Alea Group Holdings (Bermuda) Ltd.

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

    London (ots) -


    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).


    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

                                                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)
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
=============================== ========                      =========


                                                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
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:


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


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