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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 20, 2008 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating (ICR) of "a-" of Novae Insurance Company Limited (NICL) (United Kingdom). The outlook for all ratings remains stable.
A.M. Best believes that NICL will maintain excellent risk-adjusted capitalisation in 2008, supported by an increase in retained earnings. Additionally, NICL benefits from the financial flexibility of its parent company, Novae Group plc (NG), which has demonstrated its ability to raise funds to support the group's growth.
NICL is expected to produce a pre-tax profit in 2008 of between GBP 2 million and GBP 4 million (2007: GBP 1.9 million), supported by solid earnings from the company's conservative investment portfolio. However, an underwriting loss is anticipated, underpinned by a loss ratio in excess of the 59% achieved in 2007. Earnings are likely to be impacted by deteriorating rates across the portfolio and reserve strengthening for regional professional indemnity business (which continues to experience intense competitive pressure), although this is likely to be partially offset by reserve releases from the other areas of the portfolio. Additionally, an increase in claims frequency within the professional indemnity account, owing to the deteriorating economic environment, is anticipated. Weakening performance is likely to be tempered by management's decision not to renew accounts where rates are either inadequate or where claims experience continues to deteriorate.
A.M. Best believes that NICL benefits from the good profile of the Novae brand in the United Kingdom (the company leads on over 90% of business written). The company underwrites predominantly specialist liability business and a book of non-correlated risks in the motor, property and bloodstock markets. In 2008, A.M. Best anticipates an increase of approximately 20% in gross premium income from GBP 54.5 million in 2007, principally due to the expansion of NICL's new motor account. Although this is significant growth at a time when rates in segments of the UK motor market remain under pressure, A.M. Best believes that the specialist profile of the account is likely to reduce prospective earnings volatility.
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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.