Fitch Ratings has downgraded Novae Group plc’s (Novae) Issuer Default Rating to ‘BBB-‘ from ‘BBB’ with a Stable Outlook and subordinated debt issue to ‘BB’ from ‘BB+’ and removed both ratings from Rating Watch Negative (RWN) Fitch has subsequently withdrawn the ratings as they are no longer considered to be relevant to the agency’s coverage.
The downgrade reflects a decrease in Novae’s risk-adjusted capital adequacy, as calculated by Fitch, as well as the agency’s expectation that the group’s 2011 earnings will be significantly reduced by net claims from a number of catastrophe events that occurred in Q111.
The reduction in risk-adjusted capitalisation reflects the repatriation of GBP32.9m to its shareholders in 2010 and strong premium growth in 2010. Prior to the reorganisation of Novae’s operations in 2009/2010, capital had been a supportive rating factor.
The Stable Outlook reflects the agency’s expectation that the reduced capital base has stabilised at a level commensurate with the new rating, assuming expected catastrophe losses are in line with Novae’s published exposure limits.
Fitch put Novae on RWN in December 2009 following its decision to transfer the business of Novae Insurance Company Ltd (NICL) into the group’s Lloyd’s Syndicate and return residual capital to its shareholders. At the same time, NICL’s Insurer Financial Strength rating was downgraded to ‘BBB’ with a Negative Outlook, and simultaneously withdrawn, meaning that Fitch stopped providing analytical or rating coverage for NICL from that point.
London-based Novae provides insurance and reinsurance underwriting services to international and UK provincial market and operates through its Lloyd’s operation Novae Syndicates. In 2010, the group recorded a profit before tax of GBP35.1m (2009: GBP4.2m).
Source : Fitch Ratings Press Release
