Subprime exposure has taken a $95.3 million bite out of Scottish Re's third quarter income, sending the insurer, which has offices on Par-La-Ville Road, spiralling to a hefty $107.1 million third quarter net loss.

Earlier this year the company was saved from possible bankruptcy after a $600 million capital market rescue, but it continues to struggle to regain momentum as its latest quarterly report, and corrected figures for the second quarter, reveal.

Scottish Re reported a healthy second quarter performance but it had missed a one-off $120 million deduction which was later spotted by the US Securities and Exchange Commission.

This time the company appears to have been fully vigilant and has owned up to a $95.3 million subprime exposure, which makes up the bulk of the $102 million of realised investment losses contained within its third quarter report.

Of that figure $54.2 million relates to securities for which the company has projected principal loss, while a further $41.1 million relates to securities Scottish Re continues to expect will eventually repay full interest and principal.

However, under US GAAP requirements companies must impair to market value certain recently downgraded securities that can no longer be proven to be fully recoverable.

For Scottish Re that, together with a $14.8 million net change in the value of embedded derivatives, means posting a $107.1 million quarterly net loss compared to a $27.4 million net loss a year ago.

However, Scottish Re has increased its operating income by $1.4 million to $1.6 million.

George Zippel, president and CEO, said: "On one hand, we delivered positive pre-tax operating income - the first time in four quarters that we've done that - driven by improved performance in our in-force books of business.

"On the other hand, we incurred significant realised losses reflecting our sizable subprime exposure. Our subprime impairment analysis was rigorous and represents our best estimate of the current impact of the subprime market on our investment portfolio.

"It should be noted however, that if the assumptions underlying our analysis prove to be inaccurate, the projected principal losses and associated asset impairments will vary from our current view."