Lloyd’s: who’s next for takeover?

All the talk in the Lloyd’s of London market at the moment is about what will be the next acquisition deal.

Mergers and acquisition (M&A) activity in the market has picked up considerably over the last year and looks set to continue for the rest of 2012.

Consolidation of companies will be the key as reflected in rating agency AM Best’s latest report, which said that Lloyd’s businesses will continue to be potential takeover targets as firms struggle to achieve organic growth on their own and insurers look to diversify portfolios.

Despite 2011’s unprecedented catastrophe losses, most of the London market players managed to maintain a strong capital position, as have global insurers, resulting in relatively flat rates, limiting opportunities for organic growth and causing many firms to turn to acquisitions.

There have been several significant deals over the last year, with Hardy acquired by CNA Financial for £143m, Chaucer bought by US insurance group Hanover and the Jubilee Group sold to Ryan Specialty Group.

This month, Omega’s shareholders approved the company’s £164m acquisition by Canopius, and the latter’s chairman Michael Watson is still keen for other deals.

QBE, which acquired the renewal rights to Brit UK’s regional business in April to a mixed reaction, will also be hungry to make more acquisitions given its strong position and the number of well-priced deals available.

Another obvious target is Novae, which pulled out of merger talks with Omega in May last year, with Chaucer mooted to be interested at one stage.

Several US companies have attempted to buy Lloyd’s vehicles over the past year and more takeover approaches appear likely as overseas players look to get a foothold in the London market.

The question is, who will be next?