LONDON (Reuters) - Reinsurer Alea Group Holdings (ALEAq.L: Quote, Profile, Research) said on Monday it expected to post a net loss for 2005, but said it remained in sale talks with potential bidders for all or parts of its business.

The firm, which dropped plans for a $210-million fundraising in September after its financial strength rating was cut by agency A.M. Best, upped its pretax loss forecast from Hurricane Katrina to between $55 million to $70 million, net of reinsurance and including reinstatement premiums.

The company said it expected a pretax hit of $5 million to $10 million from Hurricane Rita, and another $10 million to $12 million in losses from floods in Europe, also net of reinsurance and including reinstatement premiums.

Alea shares were listed in November 2003 at 250 pence each, but the company has been dogged by a string of disappointing earnings mainly due to a series of charges to bolster its claims reserves.

Numis Securities forecast the company would post a net loss of 13.5 million pounds for the year, but said this was likely to increase further due to claims from Hurricane Wilma, which will be included in the fourth quarter figures. It kept its "sell" recommendation on Alea shares with a price target of 95 pence.

Alea said it was still pursuing strategic alternatives including the sale of the group or specific businesses, and said due diligence and talks with potential suitors were continuing.

But the company cautioned that the talks may not result in a deal or that a sale could be achieved at or above the current market price, a sentiment echoed by analysts.

Numis Securities said in a note that it regarded the prospects of a sale as being low. The appetite of potential buyers is likely to have been diverted by more attractive opportunities arising out of the hurricane losses," it said.

As part of a plan to salvage the company, Alea's executives announced in August a shift in the company's underwriting focus to property insurance, away from volatile liability reinsurance.

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