UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 30, 2004
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SCOTTISH RE GROUP LIMITED
(Exact Name of Registrant as Specified in Charter)
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Cayman Islands 001-16855 98-0362785
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
P.O. Box HM 2939
Crown House, Third Floor, 4 Par-la-Ville Road
Hamilton HM12
Bermuda N/A
(Address of Principal Executive Offices) (Zip Code)
(441) 295-4451
Registrant's telephone number, including area code
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
During the fourth quarter of 2004, Scottish Re Group Limited (the
"Company") determined that its International Segment had incorrectly reported
premiums earned, claims and other policy benefits, acquisition costs and other
insurance expenses and related income tax benefits in the quarters ended June
30, 2004 and September 30, 2004. The effect of these errors was to understate
net income by $1.1 million in the three months ended June 30, 2004, or $0.03 per
diluted ordinary share, to overstate net income by $1.2 million in the three
months ended September 30, 2004, or $0.03 per diluted ordinary share, to
overstate net income by $112,000 in the nine month period ended September 30,
2004 and to overstate shareholders' equity at September 30, 2004 by $112,000.
The effect was also to understate net operating earnings by $1.1 million, or
$0.03 per diluted ordinary share, in the three months ended June 30, 2004, to
overstate net operating earnings by $1.2 million, or $0.03 per diluted ordinary
share, in the three months ended September 30, 2004, and to overstate net
operating earnings by $112,000 in the nine months ended September 30, 2004.
There is no impact on previously reported earnings per share of $1.35 or net
operating earnings per share of $1.44 for the nine months ended September 30,
2004, or book value per share of $20.08 at September 30, 2004.
Net operating earnings is a non-GAAP measurement. The Company determines
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
continuing operations determined in accordance with GAAP.
The errors were made in the process of compiling income statement
information on the accrual of premiums and resulted from incorrect references
within the spreadsheets used to calculate these accruals. As a result, incorrect
information was referenced to prepare the journal entries used in updating the
general ledger for the International Segment. The errors were detected by
management as part of their ongoing documentation and testing of internal
controls over financial reporting for Sarbanes Oxley Section 404 reporting.
Management has taken a series of steps in its ongoing review of internal
controls over financial reporting to improve control processes, including those
involving the compilation of information used in reporting premium accruals, and
to avoid similar errors going forward. Management has also taken steps to
improve controls around segregation of responsibilities and review of manually
prepared information and has strengthened procedures for the reconciliation of
all material general ledger balances.
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On December 30, 2004, the Company's Audit Committee determined it was
appropriate to amend the previously filed consolidated financial statements
contained in the Company's second and third quarter 2004 Form 10-Qs to reflect
changes that correct these errors.
Management and the Company's Audit Committee discussed the matters
disclosed in this Current Report on Form 8-K with Ernst & Young LLP, the
Company's independent registered public accounting firm. The Company is working
to complete amendments that correct these errors expeditiously and expects to
file the amendments to its quarterly report on Form 10-Q for the periods ended
June 30, 2004 and September 30, 2004 in January 2005. The Company's independent
registered public accounting firm will perform review procedures on such
amendments. Accordingly, the referenced financial statements should not be
relied upon until such time as the Company files its corrected interim financial
statements.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SCOTTISH RE GROUP LIMITED
By: /s/ Paul Goldean
Paul Goldean
Executive Vice President and General Counsel
Dated: December 30, 2004
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