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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Novae Grp | LSE:NVA | London | Ordinary Share | GB00B40SF849 | ORD 112.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 714.00 | 714.00 | 715.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMNVA
6 April 2016
NOVAE GROUP PLC
Annual Financial Report and Notice of Annual General Meeting
Novae Group plc ("the Company") confirms that the following documents
have today been posted or otherwise made available to shareholders.
1. Annual Report and Accounts for the year ended 31 December 2015
2. Notice of Annual General Meeting to be held on 11 May 2016
3. Proxy form for the Annual General Meeting to be held on 11 May 2016
In accordance with Listing Rule 9.6.1 a copy of each of these documents
has been uploaded to the National Storage Mechanism and is available for
inspection at: www.Hemscott.com/nsm.do.
The Annual Report and Notice of AGM are also available on the Company's
website at www.novae.com.
Compliance with Disclosure and Transparency Rule 6.3.5 ("DTR 6.3.5") -
Extracts from the 2015 Annual Report
The information below, which is extracted from the 2015 Annual Report,
is included solely for the purpose of complying with DTR 6.3.5 and the
additional requirements it imposes on the publication of Annual
Financial Reports. It should be read in conjunction with the Company's
Preliminary Announcement issued on 2 March 2016 (available on
www.novae.com.). Together, these constitute the material required by DTR
6.3.5 to be communicated to the media in unedited full text through a
Regulatory Information Service. This material is not a substitute for
reading the full 2015 Annual Report. All page numbers and
cross-references in the extracted information below refer to page
numbers in the 2015 Annual Report.
The information contained in this announcement and in the Preliminary
Announcement does not constitute the Company's statutory accounts, but
is derived from those statutory accounts. The statutory accounts for the
year ended 31 December 2015 have been approved by the Board and will be
delivered to the Registrar of Companies following the Company's Annual
General Meeting. The auditors have reported on those statutory accounts
and their report was unqualified, with no matters by way of emphasis,
and did not contain any statements under Section 498(2) of the Companies
Act 2006 ("the Act") regarding adequacy of accounting records and
returns) or under Section 498(3) of the Act (regarding provision of
necessary information and explanations).
Appendix A - Risk Management
ERM Framework
Novae's Enterprise Risk Management ("ERM") framework provides a
consistent view of risk aligned and integrated with strategic decision
making and reflects our defined risk appetite.
Novae adopts the three lines of defence model for the application of
risk controls.
2015 has seen further development of the ERM Framework, building on a
strong base of risk management processes and controls to deliver
operational improvements for the business. The following section
provides an overview of some of the core components of our ERM
framework.
Risk Strategy
Novae's risk strategy is an extension of our business strategy. As a
specialty (re)insurer, it is central to our strategic goals that we seek
to take on underwriting risks, and to a lesser extent investment risks
through the specialty (re)insurance products that we underwrite and the
financial investments we make to support those products.
Further to this, we recognise our business operation requires the
assumption of other, non-core, risks and that seeking to eliminate these
risks is uneconomical.
Our risk strategy guides our risk taking with the following principles:
> We take risks that are in line with our strategy
> We take risks that are rewarded, with returns commensurate to the
level of risk assumed
> We take risks that we understand and can manage
> We take risks within clearly defined limits
Risk Appetite
We undertook a refresh of our risk appetite framework in 2015. An
updated set of Risk Appetite Statements was approved by Novae Group
Board in November 2015. This refresh has resulted in some changes to the
way we express our appetites, although the level of risk sought remains
broadly in line with our prior position. The refreshed risk appetite
framework is better aligned to business operations and is helping us to
ensure consistency between operational procedures and Group-level risk
appetite.
The refreshed risk appetite follows a hierarchical structure:
GECR Group economic capital requirement:
Defines the overall level of risk in reference to
an economic capital requirement.
Tier 1: Key Tier 1 risk appetites:
risks Risk level statements of appetites and limits for
major risk exposures.
Tier 2: Tier 2 risk appetites:
Operational Limits, thresholds and indicators applied at an operational
level level to individual risk and sub-risks.
First line: executive management
Primary responsibility for risk and control procedures. This includes
risk identification, assessment, mitigation and monitoring, as well as
the design, implementation and performance of internal controls.
Second line: risk management
Responsibility for facilitating and monitoring effective risk management
in the first line. This includes oversight and challenge of operational
management procedures, and reporting to the Risk Committee, Audit
Committee and Boards.
The Compliance function performs a similar second line role in respect
of compliance with relevant regulatory requirements.
Third line: internal audit
Responsibility for providing independent assurance on the effectiveness
of governance, risk management, compliance and internal controls.
Risk Appetites are broadly classified using the following three
definitions:
-- Positive Appetite signifies a strategic desire for a particular risk,
within defined limits
-- Neutral Appetite signifies a measured acceptance of a particular risk
-- Negative Appetite signifies a general intention to avoid a particular
risk, to the extent it is practical and commercial to do so
We group the principal risks to Novae into the following groups, and
then further into "Tier 1" risks:
Risk group
Strategic risks Core risks Non-core risks
Risks that changes to external circumstances impact Risks where Novae has the expertise and experience Risks that are not actively sought, but arise as a
Novae as a consequence of executing the strategy for to price and manage risks to derive a profit. consequence of executing the strategy for core risks.
core risks. Our strategy focuses on selecting, pricing and managing Our strategy does not seek to generate economic return
these risks to deliver economic returns. from these risks but seeks to control exposure that
arises in the normal course of business.
Tier 1 Risk Category
Strategic Reputational Underwriting Underwriting non-cat Credit Liquidity
catastrophe
Underwriting Investment Operational (inc regulatory and legal)
reserving
Further detail of our appetite for, and exposure to, these risks is
contained in the "Principal Risks" section on pages 40 to 41.
Risk Governance
During 2015 the Boards of Novae Group plc and Novae Syndicates Limited
operated a Risk Committee which has oversight responsibility for the
Risk Management Framework of the Group under the three lines of defence
model. The role of monitoring risk exposures is delegated by the Risk
Committee to a number of functional subcommittees, which have
responsibility for the management of specific risks with the exception
of strategy and group risks, which remain the responsibility of the
Board of Novae Group plc. The Risk Committee is supported by the Group
Risk Management Function in executing its risk oversight duties. The
following table summarises the roles of the Risk Committee,
sub-committees and the Risk Management Function within the governance
structure. It also describes at a high level the linkage with the Third
Line of Defence, Internal Audit:
Risk Committee Sub-Committees
> Provides oversight and responsibility for the Group > Have delegated responsibility for specific risks
Risk Management Framework > Monitor risk exposures and controls for delegated
> Responsible for the continuous review of the risk risks
and control environment > Consider action where specific delegated risks are
> Monitors Group position against risk appetite outside of appetite
> Reviews ongoing compliance with all regulatory requirements > Escalate material risk issues to the Risk Committee
> Reviews the effectiveness of the Risk Management
Function on an ongoing basis
Group Risk Management Function Internal Audit & Audit Committee
> Headed by the Chief Risk Officer > Reviews the Enterprise Risk Management Framework
> Provides day to day support to the Risk Committee and tests the extent of the reliance that can be placed
in its role of oversight, monitoring and reporting on risk assessments performed by the risk management
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on risks facing the Group function
> Supports and challenges business risk owners in > Assesses the effectiveness of specific operational
the 1st line of defence controls in mitigating identified risks
> Provides oversight of all risks that could affect > Identifies and escalates control weaknesses, including
Novae's ability to meet its strategic objectives of agreement of remedial action plans
expert underwriting, consistent performance and dynamic > Provides quarterly reporting and monthly action
capital management plan status updates to the Audit Committee
> Assesses the effectiveness of the Risk Management
Function on an annual basis
From January 2016 onwards, the Group's risk management governance is
being amended to provide clarity of responsibility between Group
governance and specific subsidiary governance (and in particular, the
governance of Syndicate 2007). The remit of the Group Risk Committee
remains as described above, but the Governance change will allow a
sharper focus on strategic and Group-level risk issues. This additional
clarity in roles is expected to increase the robustness of risk
oversight at both Group and Syndicate level.
Internal audit review the effectiveness of the risk management framework
on an annual basis. Throughout the year, individual audit engagements,
as outlined in the audit plan, assess the design and application of
internal controls for managing the principal risks faced by Novae, which
can include those internal controls in relation to the financial
reporting process. In addition, a separate review on the effectiveness
of the risk management function is performed annually, providing an
overall opinion on the effectiveness of all risk management processes
throughout a 12 month period and consolidating any observations arising
from individual audit engagements. All findings are reported to the
Audit Committee.
Risk Culture
Risk management is at the heart of Novae's business culture and is
considered a driver of competitive advantage. We therefore foster a risk
aware culture so that risks are identified, assessed and managed. The
Risk Management Function works closely with the business to ensure there
is appropriate knowledge and understanding of the ERM Framework
throughout Novae, ensuring actions taken reflect Novae's risk culture.
The Board annually commissions the Internal Audit function to review the
effectiveness of risk management at Novae. All internal audit reviews
include cultural elements, such as the business awareness and execution
of the appropriate risk management approach.
Risk Processes and Controls
The high level and strategic elements of the framework described above
sit above a wide-ranging and robust set of Risk Management processes and
controls. The most significant of these are highlighted below:
1. The ORSA Process
A key development for 2015 has been the adoption of a Quarterly ORSA
(Q-ORSA) process to bring together core risk assessment and response
processes. This has also helped us to create focused and effective
Management Information for executives and the Board in the Quarterly
ORSA report. This is a focused report that summarises key risk
information, including:
> the as-is and projected position against risk appetite
> risk exposure and control performance
> emerging risks
> material risk events
> available capital
This has enhanced risk assessment processes in some areas, and has
brought together the output from other existing processes in a
consistent fashion.
Continued development of internal risk reporting is planned for 2016 to
reflect changes in the Risk Governance structure. This will enhance
information received by the Group Risk Committee and the Group Board in
respect of our principal risk exposures.
2. Risk response cycle
Risk owners are senior managers within the business responsible for the
day to day managing, monitoring and reporting of their allocated
risk(s). Similarly control owners are responsible for the operation,
monitoring and reporting of their allocated controls.
The Risk Management Function facilitates a risk and control
self-assessment (RCSA) every quarter to monitor the ongoing exposure to
risks and the effectiveness of controls. Risk owners confirm that risks
are being managed within agreed tolerances, and identify any areas where
remedial control action is required. The assessment includes
consideration of risk indicators that are updated to monitor compliance
with the risk appetite. Findings of the RCSA exercise are reported to
the sub-committees via risk dashboards, and to the Risk Committee
through the ORSA process. This is complemented, on a rolling annual
basis, by detailed control reviews (DCR), which ensure that controls are
appropriately designed and effective.
An Emerging Risks Working Group is charged with identifying,
investigating and reporting new or developing insurance risks and trends
Novae may be exposed to. Membership includes stakeholders across the
business, and an annual meeting is conducted to identify emerging risks
for escalation to the relevant sub-committees. Outputs from this process
are reported in the Q-ORSA.
3. Capital management and the internal model
The internal model is a set of processes and tools, including a
stochastic risk model, used to quantify risk to calculate regulatory and
economic capital requirements, and to provide insight to a wide range of
other business decisions.
Substantial investment was made in the Internal Model in 2015. This
investment has allowed us to both enhance the modelling methodology and
improve model performance, thus increasing the breadth and depth of
information and analysis we are able to incorporate in business
decisions. Our Internal Model is able to provide important insights in
many areas, including the following:
-- Capital setting - assessment of the regulatory and economic capital
requirements of the Group and of subsidiary entities
-- Capital planning - forward-looking assessment of the capital required to
support our strategic growth plans
-- Risk profile measurement and risk appetite analysis - analysis of
material risk exposures and comparison to appetite
-- Reinsurance purchasing - analysis of the outwards reinsurance programme
to support an effective and efficient purchase
-- Strategic assessment - consideration of the impact of strategic decisions
on risk profile and capital requirements
Continuing development of the Internal Model will allow this list of
uses to expand further into 2016 and beyond.
Given the importance of the internal model both in terms of setting
capital and the assessment of risk exposures, Novae has a robust,
independent model validation process that reports into the Risk
Committee. This ensures that model outputs are fit for purpose, and that
any assumptions and limitations in the modelling are discussed and
understood by model users, management and the Board. This validation
process is overseen by the Risk Management function.
Analysis from the internal model is supported by stress and scenario
testing, including reverse stress testing. Outcomes of this analysis
provide further insight to the risks facing the business and assist in
the development of mitigation strategies. Reverse stress testing further
supports the formulation of recovery plans identifying management
actions to return to a stable and sustainable position.
Viability Statement
The Directors have completed a thorough assessment of the risks facing
the Group, including those which threaten its viability over a three
year period.
A period of three future years has been selected as it is considered
long enough to reflect the key drivers of the Group's risk profile, but
short enough to be reasonably assessable given the nature of the
business. This period also aligns with the length of time over which
business at Lloyd's is managed and is consistent with the Group's
average assessment of duration of its economic liabilities.
The Board annually reassess the Group's strategy, which includes a
longer-term five year rolling forecast. The assessment of the three year
period has been made with reference to this.
Principal risks to the Group are summarised on pages 40 and 41. The
impact of these risks on the Group's viability has been assessed and in
doing so, a number of key assumptions have been made, principally that
market conditions will be in line with expectations and availability of
capital remains stable.
The Board has then examined the robustness of the Group's strategic plan
considering severe but plausible scenarios including changes to the
assumed level of growth, variations in market pricing, a change in
funding and the impact of a major catastrophic loss. The Directors have
concluded, that there is reasonable expectation that the Group with be
able to continue in operation and meet its liabilities as they fall due
over the three year period.
Principal risks
The Board has made an assessment of the principal risks facing Novae,
including those that would threaten its business model, future
performance, solvency or liquidity. The table on the following page
defines our principal risks, sets out our appetite for these, provides
our view on observable trends and relevant risk mitigation strategies.
Group risk appetite
The overall level of risk that the Group is willing to take on is a
function of the amount of capital at our disposal. Novae expresses an
overall risk appetite as a target surplus above the Lloyd's regulatory
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capital requirement for Syndicate 2007:
Novae seeks to maintain around 20% surplus capital over the regulatory
requirement on a prospective basis.
This allows efficient deployment of capital to optimize returns, whilst
maintaining sufficient balance sheet strength for flexibility in our
response to risk events and the changing risk and business environment.
The Group has remained within appetite throughout 2015, and we expect to
continue to do so going into 2016. Note that the Group's current
regulatory capital requirement is defined by the Lloyd's requirement for
Syndicate 2007. This is set to allow Lloyd's to maintain a target rating,
and therefore includes a material uplift relative to the Solvency II
minimum.
Risk category Description of risk Appetite Trend Key mitigations
Core risks - we have the expertise and experience
to price and manage core risks to derive a profit.
Our strategy therefore focuses on selecting, pricing
and managing these risks to deliver economic returns.
Underwriting risk
Catastrophe The potential for aggregated losses to arise from Novae has a positive appetite for catastrophe risk. Growth of exposures from underwriting opportunities Underlying strategy and geographical diversification
catastrophic events. We seek to diversify our exposures across our core in some niche areas is partially offset by the increased Monitoring and controls of aggregate exposures and
(re)insurance book, but recognise the potential for use of reinsurance to cover peak exposures. disaster scenarios across multiple return periods
aggregate losses arising from natural or man-made Strategic reinsurance purchase
catastrophic events.
Non-catastrophe The risk of adverse loss experience arising from small Novae has a positive appetite for non-catastrophe Continued pressure on rates has been offset by strategic Niche book of specialist insurance business
or large individual insurance claims (including the underwriting risk. diversification and dynamic allocation of capital Focus on underwriting
risk of mispricing underlying insurance contracts). Our residual appetite for Underwriting risk -non-catastrophe away from underperforming units. profitability, with regular monitoring of underwriting
is determined by our available capital and the adequacy performance
of returns available in the market. Proprietary pricing models and regular rate adequacy
monitoring including the effect of changes in terms
& conditions
Underwriting protocols limit exposure to individual
large losses
Strategic reinsurance purchase
Reserving The risk that claims reserves will be materially different Novae has a neutral appetite for reserving risk. The margin held over the actuarial best estimate reserves Use of proprietary and standard reserving models
from the ultimate cost of settlement. We recognise the uncertainty in estimating claim amounts remains stable around the top end of our target ranges. Internal and external reserve benchmarking
in advance of final settlement. Claims development review
Our appetite for reserving risk is set in our reserving
policy, which requires that reserves are set prudently,
with target margin ranges in excess of the actuarial
"best estimate".
Investment risk The risk of economic losses arising from fluctuations Novae has a positive appetite for investment risk. Change in the Investment Asset-Liability modelling
in the value of our asset and liability portfolio A measured level of investment risk is sought as it Strategy in 2015 has brought economic matching of techniques to ensure all sources of investment risk
driven by economic variables. offers the potential for enhanced returns, and diversifies assets and liabilities, with an explicit allocation are considered
from core underwriting risk exposures. to risk assets such as equities. This has reduced Strategic Asset Allocation process to optimize the
This risk is measured on an "asset - liability" basis. the economic risk from asset-liability mismatches, risk and reward balance
replacing it with risk asset exposure. This gives Investment modelling and stress testing to ensure
a higher expected return, with the potential for volatility within appetite
in reported results. Investment guidelines
monitoring
Risk category Description of risk Appetite Trend Key mitigations
Non-core risks arise as a consequence of executing
the strategy for core risks. We do not actively seek
to generate economic return from these risks, but
to control exposure that arises in the course of business.
Credit The risk arising from the potential failure of business Novae has a neutral appetite towards credit risk. Increased exposure to some reinsurance counterparties Specific risk controls are operated at a counterparty
counterparties to fulfil financial obligations to Credit risk arises through Novae's normal commercial has arisen as reinsurance usage has increased in response level, to ensure appropriate security for all reinsurance
Novae Group. operations, the most material of which is ceded reinsurance. to increases in gross underwriting exposures. Guidelines support careful selection and monitoring
Reinsurance protection is a key tool for managing We generally seek to reduce this risk via controls of counterparties, including limits to individual
our underwriting exposures, and this requires a measured over counterparty exposures. We do not seek to generate exposures
acceptance of credit risk. economic returns through the assumption of counterparty Purchase of collateralised
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This excludes investment counterparties, which are credit risks. reinsurances
considered as Investment Risk.
Liquidity The risk of not being able to meet our liabilities Novae has a negative appetite for liquidity risk. We continue to maintain a high allocation to cash Strategic liquidity target
as they fall due, or incurring excessive costs to We generally seek to reduce the potential that there and liquid assets, and monitor against minimum liquidity Stress testing of available liquidity against requirements
do so. might be insufficient funds available to meet claims. targets on a regular basis. in catastrophe situations
Strategic asset allocation considers duration match
between assets and liabilities
Limits on allocation to assets that may become Illiquid
in times of stress
Operational The risk arising from inadequate or failed processes/systems, Novae has a negative appetite towards operational Growth in the business and changes in structure have Operational control system that covers all material
people, or external events. risk. increased operational complexity; this has been offset business processes keeping
We seek to reduce exposures subject to cost and practical by improvements in systems, processes and controls the likelihood and impact of operational failures
considerations, recognising that operational risks to enhance operational capabilities. within
arise in all business systems and processes, and to 2015 has seen some large strategic projects in operations, acceptable bounds
eliminate these risks entirely would entail excessive which have been tightly managed according to our project Change management controls, including a project methodology
costs. methodology. Detailed Business continuity planning
Succession planning, talent management and effective
remuneration controls
Strategic risks arise from changes to external circumstances
and impact Novae's ability to generate adequate returns
from its strategy.
Strategic risk The risk that the strategy is not delivered against, Novae has a positive appetite for strategic risk. Long term strategies are delivering positive outcomes, Annual review of strategy by Board
not clearly communicated, or not appropriate for the We continually seek ways to build shareholder value and are subject to regular review and refresh. Major strategic opportunities assessed by reference
changing business environment. This includes Reputational as an underwriter of specialty (re)insurance products, to Group strategy
risk recognising that strategic risks arise from constant Established policy for interacting with the media,
change in the business environment as well as risks analysts, shareholders and regulators
in the implementation of our strategy.
Appendix B - Directors' Responsibility Statement pursuant to Disclosure
and Transparency Rule 4
The following statement is extracted from page 85 of the 2015 Annual
Report and is repeated here for the purposes of compliance with DTR
6.3.5. This statement relates solely to the 2015 Annual Report and is
not connected to the extracted information set out elsewhere in this
announcement or the Preliminary Announcement.
The Directors, whose names and functions are set out on pages 50 and 51
confirm that to the best of our knowledge:
> the financial statements, prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole;
> the Strategic Report contained in this report (on pages 8 to 48)
includes a fair review of the development and performance of the
business and the position of the Group. In addition, the risk
disclosures (on pages 102 to 117) describe the principal risks and
uncertainties faced by the Group; and
> in addition, each of the Directors considers that the Annual Report
and accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group's performance, business model and strategy.
Appendix C - Related Party Transactions
Certain Directors of the Group are also directors of other companies, as
set out in the biographies of the Board of Directors in the Corporate
Governance report on pages 50 and 51. Some of these companies conduct
business with the Group, including Morgan Stanley International plc (of
which Mary Phibbs is a non-executive director). All transactions between
such companies and the Group are carried out at arms-length and on
normal commercial terms.
During the period 1 January 2016 to 6 April 2016, there were no
transactions, loans or proposed transactions between the Company and any
related parties which were material to either the Company or the related
party, or which were unusual in their nature or conditions (see also
Note 31 to the Annual Report on page 143).
Enquiries:
Alex Moon
Group Company Secretary
6 April 2016 020 7050 9500
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Novae Group plc via Globenewswire
HUG#2001024
http://www.novae.com/home.aspx
(END) Dow Jones Newswires
April 06, 2016 04:31 ET (08:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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