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XL to write nearly a tenth of Lloyd's business after Catlin buyout


(Reuters) - XL Group P.L.C. said it would buy underwriter Catlin Group Ltd. for about 2.79 billion pounds ($4.28 billion), increasing the Dublin-based insurer's share of business written in the Lloyd's of London market to nearly 10%.

The deal is the latest in a string of European insurance mergers as the region's 5,000 underwriters face stricter capital rules. Mergers usually make it easier for companies to cut expenses relative to assets, helping them to raise capital.

“We are forecasting that we will, at a minimum, have about $200 million in cost savings across the two organizations when they are combined,” XL CEO Mike McGavick, who will head XL Catlin, said in an interview.

“That's about 10% of the combined expenses of the company,” he added.

It is too early to say how many jobs will be cut, he said.

Catlin writes about 7.5% of all Lloyd's premiums, making it the biggest syndicate on the market, while XL accounts for about 2%.

The offer values each Catlin share at a premium of 8.3% to the stock's close on Thursday.

Bermuda-based Catlin sells insurance for everything from flooding to kidnapping.

Catlin's top investors include BlackRock Institutional Trust Co, Cantillon Capital Management and MFS Investment Management.

“This bid both highlights the attractions of Lloyd's for external players and increases the scarcity value for the remaining companies,” Shore Capital analyst Eamonn Flanagan said in a research note.

Earlier this week, brokerage Westhouse Securities flagged Novae Group P.L.C. and Lancashire Holdings Ltd. as the next possible Lloyd's takeover targets.