UPDATE 1-Lloyds appoints Deutsche to review insurance-source

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By Victoria Howley

LONDON, March 30 (Reuters) - Lloyds Banking Group (LLOY.L) has appointed Deutsche Bank (DBKGn.DE) to review its insurance operations, including potential disposals, a person familiar with the matter said on Monday.

"It's a fairly broad mandate although it is at an early stage and there is no timeline for action yet," the person said.

Lloyds' insurance assets include Scottish Widows, which was acquired for about 7 billion pounds in 2000, and units acquired as part of this year's takeover of HBOS, including Clerical Medical and Halifax Life Insurance.

Bankers said it would be some time before any of the assets came to market. Deutsche was given the mandate about three to four weeks ago.

"All of the processes in the insurance sector have been halted or pulled. I don't think anyone would pursue these businesses for many months," said a senior financial services banker.

Bidding for American International Group's (AIG.N) prized Asian business collapsed recently because candidates could not reach the vendors' price expectations. Royal Bank of Scotland (RBS.L) shelved the disposal of its insurance business after offers were too low.

"A quick sale would mean selling at a discount and I don't think that is likely with the government as a Lloyds shareholder," said another banker, who also covers the financial services sector.

The banker said there would be more interest in general insurance assets than the life insurance businesses.

Lloyds declined to comment.

Lloyds' insurance and investments arm reported a profit of 911 million pounds last year, up 22 percent from 2007.

HBOS's insurance and investment business made a 739 million pound profit last year. That included general insurance, which included household, repayment and motor insurance and made a profit of 365 million pounds.

The British government owns 43 percent of Lloyds after providing emergency funds in October. Its stake could rise to 77 percent after the state pumped in more cash and insured risky assets in a deal earlier this month.

(Additional reporting by Steve Slater)