Consolidation theories

Traders were relishing the prospect of bid activity in the insurance sector, as rumours circulated that consolidation was on the cards.

Among the many tales, two stood out: that life assurer Prudential is still a takeover target, and that Jardine Lloyd Thompson (JLT) could pair up with rival broker Heath Lambert.

The chatter caused Prudential to see considerable activity in its shares. One day last week, the shares had been down but swung round in late trading on renewed talk that French insurer AXA could soon announce its intentions.

This lead to a massive 26.3 million shares changing hands, when usually 16 million shares are traded each day. Prudential is now trading at around 630p.

JLT, worth 368p, has too been a focal point. According to market sources, it is exploring the possibility of a bid for Heath Lambert. Traders previously speculated that JLT - one of the worst performing shares in the FTSE 250 this year - could hold hands with Benfield Group.

On Tuesday, Deutsche Bank raised the old suggestion that Royal & SunAlliance (R&SA) may attract suitors. As it repeated its 'hold' rating and lifted its target price on the insurer from 129p to 133p following the group's positive first quarter results last week, the bank said: "The fact that the shares trade above this reflects the possibility of a bid approach as a farewell to the US becomes clearer." R&SA is at 132p a share.

' Yvette Essen is stock market reporter for The Daily Telegraph