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October 30, 2003 at 07:00 PM
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Analysts expressed general support for Scottish Res announced acquisition of ERC Life Reinsurance Corp.
On Oct. 24, Scottish Re, Hamilton, Bermuda, said it would acquire 95% of the outstanding capital stock of ERC Life Re for $151 million in cash. ERC Life is a unit of Employers Reinsurance Corp., Overland Park, Kan. General Electric Company is ERCs parent.
The business of ERC Life consists of a closed block of mostly traditional life reinsurance. The company has about $800 million in total assets and about $100 million of statutory capital and surplus.
The gross face amount of the in-force business, approximately $170 billion, represents about 5% of GE ERCs life and health reinsurance business.
Increasing the size of Scottish Res block of business is a positive step but there could be integration risks, says Scott Robinson, vice president and senior analyst with Moodys Investors Service, New York. But, overall, it fits within Scottish Res plans, Robinson adds.
In general, one risk associated with an acquisition includes making sure the original business being assumed was well underwritten and accounted for. Integrating different administrative systems is another risk in many cases.
As an example of this risk, Robinson notes that Scottish Re took a $12.5 million third quarter charge to account for revised death claims reporting by a ceding company.
