Omega Insurance Holdings is still talking to potential bidders after increasing annual pre-tax profits 163 per cent to $59.5 million (£29.7 million).

Now based in Bermuda, the AIM-quoted insurer and re-insurer, which holds 16.4 per cent of the £250 million underwriting capacity of Lloyd’s syndicate 958, increased net written premiums 121 per cent to $196.3 million (£98 million) last year. Earnings almost trebled to 34 cents a share, reflecting lower taxes since the Bermuda restructuring last March, and a final dividend of 16.3 cents a share, added to the interim dividend of 7.7 cents, will take the full-year payout to 24 cents a share, representing a 70 per cent distribution of earnings.

Omega specialises in insuring smaller companies in the US and elsewhere and seeks to avoid larger risks and larger insured clients, especially outside North America, because those sectors are where competition between insurers can be fiercest. Chairman Walter Fiederowicz says rates on some of the company’s core business lines began 2007 ‘at an all-time high’ and concedes rates have since been softening, in the absence of major catastrophe claims to stiffen the market.

Chief executive Richard Tolliday says it is hard to see the rate softening coming to an end soon, without a major hit, and stresses Omega is handling the pressure by being ‘more selective’ in its underwriting and ‘going further’ into its ‘consistent’ small-ticket market, where competition is as likely to be in terms of service as of premium rates. He points out that investment returns on premiums are relatively low and argues self-destructive premium cutting is more of a danger when underwriters think they are cushioned by high investment yields.

Last month, Omega said it was in talks with other parties about a potential bid for the company, which some time ago had been in abortive merger talks with fellow insurer Hardy Underwriting. A tight-lipped Tolliday says only that these discussions are ‘still ongoing’.

Despite the soft rating environment, it all adds some spice to the shares at 164.5p.

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