Like its peers, Lloyd's insurer Novae (NVA) benefited from a relatively benign claims backdrop last year. That pushed its combined ratio (of claims to premiums) down four percentage points to an impressively profitable 86 per cent.
But market conditions are softening in some areas. Catastrophe-exposed business lines are under pressure, and Novae's property reinsurance book saw rates slip 2 per cent. Elsewhere, however, pricing was more stable and Novae's premium rates were broadly flat overall during 2013. But that weaker backdrop leaves growth prospects looking limited to certain niche lines. As a result, Novae is returning capital that it is unlikely to utilise during 2014 through a 20p special dividend (implying an attractive 7.3 per cent yield).
The investment portfolio - which is all in cash and bonds - is also under pressure. Low interest rates and rising bond yields depressed the annualised return to 0.9 per cent, from 2.2 per cent in 2012. A shift in the asset allocation strategy towards higher-yielding assets isn't yet on the cards, although chief executive Matthew Fosch says he is now prepared to consider change, assuming a continued strong underwriting performance.
Prior to these figures, broker Numis Securities forecast adjusted EPS of 40.2p for 2014 (49p in 2013) and net tangible assets (NTA) of 502p.
NOVAE (NVA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 579p | MARKET VALUE: | £373m | |
| TOUCH: | 579-582p | 12-MONTH HIGH: | 665p | LOW: 440p |
| DIVIDEND YIELD: | 3.9%* | PE RATIO: | 12 | |
| NET ASSET VALUE: | 486p | COMBINED RATIO: | 86% | |
| Year to 31 Dec | Gross premiums (£m) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 389 | 4.2 | 31 | 12.4 |
| 2010 | 529 | 35.1 | 25.4 | 15.7 |
| 2011 | 606 | -6.3 | 21 | 18.0 |
| 2012 | 612 | 39.9 | 25.8 | 18.0 |
| 2013 | 590 | 42.8 | 11.1 | 22.5* |
| % change | -4 | +7 | -57 | +17 |
Ex-div: 16 Apr Payment: 16 May *Excludes 20p special special dividend Capacity owned: 100 per cent | ||||
