Replies to post #1657 on Scottish Re Group Ltd (fka SKRRF)

[Enterprising Investor]

Dividends stop accruing 5/07/12

Upon a change-in-control event, the redemption price of the Convertible Cumulative Participating Preferred Shares is an amount equal to the greater of (i) the stated value of the outstanding Convertible Cumulative Participating Preferred Shares, plus an amount equal to the sum of all accreted dividends through the earlier of (A) the date of payment of the consideration payable upon a change-in-control event, or (B) the fifth anniversary of the issue date of the Convertible Cumulative Participating Preferred Shares, or (ii) the amount that the holder of the Convertible Cumulative Participating Preferred Shares would have been entitled to receive with respect to such change-in-control event if it had exercised its right to convert all or such portion of its Convertible Cumulative Participating Preferred Shares for ordinary shares immediately prior to the date of such change-in-control event.

Page 22 paragraph 6

http://www.scottishre.com/pdf/SRGL_2010_Q3_Financial_Statements.pdf

[h_man_investor]

Thanks for the clarification.

As for the dividend, that would be huge for the preferred holders and insignificant to the company.


Let's take a look at earning potential, because $80mm a quarter in mark-to-market gains are not sustainable (I know- I've been saying this for the past 2 quarters but the 4th quarter will be a wake up as rates have increased). Under the best scenario from an income statement perspective, the run-off operations excluding the unrealized gains are break even.

The current yield on the investment portfolio is around 4.5% which covers a portion of the claims.

50% of the holdings are in fixed income securities that will most likely not go up in value any further (IG).

The other 50% is in RMBS with a "YTM" of 12% (assuming a certain CPR, default & severity). Strip out the income and you are looking at 8% growth.

I just cant see how the BV gets above $900mm. Please convince me otherwise. What am I missing?