Alea Group said it risks breaching a banking covenant after it forecast a net loss of $200m-$240m for 2005 as a result of run-off charges and storm losses.
The reinsurance group went into run-off as a result of the inability to attract a suitable volume and quality of business following the rating agency downgrades in the third and fourth quarters of 2005. As a result, it sees resulting charges of $95m-$105m in 2005.
The group said losses of $108m-$125m were also estimated from the impact of the hurricanes in 2005.
In an update, Alea said: "If the group's consolidated loss for the 2005 financial year is towards or above the higher end of the range estimated in this announcement the company will be in breach of a single financial covenant in its bank credit agreement."
Alea said its reserve development for 2005 was currently estimated at $95m after it experienced adverse conditions in the second half but it was still in the process of completion.
The group said it was still exploring sale options for all or certain parts of the business.
