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To: pcyhuang who wrote (1092)	2/21/2007 7:58:41 PM
From: pcyhuang	of 4080

SCT -- Clarification of current developments The loss for fourth quarter 2006 was driven primarily by a number of write-downs including goodwill, deferred acquisition costs, reinsurance recoverables and deferred tax assets. Moreover, Scottish Re's operating earnings from its North American reinsurance segment were adversely affected by higher mortality and unfavorable lapse experience. The results for 2006 continue to reflect the difficulties Scottish Re has with earlier tax planning strategies, weak accounting systems and higher expenses associated with collateral financing and interest costs as a result of rating downgrades and liquidity concerns. Despite the reported loss in fourth quarter 2006, which was significantly below expectations, A.M. Best is maintaining Scottish Re's ratings based on the belief that MassMutual Capital Partners LLC and Cerberus Capital Management L.P. will move forward with their previously announced intent to invest $600 million into Scottish Re. In addition, Scottish Re is amending the original terms of the agreement to provide for additional indemnification to these investors of up to $68.5 million should mortality experience deteriorate below a predetermined level over the next three years. A.M. Best expects the transaction to close in second quarter 2007. The capital investment will be a major step toward improving Scottish Re's liquidity posture and should enable it to resume meaningful new business activities. Scottish Re's statutory results for its onshore operating companies are not yet public. Although the main items driving the reported net loss are primarily GAAP related and thus not expected to materially impact U.S. statutory results, A.M. Best will revisit Scottish Re's ratings should statutory earnings and capital levels be reported significantly below A.M. Best's expectations. Furthermore, any deterioration in the perceived commitment of the acquiring entities by A.M. Best would result in a downgrading of the company's ratings. pcyhuang

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