UPDATE 2-Pamplona ups stake in Chaucer, Brit offer rejected

* Pamplona builds stake to 9.99 pct

* Brit withdraws offer for Chaucer after rejected by board

* Chaucer CEO, CFO to leave company (Adds statements from Brit, Chaucer)

LONDON, June 23 (Reuters) - Private equity firm Pamplona Capital Management said on Tuesday it had upped its stake in Lloyd's of London insurer Chaucer Holdings (CHU.L: Quote, Profile, Research) to 10 percent, whilst rival bidder Brit Insurance (BRE.L: Quote, Profile, Research) dropped its proposed all-share offer.

Brit said in a statement that Chaucer would not recommend its proposal, leading to Brit withdrawing its offer, valuing the insurer at 221 million pounds ($364 million).

In a separate statement Chaucer said its chief executive, Ewen Gilmour, and chief financial officer, Mark Graham, have decided to leave the company, with Gilmour announcing his intention to retire at the end of year whilst Graham will pursue other opportunities.

The move follows a tumultuous period for Chaucer which raised 75 million pounds earlier this year and has been in talks with potential suitors since January after taking a hit from an investment exposure to hedge funds last year.

Brit had said on Monday it would offer 0.23 shares, worth 40.25 pence based on Friday's close, for each Chaucer share. [ID:nLM670231]

However, analysts had said the offer, nearly a third below Chaucer's book value, was unlikely to be popular with its shareholders.