A Hamilton, Bermuda, life reinsurer could run into turbulence.[@@]

The reinsurer, Scottish Re Group Ltd., recently acquired one large life reinsurance business from a unit of ING Groep N.V., Amsterdam, and a second large life reinsurance business from Employers Reinsurance Corp., a subsidiary of General Electric Company, Fairfield, Conn.

A team of analysts at UBS Investment Research, New York, has reacted to the deals and other developments at Scottish Re by cutting its rating on the company’s stock to “reduce,” from “neutral,” and by lowering its target price for Scottish Re’s stock to $19, from $26.

Representatives for Scottish Re were not immediately available for comment.

The UBS team, led by Andrew Kligerman, has concerns about the prices of the deals and about the risks involved with acquiring aging books of business, according to a research note released today.

“Mortality experience on life reinsurance can deteriorate as the business ages, particularly after the 3-year mark,” the analysts write in the research note. “As time passes, a larger proportion of Scottish Re’s business will have originally been assumed at least 3 years ago.”

The analysts also are questioning why Scottish Re was willing to outbid more experienced competitors for the ING and Employers Re reinsurance operations, and they note that Scottish Re has missed consensus earnings forecasts for 4 of the past 5 quarters.

“A positive non-recurring item drove the single quarter of out-performance, and without large tax benefits, 2 of the misses would have been significantly larger,” the analysts write.

Additional information was supplied by Allison Bell.