Novae Syndicate Results and Updated Forecasts - 6.02.08

Novae Syndicates Limited, the Lloyd's managing agency owned by Novae Group plc announced syndicate results for the 2005 underwriting year (subject to audit), as well as syndicate forecasts for the 2006 and 2007 underwriting years, and for the 2002 and prior run-off years. The 2002 Account of Syndicate 1007 has improved by 2.5% points but the same year of Syndicate 1241 has deteriorated by 5% points.

* 2005 year: results unchanged or improved from forecasts

* 2006 year: forecasts unchanged

* Discontinued Units: no movement in reserves during Q4 (Q4
2006: £5 million deterioration)

* £4 million of the provision utilised during Q4 in
delivering finality deals on major contracts, leaving £5 million to be carried forward.

* Current trading: overall average rate reduction of 6% in
2007, but the outlook for continued profitability remains
Encouraging

2005 Year of Account

Syndicate 1007 benefited from a favourable environment for Specialty lines business. The net incurred loss ratio at 36 months is 26% (2004: 24%; 2003: 21%).

The outcome for Syndicate 2147 reflects principally the severity of the windstorm losses in that year. The net incurred loss ratio at 36 months is 112% (2004: 60%; 2003: 36%).

2006 Year of Account

Notwithstanding softening Specialty classes during 2006, Syndicate 1007 is forecast to remain healthily profitable. The net incurred loss ratio at 24 months is 18% (2005: 18%; 2004: 15%).

Forecasts for Syndicate 2147 reflect the improvement in claims
experience on property classes for this year. The net incurred loss ratio at 24 months is 36% (2005: 109%; 2004: 46%).

2007 Year of Account

Syndicate 2007 for this year combines the previous Syndicates 2147 and 1007, delivering a mix of property and casualty classes into one diversified syndicate. The first public forecast indicates good profitability notwithstanding cautious utilisation of capacity available. The net incurred loss ratio at 12 months is 26% (pro forma 2006 11%; pro forma 2005 58%).

2002 Run-off Year of Account

As in Q3, there was no deterioration in reserves for the Discontinued Business Unit during Q4. Substantial progress was made in reducing the population of claims via commutations, at a cost of £4 million to the provision. There was a consequent reduction in outstanding reinsurance receivables. £5 million of the provision remains unutilised and is carried forward into 2008. When credit is taken for investment income associated with the Discontinued Units there was no net deterioration during 2007.

During the year, via a combination of claims settlement and
commutations, the scale of the total problem related to 2002 & prior reduced 49% by population of open lead claims. The consequent reduction in volatility of the ultimate likely outcome for Syndicate 1241 is reflected in the narrower forecast range. Opportunities for further reduction or elimination of the Group's exposure to these run-off years remain under constant consideration.

Current trading and prospects
A competitive rating environment on a broad front was a feature of 2007, with the overall impact of rate reductions being around 6%. These competitive conditions have persisted into 2008 and we do not anticipate a strengthening of the trading environment before the end of the year.
This cautious assessment of underwriting conditions restrains like for like income growth, although income is being maintained by the emerging importance of NICL, established in July 2006, and by the new underwriting teams introduced since April 2006. The strategy of pursuing new teams, steadily diversifying the business with non-aggregated books of business, continues. Notwithstanding the competitive market, opportunities for the Group to enhance shareholder value remain.

For further information:
Matthew Fosh - Novae Group plc 020 7903 7300
Nick Miles - M:Communications 020 7153 1535