9th Nov 2006 08:00
Novae Group PLC09 November 2006 NEWS RELEASE 9 November 2006 For immediate release Novae Group plc Q3 2006 syndicate forecasts Novae Syndicates Limited, the Lloyd's managing agency owned by Novae Group plc,today announces updated quarterly forecasts for its managed syndicates for the2004 and 2005 Years of Account, and also for the 2002 and prior run off years. • 2004 and 2005 year: forecast ranges unchanged • 2002 run off year: forecast ranges unchanged • £2 million utilisation of the exceptional provision in Q3 2006 (Q3 2005: £6 million), leaving £18 million to be carried forward • Average syndicate rate increases of 3% (Jan - Sept 2006); claims experience so far this year remains encouraging 2004 Year of Account Syndicate Capacity Aligned Current forecast Previous forecast £m (%) % % 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 The net incurred loss ratio of Syndicate 2147 at 33 months is 58% (2003: 34%;2002: 48%). This reflects the impact of windstorm activity and a lower level ofprofitability from Fusion's property account. Syndicate 1007, with its Specialty lines focus, is longer tail in nature.However, a net incurred loss ratio at 33 months of 24% (2003: 17%; 2002: 25%) isconsistent with a satisfactory level of profitability. 2005 Year of Account Syndicate Capacity Aligned Current forecast Previous forecast £m (%) % % 2147 286.0 100.0 (12.5) - (7.5) (12.5) - (7.5) 1007 151.0 81.6 10.0 - 15.0 10.0 - 15.0 Forecasts for Syndicate 2147 continue to reflect the severity of windstormlosses in the year. The transfer of certain business lines to Novae InsuranceCompany Limited also has the effect of depressing the syndicate headline resultalthough it has no effect at a Group level. The net incurred loss ratio after 21months is 111% (2004: 41%; 2003: 20%). By contrast, for Syndicate 1007, the net incurred loss ratio at 21 months is 13%(2004: 14%; 2003: 4%). While this is still at an early stage of development,current claims experience indicates another profitable year. 2002 run off Year of Account Syndicate Capacity Aligned Current forecast Previous forecast £m (%) % % 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) Experience during Q3 was encouraging in respect of the 2002 run off year. Therewas some modest reserve strengthening required for Casualty Treaty, but this wasoffset by favourable developments on Healthcare business; also, the level ofoutwards reinsurance recovery during Q3 was more favourable than anticipated. Utilisation of the provision Utilisation of the Group level provision during the quarter amounted to £2million. Taking the first nine months of 2006 as a whole, utilisation of theprovision amounted to £9 million (first nine months of 2005: £19 million). £18million of the provision remains available to be carried forward to theremainder of this year and into next. Overall, syndicate forecast ranges for the2002 year are unchanged. They have now shown stability since 31 December 2005. A transactional solution for these run off years remains under constant review. Current trading and plans for 2007 During the first nine months of 2006, rate increases for the Group's Lloyd'sbusiness averaged 3%; Q3 was consistent with experience in the first half of theyear. This increase is a combination of a further upward move in rates onrenewal of US windstorm-exposed reinsurance business in July, coupled with somesoftening trends on Specialty business within Syndicate 1007. With Specialtybusiness dominating renewals in Q4, we anticipate some slippage in the overalllevel of rate increase for the year as a whole. Property catastrophe reinsurance and aviation reinsurance have so far enjoyed abenign claims experience during 2006; the net incurred loss ratio for Syndicate2147 after nine months is 7%. Not only does this represent a marked improvementupon 2004 and 2005 at this stage (60% and 21% respectively) but it also comparesfavourably with the excellent years of 2002 (11%) and 2003 (10%). For Syndicate1007 it is too early to draw any conclusions on implied profitability from thenet incurred loss ratio of 1% (2005: 1%; 2004: 2%). Consistent with our anticipation of a less firm pricing environment into 2007and 2008, we have taken a cautious view when planning for 2007. The mergedsyndicate capacity is being held at £360 million, and this includes scope fornew initiatives which are increasingly being presented to us. In 2007 the Groupcurrently expects to provide some 94% of total capacity, or £339 million.Provisional indications are that this will require capital, prior to open yearsolvency deficits, of around £200 million in our Lloyd's business, a substantialdecrease from 2006 levels. We currently expect to write between £55 million and£60 million of gross written premium in our insurance company subsidiary. Novae Insurance Company Limited, which commenced trading on 1 July 2006, isperforming in line with expectations, with premium income of £13 million for the four months to the end of October. Diversifying Novae Group by platform and by class of business has long been a strategic goal for the business, and thegrowth of the insurance company alongside the Lloyd's business is delivering the structure to achieve this. For further information: Matthew Fosh - Novae Group plc 020 7903 7300Nick Miles - M:Communications 020 7153 1535 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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