Clerical Med agrees deal for German life business

Clerical Medical, the life insurance arm of HBOS, strengthened its presence in the German market yesterday, buying the life business of the German financial services group MLP for up to €325m (£218m).

Clerical Medical, the life insurance arm of HBOS, strengthened its presence in the German market yesterday, buying the life business of the German financial services group MLP for up to €325m (£218m).

Clerical will pay €270m in cash upon the closing of the transaction, with a further €40m depending on future sales volumes, as well as up to €15m for any premium increases within the existing book over the next three years.

MLP's life book has some 600,000 policies, most of which are unit linked, from about 250,000 customers. As part of the deal, Clerical and MLP, one of Germany's largest distributors of investment products, have entered into a long-term agreement in which MLP will distribute Clerical's products in its home markets. MLP has a sales force of about 2,500 advisers, with the majority of their client base comprising doctors and lawyers. Clerical said the deal would accelerate its growth in a market which has "favourable demographics and regulatory trends".

John Edwards, the chief executive of HBOS Financial Services, said: "This transaction provides Clerical Medical with a unique opportunity to extend its operations in the German market, and is a logical extension to its existing cross-border operations. It gives us a partnership with a leading distributor in this market with highly professional advisers."

Dr Uwe Schröder-Wildberg, the chief executive of MLP, said: "This transaction completes the strategic refocusing of our business to enable us to concentrate on distribution. It is also an opportunity for MLP to strengthen the relationship with one of our most important product providers while at the same time securing stability for both the customers and staff of MLP Life."

Before yesterday's deal, Clericalhad a small foothold in Germany, with a 6 per cent market share in the unit-linked life insurance market. Its European business generates about 20 per cent of HBOS Financial Services' annual profits.

The deal is expected to complete in the third quarter of this year, but is subject to approval by UK and German regulators, as well as antitrust authorities.