LONDON (Bloomberg) — Lloyd's of London insurers should be wary of making large acquisitions as premium rates decline, Jupiter Fund Management Plc's Anthony Nutt said.

"Don't consider value-destructive and expensive acquisitions in a softening market," the head of UK equity income funds at the firm told insurance executives at the Insurance Insider conference in London yesterday.

"Consolidation can work, but we're very doubtful about it" because there are many examples of acquisitions failing in the past, he said.

"Falling premium rates, increasing regulatory costs and lower investment returns will put pressure on insurers' earnings next year," Royal Bank of Scotland Plc analyst Joanna Parsons said at the same conference. "That has created an environment for takeovers in the Lloyd's market," she said.

Private-equity firms Apollo Global Management and CVC Capital Partners Ltd. agreed to buy Lloyd's insurer Brit Insurance Holdings NV for as much as £888 million ($1.4 billion) last month. Beazley Plc, the fifth-biggest publicly traded Lloyd's insurer, had its second bid for rival Hardy Underwriting Bermuda Ltd. rejected this month.

"I can't think of any large deal which has added value significantly during my time in the City," Nutt said. "Why do you need to grow? Some of my very best investments are businesses that give it all back to shareholders as soon as possible."

The fund manager's investments in Lloyd's insurers include a 10 percent stake in Beazley, and holdings in Amlin Plc and Hiscox Ltd., according to data compiled by Bloomberg. Nutt manages about £3.8 billion at Jupiter.

Lloyd's insurers should focus on giving excess capital back to shareholders during the current low premium-rate environment, he said. "Capital should be returned when not required."