Lloyds begins review of its insurance arms

The FTSE 100 giant Lloyds Banking Group is believed to have hired Deutsche Bank to run a review of its key insurance businesses. This could lead to the sale of famous names such as Clerical Medical later this year.

Lloyds is thought to have brought in Deutsche Bank's Financial Institutions Group (FIG) to examine the insurance assets following its takeover of HBOS last year.

With that acquisition, Lloyds inherited insurance brands including Clerical Medical and Halifax Life Insurance, as well a 60 per cent stake in the wealth manager St James's Place Capital.

With Lloyds already owning such brands as Scottish Widows, there is considerable overlap within the insurance portfolio of the merged business.

Lloyds is on record as saying it would combine its insurance and investment propositions under plans that could enable it to reap cost savings of more than £200m.

A Deutsche Bank managing director, Mike Lamb, is believed to be co-ordinating the review process for Lloyds, which began last month. Mr Lamb is also currently advising Just Retirement – a firm that sells pensions to unhealthy people – over its sale.

Reports suggested last year that the insurance entrepreneur Clive Cowdery was readying himself for a tilt at Clerical Medical, after the launch of his new Resolution investment vehicle. But the start of a Financial Services Authority (FSA) investigation into Mr Cowdery's dealings have put his ambitions on hold.

In November, Lloyd's chief executive, Eric Daniels, said: "I think there's no truth in the rumours that we're selling off Clerical Medical. We think that they've done an excellent job in banc-assurance."

However, a sale of key insurance assets would help Lloyds, which is now more than 70 per cent owned by the taxpayer, to pay off its debts to the Exchequer more quickly.

Royal Bank of Scotland (RBS) shelved plans last year to offload its insurance business following a sales process lasting nearly a year. RBS's chief executive, Stephen Hester, abandoned the sale after bids for the unit, which includes the Churchill and Direct Line brands, came up well short of the £6bn asking price.

Shares in Lloyds closed up nearly 40 per cent last week, second only to Barclays, after the bank moved to bolster its finances through the sale of a £3.4bn government-guaranteed bond and a bond exchange worth £7.5bn intended to strengthen its capital buffer.

On Friday, shares in Barclays rocketed after the company said it had passed a key financial health check by the FSA. A statement from Barclays' chief executive, John Varley, confirming it had passed the FSA's "extreme stress test", saw shares climb over 60 per cent during the week.

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