Novae closes in on Chaucer

Chaucer and Novae are in due diligence over their proposed merger, said Novae’s chief executive Matthew Fosh this week, as the two insurers announced their results.

A source confirmed that Novae was up against rival suitors Amlin and Brit, as well as a possible offer from Bermuda.

Novae announced its intention to merge with Chaucer on 10 February. “A merger could bring attractive scale and diversification benefits within the context of the group’s strategic objectives but will only be pursued on terms beneficial to Novae shareholders,” said Fosh.

Novae reported pre-tax profit of £40.2m for the year to 31 December 2008, slightly down from £41m in 2007. Net tangible assets per share were up 12% to 410.8p for 2008 from 366.7p in 2007. Investment income for 2008 stood at £50m, up from £46.8m. “It was all about not being sucked into the ‘wonderful’ products available in 2006/07/08 and being tempted into doing fancy things with investments. We just stuck to gilts, bonds, cash and treasuries,” said Fosh.

Novae reduced the estimated loss from hurricanes Gustav and Ike from $45m (£33m) to less than $40m. “We have also made exceptional investment return,” said Fosh. “Rates are set to harden across many areas of the market in response to capital erosion and high-profile losses and we relish the opportunities.”

Chaucer announced pre-tax loss of £26.2m for 2008, down from £89.4m profit in 2007. But net earned premium rose 23.1% to £547.2m from £444.5m.