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

by Caitlin Bronson10 Sep 2015

Japanese insurer Mitsui Sumitomi Insurance Co. is reportedly in talks to buy a Lloyd’s of London unit in a deal that could be announced as soon as today.

According to a Bloomberg report, an anonymous source said the acquisition of Amlin PLC could cost Mitsui more than $4.2 billion and would be paid in existing cash and bank loans. Amlin’s management would remain with the firm.

The takeover talks come just two weeks after Amlin Chief Executive Officer Charles Philipps told reporters the insurer was not for sale. Amlin had posted lower than expected profits for the first half of 2015 and is facing further declines in reinsurance prices.

Spokespeople for both companies declined comment on the prospective transaction, though financial analysts have responded positively.

“We view this deal as on the whole positive,” Mac Salman, head of research at Jefferies Group LLC in Tokyo said in a note. “MS&AD will purchase an established insurance company in developed markets with stable earnings.”

If it goes ahead, it would be the biggest ever acquisition for Mitsui, which is owned by MS&AD Insurance Group Holdings. It would also be the fifth acquisition worth more than $1 billion completed by Japanese insurers this year.

Already, the global insurance industry has generated mergers and acquisitions worth about $81 billion this year – a record-setting period that has more than doubled the transaction value for the same period in 2014.

Analysts attribute the activity to an influx of reinsurance capital that has pushed prices lower in a variety of lines of business. Catlin Group and Brit PLC sought the safety of a merger with a larger insurer, and Zurich is still in talks regarding a potential takeover of RSA Insurance.