Amlin said in $4.16bn M&A talks with Mitsui Sumitomo

According to a report in the Japanese Nikkei newspaper, London headquartered insurance, reinsurance and third-party ILS capital management stakeholder Amlin is being pursued by Japanese insurance group Mitsui Sumitomo.

Update 8th Sept 2015: The deal has been agreed, Mitsui Sumitomo to acquire Amlin for approximately $5.33 billion.

Mitsui Sumitomo is among the group of Japanese insurers that has been looking overseas for acquisition or merger targets, according to reports, with a globally active insurance and reinsurance diversified group the most likely target.

Amlin fits that bill, with its London base, Lloyd’s of London activity, Switzerland and Bermuda underwriting centres, with U.S. and global operations as well. The re/insurance firm has global access to underwriting business, as well as a 75% stake in insurance-linked securities (ILS) investment manager Leadenhall Capital Partners.

For an insurance group like Mitsui Sumitomo, Amlin makes a sound acquisition target, with its global mix of insurance and reinsurance business, as well as an ILS asset manager stake. It would give Mitsui Sumitomo a foothold in international reinsurance business which it perhaps has lacked before.

Mitsui Sumitomo and other Japanese insurance groups have been struggling with shrinking domestic markets, aging population and a lack of diversification for catastrophe risks. The attraction to a globally diverse re/insurance group, with an almost 50/50 primary to reinsurance business mix, like Amlin is clear.

For Amlin, an acquisition by a group such as Mitsui Sumitomo would provide capital, reach into Asia, an enhanced primary offering and access to significant resources as well. ILS manager Leadenhall could benefit from such a deal as well, with the enhanced access to business and also potential capital access that being part of the Mitsui Sumitomo group could bring.

Right now it’s a widely reported rumour, but the Nikkei and others are all suggesting that a deal could be announced imminently (with some saying as soon as Tuesday), suggesting that talks would have been underway for some time.

It’s reported that Mitsui Sumitomo could plan to acquire Amlin with cash and financing secured through bank loans. The Nikkei also said that if a deal is reached, the Amlin management team would likely remain in place. Amlin is said to be worth £2.45 billion, at market price, but any deal would be expected to be at a premium to that valuation. The number mooted by the Nikkei is that Amline would cost over $4.16 billion, or £2.73 billion.

As competition continues to heat up in reinsurance and spills over into primary lines, Amlin may be well-positioned to take advantage of any approach from a group like Mitsui Sumitomo. It’s attractive mix of business and profitable recent history makes it an attractive target.

While the pressure to merge or acquire remains prevalent in re/insurance, getting an offer from a group with the stature of Mitsui Sumitomo could be a very positive step.

There would be little cross-over between the Amlin and Mitsui Sumitomo business, making integration more simple and the synergies are clear and likely to result in incremental profit potential. Compared to an offer from a comparable, or similarly sized, re/insurer, a deal with Mitsui Sumitomo could be a much more attractive prospect for Amlin.

We’ll update you if/when any further information or confirmation of a deal being on the table or completing emerges.