Scottish Re Group Ltd, a struggling life reinsurer, said on Friday it may sell its international life reinsurance and wealth management units, and plans to cut costs after suffering mortgage-related losses and a credit rating downgrade.

The Hamilton, Bermuda-based company announced the changes less than a year after receiving a $600 million injection from private equity firm Cerberus Capital Management LP and MassMutual Financial Group's affiliate MassMutual Capital Partners LLC, giving them a majority stake in the company.

Scottish Re said it is changing its strategy because it is losing money from investments tied to subprime and "Alt-A" residential mortgages, and because a January 31 downgrade by Standard & Poor's will make it harder both to compete and to expand its core life reinsurance business.

Scottish Re said it plans to continue focusing on its North American life reinsurance business, "through strategic alliances or other means", and cut costs to preserve capital and liquidity. It said it has established a financial incentive programme to retain "essential" employees. Shares of Scottish Re fell five percent on Friday to 60 cents. They traded as high as $5.36 last June 1.

Fitch Ratings responded to the change of strategy by downgrading Scottish Re's issuer default rating (IDR) to B from BB- and the insurer financial strength (IFS) ratings of its primary operating subsidiaries to BB from BBB-.

Fitch placed all ratings on rating watch negative with the exception of Scottish Re Ltd., which was placed on rating watch evolving.

In its commentary on the action, Fitch stated: "The downgrades reflect Fitch's heightened concern over continued sub-prime losses in the consolidated investment portfolio, uncertainty over the SCT's strategic direction and the potential impact to the Reg. XXX securitisation structures."

On February 15, Moody's placed the ratings of Scottish Re Group Ltd. on review for downgrade.

Moody's said that "credit challenges in the investment portfolio make it increasingly more difficult for Scottish Re to regain the confidence of cedants and write meaningful amounts of new business".