Lloyds Tsb Reaffirms Insurance Ambitions

Lloyds TSB, the UK retail bank, is still looking for insurance acquisitions, Sir Brian Pitman, chief executive, said yesterday. He also finalised details of the group's £1.68 billion buy-out of minority shareholders in Lloyds Abbey Life, the life assurer in which it already owns 62.4 per cent.

Sir Brian dismissed speculation that Lloyds would immediately sell Abbey Life, LAL's direct sales operation, and said LAL's interest in buying a mutual insurer would not change.

We shall be growing organically, but if there were further opportunities for acquisition, we would be interested, he said. The remarks came as Lloyds revealed more details of its offer for LAL, valuing the life assurer at £4.5 billion.

 

Lloyds anticipated cost savings rising to about £50 million a year in three years after putting LAL's insurance, hire purchase and leasing activities together with its own. Until Lloyds' merger last year with TSB, its life, insurance, estate agency and finance house activities were contained in LAL. But these activities were duplicated by TSB's 100 per cent owned businesses.

Lloyds anticipates further streamlining benefits from a thorough integration of the two businesses. The offer comprises six Lloyds TSB shares and 21 cash for every seven LAL shares, including a 50p a share special dividend to be paid by LAL on completion of the takeover.

This values each LAL share at 635p, which represents 2.57 times LAL's net asset value and a premium of 13 per cent over its share price before market speculation intensified.

The offer includes a provision for shareholders to receive cash, instead of up to half the Lloyds TSB shares to which they would be entitled.

Depending on demand for this alternative, Lloyds could pay between £790 million to 1.22 billion in cash. That could lower its Tier 1 capital adequacy ratio, to 6.3 per cent or less at the end of the year, below the sector average of about seven per cent.

It had been forecast to reach 6.7 per cent. ButSir Robin Ibbs, Lloyds TSB chairman, said he regarded the capital ratios as still satisfactory. We shall be able to meet the requirements of the Bank of England, he said. We do not have any worries.

Lloyds TSB has been advised by Baring Brothers, and Lloyds Abbey Life by SBC Warburg.