Chaucer profit drops 20% on catastrophes

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Insurer still in discussions with potential buyers

Lloyd’s insurer Chaucer made a profit after tax of £22.5m for the full year of 2010, down 20% on the £28.1m it made in 2010.

Profit before tax for 2010 was £32.9m, down 22% on 2009’s £42m, and the insurer’s reported combined ratio for the year increased to 99% from 93%.

The profit reduction comes despite a 6.7% increase in gross written premiums to £848.7m in 2010 from £795.6m in 2009.

While there were no US-related hurricane losses, Chaucer was hit by a series of natural and man made catastrophes elsewhere in the world, including the Chilean earthquake and Deepwater Horizon oil rig explosion (see figures below). As a result, the proerty division posted a combined ratio of 107% in 2010, compared with 77% in 2009.

In addition, Chaucer’s UK business made another underwriting loss, posting a combined ratio of 106%. However, this was an improvement over 2009’s 109%. Thanks to rate increases taken during the year for motor business, Chaucer said the underwriting year combined ratio for 2010 would be 98%.

Chacuer boosted UK motor rates by 17.3% in 2010 and is forecasting 2011 increases of 14%, compared with expected claims inflation of 8%.

Chaucer chairman Martin Gilbert also said the firm was continuing discussions with parties interested in buying it. “A further update will be provided in due course, when appropriate,” he said.

The company revealed in February that it had received a number of takeover approaches. It later emerged that one of the suitors was Guy Hands private equity firm Terra Firma.

Gilbert said the approaches were subject to due diligence and pre-conditions, and it would take time to determine whether an offer would be made.

Chaucer 2010 highlights in £m (compared with 2009)