Newspaper article The Evening Standard (London, England)

Chaucer's Next Chapter May Turn the Tables

Newspaper article The Evening Standard (London, England)

Chaucer's Next Chapter May Turn the Tables

Article excerpt

Byline: Anthony Hilton CITY COMMENT

CHAUCER, the Lloyd's of London insurance group, has long been treasured by the London market for its entertainment value.

But it surpassed itself on Tuesday when a board meeting called to discuss a merger proposal from rival Brit Insurance -- known to people outside the insurance world as sponsor of the Oval -- resulted in the departure not only of chief executive Ewen Gilmour but also of finance director Mark Graham and senior independent director Chris Forbes. Then, to cap a turbulent day, Brit withdrew its offer.

The obvious conclusion is that the departing members supported the bid, and quit when they could not persuade their colleagues on the board to recommend it. But that appears not to be the case. The alternative explanation is that the outside shareholders said the Brit offer was inadequate, but they would only support Chaucer's continued independence if there was sweeping management change. Hearing the message, Chaucer's non-executive chairman, Martin Gilbert of Aberdeen Asset Management, picked up his broom and swept.

The finance director at least cannot have been that surprised. In March, Chaucer reported a loss of [pounds sterling]26.2 million -- not because of bad underwriting but because of [pounds sterling]71 million of losses on the investment side, which appear to have resulted from its having flirted rather too closely with hedge funds rather than sticking to the boring but safe investment strategies usually employed by insurance companies.

Graham, an actuary by training, got the blame for that, and became a target for institutional shareholders -- presumably those that don't have hedge funds of their own.

Actually, in Chaucer there is a rather good business trying to get out, and its underwriters are well enough respected in the market. If it could avoid the unforced errors, as they say at Wimbledon, it could do quite well on its own. Indeed, there is an interesting case to be made for the shares because Pamplona Capital Management -- a private-equity vehicle whose financial investment side is run by Paul Thompson, who used to run Resolution -- said in May that it would like to buy 29. …

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