Bermuda-based Argo Group International Holdings announced todaythat it has made a $272 million cash offer to acquire HeritageUnderwriting Agency, Plc, a Lloyd's insurer, creating a combinationthat Argo said broadens its international presence.

During a conference call this morning, Argo Chief Executive MarkWatson noted the "more international approach" his company hastaken in recent years. In particular, he said Argo's merger lastyear with property-catastrophe reinsurer PXRE Group established aninternational reinsurance operation, now named Peleus Re, inBermuda.

Heritage and Argo are similar operations in that both targetsmall-account business, he said, noting, however, that Argo's U.S.specialty insurance operations, Argonaut Specialty and ColonyInsurance, focus on casualty risks, while Heritage has a book thatis predominately property.

In addition to a worldwide property unit focusing on commercialaccounts, he noted that Heritage does write some liability risks,but these are non-U.S. liability risks, making the operationscomplementary to Argo's U.S. operations.

The deal is subject to the approval of Heritage shareholders andlegal and regulatory requirements.

Earlier this year, Bermuda-based Ironshore attempted to acquireHeritage, but talks broke down over price, Ironshore CEO RobertDeutsch confirmed in February.

According to Argo, Heritage managed total premium capacity of?315m ($630 million) in 2007, and capacity is similar for 2008.

Gross premiums for Argo Group were nearly $1.2 billion in2007.

In reaction to the offer, Standard & Poor's Ratings Servicesin New York affirmed the "A-minus" financial strength rating onArgo but said the rating outlook remains negative.

S&P noted that funding for the deal will not impact thestrong capitalization of the U.S. insurance operations. Amongnegatives it mentioned is the possibility that the Bermudareinsurance operations will expose the Argo Group to largecatastrophe losses through Peleus before management can demonstratestrong property-catastrophe risk management.

S&P said its initial concerns over this issue had diminishedsince the merger with PXRE last year, but the proposed acquisitionof Heritage could now materially change the risk profile ofPeleus.

"In particular, acquiring Heritage would significantly increasethe amount of catastrophe-exposed property business written,"S&P said, adding that it will meet with management to discussits growth and diversification plans, underwriting controls, andrisk-management tools and processes.

Argo's announcement today follows a separate announcement of amove into Lloyd's by another Bermuda specialty company, AspenInsurance Holdings Limited, last week.

Last Friday, Aspen announced that it received approval fromLloyd's to set up a new Lloyd's Syndicate, called Syndicate 4711with the pseudonym of "ASP."

Syndicate 4711 will commence underwriting from early April forbusiness incepting from May 1, Aspen said.

Syndicate 4711 is managed by a newly created Lloyd's managingagency, Aspen Managing Agency Limited (AMAL), which is authorizedby the Financial Services Authority in the United Kingdom.

Aspen said Syndicate 4711's business plan for this year is torenew certain participations on selected classes ofbusiness--energy, hull, marine liability, transportation andothers--currently written by its existing UK company, AspenInsurance UK Limited.

For 2008, Aspen said it plans to write roughly $100 million ofits gross written premiums in Syndicate 4711.

In 2007, Aspen reported gross written premiums of $1.8billion.