James River Group Holdings Ltd. could be a takeover target after hedge fund firm D.E. Shaw took the insurer public, according to an analyst at BMO Capital Markets.

The insurer will probably post increases in premium revenue because of its focus on specialty products for commercial clients, which faces less competition than property coverage, BMO’s Charles Sebaski said in a note today. He assigned an outperform rating to the Bermuda-based insurer.

Insurers have been pursuing acquisitions to find paths for growth beyond property protection, where prices are pressured by hedge funds and other investors seeking to enter deals for weather-related hazards. RenaissanceRe Holdings Ltd. agreed in November to buy Platinum Underwriters Holdings Ltd., and XL Group Plc said last month that it approached Catlin Group Ltd. about a possible deal for almost $4 billion.

“Given the interest by other larger insurers for diversification and liability exposure, we would not be surprised to see James River on a list of take-out candidates,” Sebaski wrote.

James River climbed 1.1 percent to $23.08 at 9:30 a.m. in New York trading. Bob Myron, chief operating officer of James River, didn’t immediately return a call seeking comment.

Sebaski said that James River will become more attractive to potential buyers as it moves beyond forays into crop insurance and some workers’ compensation lines that proved less profitable than other niches. He set a price target of $25 a share, which compares with the $21 price in the initial public offering in December.

Billionaire David Shaw’s hedge fund bought James River for more than $560 million in 2007. D.E. Shaw lowered its stake in an IPO that raised about $231 million. Analysts at SunTrust Robinson Humphrey; Keefe, Bruyette & Woods Inc. and FBR & Co. also initiated coverage today with the equivalent of buy ratings. The banks all helped underwrite the IPO.