NEW YORK—Transatlantic Holdings Inc.'s decision to entertain a fourth bidder for the reinsurer looks to be an effort to increase competition and win a price closer to its book value, analysts say.

Hamilton, Bermuda-based Enstar Group Ltd. and New York-based C.V. Starr & Co. reportedly entered the bidding with a joint bid last week, though an Enstar spokeswoman declined comment and C.V. Starr did not respond to a request for comment.

New York-based Transatlantic, the world's ninth-largest reinsurer in the 2011 Business Insurance ranking, also declined comment.

Enstar, which typically buys and manages insurers and reinsurers in runoff, has backing from private equity investor and former Goldman Sachs Group Inc. banker Chris Flowers.

C.V. Starr is led by Chairman and CEO Maurice R. Greenberg, who is familiar with Transatlantic as the former leader of American International Group Inc., which sold its stake in Transatlantic in 2010 to help repay its 2008 government bailout.

Transatlantic said its agreement last week to discuss a deal with a fourth bidder is in addition to discussions with a third party, which it has not named but is believed to be a group of investors that includes former Gen Re Corp. CEO Joseph Brandon, as well as Bermuda-based Validus Holdings Ltd. and Omaha, Neb.-based Berkshire Hathaway Inc.'s National Indemnity Co. It is unclear whether Berkshire is still in the running as Transatlantic refused its $52 a share offer and Berkshire has said that it won't increase the offer.

The latest bid shows that Transatlantic's board is “still entertaining as many offers as they possibly can,” said Michael G. Paisan, a New York-based analyst for Stifel Nicolaus & Co. Inc.

“If you're looking for a deal, the more the merrier,” said a Transatlantic investor. “A competitive bid situation is likely to get a higher price. It's that simple.”

“Enstar and a few others, what they typically do is buy the existing business and then they don't sell new product,” said a source familiar with the matter. “You would only do that if you thought there was no future value or little future value in continuing to write the policies...I can't imagine that this is anyone at Transatlantic's first choice. It's true we're in a soft casualty market, but the business still makes money.”

Transatlantic reported profits of $402 million for 2010 compared with $478 million in 2009. The reinsurer reported revenues of $3.88 billion last year compared with $3.99 billion in 2009. Its combined ratio for 2010 was 98.2% compared with 93.5% in 2009.

Like many other reinsurers, Transatlantic faced significant catastrophe losses in the first half of 2011. It reported a first-half loss of $109.3 million on revenues of $2.19 billion, compared with a profit of $126.4 million on revenues of $1.97 billion in the same period last year. Its first-half combined ratio was 123.7% this year compared with 101.8% a year ago.

Previous deals involving Enstar include its 2009 agreement to pay about $28 million to Danish financial services firm Alm Brand Forsikring A/S for Copenhagen Reinsurance Co. Ltd. But that reinsurer was already in runoff, having suspended underwriting shortly after Sept. 11, 2001.

Earlier this year, Enstar bought Clarendon National Insurance Co. from Hannover Reinsurance Co. for $219.1 million. But, again, Clarendon already was in runoff.

Transatlantic is financially solid, experts say.

“We'd view Transatlantic as having a good platform to write new business,” said James Eck, vp-senior credit officer at Moody's Investors Service Inc. in New York.

“Transatlantic is a longstanding, well-regarded franchise with an A (excellent) financial strength rating,” John Andre, group vp at Oldwick, N.J.-based A.M. Best Co. Inc., said in an email. “Each bidder likely has different thoughts for how they would manage the company.”

But the offers for Transatlantic, which began a stock buy-back program in mid-September, have been less than its book value.

For example, National Indemnity's $3.25 billion bid in August was rejected, with Transatlantic saying it was only 77% of its June 30 book value.

Transatlantic also rejected Validus' bid of 1.5564 of its shares and $8.00 per share in cash as well as a $500 million boost to Transatlantic's reserves.

The four existing bids came in the wake of Transatlantic's proposed merger with Zug, Switzerland-based Allied World Assurance Co., which was announced in June. That deal collapsed in September after Validus and National Indemnity made their bids.

“If Validus wins, (Transatlantic will end up as) an ongoing concern,” said Cliff Gallant, an analyst with Keefe, Bruyette & Woods Inc. in New York.

“If one of these other bidders win, and they're doing it for economic reasons and they think they can run it off and that has more value and it's financially attractive, you probably won't need a lot of employees at Transatlantic. But it's a real possibility that Transatlantic stays independent and continues to do business,” he said.

Transatlantic, preparing for the retirement of President and CEO Robert F. Orlich, has had discussions about possible deals with insurers and reinsurers since June 2009, according to a U.S. Securities and Exchange Commission filing.