London (1) London New York Robert S. Smith Allerton G. Smith Director – Senior Analyst Senior Director Moody's Analytics UK - Insurance Capital Markets Research Group Moody's Analytics Moody's Analytics JOURNALISTS: 44 20 7772 5456 JOURNALISTS: 212-553-0376 SUBSCRIBERS: 44 20 7772 5454 SUBSCRIBERS: 212-553-1653 Moody’s Analytics places the B (Average) Continuity Opinion of Lloyd’s syndicate 958 under review for possible upgrade LONDON, January 13th 2014 – Moody's Analytics (Moody’s) today placed the B (Average), stable outlook, continuity opinion of Lloyd's syndicate 958 (Canopius Managing Agents Limited) under review for possible upgrade following the announcement that NKSJ Holdings (“NKSJ”) had signed an agreement to purchase 100 per cent of the shares of Canopius Group Limited. Syndicate 958 is managed by Canopius Managing Agents Limited, whose ultimate holding company is Canopius Group Limited (Canopius), which is predominantly backed by private equity funds managed by Bregal Capital LLC. The syndicate writes a composite account with a material binding authority book. For 2014, syndicate 958 has a capacity of GBP175m with Canopius holding a 69% interest in syndicate 958. Canopius also holds a 67% interest in syndicate 4444 (Continuity Opinion B (Average)), which from 2014 is being written in parallel with syndicate 958, business being split 20:80 syndicate 958: syndicate 4444, with the syndicates’ combined effective capacity £875m. Please also refer to our separate press release related to syndicate 4444’s Continuity Opinion. Syndicate 958 recorded a 2012 annual loss of 23% of Net Premium Earned (NPE) on a combined ratio of 125% (including forex) at 31.12.12. Moody's stated that, in terms of reported results, on a cross-cycle basis the syndicate had recorded average profits of 4% of Net Premium Earned (NPE) for the period 2004 to 2012 under annual accounting, albeit benefiting from a material forex gain in 2008, performing in line with the B (Average) peer group in terms of indicative average annual returns on capital, but that more recent 5-year indicative average annual returns on capital had been in line with B- (Below Average) benchmarks. Moody’s continued, however, that with the syndicate operating under Canopius management from August 2012 and with its business being written in parallel with syndicate 4444 from 2014, Moody’s currently considered that its relative performance and continuity prospects should be in line with those of Canopius syndicate 4444 and the B (Average) peer group. NKSJ and Canopius announced in December 2013 that NKSJ’s subsidiary, Sompo Japan Insurance Inc. (“Sompo”) (Moody’s Investors Service A1 Insurance Financial Strength Rating) was due to acquire Canopius in the second quarter of 2014. On completion, Canopius is due to operate as Sompo’s international, Specialty insurer under its existing brand and management, continuing its current growth strategy. Moody’s commented that Canopius’ 2014 share of syndicate 958 and syndicate 4444’s combined 2012 Net Premium Written (NPW) represented some 5% of Sompo’s 2012 NPW and 3% of ultimate group, NKSJ’s 2012 NPW, although the full details of NKSJ’s participation in the combined syndicates’ operations had not yet been released. Furthermore, no disclosure had yet been made of any public commitment of additional support that might be made by NKSJ on completion of the acquisition. However, with the combined operation likely to be material to Sompo and Canopius’ combined operation’s lead syndicate 4444’s 5-year average indicative cross-cycle returns on capital in line with the lower end of the B+ (Above Average) peer group, Moody’s has placed the B (Average) continuity opinion of Canopius syndicate 958 under review for possible upgrade, reflecting Moody’s view of relative performance and continuity prospects for the syndicate over the insurance cycle. Moody’s stated that the review would focus on confirming completion of the acquisition and considering any potential formal commitment to the syndicate from Sompo, should any formal commitment be made. Moody’s continued that any upgrade was likely to be limited to a one-notch upgrade to B+ (Above Average), subject to the proposed acquisition being completed. The last action was in June 2012 when the syndicate’s B+ (Above Average), under review for possible downgrade, continuity opinion was downgraded to B (Average) and a stable outlook assigned. Canopius Syndicate 0958 is a Composite syndicate, ultimately backed c.69% by the Canopius Group, which operates within the Lloyd’s of London insurance market. * * * © Copyright 2014 Moody’s Analytics, Inc. and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. 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