Specialist insurer Novae, which is based in London and Bermuda, made a pre-tax profit of £23.7 million for full year 2016, a fall from the £52.4 million that it made in 2015.
The company said that its profits were hit by the decision in February by the UK’s Lord Chancellor to adjust the discount rate for personal injury claims (the Ogden rate) down from 2.5 percent to minus 0.75 percent.
Novae said that before making the adjustment for the Ogden rate change it would have reported a pre-tax profit of £59.1 million.
According to Novae, the Ogden revision also meant that its combined ratio for 2016 went from 98.3 percent before the rate change to 103.6 percent after it. Novae’s 2015 combined ratio was 91.3 percent.
Novae’s gross written premiums increased from £787 million in 2015 to £901 million in 2016, a rise of 14.5 percent. It also reported a substantial rise in net investment income, which went from £6.8 million in 2015 to £32.7 million in 2016.
Novae also stated that that its 2016 results had been aided by favourable foreign exchange movements following the UK’s decision to exit the European Union as well as the US Presidential election.
"The well understood market headwinds caused by surplus capital and premium rate reductions persisted through 2016," said John Hastings-Bass, chairman of Novae in a statement on the results.
"Combined with an increase in global risk and catastrophe losses, this was a challenging year for the group. Although market conditions remain tough, the group continued to invest in core classes of business where we see positive returns and future growth opportunities.
"While taking advantage of profitable growth opportunities, we have also taken steps to withdraw from, or reduce exposure to, classes such as international liability and property per risk reinsurance where returns have become unacceptable."
Novae, Ogden, Results 2016, John Hastings-Bass, Bermuda, London, UK