BRIT INSURANCE has been a source of frustration to investors for some time. Before Apollo came along, the stock was trading on less than 0.7 times 2010 net tangible assets (NTA), a deeper discount than many of its peers on the generally undervalued Lloyd’s of London market.

Quite what a large-scale US private equity player wants with a mid-cap UK insurer is unclear. Apollo appears to have been tempted by an arbitrage opportunity and Brit Insurance’s healthy seven per cent divided yield. But its approach may instead be the catalyst that leads to a re-rating of the company’s shares.

Analysts are hoping Brit’s weak 10 per cent return on equity and inflation-vulnerable long tail of liabilities have been priced into the improvement in its paper since the end of last week. The stock now trades on 0.8 times NTA. Barring a major natural disaster, it could climb further from here.