Buffett plan fails to whet appetite of investors

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Capital Insurance, the insurance vehicle being backed by the US investment guru Warren Buffett, was forced to abandon its planned flotation on the stock market yesterday after City investors refused to back it.

Capital Insurance, the insurance vehicle being backed by the US investment guru Warren Buffett, was forced to abandon its planned flotation on the stock market yesterday after City investors refused to back it.

Despite having an assurance that Mr Buffett, one of the shrewdest investors of his generation, was to take a 25 per cent stake in Capital through his company, Berkshire Hathaway, UK institutions showed little enthusiasm for the float. The move means Capital, which was trying to float for about £125m on the junior AIM, has been stalled in its plan to bring about widescale consolidation in the insurance market.

Capital would not comment on its decision to pull its float. But while a considerable number of American investors had supported the move, British institutions are thought to have said they were not keen to buy Capital's paper.

That is because they expected they would also become holders of Capital's stock through its plans to buy up other insurers, in which they were already shareholders.

Sources said Capital had also suffered because the initial public offering market has become tougher in the past few months, as investors have become more selective about which of the many companies trying to list their shares they will back.

Capital, advised by Collins Stewart Tullett and Lexicon Partners, is expected to attempt to return to the market later this year. It is unable to go through with its consolidation programme until it has raised sufficient funds. Mr Buffett is also thought to still be committed to backing Capital when it does float.

The aim of Capital, chaired by Michael Wade, a veteran of the London insurance market, had been to snap up many of the small underwriters that operate within the Lloyd's of London market. Currently, insiders at Lloyd's believe the institution is held back in its attempt to compete with other underwriters around the world because it is fragmented into many small players.

Lloyd's, which can underwrite £15bn of premiums a year, is a market of 66 underwriting syndicates, with some operated privately and others by publicly listed companies.

While most analysts back moves towards consolidation as a way to increase Lloyd's efficiency, they believe the process could be fraught with difficulty because previous attempts have led to high-profile disputes between some of the colourful characters who dominate the Lloyd's market.

Separately, it emerged that Mr Buffett's wife, Susan, has died of a stoke. Ms Buffett, 72, was the second-largest shareholder in Berkshire Hathaway. She is thought to have owned stock worth £1.65bn.

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