Bermuda-based life reinsurer Scottish Re has
again delivered unpleasant news, revealing in its second-quarter
financial statement that it has a hefty exposure to US subprime
residential mortgage-backed securities (RMBSs). The revelation came
only two months after Scottish Re had received a much-needed $600
million capital injection from MassMutual Capital Partners, a
member of the US-based MassMutual Financial Group, and affiliates
of private equity firm Cerberus Capital Management.
According to Scottish Re, its investment exposure
to subprime RMBSs stood at $2.1 billion on 30 June while its
exposure to slightly less risky Alt-A RMBSs stood at $1 billion.
The $3.1 billion total exposure represents 28 percent of Scottish
Re’s total investment assets of $11 billion. Alt-A RMBSs are also
experiencing rising delinquency levels.
Commenting on the exposure, Scottish Re’s outgoing CEO, Paul
Goldean, said: “We are working actively with our third-party
investment managers to further evaluate and proactively manage our
subprime and Alt-A exposures.”
In the quarter to 30 June, Scottish Re reported net operating
earnings of $98.2 million compared with a net operating loss of
$130.3 million in the second quarter of 2006. However,
second-quarter 2007 results included a one-time tax benefit which,
if excluded, left Scottish Re reflecting a pre-tax operating loss
of $52.9 million, up from a pre-tax operating loss of $28.5 million
in the comparable 2006 quarter.
Scottish Re’s second-quarter revenue totalled $612.7 million, up 3
percent compared with the 2006 second quarter.