UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK REPURCHASE SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2005
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
Commission File Number 001-16855
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
SCOTTISH HOLDINGS, INC. 401(K) AND PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
SCOTTISH RE GROUP LIMITED
Crown House, Third Floor
4 Par-la-Ville Road
Hamilton HM12, Bermuda
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
INDEX
Report of Independent Registered Public Accounting Firm........................3
Financial Statements
Statements of Net Assets Available for Benefits................................4
Statement of Changes in Net Assets Available for Benefits......................5
Notes to Financial Statements..................................................6
Supplemental Schedule
Schedule H Line 4i - Schedule of Assets (Held at End of Year).................12
Report of Independent Registered Public Accounting Firm
The Plan Administrator and Participants
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of the Scottish Holdings, Inc. 401(k) and Profit Sharing Plan as of December 31,
2005 and 2004 and the related statement of changes in net assets available for
benefits for the year ended December 31, 2005. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2005 and 2004 and the changes in its net assets available for
benefits for the year ended December 31, 2005, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2005, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Charlotte, North Carolina
June 26, 2006
3
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Statements of Net Assets Available for Benefits
December 31,
2005 2004
-------------------------------
Assets
Investments, at fair value $7,324,195 $4,681,605
Receivable from participant 124,952 -
-------------------------------
Net assets available for benefits $7,449,147 $4,681,605
===============================
See accompanying notes.
4
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
Additions
Investment income:
Interest $ 3,071
Dividends 263,765
Net appreciation in fair value of investments 209,706
----------------
476,542
Contributions:
Participants 1,538,695
Rollovers 419,451
Employer, net of forfeitures 1,156,145
----------------
3,114,291
----------------
Total additions 3,590,833
Deduction
Benefits paid to participants 823,291
----------------
823,291
Net increase 2,767,542
Net assets available for benefits:
Beginning of year 4,681,605
----------------
End of year $ 7,449,147
================
See accompanying notes.
5
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Notes to the Financial Statements
December 31, 2005
1. Description of Plan
The following description of the Scottish Holdings, Inc. (the Company) 401(k)
and Profit Sharing Plan (the Plan) provides only general information.
Participants should refer to the Plan Document for a more complete description
of the Plan's provisions.
General
The Plan is a defined contribution plan covering substantially all employees of
Scottish Holdings, Inc., with certain exceptions as provided in the Plan
document, and the following subsidiaries (collectively, the Plan Sponsor):
o Scottish Re (U.S.), Inc.
o Scottish Annuity & Life International Insurance Company (Bermuda),
Ltd.
An employee is eligible for the Plan on the first day of the month following
completion of one hour of service as defined in the Plan document.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA), as amended. The Company serves as Plan administrator and
trustee of the Plan.
Effective January 1, 2005, eligible participants may contribute up to 100% of
their pre-tax compensation, as defined in the Plan document, subject to Internal
Revenue Service (IRS) limitations. Prior to January 1, 2005, the deferral limit
was 7.5%. Participants may also contribute amounts representing distributions
from other qualified plans. Participants who have attained age 50 before the end
of the Plan year are eligible to make catch-up contributions. The maximum
participant catch-up contribution amount for 2005 and 2004 was $4,000 and
$3,000, respectively. The Company matches 100% of a participant's total pre-tax
contributions for the Plan year which do not exceed 7.5% of a participant's
compensation for the portion of the year during which the participant elected to
make pre-tax contributions. Additional amounts may be contributed by the Company
at its sole and unrestricted discretion. The amount of such profit sharing
contribution is determined by the Company and is allocated to participants
pro-rata based on the compensation. Employees are eligible to receive the profit
sharing contribution if they are active employees on the last day of the Plan
year. There were no profit sharing contributions to the Plan during 2005 or
2004.
Upon enrollment, a participant may direct contributions in 1% increments to any
of the Plan's fund options. Participants may change their investment options on
each business day of the Plan year.
6
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Notes to the Financial Statements (continued)
1. Description of Plan (continued)
Participant Accounts
Each participant's account is credited with the participant's contributions and
allocations of (a) the Company's contributions and (b) Plan earnings.
Allocations are based upon participant earnings and account balance as defined
in the Plan document. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account balance.
Forfeited balances of terminated participants' nonvested accounts are used to
fund the employer's contributions to the Plan. The balance in the forfeiture
account at December 31, 2005 and 2004 was $24,431 and $59,972, respectively. The
amount of forfeitures used to reduce employer contributions for 2005 was
$67,545.
Vesting
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's qualified matching contribution portion of
their account, which represents matches up to 4% of compensation, plus actual
earnings thereon is 100% at the time of contribution. Vesting in the Company's
matching contribution portion of their account, which represents matches greater
than 4% of compensation but not more than 7.5% of compensation, plus actual
earnings thereon is based on years of continuous service. A participant is 100%
vested after three years of credited service. Vesting in the Company's profit
sharing contribution is based on years of continuous service and a participant
is 100% vested after 5 years of credited service.
Participant Loans
Participants may borrow from their 401(k) accounts a minimum amount of $1,000 up
to a maximum amount equal to the lesser of (1) 50% of their vested account
balance or (2) $50,000 reduced by the outstanding balance owed by the
participant during the period up to one year before the issuance of the loan.
Loan terms may not exceed 5 years unless the loan is being used to buy or build
the participant's personal residence. Loans are secured by the balance in the
participant's account and bear interest at a rate equal to the prime lending
rate plus one percentage point. The interest rate will be approved at the time
of the loan and remain constant throughout the loan period. Principal and
interest are paid ratably through regular periodic payroll deductions if the
participant is an employee or in substantially equal installments in the case of
a non-employee.
7
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Notes to the Financial Statements (continued)
1. Description of Plan (continued)
A loan is not available from the portion of a participant's account balance
consisting of profit sharing contributions or the pension plan (account balances
previously transferred-in and merged from the Scottish Holdings, Inc. Money
Purchase Pension Plan on January 1, 2003).
Payment of Benefits
Participant 401(k) account balances may be distributed upon termination of
service, retirement, proven financial hardship, or death. Participant profit
sharing and pension plan account balances may be distributed upon termination of
service, retirement, or death. A terminated, retired, or hardship participant
may receive the vested value of his or her 401(k) and profit sharing accounts in
a lump sum amount. Annuity payment options are also provided for beneficiaries
of deceased participants or for participants with pension plan account balances.
Such annuity payments are distributed based on the vested value of the
participant account in substantially equal installments over a period not
exceeding the estimated life expectancy of the participant or such beneficiary.
Distributions from the Parent Company, Scottish Re Group Limited, Common Stock
Fund may be distributed in cash or in shares of the Parent Company's common
stock, if so elected.
As of December 31, 2005 and 2004, there were no benefit amounts participants
elected to withdraw from the Plan that were approved and processed for payment,
but were not yet paid.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
Administrative Expenses
Administrative expenses for the Plan are paid by the Company.
8
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Notes to the Financial Statements (continued)
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statement in conformity with U.S. generally
accepted accounting principles requires management to make estimates that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value which equals the quoted market
price on the last business day of the plan year. The shares of registered
investment companies are valued at quoted market prices which represent the net
asset values of shares held by the Plan at year-end. The Plan's investments in
the Scottish Re Group Limited common stock are stated at fair value based on
quoted market prices. The participant loans are valued at their outstanding
balances, which approximate fair value. Investments in the money market fund are
short term and generally valued at cost, which approximates the fair value.
Purchases and sales of security transactions are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
3. Investments
During 2005, the Plan's investments (including investments purchased, sold as
well as held during the year) appreciated in fair value as determined by quoted
market prices as follows:
Net Realized and
Unrealized Appreciation
/ (Depreciation) in Fair
Value of Investments
--------------------------
-
Registered Investment Companies $225,877
Parent Company Common Stock (16,171)
--------------------------
$209,706
==========================
9
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Notes to the Financial Statements (continued)
3. Investments (continued)
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
December 31
2005 2004
----------------- ---------------
Investments at fair value :
American Funds Growth Fund of America $ 802,377 $ 412,817
Davis New York Venture Fund 990,970 580,765
Fidelity Advisor Mid Cap Fund 705,806 403,423
Janus Advisor Balanced Fund 859,668 591,030
Janus Advisor Flexible Income Fund 475,197 326,787
Columbia Acorn Fund 581,439 401,206
SSGA S & P 500 Index Fund 825,926 343,027
Templeton Foreign Fund 635,804 406,913
Scottish Re Group Limited Common Stock* 491,687 430,924
UBS Money Market Fund* 776,289 599,056
* Party-in-interest Transaction
4. Income Tax Status
The Plan has received a determination letter from the IRS dated November 5,
2003, stating that the Plan is qualified under Section 401(a) of the Internal
Revenue Code (the "Code") and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Sponsor has indicated that it will
take the necessary steps, if any, to bring the Plan's operations into compliance
with the Code.
5. Party-in-interest Transactions
The Plan invests in common stock of the Parent Company, Scottish Re Group
Limited. Purchases of Scottish Re Group Limited common stock must be made on the
open market. The Plan also invests in a money market fund of the Plan custodian,
UBS. Investment balances for the stock and money market fund are listed in
Footnote 3 of these notes to the financial statements.
10
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Notes to the Financial Statements (continued)
6. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investments securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and such changes could materially affect participants'
account balances and the amounts reported in the statements of net assets
available for benefits.
7. Receivable from Participant
The receivable from participant reflects a duplicate benefit payment
distribution. The item was subsequently collected, but was outstanding as of
December 31, 2005.
11
Scottish Holdings, Inc. 401(k) and Profit Sharing Plan
Schedule H, Line 4i - Schedule of Assets
(Held At End of Year)
EIN #52-2234408 Plan # 001
December 31, 2005
(c)
(b) Description of Investment,
Identity of Issue, Including Maturity Date, Rate (e)
Borrower, Lessor or of Interest, Collateral, Par or (d) Current
(a) Similar Party Maturity Value Cost Value
-----------------------------------------------------------------------------------------------
Davis New York Venture Fund + $ 990,970
Janus Advisor Balanced Fund + 859,668
SSGA S&P 500 Index Fund + 825,926
American Funds Growth Fund of America + 802,377
Fidelity Advisor Mid Cap Fund + 705,806
Templeton Foreign Fund + 635,804
Columbia Acorn Fund + 581,439
* Scottish Re Group Limited Common Stock + 491,687
Janus Advisor Flexible Income Fund + 475,197
Alliance Bernstein Global Strategic Income Fund + 241,203
----------------
6,610,077
* UBS Money Market Portfolio, 3.58% + 776,289
Participant Loans Interest rates ranging from
5.00-8.00%, maturity dates
ranging from 1-10 years 62,781
----------------
$ 7,449,147
================
* Represents party-in-interest
+ Cost information is not presented, as investment is participant directed
12
Signatures
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
SCOTTISH HOLDINGS, INC. 401(K) AND PROFIT SHARING PLAN
Date June 29, 2006 /s/ Dean E. Miller
----------------- ------------------------------------------
Name: Dean E. Miller
Title: Chief Financial Officer