Bermuda-based Alea Group Holdings Ltd., a reinsurer that raised $263.7 million in an initial share sale in November, said profit fell 11 percent last year after unrealised losses on investments. Its shares fell as much as 5.1 percent.

Net income in 2003 fell to $48.5 million, or 42 cents a share, from $54.6 million, or 51 cents, in the year before, chief executive Dennis Purkiss said in a telephone interview. The company aims to begin paying a dividend this year.

Earnings were pulled lower by a $17 million unrealised loss on bond investments compared with a $33.9 million profit on investments the year earlier. The insurer, which is 38 percent owned by Kohlberg, Kravis Roberts & Co., said it has had a ?conservative? investment strategy since selling its equity portfolio in May 2000.

?The investment losses in the bond portfolio? were worse than expected, said Zenon Voyiatzis, an analyst at Merrill Lynch & Co. who has a ?buy? rating on the stock. Merrill managed the sale of shares in the IPO with Goldman Sachs Group Inc.

The unrealised loss has been reversed this year, chief financial officer Amanda Atkins said in a telephone interview.

Mr. Purkiss said the reinsurance market is experiencing a decline of as much as 15 percent in property catastrophe reinsurance premium rates.

Alternative risk business and some casualty insurance business is ?still ahead of inflation,? he said.

Alea has a ?positive outlook across all business lines,? it said in a UK Regulatory News Service statement.

Operating profit in 2003 jumped to $80.8 million from $21.6 million. Gross written premiums rose to $1.3 billion from $931.6 million.

?Our targeted growth segments in the United States and Europe produced excellent results in 2003 and have continued to remain strong during the important January renewal period,? chairman John Reeve said in the statement.

The company last year moved away from unprofitable marine underwriting and used most of the IPO proceeds expand its US business. Alea?s activity in the US and Europe includes alternative risk transfer, or the use of capital markets to cover property and aviation risks.

The company?s combined ratio, or expenses and claims as a percentage of premiums, fell to 94.9 percent, from 100.7 percent.

?The operating earnings and combined ratio were better than expected,? said Merrill?s Voyiatzis. The reinsurer won?t pay a dividend for 2003, which it had indicated at the IPO was its plan. It aims to pay out about 10 cents a share for this year.

New York-based Kohlberg, Kravis Roberts is the world?s biggest buyout firm.