Lloyds TSB to cut jobs as insurance arms merge

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Hundreds of jobs are threatened at Lloyds TSB as a result of the merger of the group's TSB and Abbey Life insurance arms. But the bank said yesterday it was determined to expand its insurance operations and would consider further acquisitions in the sector.

Lloyds TSB announced plans last week to buy up the remaining stake in Lloyds Abbey Life, its majority-owned insurance venture.

Sir Brian Pitman, outgoing chief executive and chairman designate, said: "We are keen to go on expanding our insurance business. We think it is a growth market. If opportunities [arise] to grow further by acquisitions, we'd certainly be interested at the right price."

Lloyds TSB now has the task of linking Lloyds Abbey Life with the other insurance business it acquired through its merger with TSB last year. It already expects pounds 50m of cost savings in the next three years by uniting the two businesses.

The bank is drawing up a management structure for the insurance business and has to decide which of its well-known brands to keep.

In addition, more than 2,000 Lloyds Abbey Life staff and just under 2,000 TSB staff will be affected by the review, although the bank aims to achieve staff reductions on a voluntary basis.

The bank said it was too early to detail the number of job losses as Lloyds Abbey Life shareholders would not meet until November to approve the deal.

Peter Ellwood, who takes over as chief executive next year, said the bank would retain the best of both businesses.

"Lloyds Abbey Life has excellent technology, superior to anything else we have," said Mr Ellwood, while TSB had an integrated approach to selling which gave a high level of productivity.

The Lloyds Abbey Life venture was formed in 1988 when Lloyds merged its insurance businesses - Black Horse Financial Services, Lloyds Bank Insurance Services, Lloyds Bowmaker Finance, Lloyds Bank Unit Trust Managers and Black Horse Agencies - with Abbey Life.

However, after the Lloyds Bank merger with TSB last year, the newly formed bank also gained TSB's bancassurance units: TSB Life, TSB General Insurance, UDT, the consumer finance group, and TSB Property Service. Lloyds Abbey Life also contains the core business that Abbey Life brought to the venture, mainly Abbey Life Assurance.

Market sources expect the bank to spin off this Abbey Life business through a trade sale, despite moves by Lloyds TSB to quash such speculation yesterday. "I do think there's a price for everything and I think Abbey Life is of significant value to a European insurer," said one source.