Alea Group Holdings (Bermuda) Ltd.

Preliminary Results for the year ended 31 December 2003 - Part 7 of 7

London (ots) - 5. CONTINGENT LIABILITIES Structured settlements The Group, through the Canadian branch of Alea Europe Ltd, has assumed ownership of certain structured settlements and has purchased annuities from life assurers to provide fixed and recurring payments to those underlying claimants. As a result of these arrangements, the Group is exposed to a credit risk to the extent that any of these insurers are unable to meet their obligations under the structured settlements. This risk is viewed by the Directors as being remote as the annuities are fully funded and the Group has only purchased annuities from Canadian insurers with a financial stability of AA or higher (Standard & Poor's). The Canadian branch is in run-off and the branch discontinued accepting assignments of annuities in August 2001. In the event of all the relevant life insurers being unable to meet their obligations under the structured settlements, the total exposure, net of amounts that may be recoverable from the Compensation Corporation of Canada (a Canadian industry-backed compensation scheme), is estimated to be 180 million Canadian Dollars ($139 million) and the maximum in relation to any one insurer 83 million Canadian Dollars ($64 million). Litigation Lumbermens is in dispute with PXRE Reinsurance Company ("PXRE"), who is seeking rescission (amongst other claims) in respect of a retrocession arrangement reinsuring Lumbermens excess of the 75% paid loss ratio through a retrocessional arrangement. On 26 August, 2003 Alea North America Company (''ANAC'') was joined as a third party defendant in the lawsuit between PXRE Reinsurance Company and Lumbermens. The amount in issue is approximately $29.25 million. PXRE's maximum liability under the retrocessional arrangement is $50 million and it has been paid $20.75 million in premium. PXRE will be required to return premium with interest if it is entitled to rescission. Lumbermens has advised the Directors that it will vigorously defend itself against PXRE's claims. ANAC intends to vigorously defend the claims against it. Since ANAC was recently served with the third party complaint and is involved in ongoing discovery, the Directors believe it is premature to provide any assessment of the likelihood of Lumbermens' prevailing on PXRE's claims or ANAC prevailing on Lumbermens' claims. A claim has been made against the Group and its indirect subsidiary ANAC by a former employee of ANAC alleging, inter alia, discrimination, harassment and retaliation for damages totalling $3.5 million. At this stage it is not possible to estimate the amount of any potential liability that may arise for the Group. The Group believes the allegations are unfounded and intends to vigorously defend itself against the claim. The Group has filed Notice of Service of its Motion for Summary Judgement. No provision has been made in the accounts for either matter. 6. Note to the Consolidated Cash Flow Statement Reconciliation of profit on ordinary activities before tax to net cash inflow from operating activities Restated Year ended Year ended 31 Dec 03 31 Dec 02 $'000 $'000 Profit on ordinary activities before tax 54,538 52,585 Depreciation of tangible assets 5,868 5,561 (Profit)/Loss on disposal of tangible assets (288) 457 Changes to market value and currencies on investments (24,893) (24,319) Losses on foreign exchange 9,095 5,746 Change in capital reserve - (3,372) Elimination of own shares - (794) Change in debtors arising out of re/insurance (109,423) (172,274) operations Change in amounts due from reinsurance operations not transferring significant insurance risk 6,044 25,429 Change in other assets (1,474) 110 Change in prepayments and accrued income (1,395) (2,729) Change in technical provisions 481,416 296,083 Change in claims equalisation provision 3,771 2,368 Change in reinsurers' share of technical provisions (165,849) (109,883) Change in deposits with ceding undertakings (13,407) (11,268) Change in reinsurance deposits and creditors 12,360 28,424 Change in liabilities from reinsurance operations not transferring significant insurance risk (8,811) (6,806) Change in other creditors (2,733) 2,684 Change in accruals and deferred income 1,442 4,862 Debt interest expense 4,718 6,530 ------------------------------- -------- --------- Net cash inflow from operating activities 250,979 99,394 =============================== ======== ========= 7. RETURN ON EQUITY Year ended Year ended 31 Dec 03 31 Dec 02 $'000 $'000 Profit after tax 48,510 54,579 Operating profit after tax 63,007 25,614 Net assets as at 30 June 444,927 371,337 Subordinated preferred equity 50,000 50,000 --------- --------- 494,927 421,337 Retained profit movement 1 July - 31 December 6,374 40,117 Exchange movement 1 July - 31 December 1,009 (914) --------- --------- Net equity 31 December excluding equity proceeds 502,310 460,540 --------- --------- Repurchase of subordinated preferred (42,500) Net proceeds 1 July - 31 December 265,592 --------- 223,092 --------- Net assets as at 31 December 725,402 --------- -------- Average equity proceeds (6 weeks) 25,741 --------- Average equity June excluding proceeds 498,619 440,938 Weighted proceeds 25,741 --------- --------- 524,360 440,938 --------- --------- Return on average equity 9.3% 12.4% Operating return on average equity 12.0% 5.8% This information is provided by RNS The company news service from the London Stock Exchange ots Originaltext: Alea Group Holdings (Bermuda) Ltd Internet recherchierbar: Contact: Alea Phone: +44'20'7621'3333 Dennis Purkiss Chief Executive Phone: +41'41'767'0401 Amanda Atkins Finance Director Financial Dynamics Robert Bailhache Phone: +44'20'7269'7200 Charles Armitstead Phone: +44'20'7269'7182 END

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