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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 £26.2 million - not because of bad underwriting but because of £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 headed by Paul Thomson, the man who used to run Britannic Assurance - said in May that it would like to buy 29.9% of the business.
Furthermore, it has taken advantage of the turmoil this week to snap up just under 10% - at which point it has to mark time until the FSA gives it approval to go beyond that threshold, which will no doubt take a month or two.
Pamplona is not saying what its game is, but it's not rocket science. There is scope for consolidation among Lloyd's vehicles but it tends not to happen because they can never agree on who is going to be boss - albeit that is something which is not currently a problem at Chaucer. It also could be quite a good time in the insurance cycle. Although one can never be sure about anything in insurance, rates appear to be hardening in some classes, and the shortage of capital throughout the world may well have the effect of reducing the amount of competition going forward.
That means Chaucer's prospects probably look better than those of Brit, because what the proposal has done is focus attention on why Brit felt it needed a deal so much that it was prepared to move when its share rating was significantly worse than Chaucer's, at 0.7 times asset value against 0.9 times. It undermined investor confidence that the bank doing the refinancing Brit needed to put in place before it could launch its offer seemed to take an inordinate amount of time.
Brit then failed to get the Chaucer board on side and, realising it did not have the firepower to increase its offer because any improvement in the terms would just have increased the dilution and trashed its share price, it dropped the whole idea.
So if in a few months' time a reinvigorated Chaucer goes looking for deals, don't be too surprised if Brit finds it has been turned from predator into prey.
We'd miss IFAs if they weren't there
It's an unfortunate fact of life that no one much cares for independent financial advisers — perhaps because too many in the past have appeared to be not particularly independent of the product providers from whom they draw large commissions, and not particularly skilled in their advice. But the brutal lesson from a little-noticed deal late on Tuesday is that we would miss them if they were not there.
The Money Portal — Britain's largest IFA network behind such brands as Burns Anderson, Sage Financial Services and Willis Owen — went into administration and was promptly bought from the receivers by a new business Honister Capital. The principal behind Honister is Peter Simon, the founder of High Street fashion chain Monsoon, which was a client of Money Portal.
Money Portal got into difficulties because it borrowed money to expand and at the beginning of the year had debts of £30 million, just when the savings market collapsed. This transaction, known as a pre-pack administration, frees the business of its debts, so the new company which emerges should be able to trade profitably.
Pre-packs sometimes look like stitch-ups but this time we should be relieved. Money Portal has 150,000 clients whose portfolios are held on its systems. If it had collapsed, all these people's savings would have been frozen, for months, if not years, while the business was liquidated or a buyer found. It could have been as scary as Northern Rock, and a nightmare the FSA.
