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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 Lloyd's Syndicate 2007 (United Kingdom), which is managed by Novae Syndicates Limited (NSL). At the same time, A.M Best has affirmed the ICR of "bbb" of Novae Group plc (NG) (United Kingdom) and the debt ratings of "bbb" on the GBP 50 million convertible bond and "bbb-"on the GBP 100 million subordinated note, both issued by NG. Additionally, A.M. Best has affirmed the ICR of "bbb-" of Novae Holdings Plc (NH) (United Kingdom) and the debt ratings of "bbb-" on the USD 15 million floating rate note, "bb+" on the USD 11 million floating rate subordinated loan note and "bbb-"on the USD 10 million floating rate note, all issued by NH. The outlook for all ratings remains stable.
The ratings of syndicate 2007 reflect the financial strength of the Lloyd's market, which underpins the security of all Lloyd's syndicates. In addition, A.M Best believes that the syndicate benefits from the financial flexibility of its parent company (NG), which is expected to maintain strong risk-adjusted capitalisation in 2008. Capacity is unchanged at GBP 360 million for the 2008 year of account, to allow the syndicate to capitalise on new initiatives and growth opportunities within the more profitable segments of the portfolio, while cutting back on business where rates are unfavourable.
A.M. Best believes that syndicate 2007 will produce a good operating profit (on an annually accounted basis) in excess of GBP 35 million in 2008, assuming normal catastrophe activity. This compares to the 2007 combined annual result of GBP 55.5 million, for syndicates 2007 and 1007 (the two syndicates merged for the 2007 underwriting year). A combined ratio of between 85% and 90% (2007: 81.2%, combined for syndicates 2007 and 1007) is anticipated, supported by favourable rating conditions for credit and financial services business and adequate rates for property reinsurance business. However, results are likely to be negatively affected by the continued deterioration in rates for liability business as competition intensifies. On a year of account basis, a good return on capacity is anticipated for 2006 and 2007, underpinned by a strong rating environment for U.S. catastrophe-exposed business following the 2005 hurricanes and favourable claims experience for specialty lines business.
In A.M. Best's opinion, syndicate 2007 continues to improve its market profile within the London market as a specialist underwriter of liability risks, and in 2007 led approximately 60% of liability and specialty business written. The United States and United Kingdom represent approximately 65% of gross premium income, with the remainder spread across a diverse range of territories. A.M. Best believes that the merger of syndicates 2007 and 1007 in 2007 has increased business line diversification and enhanced the syndicate's business profile.
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.