Novae Group Regulatory News (NVA)

31 Jul 2006 10:01

Novae Group PLC31 July 2006 NEWS RELEASE 31 July 2006 For immediate release Novae Group plc Q2 syndicate forecasts, current trading and business planning for 2007 Novae Syndicates Limited (formerly SVB Syndicates Limited), the Lloyd's managingagency owned by Novae Group plc, today announces updated quarterly forecasts forits managed syndicates for the 2004 and 2005 Years of Account, and also for the2002 and prior run off years. • 2004: forecast ranges unchanged • 2005: ranges narrowed within previous forecasts, including the planned transfer of business to the Group's new insurance company from Syndicate 2147 • 2002 run off year: forecast ranges unchanged • Estimated £5 million utilisation of exceptional provision in Q2, making £7 million for the half year (H1 2005: £13 million), leaving £20 million available to be carried forward • Overall rate increases averaged 3% for the half year (after allowing for assumed claims inflation). 2004 Year of Account Syndicate Capacity Owned by Novae Current Previous £m (%) forecast % forecast % 2147 286.4 100.0 6.0 - 11.0 6.0 - 11.0 1007 215.6 80.5 7.5 - 12.5 7.5 - 12.5 Syndicate 2147's net incurred loss ratio after 30 months is 55% (2003: 32%;2002: 44%). This reflects the impact of five major windstorms in 2004 and somemodest impact from 2005 windstorms. The forecast range is unchanged. Syndicate 1007 with its Specialty lines focus is longer tail in nature, butexperience remains encouraging. The net incurred loss ratio at 30 months is 22%(2003: 12%; 2002: 23%). As previously reported, lower utilisation of stampcapacity for this year depresses the return on capacity. The forecast range isunchanged. 2005 Year of Account Syndicate Capacity Owned by Novae Current Previous £m (%) forecast % forecast % 2147 286.0 100.0 (12.5) - (7.5) (15.0) - 0.0 1007 151.0 81.6 10.0 - 15.0 7.5 - 15.0 As stated at the year end, the severity of windstorm losses in 2005 is expectedto result in Syndicate 2147 reporting a loss for 2005. Now that some businesswill be transferred from the syndicate to Novae Insurance Company Limited("NICL"), the range has been narrowed appropriately. The net incurred loss ratioafter eighteen months is 107% (2004: 33%; 2003: 15%). For Syndicate 1007 the net incurred loss ratio at 18 months is 8% (2004: 12%;2003: 3%). This represents an early stage of development, but currentperformance is encouraging. 2002 Run Off Year of Account Syndicate Capacity Owned by Novae Current Previous £m (%) forecast % forecast % 1007 150.8 55.4 (20.0)-(10.0) (20.0)-(10.0) 1241 168.9 99.7 (95.0)-(75.0) (95.0)-(75.0) The generally quiet underlying claims experience seen in Q1 continued into Q2. There was further utilisation of the exceptional provision during the secondquarter of approximately £5m, in part reflecting two large contract lossreviews. In the first half of 2006 as a whole utilisation of the exceptionalprovision totalled £7million (H1 2005: £13 million). Such is the nature of the business written, in particular during the 1997 - 2000years, that material uncertainty remains; but, two years after the provision wasset, £20 million remains available to be carried forward against futurepotential reserve deterioration. Current trading and business planning for 2007 During the first half of 2006 rate increases across all classes of businesstransacted by Novae (after allowing for assumed claims inflation) averaged 3%.These rate changes are broadly consistent with indications provided earlier thisyear. Looking further forward we are conscious of the length of time that therating environment has now remained favourable, and we remain vigilant in ourplanning process. Our business plans for 2007 assume the merger of our Lloyd's business into onesyndicate with capacity of £360 million, identical to the combined capacity ofthe two syndicates managed in 2006. Current plans imply approximately 80%utilisation of this capacity. This reflects a cautious planning dispositionwhile providing flexibility to respond to market conditions. Our insurance company (NICL) began writing business in July, having securedregulatory approval from the FSA and an A- Rating from AM Best. NICL'sopportunity in the UK regional commercial lines market was set out in theprospectus published in March 2006. Excluding acquisition costs it is expectedto write just over £60 million of premium income in 2007, representingapproximately 15% of the Group's overall premium income. Some information extracted from the Syndicate Business Forecast submitted toLloyd's can be found on the company's website www.novae.com. For further information: Matthew Fosh - Novae Group plc 020 7903 7300 Nick Miles - M:Communications 020 7153 1535 This information is provided by RNS The company news service from the London Stock Exchange