Lloyds Banking Group Plc, according to sources familiar with the situation, is working with investment bankers on the sale some assets of its pension provider Scottish Widows.
People familiar with the matter said that Morgan Stanley and Fenchurch Advisory Partners are advising the British bank to sell a portfolio of bulk annuities worth £6 billion ($7.3billion).
Bulk annuities, also known as bulk insurance policies, are offered by pension plans in order to reduce the risk of pensioners who receive defined benefit pensions. These deals are more attractive now that gilt yields have improved the pensions’ funding position.
Morgan Stanley, Fenchurch, and Lloyds declined to comment.
Scottish Widows is a fast-growing company in this space. It entered the market in 2015 and has seen rapid growth. With a market size of 4%, it is still small compared to Legal & General Group Plc or Pension Insurance Corp. which control a quarter each.
The disposal of Lloyds would allow the arm to concentrate on its core business, such as workplace and individual pensions. This is in line with Charlie Nunn’s strategy for growth in areas such as wealth.
Scottish Widows is part of Lloyds and has been since 2000. However, the company’s roots date back to 1815 when it began selling policies to cover women and children whose fathers, brothers, and husbands were killed in the Napoleonic Wars. It has six million customers today.