LONDON British insurance broker Jardine Lloyd Thompson Group (JLT.L) is buying Towers Watson's TW.N reinsurance brokerage for $250 million, accelerating an expansion into the United States.
In a statement on Friday JLT said the all-cash deal will be completed by the end of the year and is expected to add to earnings in the first full year after completion, with the combined businesses generating annual revenues of $266 million.
JLT, which has a market capitalization of $3.2 billion, negotiates insurance cover on behalf of corporate clients around the world. It currently earns most of its revenue in Britain and is trying to build up its reinsurance operations.
Reinsurers help shoulder the risks faced by insurers in exchange for part of the profit.
JLT shares rose 3 percent to 947 pence, compared with a broader flat UK stock market at 1023 GMT. The shares have risen about 25 percent since the start of the year.
Dominic Burke, JLT Chief Executive said he planned to devote considerable resources to what he called a "prize asset in the reinsurance world", sprucing up modeling and analytics as well as hiring in new talent.
"We're going to invest heavily in this business. We absolutely believe it can take substantial market share from our competitors," Burke said.
"Bearing in mind the U.S. represents 50 percent of the world's reinsurance market we were too light. Our reinsurance business as a percentage of our total brokerage as a firm was materially below that of our competitors. So we were underweight."
JLT said Towers Watson's reinsurance brokerage business will be merged with JLT's reinsurance business and branded for a transitional period as JLT Towers Re.
Alastair Speare-Cole, CEO of JLT Re, will become chief executive of the merged operation, while Ross Howard, who currently heads Towers Watson's reinsurance brokerage business, will become executive chairman.
(Reporting by Chris Vellacott; Editing by Elaine Hardcastle)