Interim results Six months to 30 June 2006

Transcription

1 Interim results Six months to 30 June 2006

2 Disclaimer This document and the presentation to which it relates ( Presentation ) do not constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of, any securities of Novae Group PLC ( Novae ) nor should they or any part of them form the basis of, or be relied on in connection with, any contract or commitment whatsoever which may at any time be entered into by the recipient or any other person, nor do they constitute an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 ( FSMA ). This document and the Presentation do not constitute an invitation to effect any transaction with Novae or to make use of any services provided by Novae. This Presentation may contain forward looking statements in relation to certain of Novae s plans and current goals and expectations, in particular but not limited to its future financial condition, performance and results. By their very nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Novae s control, including but not limited to insurance pricing, interest and exchange rates, inflation, competition and market structure, acquisitions and disposals, and regulation, tax and other legislative changes in those jurisdictions in which Novae, its subsidiaries and affiliates operate. As a result, Novae s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in any forward looking statement made by Novae. Novae has no obligation to update any forward looking statement contained in this document or the Presentation or any other document or any other forward looking statement Novae may make. Past performance cannot be relied upon as a guide to future performance. No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions made in this document and the Presentation, which information and opinions should not be relied or acted on, whether by persons who do not have professional experience in matters relating to investments or persons who do have such experience. The information and opinions contained in this document and the Presentation have not been audited nor have they been subject to formal or independent verification. The information and opinions contained in this document and Presentation are provided at the date of this document and the Presentation and are subject to change without notice. No responsibility or liability whatsoever is or will be accepted by Novae, its subsidiaries or affiliates or by any of its officers, directors, employees or agents for any loss howsoever arising, directly or indirectly, from any use of this document or its contents or attendance at the Presentation. This document is for distribution only in the United Kingdom and the Presentation is being made only in the United Kingdom to persons falling within Articles 19, 43, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, to persons who have professional experience in matters relating to investments or to persons in the United Kingdom to whom this document may otherwise be lawfully distributed. This document is being supplied and the Presentation made to you solely in that capacity for your information. This document may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any purpose. By accepting this document and Presentation, you agree to be bound by the foregoing limitations, undertakings and restrictions and agree that you have solicited the information contained in this document and Presentation. Novae Group plc Interim Results to 30 June

3 Agenda Highlights Financial and underwriting review Outlook Matthew Fosh Oliver Corbett Matthew Fosh Novae Group plc Interim Results to 30 June

4 Highlights Continuing business - underlying PBT 16.0m (H m) - H1 combined ratio 83.8% (H %) - encouraging outlook for full year - Group reorganisation - formation of NICL - rights issue/new bank facilities Discontinued business - provision usage 6.9m (H m) - loss reviews Novae Group plc Interim Results to 30 June

5 Financial and underwriting review Oliver Corbett Novae Group plc Interim Results to 30 June

6 Financial highlights income statement (1) m June 2006 June 2005 December 2005 Gross premium revenue (2005: incl. Fusion) Net premium revenue Investment return Net claims incurred (60.9) (39.3) (187.7) Expenses (48.5) (48.9) (113.1) Other income Operating profit Combined ratio -100% level 83.8% 71.9% 95.2% Novae Group plc Interim Results to 30 June

7 Financial highlights income statement (2) m June 2006 June 2005 December 2005 Operating profit Financing costs (6.9) (11.9) (20.8) Non recurring professional costs (1.5) - - Profit on disposal of Fusion Profit/(loss) before tax (13.9) Tax (4.8) (8.5) (3.2) Minorities - (0.2) (0.1) Profit/(loss) after tax and minorities (17.2) Novae Group plc Interim Results to 30 June

8 Discontinued units financial drag m m m m 18.6m 25.1m m absorbed by exceptional loss provision Novae Group plc Interim Results to 30 June

9 Balance sheet m June 2006 December 2005 Financial assets/cash Reinsurance contracts Insurance and other receivables Deferred tax All other assets , ,697.7 Insurance contracts 1, ,461.1 Financial liabilities Insurance and other payables All other liabilities , ,585.3 Shareholders funds , ,697.7 Novae Group plc Interim Results to 30 June

10 Cash flow statement m June 2006 June 2005 December 2005 Net cash flow from operating activities (5.6) Servicing of finance (2.8) (2.6) (5.2) Interest received Capital expenditure (0.9) (2.6) (1.5) Tax paid - (0.7) (1.1) Financing Net portfolio investment (111.9) (16.1) (23.6) Net cash flow for the period (13.0) Novae Group plc Interim Results to 30 June

11 Per share results June 2006 June 2005 December 2005 Earnings per share 2.5p 5.3p (4.8p) Net asset value per share 31.1p 40.7p 31.2p Net tangible asset per share 30.0p 38.2p 28.9p Novae Group plc Interim Results to 30 June

12 Key asset classes Other 17% Financial assets/cash ( million or 52%) Reinsurance contracts ( million or 31%) All other assets ( million or 17%) RI contracts 31% Financial assets 52% Novae Group plc Interim Results to 30 June

13 Financial assets m June 2006 December 2005 FAL assets NICL assets Cash PTF assets/overseas deposit/cash (Novae share) Total financial assets Managers weighted average FY06 return expectations - denominated: FAL / NICL PTF - $ denominated: FAL (annualised) PTF 4.3% 4.4% 4.9% 4.2% 4.9% 4.8% - 1.9% Novae Group plc Interim Results to 30 June

14 Reinsurance contracts m June 2006 December 2005 Reinsurers share of claims notified not yet due Bad debt provision (10.1) (11.7) Net reinsurers share of claims notified not yet due Reinsurers share of losses incurred but not reported Reinsurance recoveries Reinsurers share of UPR Reinsurance contracts Novae Group plc Interim Results to 30 June

15 Underwriting performance 100% level m June 2006 June 2005 December 2005 Gross written premium Net premium revenue Net claims incurred %age of net premium revenue 53.3% 37.9% 71.5% Expenses (incl. brokerage) %age of net premium revenue 30.5% 34.0% 23.7% Combined ratio: earned basis 83.8% 71.9% 95.2% Novae Group plc Interim Results to 30 June

16 Results by underwriting year m 1998 & prior H Total Specialty (0.4) (0.8) (4.7) (1.0) (1.6) 13.7 Property (0.2) (0.2) (0.3) (0.7) (0.9) 5.5 (0.4) 3.4 Liability (0.4) (0.2) (1.2) 3.5 Aviation & Marine (0.3) (0.5) (0.5) (0.2) (1.6) 6.0 Continuing (0.4) (0.6) (4.9) (0.6) (4.8) 26.6 Discontinued (4.6) (5.5) 7.5 (3.7) (0.6) (6.9) Novae Group plc Interim Results to 30 June

17 Specialty 100% level summary Gross written premium m Underwriting profit m As % net premium revenue 2006 half year % 2005 half year % 2005 full year % Novae Group plc Interim Results to 30 June

18 Property 100% level summary Gross written premium m Underwriting profit m As % net premium revenue 2006 half year % 2005 half year % 2005 full year 71.0 (31.5) (33.1)% Novae Group plc Interim Results to 30 June

19 Liability 100% level summary Gross written premium m Underwriting profit m As % net premium revenue 2006 half year % 2005 half year % 2005 full year % Novae Group plc Interim Results to 30 June

20 Aviation & Marine 100% level summary Gross written premium m Underwriting profit m As % net premium revenue 2006 half year % 2005 half year % 2005 full year % Novae Group plc Interim Results to 30 June

21 Capacity outlook for 2007 m 2006 managed capacity 2007 managed capacity * 2007 aligned capacity Aligned Syndicate Syndicate Merged syndicate (proposed) % Total % * business plan as submitted to Lloyd s, June 2006 Novae Group plc Interim Results to 30 June

22 Outlook Matthew Fosh Novae Group plc Interim Results to 30 June

23 Overview Discontinued business - rolling review process - finality Ongoing business - outlook for the year - Novae Syndicates / Novae Insurance Company - market conditions Novae Group plc Interim Results to 30 June

24 Discontinued business Exceptional loss provision m Q1 Q2 Q3 Q4 Year total m m Novae Group plc Interim Results to 30 June

25 Comparative six monthly moving averages of net claims incurred movement by year of account 'm '04 '02 ' (5.0) '03 '00 '99 '98 '97 ' Quarter Novae Group plc Interim Results to 30 June

26 Ongoing business 2006 published combined ratios 100% 90% 80% 70% 60% 50% Advent Amlin BRIT Novae Catlin Chaucer Wellington Kiln Beazley Hiscox Highway Novae Group plc Interim Results to 30 June

27 Rate index (2000 = 100) months Change 6 months (%) Specialty Property Liability Aviation & Marine % +26% n/c +1% Whole account % Novae Group plc Interim Results to 30 June

28 Conclusion One company, two platforms NICL Business outlook Novae Group plc Interim Results to 30 June

29 Appendices Novae Group plc Interim Results to 30 June

30 Managed and aligned capacity at Lloyd s 600 m Managed capacity Aligned capacity Novae Group plc Interim Results to 30 June

31 Lloyd s capital stack 350 m m 296m Lloyds TSB LOC Everest Re LOC 250 Own FAL Jan - June 2006 Following June 2006 coming into line Novae Group plc Interim Results to 30 June

32 NICL capital stack 120 m m NICL capital /07/2006 Novae Group plc Interim Results to 30 June

33 2007 business plan 100% level Segmental income m Lloyd s NICL Total Specialty Property Liability Aviation & Marine Total Novae Group plc Interim Results to 30 June

34 2003, 2004 and 2005 track record published combined ratios % 90% 80% 70% Kiln Atrium Hardy SVB ongoing Beazley Amlin Chaucer Wellington Catlin Hiscox BRIT Goshaw k ALEA ongoing Highw ay 110% 100% 90% 80% % Amlin Atrium SVB ongoing Kiln Wellington Chaucer Catlin Beazley BRIT Hiscox Hardy ALEA ogoing Highw ay Goshaw k % 190% 170% 150% 130% 110% 90% 70% Amlin Hardy Omega SVB ongoing Highw ay Hiscox Chaucer Catlin Beazley BRIT Atrium Kiln Wellington ALEA Advent Novae Group plc Interim Results to 30 June

35 All syndicates : gross incurred loss ratio development Year Syndicates At 18 months At 36 months July 2006 [stage] , % 37.9% 45.7% [163 months] , 1212, % 38.3% 50.3% [151 months] , 1212, % 43.9% 69.4% [139 months] , 1212, % 51.2% 67.8% [127 months] , 1212, 575, % 70.3% 117.9% [115 months] , 1212, 575, % 100.4% 158.0% [103 months] , 1212, 1241, 575, % 99.9% 164.1% [ 91 months] , 1212, 1241, 575, % 97.4% 168.4% [ 79 months] , 1212, 1241, 575, % 93.5% 163.1% [ 67 months] , 1241, % 42.2% 61.0% [ 55 months] , % 31.6% 33.7% [ 43 months] , % 43.7%[31 months] , % 61.4%[19 months] , % [ 7 months] Exchange rates used are 1 = $1.79 and 1 = C$2.20 Novae Group plc Interim Results to 30 June

36 All Novae syndicates : gross incurred loss ratio 180% 160% 140% 120% 100% 80% 60% 40% 20% % Novae Group plc Interim Results to 30 June

37 All Novae Syndicates : gross incurred loss ratio for the good years 80% 70% 60% 50% 40% 30% 20% % 0% Novae Group plc Interim Results to 30 June

38 Summary segmental performance m Specialty Property Liability Aviation & Marine Total H Gross written premium Net written premium Net premium revenue Technical profit Attributable to SVB At 30 June 2006 Gross technical reserves Attributable reinsurance assets Attributable PTF investment assets Novae Group plc Interim Results to 30 June

39 Attributable results by syndicate by year m 1998 & prior 1999/ Total 1007 (1.1) (0.6) (0.8) (1.5) (0.8) (3.3) (4.3) 3.2 (3.0) (4.9) (9.0) Total (5.0) 3.7 (2.5) (5.5) (0.6) (4.8) 19.7 Novae Group plc Interim Results to 30 June

40 Reinsurance recoveries : status of reinsurers As a general rule we grade reinsurers based on an AM Best rating for companies domiciled in the USA or Bermuda and S&P rating for companies domiciled elsewhere. We then use standard descriptions as shown below. In this table we have excluded recoveries anticipated on IBNR and we have confined the analysis to the reinsurance asset attributable to Novae. The overall security profile shown does not change materially as a consequence of this change. AM Best S&P June 2006 June 2005 December 2005 Superior A++, A+ AAA 13.7% 11.8% 13.1% Excellent A, A- AA 22.9% 36.8% 32.7% Good (incl Lloyd s) B++, B+ A 57.0% 45.6% 44.6% Other 6.4% 100.0% 5.8% 100.0% 9.6% 100.0% Novae Group plc Interim Results to 30 June

41 Willingness to lose and realistic disaster scenarios figures converted into sterling at 1 = $1.79 Scenario WTL m Net RDS impact on Novae m (01/08/06) Florida Windstorm ($60bn insured loss) Californian Earthquake ($50bn insured loss) New Madrid Earthquake ($40bn insured loss) UK Flood (1953 type event) UK/European Windstorm ( 17bn insured loss) Japanese Earthquake ( 28bn insured loss) Japanese Typhoon ( 8bn insured loss) Aviation Event ($3.5bn insured loss) Syndicate 1007 Liability Corporate Collapse * Syndicate 2147 Occurrence Liability Syndicate 1007 Political Risks (various scenarios) * Marine and Energy Events (various scenarios) * Syndicate 1007 scenarios shown above reflect Novae ownership percentage Novae Group plc Interim Results to 30 June

42 Realistic disaster scenarios : Lloyd s specific US scenarios figures converted into sterling at 1 = $1.82 Scenario (market loss x event code) Net impact on Novae m (01/08/06) Windstorms Florida west coast ($100bn insured loss RMS ) 40.8 Florida east coast ($100bn insured loss RMS ) 21.6 Gulf-Texas/Louisiana ($100bn insured loss RMS ) 23.3 North east USA ($65bn insured loss RMS ) 38.3 As a second event : Carolinas ($30bn insured loss RMS ) 9.8 Earthquakes Los Angeles ($65bn insured loss RMS ) 19.8 San Francisco ($65bn insured loss RMS ) 20.2 New Madrid ($40bn insured loss RMS ) 13.2 New Madrid extreme stress ($90bn insured loss RMS ) 18.7 Novae Group plc Interim Results to 30 June