Co-op Group tests water for selling off life arm

THE Co-operative Group is preparing to hang a "for sale" sign on its £18 billion life assurance arm after appointing Deutsche Bank to line up potential suitors.

Neville Richardson, chief executive of Co-operative Financial Services (CFS), is considering a disposal of the unit as part of a strategic review following the Co-op's merger with Britannia Building Society last year.

It is understood that a brochure about the operation - which lays claim to almost three million customers - has been sent to a raft of possible bidders including Clive Cowdery's Resolution vehicle, investment firm Phoenix, Royal London, Legal & General and Aviva.

A spokesman for the Co-op would not comment yesterday but a source close to the situation confirmed that Deutsche had been instructed to gauge market interest in the unit.

"No decision has been taken and retention of the whole business is absolutely an option. They are testing the water as part of the strategic review," the source added.

The insurance operation includes a with-profits fund valued at between 11bn and 12bn and a unit-linked investment management business.

CFS grew profits 45 per cent to 109 million in the first half of the group's financial year as it cashed in on households' disappointment with some of the traditional high street banks following the banking crisis.

The financial services arm operates two corporate banking centres in Scotland - one each in Edinburgh and Glasgow - accounting for some 200 business customers between them.