Bermuda-based insurer Allied World Assurance Company Holdings Ltd. said it will buy Darwin Professional Underwriters Inc. for about $550 million to expand coverage of doctors.

Darwin shareholders will receive $32 a share, six percent more than the company's $30.20 closing price on June 27, Allied World said yesterday in a statement. The boards of both companies have approved the transaction, which is expected to be completed in the fourth quarter, Allied World said.

Allied World will double its overall US operations through the purchase as prices for business insurance decline, and said it expects the acquisition will increase profit in 2009.

The company is expanding after repurchasing about 19 percent of its outstanding shares from American International Group Inc. AIG, the world's largest insurer by assets, helped found the company.

The Darwin deal combines "two companies that have complementary product offerings, cultures and commitments to client service," said Allied World chief executive officer Scott Carmilani in the statement.

"Acquiring Darwin is expected to immediately enhance both companies' market profile and accelerate Allied World's expansion of its US specialty insurance operations," Mr. Carmilani added.

"This acquisition will more than double Allied World's presence in the US, particularly within the US health care market. Darwin's strong reputation for both product and technology innovation will continue as a hallmark of Allied World."

Darwin, based in Farmington, Connecticut, is a subsidiary of insurer Alleghany Corp. New York-based Alleghany owns 55 percent of Darwin's stock and agreed to vote 40 percent of outstanding shares in favour of the transaction, the insurer said in a separate statement.

Darwin CEO Stephen Sills will retire when the transaction is completed, and Jack Sennott, Darwin's chief financial officer, will become chief operating officer of the unit, Allied World said.

Mr. Sills said: "We are gratified that the franchise we have built through the hard work and dedication of our employees and the support of our producer partners will be further expanded as part of a larger global organisation. We feel certain that what we have created at Darwin will quickly enhance Allied World's name recognition in the US in the specialty professional liability market."

Mr. Sennott added: "The Darwin team is very excited about becoming part of Allied World. Darwin will reap the benefits from being part of a global company with strong ratings, a worldwide distribution network and over $3 billion in capital."

The transaction is expected to be completed during the fourth quarter of 2008 and is anticipated to be accretive to Allied World's earnings in the first full year after the closing. Pending the completion of this transaction, both companies will continue to conduct business as usual.

Allied World declined $1.85 to $39.62 in New York Stock Exchange trading.