Shares of Scottish Re Group Ltd. plummeted as much as 82 percent yesterday after the global life reinsurance specialist projected a second quarter loss of $130 million and said Scott Willkomm had resigned as chief executive officer.

The Bermuda-based life reinsurance company also said it had cancelled its quarterly dividend of five cents a common share and engaged investment banks Goldman Sachs and Bear Stearns to assist with evaluating strategic alternatives and potential sources of capital ? a move that often leads to a sale.

More than 36 million Scottish Re shares traded hands yesterday on the New York Stock Exchange, prompting one writer to deem the shares about as ?appetising as a plateful of haggis?. Scottish Re hit a low of $2.95 before finally closing the day at $3.99, down $12.01 or 75 percent.

Scottish Re said the projected loss for the quarter is related to a valuation allowance on deferred tax assets of approximately $112 million combined with a reduction in estimated premium accruals, increased retrocession costs, write-down of deferred acquisition costs due to higher than expected lapse rates on certain fixed annuity treaties, severance and retirement costs and other non-recurring operating expenses.

The company also warned third and fourth quarter earnings will be lower than expected as a result of lower than expected new business volumes, higher than anticipated retrocession costs and income tax expense due to the inability to recognise future deferred tax benefits.

Oppenheimer & Co analyst Richard Sbaschnig downgraded the stock to a sell from a buy and expressed doubt about Scottish Re?s ability to continue as a going concern.

He said the announcement yesterday was troubling because it did not explain the nature of the losses.

?That scares people more,? he said. ?We don?t know what went wrong. That?s the problem,? he said adding that he would not be surprised if there were more bad news from the company.

Bear Stearns & Co. analyst Saul Martinez lowered his investment opinion of Scottish Re Group Ltd. to ?underperform? from ?peer perform.?

?We have long been concerned about operational issues given numerous operations hiccups in recent years. However, we believe that the latest charge may put in danger the financial strength of the company. We are concerned that a downgrade in the financial strength rating would cause substantial adverse consequences,? he said.

Yesterday morning Fitch cut Yesterday morning Fitch cut Scottish Re?s issuer default rating two notches to ?BBB,? its second lowest investment grade rating, from ?A-minus?.

?This loss follows disappointing results in the first quarter of 2006 relative to management?s plans. Performance over the past several years has been characterised as moderate compared to Fitch?s rating expectations, and has reflected the challenges associated with rapid growth and successive acquisitions,? Fitch said adding it may cut the rating again.

Scottish Re?s first quarter income fell 59 percent to $13.8 million. The company plans to unveil its second quarter results on Thursday.

By mid-afternoon, A.M. Best Company downgraded Scottish Re?s financial strength rating and issuer credit ratings to B++ from A- citing the magnitude of the loss, Mr. Willkomm?s departure, potential for further deterioration, an aggressive acquisition strategy and the impact on earnings from spread compression and higher lapses on interest sensitive products due to higher interest rates. The ratings are under review and could be downgraded again, A.M. Best noted.

Reinsurers have difficulty underwriting business if they have a rating lower than A-.

Moody's Investors Service slashed Scottish Re's debt ratings three levels to Ba2, its second-highest junk-bond rating. Moody's kept the company's ratings on "negative outlook," indicating they may be downgraded further.

Scottish Re?s announcements came just a day before a US Senate panel, the Permanent Subcommittee on Investigations, was due to examine trusts held by Dallas billionaire brothers Sam and Charles Wyly as part of a probe into offshore tax evasion and money laundering.

The Wall Street Journal reported yesterday that Wyly money in Isle of Man trusts was used to establish Scottish Annuity and Life in the Cayman Islands in May 1998 to market offshore annuities to other investors. The company was set up and run by Wyly family lawyer Michael French and the Wyly brothers sat on its board from 1998 to 2000. It moved to Bermuda in April 2001 and changed its name to Scottish Re Group in September 2003.

Scottish Re recently disclosed it had received an US Securities and Exchange Commission subpoena regarding transactions early in its history by Wylys and Mr. French.

Mr. French retired from Scottish Re?s board on May 3 this year. Scottish Re previously announced it would tax a pre-tax charge of $3.1 million in the second quarter related to a $3.1 million payment payment to meet its obligation under Mr. French?s contract.

Scottish Re said yesterday it had named Paul Goldean, executive vice president and general counsel, its interim CEO. It has also appointed a special committee ? which includes Bill Caulfeild-Browne, Glenn Schafer, chairman of the board of directors, as well as Mr. Goldean ? to assist executive management in directing the company in the near term.

A spokeswoman for Scottish Re could not comment beyond what was in the company?s press release.

Andrew Kligerman, analyst at UBS Investment Research deemed the situation ?extremely serious?.

?The degree is murky at this stage of the game,? he said.

Scottish Re Group reinsured policies with a face value of $1 trillion as of September 30, 2005. It acquired US life reinsurance businesses from General Electric Co. in 2003 and ING Group NV in 2004.

?Those two large deals may have been mispriced,? said Mr. Kligerman, who has rated the stock ?reduce? since May, 2004.

Scottish Re?s largest shareholder is the private equity firm, The Cypress Group. Other large investors as of the first quarter included Boston Partners Asset Management, Fidelity Investments, Wellington Management and Wells Fargo & Co., acquiring to Bloomberg data.

The company?s operations are conducted operates through wholly-owned subsidiaries in Bermuda, the Cayman Islands, Ireland, the United Kingdom and the United States.

Smartmoney.com reported that Wall Street is wondering how Scottish Re?s complicated financial structure may have contributed to its current troubles.

Unwinding that may be the biggest obstacle to a sell-off, analyst Mr. Sbaschnig said.

?I don?t think anybody takes on the whole thing,? he said. ?Their financial solutions business, which may include a lot of annuities ? I don?t think anybody will be too happy taking that. I think the most likely buyers are foreign reinsurers who have a European presence, but not a US presence. If they buy the [domestic reinsurance business, they are automatically No. 2 in the market.?