Lloyd's to outperform Bermuda,M&A likely: AnalystPosted On: Jul. 4, 2007 12:00 AM CST
LONDON Sensible capacity management among the major insurers at Lloyd's of London should ensure the market outperforms other markets during the coming cyclical downturn, according to Chris Hitchings, insurance analyst at the London arm of U.S. investment bank Keefe, Bruyette & Woods.
Mr. Hitchings said that share prices of the major Lloyd's insurers have fallen by about 10% since the end of April while shares in the main Bermuda insurers are up 8%. This now leaves investors with only a "modest premium" to pay for the power potential risk faced by Lloyd's companies to the coming Gulf of Mexico hurricane season.
The analyst also said that there is a "good economic case" for a Bermuda monoline company to buy a Lloyd's insurer but points out that the capital efficiency of the Lloyd's system does make them "look expensive."
This does not mean that potential acquisitions can be ruled out though, said Mr. Hitchings. "Their alternative of building their own may be slow so we do not rule out renewed interest in future," he said.