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Alea merges European and Bermuda operations

Run-off (re)insurer Alea Group has amalgamated its European and Bermudian subsidiaries and redomiciled Alea Europe from Switzerland into Bermuda.

Alea said it will maintain its presence in Switzerland through Alea Services - which will provide claims handling for the reinsurance reserves previously held by the main European subsidiary.

Outgoing group CEO Mark Cloutier - who earlier in the year confirmed he will step down by 31 March 2010 - said the streamlining of Alea's operations "should be viewed as the next logical step in our continuing efforts to more efficiently manage the group's capital".

The news comes after the discontinued (re)insurer sold its UK arm, Alea Holdings UK, to Bermudian Catalina Holdings in June this year, in a move that Cloutier said reduced the group's insurance contract obligations by $315.5mn.

Alea Group booked a hefty net loss of $44.7mn in the first six months of 2009, compared to a small profit of $819,000 in the first half of 2008.

The run-off (re)insurer is struggling with its investments in US mortgage-backed securities, which resulted in a $21.6mn charge. Last year, the group reclassified its portfolio of these distressed assets from investments available-for-sale into loans and receivables, carrying an amortised cost as at 1 July 2008 of $377mn which is to be spread out "over the life of the instruments using the effective interest method".

Nevertheless, Alea was able to make progress in managing the run-off of its liabilities, which decreased by 11.9 percent from $885.7mn at the end of 2008 to $780.5mn at 30 June 2009.

Furthermore, investment income was relatively stable against the prior-year period at $20.2mn, against $24.9mn for the first six months of 2008.

"As we move through the second half of the year we will work with regulators to see the successful completion of the sale of Alea Holdings UK and will remain diligent in our efforts to preserve and grow our capital, reduce expenses and liabilities, and explore further opportunities to realise and/or enhance the value of the group," Cloutier concluded.

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