LISTED Lloyd's of London insurers are expected to be the subject of takeover interest, analysts have said, following news that foreign rivals are circling Hiscox.

Hiscox's shares rose as much as 14 per cent on Monday after Insurance Insider reported that Japan's Sompo and Italy's Generali were considering making bids for the FTSE 250 company.

Hiscox, Sompo and Generali declined to comment when contacted by City A.M.

Analysts have said a potential offer would come as no surprise, with London-listed specialist insurers continuing to trade at a heavy discount compared to pre-pandemic levels.

"We have written about M&A across the insurance sector in the recent past and highlighted the Lloyds' names as being vulnerable," Abid Hussain, an analyst at Panmure Liberum, said in a note. "The sub-sector has seen takeover activity in the previous hard market."

"Other listed names are also vulnerable to takeover given the low price to tangible net asset values and high returns on equity,"

Hussain added.

M&A in the Lloyd's market has been quiet since the last major deal in 2017. The number of listed Lloyd's insurers fell from 10 in 2007 to three from 2017 onwards - Beazley, Lancashire and Hiscox.

"We see all three players as potentially being attractive targets for M&A," JPMorgan analysts said in a note. "The main Beazley and Hiscox syndicates are among the top 10 largest individual syndicates at Lloyd's, making them some of the most obvious targets, in our view."

The CEO of Japanese group Mitsui Sumitomo, which acquired UK insurer Amlin in 2016, told the Financial Times in February that acquisitions were "on the table" again as part of its international push.

JPMorgan analysts said any Lloyd's transactions would likely bring "synergies on costs, capital and reinsurance for the major Japanese insurers".

"We are not surprised by the emergence of M&A speculation within the subsector," said Nick Johnson, an analyst at Deutsche Bank. "Fundamentals are strong, cash is plentiful within the industry, and UK valuations are inexpensive."

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