S&P Sees No Rating Change for Alea after Lower Earnings Forecast

January 20, 2005

Standard & Poor’s Ratings Services has issued a bulletin indicating that its ratings and outlook on the operating subsidiaries that comprise the Alea group – currently rated “A-” with a stable outlook – will remain unchanged following the Group’s announcement that its forecast earnings for the full year 2004 have been revised downward.

Alea attributed the lowered forecast to adverse development on its loss reserves in respect of the 2002 (and prior) underwriting years.

“The adverse development, primarily attributable to Alea’s historical book of U.S. casualty reinsurance, is expected to add between five and seven percentage points to the group’s combined ratio for the financial year ended Dec. 31, 2004, bringing the revised forecast to 103 to 105 percent,” said S&P.

The rating agency noted that “while unexpected, the proposed additions to reserves are of a magnitude that can easily be absorbed by the group’s very strong capital base, which continues to underpin the ratings at their current level.”

It added, however, “operating controls, particularly those governing prior underwriting years, will require further management review to ensure that financial strength is not affected.”

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