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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): September 26, 2007
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SCOTTISH RE GROUP LIMITED
(Exact name of registrant as specified in its 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, Second 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.
On September 12, 2007, Scottish Re Group Limited (the "Company") received
correspondence from the Securities and Exchange Commission (the "SEC") providing
several comments to the Company's: (i) Form 10-K for the fiscal year ended
December 31, 2006, which was filed on March 1, 2007, (ii) Amended Form 10-K for
the Fiscal Year ended December 31, 2006, which was filed on April 26, 2007, and
(iii) Form 10-Q for the quarter ended June 30, 2007, which was filed on August
14, 2007. The Company continues to communicate with the SEC and to conduct the
review necessary to respond appropriately to all of the comments in the SEC's
letter.
In conducting the review necessary to respond to one of the comments in the
SEC's letter, the Company, with the concurrence of its independent registered
public accounting firm Ernst & Young LLP, determined on September 26, 2007 to
restate basic earnings per ordinary share and diluted earnings per ordinary
share for the three months and six months ended June 30, 2007, as reported in
its Form 10-Q for such period, which was filed on August 14, 2007, and,
therefore, that the calculation of earnings per share for such periods should no
longer be relied upon. The requirement to restate the Company's reported basic
earnings per ordinary share and diluted earnings per ordinary share arose from
the Company's failure to deduct $120.8 million attributable to the beneficial
conversion feature of the Convertible Cumulative Participating Preferred Shares
issued on May 7, 2007 in calculating net loss available to ordinary shareholders
for the purposes of earnings per share, in accordance with EITF Topic D-98. This
deduction is a one time non-cash deemed dividend as a result of the Company's
election to accrete the $120.8 million immediately and does not have an effect
on net income, comprehensive income or cash flows for the three months and six
months ended June 30, 2007, nor does it have an impact on total shareholders'
equity as of June 30, 2007. The impact of this change is a reduction in basic
income per ordinary share of $1.46 to a basic loss per ordinary share of $(0.30)
for the three months ended June 30, 2007, and a reduction in basic income per
ordinary share of $0.98 to a basic loss per ordinary share of $(0.84) for the
six months ended June 30, 2007. The impact on diluted income per ordinary share
is a reduction of $0.63 to a diluted loss per ordinary share of $(0.30) for the
three months ended June 30, 2007, and a reduction in diluted income per ordinary
share of $0.58 to a diluted loss per ordinary share of $(0.84) for the six
months ended June 30, 2007.
On September 26, 2007, the Company's executive management and Ernst & Young
LLP met with the Audit Committee of the Company's Board of Directors to discuss
the foregoing matters and after discussion, the Audit Committee concurred with
the conclusion of Company management.
The Company intends to file an amended Form 10-Q for the quarter ended June
30, 2007 in which the current "Note 5. Earnings per ordinary share" will be
removed and replaced by the following:
5. Earnings per ordinary share (restated)
The following table sets forth the computation of basic and diluted
earnings per ordinary share under the two-class method as required under SFAS
Statement No. 128
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("SFAS No. 128"), "Earnings Per Share" and EITF No. 03-06, "Participating
Securities and the Two-Class Method under FASB Statement No. 128." Subsequent to
the issue of the Form 10Q for the period ended June 30, 2007 the Company
determined that in accordance with EITF Topic D-98, the non-cash beneficial
conversion feature recorded on issue of the Convertible Cumulative Participating
Preferred Shares amounting to $120.8 million is to be treated as a deemed
dividend and deducted from income available to ordinary shareholders for the
purposes of calculating earnings per share. Accordingly, we have included this
deemed dividend in our calculation of income available to ordinary shareholders
and restated our calculations of earnings per share in the table below. The
non-cash deemed dividend did not have an effect on net income or cash flows for
the six months ended June 30, 2007 nor did it have an impact on total
shareholders' equity as of that date.
Basic earnings per share is computed based on the weighted average
number of ordinary shares outstanding and assumes an allocation of net income to
Convertible Cumulative Participating Preferred Shares for the period or portion
of the period that this security is outstanding. Losses are not allocated to
Convertible Cumulative Participating Preferred Shares which have no contractual
obligation to share in the losses of the Company. Under the provisions of SFAS
No. 128, basic earnings per share are computed by dividing the net income
available to ordinary shareholders by the weighted average number of shares of
our ordinary shares outstanding for the period. Diluted earnings per share is
calculated based on the weighted average number of shares of ordinary shares
outstanding plus the diluted effect of potential ordinary shares, if any.
Dilutive earnings per share exclude the effect of options and warrants or
conversion of convertible securities because the effect is anti-dilutive.
Three months ended Six months ended
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June 30, June 30, June 30, June 30,
2007 2006 2007 2006
Numerator:
Net income (loss).................................... $ 102,690 $ (121,590) $ 69,478 $ (107,741)
Dividend declared on non-cumulative
perpetual preferred shares......................... (2,265) (2,265) (4,531) (4,531)
Deemed dividend on beneficial conversion
feature (120,750) - (120,750) -
Imputed dividend on prepaid variable share
forward contract .................................. - (72) - (72)
Net loss applicable to ordinary shareholders
(restated) $ (20,325) $ (123,927) $ (55,803) $ (112,344)
Denominator:
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Denominator for basic and diluted loss per
ordinary share - weighted average number of
ordinary shares.................................... 68,195,614 53,720,242 66,204,855 53,578,152
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Basic loss per ordinary share (restated)............. $ (0.30) $ (2.31) $ (0.84) $ (2.10)
Diluted loss per ordinary share (restated)........... $ (0.30) $ (2.31) $ (0.84) $ (2.10)
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The remaining comments in the SEC's letter predominately relate to
disclosure matters the Company believes will not result in material changes, if
any, to previously reported net income or shareholders' equity. The Company has
not yet responded to the SEC's letter and therefore, notwithstanding the
foregoing, cannot provide any guarantee the SEC will concur with the Company's
approach to responding to any of the SEC's comments.
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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
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Paul Goldean
Chief Administrative Officer
Dated: September 28, 2007
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