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Scottish Re
NEWS RELEASE
Scott E. Willkomm
Scottish Re Group Limited
(441) 298-4364
scott.willkomm@scottishre.com
For release at 6:00 AM EDT/May 6, 2004
Scottish Re Group Limited Announces
Operating Results for the First Quarter Ended March 31, 2004
HAMILTON, Bermuda - May 6, 2004 - Scottish Re Group Limited (NYSE:SCT)
today reported that income from continuing operations for the quarter ended
March 31, 2004 was $10.1 million, or $0.27 per diluted ordinary share, as
compared to $7.4 million, or $0.26 per diluted ordinary share for the prior year
period. Net operating earnings were $16.6 million, or $0.45 per diluted ordinary
share for the quarter ended March 31, 2004 as compared to $9.4 million, or $0.34
per diluted ordinary share for the prior year period.
Net operating earnings is a non-GAAP measurement. We determine net
operating earnings by adjusting GAAP income from continuing operations 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 enhances the understanding of its results of operations by highlighting
earnings attributable to the normal, recurring operations of its reinsurance
business. However, net operating earnings are not a substitute for income from
continued operations determined in accordance with GAAP.
Net income for the quarter amounted to $10.1 million, or $0.27 per diluted
ordinary share as compared to $7.2 million, or $0.26 per diluted ordinary share
for the prior year period.
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"We are pleased to report that net operating earnings increased 77% in the
first quarter as compared to last year's results," said Michael C. French,
Chairman and Chief Executive Officer of Scottish Re Group Limited. "On a per
share basis, net operating earning increased 32% in the first quarter over last
year."
Total revenue for the quarter increased to $179.2 million from $96.8
million for the prior year period, an increase of 85%. Excluding realized gains
and losses and the change in fair value of the embedded derivative, total
revenue for the quarter increased to $186.4 million from $99.1 million for the
prior year period, an increase of 88%. Total benefits and expenses increased to
$167.9 million for the quarter from $89.1 million, an increase of 88%. The
increases were principally driven by the acquisition of Scottish Re Life
Corporation (previously ERC Life) and growth in the Company's reinsurance
business in North America.
The Company's total assets were $6.4 billion as of March 31, 2004. The core
investment portfolio, comprising fixed maturity investments and most of the cash
and cash equivalents, totaled $2.7 billion, and had an average quality rating of
"AA-", an effective duration of 3.8 years and a weighted average book yield of
4.4%. This compares with a portfolio balance of $2.4 billion, an average quality
rating of "AA-", effective duration of 3.9 years and an average book yield of
4.5% as of December 31, 2003.
Funds withheld at interest, totaling $1.5 billion, had an average quality
rating of "A-", an effective duration of 4.9 years and a weighted average book
yield of 6.2% at March 31, 2004. This compares with a total of $1.5 billion with
an average quality rating of "A-", an effective duration of 5.1 years and an
average book yield of 6.3% at December 31, 2003. The market value of the funds
withheld at interest amounted to $1.6 billion at March 31, 2004.
"Over the past five years, Scottish Re has evolved from a reasonable good
idea in to one of the world's leading professional life reinsurers," said Scott
E. Willkomm, President of Scottish Re Group Limited. "We have the people, the
knowledge and the financial resources to capitalize on favorable market
opportunities to grow our business and produce superior risk adjusted returns.
This is demonstrated by the knowledge that the franchise we have built is now
the number six market share leader in the North American life reinsurance
business and one of the emerging leaders in the European life reinsurance
markets."
As of March 31, 2004, the Company had reinsurance in-force of approximately
$286 billion covering 6.9 million individual lives with an average benefit per
life of $41,000 in its North American operations. As of December 31, 2003, the
Company had reinsurance in-force of approximately $275 billion covering 6.2
million lives and an average benefit per life of $43,000.
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The Company's book value per share was $19.79 at March 31, 2004 as compared
to $18.73 per share at December 31, 2003.
The Company's earnings conference call will be held at 11:00 AM (EDT) on
Thursday, May 6, 2004. The dial-in number is (703) 871-3021 or (800) 982-3654
and the reservation number is 436833. A replay of the call will be available
beginning at 3:00 pm on Thursday, May 6, 2004 and running through Thursday, May
20, 2004. The dial-in number for the replay is (703) 925-2533 or (888) 266-2081
and the PIN code is 436833. In addition, a simultaneous Web cast, as well as an
on-demand replay, of the conference call will be available at the Company's Web
site, www.scottishre.com/conferencecall.
Scottish Re Group Limited is a global life reinsurance specialist and
issuer of customized life-insurance based wealth management products for high
net worth individuals and families. Scottish Re Group Limited has operating
companies in Bermuda, Charlotte, North Carolina, Dublin, Ireland, Grand Cayman
and Windsor, England. Its operating subsidiaries include Scottish Annuity & Life
Insurance Company (Cayman) Ltd. and Scottish Re (U.S.), Inc. which are rated A-
(excellent) by A.M. Best, A (strong) by Fitch Ratings, A3 (good) by Moody's and
A- (strong) by Standard & Poor's, Scottish Re Limited, which is rated A-
(excellent) by A.M. Best, A (strong) by Fitch Ratings and A- (strong) by
Standard & Poor's and Scottish Re Life Corporation Limited which is rated
A-(excellent) by A.M. Best. Additional information about Scottish Re can be
obtained from its Web site, www.scottishre.com.
Certain statements included herein are "forward-looking statements" within
the meaning of the federal securities laws. The management of Scottish Re Group
Limited (the "Company") cautions that forward-looking statements are not
guarantees, and that actual results could differ materially from those expressed
or implied in 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, the Company's ability to attract
clients and generate business; the competitive environment; the Company's
ability to underwrite business; performance of outside service providers;
mortality risk; surrender risk; investment risk (including asset value risk,
reinvestment risk and disintermediation risk); the impact of unforeseen economic
changes (such as changes in interest rates, currency exchange rate, inflation
rates, recession and other external economic factors); the impact of terrorist
activities on the economy, the insurance and related industries in general and
the Company in particular; regulatory changes (such as changes in U.S. tax law
and insurance regulation which directly affect the competitive environment for
the Company's products); rating agency policies and practices; and loss of key
executives. Investors are also directed to consider the risks and uncertainties
discussed in documents filed by the Company with the Securities and Exchange
Commission.
(Tables to follow)
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Scottish Re Group Limited
Financial Highlights
(Stated in Thousands of United States Dollars, Except Per Share Data)
Three months ended Three months ended
March 31, 2004 March 31,2003
--------------- -------------
Total revenue $179,179 $96,813
Net operating earnings* 16,613 9,419
Income from continuing operations 10,096 7,423
Net income 10,096 7,243
Net operating earnings per share
Basic $0.47 $0.35
Diluted $0.45 $0.34
Earnings per share from continuing operations
Basic $0.29 $0.28
Diluted $0.27 $0.26
Earnings per share
Basic $0.29 $0.27
Diluted $0.27 $0.26
Dividends per share $0.05 $0.05
Weighted average shares
Outstanding
Basic 35,327,658 26,940,294
Diluted 37,230,112 28,096,106
*Excludes effect of realized gains and losses, change in value of embedded
derivative, amortization of related deferred acquisition costs and losses
from discontinued operations.
March 31, 2004 December 31, 2003
-------------- -----------------
Book value per share - including effect of
SFAS 115 and fair value of derivatives $19.79 $18.73
Book value per share - excluding effect of
SFAS 115 and fair value of derivatives $19.01 $18.51
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Scottish Re Group Limited
Consolidated Balance Sheets
(Stated in Thousands of United States Dollars)
March 31, 2004 December 31, 2003
-------------- -----------------
Assets
Fixed maturity investments $2,336,664 $2,014,719
Preferred stock 137,836 126,449
Cash and cash equivalents 215,693 298,149
Other investments 17,526 17,678
Funds withheld at interest 1,473,502 1,469,425
--------------------------------------
Total investments 4,181,221 3,926,420
Accrued interest receivable 25,598 22,789
Reinsurance balances and risk fees receivable 209,443 196,192
Deferred acquisition costs 328,149 308,591
Amounts recoverable from reinsurers 769,893 737,429
Present value of inforce business 12,794 13,479
Goodwill 35,847 35,847
Fixed assets 12,570 11,800
Other assets 48,685 45,209
Deferred tax benefit 6,605 12,624
Segregated assets 794,627 743,137
--------------------------------------
Total assets $6,425,432 $6,053,517
======================================
Liabilities
Reserves for future policy benefits $1,528,589 $1,502,415
Interest sensitive contract liabilities 2,864,570 2,633,346
Accounts payable and accrued expenses 28,383 31,673
Reinsurance balances payable 145,873 125,756
Other liabilities 39,175 30,546
Current income tax payable 6,896 13,077
Long term debt 162,500 162,500
Segregated liabilities 794,627 743,137
--------------------------------------
Total liabilities 5,570,613 5,242,450
--------------------------------------
Minority Interest 9,546 9,295
Mezzanine Equity 142,008 141,928
Shareholders' equity
Share capital, par value $0.01 per share:
Issued and fully paid: 35,540,728 ordinary
shares (2003 - 35,228,411) 355 352
Additional paid- in capital 552,318 548,750
Accumulated other comprehensive income
Unrealized appreciation on investments, net of tax 45,197 16,848
Other comprehensive income 15,359 12,186
Retained earnings 90,036 81,708
--------------------------------------
Total shareholders' equity 703,265 659,844
--------------------------------------
Total liabilities and shareholders' equity $6,425,432 $6,053,517
======================================
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Scottish Re Group Limited
Consolidated Statements of Income
(Stated in Thousand of United States Dollars)
Three months Three months
ended ended
March 31, 2004 March 31, 2003
-------------------------------
Revenues
Premiums earned $ 133,347 $ 64,819
Investment income, net 50,103 32,324
Fee income 2,953 1,991
Realized gains (losses) 1,421 (2,321)
Change in value of embedded derivatives (8,645) --
----------------------------
Total revenues 179,179 96,813
----------------------------
Benefits and expenses
Claims and other policy benefits 95,167 42,914
Interest credited to interest sensitive
contract liabilities 24,193 15,893
Acquisition costs and other insurance expenses 32,869 20,655
Operating expenses 12,854 7,865
Interest expense 2,777 1,813
----------------------------
Total benefits and expenses 167,860 89,140
----------------------------
Income before income taxes and
minority interest 11,319 7,673
Income tax expense (874) (250)
----------------------------
Income from continuing operations before
minority interest 10,445 7,423
Minority interest (349) --
----------------------------
Income from continuing operations 10,096 7,423
Loss from discontinued operations -- (180)
----------------------------
Net income $ 10,096 $ 7,243
============================
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Scottish Re Group Limited
Supplemental Information - Net Operating Earnings and Book Value Per Share
(Stated in Thousand of United States Dollars, Except Per Share Amounts)
Three months Three months
ended ended
March 31, 2004 March 31, 2003
--------------------------------
Net operating earnings
- ----------------------
Income from continuing operations $10,096 $7,423
Realized losses- non taxable companies 2,121 1,068
Realized losses (gains) - taxable
companies (3,542) 1,253
Change in value of embedded derivatives
- - nontaxable companies 290 --
Change in value of embedded derivatives
- - taxable companies 8,355 --
Taxes on realized gains/losses and change
in value of embedded derivatives (707) (325)
--------------------------------
Net operating earnings $16,613 $9,419
================================
Net operating earnings per share
Basic $0.47 $0.35
Diluted $0.45 $0.34
================================
Weighted average number of shares
Outstanding
Basic 35,327,658 26,940,294
Diluted 37,230,112 28,096,106
March 31, 2004 December 31, 2003
-------------- -----------------
Book Value Per Share
- --------------------
Shareholders' equity $ 703,265 $ 659,844
Unrealized appreciation on investments,
net of taxes (45,197) (16,848)
Fair value of embedded derivatives 17,694 9,049
Total $675,762 $652,045
================================
Number of shares 35,540,728 35,228,411
Book value per share - excluding effect of
SFAS 115 and fair value of embedded
derivatives $ 19.01 $ 18.51
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