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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

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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