Omega aims to buy out Names on Lloyds syndicate

LONDON (Reuters) - Insurer Omega Insurance (OIH.L) plans to boost its exposure to Lloyds of London, spending up to 125 million pounds buying out Names who are members of the insurance market's successful Syndicate 958.

Omega already has a 16 percent stake in Syndicate 958, which has turned a profit every year since 1980. It is offering to pay private investors in the syndicate, known as Names, between 50 million and 125 million pounds in cash or shares in order to raise its stake as high as 50 percent.

Chief Executive Richard Tolliday told Reuters it was the only capacity offer it would make this year after the company raised 130 million pounds from investors at the start of the year to help fund expansion.

Omega will offer existing capacity holders 0.332 new shares for every 1 pound of capacity, which equates to about 45 pence based on the current share price. Names will also be able to opt for a cash alternative of 40 pence.

Charles Coyne, analyst at Finncap, said it was a sensible strategic move by Omega but that there was no guarantee existing syndicate members would accept the offer.

"Since capacity on the syndicate has rarely traded above 20p (per pound) this looks reasonable, but Names are notoriously difficult to shift," Coyne said.

Non-life insurers who can afford it are looking to take advantage of hardening rates in the reinsurance sector following hits from Hurricanes Gustav and Ike, investment losses and a lack of capital that is pushing rates higher.

"Rates are continuing to harden this year. We also expect it to be more prolonged (than previous increases)," said Tolliday, adding that he had yet to see a fresh influx of capital from other players.

But despite the stronger rates, dollar weakness threatens the 2009 earnings of many non-life insurers, which have a large dollar exposure. Shares in Amlin (AML.L), Catlin (CGL.L) and Novae (NVA.L) slid on Monday after a downgrade from Numis.

"We expect 2009 earnings to be materially impacted by forex losses on a number of levels," said Nick Johnson, analyst at Numis Securities.

Tolliday said he hoped the company's planned move next month from the London Stock Exchange's junior AIM market onto the Main Market would make its offer to members of Syndicate 958 more attractive.

Shares in Omega, which has a current market value of 318 million pounds, will start trading on the official list on July 7. It floated on AIM in 2005 with a market value of 18 million pounds.

(Reporting by Lorraine Turner, editing by Paul Hoskins/Will Waterman)