Decision praised by analysts as being a constructive 'tidying up exercise'
A move by Novae to fold its 2002 and prior open years of run-off syndicates 1007 and 1241 into its 2007 live?syndicate reflects the firm’s new-found confidence, market analysts claim.
The Lloyd’s insurer’s chief executive Matthew Fosh said in a statement that the move was a long-held strategic objective. “The closure of the 2002 and prior years of account brings this issue to an end,” he said.
Numis Securities analyst Nick Johnson said the move was a “good tidying up exercise”. “It’s part of the firm’s ongoing efforts to resolve its legacy issues,” he said. Collins Stewart analyst Ben Cohen agreed: “It’s a constructive move that reflects the fact that the business has moved on a lot since it had problems and had to raise capital to get itself out of a very difficult situation. It doesn’t change any numbers in the near term, but I think it will make the business more stable.”
Cohen said the decision to move the business away from long-term lines would make it a prime target for acquisition, adding: “That doesn’t necessarily mean there will be a deal done soon.”
Johnson disagreed that the move would make the company more of a target. “It doesn’t change a whole lot,” he said. “Novae shareholders continue to have exposure to any residuals from those syndicates because these have been reinsured to close into their current syndicates.”
“In reality, the residual risk in this business is minimal,” Johnson added.
The value of open lead claims from the 2002 and prior years fell to £88.8m at the end of 2010 from £378m at the end of 2005.