Terry Murden: Why even Cowdery may fail to turn this lady's head

SHORT of shareholder friends and short of cash. Lloyds Banking Group would surely be a willing asset seller if anybody waved a cheque book at it. Well, not necessarily.

Word has been spreading that it may part with its Scottish Widows business to an acquisitive Clive Cowdery, who's just conquered Friends Provident and is looking to add further scalps as he builds a life and pensions business under his new Resolution banner.

In fact, Widows was one of 25 businesses in the sector named as potential targets for the empire builder, who is said to have drawn up a little list. But with Lloyds selling its Insight asset management business on the same day, attention focused on the bank as the most likely to offload more divisions and the perennial "Scottish Widows for sale" story was again doing the rounds.

It's not entirely without foundation, given Lloyds' need to raise money. Industry sources say it is gauging appetite for a bumper rights issue of as much as 20 billion to allow it to reduce reliance on the government and avoid 15.6bn of fees to take part in the asset protection scheme that insures its bad debts.

With shareholders raising eyebrows at what would be a record rights issue, and coming so soon after HSBC raised 12.5bn – itself a record – it looks like Lloyds could have difficulty getting such a chunky cash call away. This is fuelling the assets-for-sale stories.

But would Lloyds part with Widows? The case against a sale is built around the extent to which the Widows business has been integrated into Lloyds at some expense and hard labour, as well as the cash-generative nature of the business, particularly when the economy recovers.

The bank was notably subdued on the subject yesterday, preferring to issue only a brief statement reiterating that Scottish Widows will be its "main brand" in insurance. The Insight deal brings enormous benefits to SWIP where it intends to build a "centre of excellence", add considerably to its assets under management and even create jobs. It doesn't sound like preparation for a sale.

One theory is that Lloyds may offer Widows to a buyer as a means to satisfy European Commissioner Neelie Kroes, who wants a sacrificial lamb or two in exchange for the state aid being offered to the banks. But her concerns focus around business lending and retail markets. She's concerned with monopoly issues and selling an insurance business would not come into it.

What about splitting off the life and pensions business from the newly-aggrandised SWIP? That's possible, says one source, but highly unlikely given the extent to which the Widows businesses are integrated and branded.

All that aside, any company would consider a silly price for any of its assets and Lloyds would be no different. But a buyer would have to offer cash, and even Cowdery may struggle to find the sum required, estimated by one source at 5bn.

The speculation about his next swoop has embraced every life company in Britain, but Cowdery himself has refused to name anyone on the shortlist. Industry insiders insist that Lloyds is high up that register and point to Widows, probably because of the unhappy relationship between the two in the early years after Lloyds overpaid for it.

Also, the Lloyds-HBOS merger has left the group with a lot of overlapping businesses and there is an acknowledged need for de-duplication. But a more likely scenario would be for Lloyds to offload the Clerical Medical business it acquired from HBOS.

Insurance analyst Ned Cazelet knows Cowdery well, but does not know who he's looking to pounce on next. "It has been very clear for some time that Resolution is interested in large targets. He's interested in elephant hunting."

Cazelet names 11 companies of the right size that fall into this category. They include Aviva, Legal & General, Royal London, Standard Life, Skandia and Zurich. Then there are the UK operations of Aegon, Axa and Prudential. Anyone conducting a review – such as Axa – is vulnerable, he says. But what about Aegon, whose UK business is an Edinburgh neighbour of Widows and Standard Life?

It has some businesses, such as Guardian, that it has picked up over the years and says it is committed to the UK, observes Cazelet. He worries about capital weakness at Aviva and Legal & General, forcing both to cut dividends.

Royal London, which acquired Scottish Life, is thought to be off the radar as it would require demutualisation and, therefore, a change of strategy by the board.

Panmure Gordon analyst Barry Cornes reckons now is the time for consolidation in the industry, but has offered a similarly wide sweep of potential targets for Resolution.

Cazelet is less convinced than some about the inclusion of Standard Life, believing there to be easier, more distressed targets for Cowdery to aim at.

"All I can say is that there are bound to have been talks between Clive and all of the above at some sort of level. What I'm sure about is that he won't go hostile."