AM Best


A.M. Best Affirms Financial Strength and Debt Ratings of Scottish Annuity and Scottish Re


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Jim Peavy

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Rachelle Striegel

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FOR IMMEDIATE RELEASE

OLDWICK, N.J. - OCTOBER 24, 2003 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Scottish Annuity & Life Insurance Company (Cayman) Ltd. (Scottish Annuity), and its wholly owned subsidiary, Scottish Re (U.S.), Inc. (Wilmington, DE). Concurrently, A.M. Best has affirmed the existing debt ratings of Scottish Re Group Limited (formerly known as Scottish Annuity & Life Holdings Ltd.) (Scottish Re) [NYSE:SCT]. The rating outlooks are stable.

These rating actions follow Scottish Re's announced intent to acquire 95% of the common stock of ERC Life Reinsurance Corporation (Overland Park, KS) (ERC Life) from GE Global Insurance Holding Company (GE) for approximately $150 million. The deal is being funded through existing funds and thus Scottish Re's debt to total capitalization remains unchanged at about 20%.

Scottish Annuity's operating fundamentals and capitalization are sound, enhanced by conservative investment management practices, profitable operations and favorable growth trends in new reinsurance business. With a book of business comprised almost entirely of life reinsurance and historically profitable operations, A.M. Best believes ERC Life will complement Scottish Re's core life reinsurance business, resulting in lower unit costs and ultimately stronger earnings.

Offsetting these positive rating factors are the highly competitive nature of the life and annuity reinsurance business and A.M. Best's belief that Scottish Re's growth will result in lower risk-based capital ratios at its insurance subsidiaries over the medium term and may require additional capital support from the parent organization. Although A.M. Best expects Scottish Re to continue to report earnings growth, the reported reduction in third quarter 2003 earnings increases the uncertainty as to the strength of future earnings expansion and the rate of organic capital growth.

For a list of A.M. Best's current debt ratings, please visit: DEBT RATINGS.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.

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