Co-op agrees to insurance arm sell off

THE Co-op has struck a deal to sell its life insurance and investment business to mutual Royal London for £219m, writesJamesSalmon.

If approved by Royal London members and the regulator, the deal will affect two million savers – mainly in the Co-operative Insurance Society’s £16bn with profits fund.

The Co-op is also offloading its ‘sustainable’ investment funds which seek out companies with green, or socially responsible, credentials.

The move will raise much needed capital for the Co-op, which is reported to be facing a £1bn shortfall.

This is thought to be endangering a long-running deal to buy 632 branches which Lloyds was forced to sell as a condition of receiving a bail out from taxpayers. The initial terms of the agreement were reached in the Summer of 2011, long before it entered into negotiations with Lloyds.

But the Co-op was already looking at streamlining its business and focusing more heavily on its banking operation. The agreement will increase Royal London’s assets under management by around £20bn to about £70bn. It said it hoped the deal would ‘generate additional synergies’ and boost its profits.

The Co-op’s with profits fund will be run by Royal London, and eventually transferred into the mutual’s own with profits fund.