By Sinead Cruise
LONDON Aug 21 British lender Lloyds Banking
Group has sold German life insurer Heidelberger Leben
to private equity group Cinven and reinsurer Hannover Re
for around 300 million euros ($400 million), raising
hopes that the state-rescured bank is moving closer to restoring
The deal, which will boost Lloyds' core capital by 400
million pounds, and the separate sale on Wednesday for 254
million pounds of a portfolio of leveraged loans, helps
strengthen the bank's balance sheet and could accelerate
government plans to start selling down its 39 percent stake,
"It's another step along the road to just focusing on the
domestic retail business, and another step along the road to a
fourth-quarter dividend," said Mike Trippitt, director of banks'
research at London-based Numis Securities.
Funds advised by Cinven will acquire 80 percent of
Heidelberger Leben shares, leaving Hannover Re, the
third-largest reinsurer worldwide, with the balance.
Demand for new life insurance policies has been hit by low
interest rates, while stricter capital requirements for insurers
have made the policies more expensive to underwrite, leaving
owners of many smaller operators looking to sell.
Cinven plans to buy up and consolidate life insurers in
Germany, allowing it to invest in updating systems and improving
service while achieving cost savings through scale in a similar
way to what it has done in the UK following its investment in
life and pension products provider Guardian Financial Services.
"Germany is a very large market, and it is very fragmented,"
Cinven Partner Caspar Berendsen said.
"We see dozens of acquisition opportunities in Germany, it
is growth through buy and build," he said, adding that the
consolidation process would take several years.
Heidelberger Leben, which employs around 300 people, has a
portfolio of around 600,000 policies, mainly unit-linked, and
ran 5.2 billion euros of assets as at Dec. 31 2012.
SPECULATION SALE IMMINENT
Lloyds has been aggressively selling non-core assets this
year, raising 450 million pounds from shares in wealth manager
St. James Place, U.S. mortgage portfolio disposals and
the sale of branches from its Spanish retail banking network.
The bank's share price has surged by more than 50 percent in
the year to date to around 74 pence, well above the UK
government's so-called break-even price of 61 pence, prompting
speculation that a 5 billion-pound state share sale is imminent.
Lloyds shares were up 0.34 percent at 74 pence by 1032 GMT.
The government has said it has no timetable or target price
for the sale but it appointed JP Morgan in late July to advise
on the possible sale of taxpayer interests in Lloyds and a much
larger 81 percent stake in Royal Bank of Scotland.
Speaking at the bank's half-year results this month, Lloyds
Chief Executive Antonio Horta-Osorio also said he expects the
bank to be a "high dividend" paying stock in the future,
potentially paying out at least half of its
Shareholders have not received a dividend from Lloyds since
it took over crisis-stricken lender HBOS in 2008. But management
are back in talks with regulators about restarting the payout, a
key milestone in its long-term recovery plan.
Trippitt said the asset sales helped the bank's dividend
aspirations because they left the bank with a cleaner, more
streamlined portfolio and boosted it's capital, encouraging
regulators to allow the bank to return cash to shareholders.
The Heidelberger sale will result in a loss of around 330
million pounds in Lloyds' group accounts but, combined with the
sale of other assets, is expected to boost the bank's common
equity Tier 1 capital by around 400 million pounds when it
completes, Lloyds said in a statement.
This is largely because of accounting conventions, which
required Lloyds to deduct the embedded value of the insurance
company from its assessment of its core Tier 1 equity, a
deduction that will no longer have to be made.