TIDMCHU
RNS Number : 8811G
Chaucer Holdings PLC
19 May 2011
19 May 2011
CHAUCER HOLDINGS PLC
Interim Management Statement for the 3 months ended 31 March
2011
Highlights
- Total gross written premium income was GBP274.1m (2010 Q1
GBP250.1m)
- Forecast premium rates for underwriting portfolio to increase
by 6% for 2011, against previous forecast of 2.2%, following high
catastrophe losses
- UK motor market conditions continue to harden and we achieved
average rate increases of 19% across our portfolio in the
quarter
- Previously announced Queensland flood and New Zealand and
Japanese earthquake loss estimates remain unchanged
- Net investment return of GBP6.0m for the quarter, 0.5% return
on average fund (2010 Q1 GBP11.3m, 0.9% return on average
funds)
Post period end
- On 20 April 2011, the Board announced that it had unanimously
recommended an all cash offer for Chaucer Holdings PLC by The
Hanover Insurance Group for a total consideration of 56p per share.
This includes the 2010 final dividend of 2.7p per share
Bob Stuchbery, Chief Executive Officer, commented:
"Following the Japanese earthquake, underwriting opportunities
are increasing and we are actively seeking an improvement in terms
and conditions across the majority of our business classes, with a
marked rise sought for catastrophe-exposed property and marine
risks. Away from international markets, we also continue to benefit
from the improving UK motor market, where we forecast rates to
increase by 16.5% in 2011.
On 20 April 2011, the Board announced a recommended cash offer
for Chaucer by The Hanover Insurance Group. This transaction will
enable us to benefit from the scale, diversity and financial
strength of being part of an enlarged group while we focus on the
successful execution of our Foundation Flex Flagship strategy.
Looking forward, I remain confident of our continued progress
toward achieving our vision of being the leading Lloyd's specialist
insurer of choice."
Financial performance and position
Current trading and outlook
Gross written premium income was GBP274.1m (2010 Q1 GBP250.1m)
for the first quarter of 2011 as the business continued to take
advantage of good underwriting conditions in selected markets,
notably for UK motor and energy, in accordance with our Foundation
Flex Flagship strategy. Our new International Liability Division is
also benefitting from exceptional support from brokers despite
challenging market conditions.
The following table provides an analysis of income for the
period.
Gross written premiums (1)
1 January to 31 March
2011 2010
GBPm GBPm
Energy 49.4 44.1
Property 82.3 77.3
Marine 56.2 49.1
International Liability
(2) 8.6 -
Specialist Lines 19.9 24.4
Aviation 9.8 11.8
UK 43.8 36.1
Nuclear 4.0 5.1
Total divisional income 274.0 247.9
Syndicate participations
(3) 0.1 2.3
Run off (4) - (0.1)
Total income 274.1 250.1
(1) Excludes the impact of our increased ownership of Syndicates
1084 and 1176 arising from the reinsurance to close of third party
participations in the year of account in which the closure occurs
(2) International Liability Division launched for the 2011 year
of account
(3) Our underwriting interests on Syndicate 4242 (2009 and 2010
years of account) and Syndicate 4000 (2008 year of account)
(4) Represents the Reinsurance to Close of Syndicates 1204, 1224,
1229 and 1245 into Syndicate 1084
Private car rates continue to increase in excess of inflation
levels and we currently forecast an annual increase of
approximately 25%, taking into account an expected second half
slowdown in rate rises. We are ahead of our planned business
volumes for the first quarter and expect our reported combined
ratio to be less than 100% for 2011.
Initiatives to develop our UK motor direct business are also on
track, with ChaucerDirect generating significant volume growth from
the four major aggregator sites and obtaining renewal retention
rates above those for our broker business.
The fleet market is beginning to secure rate rises in line with
inflation, although further increases are required for this market
to return to profit.
Our Flagship Energy Division continues to press for rate rises,
especially in light of three major market losses in the first
quarter of 2011;storm damage at the Maersk Oil Gryphon installation
in the North Sea, an explosion at the Canadian Natural Resources
oil sands processing facility in Northern Alberta and the Petrobras
buoyancy can loss in the Gulf of Mexico. With total insured losses
of over US$1.5bn, the impact of these events is comparable to
Deepwater Horizon and demand a strong energy market response with
significant rate rises. In line with our strategic objective of
building a Global Energy Practice, we have completed the
recruitment of a seven strong development team to provide expert
technical underwriting and risk management support to brokers and
clients.
Our loss estimates remain as previously announced for the
Queensland floods and earthquakes in New Zealand and Japan.
Adequate reinsurance protection remains in place for 2011.
Catastrophe Date Assumed market Loss estimate
loss (1)
Queensland, Australia January Aus$4bn GBP8m
floods 2011
Christchurch, New Zealand February NZ$12bn GBP19m
earthquake 2011
North Eastern Japan March 2011 US$20bn to US$30bn GBP27.5m to
earthquake and tsunami GBP35.0m
(1) Net of reinstatement premiums and reinsurance
In response to these events, we are actively seeking an
improvement in terms and conditions across the majority of our
business classes, with a marked rise sought for catastrophe-exposed
property and marine risks.
We currently forecast premium rates for our underwriting
portfolio to increase by 6% this year, against our previously
published forecast of 2.2%, and with Syndicate 1084 still to write
two thirds of premium income for the 2011 year of account we expect
to write this business at improved terms.
Full year forecast
31 March 2011 Full year forecast
% 1 January 2011
%
Energy +11.9 +9.7
Property +1.3 -7.9
Marine +4.6 0.0
Specialist Lines +0.6 +1.2
International Liability +3.0 0.0
Aviation +3.3 -2.0
Combined (excluding UK) +5.5 +0.5
UK +16.5 +14.2
Combined +6.0 +2.2
During the quarter, we released further net loss reserves
created in 2010 and prior years of GBP13.1m (2010 Q1 GBP10.8m),
with the bulk provided by the Property and Marine Divisions, in
addition to the GBP7.0m of releases announced on 18 March in
relation to reduced claims arising from the 2010 New Zealand
earthquake and Australian floods.
Investment portfolio performance
We achieved a net investment return of GBP6m (0.5% return on
average funds) for the first quarter of 2011 (2010 Q1 GBP11.3m or
0.9%). The return for April 2011 was GBP4m or 0.3%.
At 31 March 2011, we held financial investments (excluding the
GBP17.0m investment in Antares Holdings Limited), cash and deposits
of GBP1,430.9m (31 December 2010 GBP1,455.0m), comprising bonds of
GBP688.2m (48.1% of portfolio), cash and deposits of GBP734.5m
(51.3% of portfolio) and equities and hedge funds of GBP8.2m (0.6%
of portfolio).
The bond portfolio performed satisfactorily during the quarter,
recording a return of 0.5%. The average duration of the portfolio
at 31 March 2011 was 1.6 years (31 December 2010 1.4 years) and the
weighted average yield to maturity was 2.0% (31 December 2010
1.9%).
Returns from cash and deposits remain more certain than for
other asset classes but poor due to continued low interest rates.
Where approved liquidity and credit limits permit, we have placed
funds on longer-term deposit at favourable rates.
The Hanover Insurance Group
On 20 April 2011, the Board recommended the cash acquisition of
Chaucer Holdings PLC for 56p per share by The Hanover Insurance
Group. This includes the 2.7p final dividend for the year ended 31
December 2010 announced on 7 March 2011 and payable to shareholders
on 27 May 2011. For further information on this transaction, please
refer to the stock exchange announcement of 20 April 2011 and the
circular issued to shareholders on 11 May 2011. Both of these
documents are available on our website.
Calendar
We will hold our AGM at 12 noon today at our offices at
Plantation Place, 30 Fenchurch Street, London EC3M 3AD.
Cautionary statement
This statement includes known and unknown risks, assumptions,
uncertainties and other factors that are forward looking in nature.
As a result, the performance or achievements expressed or implied
by such forward-looking statements may be materially different from
the actual performance or achievements of Chaucer. Except as
required by the Listing Rules, Disclosure and Transparency Rules
and applicable law, we undertake no obligations to update, revise
or change any forward looking statements to reflect events or
developments occurring after the date of this statement.
Enquiries
Bob Stuchbery, Chief Executive Officer
Bruce Bartell, Chief Underwriting Officer
Ken Curtis, Chief Finance Officer
Chaucer Holdings PLC
T 020 7397 9700
Jessica Stephenson, Marketing and Communications Manager
Chaucer Holdings PLC
T 020 7105 8258
E Jessica.stephenson@chaucerplc.com
Justin Griffiths/Sarah Gestetner/Kate Lehane
Citigate Dewe Rogerson
T 020 7638 9571
E chaucerpr@citigatedr.co.uk
Website: www.chaucerplc.com
Notes to editors
Chaucer Holdings PLC is a diversified insurance group listed on
the London Stock Exchange. Chaucer underwrites business at Lloyd's,
the world's leading insurance and reinsurance market.
Chaucer deploys specialist underwriters in over 28 major
insurance and reinsurance classes, balancing global marine, energy,
non-marine and aviation with UK motor and nuclear.
Headquartered in London, Chaucer has international operations in
Buenos Aires, Copenhagen, Houston and Singapore.
For more information on Chaucer, please visit
www.chaucerplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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