Orascom Inv Regulatory News (OIH)

19 May 2011

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") for the period from 1 January 2011 to date.

Financial data reflects the quarter to 31 March 2011.

Highlights 

·; Group gross written premium in the first 3 months of 2011 totaled $129.5 million (2010: $124.5 million) in the following operating segments:

o Group premium participation on and reinsurance of Syndicate 958 increased 12.7% to $98.5 million (2010: $87.4 million)

o Omega Specialty, Bermuda reduced premium by 26.4% to $19.5 million (2010: $26.5 million)

o Omega US Insurance premium increased 8.5% to $11.5 million (2010: $10.6 million)

·; Net loss estimates for Q1 2011 catastrophes remain as previously announced

·; Net loss estimates from the 2010 catastrophes remain unchanged

·; Continued progress de-risking the business to protect shareholders' capital through reduction of property catastrophe treaty premium income (20.1% lower than 2010) and enhanced reinsurance protections

Commenting on the Group's performance, Richard Pexton, Chief Executive of Omega, said: 

"The first quarter of 2011 has experienced several tragic catastrophic events.

"Although these events resulted in large insured market losses, the related impact on Omega as a proportion of net tangible assets in 2011 compares favourably to our market peers. This demonstrates the continued de-risking of the business by the management team since its arrival in 2010.

"We now expect to see incremental rate increases throughout the year across most lines of business we underwrite".

Group gross written premium

Segmental and class of business gross written premium for the three months to 31 March 2011 and the corresponding period in 2010 was as follows:

Market Environment

A benign Atlantic hurricane season during 2010 resulted in continued overcapacity in the US catastrophe reinsurance market and rate reductions of approximately 5% were experienced in 1 January 2011 renewals. Pricing and renewals on the non-marine property insurance book remains flat. Our selective approach to underwriting, principally through the use of well-established binding authorities concentrating on small, commercial business which remains sheltered from aggressive competition has allowed us to protect these margins.

Premiums

Group Participation on and reinsurance of Syndicate 958

The Group's share of gross written premium from Syndicate 958 for the first three months of the year increased by 12.7% to $98.5 million (Q1 2010: $87.4 million) resulting from the additional group ownership of Syndicate 958 from the 2010 year of account. As planned, total business written by Syndicate 958 is not materially different to that written in the same quarter of 2010. Syndicate 958 capacity for the 2011 year of account is $420 million with an unchanged expectation of utilisation of 79% of capacity, which is attributable to the previously announced exit from the energy class of business and continued cycle management reflecting the current rating environment.

Omega Specialty, Bermuda

Gross written premiums for the first three months of the year were reduced by 26.4% to $19.5 million (Q1 2010: $26.5 million) demonstrating continued de-risking of the business including retrocessional exposures, in particular. We will continue to reduce catastrophe exposures as the wind season approaches, as early signs of the 1/6 and 1/7 renewals do not warrant continued current levels of capital allocation. The total estimated impact of this reduced underwriting is a reduction in full year net written premium for this segment of approximately $25 million compared to 2010.

In addition, a new more strategic reinsurance program has been placed with enhanced cover for the third party business written by Omega Specialty as well as the exposures from the 20% quota share of Syndicate 958.

Omega US Insurance

Gross written premium increased 8.5% to $11.5 million for the three month period (Q1 2010: $10.6 million). The rating environment in the US excess and surplus market remains challenging; therefore we will continue with our selective and profit-focused approach to underwriting, concentrating on steady growth whilst we wait for the market upturn. The business is well positioned for growth when rating conditions improve.

Claims

There were a number of tragic catastrophic events in the first quarter of 2011. These include the Japanese earthquake on 11 March, the earthquake in Christchurch, New Zealand on 27 February and floods in Brisbane, Australia in January. Our initial estimates of losses to the Group arising from these events remain at $23.6 million, $9.5 million and $7.6 million, respectively, net of reinsurance and reinstatement premiums. Our estimate of forgone managing agency profit commission associated with these events remains at $5.0 million.

Our estimates of the Group's losses from the 2010 catastrophic events also remain unchanged.

There is still uncertainty as to the ultimate cost of these events, and therefore our estimates may be subject to revision as loss notifications are received and information becomes clearer.

 Investment Return

The Group's investment return for the three month period to 31 March 2011 is 0.14%, reflecting our largely US dollar denominated portfolio and its high concentration in government bonds. These government bonds have rallied significantly subsequent to 31 March resulting in a significantly improved investment return in April and May. As previously announced we are continuing our strategy of cautiously diversifying the portfolio in order to protect returns should interest rates rise in the future.

Full Year Outlook

The Company's 2011 results will be significantly impacted by the 2011 catastrophe losses to date and clearly any further catastrophic events would have an effect on the Company's profitability. The underlying core book of business is expected to perform as in the prior year.

Update on Corporate Activity

As previously announced, Omega has received a number of approaches that may lead to an offer being made for the Company, and the Directors will continue to review these approaches in the context of the best interests of the business, shareholders and staff.

Enquiries:

David Coles, Head of Investor Relations, Omega 020 7767 3051

David Haggie/Juliet Tilley, Haggie Financial 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. 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.

Syndicate 958

Syndicate 958's capacity is $420 million for the 2011 year of account. The Syndicate has made an underwriting profit in every closed year of account since its inception in 1980. The Syndicate has focused predominantly on short-tail, diversified, property orientated insurance and reinsurance with a focus on small to medium-sized insureds.

Omega Specialty

In February 2006 Omega Specialty Insurance Company Limited ("Omega Specialty"), was established as a new insurance and reinsurance Bermuda based business. Omega Specialty received its licence from the Bermuda Monetary Authority as a Class 3 insurer and was subsequently reclassified as a Class 3B insurer. Omega Specialty's premium income has been 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 to be complementary to the Property Catastrophe business underwritten by Syndicate 958.

Omega US Insurance

In September 2006 Omega incorporated a new surplus lines insurer, Omega US Insurance, Inc. ("Omega US Insurance"), which is held under an incorporated intermediate holding company Omega US Holdings, Inc. 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 42 US jurisdictions (including on an admitted basis in Delaware) and applications are pending in further states. It was capitalised at US$50 million from the net proceeds of a share placing by OUH in October 2006.