Alea Share Discussion Threads

[m.t.glass] 30/1/2006 23:12

A.M.Best is not impressed:



January 30, 2006 03:27 PM US Eastern Timezone
A.M. Best Downgrades and Withdraws Ratings of Alea Group Subsidiaries
OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 30, 2006--A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B++ (Very Good) and the issuer credit rating to "bb" from "bbb" of the insurance and reinsurance operating subsidiaries of Alea Group Holdings (Bermuda) Ltd (collectively referred to as Alea Group or Alea). The rating applies to Alea London Limited, Alea (Bermuda) Limited, Alea Europe Limited, Alea North America Insurance Company, Alea North America Specialty Insurance Company, Alea Global Risk Limited and Alea Jersey Limited. The outlook for all ratings remains negative. Subsequently, A.M. Best has withdrawn all ratings and has assigned an NR-4 (Company Request) to the Alea Group companies.

The downgrade follows significant deterioration in the company's consolidated risk-adjusted capitalisation as a result of worse than anticipated performance in 2005 due to run-off charges, catastrophe losses and further adverse reserve development. A.M. Best believes that the company is likely to continue to be affected by high expenses related to the transition of Alea Group into run off and the continuing possibility of adverse reserve development.

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.

[paddyfool] 30/1/2006 22:10

me to and I expect a sale to the likes of castlewwod.

[effortless cool] 30/1/2006 20:48

Right so far, Paddy. Now - close bets ot let them run?

According to today's announcement, NTA is now between 145p and 158p per share - let's say 150p. With 174m shares in issue, that's £260m. Market cap is £113m, so the discount is £147m, or about $250m.

That's a hell of a discount, even for a share with a record like this. However, there are a few things that suggest there may be shorting value in this yet.

Firstly and most importantly, a lot of the reserve strengthening relates to recent years, with a substantial element from 2004. These are years from which most other companies are seeing releases, even if old years are still deteriorating. This suggests that Alea were reserving these recent years very aggressively in a bid to retain their rating and/or help with capital raising. there could be further material deterioration to come from these recent years.

Secondly, delisting is likely in due course. There's little benefit now for KKR to maintain the expense (and transparency) of a listing. The prospect of delisting is likely to depress the price, since who wants to be left trapped in an unmarketable investment?

Finally, the group remains significantly over-staffed for a run-off operation; there will surely be further redundancy expenses. Further, its management are not run-off experts and may struggle to manage the company's transition effectively.

In conclusion, I'm continuing to run my full short position.

EC

[paddyfool] 30/1/2006 20:20

Well effortless it looks like my view on reserves was right....;-)

[effortless cool] 30/1/2006 20:11

Not if you're shorting, Holly.

[handycam] 30/1/2006 18:34

I too tuned in. Evasive; might ask to defer payment of outstanding bond; not appropriate to comment on legacy under-reserving until the forensics drafted in have completed their task, ie. not even the company knows the final loss ratio.

For some reason, the Board felt that there was significant value in the run-offs.

As with GOStwo months' back, this now trades at 1/3rd maximum NTA. (Gos is now one half NTA).

[paddyfool] 30/1/2006 17:49

just had a listen to the webcast...strong inference of more bad news to come.

[adeyberry] 30/1/2006 16:58

IG now taking cfd shorts, at a premium I hassen to add, added today!

[tigrebone] 30/1/2006 16:10

IG NOW TAKING SHORTS ON DAILY BETS

[m.t.glass] 30/1/2006 15:25

Hmm... auction at 64/64.
Edit: Didn't last long.

[paddyfool] 30/1/2006 12:58

big sale 500,000 just gone through we may yet see 60p today.

[alexandrews] 30/1/2006 12:50

Better late than never, I guess...

[m.t.glass] 30/1/2006 12:34

"The position the group has outlined today is worse than the bear-case scenario we had anticipated," according to the first of the brokers to comment today - so presumably more mileage yet on the short side:


Numis Securities Downgrades Alea To Sell
- Monday, January 30, 2006 5:27:36 AM ET
Dow Jones Newswires

0907 GMT [Dow Jones] Numis Securities downgrades Alea (ALEA.LN) to sell from hold. Cuts target price to 60p from 80p. Follows confirmation that Alea has moved into run-off and statement saying it'll manage-down outstanding contracts to preserve capital for shareholders. "The position the group has outlined today is worse than the bear-case scenario we had anticipated," Numis says. "The two biggest negatives to shareholder value are the erosion of asset value by the time it might take to extinguish liabilities, and the risk of further reserves deterioration." Trades -19% at 68.75p. (DWE)

[8para] 30/1/2006 11:10

It has turned out as expected, a proper basket case

Cant get that 200k+ trade in the auction just before christmas on the half day out of my head, it was about 3p above the price that day

What was that all about??

Well done all shorters..

[paddyfool] 30/1/2006 11:06

Well all that was predicted has come to pass and yet more to follow. Yet more additions to early year reserves, these will only get worse. Distribution of any funds now looks unlikely. The year end results will contain more reserve deteriotaion. I expect a gentle drift downwards. Thx again for tip on Cantor that has made me £3000 so far since Friday.

[m.t.glass] 30/1/2006 10:42

Share price fell 30% in final four months of 2005.
Starts 2006 plunging 30% in this first month alone.


Incidentally, if existing June bets incorporated an allowance for the expected dividend (xd May), the starting price of those bets should presumably be adjusted upwards if divi is cancelled?

[adeyberry] 30/1/2006 10:38

They could have waited till I opened up my Cantor account this morning!!!

How selfish of them..........

Still, mustn't grumble, what a splendid start to the week!

I wonder if the US will have any further effect this afternoon?

[m.t.glass] 30/1/2006 08:43

LONDON (AFX) - Charles Taylor Consulting PLC said LCL Group, one of its
subsidiaries, has been appointed to provide strategic advice and implementation
support to London based European and US operations of Alea Group Holdings
(Bermuda) Ltd......
.....The overall objective will be to enhance and realise value for
Alea shareholders.....




- That's presumably after ensuring there's enough left in the kitty to pay their fee. While shaking their heads and whistling inly? It's an ill wind..


(What's the proper term for that reverse whistle (sucking in a whistle) that builders do when saying "Ooooh, that'll cost ya")


And what's with hiring in LCL now - at this date?
How much has ALEA spent of its own before deciding it can't work out an answer and needs outside help?

[alexandrews] 30/1/2006 08:41

There was an awful lot of detail in this morning's announcement and I don't really appreciate fully its implications but the following statement stood out a mile:

The Group estimates the cost of its terminated capital raising plans to be approximately $8 million.

They spent $8m trying to raise more money... and failed?!?!? Surely that is sheer management incompetence...

Alex

[partner] 30/1/2006 08:28

What price target now given our latest up-date.

[holdontight] 30/1/2006 08:23

bloody hell....congrats all shorts!