OPERATOR: Good morning. My name is Shawanna, and I will be your conference operator today. At this time I would like to welcome everyone to the first-quarter 2007 Scottish Re earnings conference call. (OPERATOR INSTRUCTIONS).

Thank you. It is now (technical difficulty)-- to your host, Mr. Paul Goldean. Sir, you may begin your conference.

PAUL GOLDEAN, PRESIDENT & CEO, SCOTTISH RE GROUP LIMITED: Thanks, operator. Good morning, everyone. Thank you for taking the time to join us this morning, and we look forward to presenting our results for Q1 2007.

Before we begin today's presentation, let me remind all listeners that certain statements included in today's presentation are forward-looking statements within the meaning of the federal securities laws, and management cautions that forward-looking statements are not guarantees. Actual results could differ materially from those expressed or implied in the forward-looking statements, and we expressly incorporate the risk factors contained in our Company's SEC filings. There will be a recording of this call available after 10:30 AM today running through May 23, 2007. Instructions on how to access the reply are included in your conference call invitation with today's earnings release.

Also, a replay of the call can be accessed on our website at www.ScottishRe.com.

Let's start with the earnings call itself. During today's prepared remarks, we will focus on the following three areas. First, the closing of our transaction with MassMutual and Cerberus; second, a summary of our financial results for the first quarter ended March 31, 2007 and expectations for the remainder of 2007; and third and finally, an update as to key business issues such as the financing of our existing new business production and other items.

Following our prepared remarks, we will open up the phone lines for a question-and-answer session. Let me now begin with our prepared remarks by stating how pleased I am regarding the closing of our $600 million equity investment transaction with our new majority investors, MassMutual Capital and Cerberus. As a brief reminder of the specifics of the transaction, MassMutual Capital and Cerberus each invested $300 million into Scottish Re in exchange for 1 million newly issued convertible preferred shares, which can be converted into 150 million ordinary shares at any time and automatically on the ninth anniversary if not done sooner.

MassMutual Capital and Cerberus now hold a combined 68.7% of the voting power of Scottish Re and have appointed our new Board of Directors. The completion of this transaction provides Scottish Re the capital and liquidity necessary to support our business on a go forward basis and also allows us to concentrate our full attention on re-establishing Scottish Re as one of the top global Life Reinsurance companies.

Scottish Re will continue to be independent and trade on the New York Stock Exchange. As noted in our press release Monday, our new Board of Directors consists of three MassMutual members, three Cerberus members, three independent directors, a Cypress Group designee and myself as CEO. This new Board of Directors brings an immense amount of business and industry expertise and will be actively involved in the business providing the direction, support and oversight necessary for Scottish Re to be successful in the future. Some of the key objectives of the new board and management will be to re-establish Scottish Re's presence in the market, create a culture of accountability within the Company, alignment of the Company and employee goals, and finally and probably most importantly, a focus on operational excellence.

An important part of our future success will be the improvement in our credit ratings over time. We believe that we have strategies in place that will allow us to earn new business prior to regaining an A level rating, and we are working closely with our clients to ensure them that Scottish Re is a reinsurer that they want to do business with. We have met with several of the rating agencies in the past several weeks. Some of those rating agencies have already increased our ratings, and we expect our ratings to continue to improve over the mid-term now that the Company is well capitalized and as we continue to demonstrate that we have the people, processes and systems to mitigate the earnings volatility experienced in the past year.

In closing my remarks regarding MassMutual Capital and regarding the MassMutual Capital and Cerberus transaction, I would like to summarize by saying we're looking forward to working closely with our new majority investors to return the Company to its position as a leader within the reinsurance industry and provide long-term value to our shareholders and clients.

Now let me turn the call over to Dean Miller, our Chief Financial Officer, who will walk you through the financial results for the first quarter. Dean?

DEAN MILLER, CFO, SCOTTISH RE GROUP LIMITED: Thank you, Paul. Last night Scottish Re reported a net loss available to ordinary shareholders for the three months ended March 31, 2007 of $35.5 million or a loss of $0.55 per diluted ordinary share as compared to net income available to ordinary shareholders of $11.6 million or $0.20 per diluted ordinary share for the prior year period.

Net operating earnings or loss is a non-GAAP financial measure which is net income or loss adjusted for the after-tax impact of realized gains or losses in the change in value of embedded derivatives. The net operating loss available to ordinary shareholders for the three months ended March 31, 2007 was $36.5 million or a loss of $0.57 per diluted ordinary share as compared to net operating earnings of $14.3 million or $0.25 per diluted ordinary share for the prior year period.

As of March 31, 2007, our fully converted book value per share was $14.81. On a pro forma basis, reflecting the $600 million equity investment by MassMutual Capital and Cerberus, our fully converted book value per share is $7.36.

I would now like to take a moment to review the most significant factors impacting the first quarter. All amounts in my following discussion are on a pre-tax basis. Premiums earned in the first quarter of 2007 increased 2% to $458.2 million compared to $449 million in the same period in 2006. The increase is primarily related to our international segment with the impact of new UK protection treaties won in 2006 of approximately $9 million, partially offset by reduced premiums on canceled business in other regions.

In addition, first-quarter 2006 international segment premiums were negatively impacted by $9.6 million related to various client adjustments. In our North America segment, 2007 premiums were negatively impacted by lower new business and higher retrocessional premiums which reduce our earned premiums. North American traditional new business for the first quarter of 2007 was $7.6 billion compared to $15.5 billion in the first quarter last year due to the impact of our credit rating downgrades in the second half of 2006. 2007 represents new business mostly on open treaties and not new treaty wins. Although our new business volumes are understandably low, we have experienced virtually no terminations of new business or treaty recaptures with the exception of one UK annuity treaty as a result of our financial situation during the last nine months.

Investment income in the first quarter of 2007 increased 10% to $141.6 million compared to $129 million in the same period in 2006. This increase is primarily due to higher total investments from the Ballantyne Re transaction completed in May 2006. The Company's investment portfolio maintained an average quality rating of AA- and increased its average book yield from 5.3% in the first quarter of 2006 to 5.7% in the first quarter of 2007.

Looking forward, investment income will increase as we invest the proceeds from the MassMutual Capital and Cerberus transaction. Our intention is to utilize the net proceeds of $560 million to repay the $275 million outstanding on the Stingray Trust. The remaining net proceeds will remain at our holding companies until required within the operating subsidiaries in the future.

Claims and other policy benefits increased by 2% to $383.6 million in the first quarter of 2007 from $374.5 million in the same period in 2006. Specifically North America experienced approximately $14 million of favorable net mortality.

With respect to the North America mortality, our favorable experience is relative to our best estimate assumptions. Our current best estimate assumptions for all traditional life blocks of business are based on our most recent version of Summit, which is our application for developing best estimate mortality based on all available mortality experience dating back to 1997 for the ING Block. For the ING Block, the current best estimate assumptions remain consistent with those used in pricing the acquisition. For the organic and SRLC Blocks, we have adjusted our best estimate to be consistent with Summit and the assumption framework for the ING Block.

During the first quarter of 2007, assumed mortality for the ING Block was favorable by approximately $26 million, representing an actual to expected ratio of 90%. This positive experience was driven by favorable results on large claims and as such was partially offset by lower than expected retrocessional recoveries of approximately $16 million.

Accordingly, net mortality for the ING Block was approximately $10 million favorable for the first quarter of 2007. Experience in our organic and SRLC Blocks contributed an additional $4 million of favorable net mortality, bringing the total favorable mortality for the first quarter to $14 million or a 95% actual to expected ratio.

This is a good time to highlight another initiative we have completed to further ensure our processes and models are appropriate. In conjunction with our new majority investors, we engaged the services of an actuarial firm to review our 150 largest North American traditional treaties, representing over 75% of our in force. The recently completed results of this work concluded that there were no material findings in the aggregate.

As you will hear later on this call regarding the impact our GAAP models have on our earnings pattern over the near-term, having confidence in these models is extremely important.

Interest credited decreased 17% to $35.3 million for the first quarter of 2007 from $42.7 million for the same period in 2006 due to the termination of four funding agreements in the third quarter of 2006 due to our rating downgrades and also due to higher lapses on annuity treaties in late 2006 and the first quarter of 2007.

Acquisition costs and other insurance expenses increased 9% to $95.1 million in the first quarter of 2007 from $87.5 million in the same period in 2006, principally due to our international segment in which commission expense on UK protection treaties are incurred at a much higher rate than our existing legacy book and also due to the cost of the Tartan Catastrophe Bond issued in May, 2006.

Operating expenses for the first quarter of 2007 increased 11% to $34.6 million compared to $31.1 million for the same period in 2006. Included in the first quarter of 2007 was a gain of $2.6 million resulting from a settlement of an indemnification provision in the ERC purchase agreement. This settlement is unrelated to our ongoing mediation with GE regarding the ERC purchase. Excluding this onetime gain, the increase in expenses of approximately $6.1 million is primarily due to higher personnel costs in our international segment and professional fees, mostly legal and tax.

Collateral facilities expense of $73.7 million for the first quarter of 2007 was $42.6 million higher than in the same period in 2006. This increase is principally due to the Ballantyne Re transaction closed in May 2006. Additional interest costs of approximately $4.5 million resulting from the drawdown of the Stingray facility in August 2006 and increased financial guarantor cost of approximately $3 million due to the rating downgrades.

As I mentioned earlier, we will repay the Stingray outstanding balance in mid-June which will reduce the collateral facility expense going forward.

Income tax expense in the first quarter of 2007 was $13.4 million compared to an income tax benefit of $7.5 million in the same period of 2006, primarily related to an $11 million valuation allowance established in the first quarter of 2007 on deferred tax assets. The valuation allowance principally relates to current period tax benefits not being recognized as we can no longer recognize tax benefits for certain legal entities.

An additional valuation allowance was established on deferred tax assets resulting from estimated statutory and tax projections related to certain legal entities.

As discussed on prior calls, our GAAP tax expense is not directly related to our pretax GAAP earnings for several reasons.

First, our consolidated pretax GAAP earnings are the aggregation of individual profits and losses by legal entity. This, combined with our inability to recognize tax benefits, creates tax expense in certain legal entities while creating no offsetting benefit and other legal entities that have losses.

Finally, our GAAP tax expense is also impacted by the magnitude and timing of our statutory profits and reserves as these are the primary drivers of our gross deferred tax assets and gross deferred tax losses, which are the basis for the calculation of any required valuation allowance.

Effective January 1, 2007, we have adopted a new accounting standard, FASB Interpretation Number 48, or FIN 48, which is accounting for uncertainty in income taxes. GAAP-based financial statements must now account for taxes under this new standard, including an analysis of all tax positions for all jurisdictions for all open years. FIN 48 clarifies the accounting treatment of uncertain tax positions taken or expected to be taken on any income tax returns. The cumulative effect of adoption of this new accounting standard is accounted for as an adjustment to the beginning balance of retained earnings. At January 1, 2007, the adoption of this new accounting standard resulted in a total FIN 48 liability of $78 million, which includes $11.1 million of interest and penalties for all jurisdictions for all prior open years.

However, since we recorded a valuation allowance for various deferred tax assets in prior periods, the total FIN 48 liability was reduced by $45.4 million adjustment to our existing valuation allowances, resulting in a net retained earnings adjustment of $32.6 million. Finally, we do not expect the FIN 48 liability to change significantly within the next 12 months.

That concludes my remarks regarding the significant factors impacting the quarter.

With respect to guidance for the remainder of the year, you should view the results for the first quarter of 2007 as roughly indicative of the next three quarters with certain exceptions.

First, we would anticipate our North American mortality returning to our best estimate levels. Second, in addition to the impact of the net proceeds and repayment of the Stingray debt, the closing of the transaction with MassMutual Capital and Cerberus triggers certain onetime expenses, as will certain other transactions to be discussed later during this call. The MassMutual Capital and Cerberus transaction results in a change in control which immediately vest all outstanding stock options and restricted shares. Under GAAP previously unrecognized expense of approximately $10 million must be expensed in the second quarter as part of the change of control even though the stock options are under water and the value of the restricted shares has significantly reduced.

In addition, a new stock option program is currently being finalized, which will result in additional immediate expense recognition with respect to options granted to directors of 4 to $6 million.

As discussed shortly, we are in the process of completing the transaction to finance our 2005 and 2006 new business production. We also terminated the $100 million term loan facility which will result in onetime expenses during the second quarter of up to $10 million.

Due to our current ratings, the new 2005 and 2006 financing facility will have a higher cost than our existing facility and will result in approximately $5 million of additional costs over the second half of 2007.

Finally, we anticipate severance, recruitment and relocation costs for various management positions over the coming quarters.

The third factor impacting our future quarterly results is that we will still experience a modest positive seasonal impact in the fourth quarter due to higher renewal premiums in that quarter, combined with an upward trend in our North American traditional business due to the impact of our GAAP models as I will discuss shortly.

As you have no doubt noticed, while we had favorable mortality in our North American segment for the first quarter, we still incurred an overall loss for the quarter. We are projecting to incur losses for the remaining quarters of 2007 although at a decreasing level.

I would like to spend a few minutes to explain the basis of these projected losses and our expectations for future years.

Our ratings have an impact on our earnings in several ways. First, our current ratings significantly impact our ability to write new business. Although we believe the closing of the MassMutual Capital and Cerberus transaction and the recent upgrades by certain rating agencies will have a positive impact with our clients, we are nonetheless projecting lower new business profits over the near-term. As our ratings improve and we execute on our client initiatives, our new business premium and related profits will increase over time. This is especially true in our international segment where we have significantly improved and expanded our management team in our focus markets of the UK and Asia.

Our ratings also impact the cost of our Triple-X financing. Based on our expected ratings for 2007, we will incur an incremental 13 million for all of 2007 due to higher financial guarantor costs. As previously noted, our new 2005 and 2006 new business financing facility will incur higher cost to our current ratings with the estimated impact in 2007 of $5 million.

Again, as our ratings improve, these incremental costs will decrease. As described on previous calls, we have been aggressively building our international segment team in order to grow and diversify our book of business in certain key markets. Due to the natural lag between the winning of a treaty and when the premiums begin to flow, combined with the impact of our ratings, our international segment premiums have not kept pace with our expense structure. Accordingly, we are projecting improving operating results over the next couple of years in our international segment as we complete the cleanup of the legacy book of business and continue to write more business in those focus markets.

The last and most significant item impacting our operating results relates to certain aspects of US GAAP which impact the emergence of profits over time within our North American traditional business. As brief background, FAS 60 requires assumptions to be set and locked in for the duration of a policy or treaty. Once established, these assumptions cannot be changed except under very limited circumstances. The objective of US GAAP for life insurance is to recognize profits over a level percentage of premium over the duration of the policy or treaty.

However, US GAAP requires a provision for adverse deviation or PAD in the reserves for which the mechanics of the release of such PADs tend to suppress US GAAP profits in early years due to the interaction with mortality and lapse assumptions.

While this US GAAP issue is present what all life insurers, it has a greater impact on Scottish Re due to the newness of our book, the impact of purchase GAAP accounting on the ING Block and the mortality and lapse assumptions used that are unique to Scottish Re. Based on our specific assumptions established at the inception of our models, our profit pattern over the near-term is being adversely impacted. With no change in assumptions, our in force book of business will show significantly improving GAAP profits during the next five to 10 years. We start to see this improving pattern beginning in 2007, which is one of the reasons why our North American segment operating results will improve each quarter going forward.

I will now cover some other items of significance. As previously announced, we entered into a $100 million term loan facility with MassMutual Capital and Cerberus to provide additional liquidity between the shareholder vote and the closing of the MassMutual/Cerberus transaction if needed. We did not draw on this term loan, and it was terminated concurrent with the closing of the $600 million equity investment transaction on Monday.

Also, as previously announced, we have been working on a long-term facility to fully fund up to the peak reserves our 2005 and 2006 new business production. We anticipate closing this facility within the next 30 to 45 days. Upon the completion of this facility, we will have fully financed virtually all of our Triple-X business.

That completes our prepared remarks. At this point we will open up for questions. Operator?

OPERATOR: (OPERATOR INSTRUCTIONS). Ann Maysek, Deutsche Bank Securities.

ANN MAYSEK, ANALYST, DEUTSCHE BANK SECURITIES: One question. On the Stingray Trust, you mentioned that you were repaying the $275 million that remained outstanding. I am assuming that means that the trust will remain available to the Company as the liquidity facility going forward, or are you simply closing out that whole facility?

DEAN MILLER: Yes. When we repay the 275, that 275 will then be available for either future letters of credit usage or cash drawdowns. So there's no impact on our ability to use that going forward.

ANN MAYSEK: Got it. And then secondly, you mentioned that you had strategies in place to win business absent better ratings. Can you expand on that at all, or is that too much of a competitive question to ask?

PAUL GOLDEAN: Yes, we can talk about that. First of all, this is not new. This is something we have been working on over the last several years, especially after the acquisition of the ING business which brought lots of talent people, systems and capabilities. It is the evolution of Scottish Re from its early years as really a low-cost provider to a full-service provider. And areas that we have been dealing with the last couple of years and are a key focus this year would be like the Mortality Research Center, which we have a big investment in which not only does it provide us with invaluable information about the mortality experience of our book of business, but also it provides us an opportunity to provide services to our clients that not all reinsurers offer, and it gives us a competitive advantage.

Other areas is clients rely on Summit, for example, which I briefly mentioned, which is our mortality application system. Our clients will use that to set their own pricing and best estimate assumptions.

We have an underwriting manual that is called [Ascent]. That was very well-regarded and a big value-add for clients. We're investing time and money in just further enhancing that. So the clients get the most of that.

So its those types of value-added services that the clients need and want that not all of our competitors offer that will help us remain competitive. The one thing we will not do is we're not lowering our profit margins by attempting to win new business. We are going to do it through the value-added services and demonstrating that Scottish Re is financially stable, we will be here in the future and is the reinsurer that can meet their needs.

OPERATOR: Richard Sbaschnig, Oppenheimer.

RICHARD SBASCHNIG, ANALYST, OPPENHEIMER: Just to kind of follow-up to that strategy as to win new business, won't you need to post collateral or set up other types of facilities to try to actually close on new business with the lower rating?

PAUL GOLDEAN: Well, not necessarily. Part of it is depends on the mix of business. Coinsurance versus YRT can have an impact, and we're definitely seeing a shift -- it is not us; it is the whole market -- a shift towards YRT, which then the ceding Company has less credit exposure to the reinsurer. Secondly, our intent is to demonstrate through improving ratings, the financials of the Company and so forth, that we are not a credit risk to the Company.

Now we are working on, are there ways in which we can provide collateral or maybe some form of a cut through? We're thinking through those. We are working on that. But that is not the primary focus. The focus is, again like I said, is the value-added services. It is filling a capacity need in the market and just demonstrating the financial strength of the Company.

So yes, we might look at some things like that, but that is not at the top of the agenda.

RICHARD SBASCHNIG: Just to expand on kind of your strategy going forward, it seems like there is no major strategic shift after this deal. But if I understand your comments, there seems to be a little bit more of a focus on international. I'm just wondering if you could maybe provide more color on that.

PAUL GOLDEAN: This is Paul Goldean. We have always been focused on our international segment. We just, I think if you heard us talk in the past, we did not execute effectively on our strategic plan. And now, as we come through the last nine months, we will engage our international segment team to actively pursue the goals and objectives that they have put in place. We're very happy with our international segment team, and the new investors are very happy with them, and we expect them to go out and execute on a strategy that we were thinking of at least three years ago. (multiple speakers). I expect you would see increasing improvement in our international segment.

RICHARD SBASCHNIG: Okay. Another question is, in terms of you briefly touched on these, but what steps -- maybe if you can elaborate more on steps you have taken to prevent any types of any potential future blowup with regard to the financials and operations.

DEAN MILLER: Well, first of all, I think we have got to put 2006 in perspective. It was a difficult year, but if you really break down the some of the root cause of what created the volatility, first of all, you go back and you say, okay, growth by acquisition, and then we went through the second half of '05, first half of '06 of building the team, the infrastructure. There's a lot of new people we have talked about. A big part of what happened in 2006 was the right people with better data and better systems.

For example, putting all of our retrocession business, cleaning up all the data and putting it onto a proper system is a great proactive initiative that we undertook. Unfortunately it uncovered some things that were not administered properly in prior years.

So a lot of what happened in 2006 was driven by things that we did proactively. You combine that with some variability and some lapses in mortality like the shock lapse on the one annuity treaty that hit its five-year term or -- see then that. So what we did proactively combined with some kind of volatility then creates the deferred tax asset. Because what it did, is it then had the issue of we could not finance. The rating agencies got nervous and downgraded us which closed off the Capital Markets, which, as you may recall, we were literally a week away from closing any collateral finance facility deal, a debt offering that would refinance the convertible notes. Once the ratings went down and you lost access to those facilities, then we had the liquidity crisis.

So I'm not saying that things did not go wrong. But it was kind of a snowball effect of things that we did combined with things outside of our control which led to the deferred tax asset, which led to the ratings, which led to the Capital Markets, which ultimately led to the sale. Now if you sit and say, okay, so where are we today? To really get back to your question, first of all we have been through tremendous due diligence for the last six months. The team that was in place in the latter half of '05 and the first half of '06 now have almost a year under their belts.

We have continued to do the things we were doing. Something that I talked about briefly was the review of the top 150 treaties. That was all multimode effort with a significant amount of involvement from an external actuarial firm to really tear apart the models, and that's 75% of the in force.

So our focus right now is some automation, better process. We feel that we have largely taken the steps in '06 which unfortunately created some of the issues. So we are always going to have volatility and mortality and to a lesser extent in lapses. That is the business we're in, and we are always going to have clients that are going to change systems and report things. And typically those aren't -- that is significant. But if we are the size of a company like Scottish Re, one client reports 5 million. That is significant to our earnings in a quarter.

The other thing that throughout this whole process last year was the focus on liquidity. When liquidity gets very tight, you implement a lot of procedures to track and monitor it, and we feel that we have a very robust liquidity analysis that is updated weekly, that is integrated with all aspects of the business. The key for us and the key for the rating agencies is, as we begin to write new business, to make sure that we have got the financing facilities and the capital in place before it builds like it did before. We cannot have the dependency on the Capital Markets that we had before. And that is something that the new board, the new investors and management will ensure does not happen.

RICHARD SBASCHNIG: So, in terms of those processes, you're basically -- in terms of your own processes, you are basically done with those?

DEAN MILLER: Well, you are never done. We have a list of company initiatives that any company would have and always improving. But the answer is we do not have a laundry list of things that we think we need to work on to avoid or mitigate volatility.

RICHARD SBASCHNIG: That is basically my question. In terms of some numbers questions, the stock option expense, the 4 to $6 million, is that an annual or is that a quarterly number?

DEAN MILLER: Well, what that relates to is we are finalizing right now the stock option program, you know the number of shares and who gets them and the strike price and so forth. A portion of those stock options will be granted to directors. And under FAS 123R, directors are not employees, and therefore, the total projected expense under your Black-Scholes method has to be expensed immediately at grand date.

Now all the other employees you will calculate the total expense, and you amortize it over the five-year vested period. So that 4 to $6 million that I mentioned, it is a range because we don't know exactly what the strike will be and how many, but that relates to the directors on the date of grant, which we anticipate happening in Q2. And it is a onetime expense. So there will be no further expense for those options related to those directors.

OPERATOR: David Havens, UBS.

DAVID HAVENS, ANALYST, UBS: Maybe you could just spend a minute on your ratings and maybe tell us what you're thinking in terms of ratings as sort of being an integral part of your strategy and what your goals are in restoring competitive ratings?

PAUL GOLDEAN: Well, we have met with most of the rating agencies during the past two weeks. It is kind of the time of year when you go through the annual process anyway. But it was especially timely for us given the close of the transaction. So we have very -- you know, MassMutual service were in attendance. We did the normal review of operations, the plan and so forth. And, as you can see, each rating agency -- some had the transaction included in the rating. Others did not. But all of them have either upgraded us or put us on positive. They are still in the process of running their capital models now that they have the plan, digesting everything that we told them.

But the key for us is transparency, good communication with the rating agencies, delivering upon what we promise, and at the end of the day, they really want to see two things.

They want to see one, execution and lower volatility in our earnings. And secondly, they want to see that we have a valid new business franchise.

Now what does that mean? Well, part of it is treaties that are open for new business aren't terminated, which we have been very successful in working with our clients and not having open treaties terminated. It is not having recaptures, which we've had virtually none. And it is also, it is a little bit of a chicken and egg issue, but it is also demonstrating that the clients view Scottish as a key member in the market and want to do business with us. And it is not really -- I don't think so much the actual volume of new business that we have. It is that we have a volume of new business with clients and that we are in the market.

So that new business franchise and the execution are they keys, and that's not going to happen overnight. We are in a prove it mode to some extent, and they are going to watch us closely over the following three or four quarters and see how things go and go from there.

DAVID HAVENS: I guess common wisdom is that you kind of need to be in the A category from a claims paying perspective. Is that the goal?

PAUL GOLDEAN: Oh, absolutely. It is getting back to A- or A is the goal. But like we mentioned before, we do have a lot of initiatives and especially with the new team in the international segment a lot of momentum that we are cautiously optimistic that we will win some level -- I mean don't overstate it. It is not going to be big volumes, but we will have a flow of new business pre-A-. And right now the clients have been very supportive sending us quotes. We are not winning much, although real positive news flows. We have won a couple of smaller treaties in the US in the last month and also in the UK in the international segment.

So what the unknown is, as supportive as the clients have been, the question is, now that the deal is closed and the rating agencies have come out and will continue to come out, will that -- how much will that free them up? They have all got risk committees and policies about who they can do business with and so forth, and each client is a little different. But like I said, I guess the summary is be cautiously optimistic, but not putting into our projections substantial new business volume.

OPERATOR: Chris Cook, Zazove Associates.

CHRIS COOK, ANALYST, ZAZOVE ASSOCIATES: I was curious as to given all the near-term noise if you guys could provide some window into what you expect the returns on your existing book of business to be sort of on a return on equity basis, as well as any new business you might put on in the next year or two, what kind of returns you're seeing in the marketplace on that book of business or that you're estimating you are seeing when you look at new books?

DEAN MILLER: Let me answer the new business piece first. The market in North America in particular has been very stable over the last several years, and we have not really seen any shift in just general pricing better or worse. As we mentioned before, we are not going to win new business by lowering our margins.

So the simple answer is, our margins will be consistent with what they have been in the past but at a much lower rate of volume.

So over the next -- 2007/ 2008 new business is not going to be the driver of our results. While we hope to win treaties and grow the business and do well, it is not going to be the main driver. The in force is what will drive the book the remainder of this year and a large part in '08.

Now return on equity in the in force is difficult because well, first of all, we have losses. We talked about some of the issues that create short-term losses. Secondly, it is difficult. What is E in equity when you're trying to look at a segment? So it is difficult. And we look at return of equity on a company as a whole, and as a company as a whole, it is going to be as we said we're projecting losses for the remainder of 2007.

But if you were to look at the underwriting margin, and again that is difficult. One, because again relative to equity because we don't allocate equity down to treaties or lines of business. And then secondly, we have got this phenomena of the short-term suppression of the GAAP profits because of the mechanics of the way our models and our assumptions and the interplay of those on our US GAAP and our organic and the ING Block.

So having said all that, what I would say is the in force the margins will be suppressed for a short period but increasing over the near-term and continuing out in the 5 to 10 year period.

PAUL GOLDEAN: This is Paul Goldean. I just thought that I would add a couple of points. First is, you have been on our calls in the past. We have been accused of overpromising and under-delivering. So the goal is to make sure that we make a promise to our shareholders and other third parties and we stick to that promise.

So when we talk about these items, we don't project out things like acquisitions or big wins or things of that nature. We are going to give you exactly what comes off of our models and what our best estimations are given where we are in the ratings environment. That is number one.

Number two, the new investors have been fully aware of what our plan is on a go forward basis. And I think they understood it enough and they still continue to close the transaction. I think it is an important note for the rest of the investors out there, and that is pretty much all the comment I have on the two points.

Is anyone still on?

OPERATOR: Does that answer your question?

CHRIS COOK: Not particularly, but thanks anyway. I understand your answer.

OPERATOR: (technical difficulty)--

UNIDENTIFIED PARTICIPANT, ANALYST: Most of my questions have been answered, but I did have one on the facility you're putting in place to finance all your '05, '06 Triple-X production. Is that more of a credit line type of facility, or is it more like a securitization shelf?

DEAN MILLER: Yes, this is -- when we announced the transaction back on November 26, 27, we indicated at that time that we had a commitment from Citigroup and Calyon to provide a facility. What we have been -- so that was a full commitment.

What we have been doing since then is working on the structure, the pricing and so forth. As I mentioned, we're maybe a month or roughly a month away from closing.

So basically it is similar to the HSBC type facilities, which is a bank facility than it would be our Orkney or Ballantyne. It is a 15-year committed committed line up to the full 550 million peak reserves. So it is not a Ballantyne REIT type structure.

OPERATOR: Jeff Bernstein, Schroder's.

JEFF BERNSTEIN, ANALYST, SCHRODER'S: My question has been answered.

OPERATOR: [Dru Newton], Jefferies.

DRU NEWTON, ANALYST, JEFFERIES: Thank you. My question has been answered as well.

OPERATOR: Richard Sbaschnig, Oppenheimer.

RICHARD SBASCHNIG: Just a quick question, some numbers questions. First of all, on the severance and relocation, I guess we can expect to see some management changes over the next couple of quarters?

PAUL GOLDEAN: Richard, is that your -- we broke up a little bit at the beginning. So you're asking us about management changes and severance that we announced?

RICHARD SBASCHNIG: Yes.

PAUL GOLDEAN: The answer is like any transaction of this magnitude you would expect to see some level of change in the management structure both exiting and coming in. And what those are at this point, we just don't have all that information, but we know it is going to happen.

DEAN MILLER: The only comment I would make, Richard, from an accounting perspective is, it is difficult to both quantify the amount and to put the timing of which quarter it will play into. So there is a lot of variables in those types of subjects. So some Q2, maybe Q3, Q4 -- I'm not picking any pegging any particular amount or quarter.

RICHARD SBASCHNIG: Got it. Okay. That makes sense. The other question ahead, with regard to your Orkney I transaction, I remember you had this issue of stat versus GAAP accounting on it, and some potential tax assets that might be coming through on those. I was just wondering if there has been any change with regard to that and if you expected any?

PAUL GOLDEAN: This is Paul Goldean. There are two elements there. First is, we have successfully redomesticated Orkney I into Delaware from South Carolina. In doing so, we have been given certain treatments that allow us to avoid significant tax impact on the structure. What we do with Orkney I in the future will be a business decision on whether we restructure it into another domicile or keep it as is. But the key point here is yes, we have moved Orkney I into Delaware, and we have been given the treatment that we were looking for.

RICHARD SBASCHNIG: And to my understanding, I guess there was some of the valuation allowance on the deferred tax asset was tred to the original issues I guess with Orkney I. I guess those are expected to reverse?

DEAN MILLER: No, no, all we have really done with the redomestication is just that, is redomesticate, and there is different treatment of the reserves. But the tax planning strategy that supported the deferred tax asset of Orkney I that has not changed. And so again, like all the valuation allowances we set up, we set those up because we cannot take credit for the profits that are projected to come through the book of business. Because we don't have a history of profits, especially in a new securitization.

So there is no change. We cannot reverse the valuation allowance, but to the extent the projected profits in the models do come to fruition over the long-term, we will get those tax benefits back over time. So there is no -- there's nothing -- there is no tax planning strategy or change in our circumstances in how we recognize deferred tax assets to allow us to reverse that valuation allowance.

The other comment I would make on Orkney I with the redomesticated is it has no impact on the securitization transaction itself. The cash flows, the debt to the third parties, everything is unchanged with respect to that piece of it.

RICHARD SBASCHNIG: Okay. Do you get a little bit of help on your stat capital -- (multiple speakers)?

DEAN MILLER: Sorry. That was the other point I wanted to make. No, we won't. It is part -- even though we're going to GAAP reserves, there are still provisions within statutory accounting that Delaware is saying, hey, we're not going to give you stat accounting treatment. So that extra whatever it was, maybe 40 to $60 million of capital boost that we thought we might get when we were trying to do some other things last year, we're not going to get.

OPERATOR: [Si Lund], Morgan Stanley.

SI LUND, ANALYST, MORGAN STANLEY: As far as the guidance for the balance of the year, you said you're projecting losses but at a decreasing level. What do we use as the starting point there? Should we use net income or the net loss in the quarter as a starting point for that?

DEAN MILLER: Well, you always should start with operating, back out the realized gains and losses in the embedded derivatives. So that is -- I forget what that is now -- 36.5 would be the net operating.

Now, I guess at a very macrolevel, if you were to kind of roll forward to Q1 from that 36 if you've got the mortality piece, which best estimates come back, you would have that. Q2 we had the things I walked through with the onetime transactions with the stock options and so forth.

So what you are going to have is Q2 is going to have a fair amount of extra onetime expenses that won't recur later. You have got the mortality. And then -- well then, this GAAP model impact that we talked about, which actually impacts North America each quarter starting in Q2 a little bit. So having said that, if you look at North America and put aside any expenses on the onetime, what you will see is it goes down a little bit if mortality goes to where we expect, but goes up some with the GAAP models and then up a little bit more in Q3 and up a little bit more in Q4.

And international I would say is roughly going to stay kind of where it is for the remainder of 2007. Because while we are hopeful to win new treaties, the lag will be if we win them today, we probably won't see any premium until six months from now. So -- and the premiums that are coming in on the treaties we won last year are at a relatively flat level. And the nuance for that is the product that was underlying some of the big treaty wins we had in the UK about this time last year was related to what is called a pension term insurance product, which had some tax benefits under the UK tax regime. They repealed that in the first quarter of this year. So all the new business flow under that product just stopped around February/March this year and kind of -- so that has an impact. So we will be about flat in international.

And in corporate, to round off the segments, again you've got to put aside the proceeds on the transaction and the collateral facility expense and paying down Stingray. But absent those items, what you will see is pretty much status quo, except we had a little bit higher operating expenses because we had some tax consulting around FIN 48 and the transaction, some extra legal and some audit spillover. So I would expect OpEx to go down a little bit going forward and everything else about the same.

SI LUND: Okay, thank you. And then on the actuarial review, did that include a review of the DAC asset on the balance sheet?

DEAN MILLER: Well, it is a review of the cash flows in the models. And those cash flows in the models are what underpin all of your GAAP reporting, statutory reporting, cash flows for stat and so forth. And so that was really the focus is, are the underlying cash flows appropriate, and then those cash flows feed into lots of different applications to do whatever GAAP or stat reporting you're doing.

SI LUND: Okay. And then a final quick numbers question. As far as cash at the holding company before the proceeds from the investment, do you have a number for that, or can we sell through higher or lower than what we saw in the 10-K?

DEAN MILLER: I'm not sure we disclosed the number in the 10-K. Well, you have got to be careful. If you're looking at cash on the balance sheet, that can be misleading. Because there is a lot of cash that is encumbered and not available.

The way we look at liquidity is how much liquid cash do we have at our two holding companies, SRGL and SALIC, that can either be put into trust funds to support our offshore reserves, which is almost greatly mitigated and eliminated with the new financing structure we just talked about, or if we need to put capital in for risk capital purposes.

Now that number is what was driving the issues last year with the liquidity. And, as we talked a lot in the 10-Qs and the 10-K, that liquidity was extremely tight, and if the transaction did not close, we would be in big trouble.

Now pre-close liquidity is very tight, and that's why we put the $100 million term loan in in case the deal got postponed or delayed slightly. So I guess long answer but the short answer is, liquidity pre-close is very tight as it was before but very sufficient post-close.

OPERATOR: At this time there are no further questions. I would now like to turn the call back over to Mr. Paul Goldean.

PAUL GOLDEAN: Well, once again, thanks to everyone for spending time with us on our Q1 results. We look forward to better things at Scottish Re on a go forward. Appreciate it. Thanks.

OPERATOR: Thank you. This does conclude today's Scottish Re first-quarter 2007 earnings conference call. You may now all disconnect, and have a great day.

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