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, raising hopes the state-rescured bank is moving closer to restoring its dividend.
The deal, which will boost Lloyds’s core capital by £400 million, and the separate sale yesterday for £254 million of a portfolio of leveraged loans, helps strengthen the bank’s balance sheet and could accelerate government plans to start selling down its 39 per cent 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 per cent 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.”
Heidelberger Leben, which employs around 300 people, has a portfolio of around 600,000 policies, and ran €5.2 billion of assets as of the end of last year. – (Reuters)
