RNS Number:4883P
Alea Group Holdings(Bermuda) Ltd
06 March 2008
12 Results of operating activities
Loss from operations has been arrived after charging:
Year ended Year ended
31 December 31 December
2007 2006
$'000 $'000
Depreciation of property, plant and equipment 2,534 4,142
Staff costs (see note 13) 27,579 37,757
Auditors' remuneration (see below) 2,369 3,283
A more detailed analysis of auditors' remuneration on a worldwide basis is
provided below:
Year ended Year ended
31 December 31 December
2007 2006
$'000 $'000
Audit services 2,193 2,523
Tax services 46 18
Actuarial and other consulting 130 742
Total auditors' remuneration 2,369 3,283
13 Staff costs
The average monthly number of employees (including Executive Directors) was:
Year ended Year ended
31 December 31 December
2007 2006
Underwriting - 14
Finance 22 45
Information Technology 14 19
Claims 50 48
Technical Accounts 15 22
Management and administration 18 30
119 178
Their aggregate remuneration comprised:
Year ended Year ended
31 December 31 December
2007 2006
$'000 $'000
Wages and salaries 1 24,401 32,524
Social security costs 1,562 2,608
Other pension costs (see note 38) 1,616 2,625
27,579 37,757
1 Severance payments of $2.0 million made in the year ended 31 December 2007
(2006: $12.2 million) are excluded in the table above. Of this $2.0 million,
$0.4 million (2006: $8.6 million) was provided in the restructuring provision
established at 31 December 2005 (see note 27). The remaining $1.6 million has
been charged through the income statement in 2007 (see note 6).
14 Finance costs
Year ended Year ended
31 December 31 December
2007 2006
$'000 $'000
Interest on borrowings 18,184 22,990
Other investment expenses 2,932 3,288
Exchange losses/(gains) on non-functional currencies and 580 (1,871)
transactions losses
21,696 24,407
15 Net gains or losses on borrowings
Year ended Year ended
31 December 2007 31 December 2006
$'000 $'000
Capitalised debt raising expenses charged to income 518 636
statement
518 636
16 Income tax expense/(credit)
Year ended Year ended
31 December 2007 31 December 2006
$'000 $'000
Current tax expense/(credit):
UK corporation tax (5) 326
Foreign tax 1,002 (4,934)
Total current tax 997 (4,608)
Deferred tax (note 23): (897) (1,894)
Total income tax expense/(credit) 100 (6,502)
UK corporation tax is calculated at 30% (2006: 30%) of the estimated assessable
UK profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The tax expense for the periods presented varied from the stated rate of UK
corporation tax as explained below:
Year ended Year ended
31 December 2007 31 December 2006
$'000 $'000
Loss on ordinary activities before taxation (78,080) (7,337)
Loss on ordinary activities multiplied by the standard rate of
UK corporation tax at 30% (2006: 30%) (23,424) (2,201)
Factors affecting tax expense/(credit):
Adjustment in respect of foreign tax rates 11,426 611
Adjustment in respect of prior periods 130 (884)
Overseas and other taxes 670 973
Change in UK corporation tax rate used to provide deferred tax
asset 79 -
Deferred tax asset in respect of current year losses not
recognised 9,936 -
Utilisation of tax losses in respect of which no deferred tax
assets were provided (600) (4,276)
Other permanent differences 1,883 (725)
Tax expense/(credit) for the year 100 (6,502)
In addition to the amount expensed to the income statement, deferred tax of $1.0
million has been expensed to equity in the year (2006: expense of $Nil).
17 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended Year ended
31 December 2007 31 December 2006
Earnings $ $
Earnings for the purposes of basic earnings per share (78,179,546) (835,201)
being net loss attributable to equity holders of
the Company
Effect of dilutive potential ordinary - -
shares:
Earnings for the purposes of diluted earnings per (78,179,546) (835,201)
share
Number of shares Year ended Year ended
31 December 2007 31 December 2006
Number Number
Weighted average number of ordinary shares 173,788,126 173,738,502
for the purposes of basic earnings per
share
Effect of dilutive potential ordinary
shares:
- Share options - -
Weighted average number of ordinary shares 173,788,126 173,738,502
for the purposes of diluted earnings per
share
18 Property, plant and equipment
Computer equipment Fixtures and office Other Total
and software equipment
$'000 $'000 $'000 $'000
Cost or Valuation
At 1 January 2006 26,117 7,793 1,724 35,634
Additions 705 31 - 736
Exchange difference 2,294 255 120 2,669
Disposals (6,263) (3,481) (131) (9,875)
At 31 December 2006 22,853 4,598 1,713 29,164
Additions 374 220 53 647
Exchange difference 383 23 133 539
Disposals (830) (448) (2) (1,280)
At 31 December 2007 22,780 4,393 1,897 29,070
Accumulated depreciation and impairment
At 1 January 2006 (18,635) (5,525) (1,566) (25,726)
Charge for the year (3,778) (336) (28) (4,142)
Exchange differences (1,957) (230) (160) (2,347)
Eliminated on disposals 5,780 3,522 147 9,449
At 31 December 2006 (18,590) (2,569) (1,607) (22,766)
Charge for the year (2,017) (392) (125) (2,534)
Exchange differences (357) (12) (131) (500)
Eliminated on disposals 823 394 - 1,217
At 31 December 2007 (20,141) (2,579) (1,863) (24,583)
Carrying amount
At 31 December 2007 2,639 1,814 34 4,487
At 31 December 2006 4,263 2,029 106 6,398
19 Intangible assets
Licences
$'000
Cost
At 1 January 2006 9,968
Additions -
At 31 December 2006 9,968
Additions -
At 31 December 2007 9,968
Amortisation
At 1 January 2006 (1,489)
Impairment of asset -
At 31 December 2006 (1,489)
Impairment of asset -
At 31 December 2007 (1,489)
Carrying amount
At 31 December 2007 8,479
At 31 December 2006 8,479
Capitalised licences represent the cost of licences acquired to conduct business
in the United States. The Directors consider these licences to have indefinite
useful lives. The licences are tested for impairment at each balance sheet date.
At 31 December 2007 the impairment review indicated that the carrying value of
the licenses reflects the recoverable amount and no impairment write down is
necessary (31 December 2006: no impairment write down was necessary).
20 Deferred acquisition costs
Deferred acquisition costs
$'000
At 1 January 2006 107,000
Change in year (103,718)
Exchange difference 224
At 31 December 2006 3,506
Change in year (1,351)
Exchange difference 168
At 31 December 2007 2,323
At 31 December 2007
Current assets 1,992
Non-current assets 331
2,323
At 31 December 2006
Current assets 283
Non-current assets 3,223
3,506
21 Financial assets
As at As at
31 December 2007 31 December 2006
$'000 $'000
Available-for-sale investments
- Equity securities 165 198
- Debt securities 1,365,040 1,664,341
The investments included above represent investments in listed equity securities
and listed debt securities. The fair values of these investments are based on
quoted market prices.
As at As at
31 December 2007 31 December 2006
Summary by maturity - Debt securities $'000 % $'000 %
Less than 1 year 598,506 43.8 661,770 39.8
1 year up to 3 years 317,638 23.3 354,899 21.3
3 years up to 5 years 113,916 8.3 228,385 13.7
5 years up to 10 years 102,707 7.5 136,633 8.2
More than 10 years 232,273 17.1 282,654 17.0
1,365,040 100.0 1,664,341 100.0
22 Loans and receivables including insurance receivables
As at As at
31 December 2007 31 December 2006
$'000 $'000
Deposits with ceding undertakings 91,177 118,558
Debtors arising out of insurance operations 1,496 21,989
Debtors arising out of reinsurance operations 101,689 143,993
Amounts due from reinsurance operations not transferring significant - 66,293
risk
Accrued income (1) 42,805 49,282
Other prepayments 5,108 2,531
Other debtors 31,432 38,315
Total loans and receivables including insurance receivables 273,707 440,961
Current asset 49,182 63,710
Non-current asset 224,525 377,251
273,707 440,961
1 $31.8 million (31 December 2006: $35.2 million) of the renewal rights
sales are recorded as accrued income at the balance sheet date as disclosed in
note 5.
Loans and receivables including insurance receivables are recorded on the
balance sheet at amortised cost.
23 Deferred income tax
The following are the major deferred tax assets and liabilities recognised by
the Group and movements thereon during the current and prior reporting period:
Deferred tax assets and liabilities
Unrealised Depreciation US subsidiary Bonus and Total
gains on in advance of insurance pension accruals
investments capital transaction not currently
allowances timing deductible and
differences and other timing
losses differences
$'000 $'000 $'000 $'000 $'000
At 1 January 2006 - 989 (1,878) 8 (881)
Credit/(expense) to the income - 27 1,878 (11) 1,894
statement
Exchange differences - 138 - 3 141
At 1 January 2007 - 1,154 - - 1,154
Expense to equity (1,030) - - (1,030)
Credit/(expense) to the income (132) 1,030 - 898
statement
Exchange differences 12 - 12
As at 31 December 2007 (1,030) 1,034 1,030 - 1,034
Certain deferred tax assets and liabilities have been offset. The following is
the analysis of the deferred tax balances (after offset) for financial reporting
purposes:
As at As at
31 December 2007 31 December 2006
$'000 $'000
Deferred tax assets 1,034 1,154
Deferred tax liabilities - -
1,034 1,154
At the balance sheet date the Group has unrecognised deferred tax assets of
$66.5 million (31 December 2006: $47.8 million) in respect of tax losses carried
forward. The assets have not been recognised due to the unpredictability of
future profit streams.
At the balance sheet date, the Group has unused tax losses of $266.7 million (31
December 2006: $182.6 million) available for offset against future profits. Of
the losses at 31 December 2007 $62.6 million (31 December 2006: $24.6 million)
relate to the US, $151.0 million (31 December 2006: $140.5 million) relate to
the UK and $53.1 million (31 December 2006: $17.5 million) relate to
Switzerland.
US losses expire as follows: $21.7 million in 2026 and $40.9 million in 2027.
In the UK, tax losses are in part carried forward as disclaimed technical
reserves. UK losses have no expiry date.
Swiss losses of $53.1 million expire in 2011.
The deferred tax assets as at 31 December 2007 and as at 31 December 2006 are
non-current assets.
The deferred tax liabilities as at 31 December 2007 and as at 31 December 2006
are non-current liabilities.
The deferred income tax expensed to equity during the year is as follows:
Year ended Year ended
31 December 2007 31 December 2006
$'000 $'000
Revaluation reserve1 1,030 -
Hedging and translation reserve2 - -
1,030 -
1 The revaluation reserve is a component of shareholders' equity that is used
to record the difference between the market value of available for sale
investments carried on the balance sheet and the amortised cost of those assets.
Unrealised gains and losses arising when the market value is compared with the
amortised cost of the assets are taken to this reserve.
2 Movements in the unrealised gains and losses arising from the translation of
the Group's assets and liabilities denominated in functional currencies of the
Group are shown in the hedging and translation reserve. The hedging and
translation reserve is a component of shareholders' equity.
24 Cash and cash equivalents
Cash and cash equivalents are comprised of the following:
As at As at
31 December 2007 31 December 2006
$'000 $'000
Cash at bank and in hand 31,589 69,738
Short-term deposits with credit institutions 122,664 87,482
Total cash and cash equivalents 154,253 157,220
Cash and cash equivalents yielded an effective rate of interest of 4.3% in 2007
(2006: 5.2%).
25 Insurance and reinsurance contracts
Insurance and reinsurance contracts are comprised of the following:
As at As at
31 December 2007 31 December 2006
$'000 $'000
Gross claims outstanding
Provision for claims outstanding, reported and not 1,605,617 2,026,102
reported
Discount (67,541) (105,855)
1,538,076 1,920,247
Claims handling provisions 11,815 17,823
Total gross claims outstanding 1,549,891 1,938,070
Provision for unearned premiums on insurance contracts - 3,444
Total insurance contracts 1,549,891 1,941,514
Aggregate excess reinsurance
Provision for claims outstanding, reported and not 41,162 299,544
reported
Discount - (7,657)
Net aggregate excess reinsurance 41,162 291,887
Other reinsurance
Provision for claims outstanding, reported and not 508,651 573,216
reported
Discount (3,012) (2,665)
Net other reinsurance 505,639 570,551
Total reinsurance
Provision for claims outstanding, reported and not 549,813 872,760
reported
Discount (3,012) (10,322)
Total reinsurers' share of claims outstanding 546,801 862,438
Provision for unearned premiums on reinsurance - 1,037
contracts
Total reinsurance contracts 546,801 863,475
Undiscounted claims outstanding, net of reinsurance 1,067,619 1,171,165
Discount (64,529) (95,533)
Claims outstanding net of reinsurance 1,003,090 1,075,632
As at As at
31 December 2007 31 December 2006
Security held for aggregate excess reinsurance $'000 $'000
Deposits received from reinsurers 41,162 46,119
Trust fund and LOC collateral available against aggregate excess - 240,182
contracts
Total collateral available against aggregate excess reinsurance 41,162 286,301
recoverable
As at As at
31 December 2007 31 December 2006
$'000 $'000
Current assets 72,669 211,817
Non-current assets 474,132 651,658
Total reinsurance contracts 546,801 863,475
Current liabilities 424,653 697,937
Non-current liabilities 1,125,238 1,243,577
Total insurance contracts 1,549,891 1,941,514
Basis for establishing provision for claims outstanding
Loss reserves for reinsurance business are established based on claims data
reported to the Group by ceding companies supplemented with relevant industry
benchmark loss development patterns used to project the ultimate incurred loss.
Ultimate incurred loss indications are calculated by the Group's actuaries using
several standard actuarial methodologies including paid and incurred loss
development and the Bornhuetter-Ferguson incurred and paid loss methods.
The Group's actuaries utilise several assumptions in applying each methodology,
including loss development factors, expected loss ratios based on pricing
analysis, and actual reported claim frequency and severity. These reviews and
documentation are completed in accordance with professional actuarial standards
appropriate to the jurisdictions where the business is written. The selected
assumptions reflect the actuaries' judgement based on historical data and
experience combined with information concerning current underwriting, economic,
judicial, regulatory and other influences on ultimate claim settlements.
Based on the actuarial indications, the Group selects and records a single point
estimate separately for each line of business for each underwriting year. The
single point reserve estimate is management's best estimate which the Group
considers to be one that has an equal likelihood of developing a redundancy or
deficiency as the loss experience matures. On a quarterly basis the Group
analyses and records its loss reserve estimates across over 400 detailed lines
of business which reflect class of business, geographic location, insurance
versus reinsurance, proportional versus non-proportional, and treaty versus
facultative exposures. In addition, a limited number of the Group's largest
contracts are reviewed individually.
During the loss settlement period, additional facts regarding claims are
reported. As this occurs it may be necessary to increase or decrease the unpaid
losses and loss expense reserves. The actual final liability may be
significantly different to prior estimates. The Group reviews additional
reported claim information on a monthly basis. Actual claim experience is
compared to that expected from the most recent actuarial reserve review to
highlight significant variances. A complete actuarial analysis by detailed line
of business including selection of single point estimates is completed
semi-annually and is reviewed by the Group's management.
Underwriting year table
1999 and prior 2000 2001 2002 2003 2004 2005 Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Gross
Estimate of cumulative claims:
At end of
underwriting year 3,022,313 367,605 386,762 590,359 821,724 1,092,870 630,215 -
One year later 4,564,137 452,324 396,996 612,137 816,546 990,260 610,599 -
Two years later 4,710,816 485,269 417,049 611,228 794,346 883,970 616,375 -
Three years later 4,755,187 507,747 441,839 654,210 786,147 874,949 - -
Four years later 4,828,948 539,694 440,855 660,908 790,476 - - -
Five years later 4,874,927 550,212 459,255 655,037 - - - -
Six years later 4,883,595 563,532 467,672 - - - - -
Seven years later 4,893,658 560,023 - - - - - -
Eight years later 4,874,618 - - - - - - -
Estimate of
cumulative claims
as at 31 December 4,874,618 560,023 467,672 655,037 790,476 874,949 616,375 8,839,150
2007
Cumulative (4,623,090) (476,632) (391,183) (552,650) (578,367) (600,775) (385,598) (7,608,295)
payments
at 31
December 2007
251,528 83,391 76,489 102,387 212,109 274,174 230,777 1,230,855
Unearned element - - - - (17) - (75) (92)
of reserves at 31
December 2007
Earned non-life
reserves before 251,528 83,391 76,489 102,387 212,092 274,174 230,702 1,230,763
effect of
discounting as at
31 December 2007
Life and finite - - - - - - - 374,854
reserves as at 31
December 2007
Claims handling - - - - - - - 11,815
provisions as at
31 December 2007
Present value of - - - - - - - 1,617,432
reserves before
discount recognised
in the balance sheet
as at 31 December
2007
1999 and 2000 2001 2002 2003 2004 2005 Total
prior
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Reinsurance recoverable
Estimate of cumulative claims:
At end of underwriting
year 557,558 87,617 140,151 176,731 165,184 177,565 144,472 -
One year later 1,544,260 163,700 173,153 196,084 184,701 145,792 132,953 -
Two years later 1,662,449 156,068 177,605 211,944 190,173 137,365 128,042 -
Three years later 1,646,776 149,374 152,152 212,974 182,641 147,960 - -
Four years later 1,660,199 136,623 146,574 199,845 173,223 - - -
Five years later 1,684,626 130,220 157,163 181,349 - - - -
Six years later 1,667,762 130,984 157,466 - - - - -
Seven years later 1,669,539 128,163 - - - - - -
Eight years later 1,652,959 - - - - - - -
Estimate of cumulative
recoveries 1,652,959 128,163 157,466 181,349 173,223 147,960 128,042 2,569,162
at 31 December 2007
Cumulative recoveries
received at 31 December (1,538,292) (110,301) (147,733) (173,738) (135,848) (97,220) (93,305) (2,296,437)
2007
114,667 17,862 9,733 7,611 37,375 50,740 34,737 272,725
Unearned element of
reinsurance recoverable - - - - - - - -
at 31 December 2007
Earned net non-life
reinsurance recoverable 114,667 17,862 9,733 7,611 37,375 50,740 34,737 272,725
before effect of
discounting as at 31
December 2007
Life and finite - - - - - - - 277,088
reinsurance recoverable
as at 31 December 2007
Present value of - - - - - - - 549,813
reinsurance recoverable
before discount
recognised in the
balance sheet as at 31
December 2007
1999 and 2000 2001 2002 2003 2004 2005 Total
prior
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Net
Estimate of cumulative claims:
At end of underwriting
year 2,464,755 279,988 246,611 413,628 656,540 915,305 485,743 -
One year later 3,019,877 288,624 223,843 416,053 631,845 844,468 477,646 -
Two years later 3,048,367 329,201 239,444 399,284 604,173 746,605 488,333 -
Three years later 3,108,411 358,373 289,687 441,236 603,506 726,989 - -
Four years later 3,168,749 403,071 294,281 461,063 617,253 - - -
Five years later 3,190,301 419,992 302,092 473,688 - - - -
Six years later 3,215,833 432,548 310,206 - - - - -
Seven years later 3,224,119 431,860 - - - - - -
Eight years later 3,221,659 - - - - - - -
Estimate of net 3,221,659 431,860 310,206 473,688 617,253 726,989 488,333 6,269,988
cumulative claims at
31 December 2007
Net cumulative (3,084,798) (366,331) (243,450) (378,912) (442,519) (503,555) (292,293) (5,311,858)
payments at 31
December 2007
136,861 65,529 66,756 94,776 174,734 223,434 196,040 958,130
Unearned element of
reserves at 31 - - - - (17) - (75) (92)
December 2007
Earned net non-life
reserves before effect 136,861 65,529 66,756 94,776 174,717 223,434 195,965 958,038
of discounting as at
31 December 2007
Net life and finite - - - - - - - 97,766
reserves as at 31
December 2007
Claims handling - - - - - - - 11,815
provisions as at 31
December 2007
Present value of net - - - - - - - 1,067,619
reserves before
discount recognised in
the balance sheet as
at 31 December 2007
(1) In June 2000 the Group added a UK insurance and reinsurance license through
the acquisition of The Imperial Fire And Marine Company Limited ('Imperial')
(now called Alea London Limited). In acquiring this entity, the Group assumed
insurance and reinsurance liabilities relating to 1999 and prior underwriting
years written by Imperial. This explains the significant increase in cumulative
claims in respect of 1999 and prior underwriting years that occurs in the table
above between 31 December 1999 and 31 December 2000. The increase in gross
cumulative claims in respect of 1999 and prior as a result of the acquisition
was $1,620.2 million and the increase in ceded cumulative claims was $897.7
million.
(2) The underwriting year development table above includes all cumulative claims
in respect of underwriting years 1987 to 2005. It also includes 1986 and prior
underwriting year claims paid in calendar years 1999 to 2006, and the reserves
in respect of 1986 and prior at each balance sheet date from 1999 to 2006.
(3) The insurance and reinsurance claims outstanding carried in the balance
sheet of the Group include gross and ceded amounts in respect of Canadian
structured settlement life business. The gross and ceded amounts match exactly,
to leave no net liability. As these balances relate to life business they are
excluded from the underwriting year development table. Consequently, in order to
achieve reconciliation to the balance sheet gross and ceded claims outstanding,
they are added back in the table above. The amount as at 31 December 2007 was
$277.1 million (2006: $246.2 million).
26 Borrowings
The borrowings are repayable as follows: As at As at
31 December 2007 31 December 2006
$'000 $'000
On demand or within one year - 200,000
In the second year 30,000 -
In the third to fifth years inclusive - -
After five years 120,000 120,000
Total borrowings 150,000 320,000
Less: Capitalised debt raising expenses (2,215) (2,733)
Total borrowings net of capitalised expenses 147,785 317,267
Analysis of borrowings:
As at As at
31 December 2007 31 December 2006
$'000 $'000
Amounts owed to credit institutions 30,000 200,000
Trust preferred securities 120,000 120,000
Total borrowings 150,000 320,000
All borrowings are recorded at fair value. The directors consider the carrying
values disclosed above to be a reasonable approximation of the fair value at the
year end.
Conditions attaching to amounts owed to credit institutions as at 1 January 2007
The three-year bank term loan of $200.0 million (of which $150.0 million had
been drawn down) and the $50.0 million revolver carried an interest margin of
120 basis points, which was adjustable based upon the Standard and Poor's debt
ratings for Alea. The $50.0 million revolver facility was additionally subject
to a commitment fee of 40% of the applicable margin.
These borrowings fell due for repayment in September 2007. On 19 April 2007, the
Group repaid $25.0 million of the term loan and all of $50.0 million revolver
using its cash reserves, leaving an outstanding amount of $125.0 million.
Conditions attaching to the term loan agreed 6 July 2007
The Group drew down the maximum aggregate commitment under this new term loan
agreement of $90.0 million. This was due for repayment in three equal
instalments of $30.0 million on 16 October 2007, 14 January 2008 and 18 July
2009. However, the Group made an optional prepayment of $60.0 million on 18 July
2007. The remaining loan of $30.0 million was repaid on 14 January 2008. It
carried an interest margin of 200 basis points over LIBOR.
Trust preferred securities
Restructuring Provision
$'000
At 1 January 2006 17,562
Utilisation of provision due to onerous contracts (2,052)
Reversal of provision due to onerous contracts 1 (2,500)
Utilisation of provision due to severance payments (8,638)
Exchange difference 869
At 31 December 2006 5,241
Utilisation of provision due to onerous contracts (2,448)
Utilisation of provision due to severance payments (426)
Severance participation received due to sale of renewal rights 310
Exchange difference 160
At 31 December 2007 2,837
In December 2004, the Group issued $100.0 million of trust preferred securities
and had in place a commitment for an additional $20.0 million of trust preferred
securities issued in January 2005. These securities (issued from three Delaware
trusts established by Alea Holdings US Company, of which one trust was
established in January 2005) provide for a preferred dividend at a rate of three
month LIBOR plus 285 basis points. These securities allow for the postponement
of preferred dividends under certain circumstances for up to five years. These
securities carry no financial covenants and no cross default covenants, have a
fixed maturity of 30 years, and are callable after five years.
27 Provisions
1 As a result of Alea North America's sublease of its empty offices in
Wilton a reversal of the previously recognised provision for onerous contracts
has been made. The reversal is part of the restructuring costs presented in the
income statement.
For further details regarding the restructuring costs see note 6.
At 31 December 2007
Current liabilities 1,955
Non-current liabilities 882
2,837
At 31 December 2006
Current liabilities 3,433
Non-current liabilities 1,808
5,241
28 Other liabilities and charges
Deferred reinsurance Other accruals and Total
commission deferred income 1
$'000 $'000 $'000
At 1 January 2006 3,362 33,783 37,145
Change in the period (516) 4,782 4,266
Exchange difference - (457) (457)
At 31 December 2006 2,846 38,108 40,954
Change in the period (1,405) (6,550) (7,955)
Exchange difference - 236 236
At 31 December 2007 1,441 31,794 33,235
1 Includes regulatory levies of $4.7 million for Alea US (2006: $7.9
million).
At 31 December 2007
Current liabilities 29,119
Non-current liabilities 4,116
33,235
At 31 December 2006
Current liabilities 38,545
Non-current liabilities 2,409
40,954
29 Trade and other payables
As at As at
31 December 2007 31 December 2006
$'000 $'000
Insurance balance payable 9,340 7,109
Reinsurance balance payable 105,220 177,726
Deposits received from reinsurers 33,530 52,847
Reserves withheld creditors 42,048 47,004
Liabilities from reinsurance operations not transferring significant 230 67,342
risk
Other taxes and social securities 1,373 3,578
Total trade and other payables 191,741 355,606
Current liabilities 65,707 54,380
Non-current liabilities 126,034 301,226
191,741 355,606
30 Consolidated statement of changes in equity
Attributable to equity holders of the Company
Share Share Capital Revaluation Hedging and Retained Share Total
capital premium reserve reserve 1 translation earnings based
reserves 2 payment
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 1 January 2006 1,738 629,668 75,381 (23,697) 5,305 (204,974) 720 484,141
Loss of the period - - - - - (78,180) - (78,180)
Revaluation on available - - - 14,342 - - - 14,342
for sale investments -
gross
Revaluation on available - - - (1,030) - - - (1,030)
for sale investments -
tax
Movement in share based - - - - - - 146 146
payment reserve
Translation gains - - - - - 8,620 - - 8,620
gross
Translation gains - tax - - - - - - - -
As at 31 December 2007 1,738 629,668 75,381 (10,385) 13,925 (283,154) 866 428,039
Attributable to equity holders of the Company
Share Share Capital Revaluation Hedging and Retained Share Total
capital premium reserve reserve 1 translation earnings based
reserves 2 payment
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 1 January 2006 1,737 629,311 75,381 (12,671) (176) (204,139) 986 490,429
Issuance of shares 1 357 - - - - (358) -
Loss of the period - - - - - (835) - (835)
Revaluation on available - - - (11,026) - - - (11,026)
for sale investments -
gross
Revaluation on available - - - - - - - -
for sale investments -
tax
Movement in share based - - - - - - 92 92
payment reserve
Translation gains - - - - - 5,481 - - 5,481
gross
Translation gains - tax - - - - - - - -
As at 31 December 2006 1,738 629,668 75,381 (23,697) 5,305 (204,974) 720 484,141
1 The revaluation reserve is a component of shareholders' equity that
is used to record the difference between the market value of available for sale
investments carried on the balance sheet and the amortised cost of those assets.
Unrealised gains and losses arising when the market value is compared with the
amortised cost of the assets are taken to this reserve.
2 Movements in the unrealised gains and losses arising from the
translation of the Group's assets and liabilities denominated in functional
currencies of the Group are shown in the hedging and translation reserve.
31 Share capital
As at As at
31 December 2007 31 December 2006
Number $'000 Number $'000
'000s '000s
Authorised:
Common shares of $0.01 1,000,000 10,000 1,000,000 10,000
Total authorised 1,000,000 10,000 1,000,000 10,000
Allotted, called up and fully paid:
Common shares of $0.01 173,788 1,738 173,788 1,738
Total allotted, called up share capital and fully paid 173,788 1,738 173,788 1,738
32 Stock options and restricted shares
Bermuda Plan
Alea Group Holdings AG (a former Group company which was merged with Alea Europe
Ltd in 2005) had in place a stock purchase and option plan for key employees and
advisors known as the 1998 Amended and Restated Stock Option Plan for Key
Employees and Subsidiaries (the ''Swiss Plan''). The Company adopted a 2002
Stock Purchase and Option Plan for Key Employees of the Company and its
Subsidiaries, as amended (the ''Bermuda Plan''), in connection with the
re-domiciling of the ultimate parent company of the Group to Bermuda and all
awards under the Swiss Plan are now governed by the terms of the Bermuda Plan.
The terms of the Bermuda Plan are substantially similar to the terms of the
Swiss Plan. All Alea Group Holdings AG non-voting participation shares and
options were exchanged for common shares and options in connection with an
equity exchange offer that was completed on 3 April 2002. In total, 15,000,000
common shares are authorised for use under the Bermuda Plan.
The exercise price of the options will be the fair market value of the common
shares on the grant date. Generally, the options vest rateably over a five-year
period except in the case of performance options where vesting is affected by
attainment of certain pre-approved financial targets. The exercisability of the
options accelerates upon a change of control of the Group. Options expire and
are no longer exercisable on the tenth anniversary or in certain circumstances
at the end of the three month period following such tenth anniversary of the
grant date. The expiration of the options can accelerate due to termination of
employment. Certain options granted contain shortened expiration and vesting
periods.
The terms of the Company's common shares and the exercise price of the options
to acquire company common shares on the purchase/grant date were determined by
the Remuneration Committee in accordance with the terms of the Bermuda Plan. The
Bermuda Plan was terminated as to future grants with effect from 19 November
2003.
Executive Plan
The Company's shareholders have adopted the Alea Executive Option and Stock Plan
and the Alea Sharesave Plan ("Executive Plan"). The Executive Plan provides for
the grant of time and performance options, restricted stock units and share
savings for employees. The exercise price of options granted shall not be less
than the middle market quotation for the Company's shares on the dealing day
preceding the date of grant. The number of common shares granted in any period
under all of the Company's employee share schemes (excluding shares issuable on
exercise of options granted prior to 19 November 2003) may not exceed 10% of the
Company's issued ordinary share capital. Generally, the vesting period of an
option granted under the Executive Plan is subject to the discretion of the
Board (or a committee thereof) provided that vesting for certain tax qualified
options may not be earlier than 3 years or more than 10 years after the date of
grant and unless any relevant performance conditions have been satisfied.
Other
The company has issued to Fisher Capital Corp. LLC certain options to acquire
common shares, which are fully vested and are exercisable within 15 years of the
date of grant. In connection with a consulting agreement, the company has issued
restricted shares which are fully vested to Richard Delaney, a former director.
These shares and options were not granted pursuant to either Plan.
Transactions involving common share options are disclosed in note 33.
33 Share-based payments
Equity-settled share option plan
The Group plans provide for a grant price equal to the average quoted market
price of the Group shares on the date of grant. The vesting period is generally
5 years. If the options remain unexercised after a period of 10 years from the
date of grant, the options expire. Options are typically contractually forfeited
if the employee leaves the Group subject to certain exercise periods that apply
to vested options and to certain options granted in 2005 pursuant to the
Executive Plan.
Year ended Year ended
31 December 2007 31 December 2006
Number of Weighted Number of Weighted
options average options average
exercise price exercise
in $ price in $
Options outstanding at beginning of year 4,688,676 3.68 9,383,428 3.65
Options granted during the year - - - -
Options forfeited during the year (1,664,942) 3.78 (4,694,752) 3.95
Options exercised during the year - - - -
Options which expired during the year - - - -
Options outstanding at end of year 3,023,734 3.62 4,688,676 3.68
Options exercisable at end of year 2,509,850 3.56 3,153,866 3.59
No options were exercised during the year. The options outstanding at 31
December 2007 had a weighted average exercise price of $3.62 (2006: $3.68), and
the weighted average remaining contractual lives of those options are as
follows.
Year ended Year ended
31 December 2007 31 December 2006
Range of Weighted Number of Range of Weighted Number of
exercise Average share exercise Average share
prices Remaining options prices Remaining options
Contractual outstanding Contractual outstanding
Life Life
Options outstanding at end
of year divided into
meaningful ranges
Share options issued in $3.22 -$3.22 0.97 60,880 $3.22 -$3.22 2.04 142,660
respect of Alea Group
Holdings AG after repricing
Alea Group Holdings $3.22 -$4.30 3.09 2,266,844 $3.22 -$4.30 4.27 2,840,480
(Bermuda) Ltd options
granted pre - IPO
Alea Group Holdings $3.21 -$4.31 6.81 696,010 $3.21 -$4.31 7.95 1,705,536
(Bermuda) Ltd options
granted post - IPO
All options $3.21 -$4.31 3.91 3,023,734 $3.21 -$4.31 5.54 4,688,676
No options were granted during the twelve months ended 31 December 2007 (2006:
No options granted).
The Group recognised the following total expenses and repurchases in respect of
equity-settled share based payment transactions:
Year ended Year ended
31 December 2007 31 December 2006
'000 '000
Total expense recognised for the year arising from share-based 187 (86)
payment transactions that were recognised immediately as an
expense - (all are equity settled)
RSU expense charged in year (41) 178
Cash repurchases of vested options held by leavers - -
146 92
34 Cash used in operations
Year ended Year ended
31 December 31 December
2007 2006
$'000 $'000
Loss for the year (78,180) (835)
Adjustments for:
- tax expense/(credit) 100 (6,502)
- depreciation 2,534 4,142
Net cash flows for the period transferred to investing (55,380) (85,429)
activities
(Proft)/loss on sale of property, plant and equipment (16) 305
Net realised gains on sale of subsidiary - (4,336)
Debt interest expense 18,184 22,990
(Profit)/loss on foreign exchange (4,388) 1,500
Change in operating assets and liabilities (excluding the effect of acquisitions and
exchange differences on consolidation)
Net decrease in insurance liabilities (444,459) (979,468)
Net decrease in reinsurance assets 332,392 212,680
Net decrease in loans and receivables 179,495 364,831
Net decrease in other operating liabilities (191,192) (116,968)
Net movement in share based payment reserve 146 91
Cash used in operations (240,764) (586,999)
35 Contingent liabilities
Structured settlements
The Group, through the Canadian branch of Alea Europe Ltd, has assumed ownership
of certain structured settlements and has purchased annuities from life assurers
to provide fixed and recurring payments to those underlying claimants. As a
result of these arrangements, the Group is exposed to a credit risk to the
extent that any of these insurers are unable to meet their obligations under the
structured settlements. This risk is viewed by the Directors as being remote as
the annuities are fully funded and the Group has only purchased annuities from
Canadian insurers with a financial stability of AA or higher (Standard &
Poor's). The Canadian branch is in run-off and the branch discontinued accepting
assignments of annuities in August 2001.
In the event of all the relevant life insurers being unable to meet their
obligations under the structured settlements, at 31 December 2007, the total
exposure, net of amounts that may be recoverable from the Compensation
Corporation of Canada (a Canadian industry-backed compensation scheme), is
estimated to be 41.5 million Canadian Dollars ($41.6 million) and the maximum in
relation to any one insurer 18.6 million Canadian Dollars ($18.7 million).
Subpoenas and requests for information/regulatory matters
The US domiciled insurance members of the Group received certain subpoenas and
information requests with respect to the ongoing investigations by various
regulators and governmental authorities relating to industry-wide investigations
into US producer compensation practices and arrangements. In November 2004, Alea
North America Insurance Company ("ANAIC") received a subpoena from the Attorney
General of New York and, together with Alea North America Speciality Insurance
Company ("ANASIC"), received inquiries from the insurance departments of
Delaware and North Carolina. No allegations of wrongdoing have been made against
ANAIC, ANASIC nor any of their employees, nor does the Group have reason to
believe that any of them are specific targets of any investigation.
The Group has cooperated fully with these inquiries. After concluding their
internal investigations in connection with these matters, these member companies
have reported to these regulatory authorities that they have identified no
transactions or information causing concern, nor are they aware of any improper
conduct.
Certain members of the Group have received subpoenas and information requests
with respect to finite reinsurance from the US Securities and Exchange
Commission, the FSA, the Australian Prudential Regulatory Authority and the
Florida and Delaware state insurance authorities.
The Group has cooperated or is cooperating fully with each authority from which
it has received an inquiry and is aware of no improper conduct.
These industry-wide investigations, including certain of the investigations to
which the Group is a party, are ongoing and it is not possible to predict the
impact that these investigations, or any enquiries specific to the Group, may
have on the Group's current or future business and financial results. Moreover,
there can be no assurance that further investigations will not be initiated or
reopened in the future.
In connection with a periodic market conduct examination, the California
Department of Insurance has disputed certain fees collected from policyholders
by two agents of one of the Group's subsidiaries. The Group disagrees with the
Department's position, but is cooperating to audit these fee arrangements. The
agreements with the agents involved have been terminated. It is not possible to
predict the impact of this dispute on the Group's financial results.
Company contingent liabilities
In 2002 the Company entered into a top down guarantee with each of the Group's
rated insurance operating entities. These guarantees were in addition to the
pre-existing guarantees already in place between certain subsidiaries of the
Group. Subject to applicable corporate and regulatory requirements, the top down
guarantees required that the Company make funds available to the insurance
operating entities to allow the entities to fulfil their insurance or
reinsurance obligations to the client/customer incurred while the guarantee
remained in effect. The Group terminated all top down and other intra-Group
guarantees effective 30 November 2006.
36 Exposure to specific credit risk
Exposure to Lumbermens
In connection with the Group's acquisition of the Equus Re reinsurance division
of Lumbermens on 3 December 1999, Alea (Bermuda) Ltd and Lumbermens entered into
a 100% quota share reinsurance of the Lumbermens business written by Equus Re
through 3 December 1999 (namely, business written by Equus Re prior to the
Group's acquisition of the Equus Re operations). Lumbermens, in turn, provides
stop loss reinsurance to Alea (Bermuda) Ltd for losses in excess of a 75% paid
loss ratio on the same business incepting prior to 1 October 1999 (the
"Protected Business"). In addition to the Protected Business, the parties agreed
that the Group would write new and renewal business on behalf of Lumbermens (as
the reinsurer) up to 31 December 2001, which business is ceded by a 100% quota
share reinsurance to Alea (Bermuda) Ltd (the "Fronted Business"). Concurrent
with these arrangements, Lumbermens retained Alea North America Company ("ANAC")
as its agent to adjust and pay claims and collect premiums for both the
Protected Business and the Fronted Business.
The respective obligations of Alea (Bermuda) Ltd and Lumbermens noted above are
subject to contractual mutual offset provisions under the reinsurance agreements
and as permitted under Illinois law. Further, in respect of the Protected
Business, Lumbermens is contractually required to fund losses on its own behalf
once the 75% paid loss ratio is met. The Group's balance sheet therefore,
records (i) no net balance due from Lumbermens under the Protected Business, as
the 75% paid loss ratio was met in late December 2003 (specifically, $64.35
million due to and from Lumbermens), and (ii) as at 31 December 2007, an
aggregate balance due to Lumbermens under the Fronted Business and in respect of
business written by Equus Re between 1 October 1999 and 3 December 1999 of $39.2
million, after taking credit for amounts treated as paid for accounting
purposes.
As is required for credit for reinsurance purposes when cessions are made to
non-US licensed reinsurers, Alea (Bermuda) Ltd must collateralise its
obligations to Lumbermens. Pursuant to contract, the amount of posted collateral
is required to equal 120% of the estimated loss reserves, which based on the
above year-end balance due from Alea (Bermuda) Ltd would be approximately $47.0
million.
Alea (Bermuda) Ltd and Lumbermens continue to disagree over the level of
reserves requiring collateralisation. However, following commutations completed
in 2007 with Lumbermens with respect to certain ceding companies and a further
release of collateral at the request by Alea (Bermuda) Ltd, on 31 December 2007,
the posted collateral was reduced to $99.4 million (31 December 2006 $134.6
million). Either party may require an independent actuarial estimate of
applicable reserves to resolve their differences with regard to the required
collateral calculation. Neither party has required another independent reserve
estimate since the last independent reserve estimate dated as of 30 September
2004.
Lumbermens risk based capital level allows the Illinois Department of Insurance
to assume control of Lumbermens at its discretion. The mutual obligations of
Alea (Bermuda) Ltd and Lumbermens described above are subject to contractual
mutual offset provisions under the agreements and as permitted under Illinois
law. Accordingly, having taken legal advice, the Group believes that the Group
should not be exposed to material credit risk resulting from these arrangements
with Lumbermens. However, no assurance can be given that a court would uphold
these mutual offset provisions and contractual rights.
37 Related party transactions
Kohlberg Kravis Roberts & Co., L.P./Fisher Capital Corp. L.L.C.
At 30 June 2007, certain parties related to Kohlberg Kravis Roberts & Co., L.P.
owned in excess of 40% of the Company's issued shares. In connection with that
ownership, the Company had in place certain relationship, management rights,
shareholder and advisory fee agreements, as amended with Kohlberg Kravis Roberts
& Co., L.P., KKR 1996 Fund (Overseas), Limited Partnership, KKR Partners
(International), Limited Partnership and Fisher Capital Corp. L.L.C. These
agreements were further described in the Company's Listing Particulars dated 14
November 2003 and provided for annual advisory fees of $750,000 payable to
Kohlberg Kravis Roberts & Co., L.P., an affiliate of KKR 1996 Fund (Overseas),
Limited Partnership, a shareholder and KKR Partners (International), Limited
Partnership, also a shareholder and $350,000 payable to Fisher Capital Corp.
L.L.C., also a shareholder. In connection with negotiations pertaining to
acquisition of control of the Company by FIN Acquisition Limited, Kohlberg
Kravis Roberts & Co., L.P. and Fisher Capital Corp. LLC agreed to waive payment
of these fees for the period commencing 1 April 2007. These agreements were
terminated effective 5 July 2007 in connection with the acquisition of control
of the Company by FIN Acquisition Limited. As at 31 December 2007, Kohlberg
Kravis Roberts & Co., L.P. and Fisher Capital Corp. LLC had received $187,500
and $87,500 in advisory fees, respectively. As at 31 December 2007 the balance
due under these arrangements was $Nil (31 December 2006: $Nil). Certain of the
Company's former Directors held interests in these entities as described in the
Directors' Report included within the Annual Report 2006.
Fortress Investment Group
At 31 December 2007, certain parties related to Fortress Investment Group owned
72.40% of the Company's issued shares. Effective 1 October 2007 the Company put
in place an advisory fee agreement with FIG LLC, a Fortress affiliate
("Fortress"), under which the Company has agreed to pay Fortress $1,000,000 per
year, payable quarterly in arrears, for advisory services. At 31 December 2007,
Fortress had received $Nil. As at 31 December 2007 the balance due under these
arrangements was $250,000. The Fortress Directors' beneficial interests in
common shares of the Company as at 31 December 2007 were as follows:
Name of Director Number of common shares
Robert I Kauffman1 125,826,832
Randal A Nardone1 125,826,832
1 Robert Kauffman and Randal Nardone are members of the Joint Investment
Committee formed pursuant to the terms of a Joint Investment Committee Agreement
("JICA") by and among FIG Corp., Fortress Investment Group LLC (the direct
parent of FIG Corp. "Fortress"), Fortress Operating Entity I LP, Fortress
Operating Entity II LP, Messrs Kauffman, Nardone, Peter L. Briger Jr., Wesley R.
Edens and Michael R. Novogratz. Under the terms of the JICA, each other party to
the Joint Investment Committee Agreement has delegated all power to control, to
direct or to cause the direction of the management and policies of the Company
to Messrs Kauffman, Nardone and Edens. As such Messrs Kauffman and Nardone are
interested in the 125,826,832 common shares owned by FIN Acquisition Limited,
an indirect wholly-owned subsidiary of Fortress.
In connection with services involving potential acquisition opportunities in the
property and casualty insurance sector that may be performed by Mark Cloutier
and Kirk Lusk, these executive directors of the Company entered into a
consultancy agreement effective 1 October 2007 with Fortress Capital Finance III
(A) LLC, a Fortress affiliate, whereby each would be paid $2,000 per day spent
on such activities plus a discretionary bonus. At 31 December 2007, $Nil had
been paid or accrued under this arrangement.
Loans to officers
Loans to officers were offered in connection with their purchase of Company
shares and are interest bearing, full recourse and made on consistent terms as
those to other employees.
As at 31 December 2007 the Group had received repayment of all loans made to key
management personnel and had loans to key management personnel, in aggregate
principal amounts of $Nil (31 December 2006: $140,000). The number of key
management personnel that had outstanding loans at 31 December 2007 was $Nil (31
December 2006: 2). Key management personnel are as described below.
Appleby Hunter Bailhache
Timothy C Faries, a Director of the Company until 5 July 2007, is a partner and
the Insurance Team Practice Leader at Appleby Hunter Bailhache, Barristers &
Attorneys, in Bermuda. In 2007, from 1 January to 5 July the Company paid
$81,866 (2006: $49,338 from 1 January to 31 December) in respect of fees for
legal and corporate administrative services provided by Appleby Hunter
Bailhache. Mr Faries resigned as a director on 5 July 2007.
As at 31 December 2007 the amount outstanding was $Nil (31 December 2006: $373).
Key management personnel
The Group considers its key management personnel to include its Directors and
those members of management reporting directly to its Executive Directors that
have executive management responsibility for Group-wide operations.
Remuneration of key management personnel
The remuneration of the Directors and those members of management reporting
directly to its Executive Directors that have executive management
responsibility for Group-wide operations, who are the key management personnel
of the Group, is set out below in aggregate for each of the categories specified
in IAS 24 Related Party Disclosures. For the period ended 31 December 2007 this
included 14 individuals (2006: 13).
Year ended Year ended
31 December 2007 31 December 2006
$ $
Short-term employee benefits 6,512,367 3,190,672
Post-employment benefits 62,250 41,571
Other long-term benefits Nil 114,783
Termination benefits 127,244 2,244,314
Share-based payment Nil 171,830
Total 6,701,861 5,763,170
Key management personnel employment and retention contracts
Members of the Group have entered into employment and retention contracts with
Executive Directors and/or certain members of key management, in each case
taking into account the practices in the jurisdiction where the Group operates.
Compensation and termination benefits in the table above include amounts paid in
2006 and 2007 to Executive Directors and certain members of key management under
such contracts, to the extent not reported in earlier periods.
Share and loan transactions with members of key management
Kirk Lusk
Mr Lusk was granted a $49,998 loan in connection with the common share purchase
program, bearing interest at 4.1625% and repayable in instalments of 20% each 31
August, commencing in 2005. The Board approved a deferral of principal repayment
on Mr Lusk's loan in 2005. In October 2006, Mr Lusk paid the 2006 principal
instalment of $10,000 on this loan plus accrued interest of $2,118 through the
instalment payment date. In September 2007, Mr Lusk repaid the full principal
balance of his loan and accrued interest with the proceeds of the tender of his
shares to FIN Acquisition Limited.
Share and loan transactions with members of key management
Thomas Weidman
Mr Weidman was granted a $99,999 loan in connection with the share purchase
program, bearing interest at 3.7665% and repayable in instalments of 20% each 31
August commencing in 2006. The Board approved a deferral of principal and
interest on Mr Weidman's loan in 2006. Mr Weidman fully repaid the principal
balance of his loan plus accrued interest in July 2007 with the proceeds of the
sale of his shares of the Company. In accordance with the terms of his RSU
award, Mr Weidman was issued 6,543 RSU shares on 21 September 2006. In
connection with his separation arrangements, on 31 March 2007, Mr Weidman
forfeited his remaining 19,629 RSU shares.
Mark Ricciardelli
Mr M Ricciardelli received a loan of $375,000 in connection with his
purchase of pledged shares at a cost of $750,000 in March 2004 bearing interest
at 1 year LIBOR set on the funding date and reset annually on each anniversary
thereof.
In connection with Mr M Ricciardelli's separation arrangements, on 29 June 2006,
the Company agreed that it would vest all restricted stock units not already
vested and deliver the underlying shares (totalling 70,918 shares) to Mr M
Ricciardelli for sale. A portion of the proceeds of the sale of such shares,
together with the simultaneous sale of shares purchased in 2004 by Mr M
Ricciardelli (164,821 shares) were used to satisfy the balance of Mr
Ricciardelli's loan of $300,000 plus accrued interest of $13,360 through 31
August 2006, his last day of employment.
38 Retirement benefit scheme
Defined contribution schemes
The employees of the Group are covered by defined contribution schemes the costs
of which are charged to the income statement when incurred. The total cost of
retirement benefits for the Group in the year ended 31 December 2007 was $1.6
million (31 December 2006: $2.6 million).
39 Operating leases
At the following balance sheet dates, the Group was committed to paying total
future minimum lease payments under non-cancellable operating leases in each of
the following periods:
Year ended Year ended
31 December 2007 31 December 2006
Land and Other Total Land and Other Total
buildings buildings
$'000 $'000 $'000 $'000 $'000 $'000
- within one year 2,883 52 2,935 4,048 111 4,159
- between two and five years 5,758 2 5,760 5,561 29 5,590
- over five years - - - 189 - 189
8,641 54 8,695 9,798 140 9,938
The total of future minimum sublease payments expected to be received under
non-cancellable subleases at 31 December 2007 was $3.6 million (31 December
2006: $4.7 million).
The gross amount incurred under operating leases during the period ended 31
December 2007 was $5.2 million (31 December 2006: $4.9 million) before deducting
income receivable from subleases of $1.0 million (31 December 2006: $1.0
million).
40 Events after the balance sheet date
On 11 January 2008 the Group announced that it had reached agreement to fully
and finally commute all exposure under an excess of loss reinsurance treaty
effective 31 December 2007. Consequently, the Group has recorded an expense of
$8.8 million in the income statement for the year ended 31 December 2007 in
respect of this agreement. As the agreement was announced subsequent to the
balance sheet date, reinsurance recoverables totalling $41.2 million in respect
of this contract are still shown as a reinsurance contract asset in the balance
sheet, with a corresponding amount shown under reserves withheld creditors.
These corresponding balances of $41.2 million will be eliminated in the first
quarter of 2008.
41 Group subsidiaries
The consolidated financial information presents the financial record of the
Group for the years ended 31 December 2007 and 31 December 2006. A list of all
investments in Group subsidiaries, including the name and country of
incorporation is given below. All companies listed are wholly owned subsidiaries
of the Group and are fully consolidated into the Group accounts.
The ultimate parent company of the Group is Alea Group Holdings (Bermuda) Ltd.
Details of the Company's subsidiaries at 31 December 2007 are as follows:
Name of subsidiary Place of Proportion of Proportion of
incorporation (or ownership interest voting power
registration) and in % held in %
operation
Alea Europe Ltd Switzerland 100 100
Alea (Bermuda) Ltd Bermuda 100 100
Alea Holdings US Company USA 100 100
Alea North America Insurance Company USA 100 100
Alea North America Company USA 100 100
Alea Holdings UK Limited England and Wales 100 100
Alea London Limited England and Wales 100 100
Alea Services UK Limited England and Wales 100 100
Alea Services AG 1 Switzerland 100 100
AHUSCO Statutory Trust I USA 100 100
AHUSCO Statutory Trust II USA 100 100
AHUSCO Statutory Trust III USA 100 100
Alea Syndicate Management Limited England and Wales 100 100
Alea Corporate Member Limited England and Wales 100 100
1 IRM International Reinsurance Management AG changed its name to Alea
Services AG on 14 December 2006.
In 2006 the following five entities were liquidated: Alea Jersey Limited, Alea
Global Risk Limited, Alea Holdings Guernsey Limited, Alea Financial UK Limited
and Alea Technology Limited. Alea North America Specialty Insurance Company was
sold on 29 September 2006 as disclosed in note 10.
####
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DGGGFFVKGRZG
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