Argo Group International Holdings Ltd said yesterday it had made a £136 million pound ($269.7 million) recommended cash offer to buy Heritage Underwriting Agency plc in the latest Bermuda raid on the London insurance market.

Under the deal, shareholders in Lloyd's of London firm Heritage will receive 154 pence a share after an already announced 6p final dividend, 15 percent above Tuesday's closing price of 133.5p.

The news, part of a wave of consolidation in the world's oldest insurance market, pushed pushed shares in Heritage up 14 percent to a record 152 pence in London yesterday.

The bid values Heritage at 1.8 times its 2007 tangible book value, in line with other transactions in the sector, UBS said in a note. "We continue to believe that 2008 will be the peak period of consolidation in the Lloyd's sector," UBS said, adding that it saw Chaucer Holdings as another prime takeover target.

Heritage said in January it had received approaches from a number of interested parties after previous bid talks with Bermuda insurer Ironshore had broken down. Ironshore chief executive officer Robert Deutsch told this newspaper that the asking price had been too high.

The Heritage board has approved the offer, and Argo has already received acceptances for the bid from shareholders owning 64 percent of the company, including Heritage's biggest investors Hays Investors and HCC Insurance Holdings, as well as the company's directors.

"We expect the acquisition to enhance Argo's 2008 earnings per share by approximately 15 percent and to increase return on equity by 1.2 to 1.5 percentage points, on an annualised basis," Argo chief executive officer Mark Watson said in a statement.

Foreign rivals have recently closed in on a number of Lloyd's underwriters. Kiln agreed to be bought by Japan's Millea for £442 million in December, and Omega Insurance Holdings said in February it was in discussions with a number of potential buyers.

Insurers are looking to put to work surplus cash they have generated from several years of good trading by acquiring rivals to bolster growth as insurance market conditions weaken.

Bermudian firms created to take advantage of high prices for catastrophe risks after a string of costly hurricanes have been particularly active suitors. The 300-year old Lloyd's market is a magnet for insurance business from around the world, allowing those who buy their way into the market to grow more quickly than they would on their own, as well as allowing them to diversify their businesses.

Bermuda reinsurer Validus acquired Lloyd's insurer Talbot Underwriting last year and Ironshore has made clear its desire to buy into the London market.