EX-99 3 ex99.txt PRESS RELEASE SCOTTISH ANNUITY & LIFE NEWS RELEASE Scott E. Willkomm Scottish Annuity & Life Holdings, Ltd. (441) 298-4364 scott.willkomm@scottishannuity.com For release at 6:00 AM EST/February 13, 2002 Scottish Annuity & Life Holdings, Ltd. Announces Record Operating Results for the Fourth Quarter and Year Ended December 31, 2001 HAMILTON, Bermuda - February 13, 2002 - Scottish Annuity & Life Holdings, Ltd. (NYSE:SCT) today reported that net operating earnings increased 17% to $8.2 million, or $0.49 per diluted share for the quarter ended December 31, 2001 as compared to $7.0 million, or $0.44 per diluted share for the prior year period. The Company's results include the effects of increased claims resulting from the tragic events of September 11. In the quarter ended December 31, 2001, the Company expensed three additional claims totaling approximately $120,000 ($79,000 net of tax), related to the terrorist attacks on America. Excluding the effects of September 11, the Company's net operating earnings would have been $8.3 million, or $0.50 per diluted share for the quarter. In the quarter ended September 30, 2001, the Company expensed claims totaling approximately $630,000 ($416,000 net of tax). The Company does not expect any additional claims expense arising from the September 11th terrorist attacks since it believes that sufficient time has passed since that date and the Company has insurance that limits losses from catastrophes. Net operating earnings for the year ended December 31, 2001 increased 34% to $21.6 million, or $1.31 per diluted share from $16.2 million, or $1.01 per diluted share for the prior year period. Excluding the effects of September 11, the Company's net operating earnings for the year would have been $22.1 million, or $1.34 per diluted share. Net operating earnings for the fourth quarter of 2001 differs from net income by net realized investment gains and losses net of taxes and the amortization of deferred acquisition costs related to those gains and losses net of tax, if applicable. Net operating earnings for the year ended December 31, 2001 differ from net income by net realized investment gains and losses net of taxes, the amortization of deferred acquisition costs related to those gains and losses net of tax, if applicable and a charge of $406,000 due to the cumulative effect of change in accounting principle. The cumulative effect of change in accounting principle resulted from the required implementation of a new accounting standard, EITF 99-20 that became effective in the second quarter of 2001. The new standard governs the method of recognizing interest income Page 1 of 9 and impairment on asset backed securities. Under the new guidelines, the Company evaluated the expected future cash flows from its asset backed securities and determined that those cash flows were impaired by approximately $406,000. Net income for the quarter was $3.7 million, or $0.22 per diluted share as compared to $7.0 million, or $0.44 per diluted share for the prior year period, and $16.8 million, or $1.02 per diluted share for the year ended December 31, 2001 compared to $16.0 million, or $1.00 per diluted share for the prior year period. Net income in the quarter was adversely impacted by capital losses of $2.6 million realized upon the sale or write-down of fixed income securities issued by Enron and capital losses of $4 million realized upon the sale of collateralized bonds issued by the Osprey Trust, an Enron-related finance company. The Enron-related losses were partially offset by capital gains that were realized in the quarter for tax planning purposes. "This financial report highlights another successful year devoted to building the Company's earnings power and franchise value," said Michael C. French, Chairman and Chief Executive Officer of Scottish Annuity & Life. "Our operating results continue to reflect the significant enhancements we have made to our business model and management team, as well as our continuing commitment to building value for all shareholders." "During the year there were many important accomplishments at Scottish Annuity," Mr. French added. "We tripled the amount of traditional life reinsurance in-force, doubled our fixed annuity reinsurance business and gained meaningful traction in our Wealth Management business. In addition, we completed the acquisition of World-Wide Reassurance, welcomed Pacific Life as our new strategic partner, added four world-class directors to our holding company board and listed on the New York Stock Exchange last month." Total revenue for the quarter increased to $41.8 million from $39.7 million for the prior year period, an increase of 5%. Total revenue for the year increased to $119.5 million from $83.9 million for the prior year period, an increase of 42%. Total revenue excluding realized gains and losses for the fourth quarter increased to $48.0 million from $39.6 million for the prior year period, an increase of 21%. Total revenue excluding realized gains and losses for the year increased to $124.8 million from $84.1 million from the prior year period, and increase of 48%. The increases were principally driven by the growth in the Company's reinsurance business, fees and investment income. Total benefits and expenses increased to $38.8 million for the quarter from $32.3 million, an increase of 20%, and to $102.2 million from $68.1 million in the year, an increase of 50%. The increase in total benefits and expenses was due to the significant increase in reinsurance business written by the Company during the 2001 periods. The Company's total assets were $2.1 billion as of December 31, 2001. The investment portfolio including cash and cash-equivalents, but not including funds withheld at interest and the investment portfolio of World-Wide Reassurance Company Limited, totaled $585.1 million, had an average quality rating of "A+", an effective duration of 3.2 years and a weighted average book yield of 6.68%. This compares with a portfolio balance of $628.8 million, an average Page 2 of 9 quality rating of "AA-", effective duration of 2.62 years and an average book yield of 7.24% as of December 31, 2000. The changes in value, quality rating, duration and yield are a result of liquidating investments in April 2001 to fund the recapture of a block of business by one of our clients. Net assets in the Company's Wealth Management business increased to $602.8 million at December 31, 2001 from $409.7 million as of December 31, 2000. Approximately $203 million in new client funds was collected by the Company during the year. The Company's balance sheet was also impacted by the completion of the Company's acquisition of World-Wide Holdings Limited and its flagship subsidiary, World-Wide Reassurance Company Limited on December 31, 2001. The acquisition of World-Wide contributed approximately $185.6 million in total assets, $114.1 million of investment assets and $78.0 million of shareholders' equity to the consolidated balance sheet of Scottish Annuity. Approximately $10.2 million of the purchase price was allocated to present value of in-force business and $30.6 million was allocated to goodwill. "Over the past two years, we have worked to take Scottish Annuity to the next level," said Scott E. Willkomm, President of Scottish Annuity & Life. "As a result, we have succeeded in building a global life reinsurance specialist with the focused business strategy, intellectual capital, organizational flexibility and operating infrastructure to meet our clients' needs while managing risk and building wealth for our shareholders. From this world-class platform, we expect to demonstrate significant profitable growth in all of our business lines in 2002." As of December 31, 2001, the Company had approximately $34.9 billion of life reinsurance in force covering 993,000 lives with an average benefit per life of $35,000. As of December 31, 2000, the Company had approximately $11.4 billion of life reinsurance in force covering 248,000 lives. For the year ended December 31, 2001, the Company's mortality experience was 92% of expected levels, including claims resulting from the September 11 terrorist attacks. Excluding the effects of September 11 claims, mortality experience for the year was 83% of expected mortality levels. The Company's actuaries determine mortality expectations in connection with the pricing of each reinsurance transaction. The Company's book value per share increased to $16.44 at December 31, 2001 as compared to $15.34 per share at December 31, 2000. Excluding the effect of SFAS 115, the Company's book value per share increased to $16.62 at December 31, 2001 as compared to $15.59 at December 31, 2000. The increase in book value per share is due primarily to the increase in the Company's retained earnings, less dividends paid and the acquisition of World-Wide Holdings as of December 31, 2001. The Company's earnings conference call will be held at 11:00 am (Eastern Standard Time) on Wednesday, February 13, 2002. The dial-in number is (703) 871-3021 or (800) 982-3654 and the reservation number is 5769715. A replay of the call will be available beginning at 2:00 pm on February 13, 2002 and running through February 20, 2002. The dial-in number for the replay is (703) 925-2533 or (888) 266-2081 and the PIN code is 5769715. In addition, a simultaneous Web cast, as well as an on-demand replay, of the conference call will be available at the Company's Web site, www.scottishannuity.com/conferencecall. Page 3 of 9 Scottish Annuity & Life Holdings, Ltd. is a global life reinsurance specialist and issuer of customized life-insurance based wealth management products for high net worth individuals and families. Scottish Annuity & Life has operating companies in Bermuda, Charlotte, North Carolina, Dublin, Ireland, Grand Cayman and Windsor, England. Its flagship subsidiaries, Scottish Annuity & Life Insurance Company (Cayman) Ltd. and Scottish Re (U.S.), Inc., are rated A (strong) by Fitch, A- (excellent) by A.M. Best and A- (strong) by Standard & Poor's. Additional information about Scottish Annuity can be obtained from its Web site, www.scottishannuity.com. Certain statements included herein are "forward-looking statements" within the meaning of the federal securities laws. The management of Scottish Annuity & Life Holdings, Ltd. (the "Company") cautions that forward-looking statements are not guarantees, and that actual results could differ materially from those expressed or implied in the forward-looking statements. Important events that could cause the actual results of operations or financial condition of the Company to differ include, but are not necessarily limited to, the Company's ability to attract clients and generate business; the competitive environment; the Company's ability to underwrite business; performance of outside service providers; mortality risk; surrender risk; investment risk (including asset value risk, reinvestment risk and disintermediation risk); the impact of unforeseen economic changes (such as changes in interest rates, currency exchange rate, inflation rates, recession and other external economic factors); the impact of terrorist activities on the economy, the insurance and related industries in general and the Company in particular; regulatory changes (such as changes in U.S. tax law and insurance regulation which directly affect the competitive environment for the Company's products); rating agency policies and practices; and loss of key executives. Investors are also directed to consider the risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission. (Tables to follow) Page 4 of 9 Scottish Annuity & Life Holdings, Ltd. Financial Highlights (Stated in Thousands of United States Dollars, Except Per Share Amounts) (Unaudited)
Three months ended Three months ended December 31, 2001 December 31, 2000 ----------------- ----------------- Total revenue $41,798 $39,694 Net operating earnings* 8,200 6,980 Net income 3,703 7,033 Net operating earnings per share Basic $0.53 $0.45 Diluted $0.49 $0.44 Earnings per share Basic $0.24 $0.45 Diluted $0.22 $0.44 Dividends per share $0.05 $0.05 Weighted average shares Outstanding Basic 15,612,576 15,627,330 Diluted 16,638,935 16,881,681 Year ended Year ended December 31, 2001 December 31, 2000 ----------------- ----------------- Total revenue $119,469 $83,934 Net operating earnings* 21,618 16,178 Net income 16,839 15,971 Net operating earnings per share Basic $1.38 $1.02 Diluted $1.31 $1.01 Earnings per share Basic $1.08 $1.01 Diluted $1.02 $1.00 Dividends per share $0.20 $0.20 Weighted average shares Outstanding Basic 15,646,106 15,849,657 Diluted 16,485,338 15,960,542 *Excludes effect of realized gains (losses), amortization of related DAC and cumulative effect of change in accounting principle. December 31, 2001 December 31, 2000 ----------------- ----------------- Book value per share Including effect of SFAS 115 $16.44 $15.34 Excluding effect of SFAS 115 $16.62 $15.59
Page 5 of 9 Scottish Annuity & Life Holdings, Ltd. Consolidated Balance Sheets (Stated in Thousands of United States Dollars)
December 31, 2001 December 31, 2000 ----------------- ----------------- (Unaudited) Assets Fixed maturity investments $583,890 $581,020 Equity securities 20,705 - Cash and cash equivalents 94,581 47,763 Policy loans 801 441 Other investments 10,121 - Funds withheld at interest 562,446 46,256 ------------------------- ------------------------ Total investments 1,272,544 675,480 Receivables: Accrued interest 9,335 6,709 Risk fees 1,436 961 Reinsurance 78,373 20,618 Deferred acquisition costs 113,898 30,922 Present value of inforce business 20,383 10,433 Other intangible assets 30,970 7,888 Deferred tax benefit - 2,192 Fixed assets 5,459 2,482 Due from related party 1,892 218 Other assets 8,764 868 Current income tax receivable 4,441 87 Segregated assets 602,800 409,660 ------------------------- ------------------------ Total assets $2,150,295 $1,168,518 ========================= ======================== Liabilities Reserves for future policy benefits $379,618 $182,391 Interest sensitive contract liabilities 718,814 310,755 Investment-type products 25,503 - Borrowings 65,145- Accounts payable and accrued expenses 17,273 18,867 Reinsurance payable 4,259 - Deferred tax liability 5,601 - Other liabilities - 4,461 Segregated liabilities 602,800 409,660 ------------------------- ------------------------ Total liabilities 1,819,013 926,134 ------------------------- ------------------------ Minority interest - 2,820 ------------------------- ------------------------ Shareholders' equity Share capital, par value $0.01 per share: Issued and fully paid: 20,144,956 ordinary shares (2000 - 15,614,240); excludes 3,062,200 held in Treasury (2000 -2,962,200) 201 156 Additional paid in capital 301,542 223,771 Accumulated other comprehensive income (loss) - Unrealized appreciation (depreciation) on investments, net of tax (3,626) (3,822) Retained earnings 33,165 19,459 ------------------------- ------------------------ Total shareholders' equity 331,282 239,564 ------------------------- ------------------------ Total liabilities and shareholders' equity $2,150,295 $1,168,518 ========================= ========================
Page 6 of 9 Scottish Annuity & Life Holdings, Ltd. Consolidated Statements of Income (Stated in Thousand of United States Dollars) (Unaudited)
Three months Three months Year ended Year ended ended ended Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000 ----------------- ---------------- ----------------- ---------------- Revenues Premiums earned $28,883 $27,195 $68,344 $37,086 Fee income 2,247 699 4,809 2,246 Investment income, net 16,904 11,731 51,692 44,793 Realized gains (losses) (6,236) 69 (5,376) (191) ----------------- ---------------- ----------------- ---------------- Total revenues 41,798 39,694 119,469 83,934 ----------------- ---------------- ----------------- ---------------- Benefits & expenses Claims and other policy benefits 20,591 15,441 51,245 23,606 Interest credited to interest sensitive contract liabilities 7,150 4,765 17,578 17,390 Acquisition costs and other insurance expenses 9,315 10,234 22,752 17,152 Operating expenses 1,279 1,874 9,256 9,925 Interest expense 468 - 1,405 - ----------------- ---------------- ----------------- ---------------- Total benefits & expenses 38,803 32,314 102,236 68,073 ----------------- ---------------- ----------------- ---------------- Net income before income taxes and minority interest 2,995 7,380 17,233 15,861 Income tax expense (benefit) (708) 283 59 (49) ----------------- ---------------- ----------------- ---------------- Net income before minority interest 3,703 7,097 17,174 15,910 Minority interest - (64) 71 61 ----------------- ---------------- ----------------- ---------------- Net income before cumulative effect of change in accounting principle 3,703 7,033 17,245 15,971 Cumulative effect of change in accounting Principle - - (406) - ----------------- ---------------- ----------------- ---------------- Net income $3,703 $7,033 $16,839 $15,971 ================= ================ ================= ================
Page 7 of 9 Scottish Annuity & Life Holdings, Ltd. Consolidated Statements of Income (Stated in Thousand of United States Dollars, Except Per Share Amounts) (Unaudited)
Three months Three months ended ended Year ended Year ended Dec. Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 31, 2000 ----------------- ----------------- ---------------- ----------------- Earnings per share - basic Net income before cumulative effect of change in accounting principle $0.24 $0.45 $1.10 $1.01 Cumulative effect of change in accounting Principle - - (0.02) - ----------------- ----------------- ---------------- ----------------- Net income $0.24 $0.45 $1.08 $1.01 ================= ================= ================ ================= Earnings per share - diluted Net income before cumulative effect of change in accounting principle $0.22 $0.44 $1.04 $1.00 Cumulative effect of change in accounting Principle - - (0.02) - ----------------- ----------------- ---------------- ----------------- Net income $0.22 $0.44 $1.02 $1.00 ================= ================= ================ ================= Dividends per share $0.05 $0.05 $0.20 $0.20 ================= ================= ================ ================= Weighted average number of shares outstanding: Basic 15,612,576 15,627,330 15,646,106 15,849,657 ================= ================= ================ ================= Diluted 16,638,935 15,881,681 16,485,338 15,960,542 ================= ================= ================ =================
Page 8 of 9 Scottish Annuity & Life Holdings, Ltd. Supplemental Information Regarding Net Operating Earnings (Stated in Thousand of United States Dollars, Except Per Share Amounts) (Unaudited)
Three months Three months ended ended Year ended Year ended Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000 Net operating earnings including Sept. 11 claims Net income $3,703 $7,033 $16,839 $15,971 Realized losses (gains) - non taxable companies* 3,486 (69) 4,790 236 Realized losses (gains) - taxable companies* 1,298 - (866) (45) Provision for taxes -- taxable companies* (287) 16 449 16 Cumulative effect of change in accounting Principle - - 406 - ----------------- ---------------- ----------------- ---------------- Net operating earnings $8,200 $6,980 $21,618 $16,178 ================= ================ ================= ================ Net operating earnings per share Basic $0.53 $0.45 $1.38 $1.02 Diluted $0.49 $0.44 $1.31 $1.01 Net operating earnings excluding Sept. 11 claims Net income $3,703 $7,033 $16,839 $15,971 Realized losses (gains) - non taxable companies* 3,486 (69) 4,790 236 Realized losses (gains) - taxable companies* 1,298 - (866) (45) Provision for taxes -- taxable companies* (287) 16 449 16 Cumulative effect of change in accounting - - 406 - Principle Sept. 11 claims, net of tax 79 - 495 - ----------------- ---------------- ----------------- ---------------- Net operating earnings $8,279 $6,980 $22,113 $16,178 ================= ================ ================= ================ Net operating earnings per share Basic $0.53 $0.45 $1.41 $1.02 Diluted $0.50 $0.44 $1.34 $1.01 Weighted average number of shares Outstanding Basic 15,612,576 15,627,330 15,646,106 15,849,657 Diluted 16,638,935 15,881,681 16,485,338 15,960,542
*Includes the effect of changes in DAC amortization related to capital losses. Page 9 of 9