EX-99.1 2 ex99-1.txt EXHIBIT 99.1 Scottish Re Group Limited Announces Operating Results for the Fourth Quarter and Year Ended December 31, 2004 HAMILTON, Bermuda--(BUSINESS WIRE)--Feb. 17, 2005--Scottish Re Group Limited (NYSE:SCT) today reported that income from continuing operations for the quarter ended December 31, 2004 was $19.5 million, or $0.52 per diluted ordinary share, as compared to $30.3 million, or $0.82 per diluted ordinary share for the prior year period. Income from continuing operations for the year ended December 31, 2004 was $69.8 million, or $1.86 per diluted ordinary share, as compared to $48.8 million, or $1.51 per diluted ordinary share for the prior year period. Net operating earnings were $26.0 million, or $0.69 per diluted ordinary share for the quarter ended December 31, 2004 as compared to $18.3 million, or $0.50 per diluted ordinary share for the prior year period. Net operating earnings were $79.6 million, or $2.12 per diluted ordinary share for the year ended December 31, 2004 as compared to $41.0 million, or $1.27 per diluted ordinary share for the prior year period. "This year was transformational for Scottish Re," said Michael C. French, Chairman of Scottish Re Group Limited. "We expect the momentum we gained in 2004 from the acquisition of ING Re's individual life reinsurance business, along with our numerous innovative capital markets financings will carry through into 2005 and beyond." Net operating earnings is a non-GAAP measurement. We determine net operating earnings by adjusting GAAP income from continuing operations by net realized capital gains and losses, the change in value of embedded derivatives as adjusted for the related effects upon the amortization of deferred acquisition costs, acquisition-related due diligence costs and taxes related to these items. While these items may be significant components in understanding and assessing the Company's consolidated financial performance, the Company believes that the presentation of net operating earnings enhances the understanding of its results of operations by highlighting earnings attributable to the normal, recurring operations of its reinsurance business. However, net operating earnings are not a substitute for income from continued operations determined in accordance with GAAP. Net income for the quarter amounted to $19.3 million, or $0.51 per diluted ordinary share as compared to $10.5 million or $0.29 per diluted ordinary share for the prior year period. Net income for the year ended December 31, 2004 amounted to $69.6 million, or $1.86 per diluted ordinary share as compared to $27.3 million or $0.85 per diluted ordinary share for the prior year period. Total revenue for the quarter increased to $215.4 million from $196.5 million for the prior year period, an increase of 10%. Excluding realized gains and losses and the change in fair value of embedded derivatives, total revenue for the quarter increased to $216.9 million from $182.0 million for the prior year period, an increase of 19%. Total revenue for the year ended December 31, 2004 increased to $816.6 million from $557.4 million for the prior year period, an increase of 47%. Excluding realized gains and losses and the change in fair value of the embedded derivative, total revenue for the year ended December 31, 2004 increased to $821.2 million from $547.9 million for the prior year period, an increase of 50%. Total benefits and expenses increased to $202.4 million for the quarter from $169.2 million, an increase of 20%. For the year ended December 31, 2004, total benefits and expenses increased to $759.1 million from $519.6 million, an increase of 46%. The increases in both total revenues and total benefits and expenses were principally driven by the acquisition of Scottish Re Life Corporation (previously ERC Life) and growth in the Company's reinsurance business in North America. The Company's total assets were $9.4 billion as of December 31, 2004. The core investment portfolio, comprising fixed maturity investments, preferred stock and most of the cash and cash equivalents, totaled $4.3 billion, and had an average quality rating of "AA-", an effective duration of 3.8 years and a weighted average book yield of 4.2%. This compares with a portfolio balance of $2.4 billion, an average quality rating of "AA-", effective duration of 3.9 years and an average book yield of 4.5% as of December 31, 2003. Funds withheld at interest, totaling $2.0 billion, had an average quality rating of "A+", an effective duration of 3.9 years and a weighted average book yield 6.2% at December 31, 2004. This compares with a total of $1.5 billion with an average quality rating of "A-", an effective duration of 5.1 years and an average book yield of 6.3% at December 31, 2003. The market value of the funds withheld at interest amounted to $2.1 billion at December 31, 2004. "Scottish Re's accomplishments are reflected in our strong growth in return on equity and operating earnings and book value per share," said Scott E. Willkomm, President and Chief Executive Officer of Scottish Re Group Limited . "These factors were offset by higher than expected Sarbanes-Oxley costs that reduced our net operating earnings per share by $0.05 for the quarter and $0.07 for the year." As of December 31, 2004, the Company had approximately $1.0 trillion of life reinsurance in force covering approximately 14 million lives with an average benefit per life of $73,000 in our North American operations. Excluding the business acquired from ING, we had approximately $305 billion of life reinsurance in force covering 7 million lives with an average benefit per life of $45,000. As of December 31, 2003, the Company had reinsurance of approximately $275.0 billion of life insurance in-force on 6.2 million lives and our average benefit coverage per life was $43,000. The Company's book value per share was $21.58 at December 31, 2004 as compared to $18.73 per share at December 31, 2003. On December 31, 2004, we completed the acquisition of the individual life reinsurance business of ING Re. In connection with the acquisition, we issued an additional $230 million of capital to support the ING Re block. This $230 million included $180.0 million of securities to The Cypress Group, a private equity firm, and $50 million of trust preferred securities. The Company's earnings conference call will be held at 11.00 a.m (EDT) on, Thursday, February 17, 2005. The dial-in number is (877) 502-2902 or (706) 679-5950 and the reservation number is 3500149. A replay of the call will be available beginning at 1:00 pm on Thursday, February 17, 2005 and running through Thursday, March 3, 2005. The dial-in number for the replay is (800) 642-1687 or (706) 645-9291 and the PIN code is 3500149 . 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.scottishre.com/conferencecall. Scottish Re Group Limited is a global life reinsurance specialist and issuer of customized life-insurance based wealth management products for high net worth individuals and families. Scottish Re Group Limited has operating companies in Bermuda, Charlotte, North Carolina, Dublin, Ireland, Grand Cayman and Windsor, England. Its operating subsidiaries include Scottish Annuity & Life Insurance Company (Cayman) Ltd. and Scottish Re (U.S.), Inc. which are rated A- (excellent) by A.M. Best, A (strong) by Fitch Ratings, A3 (good) by Moody's and A- (strong) by Standard & Poor's, Scottish Re Limited, which is rated A- (excellent) by A.M. Best, A (strong) by Fitch Ratings and A- (strong) by Standard & Poor's and Scottish Re Life Corporation Limited which is rated A-(excellent) by A.M. Best. Additional information about Scottish Re can be obtained from its Web site, www.scottishre.com. Certain statements included herein are "forward-looking statements" within the meaning of the federal securities laws. The management of Scottish Re Group Limited (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. Scottish Re Group Limited Financial Highlights (Stated in Thousands of United States Dollars, Except Per Share Data) ---------------------------------------------------------------------- (Unaudited) ----------- Three months ended Twelve months ended December 31 December 31 --------------------- ---------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ----------- Total revenue $215,446 $196,465 $816,618 $557,367 Net operating earnings (a) 26,033 18,331 79,577 41,047 Income from continuing operations 19,492 30,268 69,834 48,789 Net income 19,284 10,542 69,626 27,281 Net operating earnings per share Basic $0.72 $0.52 $2.23 $1.34 Diluted $0.69 $0.50 $2.12 $1.27 Earnings per share from continuing operations Basic $0.54 $0.86 $1.95 $1.59 Diluted $0.52 $0.82 $1.86 $1.51 Earnings per share Basic $0.54 $0.30 $1.95 $0.89 Diluted $0.51 $0.29 $1.86 $0.85 Dividends per share $0.05 $0.05 $0.20 $0.20 Weighted average ordinary shares Outstanding Basic 35,981,436 35,201,157 35,732,522 30,652,719 Diluted 37,847,645 36,919,283 37,508,292 32,228,001 (a) Excludes effect of realized gains and losses, change in value of embedded derivative, amortization of related deferred acquisition costs, losses from discontinued operations and acquisition-related due diligence costs. December 31, December 31, 2004 2003 ------------ ------------- Book value per share - including effect of SFAS 115 and fair value of derivatives $21.58 $18.73 Book value per share - excluding effect of SFAS 115 and fair value of derivatives $21.35 $18.51 Consolidated Balance Sheets (Stated in Thousands of United States Dollars) December 31, December 31, 2004 2003 ------------ ------------ Assets Fixed maturity investments $3,392,463 $2,014,719 Preferred stock 125,204 126,449 Cash and cash equivalents 794,639 298,149 Other investments 16,458 17,678 Funds withheld at interest 2,014,589 1,469,425 ---------- ----------- Total investments 6,343,353 3,926,420 Reinsurance balances and risk fees receivable 388,464 196,192 Deferred acquisition costs 417,306 308,591 Amounts recoverable from reinsurers 1,189,923 737,429 Other assets 275,753 141,748 Segregated assets 783,573 743,137 ---------- ----------- Total assets $9,398,372 $6,053,517 ========== =========== Liabilities Reserves for future policy benefits $3,239,982 $1,502,415 Interest sensitive contract liabilities 3,181,447 2,633,346 Collateral finance facility liability 200,000 - Reinsurance balances payable 535,939 125,756 Other liabilities 157,793 75,296 Long term debt 285,782 162,500 Segregated liabilities 783,573 743,137 ---------- ----------- Total liabilities 8,384,516 5,242,450 ---------- ----------- Minority Interest 9,697 9,295 Mezzanine Equity 142,449 141,928 Shareholders' equity Share capital, par value $0.01 per share: Issued and fully paid: 39,931,145 ordinary shares (2003 - 35,228,411) 399 352 Additional paid- in capital 684,719 548,750 Accumulated other comprehensive income 32,405 29,034 Retained earnings 144,187 81,708 ---------- ----------- Total shareholders' equity 861,710 659,844 ---------- ----------- Total liabilities and shareholders' equity $9,398,372 $6,053,517 ========== =========== Scottish Re Group Limited Consolidated Statements of Income (Stated in Thousand of United States Dollars) Three months ended Twelve months ended December 31 December 31 ------------------ ------------------- 2004 2003 2004 2003 --------- -------- --------- --------- Revenues Premiums earned $157,302 $139,680 $592,557 $391,976 Investment income, net 56,699 41,756 217,138 148,028 Realized gains (losses) (5,523) 521 (9,187) (4,448) Change in value of embedded derivatives 4,105 13,904 4,561 13,904 Fee income 2,863 604 11,549 7,907 --------- -------- --------- --------- Total revenues 215,446 196,465 816,618 557,367 --------- -------- --------- --------- Benefits and expenses Claims and other policy benefits 107,708 98,000 430,565 275,887 Interest credited to interest sensitive contract liabilities 29,182 23,095 106,524 89,156 Acquisition costs and other insurance expenses 39,596 39,868 149,993 116,000 Operating expenses 17,528 6,254 54,497 31,021 Acquisition-related due diligence costs 4,644 - 4,644 - Interest expense 3,776 2,024 12,902 7,557 --------- -------- --------- --------- Total benefits and expenses 202,434 169,241 759,125 519,621 --------- -------- --------- --------- Income before income taxes and minority interest 13,012 27,224 57,493 37,746 Income tax benefit 6,655 3,106 12,872 11,105 --------- -------- --------- --------- Income from continuing operations before minority interest 19,667 30,330 70,365 48,851 Minority interest (175) (62) (531) (62) --------- -------- --------- --------- Income from continuing operations 19,492 30,268 69,834 48,789 Cumulative effect of accounting principle change - (19,537) - (19,537) Loss from discontinued operations (208) (189) (208) (1,971) --------- -------- --------- --------- Net income $19,284 $10,542 $69,626 $27,281 ========= ======== ========= ========= Scottish Re Group Limited Supplemental Information - Net Operating Earnings and Book Value Per Share (Stated in Thousand of United States Dollars, Except Per Share Amounts) Three months ended Twelve months ended December 31 December 31 --------------------- ---------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ----------- Net operating earnings ---------------------- Income from continuing operations $19,492 $30,268 $69,834 $48,789 Realized losses (gains): non taxable companies 5,854 (281) 10,453 685 taxable companies (331) (240) (1,266) 3,763 Change in value of embedded derivatives: non taxable companies (164) (388) 195 (388) taxable companies (3,941) (13,516) (4,756) (13,516) Taxes on above items 1,058 2,488 1,052 1,714 Due diligence costs (net of taxation of $579) 4,065 - 4,065 - ---------- ---------- ---------- ----------- Net operating earnings $26,033 $18,331 $79,577 $41,047 ========== ========== ========== =========== Net operating earnings Basic $0.72 $0.52 $2.23 $1.34 Diluted $0.69 $0.50 $2.12 $1.27 Weighted average number of shares Outstanding Basic 35,981,436 35,201,157 35,732,522 30,652,719 Diluted 37,847,645 36,919,283 37,508,292 32,228,001 December 31, December 31, 2004 2003 ------------ ------------ Book Value Per Share -------------------- Shareholders' equity $861,710 $659,844 Unrealized appreciation on investments, net of taxes (14,339) (16,848) Fair value of embedded derivatives 5,162 9,049 ----------- ---------- Total $852,533 $652,045 =========== ========== Number of shares 39,931,145 35,228,411 Book value per share - excluding effect of SFAS 115 and fair value of embedded derivatives $ 21.35 $ 18.51 Scottish Re Group Limited Supplemental Information - Segment Operating Results (Stated in Thousand of United States Dollars) Life Reinsurance North America Three months ended Twelve months ended December 31 December 31 ------------------ ------------------- 2004 2003 2004 2003 -------- -------- --------- --------- Premiums earned $118,259 $72,237 $470,600 $230,708 Investment income, net 54,373 38,561 206,009 135,731 Realized losses (6,826) (1,468) (7,975) (6,124) Change in value of embedded derivatives 4,105 13,904 4,561 13,904 Fee income 2,074 (457) 7,869 4,067 -------- -------- --------- --------- Total revenues 171,985 122,777 681,064 378,286 -------- -------- --------- --------- Claims and other policy benefits 82,770 52,925 348,919 171,711 Interest credited to interest sensitive contract liabilities 29,182 23,095 106,524 89,156 Acquisition costs and other insurance expenses, net 30,842 27,694 131,452 83,594 Operating expenses 4,494 1,826 18,036 8,646 Interest expense 1,599 397 4,491 1,109 -------- -------- --------- --------- Total benefits and expenses 148,887 105,937 609,422 354,216 -------- -------- --------- --------- Income before income taxes and minority interest 23,098 16,840 71,642 24,070 Income tax benefit 5,936 4,534 12,686 13,934 -------- -------- --------- --------- Income before minority interest 29,034 21,374 84,328 38,004 Minority interest (175) (62) (531) (62) -------- -------- --------- --------- Income from continuing operations $28,859 $21,312 $83,797 $37,942 ======== ======== ========= ========= Net operating earnings ---------------------- Income from continuing operations $28,859 $21,312 $83,797 $37,942 Realized losses (gains): non taxable companies 5,735 620 8,087 2,235 taxable companies 1,091 848 (112) 3,889 Change in value of embedded derivatives: non taxable companies (164) (388) 195 (388) taxable companies (3,941)(13,516) (4,756) (13,516) Taxes on above items 813 1,856 857 1,251 -------- -------- --------- --------- Net operating earnings $32,393 $10,732 $88,068 $31,413 ======== ======== ========= ========= Scottish Re Group Limited Supplemental Information - Segment Operating Results (continued) (Stated in Thousand of United States Dollars) Life Reinsurance International Three months ended Twelve months ended December 31 December 31 ------------------ ------------------- 2004 2003 2004 2003 ------- ------- -------- --------- Premiums earned $39,043 $67,443 $121,957 $161,268 Investment income, net 2,195 1,933 10,023 7,537 Realized gains 1,076 1,510 803 548 ------- ------- -------- --------- Total revenues 42,314 70,886 132,783 169,353 ------- ------- -------- --------- Claims and other policy benefits 24,938 45,075 81,646 104,176 Acquisition costs and other insurance expenses, net 8,330 11,567 16,428 30,143 Operating expenses 5,784 2,094 18,891 11,518 ------- ------- -------- --------- Total benefits and expenses 39,052 58,736 116,965 145,837 ------- ------- -------- --------- Income before income taxes 3,262 12,150 15,818 23,516 Income tax benefit (expense) 493 (1,411) (77) (2,719) ------- ------- -------- --------- Income from continuing operations $3,755 $10,739 $15,741 $20,797 ======= ======= ======== ========= Net operating earnings ---------------------- Income from continuing operations $3,755 $10,739 $15,741 $20,797 Realized losses (gains): Non-taxable companies - (432) - (432) taxable companies (1,076) (1,078) (803) (116) Taxes on above item 141 629 88 460 ------- ------- -------- --------- Net operating earnings $2,820 $9,858 $15,026 $20,709 ======= ======= ======== ========= Scottish Re Group Limited Supplemental Information - Segment Operating Results (continued) (Stated in Thousand of United States Dollars) Other Three months ended Twelve months ended December 31 December 31 ------------------ ------------------- 2004 2003 2004 2003 -------- ------- --------- -------- Investment income, net $131 $1,262 $1,106 $4,760 Realized gains (losses) 227 479 (2,015) 1,128 Fee income 789 1,061 3,680 3,840 -------- ------- --------- -------- Total revenues 1,147 2,802 2,771 9,728 -------- ------- --------- -------- Acquisition costs and other insurance expenses, net 424 607 2,113 2,263 Operating expenses 7,250 2,334 17,570 10,857 Due diligence costs 4,644 - 4,644 - Interest expense 2,177 1,627 8,411 6,448 -------- ------- --------- -------- Total benefits and expenses 14,495 4,568 32,738 19,568 -------- ------- --------- -------- Loss before income taxes (13,348) (1,766) (29,967) (9,840) Income tax benefit (expense) 226 (17) 263 (110) -------- ------- --------- -------- Loss from continuing operations $(13,122)$(1,783) $(29,704) $(9,950) ======== ======= ========= ======== Net operating loss ------------------ Loss from continuing operations (13,122) (1,783) (29,704) (9,950) Realized losses (gains): non taxable companies 119 (469) 2,366 (1,118) taxable companies (346) (10) (351) (10) Taxes on above items 104 3 107 3 Due diligence costs (net of taxation of $579) 4,065 - 4,065 - -------- ------- --------- -------- Net operating loss $(9,180)$(2,259) $(23,517)$(11,075) ======== ======= ========= ======== CONTACT: Scottish Re Group Limited Scott E. Willkomm, 441-298-4364 scott.willkomm@scottishre.com SOURCE: Scottish Re Group Limited