LONDON (Bloomberg) ? Shares of Alea Group Holdings Plc fell after the Bermuda-based reinsurer said profit dropped 47 percent in the first half as it boosted reserves. Alea plans to raise about $210 million in a share sale to prevent a cut to its credit rating.

Net income was $19.5 million under new International Financial Reporting Standards compared with $36.9 million a year earlier, the Hamilton, Bermuda-based company said yesterday. Alea said it added $34.7 million to reserves to pay for US and European claims.

?Results were overall poor,? Merrill Lynch & Co analyst Zenon Voyiatzis said in a note e-mailed to investors. ?We are surprised and disappointed by the charge given that it comes so soon after the major reserving review.? Merrill Lynch has a ?neutral? rating on the stock.

Alea plans to raise capital to avoid a cut to its financial strength and credit rating of A- from AM Best after the company set aside $93.7 million last year primarily for US professional liability claims in prior years. The company said it expects to insure less business in the second half after it lost clients following AM Best?s announcement in June that more capital was needed.

Alea?s shares fell 4.8 percent to 149 pence in London, their biggest drop since June 10, valuing the company at 253.2 million pounds ($455 million). The shares have lost more than 40 percent of their value since the company?s initial public offering in November 2003.

?The first half of 2005 has been one of challenge and change for Alea,? Chief Executive Mark Ricciardelli in a statement.

The combined ratio, or claims and expenses as a percentage of premiums, rose to 101.9 percent from 95.8 percent, indicating unprofitable underwriting. Gross written premiums fell 14 percent to $855.3 million, the company said. Premium rates for reinsurance business were flat or down as much as 5 percent, the company said.

Alea said it will cut costs, focus on global property coverage and is providing more insurance and less reinsurance as premium rates for reinsurance decline at a greater pace. Alea hasn?t formally appointed banks to advise on the share sale, which is likely to take place in the third quarter, Ricciardelli said.

Alea also said it was too early to assess the impact of Hurricane Katrina, which may cause claims for the industry of $25 billion, according to the storm modeler AIR Worldwide Inc. The windstorm Erwin in January caused losses of $18.5 million for Alea.

Alea?s shares have dropped 24 percent this year, making it the worst performer on the 19-member FTSE ASX Insurance Index, which has gained 15 percent.

?There?s a potential reward,? for buying the stock ?but there?s a potential risk that there will be some negative surprises,? Bridgewell Securities analyst Geoff Miller said. ?It?s an interesting play but you are backing the management to turn this business around.? He has a ?buy? rating on the stock.

Alea is 39 percent owned by New York-based buyout firm Kohlberg Kravis Roberts & Co., according to Bloomberg data.