Friends Provident waits in wings for HBOS stake in St James's

Trevor Matthews, chief executive of insurer Friends Provident, is believed to be running the rule over HBOS's 59 per cent stake in St James's Place Capital (SJP), the wealth manager.

The stake in SJP is likely to be sold off by Lloyds TSB if it completes its acquisition of HBOS, alongside other assets deemed non-core to the business, including motor insurer esure and Clerical Medical.

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Mr Matthews will update the market on the progress of the sale of Friends' Lombard and F&C units at the end of the month during the company's third-quarter results. The businesses, alongside the smaller Pantheon wealth management unit, have been up for sale since the start of the year.

A City source said: "St James's Place Capital would sit very nicely with Trevor's thinking. Any chance of selling F&C or Lombard would seem to have gone so this deal could make real sense – if it can in this environment."

Shares in SJP closed down 26p on Friday 192p, which values the company at £920m.

CVC, the private equity group, remains the only player in negotiations over the Lombard finance firm, although these are thought to have stalled. The chances of Mr Matthews shifting the 52 per cent stake in asset manager F&C look increasingly slim.

Reports last week suggested that Dutch group Rabobank is in talks to buy the F&C stake, while the distant prospect of a management-led buyout remains.

Meanwhile, the chase for the assets of AIG, the giant American insurer that was recently bailed out by the US government, has already started. It is thought that a number of UK insurers, including Prudential and Standard Life, are interested in pockets of the firm, which is now in effect owned by the US government.

"This is the greatest fire sale in the history of the insurance industry," said one insider. "Everyone has to at least have a look at what's on offer – you'd be bonkers if you didn't."

It is thought that a number of insurers have already tabled indicative bids for chunks of AIG, even though a formal selloff process has yet to begin.