A big acquisition fed profit growth at Scottish Re Group Ltd., Hamilton, Bermuda, during the second quarter.[@@]
The life reinsurer is reporting $28 million in net income for the latest quarter on $229 million in revenue, up from $7.9 million in net income on $130 million in revenue for the second quarter of 2003.
Scottish Re paid $151 million in December 2003 to acquire 95% of the stock of ERC Life Reinsurance Corp. from an affiliate of General Electric Company, Fairfield, Conn. ERC Life reinsures life and health policies with a face value of $170 billion. Before Scottish Re acquired the unit, it reinsured $105 billion in life business.
The performance of the ERC Life block has been consistent with Scottish Re’s expectations, according to Scottish Re Chairman Michael French.
Scottish Re took control of the claims processing functions early in the second quarter and tried to get claims processing up to date.
“The financial impact of the processing backlogs was greater than estimated,” French says in a statement about Scottish Re’s latest earnings.
Although the ERC Life block has performed well, the cost of efforts to handle the processing backlogs has held operating income down to the low end of the range given in the company’s earnings guidance, French says.