Horta-Osorio may be planning Widows sale as City debates

Analyst teams from City investment heavyweights including Morgan Stanley and Deutsche Bank have been making detailed evaluations of the case as Lloyds undertakes its own root and branch review of the entire business - due to conclude in June. Reports yesterday claimed that Horta-Osorio is expected to say he will focus on core banking services when the review is complete.

There has long been speculation that Lloyds may sell insurance assets as it seeks to bolster its balance sheet.

A sale of Edinburgh-based Widows and its asset manager, Scottish Widows Investment Partnership (Swip), could raise between 5 billion and 7bn for the bank if it chooses to restructure to focus on core retail banking services. However, some analysts have put this figure far higher, at around 10bn.

Questions are also being raised about Lloyds' 60 per cent stake in St James's Place, the wealth manager it acquired after the bank took over HBOS at the height of the global banking crisis. The stake is worth about 1bn.

Both the adviser and asset management business Swip now fall under the remit of former Santander finance director Antonio Lorenzo, who last month became Lloyds' director of the wealth and international division.

Following the announcement that Archie Kane, Lloyds' group executive director of insurance, was retiring from the group, oversight of the Scottish Widows general insurance and pensions business is set to come directly under the remit of Horta-Osorio.

One buyer for Widows could be Clive Cowdery's Resolution Group. Although the consolidator recently played down its acquisition ambitions in favour of smaller, easier-to-digest bolt-on businesses, it is understood it has left the door open for major takeovers.

In January, Resolution hired Lloyds' head of general insurance, Andy Briggs, to run its Friends Provident arm. Analysts said the arrival of Briggs gave Resolution a "favourable angle" on a potential acquisition because he was "part and parcel of that (Scottish Widows] business".

However, it is thought Cowdery could struggle to raise the cash from existing investors.

Horta-Osorio could also take City advice to hang on to the profitable Scottish Widows and Swip businesses as it continues to consolidate its bancassurance model.

Under Horta-Osorio's predecessor, Eric Daniels, the group launched its integrated bancassurance proposition in June, knitting together more closely the operations of the Lloyds TSB, Halifax, Bank of Scotland and Scottish Widows brands.The bancassurance business is set to benefit when new rules come into place in 2012 banning independent financial advisers from taking commission from financial providers.

Lloyds' insurance division, spearheaded by Scottish Widows, contributed profits before tax of 1.2bn in 2010, while Swip is one of the UK's five biggest fund managers.

Lloyds has also been ordered by the European Commission to sell off 600 branches and at least 4.6 per cent of the UK personal current account market and 19.2 per cent of its retail mortgage assets, as a condition of the state aid it has received.

Horta-Osorio recently announced plans to accelerate these sales, which include the disposal of Cheltenham & Gloucester branches, the TSB brand and Intelligent Finance.