Scottish Re Group claims its business is 'sound' despite the downgrading of its credit rating by Standard & Poor's Ratings Services (S&P) and Moody's Investor Service, which sparked rumors the reinsurer could become an acquisition target.
The global life reinsurance specialist claims the decision to lower the company’s credit ratings was a result of a short-term tightening of Scottish Re’s liquidity.
On August 18, 2006 S&P lowered both its counterparty credit and financial strength ratings on Scottish Re’s operating subsidiaries and its counterparty credit rating on Scottish Re Group.
This was followed on August 21, by Moody’s dropping of Scottish Re’s senior unsecured debt rating and the downgrading of the insurance financial strength ratings of the group’s core insurance subsidiaries, Scottish Annuity & Life Insurance Company and Scottish Re.
In response to the ratings cut, Paul Goldean, interim CEO of Scottish Re Group said: 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, he added.
According to reports from the Associated Press, in a statement Moody’s said that the group’s collateral and liquidity needs were greater than anticipated at its last rating action on July 31, and it downgraded the group’s ratings following a profit warning
The report also revealed that Moody’s said the reinsurer is a prime acquisition target, but the group risks running out of liquidity before a sale occurs.
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, Mr Goldean concluded.