Brit makes proposed offer for Chaucer

LONDON (Reuters) - Lloyd's of London insurer Brit Insurance (BRE.L) made an all-share proposed offer on Monday for peer Chaucer, offering 0.23 Brit shares for each Chaucer (CHU.L) share.

Chaucer said in a separate statement that it recommends shareholders to take no action, whilst it discusses the proposed offer with a number of shareholders ahead of any further announcements.

The deal would result in Chaucer shareholders owning approximately 29 percent of the enlarged business, it added.

Brit, which is currently in the process of shifting its tax base to the Netherlands from Britain, said the proposal is conditional on a recommendation from the board of Chaucer.

However, Brit faces competition from private equity firm Pamplona Capital Management, which is in discussions with Chaucer regarding a possible stake sale.

Chaucer, whose shares closed at 42 pence on Friday, said its premium income is ahead of budget for the first five months of 2009 whilst it has benefited from an absence of major catastrophes compared to last year.

The company forecasts premium rates to increase by nearly 6 percent in 2009 for its underwriting portfolio.

Since the group's 75 million pound fundraising in January, Chaucer has increased capacity at its principal Syndicate 1084 by 15 percent whilst premium income is up 39 percent year-on-year.

Shares in Chaucer were down 2.38 percent at 8:02 a.m. British time and shares in Brit rose 0.57 percent.

($1=.6067 Pound)

(Reporting by Lorraine Turner; Editing by Hans Peters)