Japanese insurer Sompo could announce acquisition of the Lloyd’s insurer within a week

Canopius is in advanced talks with Japanese insurer Sompo regarding a £596m sale of the Lloyd’s insurer.

Rumours first surfaced in local Japanese media, and the deal could be announced as early as this week.

Bregal Capital, which owns an 84% stake in the group, entered into a deal with Canopius in 2003 when Canopius Group executive director Michael Watson led a management buy-out of Lloyd’s managing agency Trenwick, and has since supported Canopius’s expansion at Lloyd’s through various mergers and acquisitions deals.

These deals include the 2007 acquisition of Creechurch, the 2010 deal for motor carrier KGM and the £164m purchase of Omega in 2012. This helped Canopius grow to report a profit of £42m for the first half of 2013, with gross written premium of £527m and a comfortably profitable combined operating ratio of 80%.

The other major shareholder, Towergate, currently owns an 11% stake in the insurer.

In a statement to the press, Watson said: “The attractions of Lloyd’s as a platform for the transaction of global specialty insurance and reinsurance have rarely been more highly prized than they are currently. Against that background it is to be expected that Canopius would be the subject of potential acquisition interest, recognising the strength of our franchise and reputation, our scale, our position as one of a handful of privately owned Lloyd’s businesses and the 10-year duration of our private equity backing.

“As a matter of practice we do not comment on market rumours or speculation.”