Losses cut Chaucer H1 profit by 59%

Lloyd’s insurer Chaucer has made a pre-tax profit of £7m for the first half of 2010, 59% down on the £17m it made in the same period last year. Chaucer’s combined ratio jumped to 105% from 91%, and the company made an underwriting loss of £16.4m compared with a profit of £28.6m.

The company was hit by claims from the Chilean earthquake, the Deepwater Horizon oil rig explosion, and European winter storm Xynthia, among others. Chaucer expects a combined net loss from Chile and Xynthia of £25m, $25m (£16.2m) from Deepwater Horizon, £1m from the sinking of the Aban Pearl submersible and £10.7m from the Bangkok riots.

Chaucer has also been affected by rising bodily injury claims in its UK motor book. The UK division’s combined ratio was 111%, which Chaucer CEO Bob Stuchbery said he was disappointed in. The UK division’s combined ratio also includes the impact of the recently-announced 2.5% value-added tax increase on claims reserves payable from 2011 onwards.

However, the firm expects motor business written in 2010 to have a combined ratio of below 100% as a result of rate increases. Chaucer expects to increase rates by 16.8% in UK motor for the full year 2010.

Following a review of its strategic operations, Chaucer has opted to remain domiciled in the UK “for the present”. In particular, the company expects to obtain a cash flow benefit from the recent introduction of equalisation reserves and the UK government’s decision to reduce the rate of corporation tax to 24% over four years starting April 2011, from 28% currently.