Gilles Meyer, chief executive of Alea Europe, said the company could be an attractive buy for a Bermudian or American company after a ratings downgrade plunged the Bermuda-based company?s future into doubt.

Alea?s recent downgrade to BBB+ from A- by Standard & Poor?s isn?t a reflection of its capitalisation and the company will continue to fight to keep its business alive, Mr. Meyer told Reactions, in defence of the company.

?Even though our performance has not been excellent, we have not been making losses. We have made a profit for the past three years; our claims paying ability is good and our capitalisation is very good.?

Alea made a $52.6 million pre-tax profit in 2002; a $54.5 million profit in 2003; a $10.9 million profit in 2004 and a $25.9 million profit in the first half of 2005. Its plight has attracted comparisons with Scor and Converium, which were also downgraded to the triple-B range at this time of year in 2003 and 2004 respectively. But both companies also posted big losses just before they were downgraded.

?We are a very different animal from these companies,? Mr. Meyer said.

S&P?s concerns about Alea revolve around its operating performance. This includes its strategy of writing less casualty reinsurance, which S&P says will make it less diversified, and a poor combined ratio, which has been hit by reserve hikes. Alea?s combined ratio was 101.9 percent (indicating unprofitable underwriting) in the first half of the year. It hopes it can retain its clients despite the S&P rating.

Alea had been planning a $210 million rights issue to shore up its capital base. The capital injection was meant to ward off concerns that rating agency A.M. Best had with its capitalisation, rather than to do with S&P?s concerns. The capital raising was designed to prevent a downgrade.

But S&P?s downgrade has now put Alea in a difficult position with two main options left open to it. It could continue with the rights issue. Or it could try and find a buyer. Mr. Meyer says Alea?s senior management is exploring both alternatives. He believes the company would make be an attractive acquisition for a Bermudian or US company looking for a presence in Europe.

?The downgrade creates a market issue for us but we do not have financial problems.?

He points to the company?s portfolio of small and mutual cedants in Europe, managed by local teams as being one attraction for a would-be buyer. Its focused portfolio in the core markets of Germany, Austria, France, Belgium and Switzerland is another. And its profitable and non-volatile portfolio, as well as its position as leader on many treaties, is a third.

?An alignment of interests could certainly be achieved with the right company,? he said.

?It would be an attractive way of moving into Europe.? Mr. Meyer also believes Alea has a good chance of retaining business and clients if it remains independent. He believes most European cedants, which represent the biggest portion of its reinsurance portfolio, will stick with the company. He adds that A.M. Best still rates the company A-, which may appease some cedants.

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