UPDATE 2-UK insurer Novae confirms Chaucer approach
* Proposed merger on an all-share basis
* Chaucer says still exploring capital raising options
* Chaucer shares close 13 percenthigher (Adds background, analyst comment)
LONDON, Jan 27 (Reuters) - UK insurance company Novae (NVA.L) said on Tuesday it has approached the chairman of non-life insurer Chaucer Holdings CHU.L regarding a possible all share merger.
The statement follows an announcement made by Chaucer earlier saying it had received a potential merger offer, sending its shares up as much as 35 percent.
The proposal is for an all-share merger on a nil premium basis, Chaucer said in its statement.
It added that it continues to explore capital raising options.
Last week, Chaucer said it was considering raising new capital to take advantage of firmer global insurance prices.
The company was hit last year by rising claims and a weak investment performance, with profits for the six months to June 30 2008 slumping 90 percent.
The shares closed up 13.25 percent at 47 pence, having hit 56 pence following the statement.
Novae shares closed up 2 percent at 326.5 pence.
(Reporting by Ben Deighton; Editing by Elaine Hardcastle)
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