By Steve Slater
LONDON Jan 20 Britain's Co-operative Group
has scrapped the sale of its general insurance business
following a restructuring deal which means it does not have to
contribute as much capital to its struggling bank as initially
The business had been expected to fetch several hundred
million pounds and was due to have been sold during this year.
Co-op Group, whose bank has been hit by a capital shortfall
and a drugs scandal involving its ex-chairman, said on Monday it
had decided to keep the general insurance business because the
group now had to contribute less capital to the bank under a
revised restructuring plan agreed in November.
Co-op, which is owned by its members and has operations
spanning banking, supermarkets and funeral services, was last
year rocked after a 1.5 billion pound ($2.5 billion) capital
shortfall was identified at its bank and Paul Flowers, former
chairman of the bank, was arrested as part of an investigation
into the supply of illegal drugs.
A restructuring of the bank will leave hedge funds in
control of that business and Co-op Group with a 30 percent
stake. The group said it can meet its reduced capital commitment
to the bank through the already completed sale of its life and
savings business and "the strategic management" of some property
Euan Sutherland, chief executive of Co-op Group, said he had
received "a significant amount of interest" in the insurance
business, which provides home, motor and other insurance
UK insurer Legal & General considered a bid, a
person familiar with the matter previously said.
Other potential suitors included private equity firms Anacap
and Advent International, and Catalina Holdings, a consolidator
of general insurance firms, according to media reports.
"Having considered the sale process, and in light of the
changed requirements on us under the Bank recapitalisation
process, we believe it is in the best interests of our members,
customers and colleagues, that we retain this strong business
and develop it further," Sutherland said in a statement.
The Co-op announced its plan to sell the business last