Bermuda-based life reinsurer Scottish Re Group Ltd. announced a first-quarter net income of $1.71 billion — thanks principally to a non-cash gain generated by the removal of its securitisation vehicle Ballantyne Re from the company's balance sheet.

The deconsolidation of Ballantyne — a special purpose reinsurance vehicle incorporated in Ireland — resulted in a one-time, non-cash net gain of $1.15 billion.

The net income gain was also driven by a $642 million gain associated with the sale to Hannover Re of a block of individual life reinsurance business acquired by the Company from ING in 2004.

The net income broke down to $7.84 per diluted ordinary share, as compared to a net loss of $735 million, or $10.75 per share, for the prior year period.

The sale of the block of individual life reinsurance business to Hannover Re was completed on February 20, 2009 and was effective as of January 1, 2009. The gain associated with the sale was principally driven by a $1,469 million reduction in investments, offset by a $1,903 million release of reserves for future policy benefits and a $208 million decrease in other net liabilities.

Scottish Re said the release of liabilities in excess of assets transferred generated an accounting gain, but no cash proceeds and so provided limited additional liquidity for the company.

The deconsolidation of Ballantyne Re has reduced Scottish Re's consolidated total assets and liabilities by approximately $885 million and $2.03 billion, respectively.