Tokio Marine is seeking to use its acquisition of Kiln as the base for its global underwriting operations, focusing mainly on US business.
The Japanese giant spoke of its plans after the Kiln board said it would recommend Tokio Marine’s 150 pence-per-share offer to shareholders last Friday.
The offer values Kiln, the fourth largest Lloyd’s managing agency, at £442m, which will make it the largest overseas acquisition by a Japanese insurance group.
According to Kiln chief executive Edward Creasy, it would be “business as usual” for the Lloyd’s insurer, with no changes to management, syndicates or the brand.
WR Berkley has already accepted the 150p offer for its 20% stake in Kiln, with analysts recommending that shareholders follow suit.
Kichiichiro Yamamoto, group leader of Tokio Marine’s international business development department, said the “prime target” for Tokio Marine was the US.
Tokio Marine is looking to increase its revenues from overseas business to between 20% and 25% by 2010, from a forecast 13% next year.
Yamamoto said: “It is of utmost importance that we improve our underwriting expertise globally and the acquisition of Kiln would provide us with that expertise. We have been working with Kiln for about 40 years now. Tokio Marine is one of the biggest reinsurers of the Kiln Group.”
Creasy said: “The acquisition would give us excellent financial security because Tokio is one of the biggest global insurance companies.”
Kiln shares began the week at 106.5p, with initial bid speculation on Tuesday driving the price to 122.5p by the end of the day. At the end of trading on Thursday, shares stood at 129p, but rocketed to 146p on Friday morning after Kiln’s board accepted the bid.
Numis said the offer was “a good deal for shareholders”, putting Kiln at a “healthy premium to the sector”.
Commenting on the attractiveness of the Lloyd’s market to all international companies, Numis added: “We believe it is the right stage of the cycle to expect further consolidation, with organic growth becoming harder to achieve and surplus cash emerging from successive record underwriting years.”
The acquisition is expected to become effective during the first quarter of 2008.
Tokio Marine at a glance
• Founded in 1879, the Tokio Marine and Nichido Fire Insurance Company is Japan's oldest and largest commercial property, casualty and marine insurer
• Tokio Marine merged with Nichido Fire in 2004 to form Tokio Marine and Nichido Fire Insurance Co, the core company of Millea Group.
• Tokio Marine posted net written premiums of ¥1,928bn (£8.4bn) in 2006 with net profits of ¥96.4bn (£422m).
