Scottish Re Group Limited Provides Additional Disclosure on Subprime and Alt-A
Exposure
HAMILTON, Bermuda--(BUSINESS WIRE)--
Scottish Re Group Limited ("the Company") (NYSE:SCT) today provided the
following additional disclosure regarding its subprime asset backed securities
("subprime ABS") and Alt-A residential mortgage backed securities ("Alt-A")
holdings. This disclosure supplements the disclosure provided in its Form 10-Q
for the three months ended June 30, 2007 as filed with the Securities and
Exchange Commission on August 14, 2007.
Consolidated Portfolios - Invested Assets Excluding Those Held in
Securitizations
The following table details the amount of amortized costs of the
Company's subprime ABS and Alt-A holdings by rating and vintage for its
consolidated portfolios excluding invested assets held in the Company's three
securitizations: Orkney Re, Inc., Orkney Re II plc and Ballantyne Re plc.
Subprime ABS
As of June 30, 2007
($ in millions)
- ----------------------------------------------------------------------
Vintage
- ----------------------------------------------------------------------
Years ended
December 31, Six months Six months Six months
1997 to ended ended ended
December 31, June 30, December 31, June 30,
Rating 2005 2006 2006 2007 Total
- -------------- ------------ ---------- ------------ ---------- -------
AAA $ 101 $ 44 $ 2 $ 3 $ 150
AA 114 38 - - 151
A+ 6 - - - 6
A 49 - - - 49
A- 31 1 - - 31
BBB+ and lower 36 6 - - 42
------------ ---------- ------------ ---------- -------
Total $ 336 $ 89 $ 2 $ 3 $ 429
============ ========== ============ ========== =======
Alt-A
As of June 30, 2007
($ in millions)
======================================================================
Vintage
- ----------------------------------------------------------------------
Years ended
December 31, Six months Six months Six months
1997 to ended ended ended
December 31, June 30, December 31, June 30,
Rating 2005 2006 2006 2007 Total
- -------------- ------------ ---------- ------------ ---------- -------
AAA $ 91 $ 60 $ 13 $ - $ 164
AA 45 17 - 1 64
A+ 3 - - - 3
A 20 1 - - 21
A- 2 - - - 2
BBB+ and lower 17 - - - 17
------------ ---------- ------------ ---------- -------
Total $ 178 $ 78 $ 13 $ 1 $ 271
============ ========== ============ ========== =======
As of June 30, 2007, the Company estimates that it had in excess of $500 million
of available liquidity among itself and its subsidiary, Scottish Annuity & Life
Insurance Company (Cayman) Ltd. This amount represents liquidity in excess of
liquidity held by the Company's insurance operating subsidiaries and includes
cash and marketable securities as well as $275 million available under the
Stingray facility.
Because the Company has significant operations and capital outside of the United
States, the Company does not believe that limiting an analysis of its financial
position to U.S. statutory surplus calculated in accordance with the NAIC
Accounting Practices and Procedures Manual is an appropriate way to evaluate the
financial condition of its consolidated worldwide operations. Management
believes that a more appropriate measure is shareholders' equity. The Company
had total shareholders' equity, as calculated in accordance with Generally
Accepted Accounting Principles, of approximately $1.2 billion as of June 30,
2007.
Invested Assets Held in Securitization Structures
The following table details the amount of amortized costs of the Company's
subprime ABS and Alt-A holdings by rating and vintage held in the Company's
three securitization structures:
Subprime ABS
As of June 30, 2007
($ in millions)
- ----------------------------------------------------------------------
Vintage
- ----------------------------------------------------------------------
Years ended
December 31, Six months Six months Six months
1997 to ended ended ended
December 31, June 30, December 31, June 30,
Rating 2005 2006 2006 2007 Total
- -------------- ------------ ---------- ------------ ---------- -------
AAA $ 57 $ 90 $ 145 $ 16 $ 307
AA 214 441 241 30 926
A+ 120 19 14 19 173
A 3 75 123 13 215
A- 1 5 7 - 13
BBB+ and lower - - - - -
------------ ---------- ------------ ---------- -------
Total $ 395 $ 630 $ 530 $ 78 $1,634
============ ========== ============ ========== =======
Alt-A
As of June 30, 2007
($ in millions)
======================================================================
Vintage
- ----------------------------------------------------------------------
Years ended
December 31, Six months Six months Six months
1997 to ended ended ended
December 31, June 30, December 31, June 30,
Rating 2005 2006 2006 2007 Total
- -------------- ------------ ---------- ------------ ---------- -------
AAA $ 39 $ 7 $ 23 $ - $ 69
AA 91 242 261 - 594
A+ - 1 37 - 38
A - 24 25 - 49
A- - - - - -
BBB+ and lower - - - - -
------------ ---------- ------------ ---------- -------
Total $ 130 $ 273 $ 347 $ - $ 750
============ ========== ============ ========== =======
As long as the value of the assets in the securitization portfolios is greater
than the statutory reserves of the underlying block of business, the Company's
operating subsidiaries are not required to, among other things, pledge
additional assets to secure reserve credit outside of the securitization
structure. As such, the amount of invested assets that exceeds statutory
reserves within the securitization portfolios represents additional protection
from unexpected market value declines in invested assets.
As of June 30, 2007, the total invested assets within the Company's three
securitization structures exceeded the statutory reserves covered by the
structures by approximately $1.4 billion, as summarized in the following table:
As of
June 30, 2007
($ in millions)
----------------
Invested assets within securitization portfolios $ 4,548
Statutory reserves (3,161)
----------------
Amount of invested assets that exceed statutory
reserves within securitization portfolios $ 1,387
================
Management believes the Company's current financial position provides it with
sufficient capital and liquidity to withstand temporary market dislocations or
potential losses arising from underperformance of its subprime ABS and Alt-A
holdings in the current market environment.
About Scottish Re
Scottish Re Group Limited is a global life reinsurance specialist. Scottish Re
has operating businesses in Bermuda, Grand Cayman, Guernsey, Ireland, Singapore,
the United Kingdom and the United States. Its flagship operating subsidiaries
include Scottish Annuity & Life Insurance Company (Cayman) Ltd., Scottish Re
(U.S.), Inc. and Scottish Re Limited. Additional information about Scottish Re
Group Limited can be obtained from its Website at www.scottishre.com.
Certain statements included herein are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act. Forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results to differ materially from the forward-looking
statements. Management of the Company cautions that these forward-looking
statements are not guarantees of our future performance and are subject to risks
and uncertainties that could cause actual results to differ materially from the
results expressed or implied by the forward-looking statements.
-- uncertainties relating to the ratings accorded to us and our
insurance subsidiaries;
-- uncertainties in our ability to raise equity capital or other sources of
funding to support ongoing capital and liquidity needs;
-- uncertainties relating to future actions that may be taken by creditors,
regulators and ceding insurers relating to our ratings and financial
condition;
-- the risk that our risk analysis and underwriting may be
inadequate;
-- changes in expectations regarding future realization of gross
deferred tax assets;
-- exposure to mortality experience which differs from our
assumptions;
-- risks related to recent negative developments in the residential
mortgage market, especially in the subprime sector, and our exposure to
such market;
-- risks arising from our investment strategy, including risks related to
the market value of our investments, fluctuations in interest rates and
our need for liquidity;
-- uncertainties arising from control of our invested assets by
third parties;
-- developments in global financial markets that could affect our
investment portfolio and fee and other income;
-- changes in the rate of policyholder withdrawals or recapture of
reinsurance treaties whether caused by ratings pressures or general
market conditions;
-- the impact of adjustments to previous financial estimates arising from
our process improvement program under which, among other things, enhance
the automation of our reporting valuation and administrative tools
(cedant and retrocession accounting);
-- the risk that our retrocessionaires may not honor their
obligations to us;
-- terrorist attacks on the United States and the impact of such
attacks on the economy in general and on our business in
particular;
-- political and economic risks in developing countries;
-- the impact of acquisitions, including our ability to successfully
integrate acquired businesses, the competing demands for our capital and
the risk of undisclosed liabilities;
-- the risk that an ownership change will result in a limitation on our
ability to fully utilize tax net operating losses;
-- loss of the services of any of our key employees;
-- losses due to foreign currency exchange rate fluctuations;
-- uncertainties relating to government and regulatory policies
(such as subjecting us to insurance regulation or taxation in
additional jurisdictions);
-- risks relating to recent class action litigations;
-- the competitive environment in which we operate and associated
pricing pressures; and
-- changes in accounting principles.
Investors are also directed to consider the risks and uncertainties discussed in
documents filed by the Company with the Securities and Exchange Commission.
Source: Scottish Re Group Limited
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Contact: Scottish Re Group Limited
George Zippel, 441-298-4397
George.Zippel@scottishre.com