Buffett move lifts shares in insurers

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The Independent Online

Shares in the smaller Lloyd's of London insurers rose yesterday after news that a new Warren Buffett-backed vehicle plans to splash out on several of the UK's general insurers over the coming months in a bid to consolidate the industry.

Shares in the smaller Lloyd's of London insurers rose yesterday after news that a new Warren Buffett-backed vehicle plans to splash out on several of the UK's general insurers over the coming months in a bid to consolidate the industry.

The new company, Capital Insurance Holdings (CIH), is to begin its campaign by buying Euclidian, a private Lloyd's agency, which had been looking to float. The company will then float on the Alternative Investment Market within the next few weeks, and is planning to raise some £125m to kick-start its spending spree.

Goshawk, the specialist insurer, was the sector's biggest climber, jumping more than 6 per cent on the news, whilst SVB Holdings, another insurer, was up 4.5 per cent.

CIH is the brainchild of Michael Wade, a former insurance industry executive who will become non-executive chairman of the new company. He believes the fragmented general insurance industry would benefit from a consolidation process, by combining several of the smaller companies in the market to create a third FTSE 100 general insurance company, alongside Aviva and Royal & SunAlliance.

Mr Wade first canvassed the idea when presenting a paper to the Insurance Institute of London last October, where he spoke of the need for the insurance industry to create a "must have" stock for institutional investors.

Warren Buffett, the investment guru and world's second richest man, has agreed to take a 25 per cent stake in the new company through his US firm Berkshire Hathaway.

Analysts yesterday remained sceptical of CIH's chances of success, saying the sector would be difficult to consolidate because all but the weakest insurers, such as Goshawk and SVB, would resist such a move.

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