Lloyd’s Raises Novae Syndicate Assessment To ‘2+’; Outlook Stable

February 20, 2007

Standard & Poor’s Ratings Services has raised its Lloyd’s Syndicate Assessment (LSA) on London-based Novae – Syndicate 2007 to ‘2+’ from ‘2’ and assigned a stable outlook.

“The upgrade reflects that the potential impact from the run-off of the liability business written between 1997 and 2001 is materially reduced, and that the probability of the run-off being within expectations has improved,” stated S&P credit analyst Matthew Day. “We do not, however, consider that finality has been achieved at this point.”

S&P noted that the “run-off issues have also limited the financial flexibility of the group, Novae Group PLC (Novae), in recent years, but recent improvements have been made. The impact from the legacy issues is also mitigated by the syndicate’s good underlying operating performance, improved capitalization, and strong competitive position, which includes the strong financial strength of Lloyd’s (A/Positive).”

The ratings report indicated that the stable outlook reflects S&P’s expectation that the “syndicate will continue to manage down the risk from the legacy issues, and that the ongoing operations will continue to produce strong operating performance. The syndicate is expected to maintain its very good competitive position, backed by improvements to the Lloyd’s Market’s financial strength and competitive position.”

S&P also indicated that “Novae’s strong capital adequacy ratio will be improved as profits emerge from the open years of business, and that the quality of capital will improve as the level of reserves for run-off business is reduced.

“The assessment on the syndicate would be revised upward following the run-off within budget, or the disposal of the legacy issues at a cost not detrimental to capital. Negative pressure on the LSA would occur, however, should reserves deteriorate materially beyond current expectations, or if competitive position is seen to weaken.”

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