the Gross Settlement Fund by other Settling Defendants, then, at the election of Plaintiffs' Co-Lead Counsel, the parties shall jointly move the Court to vacate and set aside the releases given and Judgment entered in favor of the Settling Defendants pursuant to this Stipulation, which releases and Judgment shall be null and void, and the parties shall be restored to their respective positions in the litigation as of July 19, 2004 and any cash amounts or Settlement Shares in the Gross Settlement Fund shall be returned as provided in 26 above. 31. The parties to this Stipulation intend the Settlement to be a final and complet e resolution of all disputes asserted or which could be asserted by the Class Members against the Released Parties with respect to the Settled Claims. Accordingly, Lead Plaintiffs and Settling Defendants agree not to assert in any forum that the litigation was brought by Plaintiffs or defended by Settling Defendants in bad faith or without a reasonable basis. The parties hereto shall assert no claims of any violation of Rule 11 of the Federal Rules of Civil Procedure relating to the prosecution, defense, or settlement of the Action. The parties agree that the amount paid and the other terms of the Settlement were negotiated at arm's length in good faith by the parties, 26

27 and reflect a settlement that was reached voluntarily after consultation with experienced lega l counsel. 32. This Stipulation may not be modified or amended, nor may any of its provision s be waived except by a writing signed by all parties hereto or their successors-in-interest. 33. The headings herein are used for the purpose of convenience only and are not meant to have legal effect. 34. The administration and consummation of the Settlement as embodied in thi s Stipulation shall be under the authority of the Court and the Court shall retain jurisdiction for th e purpose of entering orders providing for awards of attorneys' fees and expenses to Plaintiffs ' Counsel and enforcing the terms of this Stipulation. 35. The waiver by one party of any breach of this Stipulation by any other party shal l not be deemed a waiver of any other prior or subsequent breach of this Stipulation. 36. This Stipulation and its exhibits constitute the entire agreement among the pa rtie s hereto concerning the Settlement of the Action, and no representations, warranties, or inducements have been made by any party hereto conce rning this Stipulation and its exhibit s other than those contained and memorialized in such documents. 37. This Stipulation may be executed in one or more counterparts. All execute d counterparts and each of them shall be deemed to be one and the same instrument provided tha t counsel for the parties to this Stipulation shall exchange among themselves original signe d counterparts. 38. This Stipulation shall be binding upon, and inure to the benefit of, the successor s and assigns of the parties hereto. 27

28 39. The construction, interpretation, operation, effect and validity of this Stipulation, and all documents necessary to effectuate it, shall be governed by the internal laws of the State of Connecticut without regard to conflicts of laws, except to the extent that federal law requires tha t federal law governs. 40. This Stipulation shall not be construed more strictly against one par ty than another merely by virtue of the fact that it, or any part of it, may have been prepared by counsel for on e of the parties, it being recognized that it is the result of arm ' s-length negotiations between th e parties and all parties have contributed substantially and materially to the preparation of thi s Stipulation. 41. All counsel and any other person executing this Stipulation and any of the exhibit s hereto, or any related settlement documents, warrant and represent that they have the full authority to do so and that they have the authority to take appropriate action required or permitte d to be taken pursuant to the Stipulation to effectuate its terms. 42. Plaintiffs' Co-Lead Counsel and Settling Defendants' Counsel agree to cooperate fully with one another in seeking Court approval of the Order for Notice and Hearing, th e Stipulation and the Settlement, and to promptly agree upon and execute all such othe r documentation as may be reasonably required to obtain final approval by the District Court of th e Settlement. 28

29 DATED:, By: David R. cott (Juris No )) Erin Green Comite (Juris No ) SCOTT & SCOTT, LLC 108 Norwich Avenue P.O. Box 192 Colchester, Connecticut Telephone: (860) Facsimile: (860) Co-Lead Counsel for Plaintiff By: Beth Kaswan ( t2 415) Ann M. Lipto (ct25358) MILBERG WEISS BERSHAD & SCHULMAN LLP One Pennsylvania Plaza New York, New York Telephone: (212) Facsimile : (212) Co-Lead Counsel for Plaintiffs By: Gary R. Battistoni (ct24690) Stuart A. Law, Jr. (ct24691) DRINKER BIDDLE & REATH LLP One Logan Squar e 18th and Cherry Streets Philadelphia, Pennsylvania Telephone: (215) Facsimile: (215) James F. Stapleton (ct04267) Terence J. Gallagher (ct22415) DAY, BERRY & HOWARD LLP One Canterbury Gree n Stamford, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendant Annuity and Life Re (Holdings), Ltd.

30 DATED: By: 2Z I David R. Cott (Juns No. 1b080) Erin Green Comite (Juris No ) SCOTT & SCOTT, LLC 108 Norwich Avenue P.O. Box 192 Colchester, Connecticut Telephone: (860) Facsimile: (860) Co-Lead Counsel for Plaintiff.T By: Beth Kaswan (t2 415) Ann M. Lipton (ct25358) MILBERG WEISS BERSHAD & SCHULMAN LL P One Pennsylvania Plaz a New York, New York Telephone: (212) Facsimile: (212) Co-Lead Counsel for Plaintiffs By:,f1P is Gary. Battistoni (ct24690) Stuart A. Law, Jr. (ct24691) DRINKER BIDDLE & REATH LLP One Logan Square 181h and Cherry Street s Philadelphia, Pennsylvania Telephone: (215) Facsimile: (215) James F. Stapleton (ct04267) Terence J. Gallagher (ct22415) DAY, BERRY & HOWARD LLP One Canterbury Green Stamford, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendant Annuity and Life Re (Holdings), Ltd.

31 By: ~~.. Thor Rosent al (ct21473) T y L. Roy (ct25188) CAHILL GORDON & REINDEL LLP 80 Pine Stree t New York, New York Telephone: (212) Facsimile: (212) Lawrence W. Andrea (ct18427) THE LAW OFFICES OF LAWRENCE W. ANDREA, ESQ. 57 North Street, Suite 313 Danbury, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendants XL Capital, Ltd., Brian O'Hara, and Michael P. Esposito, Jr. By : John W. Cannavino (ct06051) CUMMINGS & LOCKWOOD LL C Four Stamford Plaza 107 Elm Stree t Stamford, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendant Lawrence S. Doyle By : Gary R. Battistoni (ct24690) Stuart A. Law, Jr. (ct24691) DRINKER BIDDLE & REATH LLP One Logan Square 18th and Cherry Streets Philadelphia, Pennsylvania Telephone: (215) Facsimile: (215)

32 By : Thom Rosenthal (ct21473) Tammy L. Roy (ct25188) CAHILL GORDON & REINDEL LLP 80 Pine Stree t New York, New York Telephone : (212) Facsimile: (212) Lawrence W. Andrea (ct18427 ) THE LAW OFFICES OF LAWRENCE W. ANDREA, ESQ. 57 North Street, Suite 313 Danbury, Connecticut Telephone: (203) Facsimile : (203) Attorneys for Defendants XL Capital, Ltd., Brian O'Hara, and Michael P. Esposito, Jr. B C"John W. annavino ct06051) INGS & LOCKWOOD LLC Four Stamford Plaza 107 Elm Street Stamford, Connecticut Telephone : (203) Facsimile: (203) Attorneys for Defendant Lawrence S. Doyle By : Gary R. Battistoni (ct24690) Stuart A. Law, Jr. (ct24691) DRINKER BIDDLE & REATH LLP One Logan Square 18th and Cherry Street s Philadelphia, Pennsylvania Telephone : (215) Facsimile: (215)

33 By : Thorn Rosenthal (ct21473) Tammy L. Roy (ct25188) CAHILL GORDON & REINDEL LLP 80 Pine Stree t New York, New York Telephone: (212) Facsimile: (212) Lawrence W. Andrea (ct 18427) THE LAW OFFICES OF LAWRENCE W. ANDREA, ESQ. 57 North Street, Suite 313 Danbury, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendants XL Capital, Ltd., Brian O ' Hara, and Michael P. Esposito, Jr. By : John W. Cannavino (ct06051) CUMMINGS & LOCKWOOD LLC Four Stamford Plaza 107 Elm Street Stamford, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendant Lawrence S. Doyle By: A. Gary R. Battistoni (ct24690) Stuart A. Law, Jr. (ct24691) DRINKER BIDDLE & REATH LLP One Logan Square 18th and Cherry Street s Philadelphia, Pennsylvania Telephone: (215) Facsimile : (215)

34 James F. Stapleton (ct04267) Terence J. Gallagher (c122415) DAY, BERRY & HOWARD LLP One Canterbury Green Stamford, Connecticut Telephone: (203) Facsimile: (203) R. Nicholas Gimbel (Of Counsel) McCARTER & ENGLISH, LLP Mellon Bank Center 1735 Market Street, Suite 700 Philadelphia, Pennsylvania Telephone: (215) Facsimile: (215) Attorneys for Defendant Frederick S. Hamme r By : A Ga R. Battistoni (ct24690 ) Stuart A. Law, Jr. (ct24691) DRINKER BIDDLE & REATH LLP One Logan Square 18th and Cherry Street s Philadelphia, Pennsylvania Telephone: (215) Facsimile: (215) John R. Horvack, Jr. (ct12926) CARMODY & TORRANCE LLP 50 Leavenworth Street P. O. Box Waterbury, Connecticut Telephone: (203) Facsimile: (203) Marc J. Sonnenfeld (Of Counsel) Karen Pieslak Pohlmann (Of Counsel) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Streets Philadelphia, Pennsylvania Telephone: (215) Facsimile: (215)

35 James F. Stapleton (ct04267) Terence J. Gallagher (ct22415) DAY, BERRY & HOWARD LLP One Canterbury Green Stamford, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendant John F. Burke By : mes T. Shearin (ct01326) Peter S. Olson (ctl 6149) ULLMAN & COMLEY, LLC 850 Main Street P. O. Box 7006 Bridgeport, Connecticut Telephone: (203) Facsimile: (203) Attorneys for Defendant William W. Atkin 32

36 EXHIBIT A

37 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT SHERRY SCHNALL, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, V. ANNUITY AND LIFE RE (HOLDINGS), LTD., XL CAPITAL, LTD., LAWRENCE S. DOYLE, FREDERICK S. HAMMER, JOHN F. BURKE, WILLIAM W. ATKIN, BRIAN O'HARA, AND MICHAEL P. ESPOSITO, JR., Civil Action No. 02 CV 2133 (EBB ) Defendants. PRELIMINARY ORDER FOR NOTICE AND HEARING IN CONNECTION WITH SETTLEMENT PROCEEDING S WHEREAS, on August 24, 2004, the parties to the above-entitled action (the "Action") entered into a Stipulation and Agreement of Partial Settlement (the "Stipulation") which i s subject to review under Rule 23 of the Federal Rules of Civil Procedure and which, together wit h the exhibits thereto, sets forth the terms and conditions for the proposed settlement of the claim s alleged in the Complaint on the merits and with prejudice as against the Settling Defendant s only; and the Court having read and considered the Stipulation and the accompanyin g documents ; and the parties to the Stipulation having consented to the entry of this Order ; and al l capitalized terms used herein having the meanings defined in the Stipulation ; 2004 that : NOW, THEREFORE, IT IS HEREBY ORDERED, this day of Pursuant to Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure, and for the purposes of the Settlement only, this Action is hereby certified as a class action on behalf of all persons who purchased the common stock of Annuity and Life Re (Holdings), Ltd.

38 ("ANR") during the period between March 15, 2000 and November 19, 2002, inclusive, an d were damaged thereby. Excluded from the Class are the Settling Defendants, the officers and directors of ANR and XL Capital at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which Defendants hav e or had a controlling interest. For purposes of this Settlement, the term "controlling interest" shal l include any interest of 10% or more of the common stock of any entity. 2. The Court finds, for the purposes of the Settlement only, that the prerequisites for a class action under Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure have bee n satisfied in that: (a) the number of Class Members is so numerous that joinder of all member s thereof is impracticable; (b) there are questions of law and fact common to the Class ; (c) the claims of the named representatives are typical of the claims of the Class they seek to represent ; (d) the Lead Plaintiffs will fairly and adequately represent the interests of the Class ; (e) the questions of law and fact common to the members of the Class predominate over any question s affecting only individual members of the Class ; and (f) a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, and for the purpose s of the Settlement only, Lead Plaintiffs Communications Workers of America and Midstrea m Investments Ltd. are certified as Class Representatives. 4. A hearing (the "Settlement Fairness Hearing" ) pursuant to Rule 23(e) of th e Federal Rules of Civil Procedure is hereby scheduled to be held before the Court o n 2004, at ^ _.m. for the following purposes : 2

39 (a) to finally determine whether this Action satisfies the applicable prerequisites for class action treatment under Rules 23(a) and (b) of the Federal Rules of Civil Procedure ; (b) to determine whether the proposed Settlement is fair, reasonable, and adequate, and should be approved by the Court ; (c) to determine whether the Order and Final Judgment as provided under the Stipulation should be entered, dismissing the Complaint filed herein, on the merits and wit h prejudice, as against the Settling Defendants only and to determine whether the release by th e Class of the Settled Claims, as set forth in the Stipulation, should be provided to the Release d Parties ; (d) to determine whether the proposed Plan of Allocation for the proceeds o f the Settlement is fair and reasonable, and should be approved by the Court ; fees and expenses ; and (e) to consider Plaintiffs' Counsel's application for an award of attorneys ' (f) to rule upon such other matters as the Court may deem appropriate. The Court recognizes and acknowledges that one possible consequence of a determination of fairness at the Settlement Fairness Hearing is that, pursuant to Section 3(a)(10 ) of the Secu rities Act of 1933, 15 U.S.C. 77c(a)(10), the Settlement Shares maybe distribute d to Class Members without registration and compliance with the prospectus delivery requirement s of the securities laws. 3

40 The Court reserves the right to approve the Settlement with or withou t modification and with or without further notice of any kind. The Court further reserves the righ t to enter its Order and Final Judgment approving the Stipulation and dismissing the Complaint o n the merits and with prejudice regardless of whether it has approved the Plan of Allocation o r awarded attorneys' fees and expenses. 7. The Court approves the form, substance and requirements of the Notice o f Pendency of Class Action and Proposed Settlement with Certain Defendants, Motion fo r Attorneys' Fees and Settlement Fairness Hearing (the "Notice") and the Proof of Claim form, annexed hereto as Exhibits 1 and 2 respectively. 8. The Court approves the appointment of The Garden City Group, Inc. as the Claims Administrator. The Claims Administrator shall cause the Notice and the Proof of Claim, substantially in the forms annexed hereto, to be mailed, by first class mail, postage prepaid, on o r before, 2004, to all Class Members who can be identified with reasonabl e effort. ANR shall make ANR's transfer records and shareholder information available to th e Claims Administrator for the purpose of identifying and giving notice to the Class. The Claims Administrator shall use reasonable efforts to give notice to nominee owners such as brokerage firms and other persons or entities who purchased ANR common stock during the Class Period as record owners but not as beneficial owners. Such nominee purchasers are directed within, seven (7) days of their receipt of the Notice, to either forward copies of the Notice and Proof o f Claim to their beneficial owners, or to provide the Claims Administrator with lists of the name s and addresses of the beneficial owners, and the Claims Administrator is ordered to send th e Notice and Proof of Claim promptly to such identified beneficial owners. Nominee purchasers who elect to send the Notice and Proof of Claim to their beneficial owners shall send a statemen t 4

41 to the Claims Administrator confirming that the mailing was made as directed. Additiona l copies of the Notice shall be made available to any record holder requesting such for the purpos e of distribution to beneficial owners, and such record holders shall be reimbursed from the Gros s Settlement Fund, upon receipt by the Claims Administrator of proper documentation, for th e reasonable expense of sending the Notices and Proofs of Claim to beneficial owners. Plaintiffs' Co-Lead Counsel shall, at or before the Settlement Fairness Hearing, file with the Court proof o f mailing of the Notice and Proof of Claim. 9. The Court approves the form of Publication Notice of the pendency of this clas s action and the proposed settlement in substantially the form and content annexed hereto a s Exhibit 3 and directs that Plaintiffs' Co-Lead Counsel shall cause the Publication Notice to b e published in the international edition of The Wall Street Journal and the international edition of Financial Times within ten days of the mailing of the Notice. Plaintiffs' Co-Lead Counsel shall, at or before the Settlement Fairness Hearing, file with the Court proof of publication of th e Publication Notice. 10. The form and content of the Notice, and the method set forth herein of notifyin g the Class of the Settlement and its terms and conditions, meet the requirements of Rule 23 of th e Federal Rules of Civil Procedure, Section 21D(a)(7) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(a)(7) as amended by the Private Securities Litigation Reform Act of 1995, and due process, constitute the best notice practicable under the circumstances, and shall constitute due and sufficient notice to all persons and entities entitled thereto. 11. In order to be entitled to participate in the Net Settlement Fund, in the event th e Settlement is effected in accordance with all of the terms and conditions set forth in the

42 Stipulation, each Class Member shall take the following actions and be subject to the followin g conditions : (a) A properly executed Proof of Claim (the "Proof of Claim"), substantially in the form attached hereto as Exhibit 2, must be submitted to the Claims Administrator, at th e Post Office Box indicated in the Notice, postmarked not later than Such deadline may be further extended by Court Order. Each Proof of Claim shall be deemed t o have been submitted when postmarked (if properly addressed and mailed by first class mail, postage prepaid) provided such Proof of Claim is actually received prior to the motion for a n order of the Court approving distribution of the Net Settlement Fund. Any Proof of Claim submitted in any other manner shall be deemed to have been submitted when it was actuall y received at the address designated in the Notice. (b) The Proof of Claim submitted by each Class Member must satisfy th e following conditions : (i) it must be properly completed, signed and submitted in a timely manner in accordance with the provisions of the preceding subparagraph ; (ii) it must be accompanied by adequate supporting documentation for the transactions reported therein, in th e form of broker confirmation slips, broker account statements, an authorized statement from th e broker containing the transactional information found in a broker confirmation slip, or such othe r documentation as is deemed adequate by Plaintiffs' Co-Lead Counsel ; (iii) if the person executing the Proof of Claim is acting in a representative capacity, a certification of his curren t authority to act on behalf of the Class Member must be included in the Proof of Claim ; and (iv ) the Proof of Claim must be complete and contain no material deletions or modifications of any o f the printed matter contained therein and must be signed under penalty of perjury- 6

43 (c) As part of the Proof of Claim, each Class Member shall submit to the jurisdiction of the Court with respect to the claim submitted, and shall (subject to effectuation o f the Settlement) release all Settled Claims as provided in the Stipulation. 12. Class Members shall be bound by all determinations and judgments in thi s Action, whether favorable or unfavorable, unless such persons request exclusion from the Clas s in a timely and proper manner, as hereinafter provided. A Class Member wishing to make such request shall mail the request in written form by first class mail postmarked no later tha n 2004 to the address designated in the Notice. Such request for exclusio n shall clearly indicate the name, address and telephone number of the person seeking exclusion, that the sender requests to be excluded from the Class in the Annuity and Life Re (Holdings), Ltd. Securities Litigation, and must be signed by such person. Such persons requestin g exclusion are also directed to state: the date(s), price(s), and number(s) of shares of all purchase s and sales of ANR common stock during the Class Period. The request for exclusion shall not b e effective unless it provides the required information and is made within the time stated above, o r the exclusion is otherwise accepted by the Court. 13. Class Members requesting exclusion from the Class shall not be entitled t o receive any payment out of the Net Settlement Fund as described in the Stipulation and Notice. 14. The Court will consider comments and/or objections to the Settlement, the Plan o f Allocation, or the award of attorneys' fees and reimbursement of expenses only if such comments or objections and any supporting papers are filed in writing with the Clerk of the Court, United States District Court for the District of Connecticut, United States Courthouse, 141 Church Street, New Haven, Connecticut 06510, and copies of all such papers are served, on or

44 before, 2004, upon each of the following: David R. Scott, Esq., Scott + Scott, LLC, 108 Norwich Avenue, P.O. Box 192, Colchester, Connecticut and Beth Kaswan, Esq., Milberg Weiss Bershad & Schulman LLP, One Pennsylvania Plaza, New York, New York on behalf of the Lead Plaintiffs and the Class ; and Gary R. Battistoni, Esq., Drinker Biddle & Reath LLP, One Logan Square, 18`h and Cherry Streets, Philadelphia, Pennsylv an ia and Thorn Rosenthal, Esq., Cahill Gordon & Reindel LLP, 80 Pine Street, Ne w York, New York on behalf of the Settling Defendants. Attendance at the hearing i s not necessary; however, persons wishing to be heard orally in opposition to the approval of th e Settlement, the Plan of Allocation, and/or the request for attorneys' fees are required to indicat e in their written objection their intention to appear at the hearing. Persons who intend to object t o the Settlement, the Plan of Allocation, and/or counsel's application for an award of attorneys ' fees and expenses and desire to present evidence at the Settlement Fairness Hearing must includ e in their written objections the identity of any witnesses they may call to testify and exhibits the y intend to introduce into evidence at the Settlement Fairness Hearing. Class Members do not need to appear at the hearing or take any other action to indicate their approval. 15. Pending final determination of whether the Settlement should be approved, th e Lead Plaintiffs, all Class Members, and each of them, and anyone who acts or purports to act o n their behalf, shall not institute, commence or prosecute any action which asserts Settled Claim s against any Released Party. 16. As provided in the Stipulation, Plaintiffs' Co-Lead Counsel may pay the Claim s Administrator the reasonable and customary fees and costs associated with giving notice to th e Class and the review of claims and administration of the Settlement out of the Gross Settlemen t Fund without further order of the Court.

45 17. If. (a) the Settlement is terminated by Settling Defendants pursuant to 22 of th e Stipulation ; (b) any specified condition to the Settlement set forth in the Stipulation is not satisfied and Plaintiffs' Co-Lead Counsel or the Settling Defendants elect to terminate the Settlement as provided in 24 of the Stipulation, then, in any such event, the Stipulation, including any amendment(s) thereof, and this Preliminary Order certifying the Class and th e Class Representatives for purposes of the Settlement shall be null and void, of no further force o r effect, and without prejudice to any party, and may not be introduced as evidence or referred t o in any actions or proceedings by any person or entity, and each party shall be restored to his, he r or its respective position as it existed July 19, The Court retains exclusive jurisdiction over the Action to consider all furthe r matters arising out of or connected with the Settlement. Dated: New Haven, Connecticut.2004 Honorable Ellen Bree Bums UNITED STATES DISTRICT JUDGE 9

46 EXHIBIT B

47 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICU T SHERRY SCHNALL, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. ANNUITY AND LIFE RE (HOLDINGS), LTD., XL CAPITAL, LTD., LAWRENCE S. DOYLE, FREDERICK S. HAMMER, JOHN F. BURKE, WILLIAM W. ATKIN, BRIAN O'HARA, AND MICHAEL P. ESPOSITO, JR., Civil Action No. 02 CV 2133 (EBB ) Defendants. ORDER AND FINAL JUDGMENT On the day of, 2004, a hearing having been held before thi s Court to determine : (1) whether the terms and conditions of the Stipulation and Agreement o f Partial Settlement dated August 24, 2004 (the "Stipulation") are fair, reasonable and adequate fo r the settlement of all claims asserted by the Class against the Settling Defendants in th e Complaint now pending in this Court under the above caption, including the release of th e Settling Defendants and the Released Parties, and should be approved ; (2) whether judgment should be entered dismissing the Complaint on the merits and with prejudice in favor of th e Settling Defendants only and as against all persons or entities who are members of the Clas s herein who have not requested exclusion therefrom ; (3) whether to approve the Plan of Allocation as a fair and reasonable method to allocate the settlement proceeds among th e members of the Class ; and (4) whether and in what amount to award Plaintiffs' Counsel fees and reimbursement of expenses. The Court having considered all matters submitted to it at th e hearing and otherwise ; and it appearing that a notice of the hearing substantially in the form

48 approved by the Court was mailed to all persons or entities reasonably identifiable, wh o purchased the common stock of Annuity and Life Re (Holdings), Ltd. ("ANR") during the period between March 15, 2000 and November 19, 2002, inclusive (the "Class Period"), except thos e persons or entities excluded from the definition of the Class, as shown by the records of ANR's transfer agent, at the respective addresses set forth in such records, and that a summary notice of the hearing substantially in the form approved by the Court was published in the international edition of The Wall Street Journal and the international edition of Financial Times pursuant to the specifications of the Court; and the Court having considered and determined the fairness an d reasonableness of the award of attorneys' fees and expenses requested ; and all capitalized term s used herein having the meanings as set forth and defined in the Stipulation. NOW, THEREFORE, IT IS HEREBY ORDERED THAT : The Court has jurisdiction over the subject matter of the Action, the Lea d Plaintiffs, all Class Members, and the Settling Defendants. 2. The Court finds that the prerequisites for a class action under Federal Rules o f Civil Procedure 23 (a) and (b)(3) have been satisfied in that : (a) the number of Class Members is so numerous that joinder of all members thereof is impracticable ; (b) there are questions of law and fact common to the Class ; (c) the claims of the Class Representatives are typical of th e claims of the Class they seek to represent ; (d) the Class Representatives have and will fairly and adequately represent the interests of the Class ; (e) the questions of law and fact common to th e members of the Class predominate over any questions affecting only individual members of th e Class; and (f) a class action is superior to other available methods for the fair and efficien t adjudication of the controversy. 2

49 3. Pursuant to Rule 23 of the Federal Rules of Civil Procedure this Court hereb y finally certifies this Action, for purposes of this Settlement only, as a class action on behalf of al l persons who purchased the common stock of Annuity and Life Re (Holdings), Ltd. ("ANR" ) during the period between March 15, 2000 and November 19, 2002, inclusive, and were damaged thereby. Excluded from the Class are the Settling Defendants, the officers an d directors of ANR and XL Capital at all relevant times, members of their immediate families an d their legal representatives, heirs, successors or assigns, and any entity in which Defendants hav e or had a controlling interest. For purposes of this Settlement, the term "controlling interest" shal l include any interest of 10% or more of the common stock of any entity. [Also excluded from th e Class are the persons and/or entities who requested exclusion from the Class as listed on Exhibi t 1 annexed hereto.] 4. Notice of the pendency of this Action as a class action and of the proposed Settlement was given to all Class Members who could be identified with reasonable effort. The form and method of notifying the Class of the pendency of the action as a class action and of th e terms and conditions of the proposed Settlement met the requirements of Rule 23 of the Federal Rules of Civil Procedure, Section 21D(a)(7) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(a)(7) as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), due process, and any other applicable law, constituted the best notice practicable under th e circumstances, and constituted due and sufficient notice to all persons and entities entitle d thereto. The Settlement is approved as fair, reasonable and adequate, and the Clas s Members and the parties are directed to consummate the Settlement in accordance with the term s and provisions of the Stipulation. [DELETE IF ANR CHOOSES TO PAY ALL CASH : The

50 Settlement Securities are to be issued in exchange for bona fide outstanding claims ; all parties to whom it is proposed to issue such securities have had the right to appear at the hearing on the fairness of the Settlement; and the Settlement Securities are therefore unrestricted and freely tradeable exempted securities pursuant to Section 3(a)(10) of the Securities Act of 1933, 1 5 U.S.C. 77c(a)(10), provided that the holder of such secu rities is not an affiliate of ANR.] 6. The Complaint, which the Court finds was filed on a good faith basis in accordance with the PSLRA and Rule 11 of the Federal Rules of Civil Procedure based upon al l publicly available information, is hereby dismissed with prejudice and without costs, except as provided in the Stipulation, as against the Settling Defendants only. 7. Members of the Class and the successors and assigns of any of them, are hereb y permanently barred and enjoined from instituting, commencing or prosecuting, either directly o r in any other capacity, any and all claims, debts, demands, rights or causes of action or liabilitie s whatsoever (including, but not limited to, any claims for damages, interest, attorneys' fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether base d on United States federal, state, local, statutory or common law or the laws of Bermuda or an y other law, rule or regulation, whether fixed or contingent, accrued or unaccrued, liquidated o r unliquidated, at law or in equity, matured or unmatured, whether class or individual in nature, including both known claims and Unknown Claims, (i) that have been asserted in this Action b y the Class Members or any of them against any of the Released Parties, or (ii) that could hav e been asserted in any forum by the Class Members or any of them against any ofthe Released Parties which arise out of or are based upon the allegations, transactions, facts, matters o r occurrences, representations or omissions involved, set forth, or referred to in the Complaint an d relate to the purchase of shares of the common stock of Annuity and Life Re (Holdings) Ltd. 4

51 ("ANR") during the Class Period (the "Settled Claims") against any and all of the Settlin g Defendants, their past or present subsidiaries, parents, successors and predecessors, and all of th e aforementioned entities' officers, directors, agents, employees, attorneys, advisors, insurers, an d investment advisors, and any person, firm, trust, corporation, officer, director or other individua l or entity in which any Settling Defendant has a controlling interest or which is related to o r affiliated with any of the Settling Defendants, and the legal representatives, heirs, successors i n interest or assigns of the Settling Defendants (the "Released Parties"). "Released Parties" does not include KPMG in Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA" ) (collectively, "KPMG") or its partners, principals, employees, agents and affiliates. The Settle d Claims are hereby compromised, settled, released, discharged and dismissed as against th e Released Parties on the merits and with prejudice by virtue of the proceedings herein and thi s Order and Final Judgment. "Settled Claims" does not include any claims against KPMG or it s partners, principals, employees, agents and affiliates. "Unknown Claims" means any and all Settled Claims which any Lead Plaintiff o r Class Member does not know or suspect to exist in his, her or its favor at the time of the releas e of the Released Parties, and any Settled Defendants' Claims which any Settling Defendant doe s not know or suspect to exist in his, her or its favor, which if known by him, her or it might hav e affected his, her or its decision(s) with respect to the Settlement. With respect to any and all Settled Claims and Settled Defendants' Claims, the parties stipulate and agree that upon the Effective Date, the Lead Plaintiffs and the Settling Defendants shall expressly waive, and eac h Class Member shall be deemed to have waived, and by operation of the Judgment shall hav e expressly waived, any and all provisions, rights and benefits conferred by any law of any state or

52 territory of the United States or Bermuda, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542, which provides : A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Lead Plaintiffs and Settling Defendants acknowledge, and Class Members by operation of law shall be deemed to have acknowledged, that the inclusion of "Unknown Claims" in the definition of Settled Claims and Settled Defendants' Claims was separately bargained for and was a ke y element of the Settlement. 9. The Settling Defendants and the successors and assigns of any of them, are hereby permanently barred and enjoined from instituting, commencing or prosecuting, either directly o r in any other capacity, any and all claims, rights or causes of action or liabilities whatsoever, whether based on United States federal, state, local, statutory or common law or the laws o f Bermuda or any other law, rule or regulation, including both known claims and Unknown Claims, that have been or could have been asserted in the Action or any forum by the Settlin g Defendants or any of them or the successors and assigns of any of them against any of the Lea d Plaintiffs, Class Members or their attorneys, which arise out of or relate in any way to th e institution, prosecution, or settlement of the Action (except for claims to enforce the Settlement) (the "Settled Defendants' Claims") against any of the Lead Plaintiffs, Class Members or their attorneys. The Settled Defendants' Claims of all the Released Parties are hereby compromised, settled, released, discharged and dismissed on the merits and with prejudice by virtue of th e proceedings herein and this Order and Final Judgment. 6

53 10. Pursuant to the PSLRA, the Released Parties are hereby discharged from al l claims for contribution or equitable indemnity, by any person or entity, whether arising unde r United States federal, state, local, statutory or common law or the laws of Bermuda or any other law, based upon, arising out of, relating to, or in connection with the claims of the Class or any Class Member in the Action (including the KPMG Action, which has been consolidated into th e Action). Accordingly, to the maximum extent permissible under the PSLRA, the Court hereb y bars and enjoins all such claims for contribution or equitable indemnity : (a) by any person or entity against any Released Party; and (b) by any Released Party against any person or entity other than a person or entity whose liability to the Class has been extinguished pursuant to th e Stipulation and Agreement of Partial Settlement and this Order and Final Judgment. Pursuant t o 15 U.S.C. 78u-4 (f)(7)(b), if there is a final verdict or judgment against any other Defendant i n the Action, the verdict or judgment shall be reduced by the greater of: (a) an amount that corresponds to the percentage of responsibility of the Settling Defendants ; or (b) the amount pai d pursuant to this Settlement by the Settling Defendants. 11. Neither this Order and Final Judgment, the Stipulation, nor any of its terms an d provisions, nor any of the negotiations or proceedings connected with it, nor any of th e documents or statements referred to therein shall be : (a) offered or received against the Settling Defendants as evidence of o r construed as or deemed to be evidence of any presumption, concession, or admission by any of the Settling Defendants with respect to the truth of any fact alleged by any of the plaintiffs or th e validity of any claim that has been or could have been asserted in the Action or in any litigation, or the deficiency of any defense that has been or could have been asserted in the Action or in an y litigation, or of any liability, negligence, fault, or wrongdoing of the Settling Defendants ; 7

54 (b) offered or received against the Settling Defendants as evidence of a presumption, concession or admission of any fault, misrepresentation or omission with respect to any statement or written document approved or made by any Settling Defendant ; (c) offered or received against the Settling Defendants as evidence of a presumption, concession or admission with respect to any liability, negligence, fault or wrongdoing, or in any way referred to for any other reason as against any of the Settling Defendants, in any other civil, criminal or administrative action or proceeding, other than suc h proceedings as may be necessary to effectuate the provisions of this Stipulation; provided, however, that if this Stipulation is approved by the Court, Settling Defendants may refer to it to effectuate the liability protection granted them hereunder ; (d) construed against the Settling Defendants as an admission or concession that the consideration to be given hereunder represents the amount which could be or would hav e been recovered after trial ; or (e) construed as or received in evidence as an admission, concession o r presumption against Lead Plaintiffs or any of the Class Members that any of their claims ar e without merit, or that any defenses asserted by the Settling Defendants have any merit, or tha t damages recoverable under the Complaint would not have exceeded the Gross Settlement Fund. 12. The Plan of Allocation is approved as fair and reasonable, and Plaintiffs' Counsel and the Claims Administrator are directed to administer the Stipulation in accordance with it s terms and provisions.

55 13. The Court finds that all parties and their counsel have complied with eac h requirement of Rule 11 of the Federal Rules of Civil Procedure as to all proceedings herein. 14. Plaintiffs' Counsel are hereby awarded % of the Gross Settlemen t Fund in fees, which sum the Court finds to be fair and reasonable, and $ in reimbursement of expenses, which expenses shall be paid to Plaintiffs' Co-Lead Counsel fro m the Settlement Fund with interest from the date such Settlement Fund was funded to the date o f payment at the same net rate that the Settlement Fund earns. The award of attorneys' fees shal l be allocated among Plaintiffs' Counsel in a fashion which, in the opinion of Plaintiffs' Co-Lea d Counsel, fairly compensates Plaintiffs' Counsel for their respective contributions in th e prosecution of the Action. 15. Lead Plaintiff Communications Workers of America is hereby awarded and Lead Plaintiff and Midstream Investments Ltd. is hereby awarde d $. Such awards are for reimbursement of these Lead Plaintiffs reasonabl e costs and expenses (including lost wages) directly related to their representation of the Class. 16. In making this award of attorneys' fees and reimbursement. of expenses to be paid from the Gross Settlement Fund, the Court has considered and found that : (a) the settlement has created a fund of $[14.0 or 16.5] million in cash [an d $2.5 million in ANR common stock] that is already on deposit, plus interest thereon and tha t numerous Class Members who submit acceptable Proofs of Claim will benefit from th e Settlement created by Plaintiffs' Counsel ; 9

56 (b) Over copies of the Notice were disseminated to putative Clas s Members indicating that Plaintiffs' Counsel were moving for attorneys' fees in the amount of u p to % of the Gross Settlement Fund and for reimbursement of expenses in an amoun t of approximately $ and [only ] [no] objections were filed against the terms of the proposed Settlement or the ceiling on the fees and expenses requested by Plaintiffs ' Counsel contained in the Notice ; (c) Plaintiffs' Counsel have conducted the litigation and achieved th e Settlement with skill, perseverance and diligent advocacy; (d) The action involves complex factual and legal issues and was actively prosecuted over two years and, in the absence of a settlement, would involve further length y proceedings with uncertain resolution of the complex factual and legal issues ; (e) Had Plaintiffs' Counsel not achieved the Settlement there would remain a significant risk that Lead Plaintiffs and the Class may have recovered less or nothing from th e Settling Defendants ; (f) Plaintiffs' Counsel have devoted over hours, with a lodestar value of $, to achieve the Settlement; and (g) The amount of attorneys' fees awarded and expenses reimbursed from the Settlement Fund are consistent with awards in similar cases. 17. Exclusive jurisdiction is hereby retained over the parties and the Class Members for all matters relating to this Action, including the administration, interpretation, effectuation o r enforcement of the Stipulation and this Order and Final Judgment, and including any application 10

57 for fees and expenses incurred in connection with administering and distributing the settlemen t proceeds to the members of the Class. 18. Without further order of the Court, the parties may agree to reasonable extensions of time to carry out any of the provisions of the Stipulation. 19. This Action has been pending since the first of the constituent actions were file d in The Settlement Stipulation resolves all of the claims asserted by the Class against th e Settling Defendants, and pursuant to the above bar orders bars any claims for contribution o r equitable indemnity, by or against the Settling Defendants. The claims asserted against th e Settling Defendants and now settled raise issues that are separable from the remaining claims o f Plaintiffs and the Class against KPMG. Permitting the immediate appeal, if taken, of this Order and Final Judgment does not result in any duplication of review by an appellate court, because i f an appellate court were to vacate the Stipulation, then the parties may reasonably continue thei r prosecution or defense of the claims while this Court continues to preside over other relate d claims, without a waste of time or judicial resources. If this Order and Final Judgment were no t immediately appealable, once an appeal were ripe after the conclusion of the entire coordinate d litigation, and if the appellate court vacated this Order and Final Judgment, then this Court woul d face re-trying the entire litigation as to the Settling Defendants, wasting judicial resources. 20. By reason of the finding in the previous paragraph, there is no just reason for delay in the entry of this Order and Final Judgment and immediate entry by the Clerk of th e Court is expressly directed pursuant to Rule 54 (b) of the Federal Rules of Civil Procedure. The Action is not dismissed in respect of claims against any person or entity other than the Settlin g Defendants. 11

58 Dated: New Haven, Connecticut.2004 Honorable Ellen Bree Burns UNITED STATES DISTRICT JUDGE 12

59 EXHIBIT 1

60 UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT SHERRY SCHNALL, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. ANNUITY AND LIFE RE (HOLDINGS), LTD., XL CAPITAL, LTD., LAWRENCE S. DOYLE, FREDERICK S. HAMMER, JOHN F. BURKE, WILLIAM W. ATKIN, BRIAN O'HARA, AND MICHAEL P. ESPOSITO, JR., Civil Action No. 02 CV 2133 (EBB) Defendants. NOTICE OF PENDENCY OF CLASS ACTION AND PROPOSED SETTLEMENT WITH CERTAIN DEFENDANTS, MOTION FOR ATTORNEYS' FEES AN D SETTLEMENT FAIRNESS HEARING If you bought the common stock of Annuity and Life Re (Holdings ), Ltd. ("ANR") during the period between March 15, 2000 and November 19, 2002, inclusive, and were damaged thereby, then you could get a payment from a class action settlement. A federal court authorized this notice. This is not a solicitationfrom a lawyer. The settlement will provide consideration valued at $16.5 million for the benefit of investors who bought shares of ANR common stock during the period between March 15, 2000 and November 19, 2002, inclusive, and were damaged thereby. The settlement partially resolves a lawsuit over whether ANR misled investors about its future earnings. The lawsuit will continue with respect to claims asserted against ANR's independent auditors, KPMG. Your legal rights are affected whether you act, or do not act. Read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT : SUBMIT A CLAIM FORM The only way to get a payment. EXCLUDE YOURSELF Get no payment. This is the only option that allows you to ever be part of any other lawsuit against ANR and the other Released Parties about the legal claims in this case.

61 OBJECT Write to the Court about why you do not like the settlement. GO TO A HEARING Ask to speak in Court about the fairness of the settlement. DO NOTHING Get no payment. Give up rights. These rights and options - and the deadlines to exercise them - are explained in this notice. The Court in charge of this case still has to decide whether to approve the settlement. Payments will be made if the Court approves the settlement and after appeals are resolved. Please be patient. Statement of Plaintiff Recovery SUMMARY NOTICE Pursuant to the settlement described herein, a $16.5 million Settlement, consisting of either $16.5 million in cash or $14.0 million in cash plus $2.5 million worth of shares of common stock of ANR (subject to a limit on the number of ANR common shares of 19.9% of the outstanding shares), is being provided. Plaintiffs estimate that there were approximately million shares of ANR common stock traded during the Class Period which may have been damaged. Plaintiffs estimate that the average recovery per damaged share of ANR common stock under the settlement is $0.86 per damaged share before deduction of Court-awarded attorneys' fees and expenses. A Class Member's actual recovery will be a proportion of the Net Settlement Fund determined by his, her or its Recognized Claim as compared to the total Recognized Claims of all Class Members who submit acceptable Proofs of Claim. Depending on the number of claims submitted, when during the Class Period a Class Member purchased shares of ANR common stock, and whether those shares were held at the end of the Class Period or sold during the Class Period, and if sold, when they were sold, an individual Class Member may receive more or less than this average amount. See the Plan of Allocation on page [ ] for more information on your Recognized Claim. Statement of Potential Outcome of Cas e The parties disagree on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if plaintiffs were to have prevailed on each claim alleged. The Settling Defendants deny that they are liable to the plaintiffs or the Class and deny that plaintiffs or the Class have suffered any damages. 2

62 Statement of Attorneys ' Fees and Costs Sought Plaintiffs' Counsel are moving the Court to award attorneys' fees not to exceed one-third (33'/3%) of the Gross Settlement Fund, and for reimbursement of expenses incurred i n connection with the prosecution of this Action in the approximate amount of $250,000 (including approximately $10,000 for the costs and expenses of the Lead Plaintiffs directly relating to their representation of the Class). The requested fees and expenses would amount to an average of $0.30 per damaged share in total for fees and expenses. Plaintiffs' Counsel have expended considerable time and effort in the prosecution of this litigation on a contingent fee basis, and have advanced the expenses of the litigation, in the expectation that if they were successful in obtaining a recovery for the Class they would be paid from such recovery. In this type of litigation it is customary for counsel to be awarded a percentage of the common fund recovery as their attorneys' fees. Further Information Further information regarding the Action and this Notice may be obtained by contacting Plaintiffs' Co-Lead Counsel : David R. Scott, Esq., Scott + Scott, LLC, 108 Norwich Avenue, P.O. Box 192, Colchester, Connecticut 06415, Telephone (860) ; or Beth Kaswan, Esq., Milberg Weiss Bershad & Schulman LLP, One Pennsylvania Plaza, New York, New York , Telephone (212) Reasons for the Settlemen t The principal reason for the settlement is the benefit to be provided to the Class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future. [END OF COVER PAGE] WHAT THIS NOTICE CONTAIN S Table of Contents Page SUMMARY NOTICE Statement of Plaintiff Recovery Statement of Potential Outcome of Case Statement of Attorneys' Fees and Costs Sought Further Information

63 Reasons for the Settlement BASIC INFORMATION Why did I get this notice package? What is this lawsuit about? Why is this a class action? Why is there a settlement? WHO IS IN THE SETTLEMENT How do I know if I am part of the settlement? Are there exceptions to being included? What if I am still not sure if I am included? THE SETTLEMENT BENEFITS WHAT YOU GET What does the settlement provide? How much will my payment be? HOW YOU GET A PAYMENT SUBMITTING A CLAIM FORM How can I get a payment? When would I get my payment? What am I giving up to get a payment or stay in the Class? EXCLUDING YOURSELF FROM THE SETTLEMENT How do I get out of the proposed settlement? If I do not exclude myself, can I sue ANR and the other Release d Parties for the same thing later? If I exclude myself, can I get money from the proposed settlement? THE LAWYERS REPRESENTING YOU Do I have a lawyer in this case? How will the lawyers be paid? OBJECTING TO THE SETTLEMENT

64 18. How do I tell the Court that I do not like the proposed settlement? What is the difference between objecting and excluding? THE COURT'S FAIRNESS HEARING When and where will the Court decide whether to approve th e proposed settlement? Do I have to come to the hearing? May I speak at the hearing? IF YOU DO NOTHING What happens if I do nothing at all? GETTING MORE INFORMATION Are there more details about the proposed settlement? How do I get more information? PLAN OF ALLOCATION OF NET SETTLEMENT FUND AMONG CLAS S MEMBERS SCHEDULE I PLAINTIFFS' CONTENTION OF ALLEGED INFLATION ("PCAI") SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES

65 Why did I get this notice package? BASIC INFORMATION You or someone in your family may have purchased shares of the common stock of Annuity and Life Re (Holdings), Ltd. ("ANR") during the period between March 15, 2000 and November 19, 2002, inclusive. The Court directed that this Notice be sent to Class Members because they have a right to know about a proposed settlement of a class action lawsuit, and about all of their options, before the Court decides whether to approve the settlement. If the Court approves it and after objections and appeals are resolved, an administrator appointed by the Court will make the payments that the settlement allows. This package explains the lawsuit, the settlement, Class Members' legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the United States District Court for the District of Connecticut, and the case is known as Schnall v. Annuity and Life Re (Holdings) Ltd., Civil Action No. 02 CV 2133 (EBB). This case was assigned to United States District Judge Ellen Bree Burns. The people who sued are called plaintiffs, and the companies and the persons they sued, Annuity and Life Re (Holdings), Ltd. ("ANR"), XL Capital, Ltd. ("XL Capital," which owned between 11.1 and 12.9% of ANR's common stock during the Class Period), and certain of their present and former officers and directors (the "Individual Defendants," as defined below), are called the Settling Defendants. A separate action, Civil Action No. 03-CV-1826, (the "KPMG Action") with a separate complaint has been filed against KPMG in Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG"), has been consolidated with the Action, without prejudice to Defendants' rights to request a separate trial at a later and more appropriate phase of the litigation. This Settlement with the Settling Defendants does not settle any claims against KPMG or its partners, principals, employees, agents and affiliates, none of whom or which shall be released from any claims of the Lead Plaintiffs or the Class under this Settlement. The "Individual Defendants" are : Lawrence S. Doyle (Chief Executive Officer, President, and a Director of ANR from the beginning of the Class Period until approximately September 12, 2002), Frederick S. Hammer (Chairman of the Board of Directors of ANR during the Class Period, sitting variously on the Executive Committee, the Finance and Investment Committee, and the Corporate Governance Committee during the Class Period and sitting on the Transition Committee of the Board of Directors from approximately September 17, 2002 until the end of the Class Period), John F. Burke (Chief Financial Officer, Senior Vice President, Corporate Secretary, and Principal Accounting and Financial Officer of ANR from approximately September 17, 2001 until the end of the Class Period), William W. Atkin (Chief Financial Officer, Treasurer, Corporate Secretary, and Principal Accounting and Financial Officer of ANR from the beginning of the Class Period until August 31, 2001), Brian O'Hara (a Director of ANR 6

66 and the President and Chief Executive Officer of XL Capital during the Class Period), and Michael P. Esposito (a Director of ANR, sitting on the Executive Committee and the Finance and Investment Committee, and the Chairman of the Board of Directors of XL Capital during the Class Period). What is this lawsuit about? ANR provides annuity and life reinsurance, agreeing to indemnify the ceding insurance company all or a portion of the risks associated with the underlying insurance policy in exchange for a reinsurance premium payable to the reinsurer. Plaintiffs allege that ANR's liabilities for the risks on its largest contract were much greater than ANR reported publicly. The Consolidated Amended Class Action Complaint for Violations of Federal Securities Laws dated July 11, 2003 (the "Complaint") filed in the Action generally alleges, among other things, that Defendants issued false and misleading press releases and other statements regarding ANR's financial condition during the Class Period March 15, 2000 through and including November 19, 2002 in a scheme to artificially inflate the value of ANR's securities. Defendants deny that they did anything wrong. Why is this a class action? In a class action, one or more people called Class Representatives (in this case the Communications Workers of America and Midstream Investments Ltd.), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Why is there a settlement? Beginning on December 4, 2002, nine class actions alleging violations of federal securities laws were filed in this Court and were subsequently consolidated under the above caption and are hereinafter referred to as the "Action." The Court appointed Communications Workers of America and Midstream Investments Ltd. as the Lead Plaintiffs and appointed Scott + Scott, LLC and Milberg Wiess Bershad Hynes & Lerach LLP (now known as Milberg Weiss Bershad & Schulman LLP) as Co-Lead Counsel. A Consolidated Amended Class Action Complaint for Violations of Federal Securities Laws was filed on July 11, The Complaint alleges that Lead Plaintiffs and other Class Members purchased the common stock of ANR during the Class Period at prices artificially inflated as a result of the Defendants'

67 dissemination of materially false and misleading statements regarding ANR in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 1 Ob-5 promulgated thereunder. On September 30, 2003, ANR filed its answer to the Complaint, denying any liability to Lead Plaintiffs and the Class. On October 3, 2003, Individual Defendants Burke, Hammer, and Atkin each filed a separate motion to dismiss the Complaint. In addition, XL Capital and Individual Defendants O'Hara and Esposito (the "XL Capital Defendants") together filed a motion to dismiss on October 3, On October 24, 2003, Doyle filed his answer to the Complaint, denying any liability to Lead Plaintiffs and the Class. Lead Plaintiffs sought and received permission from the Court to file a consolidated response to the motions to dismiss filed by Burke, by Hammer, and by the XL Capital Defendants. As Atkin's' motion to dismiss was the only one to make substantially different arguments for dismissal, Lead Plaintiffs filed a separate response to Atkin's motion to dismiss. On November 19, 2003, Lead Plaintiffs filed these opposition papers to the motions to dismiss. Atkin filed his reply to Lead Plaintiffs' opposition on December 4, On December 13, 2003, the Court denied Atkin's motion to dismiss without prejudice. On January 26, 2004, Atkin filed a renewed motion to dismiss. On March 16, 2004, Lead Plaintiffs filed their opposition to Atkin's renewed motion to dismiss. Atkin filed his response on April 1, On April 15, 2004, Lead Plaintiffs sought and received permission from the Court to file a surreply to Atkin's renewed motion to dismiss. On April 19, 2004, Atkin filed a reply to the surreply. The XL Capital Defendants filed their reply to Lead Plaintiffs' opposition on December 18, On March 9, 2004, the Court denied the XL Capital Defendants' motion to dismiss. On April 8, 2004, the XL Capital Defendants filed their answer and cross-claim to the Complaint. The XL Capital Defendants denied any liability to Lead Plaintiffs and the Class. Hammer filed his reply to Lead Plaintiffs' opposition on December 22, On February 4, 2004, the Court denied Hammer's motion to dismiss. On February 24, 2004, Hammer filed his answer to the Complaint, denying any liability to Lead Plaintiffs and the Class. Burke filed his reply to Lead Plaintiffs' opposition on December 22, On February 26, 2004, the Court denied Burke's motion to dismiss. On April 8, 2004, Burke filed his answer to the Complaint, denying any liability to Lead Plaintiffs and the Class. The Settling Defendants deny any wrongdoing whatsoever and this Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of any Settling Defendant with respect to any claim or of any fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that the Settling Defendants have asserted. The Court did not decide in favor of Plaintiffs or Defendants. Instead, both sides agreed to a settlement. That way, they avoid the risks and cost of a trial, and the people affected will get compensation. The case would require all parties to engage expert accountants and actuaries an d 8

68 much of the proof would be highly technical. ANR and the Individual Defendants deny liability and do not have the assets to pay all the damages that Plaintiffs say they suffered and XL Capital has its own defenses which it states protects it from liability. The Class Representative and the attorneys think the settlement is best for all Class Members. The litigation is continuing against KPMG. The Settling Defendants have agreed to cooperate in providing information to the Plaintiffs for their claims against KPMG. WHO IS IN THE SETTLEMENT To see if you will get money from this settlement, you first have to decide if you are a Class Member. How do I know if I am part of the settlement? The Court directed, that for the purposes of the proposed settlement that everyone who fits this description is a Class Member : all persons who purchased the common stock of Annuity and Life Re (Holdings), Ltd. ("ANR') during the period between March 15, 2000 and November 19, 2002, inclusive, and were damaged thereby. Are there exceptions to being included? Excluded from the Class are the Settling Defendants, the officers and directors of ANR and XL Capital at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which Defendants have or had a controllin g interest. For purposes of this Settlement, the term "controlling interest" shall include any interest of 10% or more of the common stock of any entity. If one of your mutual funds own shares of ANR common stock, that alone does not make you a Class Member. You are a Class Member only if you directly purchased shares of ANR common stock during the Class Period. Contact your broker to see if you have or held ANR common stock. If you sold ANR common stock during the Class Period, that alone does not make you a Class Member. You are a Class Member only if you purchased your shares during the Class Period. What if I am still not sure if I am included? If you are still not sure whether you are included, you can ask for free help. You can call or visit for more information. Or you can fill out and return the claim form described on page [], in question [10], to see if you qualify. 9

69 What does the settlement provide? THE SETTLEMENT BENEFITS - WHAT YOU GET In exchange for the Settlement and dismissal of the Action, the Settling Defendants have agreed to pay $16.5 million, either all in cash or $14 million in cash and $2.5 million in ANR common stock (subject to a limit on the number of ANR common shares of 19.9% of the outstanding shares), to be divided, after taxes, fees, and expenses, among all Class Members who send in a valid Proof of Claim form. In addition, Settling Defendants will cooperate with Plaintiffs ' Co-Lead C ounsel in the Class' remaining case against KPMG. How much will my payment be? Your share of the fund will depend on the total Recognized Claims represented by the valid Proof of Claim forms that Class Members send in, how many shares of ANR common stock you bought, and when you bought and sold them. By following the instructions on page [ ] of this Notice, you can calculate what is called your Recognized Claim. It is unlikely that you will get a payment for all of your Recognized Claim. After all Class Members have sent in their Proof of Claim forms, the payment you get will be a part of the Net Settlement Fund equal to your Recognized Claim divided by the total o f everyone's Recognized Claim. See the Plan of Allocation on page [] for more information on your Recognized Claim. HOW YOU GET A PAYMENT - SUBMITTING A CLAIM FOR M How can I get a payment? To qualify for a payment, you must send in a claim form. A Proof of Claim form is being circulated with this Notice. You may also get a Proof of Claim form on the Internet at Read the instructions carefully, fill out the Proof of Claim form, include all the documents the form asks for, sign it, and mail it postmarked no later than

70 When would I get my payment? The Court will hold a hearing on, 2004, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It is always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. It also takes time for all the Proofs of Claim to be processed. Please be patient. What am I giving up to get a payment or stay in the Class? Unless you exclude yourself, you are staying in the class, and that means that, if the settlement is approved, you will release all "Settled Claims" (as defined below) against the "Released Parties" (as defined below). "Settled Claims" means any and all claims, debts, demands, rights or causes of action or liabilities whatsoever (including, but not limited to, any claims for damages, interest, attorneys' fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on United States federal, state, local, statutory or common law or the laws of Bermuda or any other law, rule or regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether class or individual in nature, including both known claims and Unknown Claims, (i) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, or (ii) that could have been asserted in any forum by the Class Members or any of them against any of the Released Parties which arise out of or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint and relate to the purchase of shares of the common stock of Annuity and Life Re (Holdings) Ltd. ("ANR") during the Class Period. "Settled Claims" does not include any claims against KPMG in Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG") or its partners, principals, employees, agents and affiliates. "Released Parties" means any and all of the Settling Defendants, their past or present subsidiaries, parents, successors and predecessors, and all of the aforementioned entities' officers, directors, agents, employees, attorneys, advisors, insurers, and investment advisors, and any person, firm, trust, corporation, officer, director or other individual or entity in which any Settling Defendant has a controlling interest or which is related to or affiliated with any of the Settling Defendants, and the legal representatives, heirs, successors in interest or assigns of the Settling Defendants. "Released Parties" does not include KPMG in Bermuda ("KPMG Bermuda") and KPMG LLP USA ("KPMG USA") (collectively, "KPMG") or its partners, principals, employees, agents and affiliates. "Unknown Claims" means any and all Settled Claims which any Lead Plaintiff or Class Member does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties, and any Settled Defendants' Claims which any Settling Defendant does not know or suspect to exist in his, her or its favor, which if known by him, her or it might have affected his, 11

71 her or its decision(s) with respect to the Settlement. With respect to any and all Settled Claims and Settled Defendants' Claims, the parties stipulate and agree that upon the Effective Date, the Lead Plaintiffs and the Settling Defendants shall expressly waive, and each Class Member shall be deemed to have waived, and by operation of the Judgment shall have expressly waived, any and all provisions, rights and benefits conferred by any law of any state or territory of the United States or Bermuda, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542, which provides : A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Lead Plaintiffs and Settling Defendants acknowledge, and Class Members by operation of law shall be deemed to have acknowledged, that the inclusion of "Unknown Claims" in the definition of Settled Claims and Settled Defendants' Claims was separately bargained for and was a key element of the Settlement. If you remain a member of the Class, all of the Court' s orders will apply to you and legally bind you. EXCLUDING YOURSELF FROM THE SETTLEMEN T If you do not want a payment from this settlement, but you want to keep the right to sue ANR and the other Released Parties, on your own, about the legal issues in this case, then you must take steps to get out. This is called excluding yourself - or is sometimes referred to as "opting out" of the settlement Class. The Settling Defendants may withdraw from and terminate the Settlement if in excess of a certain amount of claimants exclude themselves from the Class. How do I get out of the proposed settlement? To exclude yourself from the settlement Class, you must send a letter by mail stating that you "request exclusion from the Class in Schnall v. Annuity and Life Re (Holdings) Ltd.." Your letter should include the date(s), price(s), and number(s) of shares of all purchases and sales of ANR common stock during the Class Period. In addition, be sure to include your name, address, telephone number, and your signature. You must mail your exclusion request postmarked no later than, 2004 to : Annuity and Life Re (Holdings), Ltd. Securities Litigation Exclusions c/o The Garden City Group, Inc., Claims Administrato r P.O. Box 9000 #6254 Merrick, NY You cannot exclude yourself by telephone or by . If you ask to be excluded, you will not get any settlement payment, and you cannot object to the settlement. You will not be legally 12

72 bound by anything that happens in this lawsuit, and you may be able to sue ANR and the other Released Parties in the future. If I do not exclude myself, can I sue ANR and the other Released Parties for the same thing later? No. Unless you exclude yourself, you give up any rights to sue ANR and the other Released Parties for any and all Settled Claims. If you have a pending lawsuit speak to your lawyer in that case immediately. You must exclude yourself from this Class to continue your own lawsuit. Remember, the exclusion deadlineis, If I exclude myself, can I get money from the proposed settlement? No. If you exclude yourself, do not send in a claim form to ask for any money. But, you may sue or be part of a different lawsuit against ANR and the other Released Parties. Do I have a lawyer in this case? THE LAWYERS REPRESENTING YO U The Court ordered that the law firms of Scott + Scott, LLC in Colchester, Connecticut and Milberg Weiss Bershad & Schulman LLP in New York, New York will represent you and the other Class Members. These lawyers are called Plaintiffs' Co-Lead Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. How will the lawyers be paid? Plaintiffs' Counsel are moving the Court to award of attorneys' fees from the Settlement Fund in an amount not greater than one-third (33=5%) of the Gross Settlement Fund and for reimbursement of their expenses in the approximate amount of $250,000 (including approximately $10,000 for the reasonable costs and expenses (including lost wages) of the Lead Plaintiffs directly relating to their representation of the Class), plus interest on such expenses at the same rate as earned by the Settlement Fund. Plaintiffs' Counsel, without further notice to the Class, may subsequently apply to the Court for fees and expenses incurred in connection with administering and distributing the settlement proceeds to the members of the Class and any proceedings subsequent to the Settlement Fairness Hearing. 13

73 OBJECTING TO THE SETTLEMEN T You can tell the Court that you do not agree with the settlement or some part of it. How do I tell the Court that I do not like the proposed settlement? If you are a Class Member, you can object to the proposed settlement if you do not like any part of it. You can give reasons why you think the Court should not approve it. The Court will consider your views. To object, you must send a signed letter saying that you object to the proposed settlement in the Annuity and Life Re (Holdings), Ltd. Securities Litigation. Be sure to include your name, address, telephone number, and your signature, identify the date(s), price(s), and number(s) of shares of all purchases and sales of ANR common stock you made during the Class Period, and state the reasons why you object to the proposed settlement. Mail the objection to each of the following addresses postmarked no later than, 2004 : COURT Clerk of the Court United States District Court for the District of Connecticut United States Courthouse 141 Church Stree t New Haven, CT PLAINTIFFS' CO-LEAD COUNSEL David R. Scott, Esq. SCOTT + SCOTT, LLC 108 Norwich Avenue P.O. Box 192 Colchester, CT Beth Kaswan, Esq. MILBERG WEISS BERSHAD & SCHULMAN LLP One Pennsylvania Plaza New York, NY SETTLING DEFENDANTS' COUNSE L Gary R. Battistoni, Esq. DRINKER BIDDLE & REATH LLP One Logan Square 18`h and Cherry Streets Philadelphia, PA Thorn Rosenthal, Esq. CAHILL GORDON & REINDEL LLP 80 Pine Street New York, NY What is the difference between objecting and excluding? Objecting is simply telling the Court that you do not like something about the proposed settlement. You can object only if you stay in the Class. Excluding yourself is telling the Court that you do not want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. THE COURT'S FAIRNESS HEARIN G 14

74 The Court will hold a hearing to decide whether to approve the proposed settlement. You may attend and you may ask to speak, but you do not have to. When and where will the Court decide whether to approve the proposed settlement? The Court will hold a Fairness Hearing at _.m. on day, _, 2004, at the United States District Court for the District of Connecticut, United States Courthouse, 141 Church Street, New Haven, Connecticut 06510, in Courtroom. At this hearing the Court will consider whether the settlement is fair, reasonable and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Plaintiffs' Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. Do I have to come to the hearing? No. Plaintiffs' Counsel will answer questions the Court may have. But, you are welcome to come at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you mailed your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary. Class Members do not need to appear at the hearing or take any other action to indicate their approval. May I speak at the hearing? If you object to the Settlement, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must include with your objection (see question [18] above) a statement saying that it is your "Notice of Intention to Appear in Schnall v. Annuity and Life Re (Holdings) Ltd., et al.." Persons who intend to object to the Settlement, the Plan of Allocation, and/or counsel's application for an award of attorneys' fees and expenses and desire to present evidence at the Settlement Fairness Hearing must include in their written objections the identity of any witnesses they may call to testify and exhibits they intend to introduce into evidence at the Settlement Fairness Hearing. You cannot speak at the hearing if you excluded yourself. What happens if I do nothing at all? IF YOU DO NOTHING 15

75 If you do nothing, you will get no money from this settlement. But, unless you exclude yourself, you will not be able to start a lawsuit or be part of any other lawsuit against the Settling Defendants and the other Released Parties about the legal issues in this case, ever again. GETTING MORE INFORMATION Are there more details about the proposed settlement? This notice summarizes the proposed settlement. More details are in a Stipulation and Agreement of Partial Settlement dated, 2004 (the "Stipulation"). You can get a copy of the Stipulation by writing to Beth Kaswan, Esq., Milberg Weiss Bershad & Schulman LLP, One Pennsylvania Plaza, New York, New York or David R. Scott, Esq., Scott + Scott, LLC, 108 Norwich Avenue, P.O. Box 192, Colchester, Connecticut 06415, or by visiting You also can call the Claims Administrator at toll free ; write to Annuity and Life Re (Holdings), Ltd. Settlement, P.O. Box 9000 #6254, Merrick, NY ; or visit the website at com, where you will find answers to common questions about the settlement, a claim form, plus other information to help you determine whether you are a Class Member and whether you are eligible for a payment. How do I get more information? For even more detailed information concerning the matters involved in this Action, reference is made to the pleadings, to the Stipulation, to the Orders entered by the Court and to the other papers filed in the Action, which may be inspected at the Office of the Clerk of the United States District Court for the District of Connecticut, United States Courthouse, 141 Church Street, New Haven, Connecticut 06510, during regular business hours. PLAN OF ALLOCATION OF NET SETTLEMENT FUND AMONG CLASS MEMBERS The Cash Settlement Amount and any interest earned thereon, and the Settlement Shares (if issued) or additional $2.5 million cash payment from ANR (or the proceeds of the sale of any or all of the Settlement Shares (if issued), if sold, and the interest and any dividends thereon) shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes, approved costs, fees and expenses (the "Net Settlement Fund") shall be distributed to members of the Class who submit acceptable Proofs of Claim ("Authorized Claimants"). The Claims Administrator shall determine each Authorized Claimant's pro rata share of the Net Settlement Fund based upon each Authorized Claimant's "Recognized Claim." The Recognized Claim formula is not intended to be an estimate of the amount of what a Class Member might have been able to recover after a trial ; nor is it an estimate of the amount that will be paid to Authorized Claimants pursuant to the settlement. The Recognized Claim formula is the basi s 16

76 upon which the Net Settlement Fund will be proportionately allocated to the Authorized Claimants. The following proposed Plan of Allocation reflects the proposition that the price of ANR common stock was artificially inflated during the Class Period by various amounts as various disclosures were made. Plaintiffs' damages consultant concluded that the price of ANR common stock was inflated artificially by the amounts shown on Schedule 1 during the Class Period. For purposes of the Settlement "Recognized Claims" will be calculated as follows : 1. For shares of ANR common stock purchased during the Class Period and still owned as of the close of trading on November 19, 2002, "Recognized Claim" shall be the Plaintiffs' Contention of Alleged Inflation ("PCAI") per share on the date of purchase as shown on Schedule 1 for the date of purchase. 2. For shares of ANR common stock purchased during the Class Period and sold at a loss on or before the close of trading on November 19, 2002, "Recognized Claim" shall be the lesser of (x) the Purchase Price Paid less the Sale Proceeds Received ; or (y) the PCAI per share on the date of purchase (as shown on Schedule 1 for the date of purchase), less the PCAI per share on the date of sale (as shown on Schedule 1 for the date of sale). To the extent a Claimant had a gain from his, her or its overall transactions in ANR common stock during the Class Period, the value of the Recognized Claim will be zero. To the extent that a Claimant suffered an overall loss on his, her or its overall transactions in ANR common stock during the Class Period, but that loss was less than the Recognized Claim calculated above, then the Recognized Claim shall be limited to the amount of the actual loss. For purposes of determining whether a Claimant had a gain from his, her or its overall transactions in ANR common stock during the Class Period or suffered a loss, the Claims Administrator shall: (i) total the amount paid for all ANR common stock purchased during the Class Period by the claimant (the "Total Purchase Amount") ; (ii) match any sales of ANR common stock during the Class Period first against the Claimant's opening position in the stock (the proceeds of those sales will not be considered for purposes of calculating gains or losses) ; (iii) total the amount received for sales of the remaining shares of ANR common stock sold during the Class Period (the "Sales Proceeds") ; and (iv) ascribe a $2.24 per share holding value for the number of shares of ANR common stock purchased during the Class Period and still held at the end of the Class Period ("Holding Value"). The difference between (x) the Total Purchase Amount ((i) above) and the (y) sum of the Sales Proceeds ((iii) above) and the Holding Value ((iv) above) will be deemed a Claimant's gain or loss on his, her or its overall transactions in ANR common stock during the Class Period. Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund based on his, her or its Recognized Claim as compared to the total Recognized Claims of all Authorized Claimants. Class Members who do not submit acceptable Proofs of Claim will not share in the settlement proceeds. Class Members who do not either submit a request for exclusion or submit a n 17

77 acceptable Proof of Claim will nevertheless be bound by the settlement and the Order and Final Judgment of the Court dismissing this Action. Distributions will be made to Authorized Claimants after all claims have been processed and after the Court has finally approved the settlement. If any funds remain in the Net Settlement Fund by reason of un-cashed distributions or otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to have Class Members who are entitled to participate in the distribution of the Net Settlement Fund cash their distributions, any balance remaining in the Net Settlement Fund one (1) year after the initial distribution of such funds shall be re-distributed to Class Members who have cashed their initial distributions and who would receive at least $10.00 from such re-distribution, after payment of any unpaid costs or fees incurred in administering the Net Settlement Fund for such re-distribution. If after six months after such re-distribution any funds shall remain in the Net Settlement Fund, then such balance shall be contributed to nonsectarian, not-for-profit, 501(c)(3) organization(s) designated by Plaintiffs' Counsel. Plaintiffs, Defendants, their respective counsel, and all other Released Parties shall have no responsibility for or liability whatsoever for the investment or distribution of the Settlement Fund, the Net Settlement Fund, the Plan of Allocation or the determination, administration, calculation, or payment of any Proof of Claim or non-performance of the Claims Administrator, the payment or withholding of taxes owed by the Settlement Fund or any losses incurred in connection therewith. SCHEDULE 1 PLAINTIFFS' CONTENTION OF ALLEGED INFLATION ("PCAI") DATE(S) PCAI DATE(S) PCAI DATE(S) PCAI 03/15/2000 $ /16/2000 $ /17/2000 $ /20-21/2000 $ /22/2000 $ /23/2000 $ /24/2000 $ /27/2000 $ /28/2000 $ /29/2000 $ /30/2000 $ /31/2000 $ /03/2000 $ /04/2000 $ /05-06/2000 $ /07/2000 $ /10/2000 $ /11/2000 $ /12/2000 $ /13/2000 $ /14/2000 $ /17-18/2000 $ /19/2000 $ /20-27/2000 $ /01/2000 $ /02/2000 $ /03/2000 $ /04-05/2000 $ /08/2000 $ /09/2000 $ /10/2000 $ /11/2000 $ /12/2000 $ /15/2000 $ /16/2000 $ /17/2000 $ /18/2000 $ /19/2000 $ /22-24/2000 $ /25-26/2000 $ /30/2000 $ /31-06/02/2000 $ /05/2000 $ /06/2000 $ /07/2000 $

78 DATE(S) PCAI DATE(S) PCAI DATE(S) PCAI 06/08/2000 $ /09/2000 $ /12/2000 $ /13/2000 $ /14-15/2000 $ /16/2000 $ /19-20/2000 $ /21/2000 $ /22/2000 $ /23/2000 $ /26/2000 $ /27-28/2000 $ /29/2000 $ /30/2000 $ /03/2000 $ / $ /06/2000 $ /07/2000 $ /10/2000 $ /11/2000 $ /12/2000 $ /13/2000 $ /14/2000 $ /17/2000 $ /18/2000 $ /19/2000 $ /20/2000 $ /21/2000 $ /24/2000 $ /25/2000 $ /26/2000 $ /27/2000 $ /28/2000 $ /28/2000 $ /01/2000 $ /02/2000 $ /03/2000 $ /04/2000 $ /07/2000 $ /08/2000 $ /09/2000 $ /10/2000 $ /11/2000 $ /14/2000 $ /15/2000 $ /16/2000 $ /17/2000 $ /18/2000 $ /21/2000 $ /22/2000 $ /23/2000 $ /24/2000 $ /25/2000 $ /28/2000 $ /29/2000 $ /30/2000 $ /31/2000 $ /01/2000 $ /05/2000 $ /06/2000 $ /07/2000 $ /08/2000 $ /11/2000 $ /12/2000 $ /13/2000 $ /14/2000 $ /15/2000 $ /18/2000 $ /19/2000 $ /20/2000 $ /21/2000 $ /22/2000 $ /25/2000 $ /26/2000 $ /27/2000 $ /28/2000 $ /29/2000 $ /02/2000 $ /03/2000 $ /04/2000 $ /05/2000 $ /06/2000 $ /09/2000 $ /10/2000 $ /11/2000 $ /12/2000 $ /13/2000 $ /16/2000 $ /17/2000 $ /18/2000 $ /19/2000 $ /20/2000 $ /23/2000 $ /24/2000 $ /25/2000 $ /26/2000 $ /27/2000 $ /30/2000 $ /31/2000 $ /01/2000 $ /02/2000 $ /03/2000 $ /06/2000 $ /07/2000 $ /08/2000 $ /09/2000 $ /10/2000 $ /13/2000 $ /14/2000 $ /15/2000 $ /16/2000 $ /17/2000 $ /20/2000 $ /21/2000 $ /22/2000 $ /24/2000 $ /27/2000 $

79 DATE(S) PCAI DATE(S) PCAI DATE(S) PCA I 11/28/2000 $ /29/2000 $ /30/2000 $ /01/2000 $ /04/2000 $ /05/2000 $ /06/2000 $ /07/2000 $ /08/2000 $ /11/2000 $ /12/2000 $ /13/2000 $ /14/2000 $ /15/2000 $ /18/2000 $ /19/2000 $ /20/2000 $ /21/2000 $ /22/2000 $ /26/2000 $ /27/2000 $ /28/2000 $ /29/2000 $ /02/2001 $ /03/2001 $ /04/2001 $ /05/2001 $ /08/2001 $ /09/2001 $ /10/2001 $ /11/2001 $ /12/2001 $ /16/2001 $ /17/2001 $ /18/2001 $ /19/2001 $ /22/2001 $ /23/2001 $ /24/2001 $ /25/2001 $ /26/2001 $ /29/2001 $ /30/2001 $ /31/2001 $ /01/2001 $ /02/2001 $ /05/2001 $ /06/2001 $ /07/2001 $ /08/2001 $ /09/2001 $ /12/2001 $ /13/2001 $ /14/2001 $ /15/2001 $ /16/2001 $ /20/2001 $ /21/2001 $ /22/2001 $ /23/2001 $ /26/2001 $ /27/2001 $ /28/2001 $ /01/2001 $ /02/2001 $ /05/2001 $ /06/2001 $ /07/2001 $ /08/2001 $ /09/2001 $ /12/2001 $ /13/2001 $ /14/2001 $ /15/2001 $ /16/2001 $ /19/2001 $ /20/2001 $ /21/2001 $ /22/2001 $ /23/2001 $ /26/2001 $ /27/2001 $ /28/2001 $ /29/2001 $ /30/2001 $ /02/2001 $ /03/2001 $ /04/2001 $ /05/2001 $ /06/2001 $ /09/2001 $ /10/2001 $ /11/2001 $ /12/2001 $ /16/2001 $ /17/2001 $ /18/2001 $ /19/2001 $ /20/2001 $ /23/2001 $ /24/2001 $ /25-10/25/2001 $ /26-10/29/2001 $ /30/2001 $ /31/2001 $ /01-12/2001 $ /13/2001 $ /14/2001 $ /15/2001 $ /16/2001 $ /19/2001 $ /20/2001 $ /21/2001 $ /23-12/18/2001 $ /19/2001 $ /20/2001 $ /21/2001 $ /24/ /15/2002 $ /16-07/25/2002 $ /26/2002 $ /29-07/30/2002 $ /31/2002 $ /01/2002 $ /02/2002 $ /05/2002 $ /06/2002 $