Orascom Inv Regulatory News (OIH)

PRESS RELEASE

FOR IMMEDIATE RELEASE

17 November 2010

Omega Insurance Holdings Limited

Interim Management Statement

Omega Insurance Holdings Limited ("Omega" or "the Company"), the international insurance and reinsurance group, today announces its Interim Management Statement (IMS).

Highlights

·; 25% growth in the Group's gross written premium in the first 9 months of 2010 to $308.5 million (Q3 2009: $247.3 million) 

·; Group's share of gross premiums written by Syndicate 958 up by 34% to $206.4 million (Q3 2009: $153.7 million)

·; Gross written premium of Omega Bermuda unchanged at $67.0 million (Q3 2009: $66.6 million)

·; Gross written premium of Omega US up 30% to $35.1 million (Q3 2009: $27.0 million)

·; Net loss estimates for Chile earthquake, Deepwater Horizon unchanged

·; Net effect of the New Zealand earthquake approximately $7.0 million

·; Omega's share of Syndicate 958 increased by 1.7% to 40.5%

·; Investment return of 2.0%

·; Appointment of Geoffrey Johnson as a Non-Executive Director of the Omega Board

·; David Reed to be appointed as Managing Director of the managing agency (subject to regulatory approval)

·; Group's insurer financial strength ratings (IFSR) reaffirmed by AM Best

·; Significant progress on the operational and risk management infrastructure of the Group

Richard Pexton, Chief Executive of Omega, commented: 

"Despite the market losses incurred so far this year we expect competition and a benign hurricane season to exert further rating pressure. In this environment we will seek to maintain our selective and disciplined approach to underwriting and withdraw from business offering unattractive risk adjusted returns. Therefore, for the moment, we continue to be cautious and to ensure we are well positioned for an upturn in the market. In the meantime we are making significant progress in developing the operational and risk management infrastructure of the Group."

Group gross written premium

Segmental and class of business gross written premium for the nine months to 30 September 2010 and the corresponding period in 2009 was as follows:

Rating Environment

The market continues to soften in US property reinsurance classes. The absence of any significant industry losses during the Atlantic hurricane season will lead to further pressure on rates at the forthcoming January renewals. International catastrophe rates continue to fall despite the recent losses in Haiti, Chile, Australia and New Zealand. Loss affected areas have seen small rate increases but loss free zones have seen rate reductions of between 5-10%. Our strategy of maintaining underwriting discipline and protecting margins means we will contract our book where we believe pricing is too competitive relative to the underlying risk.

Competition is still intense for all classes of professional indemnity. Liability insurance and reinsurance pricing is steady with capacity still abundant although our long-term relationships and continuity have provided a level of protection against competition.

The UK motor insurance market has moved positively over the past nine months with rate increases seen in all areas. The motor reinsurance market, in which we operate, should see some of these benefits coming through over the next twelve months.

Syndicate 958

Overall Syndicate gross written premium has fallen compared with the same period of 2009, primarily due to reductions in the property treaty and property per risk reinsurance classes, which is in line with plan.

The Group's share of gross premium written by Syndicate 958 for the first nine months of the year is up by 34% to $206.4 million (Q3 2009: $153.7 million), compared with the same period in 2009. The Group is now benefiting from our capacity purchases in 2009, which increased our ownership of capacity on Syndicate 958 from 16.4% to 38.8% for 2010. We recently purchased a further 1.7% in the Lloyd's capacity auctions in September, bringing our ownership of Syndicate 958 up to 40.5% for the 2011 year of account. Together with quota share reinsurance, our economic interest in Syndicate 958 will be 52.4% for 2011. We expect the full effect of our increased ownership of Syndicate 958 to be felt in 2011 and 2012.

The business plan for Syndicate 958 for 2011 maintains underwriting capacity at $420m, the same as 2010. However our recent decision to exit from the direct energy market, together with a reduction in risk appetite elsewhere, has meant a material reduction in planned gross premium for 2011. This is consistent with our strategy of pulling back as the market deteriorates in order to protect returns.

The Board of the managing agency has recently reviewed their profit forecast ranges for the open years of account. The 2008 year of account range remains unchanged at 0 - 5% return on capacity. The range for the 2009 year of account has been reduced to 5 - 10%, from the previous range of 5 - 15%.

Omega Specialty, Bermuda

Gross written premium for the first nine months of the year is up by 1% to $67.0 million (Q3 2009: $66.6 million). The portfolio is predominantly a US catastrophe treaty business focused on small US regional cedants rather than nationwide accounts. The book is broadly flat for the year as we maintain underwriting discipline and protect profitability.

Omega US, Chicago

Gross premiums written by Omega US for the first nine months of the year are up by 30% to $35.1 million (Q3 2009: $27.0 million). Omega US writes commercial property and liability package business, where growth has been achieved via selective and targeted underwriting via a network of general agents. Omega US is now licensed in 42 states and continues to work towards obtaining licences in the remaining states.

The US excess & surplus market remains challenging but positive margins are still available for disciplined underwriters. In these conditions we will continue with our profit-focused approach, concentrating on steady growth and selectively expanding our network of general agents to position ourselves for an upturn in the market.

Claims

Net loss estimates for the Chile earthquake, Deepwater Horizon, Aban Pearl and US and Australian hailstorms remain in line with previously disclosed loss estimates.

The only significant loss event during the third quarter has been the New Zealand earthquake in September, which we have reserved for a loss of $6.2 million, $7.0m including profit commission effects. Our exposure to this event is through our international treaty reinsurance and direct property binder account.

Additional reinsurance was purchased in the Q3 to further reduce catastrophe exposures, in the light of the frequency of significant losses to date.

Investments

As at 30 September the Group had total cash and investments of $633.6 million, an increase of 1.9% on the half year and 3.8% on the full year 2009.

Our overall investment return for the first nine months of the year was 2.0% or 2.6% on an annualized basis. This compared to a half year return of 1.4% (2.9% annualized). Our investment strategy remains cautious being focused primarily on US Government securities and high quality corporate bonds. As a consequence, our return for the period remained relatively strong as a new round of quantitative easing by the US Federal Reserve continued to drive up the prices of US Government securities. Our corporate bond holdings also performed well over the quarter as investor fears over sovereign debt subsided resulting in a tightening of credit spreads.

Group investments, including the Group's share of Syndicate 958's investments, can be analysed as follows:

Corporate expenses

The Group incurred non-recurring costs of $3.2 million during the first half of the year, in relation to the Special General Meeting held in March. We have not incurred any similar costs during the third quarter.

Dividend

An interim dividend of US 6 cents per share was paid on the 1 October 2010 to shareholders on the register at 10 September 2010. Omega's dividend policy is to return a significant part of its profit to shareholders in the form of dividends. In making the decision as to the affordability of such a dividend, the Board takes into account the Group's current and anticipated future requirements. Notwithstanding the losses incurred by the Group during the year, absent any further significant loss events during the remainder of the year, and in light of the currently estimated capital position, we remain committed to maintaining the final dividend at a similar level to 2009. A further review of the capital requirements of the business is being undertaken by the Board during the fourth quarter.

Board and senior management changes

Geoffrey Johnson was appointed to the Omega Board in September as a Non-Executive Director and Chairman of the Group Audit and Investment committees. Geoffrey recently retired from PricewaterhouseCoopers after a forty year career during which he held senior management positions in the UK, Europe and globally.

In addition, (subject to regulatory approvals) David Reed will be joining the Group as Managing Director of the managing agency. David joins Omega from insurance broker, R K Harrison where he is the Chief Operating Officer. Previously David has held a number of underwriting and senior management roles in the Lloyd's insurance market.

Jonathan Betts stood down, as planned, as a Non-Executive director with effect from 16 November. The Board would like to thank Jonathan for his contribution over the last eight months.

Penny James, Chief Financial Officer, has informed the Board of her intention to resign from the Company to take up a new position as Director of Group Finance at Prudential plc. She will remain with Omega until March 2011 and will lead and complete the Company's 2010 financial reporting process before her departure. The Board would like to thank Penny for her valuable contribution to Omega's business and in particular the instrumental role she has played during a period of transition for the Company.

Operational progress

The Group has made significant progress in the quarter on reaching its objectives for operational improvement. A new underwriting IT system for the Syndicate was launched in October. Catastrophe modeling has also been introduced to help pricing and exposure management. As part of the group-wide Solvency II project extensive development work has been undertaken in the areas of risk management, financial reporting and actuarial modeling, We remain committed to meeting the Solvency II requirements and timetables set down by Lloyd's and the Bermuda Monetary Authority.

Enquiries:

Omega Insurance Holdings Limited

David Coles 020 7767 3051

Haggie Financial

David Haggie and Juliet Tilley 020 7417 8989

Notes to Editors

The Omega Group

Omega became the holding company of the Omega group of companies (the "Omega Group") on 9 November 2006 when the scheme of arrangement of Omega Underwriting Holdings PLC (the Omega Group's previous holding company and now wholly-owned by Omega) ("OUH") became effective. On the same date the Common Shares of Omega were admitted to trading on AIM, the admission of OUH's shares to trading on AIM was cancelled and OUH was re-registered as a private limited company.

On 7 July 2009, the common shares of Omega were admitted to the Official List of the London Stock Exchange and to trading on its main market for listed securities. On the same date, the admission of Omega's common shares to trading on AIM was cancelled.

The Omega Group, through its wholly owned subsidiary, Omega Underwriting Agents Limited, acts as a Lloyd's managing agent for Syndicate 958 and in February 2006 established a new insurance and reinsurance business, Omega Specialty Insurance Company Limited ("Omega Specialty"), based in Bermuda. In September 2006 Omega incorporated a new surplus lines insurer, Omega US Insurance, Inc. ("Omega US Insurance"), in Delaware which is held under a Delaware incorporated intermediate holding company Omega US Holdings, Inc.

Syndicate 958

Syndicate 958's capacity is $420 million for the 2010 year of account. The Syndicate has made an underwriting profit in every closed year of account since its inception in the 1980 year of account. The Syndicate has focused predominantly on short-tail, diversified property orientated insurance and reinsurance with a focus on small to medium sized insureds, with whom the Omega Group has built long-standing relationships.

On 10 September 2010, the A.M. Best Company, Inc. reaffirmed the Syndicate's Financial Strength Rating of 'A' (Excellent) and an Issuer Credit Rating of 'A+' (Excellent).

Omega Specialty

Omega Specialty received its license from the Bermuda Monetary Authority in February 2006 as a Class 3 insurer and was subsequently reclassified as a Class 3B insurer. Omega Specialty's premium income is predominantly derived from its reinsurance of Syndicate 958 and the Omega Group's Lloyd's corporate member, Omega Dedicated, together with its book of third party reinsurances where it seeks to underwrite business of a similar type and composition to be complementary to that underwritten by Syndicate 958.

On 10 September 2010, the A.M. Best Company, Inc. reaffirmed Omega Specialty's Financial Strength Rating of 'A-' (Excellent).

Omega US Insurance

Omega US Insurance is an insurance company licensed in the state of Delaware and underwrites on a surplus lines basis in other US States. Omega US Insurance is currently eligible to write business in 43 US jurisdictions (including on an admitted basis in Delaware) and applications are pending in further states. It was capitalised at $50 million from the net proceeds of a share placing by OUH in October 2006.

On 3 December 2007, Omega US Insurance received a Financial Strength Rating from A.M. Best Company, Inc. of 'A-' (Excellent). The rating was reaffirmed on 10 September 2010.