Chaucer turns profit to loss

Chaucer, the specialist Lloyd's insurer has announced pre-tax losses of £26.2m, down from last year’s £89.4m profit after a £71m haemorrhage from its investments and underwriting profits fall by nearly 60%.

Highlights (2007 in brackets)

• Gross written premiums up 26.9% to £741.0m (£584.1m)
• Net earned premiums up 23.1% to £547.2m (£444.5m)
• Underwriting profit before investment income of £33.0m (£75.5m)
• Combined ratio of 93.9% (82.6%)
• Investment losses of £71.0m (profit £41.7m)
• Loss before tax of £26.2m (profit of £89.4m)
• Total dividend of 5.5p, an increase of 10%

Ewen Gilmour, Chief Executive Officer, said: 'Our good underwriting performance in 2008 was undermined by the impact on our investments of the considerable economic upheaval. With a strengthened balance sheet, improving underwriting conditions and the talent and capital to take advantage, we look forward to 2009 and beyond with confidence and optimism.'

The company said: “We expect rates to continue their rise throughout 2009 and 2010 as capital losses and reduced investment income take their toll, causing the industry to focus even more closely on gross underwriting profit. Less capital generally means less competition for underwriting and higher rates. The credit crunch has taken a significant bite (probably around US$100bn) out of the investments held by insurers, and the further loss of capital caused by major insured losses should reinforce the rise in prices. In addition, Lloyd's should also benefit from increased business this year as clients, having witnessed the troubles of major insurers, place their risks across a larger number of carriers.

“Looking further ahead, we remain confident of our ability to grow the business profitably as the market hardens toward 2011. We will benefit from our underwriter recruitment programme that is now largely completed, which aims to provide us with the depth of underwriting talent required to achieve our long-term plans. We have recruited 20 underwriters throughout our international marine and non-marine offices in London, Singapore and at Chaucer Insurance, our motor division. Our plans also include further distribution channel development to complement the Lloyd's presence in both major and growing markets with our own presence, as we have done successfully in Singapore.

Highlights

• Steps taken to significantly de-risk investment portfolio; exit from equities and absolute return bond funds and redemptions submitted for all hedge fund investments
• Rates improving in the catastrophe-exposed property, energy and marine markets and the UK motor market
• Targeting a 5.4% rate increase across Group underwriting portfolio for 2009
• The hardening market should gather pace through 2009 and 2010
• £75.0m capital raising to strengthen balance sheet and support additional underwriting opportunities
• Further increase in syndicate 1084 capacity to at least £545.0m for 2009 (initial capacity for 2009: £480.0m, 2008: £445.0m) to take advantage of hardening market conditions
• Underwriting interests increase to at least £546.1m (2008: £519.8m)
• Underwriting recruitment to deliver growth plans largely complete