Recession-related pay-outs in Novae's trade credit book, as well as hits at the aviation reinsurance operation - reflecting such events as June's Air France disaster - explain the company's first-half loss. Adjust for those and the combined ratio (of claims to premiums) comes in at a profitable 90.4 per cent.
Indeed, the wider trading backdrop remains positive. Novae's premium rates rose 8 per cent on the whole and, driven by sectoral losses from last year's hurricanes, as well as investment book losses at many insurers, rates continue to harden. US windstorm-related rates are up strongly and rates for the group's financial institutions cover have started improving. And, while management believes that rates generally are still only rising in a "piecemeal fashion", an overall rate increase of 5-10 per cent is anticipated for the year. The discontinued US liability book continues to run off satisfactorily, too - management says it turned in a small profit.
Meanwhile, the investment portfolio's focus on cash and high quality bonds meant an annualised return of 2.02 per cent; not bad given that plenty of underwriters are making investment losses. And. despite eventually deciding not to bid for rival Chaucer, chief executive Matthew Fosh remains "well disposed towards M&A".
Numis Securities expects full-year pre-tax profits of £13.4m and EPS of 17.5p.
| ORD PRICE: | 308p | MARKET VALUE: | £225m | |
| TOUCH: | 306-310p | 12-MONTH HIGH: | 384p | LOW: 236p |
| DIVIDEND YIELD: | 3.4%* | PE RATIO: | 20 | |
| NET ASSET VALUE: | 382p | COMBINED RATIO: | 112% | |
| Half-year to 30 Jun | Net premiums (£m) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 126 | 16.3 | 20.7 | 2.5 |
| 2009 | 145 | -18.5 | 10.9 | 3.0 |
| % change | +15 | - | -47 | +20 |
Capacity owned: 100% Ex-div: 9 Sep Payment: 5 Oct *Excludes 4p special dividend | ||||
