S&P Puts Alea Group on CreditWatch/Negative

September 2, 2005

Standard & Poor’s Ratings Services announced that it has placed its “A-” long-term counterparty credit and insurer financial strength ratings on Alea Europe AG, Alea (Bermuda) Ltd., Alea Global Risk Ltd., Alea Jersey Ltd., Alea London Ltd., Alea North America Insurance Co., and Alea North America Specialty Insurance Co.–the operating entities that comprise the Alea group –on CreditWatch with negative implications.

S&P also withdrew its “BBB-” long-term counterparty credit rating on the group’s intermediate holding company, Alea Group Holdings AG, following its recent cessation as a legal entity. Earlier this year S&P revised its outlook on Alea from stable to negative (See IJ Website March 17). This latest move follows the Group’s half-year earnings report that showed a steep decline in net profits (See IJ Website Sept.1)

S&P credit analyst Simon Marshall said the CreditWatch placement follows yesterday’s announcement of Alea’s results for the first half of 2005, which met neither the rating agency’s expectation nor those of Alea’s management “and continued the disappointing operating performance trend of recent years.”

S&P noted that the “continuing negative influence of adverse reserve development on performance is a particular concern after the substantial reserve-strengthening actions taken at the 2004 year-end, and management credibility has been called into question accordingly.”

The bulletin added, however, that strong capitalization continues to underpin the ratings. S&P said it “will meet with management within the next week to resolve the CreditWatch placement. If, upon resolution of the CreditWatch placement, Standard & Poor’s decides to lower the ratings on Alea, it is not expected that they will be lowered by more than one notch.”

Only one small “notch,” however, would drop the Group out of the “A” rating category, which would adversely affect its ability to write business.

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