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Catastrophes Hurt Chaucer's 2010 Pretax Profit; Energy and Motor Expansion Ahead

Source: A.M. Best Company

Posted on 09 Mar 11

As it reported on a year that saw pretax profit drop 22%, Lloyd's insurer Chaucer Holdings plc outlined key elements of its 2011 strategy.

Building its global energy practice and direct-writer position in the U.K. motor market are on that list, Robert Stuchbery, chief executive officer, said in a statement. Chaucer also intends to generate an after-tax return on equity of more than 12%.

Global energy and the United Kingdom market, which are responsible for more than 40% of overall premium income, are operating in a favorable underwriting environment, Chairman Martin Gilbert said in a statement.

"The diversity at the heart of our underwriting portfolio is one of our key strengths as a business," Gilbert said.

Chaucer reported a 2010 pretax profit of 32.9 million pounds (38.2 million euros), down from the 2009 figure of 42 million pounds. Gross written premiums rose 6.7% to 848.7 million pounds from 795.6 million pounds. Investment return fell to 33.6 million pounds from 53.3 million pounds.

"It was another challenging period for the insurance industry, dominated by high-profile natural and man-made catastrophe losses," Stuchbery said. "This impacted the result of our property division, although energy, marine and nuclear produced good results. We are also pleased with the progress made by our U.K. division towards its target of a sub-100 combined ratio for 2011."

Stuchbery cited the Deepwater Horizon oil spill in the Gulf of Mexico, floods in Australia and earthquakes in Chile and New Zealand. On the positive side, he said, was an "absence of U.S. hurricane-related losses."

Chaucer has received takeover interest from international private equity group Terra Firma Investments. Chaucer declined further comment on the results, citing the outside interest.

"As previously announced, we have received a number of takeover approaches that are subject to due diligence and preconditions, and it will take time to ascertain whether an offer for the business may be forthcoming," Gilbert said. "We continue to hold discussions with interested parties with a view to maximizing value for shareholders."

The capacity of Syndicate 1084 was increased to 825 million pounds in 2011, from 745 million pounds. Much of that expansion was earmarked for the U.K. motor and energy sectors.

Chaucer, which established an international liability division with a 2011 capacity of 43 million pounds, increased the group underwriting interests by 7.7% to 707.2 million pounds from 656.9 million pounds.

The results were also affected by low interest rates, Gilbert said in a statement.

"This has been an important year in the strategic development of Chaucer, with the board reviewing the long-term direction of the group to ensure that we continue to respond positively to the changing dynamics of the insurance market and to differentiate ourselves successfully as a specialist Lloyd's business," Gilbert said.

"The 2011 underwriting year has started positively with both rates and premium income volumes achieved in line with budget," Stuchbery said.