A.M. Best Affirms Ratings of Insurance and Reinsurance Subsidiaries of Alea Group.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--May 25, 2004 A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of the insurance and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. of the Alea Group (Bermuda). The rating applies to Alea London Limited, Alea (Bermuda) Ltd., Alea Europe Limited, Alea North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. Insurance Company, Alea North America Specialty Insurance Company, Alea Global Risk Limited and Alea Jersey Limited. The outlook on the ratings remains stable. The affirmation is based on the group's excellent level of consolidated risk-based capital and improving market profile. Alea's strong underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance is partially offset by uncertainties with regard to future claims inflation for its U.S. casualty book of business, which could negatively impact future earnings. Excellent capitalisation--Risk-adjusted capital is expected to remain in the excellent range, as A.M. Best's concerns regarding potential growth-related capital strain were substantially addressed by the USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 263 million net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from Alea's Initial Public Offering in November 2003. Alea intends to commence paying dividends in 2004, although the majority of earnings are likely to be retained to support future growth. Strong underwriting performance--A.M. Best believes after-tax earnings are likely to result in a return on equity above 12% in 2004 and 2005, as the high volume of premium written in the hard market is earned through the income statement. In line with A.M. Best's expectations, Alea achieved an underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. of USD 27.7 million in 2003, resulting in an excellent combined ratio of 89.3%. However, A.M. Best believes that significant uncertainties remain with regard to reserve adequacy due to the relative immaturity of Alea's U.S. casualty book. These uncertainties are compounded by adverse industry loss-cost trends, which could impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. prospective earnings. Improving business position--Alea is likely to grow premium income by a further 20% in 2004 to approximately USD 1.56 billion as it continues to allocate capacity to ART risks, specialty and U.S. casualty business where pricing and conditions remain firm. A.M. Best believes Alea has been successful in transitioning its strategic focus, and the emerging presence of Alea North America Insurance Company brings the group closer to its principal market. The challenge for management prospectively is to retain underwriting discipline as the market starts to soften following a period of rapid growth and to increase the group's non-U.S. revenues in order to improve diversification within the portfolio. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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