NOVAE GROUP PLC

Annual Financial Report and Notice of Annual General Meeting

Novae Group plc ("the Company") confirms that the following documents were posted to shareholders on 31 March 2015:

  1. Annual Report and Accounts for the year ended 31 December 2014
  2. Notice of Annual General Meeting to be held on 13 May 2015
  3. Proxy form for the Annual General Meeting to be held on 13 May 2015

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 documents 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 2014 Annual Report

The information below, which is extracted from the 2014 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 4 March 2015 (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 2014 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2014 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 2014 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 - Directors' Responsibility Statement pursuant to Disclosure and Transparency Rule 4

The following statement is extracted from page 81 of the 2014 Annual Report and is repeated here for the purposes of compliance with DTR 6.3.5. This statement relates solely to the 2014 Annual Report and is not connected to the extracted information set out elsewhere in this announcement or the Preliminary Announcement.

The directors confirm that to the best of our knowledge:
>> the financial statements, prepared in accordance with the applicable set of accounting standards, 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 7 to 45) 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 96 to 111) describe the principal risks and uncertainties faced by the Group; and
>> in addition, each of the directors considers that the Annual Report, 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 B - Related Party Transactions pursuant to Disclosure and Transparency Rule 4

a) JP Hastings-Bass was Chairman of Asia Pacific, International Offices division Arthur J Gallagher, Director of Arthur J Gallagher (Singapore) Pt Ltd, Managing Director of AJG division containing OIM UK and Woodbrook, Contego, Zennor, SRS & Australis, Gallagher Heath Schemes & Affinity and Gallagher Binder Brokers until 19 December 2014. These are part of the Arthur J Gallagher group of companies, within which is a Lloyd's broker which placed risks with Syndicate 2007. The cover is provided on normal commercial terms and on an arm's length basis. The risks placed with Syndicate 2007 totalled £29,862,642 (2013: £23,646,126).

b) DJ Pye is a non-executive director of Independent Services Group Limited and its subsidiary Independent Broking Solutions Limited, which places business in Lloyd's for a number of appointed representatives. The cover is provided on normal commercial terms and on an arm's length basis. The risks placed with Syndicate 2007 totalled £277,889 (2013: £167,019).

c) RDC Henderson is a director of Majedie Investment Trust plc which purchased insurances that are partially underwritten by Syndicate 2007. The cover is provided on normal commercial terms and on an arm's length basis. The premium paid to Syndicate 2007 in 2014 totalled £16,081 (2013: £6,595).

d) MC Phibbs is a director of Morgan Stanley & Co International plc. A company within the Morgan Stanley group purchased insurances that are partially underwritten by Syndicate 2007. The cover is provided on normal commercial terms and on an arm's length basis. The premium paid to Syndicate 2007 in 2014 totalled US $93,831 (2013: US $32,687).

During the period 1 January 2015 to 31 March 2015, 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 32 to the Annual Report on page 137).

Appendix C - Risk Management pursuant to Disclosure and Transparency Rule 4

Risk Management Strategy & Objectives

The Risk Management function covers the management of all risks that could affect Novae's ability to meet its strategic objectives of expert underwriting, consistent performance and dynamic capital management. To deliver against its strategy, Novae has developed the following risk management objectives:
> Align risk appetite with strategic objectives
> Promote effective risk based decision making
> Manage loss volatility
> Identify and manage multiple and cross-enterprise risks
> Seek out and capitalise on business opportunities
> Ensure effective deployment of capital
> Ensure overall efficiency, security and continuity of operations

Risk management is at the heart of Novae's business and is seen as a driver of competitive advantage.

Enterprise Risk Management Framework

Novae has developed an Enterprise Risk Management ("ERM") framework with the objective of providing a consistent view of risk that is aligned and integrated with strategic decision making, and reflecting a defined risk appetite.

As part of this Novae adopts a three lines of defence model, summarised below:

First Line: Business Management

Second Line: Risk Management Third Line: Internal Audit
Primary responsibility for risk identification, assessment, mitigation and monitoring Responsibility for risk oversight, challenge of business management and reporting to the Risk Committee and Boards Provides risk assurance through independently testing the design and operation of controls

The ERM Framework is integral to the way in which the Group manages its business.

> High Level Risk Appetite Statements have been developed to serve as an articulation of the Group's appetite for risk on a basis consistent with the Group's strategy. These are framed initially in terms of high level outcomes - e.g. earnings risk, capital risk - but also include statements at a more granular level where the Board wishes to express a view about specific risk types - e.g. catastrophe risk.

A risk appetite, consistent with the High Level Risk Appetite Statements, is set for each individual principal risk by the relevant risk owner and recommended by the Risk Committee to the Board for approval.

> Business planning is an annual process. The Group prepares an annual business plan and a medium term business forecast as a basis for capital and operational planning. Both the annual business plan and the medium term forecast are prepared in accordance with the Group's strategy and risk appetites.

> The Internal Model is a set of processes and tools, including a stochastic risk model, used by the business to quantify and manage risk against appetite, and to calculate the Solvency Capital Requirement ("SCR"). The Risk Committee has oversight of the Internal Model, for which day to day responsibility is delegated to the Chief Risk Officer. The Internal Model is built and operated by the Actuarial Function, led by the Group Actuary. The review of parameterisation, model results and model changes - in accordance with the model change policy - is performed by the Risk Committee.

> A solvency assessment is performed on a continuous basis to review the composition of the capital available to meet the regulatory capital requirement.

> The risk management function has developed a number of tools to assist the monitoring, mitigation and management of risks. The risk matrix records the principal risks to the business, and documents the key controls applied to mitigate those risks.

Compliance with risk appetite is monitored on a forward looking basis through the use of risk indicators set out in a risk dashboard, presented to the Risk Committee. Action is taken when breaches are identified.

Stress and scenario analyses are performed periodically, to understand further the risks facing the business, test compliance with risk appetite and support the development of mitigation strategies.

A separate Emerging Risks Working Group is charged with identifying, investigating and reporting any new or developing insurance risks to which Novae might be exposed. This is chaired by the Chief Risk Officer and its findings are reported to the Risk Committee.

> The role of monitoring risk exposures is delegated by the Board to the Risk Committee. Further detail on the Group governance structure is provided on page 33.
The Own Risk and Solvency Assessment ("ORSA") report is produced annually as a consolidated analysis of the strategy, risk profile, capital and solvency of the business, on a retrospective and forward looking basis.


Key Risks



Risk category


Description of the risk


Trend


Key mitigants



Insurance risk

Underwriting - Catastrophe

The potential for losses to arise from catastrophic events Increased use of catastrophe reinsurance has resulted in reduced net exposures relative to gross exposures, although net exposures have increased in monetary terms for some perils

Monitoring of aggregates and disaster scenarios; reinsurance purchase

Underwriting- non- catastrophe

The risk of adverse attritional loss experience No major change Robust business planning process, including reinsurance purchase; use of pricing models
Underwriting- systemic mis-pricing

The risk that price is not adequate to cover the risk Recognition of continued downward pressure on rates Rate adequacy monitoring and reporting; use of pricing models
Reserving The risk that claims reserves will be materially different from the ultimate cost of settlement

No major change. The margin held over the actuarial best estimate reserves remains stable Use of proprietary and standard reserving models; internal and external reserve benchmarking; claims development review
Claims

The risk of uncertainty in the outcome of the claim settlement process No major change Segregation of claims function from underwriting; processes and procedures to ensure appropriate claims handling

Credit risk The risk of loss if a reinsurance, intermediary or investment counterparty fails to meet its obligations No major change. Continue to follow our reinsurance, intermediary and investment guidelines for the careful selection and monitoring of counterparties

Counter-party credit assessment; concentration limits; monitoring of aged receivables
Market risk The risk of loss arising from fluctuations in the value of investments driven by interest rate or currency fluctuations Macro-economic uncertainty continues and the prolonged low interest rate environment prevails

Duration monitoring and hedging; currency monitoring and hedging
Liquidity risk The risk of not being able to meet our liabilities as they fall due, or incurring excessive costs to do so

No major change Asset/liability monitoring; liquidity monitoring
Capital risk The risk that capital resources are inadequate to support regulatory capital requirement

The possibility remains that either the Syndicate or Lloyd's fails to meet the required standards for the Internal Model under Solvency II

Capital planning and modelling; stress and scenario testing
Monitoring of regulatory developments; ongoing dialogue with regulators
The successful delivery of our 2014 Solvency II programme has reduced the former risk


Regulatory and
operational risk

Operational Risk The risk arising from inadequate or failed processes/systems, people, or external events No major change Business continuity planning; scenario planning and rehearsals
Appropriate employment contracts and compensation policy; wide share ownership
Service level agreements and contract monitoring


Regulatory Risk


The risk arising from failing to discharge regulatory and legal obligations



No major change


Monitoring of regulatory and legislative developments; ongoing dialogue with regulators

Conduct Risk The reputational, business and regulatory risk arising from Novae or its distribution partners failing to pay due regard to the interest of its customers Regulatory and reputational risks arising from the poor treatment of customers continues to increase as the level of Conduct regulation rises Compliance with the FCA's conduct risk requirements and Lloyd's minimum standards; product controls through the establishment of the Product Oversight Group; root cause analysis of customer complaints; training and awareness programmes for relevant staff



Strategy and
reputational risk
The risk that the strategy is not delivered against, not clearly communicated, or not appropriate
The risk of loss from reputational damage through underwriting or non-underwriting activities.

No major change Annual review of strategy by Board; major strategic opportunities assessed by reference to Group strategy
Established policy for interacting with the media, analysts, shareholders and regulators

Risk Management Oversight

During 2014 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. The role of monitoring risk exposures is delegated by the Risk Committee to a number of functional committees which have responsibility for the management of the specific risks (with the exception of strategy and group risk, which remain the responsibility of the Board of Novae Group plc). A centralised Risk Management Function, headed by the Chief Risk Officer, provides day-to-day support to the Risk Committee in its role of oversight, monitoring and reporting on the risks facing the Group.

The risk and control environment is subject to continuous internal review by the Risk Committee. It ensures ongoing compliance with the latest requirements of Lloyd's, the PRA and the FCA and other overseas regulators as appropriate.

Further assurance is provided by Group Internal Audit. This overall assurance includes a review of the Enterprise Risk Management Framework to determine the extent to which reliance can be placed on risk assessments performed by the Risk Management function.

This review forms part of the process for generation of an internal audit plan. The planning process reviews the risks involved in each area of operation by reference to the Risk Matrix as well as discussions with senior management and Non-Executive Directors and, based on the review and discussions, determines the inclusion of a particular area in the plan and also how often the particular area should be considered. The plan is subject to amendment if a risk changes significantly during the year with any material changes to the audit plan being agreed with the Audit Committee.

The internal audit process takes the risks relating to an area of operation and ensures the controls designed to mitigate those risks are in place and working effectively. Each audit completed is the subject of a formal written report, which includes an action plan agreed by management.
The final reports are then circulated to senior management.

A separate quarterly report is circulated to the Audit Committee, which provides a summary of the various audits and findings, together with agreed actions. Actions are tracked through to completion, with action plan status being reported on a monthly basis to Audit Committee members.

Enquiries:

Teresa Furmston
Group Company Secretary

1 April 2015
020 7903 7300
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