Annuity and Life Re recovered from last year's huge profit loss to post a much more satisfactory set of results for the second quarter 2007.

The Bermuda-based reinsurer, which is currently in dispute with Transamerica over an agreement to novate reinsurance contracts with Scottish Re, reported a net loss of minus (-) $92,056 or $0 per diluted share for the three months ended June 30, compared to a net loss of minus (-) $649,949 or one cent for the same time last year.

The company also had no investment gains or losses during the 2007 second quarter in contrast to a total of $697,189 in 2006, while gross unrealised losses on the company's investments were minus (-) $256,060 as of June 30, as compared to gross unrealized losses of minus (-) $188,372 as of the end of last year.

Their investment portfolio currently maintains an average credit quality of AA.

They entered into agreement with Transamerica to novate their reinsurance contracts with F&G and Scottish Re to Transamerica effective of the end of 2004, but the two companies are now in dispute over both aspects of the novation, with Transamerica alleging Annuity's disclosures in connection with the novation were insufficient and claiming more than $40 million worth of damages.

The claims were set to be heard at an arbitration meeting in April, but it did not go ahead and a date for a new hearing is still pending negotiations.

Annuity believes Transamerica's position with respect to both the F&G and Scottish Re books is without merit, but they said they are unable to predict the outcome of the actuarial proceeding and thus the impact the dispute may have on their financial position.

Scottish Re have made adjustments to their billing process for 2004 and 2005 which indicate the company may have received overpayments of premiums and/or may not have been billed for claims for which it is responsible.

Earlier this month Annuity announced that it has reached an agreement to sell its US domiciled insurance company to an unrelated third party.