Brit Insurance's resistance against the US private equity firm Apollo showed the first sign of cracking yesterday after the company said it would grant the prospective bidder access to its books.
Approaches at £10 and £10.50 for the insurer, whose main business is done at Lloyd's of London, were both rejected by Brit, but Apollo's latest indicative offer of £10.75 saw the group bowing to pressure from shareholders to engage with the potential bidder.
The approach, which values Brit at £851m, includes the 30p a share dividend recommended alongside what were seen as positive interim results. Brit said pre-tax profits, excluding favourable currency movements, came in at £72.8m, up 12.2 per cent. However, without any adjustments, the pre-tax profit was £77.5m, against a loss of £8.5m in the first half of 2009.
Brit's gross written premiums fell from £983m to £851.5m as the group said it was being more selective at a time when premium levels are getting softer. It secured price increases of just 1 per cent against 5 per cent last time. Brit has repeatedly told Apollo that its approaches have undervalued the group. It is thought to be looking for an offer of around £11 a share, reflecting the company's "net asset value" per share. Most Lloyd's of London insurers trade at a discount.
However, the fact that Apollo has been allowed in caused a sharp rise in the shares amid hopes that the firm's lengthy courtship of the insurer could finally be reaching its end game. The shares closed the day at 1,005.00, a rise of 91.5p. Brit is still expected to argue that Apollo should pay nearer £11, even after due diligence is completed, and sources close to company stressed that it was not yet surrendering.
Dane Douetil, chief executive of the group, said of the results: "Brit Insurance has made excellent progress during the first six months towards our stated goal of delivering upper quartile underwriting performance. This progress has been reflected in the improvement of our return on equity to 16 per cent despite difficult underwriting and investment markets."
However, he admitted that the economic climate remains "challenging" at a time when the industry is grappling with regulatory issues such as the European "Solvency II" directive.Reuse content