February 8, 2011 / 8:26 AM / 7 years ago

UK insurer Beazley eyes M&A after profit jump

LONDON (Reuters) - Insurer Beazley BEZG.L said it was on the lookout for takeover targets after failing to buy Lloyd’s of London rival Hardy HDU.L last year, as it reported a forecast-beating 60 percent rise in profit.

Beazley Chief Executive Andrew Horton said the company saw more acquisition opportunities this year as persistently weak insurance prices puts pressure on smaller competitors.

“Some companies may struggle with their profitability in 2011, and there may opportunities to acquire,” he said in a telephone interview on Tuesday.

The company, which in December abandoned its pursuit of Hardy after having two informal offers rejected, said it was not involved in bid approaches revealed on Monday by Lloyd’s of London peer Chaucer.

Beazley’s 2010 pretax profit rose to $250.8 million from $158.1 million the previous year, outstripping the $209 million average forecast of four analysts polled by Reuters.

The increase reflected a foreign exchange gain of $33.7 million as well as lower costs, offsetting a 57 percent drop in investment income as the company prioritized low-risk assets.

Beazley shares were up 6.7 percent at 128 pence by 1407 GMT, making the company the top riser in the FTSE 250 index .FTMC. The stock has risen 24 percent in the last year, giving the company a market value of about 661 million pounds.

Analysts said the shares were also supported by news of a special dividend of 2.5 pence per share, lifting the total payout for the year to 10 pence from 7 pence in 2009.

“The 2.5 pence special dividend is positive and illustrates Beazley’s commitment to capital discipline,” Oriel Securities analyst Tom Dorner wrote in a note.

    Horton said Beazley, which moved to Dublin for tax reasons in 2009, planned to stay put as there was no sign Ireland would have to raise its low corporation tax rates as a condition of its bailout by the European Union in November.

    “The political pressures in Europe have not forced them to change that. Our intention is to continue as we are with Ireland as our tax domicile,” he said.

    Lloyd’s of London insurers are seen as ripe for consolidation because a steady fall in global insurance prices has weighed on their shares, opening up potentially attractive acquisition opportunities.

    Last year, Brit Insurance agreed to be taken over by buyout firms Apollo and CVC, while Omega Insurance OIH.L last month received an approach from privately held Canopius.

    The potential bidders for Chaucer include private equity tycoon Guy Hands, Hands’ Terra Firma buyout vehicle said on Tuesday, confirming media reports.

    Editing by Elaine Hardcastle

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