Novae Group has seen its profits tumble by more than £10m in the first six months of 2006, as it attempts to recover from its "debilitating" past.

The Lloyd's insurer said underlying profits before tax, excluding professional costs incurred in a scheme of arrangement, and the formation of a new insurance company, were £16m compared to £27.7m in 2005.

Matthew Fosh, chief executive, Novae Group, said: "It has been an important six months for us, during which we have turned Novae into a forward-facing business no longer dominated by the debilitating legacy of its past.

"The formation of our new FSA-regulated insurance company achieved our goal of platform diversification.

"We are delivering profits in line with our expectations. Subject to catastrophe loss experience in the second half, we remain upbeat about the prospects for the year."

Meanwhile Novae's gross written premiums (GWP) rose in the first six months of 2006 to £156.3m compared to £133.9m in the same period last year.

GWP increased in its speciality, aviation and marine lines of business in the first half of 2006. However, property and liability books fell as a result of reinsurance costs and lower reserve releases compared to 2005

The group's combined ratio rose to 83.8% from 71.9% in 2005.