Analysts believe a stockmarket flotation is the most likely route for Scottish Widows as speculation continues about the future of the Lloyds Banking Group brand.
Resolution has been tipped as a front-runner to buy the life and pension business for between £5bn and £7bn. It has already taken over Friends Provident, Axa’s UK life and pension business and Bupa Health Assurance. Money Marketing understands closed-book provider Phoenix Life is also weighing up a bid.
But life sector analysts suggest that a Widows’ stockmarket flotation would be the most practical option for Lloyds. UBS analyst James Pearce says: “If Lloyds decides to offload Scottish Widows, the most practical option at this point looks like an IPO. Corporate buyers are thin on the ground at present, so the back stop of the stockmarket could well come into play.”
Investec insurance analyst Kevin Ryan says: “I would be staggered if shareholders had any appetite for a deal of this size at the moment. Lloyds will obviously want a good price, and the most likely way to get a good price is for an IPO.”
A Lloyds spokesman insists that talk of a potential sale or IPO remains “pure market speculation”, although people within Scottish Widows have confirmed that offloading the bank’s life and pension business is a major possibility.
Resolution and Phoenix both declined to comment.
Resolution founder Clive Cowdery is understood to be keen to retain the Scottish Widows brand if a deal is agreed.
Lucian Camp Consulting principal Lucian Camp says: “The Scottish Widows brand is undoubtedly a strong one. Lloyds have underinvested in it in the last couple of years but the damage will not be serious yet. It is certainly one of the few brands in the life sector that does have some brand equity and adds a significant amount of money to the value of the business.”
Lloyds is searching for replacements after an exodus of senior management in recent months, including chief executive of general insurance and former Scottish Widows chief executive Andy Briggs, who will replace Trevor Matthews as Friends Life chief executive, executive director Archie Kane, who is retiring, and managing director of life, pensions and investments Phil Loney who has been appointed as Royal London chief executive. A spokesman says successors will be announced “in due course”.