Chaucer PLC - Trading Update and Syndicate Forecasts - 15.08.07

Chaucer Holdings PLC recently published an update on trading and syndicate forecasts for the 2005 and 2006 years of account. The full press release is attached.

Highlights
 Forecast result trend is positive for both 2005 and 2006.
 Market conditions remain encouraging.
 Total written premium for 2007 ahead of the previous year as at the end
 of July.

Current trading
We are pleased to report continued positive progress during 2007. Premium income written, net of brokerage, to the end of July 2007 was £329m, or 77% of the combined planned income for Syndicates 1084 and 1176 for the year, compared to £317m or 78% of planned income at the same stage of 2006.

We currently forecast premium rates to weaken by approximately 6% in 2008 across our non-motor divisions, while UK motor rates should improve by at least 5% as that market upturn begins. As previously announced, in response we plan to decrease the 2008 capacity of Syndicate 1084 by 8.3% to £445.0m, with a proposed increase in UK motor underwriting partially offsetting the targeted reduction across non-motor classes.

As at 30 June 2007, Chaucer held financial investments, cash and deposits of
£884m, comprising:


Cash and short term bonds                            £661m
Equities                                                        £106m
Hedge funds                                                   £97m
High yield bond funds                                     £20m


The total investment return on this portfolio was 3.3% for the 6 months to 30
June 2007.

Since then, the value of our equity portfolio has declined as financial markets have reacted to credit market weakness caused by problems with US sub-prime mortgage-backed securities. We have no material exposure to this sector, either through bond or hedge fund investments, and its weakness has only had a minor effect on the remainder of our investment portfolio during July.

Earlier this year, we took the decision to secure gains on our high yield bond
fund investments. We completed the disposal of these funds on 10 July 2007. The funds achieved an investment return of 2.9% during 2007.
Latest syndicate forecasts
Our 30 June 2007 syndicate forecasts support the confidence underpinning our business, with catastrophe-related losses settling within budget and reserve releases relating to prior periods continuing our trend of prior year
improvements.

The mid-point forecast has increased by 3.9% to 8.0% for our 2005 underwriting interests of £372m.

The mid-point forecast has increased by 1.5% to 13.4% for our 2006 underwriting interests of £427m.

We shall provide a further update on current trading and our plans for 2008 with the announcement of our interim results for the six months to 30 June 2007 on 10 September 2007.

Ewen Gilmour, Chief Executive Officer, commented: "I am pleased to report further improvement in our syndicate forecasts. Despite significant catastrophe-related losses, 2005 is firmly on course to produce healthy profits, while, as widely reported, in the absence of major catastrophes 2006 is shaping up to be an excellent year. I am also pleased to report continued good progress in 2007."

To see the full report click here.