A healthly income return on Scottish Re Group shares for the second quarter of the year has been wiped out because of an error in calculations, which has been picked up by the Securities and Exchange Commission.

A one-time deduction of $120.8 million was not made when Scottish Re produced its financial report and this is now being factored in to the three month and six month results up to June 30.

As a result the company said the change means a reduction in basic income per ordinary share of $1.46 to a basic loss per ordinary share of $(0.30) for the three months ended June 30, and a reduction in basic income per ordinary share of $0.98 to a basic loss per ordinary share of $(0.84) for the six months ended June 30.

Scottish Re went on to say: "The further impact of this change is a reduction in diluted income per ordinary share of $0.63 to a diluted loss per ordinary share of $(0.30) for the three months ended June 30, and a reduction in diluted income per ordinary share of $0.58 to a diluted loss per ordinary share of $(0.84) for the six months ended June 30."

The company recieved a notice from the SEC on September 12 providing "several comments to certain of the company's public filings."

Except for the changes to the share income, the comments are said to relate to disclosure matters the company believes will not result in material changes, if any, to previously reported net income or shareholders' equity.

Scottish Re said it has not yet responded to the SEC's letter and therefore, not withstandingits belief that everything else is in order, cannot provide any guarantee the SEC will concur.

The requirement to restate the company's basic earnings per ordinary share and diluted earnings per ordinary share arose from the Scottish Re's failure to deduct $120.8m attributable to the beneficial conversion feature of the Convertible Cumulative Participating Preferred Shares issued on May 7 in calculating net loss available to ordinary shareholders for the purposes of earnings per share, in accordance with EITF Topic D-98.

The $120.8 million deduction is a one time non-cash, deemed dividend and does not have an effect on net income, comprehensive income or cash flows for the three and six months ended June 30, 2007, nor will it have an impact on total shareholders' equity as of June 30, according to Scottish Re.