S&P Affirms Alea’s ‘A-‘ Rating; CEO Comments

May 27, 2004

Standard & Poor’s Ratings Services announced that it has affirmed its “A-” long-term counterparty credit and insurer financial strength ratings on Alea London Ltd., Alea (Bermuda) Ltd., Alea Europe Ltd., Alea North America Insurance Co., Alea North America Specialty Insurance Co., Alea Global Risk Ltd., and Alea Jersey Ltd., and its “BBB-” long-term counterparty credit and senior secured debt ratings on Alea Group Holdings Ltd. The outlook on all the Alea group companies is stable.

A.M. Best Co. announced its affirmation of Alea’s ratings one day earlier (See IJ Website May 26).

“The ratings reflect the group’s very strong capitalization, strong competitive position and management, and improving operating performance,” stated S&P credit analyst Simon Marshall. These factors are partly offset by the group’s marginal historical operating performance and rapid growth in liability business, which inherently carries greater pricing uncertainty.

S&P described Alea as “midsize international reinsurance and specialty insurance group.” It noted that the group’s largest shareholder–with a 39 percent stake–is an affiliate of Kohlberg, Kravis, Roberts & Co. L.P. (KKR), the U.S.-based LBO firm, while 38 percent of the group is the subject of a free float on the London Stock Exchange. Partly as a result “the operating subsidiaries are equalized as a consequence of a number of cross-guarantees in place between them.”

S&P indicated that these guarantees meet its rating criteria and that it expects “that the claims of the operating subsidiaries will be paid by the respective guarantors as appropriate.”

“The stable outlook reflects our expectations that Alea will convert its recently assembled platform for success into significant bottom-line profits in the medium-term favorable market conditions,” Marshall noted.

Commenting on the ratings, Alea CEO Dennis Purkiss, indicated that “the reaffirmation of the ratings by both agencies demonstrates the strength of our balance sheet and will allow us to continue to improve our operating performance and deliver our business plans.”

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