Japanese insurer mulls $4.2 billion takeover of Lloyd’s unit

Mitsui Sumitomo Insurance said it had agreed to buy British insurer Amlin Plc for 670 pence per share in cash.

Japanese firm spokesman was quoted by Reuters as saying that the two firms are in talks but nothing has been decided.

The deal comes after Meiji Yasuda Life Insurance said in July it would buy US-based StanCorp Financial Group for US$5.0 billion, while insurer Tokio Marine Holdings agreed to buy US-based HCC Insurance Holdings for US$7.5 billion in June.

Amlin chief executive Charles Philipps called the deal “extremely compelling”. The companies on Tuesday said they entered a confidentiality agreement on August 20, a few days before Mr. Phillips’s comments.

Amlin, which sponsors the Formula E racing auto championship, has long been flagged as a takeover target by analysts but Philipps said a sale had not been touted around the City. “MSI’s presence in the ASEAN region and its ambitions in the USA clearly offer very exciting prospects for Amlin”.

“We would never hoist a “for sale” sign over the company because all that does is create uncertainty for the staff”, he added. For Amlin, Mitsui’s heft will mean greater capital backing to serve larger clients. Shares in Amlin rocketed nearly 33%, lifting its market value to £3.2 billion. Oversees purchases have also allow insurers to diversify their product ranges and reduce their reliance on Japan, which is prone to costly earthquakes.

Operating in the Lloyd’s reinsurance market, Amlin sells marine and aviation insurance as well as reinsurance, a type of insurance bought by insurance companies.

The deal is the latest in a line of mergers in the insurance sector recently. Still, with Amlin’s shares having risen by 25% in the last three years, further capital gains could have proved to be somewhat elusive.

“The combination will accelerate MSI’s strategy of growing its worldwide business”, Mitsui Sumitomo president Yasuyoshi Karasawa said in a statement.

Rory Gallivan in London contributed to this article.