Alea Loses S&P ‘A’ Rating

Standard & Poor’s Ratings Services announced that it has lowered its 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 constitute the Alea group (Alea)–to “BBB+” from “A-“.

S&P also said it had removed all the ratings from CreditWatch, where they had been placed with negative implications on Sept. 1, 2005 (See IJ Website Sept. 2). The outlook on all the ratings is negative.

“The downgrades follow last week’s announcement of Alea’s results for the first half of 2005, which did not meet the expectations of Standard & Poor’s or Alea’s management and continued the disappointing operating performance trend of recent years,” stated S&P credit analyst Simon Marshall.

“This trend casts doubt on the group’s ability to meet its operating plans,” the announcement continued. S&P did indicate that the “current management team has implemented improvements to the operations. Operating performance has also been clouded by legacy issues. Nevertheless, strong capitalization continues to underpin the ratings.”

The rating agency said the “negative outlook reflects the challenge of retaining a sufficient flow of good-quality business going forward. A material decline in the quality or volumes of business written or a deterioration of balance sheet strength would trigger a further downgrade, while the absence of such a decline would maintain the ratings at their current level.”

Since S&P first put the Alea Group on CreditWatch, speculation has grown that its major shareholder, the KKR investment group, may be looking for a buyer.