Britannic in talks with Paragon on sale of its mortgage arm

The Britannic Group, the ailing insurer that this year closed to new insurance business, suspended its dividend and scrapped bonuses, confirmed yesterday that it was in talks to sell its loss-making mortgage arm to Paragon.

The Paragon Group confirmed it was in discussions with the company to take Britannic Money off its hands, and it is thought possible that a deal could be agreed within the next couple of weeks.

Analysts believe Britannic may receive only about £50m for the business, despite spending more than £140m on acquiring the mortgage firm from the Irish lender First Active.

Paragon specialises in buy-to-let mortgages and was carved out of the wreckage of National Home Loans, the failed bank that had to be bailed out by rival lenders on the orders of the Bank of England in the 1980s.

The combined company would have assets under management of £4.7bn, almost double Paragon's existing assets. Britannic Money has about £2bn in assets, including about £800m in buy-to-let loans and a strong position in current account mortgages.

A statement from Paragon yesterday said that should an offer be made, it would finance the acquisition through new debt facilities and existing cash resources.

The sale would end the drain on capital that Britannic Money has been to its parent group, which was forced to take drastic action this year to shore up its finances. Britannic Money is due to break even this year, after losses of £28m in 2001 and £5m in 2002.

Without Britannic Money, the Britannic Group is still vulnerable to a takeover approach. The group also owns Britannic Asset Management and Britannic Retirement Solutions, which could be picked off individually.

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