Royal London plots bid for £6bn Scottish Widows book

Royal London, one of the UK’s biggest financial services mutuals, is plotting a bid for a £6bn bulk annuities portfolio being sold by Lloyds Banking Group.

Sky News has learnt that Royal London, which called off a controversial merger with rival LV= – formerly Liverpool Victoria – in 2022, is in talks about a deal that would represent its biggest ever acquisition.

City sources said on Thursday that Royal London, founded in 1861, was among a small number of parties expected to submit bids next week for the bulk annuities arm of Scottish Widows, which is wholly owned by Lloyds.

Royal London describes itself as the UK’s largest mutual life, pensions and investment company, and has more than 2m members.

Last year, it bought Aegon UK’s individual protection business, which saw 400,000 customers transfer to the mutual.

It has also said publicly that it would explore further opportunities in annuities.

Analysts said that Rothesay, the specialist insurer, was the most logical buyer of the Scottish Widows portfolio given its strong position in the sector and robust balance sheet.

A number of other parties are also said to have expressed an interest.

Be the first to get Breaking News

Install the Sky News app for free

Read more from Sky News:Money latest: Where do markets expect interest rates to go?Next raises profit forecast but warns over Red Sea attacksFTSE 100 bosses ‘earn typical UK annual salary in three days’

Advertisement

Bloomberg reported in November that Lloyds was exploring a sale, and had hired Morgan Stanley and Fenchurch Advisory Partners to oversee the process.

Scottish Widows entered the bulk annuity market in 2015, and has built a market share of roughly 4% – making its presence modest compared to the likes of Legal & General, Pension Insurance Corporation and Rothesay, which each account for between 20% and 25% of the market.

Aviva is also a sizeable player, with a market share of about 15%.

One source close to the process said that disposing of the bulk annuities business would enable Scottish Widows to focus on growing its core workplace, individual pensions and direct-to-consumer insurance and investments propositions.

That would reflect Lloyds’ broader strategic priorities under chief executive Charlie Nunn, they added.

Lloyds and Royal London both declined to comment.