HAMILTON, Bermuda, May 9 /PRNewswire-FirstCall/ -- Scottish Re Group Limited (NYSE:SCT) today reported that the net loss available to ordinary shareholders for the three months ended March 31, 2007 was $35.5 million, or a loss of $0.55 per diluted ordinary share, as compared to net income available to ordinary shareholders of $11.6 million, or $0.20 per diluted ordinary share for the prior year period.
The net operating loss available to ordinary shareholders for the three months ended March 31, 2007 was $36.5 million, or a loss of $0.57 per diluted ordinary share, as compared to net operating earnings of $14.3 million, or $0.25 per diluted ordinary share for the prior year period.
"As announced earlier this week, the equity investment transaction with MassMutual Capital and Cerberus is complete and marks the beginning of the process of re-establishing Scottish Re as one of the top global life reinsurance companies. The completion of this transaction provides Scottish Re with the capital and liquidity necessary to support our business on a go forward basis," said Paul Goldean, Chief Executive Officer of Scottish Re Group Limited. Mr. Goldean further stated, "Although we incurred an operating loss for the first quarter of 2007, promising developments included favorable mortality in our North America segment. Finally, we are nearing completion of a long-term financing facility related to our 2005 and 2006 new business production, which will result in nearly all of our Regulation XXX obligations being fully financed and thereby eliminating much of the liquidity concerns that faced the company in late 2006." Total revenues for the three months ended March 31, 2007 increased to $605.7 million from $578.3 million for the prior year period, an increase of 5%. Excluding realized gains and losses and the change in value of the embedded derivatives, total revenues for the three months ended March 31, 2007 increased to $604.4 million from $581.8 million for the prior year period, an increase of 4%.
Total benefits and expenses increased to $625.8 million for the three months ended March 31, 2007 from $571.8 million for the prior year period, an increase of 9%.
Operating expenses increased to $34.6 million for the three months ended March 31, 2007 from $31.1 million for the prior year period. The company's operating expense ratio (which is the ratio of operating expenses to total revenue excluding realized gains and losses and the change in value of embedded derivatives) for the three months ended March 31, 2007 was 5.7%, as compared to an operating expense ratio of 5.3% for the prior year period.
Income tax expense for the three months ended March 31, 2007 was $13.4 million compared to an income tax benefit of $7.5 million for the prior year period.
The operating loss for the first quarter of 2007 is attributable to several factors including the impact our current ratings have on the levels of new business and collateral financing costs, higher operating expenses as we continue to improve our infrastructure and develop certain key markets, the impact our underlying GAAP valuation models have on the emergence of profits over time in our North America traditional business, and our inability to recognize tax benefits for certain legal entities. Partially offsetting these items was favorable net mortality of approximately $14 million. All of these items will be discussed in further detail during our earnings conference call on May 10, 2007.
We look forward to sharing additional information at our scheduled earnings call and additionally, have posted to our Website, http://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 am (EDT) on Thursday, May 10, 2007. The dial-in number is (888) 459-5609 (U.S.) or (973) 321-1024 (International) and the passcode is 8718097. 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 http://www.scottishre.com/. Following the earnings conference call, a replay of the call will be available for two weeks beginning at 10:30 am (EDT) on Thursday, May 10, 2007, and ending on Wednesday, May 23, 2007. The dial-in number for the call replay is (877) 519- 4471 (U.S.) or (973) 341-3080 (International) and the passcode is 8718097. An audio Webcast of the call will be archived and available for the same period on the company's Website at http://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 http://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. Important events that could cause the actual results of operations or financial condition of the Company to differ include, but are not necessarily limited to: -- uncertainties relating to the ratings accorded to us and our insurance
subsidiaries;
-- uncertainties in our ability to raise equity capital or other sources
of funding to support ongoing capital and liquidity needs;
-- uncertainties relating to future actions that may be taken by
creditors, regulators and ceding insurers relating to our ratings and
financial condition;
-- the risk that our risk analysis and underwriting may be inadequate;
-- changes in expectations regarding future realization of gross deferred
tax assets;
-- exposure to mortality experience which differs from our assumptions;
-- risks arising from our investment strategy, including risks related to
the market value of our investments, fluctuations in interest rates and
our need for liquidity;
-- uncertainties arising from control of our invested assets by third
parties;
-- developments in global financial markets that could affect our
investment portfolio and fee income;
-- changes in the rate of policyholder withdrawals or recapture of
reinsurance treaties;
-- the risk that our retrocessionaires may not honor their obligations to
us;
-- terrorist attacks on the United States and the impact of such attacks
on the economy in general and on our business in particular;
-- political and economic risks in developing countries;
-- the impact of acquisitions, including our ability to successfully
integrate acquired businesses, the competing demands for our capital
and the risk of undisclosed liabilities;
-- the risk that an ownership change will result in a limitation on our
ability to fully utilize tax net operating losses;
-- loss of the services of any of our key employees;
-- losses due to foreign currency exchange rate fluctuations;
-- uncertainties relating to government and regulatory policies (such as
subjecting us to insurance regulation or taxation in additional
jurisdictions);
-- risks relating to recent class action litigations;
-- the competitive environment in which we operate and associated pricing
pressures; and
-- changes in accounting principles.
Investors are also directed to consider the risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.
Scottish Re Group Limited
Financial Highlights
(Stated in Thousands of United States Dollars, Except Share Data)
(Unaudited) Three months ended
March 31
2007 2006 Total revenue $605,744 $578,321
Net operating earnings (loss) available to
ordinary shareholders* (36,499) 14,289
Net income (loss) (33,212) 13,849
Net income (loss) available to ordinary
shareholders (35,478) 11,583 Net operating earnings (loss) per ordinary share
Basic $(0.57) $0.27
Diluted $(0.57) $0.25 Earnings (loss) per ordinary share
Basic $(0.55) $0.22
Diluted $(0.55) $0.20 Dividends declared per ordinary share $ - $0.05 Weighted average ordinary shares
Outstanding
Basic 64,191,977 53,434,484
Diluted 64,191,977 56,532,914
* Excludes the effects of net realized capital gains and losses and the
change in value of embedded derivatives, as adjusted for the related
effects upon the amortization of deferred acquisition costs,
and taxes related to these items as well as dividends on the perpetual
preferred shares. March 31, December 31,
2007 2006 Book value per ordinary share $14.67 $15.39 Basic book value per ordinary share - excluding
other comprehensive income and value of embedded
derivatives $14.86 $15.50 Fully diluted book value per ordinary share -
excluding other comprehensive income and value
of embedded derivatives $14.81 $15.78 Scottish Re Group Limited
Consolidated Balance Sheets
(Stated in Thousands of United States Dollars, Except Share Data)
March 31, December 31,
2007 2006
(Unaudited) (Audited)
Assets
Fixed maturity investments $8,135,873 $8,065,524
Preferred stock 112,009 116,933
Cash and cash equivalents 692,284 622,756
Other investments 65,211 65,448
Funds withheld at interest 1,835,003 1,942,079
Total investments 10,840,380 10,812,740
Accrued interest receivable 56,879 57,538
Reinsurance balances and risk fees
receivable 481,022 481,908
Deferred acquisition costs 610,054 618,737
Amounts recoverable from reinsurers 545,515 554,589
Present value of in-force business 48,311 48,779
Other assets 199,633 178,311
Segregated assets 683,405 683,470
Total assets $13,465,199 $13,436,072 Liabilities
Reserves for future policy benefits $3,970,252 $3,919,901
Interest sensitive contract liabilities 3,305,858 3,399,410
Collateral finance facilities 3,775,519 3,757,435
Accounts payable and other liabilities 166,662 95,260
Reinsurance balances payable 138,119 72,304
Current income tax payable 4,289 48
Deferred tax liability 161,328 169,977
Long-term debt 129,500 129,500
Segregated liabilities 683,405 683,470
Total liabilities 12,334,932 12,227,305 Minority interest 7,716 7,910
Mezzanine equity - 143,665 Shareholders' equity
Ordinary shares, par value $0.01 per
share: Issued and outstanding 67,995,057
shares (2006 - 60,554,104) 680 606
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 1,195,481 1,050,860
Accumulated other comprehensive income
(loss) (10,947) 340
Retained deficit (187,663) (119,614)
Total shareholders' equity 1,122,551 1,057,192
Total liabilities, minority interest,
mezzanine equity and shareholders' equity $13,465,199 $13,436,072 Scottish Re Group Limited
Consolidated Statements of Income (Loss)
(Stated in Thousands of United States Dollars)
(Unaudited)
Three months ended
March 31
2007 2006
Revenues
Premiums earned, net $458,214 $449,021
Investment income, net 141,597 129,022
Fee income 4,630 3,733
Net realized losses (4,289) (13,601)
Change in value of embedded derivatives, net 5,592 10,146
Total revenues 605,744 578,321 Benefits and expenses
Claims and other policy benefits 383,583 374,463
Interest credited to interest sensitive contract
liabilities 35,302 42,701
Acquisition costs and other insurance expenses,
net 95,107 87,531
Operating expenses 34,580 31,092
Collateral finance facilities expense 73,695 31,087
Interest expense 3,576 4,893
Total benefits and expenses 625,843 571,767 Income (loss) before income taxes and minority
interest (20,099) 6,554
Income tax benefit (expense) (13,381) 7,457
Income (loss) before minority interest (33,480) 14,011
Minority interest 268 (162)
Net income (loss) (33,212) 13,849
Dividends declared on non-cumulative preferred
shares (2,266) (2,266)
Net income (loss) available to ordinary
shareholders $(35,478) $11,583 Scottish Re Group Limited
Supplemental Information - Net Operating Earnings (Loss)
(Stated in Thousands of United States Dollars, Except Share Data) "Net operating earnings (loss) available to ordinary shareholders" is a non-GAAP measurement. The Company determines net operating earnings (loss) available to ordinary shareholders by adjusting net income (loss) available to ordinary shareholders by net realized capital gains and losses and the change in value of embedded derivatives, as adjusted for the related effects upon the amortization of deferred acquisition costs and taxes. While these items may be significant components in understanding and assessing the Company's consolidated financial performance, the Company believes that the presentation of net operating earnings (loss) available to ordinary shareholders enhances the understanding of its results of operations by highlighting earnings attributable to the normal, recurring operation of its reinsurance business. However, net operating earnings (loss) available to ordinary shareholders is not a substitute for net income (loss) determined in accordance with GAAP. Reconciliations to net income (loss) available to ordinary shareholders are provided in the following tables.
Three months ended
March 31
2007 2006
(Unaudited) (Unaudited) Net operating earnings (loss) available to
ordinary shareholders:
Net income (loss) available to ordinary
shareholders $(35,478) $11,583
Net realized losses 4,289 13,601
Change in value of embedded derivatives, net (5,592) (10,146)
Taxes on realized losses and change in value of
embedded derivatives 282 (749)
Net operating earnings (loss) available to
ordinary shareholders $(36,499) $14,289 Net operating earnings (loss) per share
available to ordinary shareholders
Basic $(0.57) $0.27
Diluted $(0.57) $0.25 Weighted average number of ordinary shares
outstanding
Basic 64,191,977 53,434,484
Diluted 64,191,977 56,532,914 Scottish Re Group Limited
Supplemental Information - Segment Operating Results
(Stated in Thousands of United States Dollars)
(Unaudited) Life Reinsurance North America Three months ended
March 31
2007 2006
Revenues
Premiums earned, net $423,371 $428,918
Investment income, net 137,919 123,941
Fee income 3,916 3,017
Net realized losses (2,405) (13,919)
Change in value of embedded derivatives, net 5,592 10,146
Total revenues 568,393 552,103 Benefits and expenses
Claims and other policy benefits 357,934 347,280
Interest credited to interest sensitive contract
liabilities 35,302 42,701
Acquisition costs and other insurance expenses,
net 87,223 84,408
Operating expenses 12,258 14,592
Collateral finance facilities expense 68,856 30,543
Interest expense 3,055 2,562
Total benefits and expenses 564,628 522,086
Income before income taxes and minority interest $3,765 $30,017 Pre tax operating earnings
Pre-tax income $3,765 $30,017
Net realized losses 2,405 13,919
Change in value of embedded derivatives, net (5,592) (10,146)
Pre-tax operating earnings $578 $33,790 Scottish Re Group Limited
Supplemental Information - Segment Operating Results (continued)
(Stated in Thousands of United States Dollars)
(Unaudited) Life Reinsurance International
Three months ended
March 31
2007 2006
Revenues
Premiums earned, net $34,843 $20,103
Investment income, net 3,043 2,989
Net realized losses (625) (1,138)
Total revenues 37,261 21,954 Benefits and expenses
Claims and other policy benefits 25,649 27,183
Acquisition costs and other insurance
expenses, net 5,921 2,817
Operating expenses 9,812 5,777
Total benefits and expenses 41,382 35,777
Loss before income taxes $(4,121) $(13,823) Pre-tax operating loss
Pre-tax loss $(4,121) $(13,823)
Net realized losses 625 1,138
Pre-tax operating loss $(3,496) $(12,685) Scottish Re Group Limited
Supplemental Information - Segment Operating Results (continued)
(Stated in Thousands of United States Dollars)
(Unaudited) Corporate and Other
Three months ended
March 31
2007 2006 Revenues
Investment income, net $635 $2,092
Fee income 714 716
Net realized gains (losses) (1,259) 1,456
Total revenues 90 4,264 Benefits and expenses
Acquisition costs and other insurance
expenses, net 1,963 306
Operating expenses 12,510 10,723
Collateral finance facilities expense 4,839 544
Interest expense 521 2,331
Total benefits and expenses 19,833 13,904
Loss before income taxes $(19,743) $(9,640) Pre-tax operating loss
Pre-tax loss $(19,743) $(9,640)
Net realized losses (gains) 1,259 (1,456)
Pre-tax operating loss $(18,484) $(11,096) Dean E. Miller
Scottish Re Group Limited
Tel. # (441) 298-4395
DATASOURCE: Scottish Re Group Limited CONTACT: Dean E. Miller, of Scottish Re Group Limited, 441-298-4395, Web site: http://www.scottishre.com/
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