Novae shares plunge as Canaccord cuts rating to 'hold' after FY warning

8th Dec 2016 10:20

(ShareCast News) - Shares in Lloyd's of London insurer Novae Group plunged on Thursday as Canaccord Genuity downgraded its recommendation to 'hold' from 'buy' and cut the target price to 800p from 900p.The downgrade came after Novae warned that larger individual risk and catastrophe losses in the year would lead to its full-year underwriting contribution being lower than it expected.The insurer has been hit by losses from interrupted production at Tullow Oil's flagship Jubilee oil field in Ghana, two product recalls, Hurricane Matthew, the New Zealand earthquake and a SpaceX rocket which burst into flames and destroyed a $200m satellite owned by Israel's Space Communication Ltd.Shares fell 18.61% to 679.63p at 1027 GMT.Novae expects a full year combined ratio in the range of 98-100%, compared to 96.1% at the first half. Canaccord predicts a full year combined ratio of 96.4%.The broker also cut its 2016 estimate for earnings per share by 40%."While management has said that 2016 large losses will not impact on underwriting strategy going forward, we have assumed a 0.5% higher loss ratio going forward," Canaccord said."This impact has been partly offset by higher yields going forward, for a 3% cut to 2017 and 2018 EPS estimates. "Canaccord added: "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."