Amlin to Buy Insurance Arm of Fortis

Amlin, the Lloyd’s of London insurer, agreed to buy Fortis Corporate Insurance, or F.C.I., a provider of marine and corporate property insurance, from the Dutch government for 350 million euros, or $500 million, Reuters reported.

Amlin said Wednesday that the deal would increase its noncatastrophe business and make it a leading provider of marine, liability and commercial property insurance in the Netherlands and Belgium.

But its shares dropped over 6 percent to a near seven-month low as some analysts said the deal looked expensive.

The British company is paying just over 1.4 times book value for F.C.I., which had an underwriting loss of 11 million euros and an investment loss of 23 million euros in 2008.

Charles Philipps, chief executive of Amlin, said the deal was at a good, rather than a bargain-basement, price, and that F.C.I. would contribute to earnings in 2009 and significantly enhance Amlin’s long-term growth potential.

“We always like to maintain a balance in our book and this will allow us to grow again our reinsurance portfolio,” he said. He said he was confident that F.C.I. was returning to profitability and “going forward will generate good returns for Amlin.”

Analysts at Noble, the brokerage house, said the acquired portfolio was not likely to generate substantial underwriting returns until rate-hardening filtered through its underwriting margins over the next 24 months.

Investments were also unlikely to contribute materially to earnings in the short term, so “a multiple of 1.42 times on this portfolio looks expensive,” they said in a note.

F.C.I. was nationalized by the Dutch government after the breakup of Fortis in October 2008. The state said in November that it would sell F.C.I. and Fortis A.S.R. — a property and casualty insurer now renamed A.S.R.

Amlin is paying for the deal through issuing 23.5 million shares, representing about 5 percent of its share capital, to raise about £80 million, and from its cash reserves. The placing is being handled by RBS Hoare Govett.

Traders said the shares were expected to be priced at around 320 pence apiece.

F.C.I. had a good trading record, Mr. Philipps said, although 2008 was marred by the wider investment situation and some large claims.

F.C.I.’s premium income, however, was in line with the company’s business plan and trading conditions in the Dutch and Belgium markets were bottoming out, he said.

F.C.I. was the market leader in Dutch marine insurance, which accounted for about half its premiums, and held a top-three position in liability and commercial property insurance, Amlin said.