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Novae will return 45p a share, or about £33m, in capital to investors by mid-January, the Lloyd’s of London insurer is expected to say on Friday after 12 months of reorganisation, according to people with knowledge of the situation.
The company formerly traded as SVB and was hit hard by US casualty-related losses almost a decade ago. It was renamed in 2006 and has since been strengthening itself and refocusing its underwriting under Matthew Fosh, chief executive.
Novae, which has a market capitalisation of about £230m, has been sitting on some surplus capital for a couple of years and announced last December that it would look to return some of this, with analysts expecting a pay-out in the range of 35p-40p a share, according to people close to the business.
The extra cash on its books means it has long been seen as either a merger partner for other Lloyd’s businesses in need of funds, or as a potential takeover target for private equity or other insurers looking for a way into the Lloyd’s market.
The company was linked last year to a potential merger with rival Chaucer, which had been badly hit by losses on hedge fund investments during the financial crisis.
Since Apollo, the US private equity firm, launched its approach for Brit Insurance this summer, Novae has been talked of as a favourite next target for financial buyers.
Novae had substantial capital tied up in Novae Insurance Company Limited or NICL, a non-Lloyd’s vehicle that the company closed to new business and looked to merge with its Lloyd’s syndicate.
Novae announced in September it had completed the legal transfer of the NICL business into its syndicate, which opened the way for the capital return.
All Lloyd’s businesses have just completed their business plan approvals for 2011 with the Franchise Board, which sets their capital requirements for the year ahead.
The return of capital being planned by Novae will be subject to shareholder approval and will be affected by the issue of a new class of shares that will be exchangeable for cash in January 2011.
Novae shares closed up 15¾p at 330p on Thursday.