_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
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 22, 2005
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SCOTTISH RE GROUP LIMITED
(Exact name of registrant as specified in its charter)
____________________
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 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On December 22, 2005, Scottish Re (U.S.), Inc. ("SRUS"), an indirect
wholly-owned subsidiary of Scottish Re Group Limited (the "Company"), entered
into a coinsurance agreement (the "Coinsurance Agreement") with Scottish Re
(Dublin) Limited ("SRD"), an indirect wholly-owned subsidiary of the Company,
pursuant to which SRUS ceded 100% of its net contractual liability under the
Defined Block of Business (as defined below) to SRD. In order to provide SRUS
with credit for reinsurance on its statutory financial statements, SRD
established two trust accounts, designated as Reinsurance Trust Account A and
Reinsurance Trust Account B. Assets in each trust account will be subject to
withdrawal by SRUS in accordance with Delaware insurance regulations. The
"Defined Block of Business" constitutes a portion of the term life insurance
policies (and related riders and endorsements) subject to the Delaware Valuation
of Life Insurance Policies Regulation (referred to as "Regulation XXX") that
Security Life of Denver Insurance Company ("SLD") retroceded to SRUS pursuant to
the Coinsurance/Modified Coinsurance Reinsurance Agreement and the Coinsurance
Reinsurance Agreement, both dated as of December 31, 2004, entered into between
those parties.
SRD funded Reinsurance Trust Account A with an amount of assets
determined in accordance with the Coinsurance Agreement. A third party generated
funds for the purpose of funding Reinsurance Trust Account B by issuing
certificates (the "Certificates") with a maturity equal to 20 years in an
initial amount equal to $485.7 million, which amount may be increased up to
approximately $1 billion. HSBC Bank U.S.A. (the "Counterparty"), as initial
holder of the Certificates, entered into a total return swap (the "Swap") with
Scottish Annuity & Life Insurance Company (Cayman) Ltd. ("SALIC"), a direct
wholly-owned subsidiary of the Company. The "reference asset" for the Swap is
the Certificates. The Swap contemplates various payments to the Counterparty,
including the total return payments under the Swap and, under certain
circumstances, a make-whole payment.
To the extent the value of the Certificates declines, either as a
result of changes in the market value of assets held in Reinsurance Trust
Account B or as a result of any other decline in the value of the Certificates,
SALIC is obligated to pay the Counterparty the amount of the decline. Beginning
two calendar years prior to the initially scheduled maturity date of the Swap,
which is December 1, 2025, SALIC must begin paying the outstanding principal
amount in five semi-annual installments equal to 20% of the initial notional
amount, so that by the scheduled maturity date of the Swap, the full amount will
have been recovered by the Counterparty. The scheduled maturity date is,
however, subject to extension by agreement of the parties.
SRUS has agreed to deposit any assets it withdraws from Reinsurance
Trust Account A and Reinsurance Trust Account B in a segregated SRUS bank
account relating specifically to the Defined Block of Business reinsured under
the Coinsurance Agreement (the "SRD SRUS Account"). Any assets withdrawn from
the SRD SRUS Account may only be used to discharge specified obligations of SRUS
to SLD relating to that business, to reimburse SRUS for amounts it has paid to
discharge those obligations,
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or to return to SRD excess amounts withdrawn from Reinsurance Trust Account A
and Reinsurance Trust Account B.
Item 8.01. Other Events.
On December 22, 2005, SRUS entered into a Reinsurance Agreement (the
"Reinsurance Agreement") with a third-party, Bermuda-domiciled reinsurer (the
"Reinsurer"). The Reinsurer in turn retroceded a portion of its liability
thereunder on a stop loss basis to SRD. The Reinsurer has agreed to secure
certain of its obligations under the Reinsurance Agreement by establishing for
SRUS's benefit a trust account (the "Reinsurance Trust Account") and/or a letter
of credit (an "LOC"). The Reinsurance Trust Account and/or the LOC will provide
SRUS with statutory financial statement credit for the reserves required under
Regulation XXX that were ceded to the Reinsurer. The Reinsurer has agreed to
maintain up to $1 billion in eligible assets in the Reinsurance Trust Account
(and/or in principal amount of LOCs) for SRUS's benefit.
SRUS has agreed to deposit any assets it withdraws from the
Reinsurance Trust Account, or amounts it draws from the LOC, in a segregated
SRUS bank account relating specifically to the business reinsured under the
Reinsurance Agreement (the "Reinsurer SRUS Account"). Any assets withdrawn from
the Reinsurer SRUS Account may only be used to discharge specified obligations
of SRUS to SLD relating to that business, to reimburse SRUS for amounts it has
paid to discharge those obligations, or to return to the Reinsurer excess
amounts withdrawn from the Reinsurance Trust Account.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release issued by Scottish Re Group Limited on December 23, 2005.
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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/ Hugh T. McCormick
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Hugh T. McCormick
Executive Vice President, Corporate Development
Dated: December 29, 2005
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INDEX TO EXHIBITS
Number Description
- ------ -----------
99.1 Press Release issued by Scottish Re Group Limited on
December 23, 2005.
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