Chief exec is upbeat despite profit drop of £241.3m

Chartis UK chief executive Lex Baugh has confirmed that plans to float the insurer on the stock market by the end of the year have been shelved.

Baugh – recently promoted to president and chief executive of Chartis Europe Holdings from his role as head of the UK business – was speaking as Chartis posted a pre-tax profit of £83m for 2009, down from £324.3m (excluding restructure) in 2008. He said an initial public offering (IPO) had been on the table, but insisted there was now “no plan” for it.

AIG had intended to use the flotation to raise funds to pay back the multibillion-dollar loan it got from the US government when it was bailed out in 2008, but AIG chief executive Robert Benmosche is believed to have had a change of heart.

Baugh said: “At that point in time, we were characterising a lot of the work we were doing in terms of making the company ready for a potential IPO. We are doing those same things because we need to do them in order to have Chartis get a standalone rating in order to maximise value from the standpoint of all the stakeholders, not least of which the [US] government. Those steps are all being taken, but there is no plan specifically for an IPO.”

AIG could revisit the idea of an IPO, or a trade sale, at another point in time.

Baugh remained upbeat about Chartis’s prospects, despite its plummeting profit and a deterioration in its combined operating ratio [COR] to 105.8% from 91.7%.

Baugh said this was driven by an increase in its loss ratio of 8.4 percentage points and an increase in the expense ratio of 5.7 percentage points.

He said the cost of the rebrand from AIG UK to Chartis had some effect on its 2009 expense ratio.

The insurer also posted a 5% fall in gross written premium to £2.17bn, from £2.28bn in 2008.

Click here for analysis: Charting the course.