Bermuda life reinsurer Scottish Re Group on Friday reported a sharp fall in its quarterly earnings pushing its shares price down by 15 percent during the day.

Scottish Re, formerly Scottish Annuity and Life Re, also said it would acquire 95 percent of ERC Life Reinsurance Corp. for $151 million in cash.

Missouri-based ERC Life, with assets of $800 million, is the life reinsurance business of GE Employers Reinsurance Corp., a unit of General Electric Co.

Shares of Scottish Re, which is based in Hamilton, fell by $3.59, or 15 percent, and were trading at $20.27 on Friday afternoon on the New York Stock Exchange.

The company said income from continuing operations for the third quarter fell to $1.8 million, or 5 cents a share, from $7.1 million, or 25 cents a share, a year earlier.

Scottish Re said the results were adversely affected by a $12.5 million charge to account for revised reporting of death claims by a ceding company client in connection with two annuity reinsurance treaties.

A spokesman for Employers Reinsurance said the life reinsurance business represented only 5 percent of its total life and health reinsurance business.

Despite the poor earnings results, ratings agency Fitch on Friday affirmed all existing ratings on Scottish Re Group Ltd. and its operating subsidiaries following the insurance company's announcement and said the rating outlook was stable.

“Fitch believes that the proposed acquisition represents a good strategic fit to Scottish Re's existing US life reinsurance business,” said the company.

The proposed acquisition, which will double Scottish Re's life reinsurance inforce, gives Scottish Re increased scale, and significantly improves the company's spread of mortality risk, said Fitch.

Fitch expects Scottish Re to fund the transaction through proceeds from its recent equity issuance.

As part of the transaction, Scottish Re has proposed to the Missouri regulator that the company's statutory capital be maintained at 175 percent of company action level risk-based capital. ERC has agreed to provide indemnification on outstanding legal issues and certain reinsurance recoverables.

The agency said: “Fitch's ratings on Scottish Re and its subsidiaries are based on the strength of the group's sound capitalisation, experienced management team, disciplined underwriting and conservative investment strategy.

“Over the past year, Scottish Re has made very good progress strengthening its competitive position in the life reinsurance market in line with Fitch's expectations.

“Fitch's primary rating concerns relate to the group's limited operating history and scale.”

On September 2, 2003, the company announced that its shareholders approved changing the company's name to Scottish Re Group Limited from Scottish Annuity & Life Holdings, Ltd.

In addition, the company's wholly owned subsidiary World-Wide Reassurance Company Ltd. has changed its name to Scottish Re Ltd.

The company said in a release: “The company intends to unify its corporate identity under the Scottish Re banner to more accurately reflect the company's mission by emphasising its life reinsurance business and provide a strong and consistent brand for its operating companies.”