Orascom Inv Regulatory News (OIH)

20 Oct 2008 07:00



Omega Insurance Holdings Limited

Market Update

Omega Insurance Holdings Limited ("Omega") is today providing guidance to shareholders on the implications of both hurricane activity and the turmoil in the financial markets for our full year 2008 result and opportunities beyond.

Hurricanes

Hurricane Ike, though officially a category 2 hurricane, was exceptionally large in its area of coverage and as a result created an overall level of damage more usually connected with a more powerful storm, progressing from Texas on 13 September 2008 as far north as Ohio. Hurricane Gustav, which made landfall on 1September 2008 in Louisiana, was a less damaging storm. Modeling agencies estimated the level of insured losses from both hurricanes together to be between $11 billion and $19 billion for the combined onshore and marine energy offshore losses. Based upon information that Omega is receiving from insureds, cedants, brokers and agents, it seems most probable that the losses will ultimately be materially larger than these figures.

The overall impact to Group earnings from these two events is estimated to be $34 million, of which $8 million relates to marine energy offshore losses. Whilst it is still too early to have definitive information on claims, Omega has established prudent and realistic reserves for these events, using the intelligence it has gained from its clients and intermediaries and employing a conservative approach consistent with the well-tested methodology of the Group's historic reserving practices for major events.

At both a Syndicate and a Group underwriting level we benefit from a comprehensive reinsurance programme including aggregate whole-account reinsurance protections, which means that any increase in the gross cost of these losses, or further claims events in 2008, should be recoverable from third party reinsurers. 

Taking into account reserve levels for Hurricanes Gustav and Ike, and given a normal claims progression from this point, Syndicate 958 is estimated to produce a profit for the 2008 year of account.

Investments

The Group and Syndicate adopt a low risk approach to their investments with portfolios limited to exclusively to cash, treasuries and high grade corporate bonds. The absence of equities, hedge funds and mortgage backed securities has protected Omega from the worst of the volatility in the financial markets. 

Omega has not had to significantly write down the value of any holding. Minor value deterioration on the corporate bond portfolio as yield spreads have widened in the quarter has been offset by the strong performance of treasuries. As a result Omega is showing a positive investment return for the quarter giving a year to date return at 30 September of 2.7%.

Outlook

Omega believes that, taken together, the industry losses from Hurricanes Gustav and Ike and the erosion of capital from the wider industry through investment losses provide a catalyst for opportunities going forward. Omega anticipates a hardening of market conditions in both US property insurance and reinsurance and marine offshore energy. In addition, the capital and strategic issues being faced by a number of large carriers are likely to give rise to material opportunities for Omega. In particular, the Group's surplus lines insurance carrier, Omega US, based in Chicago, is ideally positioned to benefit. It is now eligible to write surplus lines in 39 jurisdictions, including those most important to the development of its account. As a result, Omega sees significant opportunity for attractive returns in 2009 and beyond. 

Richard Tolliday, Chief Executive of Omega, said "Given the extraordinary economic and financial backdrop, the industry losses in the first half of 2008 and the major hurricane activity in the second half, markets are being fundamentally reshaped with insureds focusing on the strength and spread of carriers providing protection. This plays to the Group's position as a recognised leader of policies and its position in subscription markets.

We are continuing to forecast significant returns in 2008 for both the Omega Group and its managed Lloyd's syndicate.  We believe that the Midwest and hurricane losses, combined with the continuing fallout from events in the wider financial markets, will result in hardening in rates, terms and conditions in Omega's core lines of business in the US, and will generate material opportunities which we are exceptionally well placed to seize upon with the focus of our account and our trading platforms in Bermuda, Lloyd's, and the US".

Enquiries:

Omega Insurance Holdings Limited +1 441 294 6610

Richard Tolliday, CEO

Threadneedle Communications +44 (0)20 7653 9844

Josh Royston

Notes to Editors

Omega became the new holding company of 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 day 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 liability company.

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 subsidiary, 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 had a capacity for the 2006 year of account of £249 million and capacity for the 2007 year of account of £274 million. Capacity for the 2008 year of account is £249 million. 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 property insurance and reinsurance, insuring small to medium sized insureds and reinsuring the smaller insurance companies.

The Syndicate's financial strength rating from A.M. Best Company, Inc. of "A" (Excellent) and an Issuer Credit Rating of "a+" (Excellent) were reaffirmed on 27 May 2008.

• Omega Specialty

Omega Specialty is authorised by the Bermuda Monetary Authority as a Class 3 insurer, underwriting its targeted classes of insurance and reinsurance, key in which are non-marine property insurance, professional indemnity insurance, property catastrophe treaty reinsurance and property per risk treaty reinsurance.

Omega Specialty's financial strength rating from A.M. Best Company, Inc. of "A-" (Excellent) was reaffirmed on 27 May 2008.

• Omega US Insurance

Omega US Insurance is authorised as an admitted insurer in Delaware and underwrites on a surplus lines basis in other US States. Omega US Insurance is currently eligible to write surplus lines business in 39 US states and will underwrite in all other states once it has been granted the requisite eligibility in each US State. It is capitalised at US$50 million from the net proceeds of a share placing by OUH in October 2006.

Omega US received a financial strength rating from A.M. Best Company, Inc. of "A-" (Excellent) on 3 December 2007.