US giant increases its stake in Hiscox

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The Independent Online

Speculation is mounting that Hiscox, the Lloyd's of London insurer, is being stalked by Chubb Corporation after the US insurance giant increased its stake in the business to just over 28 per cent.

Chubb is known to be interested in increasing its presence in London and has had its sights set on Hiscox, one of the largest Lloyd's insurers, since it took substantial stake two years ago.

Chubb has increased its holding in Hiscox from 27 per cent to 28.3 per cent through the company's recent £54m rights issue, bringing it close to the 29.9 per cent level at which it would have to make an offer for the UK company.

The American insurer already made an offer for Hiscox in January, valuing the business at £311m. It was rejected by the family-run company on the basis that the sum was too low. Hiscox's board controls about 20 per cent of its equity and is very unwilling to be taken over by the American corporation.

Chubb will be able to make a fresh offer after 23 January, as Stock Exchange rules have barred it from making a hostile approach to Hiscox for 12 months following the unsuccessful bid.

Hiscox shares were yesterday unchanged at 155.5p, a considerable discount to the 210p Chubb offered. This was an increase on its initial offer of 170p.

But analysts believe Hiscox can command an even higher price, despite reporting large liabilities from the 11 September attacks. One analyst who values the business at between 225p and 250p a share said: "The company is well positioned to take advantage of huge insurance premium increases next year and has increased its capacity to do so via the rights issue."

Chubb may be prepared to offer more for Hiscox but will want to sort out its liabilities from the twin towers attacks and the collapse of Enron first.