Scottish Re Group Limited Announces Operating Results for the Third Quarter Ended September 30, 2007



    HAMILTON, BERMUDA, November 7 /CNW/ - Scottish Re Group Limited
(NYSE:  SCT) ("Scottish Re" or the "Company") today reported a net loss
attributable to ordinary shareholders for the three months ended September 30,
2007 of $109.5 million, or $(1.60) per diluted ordinary share, as compared to
a net loss attributable to ordinary shareholders of $30.5 million, or $(0.54)
per diluted ordinary share, for the prior year period. The net loss
attributable to ordinary shareholders was driven by $102.0 million in realized
losses on investments and a $14.8 million net change in the value of embedded
derivatives.

    Related to the realized losses on investments, $95.3 million of the
$102.0 million was recognized in connection with impairment charges for
subprime and Alt-A residential mortgage securities. In arriving at the
impairment charges, we conducted extensive analysis in accordance with U.S.
Generally Accepted Accounting Principles (U.S. GAAP). As part of that analysis
and in conjunction with our third party asset managers, we performed detailed
cash flow simulations on each of our subprime and Alt-A securities stressing
multiple variables - including prepayment speeds, default rates and loss
severity. As a result, $54.2 million of the realized losses relates to
securities for which we have projected a principal loss and $41.1 million
relates to securities for which we currently expect to receive full interest
and principal. U.S. GAAP requires us to impair to market value certain
recently downgraded securities held in our securitization structures, because
we can no longer prove our ability to hold the securities to recovery of
amortized cost, as is our intent.

    We also incurred a $14.8 million charge in the quarter representing a
change, net of deferred acquisition costs, in the value of embedded
derivatives due to a shift in the yield curve used to value the derivatives.
These embedded derivatives relate to our funds withheld at interest on
modified coinsurance treaties.

    Third quarter operating income was $1.6 million, an increase of $1.4
million over the prior year period. Operating income, excluding the impact of
one-time items, was driven by solid results in our core North America
business, improving performance in our International growth platforms and
lower Corporate expenses.

    As of September 30, 2007 the Company had shareholders' and mezzanine
equity of $1.4 billion and available liquidity of $468.0 million. Fully
diluted book value per ordinary share was $6.17 as of September 30, 2007.

    George Zippel, President and Chief Executive Officer of Scottish Re,
commented, "The third quarter, my first with Scottish Re, was a challenging
one and the results highlight both the risks and opportunities facing the
Company. On one hand, we delivered positive pre-tax operating income - the
first time in four quarters that we've done that - driven by improved
performance in our in-force books of business. On the other hand, we incurred
significant realized losses reflecting our sizable subprime exposure. Our
subprime impairment analysis was rigorous and represents our best estimate of
the current impact of the subprime market on our investment portfolio. It
should be noted however, that if the assumptions underlying our analysis prove
to be inaccurate, the projected principal losses and associated asset
impairments will vary from our current view."

    Third Quarter Financial Highlights

    North America operating income for the third quarter was $19.5 million,
up 19% from the prior year period, driven by favorable mortality and one-time
items partially offset by adverse lapse experience and higher collateral
financing costs attributable to our current ratings. Total revenues for the
quarter were $464.3 million and, excluding the impact of realized losses and
the net embedded derivative change, were up 1% from the prior year period.
Premiums earned were $428.8 million, up 2% from the prior year period.

    North America generated $4.3 billion of new business (as measured by face
amount) and remained active in pursuing and winning new treaties. We enhanced
our value proposition to clients by releasing the latest version of ASCENT,
our electronic underwriting manual. We continue to be actively called upon by
our clients as a valued partner for experience analysis, assumption setting
and other mortality consultation services.

    International operating loss for the third quarter was $2.4 million, down
from operating income of $6.5 million in the prior year period. The decline
was driven by a favorable impact in the prior year from a recaptured annuity
treaty partially offset by higher underwriting profit on the UK and Ireland
protection business. Total revenues were $30.9 million, down 18% from the
prior year period and premiums earned were $27.5 million, down 13% from the
prior year period. Both total revenues and premiums earned were negatively
impacted by the exit of the Middle East business which we announced earlier
this year. UK and Ireland protection business premiums earned more than
doubled from the prior year period.

    International continues to produce new business ahead of planned levels,
generating $13.0 million of new annualized premium in the quarter and $34.0
million year to date, driven principally by UK protection treaties. We signed
two new treaties during the quarter, one in the UK and one in Asia. We
continue to enhance our market presence in the UK and released the second
issue of Re:Think, a thought-leadership publication for clients, and launched
the International version of the ASCENT electronic underwriting manual.

    Corporate operating loss for the third quarter was $15.5 million, a 32%
improvement from the prior year period. The prior year period included
one-time items for executive severance and professional fees and other
expenses incurred as part of evaluating the Company's strategic options. The
current period included lower financing costs and a $7.6 million non-cash
expense item for our new stock option plan.

    We look forward to sharing additional information at our scheduled
earnings call and additionally, have posted to our website, www.scottishre.com
a Financial Data Supplement to add further clarification to our financial
results for the quarter.

    The Company's earnings conference call will be held at 8:30 a.m. (EST) on
Thursday, November 8, 2007. The dial-in number is 1-888-694-4676 (U.S.) or
1-973-582-2737 (International) and the pass-code is 9287679. The conference
call will also be broadcast live via audio Webcast, which will be available on
the home page of the Company's website at www.scottishre.com. Following the
earnings conference call, a replay of the call will be available for two weeks
beginning at 11:00 a.m. (EST) on Thursday, November 8, 2007, and ending at
midnight on Thursday, November 22, 2007. The dial-in number for the call
replay is 1-877-519-4471 (U.S.) or 1-973-341-3080 (International) and the
pass-code is 9287679. An audio Webcast of the call will be archived and
available for the same period on the Company's website at www.scottishre.com.

    About Scottish Re

    Scottish Re Group Limited is a global life reinsurance specialist.
Scottish Re has operating businesses in Bermuda, Grand Cayman, Guernsey,
Ireland, Singapore, the United Kingdom and the United States. Its flagship
operating subsidiaries include Scottish Annuity & Life Insurance Company
(Cayman) Ltd., Scottish Re (U.S.), Inc. and Scottish Re Limited. Additional
information about Scottish Re Group Limited can be obtained from its website
at www.scottishre.com.

    Certain statements included herein are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results to differ materially from
the forward-looking statements. Management of the Company cautions that these
forward-looking statements are not guarantees of our future performance and
are subject to risks and uncertainties that could cause actual results to
differ materially from the results expressed or implied by the forward-looking
statements.

    Investors are directed to consider the risks and uncertainties discussed
in documents filed by the Company with the Securities and Exchange Commission.

    (Tables to follow)

    
                          Scottish Re Group Limited
                             Financial Highlights
      (Stated in Thousands of United States Dollars, Except Share Data)
                                 (Unaudited)

                             Three months ended      Nine months ended
                                September 30            September 30
                           ----------------------  ----------------------
                              2007        2006        2007        2006
                           ----------  ----------  ----------  ----------
    Total revenue         $   500,044 $   611,346 $ 1,718,441 $ 1,783,293
    Operating income
     (loss)                     1,575         157     (72,708)    (18,315)
    Net loss                 (107,184)    (27,415)    (37,706)   (135,156)
    Net loss attributable
     to ordinary
     shareholders            (109,450)    (30,490)   (165,253)   (142,834)
    Loss per ordinary
     share
     Basic                $     (1.60)$     (0.54)$     (2.47)$     (2.61)
     Diluted              $     (1.60)$     (0.54)$     (2.47)$     (2.61)
    Dividends declared
     per ordinary share   $         - $         - $         - $      0.10
    Weighted average
     ordinary shares
     outstanding
     Basic                 68,383,370  56,933,566  66,939,007  54,708,914
     Diluted               68,383,370  56,933,566  66,939,007  54,708,914
    

    
                                                September 30, December 31,
                                                    2007          2006
                                                ------------- ------------
    Book value per ordinary share                  $    10.88   $    15.39
    Fully diluted book value per ordinary share    $     6.17   $    15.69
    

    
                          Scottish Re Group Limited
                         Consolidated Balance Sheets
      (Stated in Thousands of United States Dollars, Except Share Data)

                                                September 30, December 31,
                                                    2007          2006
                                                 (Unaudited)   (Audited)
                                                ------------- ------------
    Assets
    Fixed maturity investments                   $ 7,635,704  $ 8,065,524
    Preferred stock                                   99,340      116,933
    Cash and cash equivalents                      1,253,071      622,756
    Other investments                                 66,250       65,448
    Funds withheld at interest                     1,636,229    1,942,079
                                                ------------- ------------
    Total investments                             10,690,594   10,812,740
    Accrued interest receivable                       57,579       57,538
    Reinsurance balances and risk fees
     receivable                                      421,772      372,512
    Deferred acquisition costs                       630,732      618,737
    Amounts recoverable from reinsurers              574,517      663,985
    Present value of inforce business                 46,310       48,779
    Other assets                                     125,642      178,311
    Current income tax receivable                      7,787            -
    Deferred tax asset                               101,087            -
    Segregated assets                                715,923      683,470
                                                ------------- ------------
     Total assets                                $13,371,943  $13,436,072
                                                ------------- ------------
    Liabilities
    Reserves for future policy benefits          $ 4,036,410  $ 3,919,901
    Interest sensitive contract liabilities        2,744,340    3,399,410
    Collateral finance facilities                  4,000,422    3,757,435
    Accounts payable and other liabilities           158,418       69,949
    Reinsurance balances payable                     154,416       97,615
    Current income tax payable                             -           48
    Deferred tax liability                                 -      169,977
    Long term debt                                   129,500      129,500
    Segregated liabilities                           715,923      683,470
                                                ------------- ------------
     Total liabilities                            11,939,429   12,227,305
                                                ------------- ------------
    Minority interest                                  7,367        7,910
    Mezzanine equity
    Convertible cumulative participating
     preferred shares (liquidation preference
     $617.6 million)                                 555,857            -
    Hybrid capital units                                   -      143,665
                                                ------------- ------------
     Total mezzanine equity                          555,857      143,665
                                                ------------- ------------
    Shareholders' equity
    Ordinary shares, par value $0.01 per share:
    Issued and outstanding 68,383,370 shares
     (2006 - 60,554,104)                                 684          606
    Non-cumulative perpetual preferred shares,
     par value $0.01 per share:
    Issued: 5,000,000 shares (2006 - 5,000,000)      125,000      125,000
    Additional paid-in capital                     1,213,688    1,050,860
    Accumulated other comprehensive income
     (loss)                                         (273,394)         340
    Retained deficit                                (196,688)    (119,614)
                                                ------------- ------------
     Total shareholders' equity                      869,290    1,057,192
                                                ------------- ------------
     Total liabilities, minority interest,
      mezzanine equity and shareholders' equity  $13,371,943  $13,436,072
                                                ------------- ------------
    

    
                          Scottish Re Group Limited
                       Consolidated Statements of Loss
                (Stated in Thousands of United States Dollars)
                                 (Unaudited)

                               Three months ended     Nine months ended
                                  September 30           September 30
                                 2007      2006       2007        2006
                              ---------- --------- ----------- -----------
    Revenues
    Premiums earned, net      $ 456,340  $453,521  $1,360,850  $1,347,484
    Investment income, net      154,450   162,408     456,926     439,407
    Fee and other income          6,017     2,380      14,881      10,752
    Net realized losses        (101,986)   (1,072)   (108,330)    (25,971)
    Change in value of
     embedded derivatives,
     net                        (14,777)   (5,891)     (5,886)     11,621
                              ---------- --------- ----------- -----------
     Total revenues             500,044   611,346   1,718,441   1,783,293
                              ---------- --------- ----------- -----------
    Benefits and expenses
    Claims and other policy
     benefits                   368,731   377,713   1,140,562   1,124,277
    Interest credited to
     interest sensitive
     contract liabilities        34,793    42,423     106,515     140,523
    Acquisition costs and
     other insurance
     expenses, net               97,755    86,241     289,363     278,644
    Operating expenses           36,982    39,447     131,364     109,904
    Collateral finance
     facilities expense          73,667    67,323     222,647     145,646
    Interest expense              3,304     5,005      14,914      16,964
                              ---------- --------- ----------- -----------
     Total benefits and
      expenses                  615,232   618,152   1,905,365   1,815,958
                              ---------- --------- ----------- -----------
    Loss before income taxes
     and minority
    interest                   (115,188)   (6,806)   (186,924)    (32,665)
    Income tax benefit
     (expense)                    7,777   (20,841)    148,717    (102,427)
                              ---------- --------- ----------- -----------
    Loss before minority
     interest                  (107,411)  (27,647)    (38,207)   (135,092)
    Minority interest               227       232         501         (64)
                              ---------- --------- ----------- -----------
    Net loss                   (107,184)  (27,415)    (37,706)   (135,156)
    Dividends declared on
     non-cumulative perpetual
     preferred shares            (2,266)   (2,266)     (6,797)     (6,797)
    Deemed dividend on
     beneficial conversion
     feature                          -         -    (120,750)          -
    Imputed dividend on
     prepaid variable share
     forward contract                 -      (809)          -        (881)
                              ---------- --------- ----------- -----------
    Net loss attributable to
     ordinary shareholders    $(109,450) $(30,490) $ (165,253) $ (142,834)
                              ---------- --------- ----------- -----------

    Operating income (loss)
    Loss before income taxes
     and minority
    interest                  $(115,188) $ (6,806) $ (186,924) $  (32,665)
    Net realized losses         101,986     1,072     108,330      25,971
    Change in value of
     embedded derivatives,
     net                         14,777     5,891       5,886     (11,621)
                              ---------- --------- ----------- -----------
    Operating income
     (loss)(1)                $   1,575  $    157  $  (72,708) $  (18,315)
                              ---------- --------- ----------- -----------

    (1) Operating income (loss) is a non-GAAP measure. The Company defines
     operating income (loss) as income (loss) before income taxes and
     minority interest before realized gains and losses and the net change
     in value of embedded derivatives. While these items may be
     significant components in understanding and assessing the Company's
     consolidated financial performance, the Company believes that the
     presentation of operating income (loss) enhances the understanding of
     its results of operations by highlighting earnings attributable to
     the normal, recurring operation of its reinsurance business. However,
     operating income (loss) is not a substitute for net income determined
     in accordance with GAAP.
    

    
                          Scottish Re Group Limited
             Supplemental Information - Segment Operating Results
                (Stated in Thousands of United States Dollars)
                                 (Unaudited)

                        Life Reinsurance North America

                               Three months ended     Nine months ended
                                  September 30           September 30
                                2007       2006       2007        2006
                             ----------- --------- ----------- -----------
    Revenues
    Premiums earned, net     $  428,806  $421,707  $1,282,459  $1,258,174
    Investment income, net      147,754   151,872     439,122     412,576
    Fee and other income          5,661     1,620      12,288       8,516
    Net realized gains
     (losses)                  (103,182)      173    (108,180)    (19,225)
    Change in value of
     embedded derivatives,
     net                        (14,777)   (5,891)     (5,886)     11,621
                             ----------- --------- ----------- -----------
     Total revenues             464,262   569,481   1,619,803   1,671,662
                             ----------- --------- ----------- -----------
    Benefits and expenses
    Claims and other policy
     benefits                   349,811   360,968   1,083,379   1,046,874
    Interest credited to
     interest sensitive
     contract liabilities        34,793    42,423     106,515     140,523
    Acquisition costs and
     other insurance
     expenses, net               89,613    74,082     266,493     255,770
    Operating expenses           12,841    14,569      38,260      43,699
    Collateral finance
     facilities expense          72,525    63,866     210,466     140,300
    Interest expense              3,180     2,986       9,468       8,586
                             ----------- --------- ----------- -----------
     Total benefits and
      expenses                  562,763   558,894   1,714,581   1,635,752
                             ----------- --------- ----------- -----------
    Income (loss) before
     income taxes            $  (98,501) $ 10,587  $  (94,778) $   35,910
                             ----------- --------- ----------- -----------
    Operating income
    Income (loss) before
     income taxes            $  (98,501) $ 10,587  $  (94,778) $   35,910
    Net realized losses
     (gains)                    103,182      (173)    108,180      19,225
    Change in value of
     embedded derivatives,
     net                         14,777     5,891       5,886     (11,621)
                             ----------- --------- ----------- -----------
    Operating income(1)      $   19,458  $ 16,305  $   19,288  $   43,514
                             ----------- --------- ----------- -----------

    (1) Operating income (loss) is a non-GAAP measure. The Company defines
     operating income (loss) as income (loss) before income taxes and
     minority interest before realized gains and losses and the net change
     in value of embedded derivatives. While these items may be
     significant components in understanding and assessing the Company's
     consolidated financial performance, the Company believes that the
     presentation of operating income (loss) enhances the understanding of
     its results of operations by highlighting earnings attributable to
     the normal, recurring operation of its reinsurance business. However,
     operating income (loss) is not a substitute for net income determined
     in accordance with GAAP.
    

    
                          Scottish Re Group Limited
       Supplemental Information - Segment Operating Results (continued)
                (Stated in Thousands of United States Dollars)
                                 (Unaudited)

                        Life Reinsurance International
                                      Three months         Nine months
                                          ended               ended
                                       September 30        September 30
                                       2007     2006     2007      2006
                                    --------- -------- --------- ---------
    Revenues
    Premiums earned, net             $27,534  $31,814  $ 78,391  $ 89,310
    Investment income, net             3,440    8,528     9,520    20,488
    Fee and other income (loss)         (353)       -       400         -
    Net realized gains (losses)          245   (2,832)     (390)  (10,878)
                                    --------- -------- --------- ---------
     Total revenues                   30,866   37,510    87,921    98,920
                                    --------- -------- --------- ---------
    Benefits and expenses
    Claims and other policy benefits  18,920   16,745    57,183    77,403
    Acquisition costs and other
     insurance expenses, net           6,167    9,396    17,325    18,398
    Operating expenses                 7,923    7,678    29,190    21,329
    Interest Expense                      11        -        11         -
                                    --------- -------- --------- ---------
     Total benefits and expenses      33,021   33,819   103,709   117,130
                                    --------- -------- --------- ---------
    Income (loss) before income
     taxes                           $(2,155) $ 3,691  $(15,788) $(18,210)
                                    --------- -------- --------- ---------
    Operating income (loss)
    Income (loss) before income
     taxes                           $(2,155) $ 3,691  $(15,788) $(18,210)
    Net realized losses (gains)         (245)   2,832       390    10,878
                                    --------- -------- --------- ---------
    Operating income (loss)(1)       $(2,400) $ 6,523  $(15,398) $ (7,332)
                                    --------- -------- --------- ---------

    (1) Operating income (loss) is a non-GAAP measure. The Company defines
     operating income (loss) as income (loss) before income taxes and
     minority interest before realized gains and losses and the net change
     in value of embedded derivatives. While these items may be
     significant components in understanding and assessing the Company's
     consolidated financial performance, the Company believes that the
     presentation of operating income (loss) enhances the understanding of
     its results of operations by highlighting earnings attributable to
     the normal, recurring operation of its reinsurance business. However,
     operating income (loss) is not a substitute for net income determined
     in accordance with GAAP.
    

    
                          Scottish Re Group Limited
       Supplemental Information - Segment Operating Results (continued)
                (Stated in Thousands of United States Dollars)
                                 (Unaudited)

                              Corporate & Other

                                   Three months ended   Nine months ended
                                      September 30         September 30
                                     2007      2006      2007      2006
                                   --------- --------- --------- ---------
    Revenues
    Investment income, net         $  3,256  $  2,008  $  8,284  $  6,343
    Fee and other income                709       760     2,193     2,236
    Net realized gains                  951     1,587       240     4,132
                                   --------- --------- --------- ---------
      Total revenues                  4,916     4,355    10,717    12,711
                                   --------- --------- --------- ---------
    Benefits and expenses
    Acquisition costs and other
     insurance expenses, net          1,975     2,763     5,545     4,476
    Operating expenses               16,218    17,200    63,914    44,876
    Collateral finance facilities
     expense                          1,142     3,457    12,181     5,346
    Interest expense                    113     2,019     5,435     8,378
                                   --------- --------- --------- ---------
     Total benefits and expenses     19,448    25,439    87,075    63,076
                                   --------- --------- --------- ---------
    Loss before income taxes       $(14,532) $(21,084) $(76,358) $(50,365)
                                   --------- --------- --------- ---------
    Operating loss
    Loss before income taxes       $(14,532) $(21,084) $(76,358) $(50,365)
    Net realized gains                 (951)   (1,587)     (240)   (4,132)
                                   --------- --------- --------- ---------
    Operating loss(1)              $(15,483) $(22,671) $(76,598) $(54,497)
                                   --------- --------- --------- ---------

    (1) Operating income (loss) is a non-GAAP measure. The Company defines
     operating income (loss) as income (loss) before income taxes and
     minority interest before realized gains and losses and the net change
     in value of embedded derivatives. While these items may be
     significant components in understanding and assessing the Company's
     consolidated financial performance, the Company believes that the
     presentation of operating income (loss) enhances the understanding of
     its results of operations by highlighting earnings attributable to
     the normal, recurring operation of its reinsurance business. However,
     operating income (loss) is not a substitute for net income determined
     in accordance with GAAP.
    

    
                          Scottish Re Group Limited
         Supplemental Information - Book Value per Ordinary Share and
                 Fully Diluted Book Value Per Ordinary Share
      (Stated in Thousands of United States Dollars, except share data)
                                 (Unaudited)

    Fully diluted book value per ordinary share is a non-GAAP measure,
     based on total shareholders' equity plus the assumed proceeds from
     the exercise of outstanding options, warrants, and other convertible
     securities, divided by the sum of shares, options and warrants
     outstanding, and the number of shares required upon the conversion of
     convertible securities. The Company believes that fully diluted book
     value per ordinary share more accurately reflects the book value that
     is attributable to an ordinary share.

                                                September 30, December 31,
                                                    2007          2006
                                                ------------- ------------

    Shareholders' equity - end of period        $    869,290  $ 1,057,192
    Preferred shares                                (125,000)    (125,000)
    Net proceeds from assumed:
    Conversion of options                             71,713       29,801
    Conversion of warrants                            39,750       39,750
    Conversion of mezzanine equity                         -      143,750
    Conversion of convertible cumulative
     participating
          preferred shares                           555,857            -
                                                ------------- ------------
    Numerator for diluted book value per share
     calculation                                $  1,411,610  $ 1,145,493
                                                ------------- ------------

    Ordinary shares outstanding-end of period     68,383,370   60,554,104
    Potential shares issued from assumed:
          Exercise of options and restricted
           stock units                             7,822,819    2,351,521
          Conversion of warrants                   2,650,000    2,650,000
    Conversion of mezzanine equity                         -    7,440,500
    Conversion of convertible cumulative
     participating
          preferred shares                       150,000,000            -
                                                ------------- ------------
    Denominator for diluted book value per share
     calculation                                 228,856,189   72,996,125
                                                ------------- ------------

    Book value per ordinary share               $      10.88  $     15.39

    Fully diluted book value per ordinary share $       6.17  $     15.69
    




For further information:

For further information: Scottish Re Group Limited Investor Relations:
George Zippel, 441-298-4397 Investors@scottishre.com or Scottish Re Media:
Rayissa Palmer, 704-752-3422 Info@scottishre.com

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SCOTTISH RE GROUP LIMITED

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