Moody's affirms Scottish Re

Moody's Investors Service affirmed Scottish Re Group Ltd.'s Baa2 senior debt rating as well as the A3 insurance financial strength ratings of the company's core insurance subsidiaries, Scottish Annuity & Life Insurance Co. (Cayman) Ltd. and Scottish Re (U.S.) Inc.

The affirmation follows Scottish Re's announcement of its acquisition of ING America Insurance Holdings Inc.'s individual life- reinsurance business.

The outlooks for the ratings of Scottish Re and its subsidiaries were changed to negative from stable, however.

According to Moody's, the negative outlooks reflect a decline in risk adjusted capital levels (as calculated by Moody's) caused by this very large transaction and the integration risk associated with it, as well as the uncertainty regarding the future financial performance of the block of business being acquired. The rating agency added that this opinion also based on the substantial and recent rapid growth at Scottish Re, including the non-organic acquisition expansion, which increases the risk profile and potential earnings volatility of the company.

Offsetting these weaknesses, Moody's noted, is that the ING transaction remains consistent with the core strategy of Scottish Re to grow its traditional mortality-risk business.

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