Takeover target Catlin has sold off its stake in a hi-tech personalised insurance company for nearly $133 million.

The Bermuda-based insurance firm offloaded its investment in Box Innovation Group Ltd (BIGL) to Aioi Nissay Dowa Insurance Company of Europe.

Catlin Insurance Co Ltd (CICL) said it expected to distribute the part of the proceeds that represent the surplus capital arising from its investment in BIGL to shareholders.

Details of the distribution are likely to be announced next month following a board meeting.

The deal means Aioi will acquire shares from Catlin, as well as other shareholders, and will own a 75.1 per cent stake in BIGL, which trades as insurethebox.

A spokesman for Catlin said: “CICL first invested in Gibraltar-based BIGL when insurethebox was launched in 2010.

“It supported BIGL in successfully developing its platform over the past four years, but after detailed evaluation determined the time is right to exit the investment and allow BIGL to find the right partner for the next phase of its development.”

It was revealed last week that XL Group had bid $4 billion to take over Catlin.

Dublin-based XL, which started up in Bermuda in the 1980s and still maintains a substantial presence on the Island, said the merger would produce a stronger business, while Catlin said it would create a combined company worth around $12 billion.

XL CEO Mike McGavick added that the proposed takeover would be “a leader in the global speciality and property cat markets and would make greater and more efficient use of companies’ global networks and infrastructure”.

The day before the announcement, Catlin shares stood at 582p on the London Stock Exchange and yesterday closed at 654p — up 12.3 per cent. XL Group shares, listed in New York, were at $35.01 just before the takeover bid was announced and last night closed at $33.99 — down 2.9 per cent.

But Paul J Davies, who writes on European business for the Wall Street Journal, wrote this week that the deal was not assured of success.

Mr Davies wrote: “Some deals make sense strategically. Some make sense financially. XL Group’s proposed takeover of Catlin doesn’t seem to make much sense either way.”

He added that — in line with industry thinking — there was a push for insurers to get bigger as regulatory costs continued to rise and companies sought to minimise natural earnings volatility, especially in catastrophe reinsurance, through diversification.

Mr Davis said that XL wanted to expand in insurance lines not correlated with business it already writes and that Catlin, a smaller, more profitable business would improve XL’s return on equity.

But he warned that Catlin’s international arm — the main point of difference between the two companies — was still small and that a large part of its business at Lloyd’s of London and most of Bermuda and the US would be similar to XL’s existing exposure.