Scottish Re Group Limited, a global life reinsurance specialist that operates companies in Bermuda, Charlotte, No. Carolina, Dublin, Grand Cayman, and Windsor, England – but oddly enough not in Scotland – has been having financial problems recently.
It reported large losses in the second quarter and was recently downgraded by Standard & Poor’s Ratings Services – financial strength from “BBB +” to “BBB-” and counterparty credit “BB+” to “B+” – and Moody’s Investor Service – to “Ba3” from “Ba2.”
Both rating agencies also downgraded its operating companies. They are mainly concerned about the Group’s short-term tightening of its liquidity.
Commenting on the rating actions, Paul Goldean, Scottish Re’s interim CEO stated: “The downgrades are in response to Scottish Re’s disclosure in its recent second-quarter 2006 Form 10-Q filing, which indicated that the Company’s short-term liquidity and collateral sources are tight and that the Company is in active discussions regarding capital and liquidity alternatives.
“At this time, it is important for shareholders to be aware that all of Scottish Re’s regulated entities are capitalized in excess of their required minimum. Scottish Re’s underlying business is sound, as both S&P and Moody’s noted, and the Company’s mortality experience remains in line with expectations.
“We continue to actively pursue the previously announced strategic alternatives and remain confident in the Company’s ability to execute one or more of these strategic alternatives.”
The “strategic alternatives” are widely rumored to include a possible sale of all or parts of the Group to one of Europe’s big reinsurance companies – Swiss Re, Munich Re or Hannover Re. Any one of them would particularly like to acquire the Group’s U.S. life reinsurance business, which is seen as offering substantial future growth. None of the companies, however, has as yet confirmed that they are interested.
Ed Note: As Swiss Re is still in the process of digesting GE Insurance Solutions and Hannover Re is in the process of restructuring its U.S. operations between Praetorian and Clarendon, Munich Re would appear to be the candidate most likely to succeed.
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