Alea Group Holdings (Bermuda) Ltd.

London (OTS) -

Unaudited
Consolidated cash flow statement

Restated
Year ended Year ended
Notes 31 Dec 03 31 Dec 02
$'000 $'000
Net cash inflow
from operating activities 6 250,979 99,394

Servicing of finance
Interest paid (4,718) (6,530)

Taxation
Taxation (paid)/refunded (1,674) 1,222

Capital expenditure
Purchase of tangible assets (10,266) (9,237)
Proceeds on disposal of tangible assets 5,977

Financing
Issue of common share capital 291,968 7,092
Purchase of subordinated
preferred shares
issued by subsidiaries (42,500)
Receipt of cash from Capital
Enhancement Program 30,000
Capital raising expenses (23,723) (172)
--------- ---------
466,043 121,769
========= =========

Cash flows were invested as follows:
Increase/(decrease) in cash holdings 13,752 (3,243)

Net portfolio investments
Shares and other variable
yield securities (331) (704)
Debt securities
- unit trusts - Listed 6,973 6,978
Debt securities and other fixed income
securities 453,123 414,079
Deposits with credit institutions (7,474) (295,341)

--------- ---------
452,291 125,012
--------- ---------

Net investment of cash flows 466,043 121,769

========= =========

Unaudited

Notes to the Financial Statements

1. ACCOUNTING POLICIES

Basis of preparation

The financial information is prepared in accordance with applicable
United Kingdom accounting standards and under the historical cost
accounting rules as modified by the revaluation of investments. The
principal accounting policies, which have all been applied
consistently throughout the periods covered by this report with the
exception of the policy for the recognition of equalisation provision
explained below, and which comply with the recommendations of the
United Kingdom Statement of Recommended Practice on Accounting for
Insurance Business issued by the Association of British Insurers in
December 1998 (the ''ABI SORP'') are set out below.

The Company is a registered Bermuda company. As such it is obliged to
prepare its financial information in accordance with the Bermuda
Companies Act 1981, which permits the Company to prepare its
financial information under generally accepted accounting principles
of the United Kingdom (''UK GAAP''). Accordingly, the financial
information has been prepared in accordance with Bermuda Law and
under the historical cost accounting rules as modified by the
revaluation of investments.

This preliminary announcement does not constitute statutory accounts
for the financial year ended 31 December 2003. The auditors have not
reported on these accounts.

This preliminary announcement uses the accounting policies set out in
the Group's Listing Particulars except for the policy in respect of
employing the longer term rate of return for investments as
recommended for UK listed companies by the ABI SORP. This policy has
changed since the publication of the
Listing Particulars and details of the change are disclosed further
below.

The financial information in this preliminary announcement for the
year ended 31 December 2003 does not constitute statutory accounts
for that period but is derived from those accounts, which are
currently unaudited, and have been restated for the effects of the
change in accounting policy.

Basis of consolidation

The consolidated financial statements incorporate the financial
statements of the Company and all its subsidiary undertakings.

From 1 January 2001 to 26 February 2002 the parent company of the
Group was Alea Group Holdings AG, a company incorporated in
Switzerland. On 7 December 2001 the Company was incorporated in
Bermuda to become the new ultimate parent company of the Group. As at
31 December 2001 following a series of capital injections from
existing shareholders and share for share exchanges, certain
subsidiaries of Alea Group Holdings AG were partially owned by both
the Company and Alea Group Holdings AG, in varying percentages. Alea
Group Holdings AG remained the controlling entity as at 31 December
2001.

As at 26 February 2002 following completion of regulatory approvals,
Alea Group Holdings AG became a 94.49% subsidiary of the Company by
way of a share for share exchange and the Company became the new
ultimate parentcompany. Following the staff equity exchange becoming
effective on 3 April 2002, and certain repurchases from terminating
employees, the Company's interest in Alea Group Holdings AG increased
to 100%.

The above share for share exchanges qualify as a Group reorganisation
as the ultimate shareholders and their rights remained the same and
no minority interests have been affected. Accordingly, as permitted
under FRS 6 ''Acquisitions and Mergers'' this Group reconstruction
has been accounted for using merger accounting.

Change in accounting policies

The Group has determined that it is appropriate to record in the
accounts of the Group the claims equalisation provision established
by Alea London Limited. This is a change in accounting policy. The
Group has opted to comply with the ABI SORP recommendation for UK
listed companies of allocating investment return to the technical
account based on the longer term rate of return, which the Group has
selected as 4.5%. This is a change in accounting policy and has no
impact on the profit on ordinary activities after tax. The
cumulative effect of the prior year adjustments is shown in the
statement of total recognised gains and losses and detailed in note
4.

Unaudited

Notes to the Financial Statements

2. SEGMENTAL INFORMATION

Underwriting results by operating segment before intra-group quota
share arrangements

The Group's business is composed of four underwriting segments,
consisting of London, Alternative Risk, North America (treaty
reinsurance) and Europe.

The following tables summarise the underwriting results for the
Group's business segments as of and for the years ended 31 December
2003 and 31 December 2002. Net premiums written and net premiums
earned are presented prior to intra-group quota share arrangements,
the underwriting results are also stated before quota share
arrangements, and the impact of quota share arrangements on these
pre-quota segmental results is presented separately.

Year ended 31 London AAR North Europe Total
December 2003 America
$'000 $'000 $'000 $'000 $'000
Gross
Premiums 566,042 261,141 282,921 190,078 1,300,182
Written
Outwards (78,198) (129,172) (33,222) (30,879) (271,471)
reinsurance
premiums
-----------------------------------------------------------------
Net
premiums
written 487,844 131,969 249,699 159,199 1,028,711
------------------------------------------------------------------
Gross
premiums
earned 482,701 205,062 228,361 198,151 1,114,275
Net
premiums
earned 407,656 97,856 189,324 163,645 858,481
Allocated
investment
return 13,995 12,681 19,022 12,113 57,811

Claims
incurred,
net of
reinsurance (224,988) (70,556) (130,024) (103,082)(528,650)

Total net
expenses
comprise :
Acquisition
costs (92,521) (19,654) (55,268) (27,958)(195,401)
Administrative
expenses (32,122) (15,880) (20,984) (21,112) (90,098)
Fee income 1,654 - 545 165 2,364
Other
technical
charges (5,611) (24) (700) (12,669) (19,004)
Other
expenses (128,600) (35,558) (76,407) (61,574)(302,139)
-------- ------------ -------- -------- -------- --------
Under
writing
result(1) 68,063 4,423 1,915 11,102 85,503
========= =========== ======== ======== ======== ========

Restated
Year
ended 31 London AAR North Europe Total
December America
2002
$'000 $'000 $'000 $'000 $'000
Gross
Premiums
Written 376,428 141,394 257,377 156,432 931,631
Outwards
reinsurance
premiums (76,245) (66,767) (48,328) (32,059) (223,399)
----------
Net premiums 300,183 74,627 209,049 124,373 708,232
written
----------

Gross
premiums
earned 278,535 54,064 176,375 165,054 674,028
Net
premiums
earned 220,885 22,044 142,663 132,459 518,051
Allocated
investment
return 9,398 9,334 17,334 10,886 46,952

Claims
incurred,
net of
reinsurance (108,997) (14,344) (87,632) (110,881) (321,854)

Total net
expenses
comprise :
Acquisition
costs (49,694) (6,851) (44,904) (26,070) (127,519)
Administrative
expenses (30,572) (5,779) (21,076) (19,035) (76,462)
Fee income 5,807 228 - (364) 5,671
Other
technical
charges (5,965) (95) (611) (10,007) (16,678)
Other
expenses (80,424) (12,497) (66,591) (55,476) (214,988)
-------- --------- -------- -------- -------- --------
Underwriting
result (1) 40,862 4,537 5,774 (23,012) 28,161
========= ========== ======== ======== ======== ========

(1) Balance on the technical account for general business before
claims equalisation provision

Intra-group quota share arrangements

For the year ended 31 December 2002 and 31 December 2003 intra-group
quota share arrangements comprise of the following: a 35% quota share
of Alea London business to Alea Europe, a 50% quota share of certain
2000 and prior underwriting year business from Alea Europe to Alea
Bermuda, a 70% quota share of Alea North America to Alea Bermuda and
an intra-group aggregate excess contract from Alea Europe to Alea
Bermuda. The effect of all of these arrangements are detailed below :

Year ended London Bermuda US Europe Total
31 December $'000 $'000 $'000 $'000 $'000
2003

Net premiums
earned 407,656 2,520 284,660 163,645 858,481
Intercompany
reinsurance (142,397) 203,005 (197,151) 36,543 -
------- ------- ------- ------- -------
Net premiums
earned after
intercompany
reinsurance 265,259 205,525 87,509 300,188 858,481
Underwriting
result
Before
intercompany
reinsurance 68,063 (10,841) 17,180 11,101 85,503
After
intercompany
reinsurance 45,468 (5,046) (1,168) 46,249 85,503

Year ended London Bermuda US Europe Total
31 December $'000 $'000 $'000 $'000 $'000
2002
Net premiums
earned 220,885 85,325 79,382 132,459 518,051
Intercompany
reinsurance (75,604) 75,030 (55,567) 56,141 -
------- ------- ------- ------- -------
Net premiums
earned after
intercompany
reinsurance 145,281 160,355 23,815 188,600 518,051
Underwriting
result
Before
intercompany
reinsurance 40,862 9,143 1,168 (23,012) 28,161
After
intercompany
reinsurance 25,094 7,902 (2,566) (2,269) 28,161

Year ended Year ended
31 Dec 03 31 Dec 02
$'000 $'000
Gross premiums written
Insurance
Casualty 339,342 125,308
Property 92,226 69,963
Marine, aviation &
transport 88 (77)
Other 745 215
--------- ---------
Total insurance 432,401 195,409
--------- ---------

Reinsurance
Casualty 584,463 365,182
Property 232,198 294,760
Marine, aviation &
transport 32,414 54,709
Other 18,706 21,571
--------- ---------
Total reinsurance 867,781 736,222
--------- ---------
Total 1,300,182 931,631
========= =========

Year ended Year ended
31 Dec 03 31 Dec 02
$'000 $'000

Gross premiums earned
Insurance
Casualty 243,787 57,353
Property 82,466 50,950
Marine, aviation &
transport 88 394
Other 619 665
--------- ---------
Total insurance 326,960 109,362
--------- ---------

Reinsurance
Casualty 481,901 285,193
Property 250,377 210,055
Marine, aviation &
transport 40,176 48,853
Other 14,861 20,565
--------- ---------
Total reinsurance 787,315 564,666
--------- ---------
Total 1,114,275 674,028
========= =========

Year ended Year ended
31 Dec 03 31 Dec 02
$'000 $'000
Net premiums written
Insurance
Casualty 432,537 55,925
Property 64,311 59,163
Marine, aviation &
transport 88 (67)
Other 649 131
--------- ---------
Total insurance 497,585 115,152

--------- ---------

Reinsurance
Casualty 288,674 305,024
Property 207,047 225,375
Marine, aviation &
transport 16,242 40,333
Other 19,163 22,348
--------- ---------
Total reinsurance 531,126 593,080
--------- ---------
Total 1,028,711 708,232
========= =========

Year ended Year ended
31 Dec 03 31 Dec 02
$'000 $'000
Net premiums earned
Insurance
Casualty 108,613 29,927
Property 69,703 41,777
Marine, aviation
& transport 88 491
Other 523 581
--------- ---------
Total insurance 178,927 72,776
--------- ---------

Reinsurance
Casualty 426,111 239,817
Property 213,541 150,065
Marine, aviation &
transport 24,600 34,235
Other 15,302 21,158
--------- ---------
Total reinsurance 679,554 445,275
--------- ---------
Total 858,481 518,051
========= =========

3. EARNINGS PER ORDINARY SHARE

Basic earnings per ordinary share is based on the profits after tax
and the weighted average ordinary shares in issue as follows :

Year ended Year ended
31 Dec 03 31 Dec 02
Number Number

Weighted average ordinary
shares in issue 114,269,807 105,872,303
Fully diluted number of shares 116,266,620 107,965,776

Operating earnings per ordinary share based on the investment income
are shown because it is considered to be a more appropriate measure
of operating performance than earnings per share including short term
fluctuations in investment return. Furthermore, as detailed in the
note relating to prior year adjustments, transfers to or from claims
equalisation provision are transfers to or from a statutory reserve
and not a deduction or credit in arriving at operating profit. The
gain on the purchase of subordinated preferred shares issued by
subsidiaries has also been excluded in calculating operating profit.

The Company has re-denominated the Swiss Franc 110.79 option price to
$64.41 for all options issued at that strike price (CHF 5.54 and
$3.22, respectively after adjustment for the bonus share grant,
comparable to a 20:1 stock split). The Company reports in United
States Dollars and the original Swiss Franc price was retained only
as a result of the original status of the parent company (AGHAG)
before the establishment of the new Bermudan ultimate parent company
Alea Group Holdings (Bermuda) Ltd. The impact of converting the Swiss
Franc options to United States Dollars options does not change the
fully diluted earnings per share and reduces the fully diluted
operating earnings per share in 2003 from 55 cents to 54 cents per
share.

The reconciliation between earnings per ordinary share and operating
earnings per ordinary share is as follows:

Restated
Year ended Year ended
31 Dec 03 31 Dec 02
$'000 $'000

Profit for the financial year attributable
to equity shareholders 48,510 54,579
--------- ---------

Less Gain on purchase of
subordinated preferred 7,500 -
shares issued by subsidiaries
Short term fluctuations in
investment return (22,477) 33,322
Movement in claims equalisation (3,771) (2,368)
provisions --------- ---------
(18,748) 30,954
Tax thereon 4,251 (1,989)
--------- ---------
(14,497) 28,965
--------- ---------
Operating profit after tax 63,007 25,614

Earnings per share - basic ($) 0.42 0.52
Earnings per share - fully diluted ($) 0.42 0.51
Operating earnings per share - basic ($) 0.55 0.2
Operating earnings per share
- fully diluted ($) 0.54 0.24

4. PRIOR YEAR ADJUSTMENTS

Reinsurers' share of technical provisions - claims outstanding -
aggregate excess reinsurance

As part of the Listing process the Group reviewed the application of
the deficit payback provisions of each of the Inter-Ocean Adverse
Development cover, the Inter-Ocean Aggregate Excess Cover and the OPL
Adverse Development Cover and determined that the previous financial
statements made a fundamental error in that they did not fully
reflect the consequences of the deficit payback and
commutation/termination provisions of the contracts. Accordingly
reinsurance recoverables were reduced by $24 million in respect of
the 2000 annual financial result and by $6 million in respect of the
2001 annual financial result. These amounts have been accounted for
as prior year adjustments in these financial statements.

Claims equalisation provision

Also as part of the Listing process the Group has determined that it
is appropriate to record in the accounts of the Group the Claims
Equalisation Provision established by Alea London Limited. This
change in accounting policy has been accounted for as a prior year
adjustment.

A claims equalisation provision for the UK subsidiary has been
established in accordance with Chapter 6 of the Interim Prudential
Sourcebook for UK Insurers (prior to 1 December 2001, the
requirements of the Insurance (Reserves) Act 1995 and the Insurance
Companies (Reserves) Regulations 1996) for the purposes of mitigating
exceptionally high loss ratios in future years. The amounts provided
are not liabilities because they are in addition to the provisions
required to meet the anticipated ultimate cost of settlement of
outstanding claims at the balance sheet date.

Longer term rate of return

The Group has chosen to allocate investment income to the technical
account from the non-technical account using the longer-term rate of
return as recommended for listed companies per the ABI SORP. As this
is a reallocation of the investment return within the Profit and Loss
Account it has no impact on prior year reserves.

The impact of the change in accounting policy and the other prior
year adjustment is as follows:

Year ended Year ended
31 Dec 03 31 Dec 02
$'000 $'000

Profit on ordinary activities after tax under
previous accounting policy 43,650 56,238
Change in the claims equalisation provision (3,771) (2,368)
Tax credit 1,131 709
-------- --------
(2,640) (1,659)
-------- --------
Restated profit on ordinary activities after 41,010 54,579
tax ======== ========

Shareholders' funds attributable to equity
interests as previously reported 728,042 442,198
Net effect of the change in accounting policy
as above (2,640) (1,659)

Prior year adjustment - reinsurers' share of
technical provisions - claims outstanding -
aggregate excess reinsurance - (30,000)
-------- --------
(2,640) (31,659)
-------- --------
Restated shareholders' funds attributable to
equity interests 725,402 410,540
======== ========
Profit and loss account as previously reported 17,598 (18,628)
Net effect of the change in accounting policy
as above (2,640) (1,659)

Prior year adjustment - reinsurers' share of
technical provisions - claims outstanding -
aggregate excess reinsurance - (30,000)
-------- --------
(2,640) (31,659)
-------- --------
Restated profit and loss account 14,958 (50,287)
======== ========

Part 7 follows

Rückfragehinweis:
Alea +44 20 7621 3333
Dennis Purkiss,
Chief Executive +41 41 767 0401
Amanda Atkins,
Finance Director

Financial Dynamics
Robert Bailhache +44 20 7269 7200
Charles Armitstead +44 20 7269 7182

OTS-ORIGINALTEXT UNTER AUSSCHLIESSLICHER INHALTLICHER VERANTWORTUNG DES AUSSENDERS | EUN

print