http://www.scottishre.com
As of June 30, 2008, SKRRF (former NYSE ticker SCT) had 68,383,370 ordinary shares outstanding.
BERMUDA
Crown House, Second Floor
4 Par-la-Ville Road
Hamilton, HM 08, Bermuda
telephone: (441) 295-4451
facsimile: (441) 295-7576
email: info@scottishre.com
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MAJORITY OWNED BY:
MASSMUTUAL http://www.massmutual.com/
CERBERUS http://www.cerberuscapital.com/
SKRRF 2Q Results (released 8/20/10):
Scottish Re Posts to its Web Site Second Quarter 2010 Financial Statements
Scottish Re Group Limited (Pink Sheets:SKRRF), "Scottish Re" or the "Company", announced today that it has posted to its web site its consolidated unaudited financial statements for the three and six month periods ended June 30, 2010. For the three month period ended June 30, 2010, Scottish Re reported net income attributable to ordinary shareholders of $78.0 million, or $0.36 per diluted ordinary share, as compared to a net income attributable to ordinary shareholders of $176.9 million, or $0.81 per diluted ordinary share, for the prior year period.
The net income attributable to ordinary shareholders for the three month period ended June 30, 2010 was driven by $83.4 million of net realized and unrealized gains in the Company’s invested assets.
For the three month period ended June 30, 2009, the net income attributable to ordinary shareholders was driven by $133.1 million of net realized and unrealized gains in the Company’s invested assets and the recognition of an additional $59.8 million gain following the satisfaction of certain contingencies related to the first quarter 2009 sale to Hannover Ruckversicherung AG of a block of individual life reinsurance business.
Run-Off Strategy/"Right Side" Balance Sheet Management
Scottish Re stated, initially in the 2009 2Q report (page 12), that the company may purchase in privately negotiated transactions, open market purchases, or otherwise, additional amounts of outstanding debt, non-voting preferred securities and other liabilities. The table below details the right side of the balance sheet on an actual and market value basis. SKRUF was increased from $1.60 to $7.00 ove time. Based on the large discounts detailed below, investors questioned its ability to continue as a going concern. Investors should expect two things going forward: (1) gains on early extinguishment of debt; and (2) shrinking discounts.
Liabilities declined $58 million over the latest quarter, but the market value decreased by $76.3 million. Despite no change in Collateral Finance Facilities on an actual basis, the market value decreased nearly $38.8 million.
Interest Sensitive Contract Liabilities declined by $27.3 million actual, but only $19.5 million on a market value basis.
Long Term Debt is comprised of Capital Trust and Trust Preferred Securities.
The acquistion of Non-Cumulative Preferred below book value would not create income; the difference is a credit to Additional Paid-In Capital.
| * | 2Q | 2Q | 3Q | 3Q | 4Q | 4Q | 1Q | 1Q | 2Q | 2Q | Change | Change |
| Account | Actual | Market | Actual | Market | Actual | Market | Actual | Market | Actual | Market | Actual | Market |
| Reserves for future policy benefits | 1,579,543 | 1,579,543 | 1,543,960 | 1,543,960 | 1,542,639 | 1,542,639 | 1,538,526 | 1,538,526 | 1,518,010 | 1,518,010 | (20,516) | (20,516) |
| Interest sensitive contract liabilities | 1,843,353 | 1,510,467 | 1,802,617 | 1,499,341 | 1,518,365 | 1,485,554 | 1,493,164 | 1,460,835 | 1,465,831 | 1,441,386 | (27,333) | (19,449) |
| Collateral finance facilities | 1,300,000 | 919,917 | 1,300,000 | 1,019,702 | 1,300,000 | 907,710 | 1,300,000 | 885,057 | 1,300,000 | 846,229 | - | (38,828) |
| Accounts payable | 116,244 | 116,244 | 147,896 | 147,896 | 68,921 | 68,921 | 44,818 | 44,818 | 47,726 | 47,726 | 2,908 | 2,908 |
| Embedded derivatives at fair value | | | - | - | 35,732 | 35,732 | 38,557 | 38,557 | 35,527 | 35,527 | - | - |
| Reinsurance balances payable | 164,850 | 164,850 | 117,874 | 117,874 | 137,597 | 137,597 | 137,985 | 137,985 | 110,809 | 110,809 | (27,176) | (27,176) |
| Deferred tax liability | 221 | 221 | 221 | 221 | 50,143 | 50,143 | 48,756 | 48,756 | 47,920 | 47,920 | (836) | (836) |
| Long term debt at fair value | | | - | - | 55,068 | 55,068 | 42,147 | 42,147 | 60,180 | 60,180 | - | - |
| Long term debt | 129,500 | 14,245 | 129,500 | 22,663 | 129,500 | 32,375 | 129,500 | 32,375 | 129,500 | 42,942 | - | 10,567 |
| Total liabilities | 5,133,711 | 4,305,487 | 5,042,068 | 4,351,657 | 4,837,965 | 4,315,739 | 4,773,453 | 4,229,056 | 4,715,503 | 4,150,729 | (57,950) | (78,327) |
| Mezzanine Equity | 555,857 | 555,857 | 555,857 | 555,857 | 555,857 | 555,857 | 555,857 | 555,857 | 555,857 | 555,857 | - | - |
| Non-cumulative preferred | 125,000 | 8,000 | 125,000 | 19,500 | 125,000 | 28,250 | 125,000 | 30,000 | 120,152 | 33,643 | - | 3,643 |
| Equity | (646,574) | (646,574) | (444,489) | (444,489) | (229,156) | (229,156) | (129,436) | (129,436) | (51,280) | (51,280) | 78,156 | 78,156 |
| Non-controlling interest | 7,258 | 7,258 | 8,168 | 8,168 | 7,668 | 7,668 | 7,908 | 7,908 | 8,359 | 8,359 | 451 | 451 |
| Shareholders' equity/(deficit) | (639,316) | (639,316) | (436,321) | (436,321) | (221,488) | (221,488) | (121,528) | (121,528) | (42,921) | (42,921) | 78,607 | 78,607 |
| Total | 5,175,252 | 4,230,028 | 5,286,604 | 4,490,693 | 5,297,334 | 4,678,358 | 5,332,782 | 4,693,385 | 5,348,591 | 4,697,308 | 15,809 | 3,923 |
| Discount | - | 945,224 | - | 795,911 | - | 618,976 | - | 639,397 | - | 651,283 | | |
Mezzanine Equity in the "fast forward" mode.
The table below details the impact of the ME conversion as if it occurred at 6/30/10 rather than 5/07/16.
Upon conversion, $555.9 million moves from ME to Ordinary Shares and Additional Paid-in Capital for 150 million shares. The conversion propels the $120.2 million in Non-Cumulative Perpetual Preferred to a more senior position. SKRRF would have 218.4 million shares outstanding. Shareholders's equity would now be $504.6 million on a pro forma basis (compared to $68.9 million). Book value per share would be $2.31. There is some risk that the conversion value could change prior to the mandatory conversion date.
Please note that the ME has a current liquidation preference of $737 million ($600 million par value plus $137 million in accrued and unpaid dividends). The liquidation value per share is $4.77.
| * | Q2 | Adjustments | Pro Forma |
| Assets | 5,348,591 | - | 5,348,591 |
| Liabilities | 4,715,503 | - | 4,715,503 |
| Mezzanine Equity | 555,857 | (555,857) | - |
| Non-cumulative preferred | 120,152 | - | 120,152 |
| Ordinary shares | 684 | 1,500 | 2,184 |
| Additional paid-in capital | 1,217,880 | 554,357 | 1,772,237 |
| Retained deficit | (1,269,844) | - | (1,269,844) |
| Total equity | 68,872 | - | 504,577 |
| Non-controlling interest | 8,359 | - | 8,359 |
| Total equity | 77,231 | - | 512,936 |
| Total liabilities, ME and equity | 5,348,591 | - | 5,348,591 |
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