After a five-day extension to allow a complete analysis and calculation of tax benefits from redomesticating of its Orkney Re unit from South Carolina to Delaware, Bermuda-based Scottish Re Group has reported a profit of $99.5 million for the second quarter.

Landing in positive territory for the quarter would not have been achieved were it not for a $154.3 million tax benefit mostly attributable to the relocation of Orkney Re.

Scottish Re had asked for the extra five-days before filing its results, which were due to due last Thursday.

Last night the company revealed it made a net profit of $99.5m, or $0.63 per diluted ordinary share, as compared to a net loss available to ordinary shareholders of $123.9 million, or $2.31 per diluted ordinary share, for the prior year period.

The company noted: "Included in net income available to ordinary shareholders and net operating earnings is a significant one-time tax benefit. This benefit resulted from the interaction between the release of a previously recorded valuation allowance following the redomestication of Orkney Re, and Section 382 of the Internal Revenue Code restrictions on the future deduction of net operating losses incurred prior to the change-in-control.

"Excluding the one-time tax benefit, we reported a pre-tax operating loss of $52.9 million for the three months as compared to a pre-tax operating loss of $28.5 million for the prior year period."

The company puts down its continuing pre-tax operating losses as being due to the impact its underlying GAAP valuation models on profit emergence in North America traditional life reinsurance business, the impact of current financial strength ratings on the level of new business production and collateral financing costs, and the costs of penetrating certain international markets.

"Despite the second quarter pre-tax operating loss, we made significant progress on several fronts. New business production of $5.8 billion in our North America segment was higher than planned and, despite our financial strength ratings, we won a number of new treaties and incurred no treaty recaptures. Mortality experience in our North America segment was favorable to plan for the second consecutive quarter. We also exited our Middle Eastern business through a retrocession arrangement with Arab Insurance Group because that business did not meet our strategic objectives, "said the company.

Scottish Re initiated the first phase of its restructuring program, incurring $20.3 million of restructuring expenses.

Paul Goldean, outgoing chief executive officer, said: "Following the completion of the equity investment transaction with affiliates of MassMutual Capital Partners and Cerberus Capital Management on May 7, we have taken the first steps towards re-establishing our position as a leading global life reinsurance company. We initiated a series of process improvement initiatives across the Company focused on strengthening our financial, risk management and operational controls."

Mr. Goldean has resigned from the board of directors and will be replaced as CEO by George Zippel today.

Mr. Goldean added: "We have also undertaken a detailed review of our non-prime investment exposure which includes $2.1 billion of subprime residential Asset Backed Securities and an additional $1.0 billion of Alt-A Residential Mortgage Backed Securities. We are working actively with our third party investment managers to further evaluate and proactively manage our subprime and Alt-A exposures."