(Adds details, analyst comments, share movement)
By Noor Zainab Hussain
Dec 8 Lloyd's of London insurer Novae Group Plc
said larger individual risk and catastrophe losses in
the year would lead to its full-year underwriting contribution
being lower than it expected, sending its stock plunging.
Shares in Novae slumped as much as 21.6 percent on Thursday,
and were poised for their biggest single-day fall in more than
Analysts pointed to losses from interrupted production at
Tullow Oil's flagship Jubilee oil field in Ghana, a
SpaceX rocket which burst into flames and destroyed a $200
million satellite owned by Israel's Space Communication Ltd, two
product recalls, Hurricane Matthew and the New Zealand
"We believe it has been a bad, but not exceptional, year for
large losses at an industry level. Novae is likely more exposed
than quoted Lloyd's peers due to its narrower scope of
business," Canaccord Genuity analysts said.
The brokerage downgraded Novae's stock to a "hold" from a
"buy" rating and cut 2016 EPS estimates by 40 percent.
Novae, which covers property, casualty, marine, aviation and
political risk, said its full-year combined ratio was expected
to be between 98 percent and 100 percent. Combined ratio is a
measure of underwriting profitability in which a result above
100 percent indicates a loss.
Analysts at RBC Capital Markets pushed up their combined
ratio forecast for Novae to 99.5 percent from 97.3 percent and
cut their 2016 profit-before-tax estimate by 26 percent.
Novae also said a "significant" bond market sell-off after
the U.S. presidential elections had hit the value of its
Analysts at RBC said that while increasing bond yields are
positive for insurers, with the Lloyd's insurers, the decline in
the value of the bonds is recognised through earnings.
"As a result, the near 30 percent increase in two-year
government bond yields since the U.S. election has led to a
significant reduction in investment income for Novae in 2016,"
the analysts added.
Novae also said a change in its accounting policies for
deferred acquisition costs would result in a non-cash full-year
writedown of about 17 million pounds ($21.49 million) and an
increased charge of about 5 million pounds.
Novae's shares were down 17.6 percent at 688 pence at 0856
($1 = 0.7912 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by