Legal & General in exclusive B&B deal

Legal & General, the UK's third-largest quoted insurer, upped the stakes in the financial services industry's battle for distribution yesterday, announcing an exclusive deal with Bradford & Bingley to provide its life insurance, protection and investment products from next year.

Legal & General, the UK's third-largest quoted insurer, upped the stakes in the financial services industry's battle for distribution yesterday, announcing an exclusive deal with Bradford & Bingley to provide its life insurance, protection and investment products from next year.

The move will be a blow to Prudential, which last month announced a £1bn rights issue partly to fund its expansion in the UK, based on the assumption that UK banks are likely to take advantage of new rules which will allow them to tie to a small handful of insurance providers rather than just one.

If other banks follow B&B's lead, Prudential could find itself in a worse position than it has anticipated. The tie-up will see about 200 financial advisers transfer from B&B to L&G next month.

The advisers, who will continue to be based in B&B branches but who will be the responsibility of L&G, will sell only L&G products once the partnership launches on 17 January. B&B still intends to tie to a panel of providers in its mortgage division, rather than just one.

David Prosser, the chief executive of L&G, said yesterday that although customers will be buying L&G products, they will still have the choice of other companies' investment funds within their Individual Savings Accounts or pensions.

"It's so much better for the client," he said. "They can change the investment style without having to change the product.

"To change a product is expensive and time-consuming. To change investment style without having to change the product wrapper is much more efficient."

Mr Prosser said that the multi-tie model may be too complex to work well in the mass market. He said he believes many others may follow the B&B route, tying to only one.

Steven Cranshaw, the group chief executive of B&B, said: "A partnership with Legal & General will give us access to their world-class sales management and product suite.

"It will be another important step in the simplification of our retail business and will further reduce costs."

Shares in L&G rose 1.7 per cent on the news to 100.75p. B&B's shares remained unchanged at 276.5p.