NEWS RELEASE
8 November
2007
For immediate release
Novae Group plc
Q3 2007 syndicate forecasts and current trading
Novae Syndicates Limited, the Lloyd's managing agency owned by Novae
Group plc, today announces updated forecasts for its managed
syndicates for the 2005 and 2006 underwriting years, and for the 2002
and prior run-off years.
* 2005 and 2006 years: minor changes in forecasts,
resulting in no net change across these years
* 2002 run off year: no change to forecasts
* No utilisation of the exceptional provision in Q3
2007 (Q3 2006: £2 million); £9 million of the provision still to be
carried forward
* Overall rate reductions of 6% reflect competitive
market conditions, but the outlook for continued profitability
remains encouraging
2005 year of account
+-------------------------------------------------------------------+
| Syndicate | Capacity | Aligned | Current | Previous |
| | £m | % | forecast | forecast |
| | | | % | % |
|-----------+----------+---------+----------------+-----------------|
| | | | | |
|-----------+----------+---------+----------------+-----------------|
| 2147 | 286.0 | 100.0 | (12.5) - (7.5) | (12.5) - (7.5) |
|-----------+----------+---------+----------------+-----------------|
| | | | | |
|-----------+----------+---------+----------------+-----------------|
| 1007 | 151.0 | 81.6 | 14.0 - 19.0 | 11.0 - 16.0 |
+-------------------------------------------------------------------+
Forecasts for Syndicate 2147, which reflect the severity of windstorm
losses in that year, are unchanged. The net incurred loss ratio at
33 months is 113% (2004 58%; 2003 34%). Syndicate 1007 has a net
incurred loss ratio at 33 months of 23% (2004 23%; 2003 17%),
prompting an improvement to forecasts.
2006 year of account
+-------------------------------------------------------------------+
| Syndicate | Capacity | Aligned | Current | Previous |
| | £m | % | forecast | forecast |
| | | | % | % |
|-----------+----------+---------+-----------------+----------------|
| | | | | |
|-----------+----------+---------+-----------------+----------------|
| 2147 | 240.0 | 100.0 | 7.5 - 12.5 | 9.0 - 14.0 |
|-----------+----------+---------+-----------------+----------------|
| | | | | |
|-----------+----------+---------+-----------------+----------------|
| 1007 | 120.0 | 81.6 | 10.0 - 15.0 | 10.0 - 15.0 |
+-------------------------------------------------------------------+
Syndicate 2147 had benign claims experience on property business in
2006, but some loss activity on aviation reinsurance in Q3 2007 has
affected the 2006 year of account. The forecast has been reduced
slightly, although the net incurred loss ratio at 21 months is still
favourable at 30% (2005 108%; 2004 41%). Syndicate 1007 remains
encouraging at this point in its development, with an overall net
incurred loss ratio of 17% (2005 13%; 2004 14%).
2002 run off year of account
+-------------------------------------------------------------------+
| Syndicate | Capacity | Aligned | Current | Previous |
| | £m | % | forecast | forecast |
| | | | % | % |
|-----------+----------+---------+-----------------+----------------|
| | | | | |
|-----------+----------+---------+-----------------+----------------|
| 1007 | 150.8 | 55.4 | (15.0) - (5.0) | (15.0) - (5.0) |
|-----------+----------+---------+-----------------+----------------|
| | | | | |
|-----------+----------+---------+-----------------+----------------|
| 1241 | 168.9 | 99.7 | (95.0) - (80.0) | (95.0) - |
| | | | | (80.0) |
+-------------------------------------------------------------------+
There was no utilisation of the exceptional provision for
discontinued business in Q3, leaving utilisation for 2007 year to
date at £4 million (2006, nine months to September: £9 million). The
syndicate forecast outcomes remain unchanged. The population of open
lead claims from 2002 and prior has fallen by 49% since the beginning
of last year.
Current trading and prospects
Softening of rates has continued during 2007 as widely anticipated
and we are currently planning for no improvement in rates before the
end of 2008. The overall rate reduction for the first nine months of
this year is 6%. However, firm control of underwriting, as well as
the addition of new, non-correlated underwriting teams utilising
capacity released by managed reductions in premium income elsewhere,
remains a sound commercial response to competitive market conditions
and allows profitability to continue.
The return to profit since 2005, and the performance of the
exceptional provision in containing the legacy since the
establishment of the provision in 2004, has provided Novae with
stability and enabled it to strengthen and diversify.
ENDS
For further information:
Matthew Fosh Novae
Group plc 020 7903 7300
Nick Miles/Caroline Villiers
M:Communications 020 7153 1521
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