Shares in Direct Line Insurance Group PLC (LSE:DLG) surged 22% to 200p on reports that it has received a bid from a European rival.
The motor and home insurer was the subject of a takeover approach from Belgian insurer Ageas, according to Bloomberg.
Directors of the FTSE 250-listed firm rebuffed the approach, the report said.
Ageas, whose shares fell 2% on the news, has a market cap of €7.2 billion (£6.2bn), while the UK insurer is worth £2.1 billion.
The Belgian insurer, which confirmed the offer in a stock market statement, is believed to be considering tabling a follow-up bid worth £3.1 billion, representing around a 43% premium to Tuesday's share price.
It comes after Direct Line suffered a string of profit warnings during 2023, which ultimately led to the exit of its chief executive.
Ageas' offer hints at the growing exodus facing the UK stock exchange with a seemingly steady flow of businesses moving listings abroad, being taken private or being snapped up by bigger rivals.
Many of the exits, which include TUI, Flutter, BHP, Smurfit Kappa, Arm, and CRH, to name a few, have been driven out due to the UK market's poor valuations and weak liquidity.
Since 2022, shares in the FTSE 250 company have dwindled around 30%.
However, by the end of 2023, the group's results were once again impressing investors, with its most recent quarterly update showing 115% growth in its motor insurance segment.
Direct Line has also managed to offset inflation concerns through what analysts labelled “substantial rate increases” in the motor segment, as well as the commencement of the Motability partnership.”
New boss Adam Winslow, the ex-general insurance chief at Aviva, is set to take the helm this week after former CEO Penny James departed last year.
In September, Direct Line sold its brokered commercial insurance business lines to Intact Financial Corp for £520 million as it aimed to put the firm on “a more stable footing”.