Manchester based Co-op in talks to sell insurance division for £300m

The Co-op is considering selling its insurance business for £300m to a privately owned firm – according to reports.

The news comes as profits before tax increased at the group by £12m to £26m over the last 12 months.

Sales increased by 10% to £5bn, driven largely by a strong food sales performance and the acquisition of Nisa.

The Manchester based organisation is thought to be in detailed discussions with Marketsudy Group.

The insurance division of the Co-op employs more than 1,000 staff and there are fears any deal could lead to redundancies.

Marketstudy currently underwites more than five percent of the UK’s motor insurance policies.

According to reports the talks are at an advanced stage but no final agreement has been reached.

The deal would see a major restructure of the Co-op’s involvement in the insurance market.

It is also comes as the Co-op continues to recover from the major problems it faced five years ago.

Rothschild, the investment bank, as hire in 2013 to oversee an auction as the Co-op struggled to deal with the £1.5bn black hole in its balance sheet caused by the struggles of the Co-op bank.

The Co-op’s life insurance business was sold to Royal London, but the general insurance sale process was halted in early 2014.

Major players in the industry including The AA, Aviva, RSA Insurance and Saga are all understood to have expressed an interest in a deal with the Co-op.

But Markerstudy, which operates through the Zenith brand, is understood to be leading the race to buy the business.

GSO, the credit arm of alternative investments firm Blackstone, has been approached with a view to help Markerstudy finance the acquisition.

The insurance arm of the business made £11m in underlying profit last year.

Any potential buyer would have to commit to a long-term deal to sell insurance products under the Co-op brand.

The Co-op currently underwrites its own home and motor insurance policies, while travel insurance policies are underwritten by US firm Mapfre.

Sources have said that a sale would free up a significant amount of capital tied up in the Co-op’s insurance arm for regulatory purposes, allowing it to invest in other growth initiatives.

Meanwhile a statement was issued to the markets this morning on the mutual’s current performance.

Group profit before tax increased to £26m and underlying profit before tax increased to £10m.

The Co-op’s presence has been strengthened through the acquisition of Nisa and the Co-op now supplies food to over 7,700 stores.

The acquisition of Dimec, a healthcare technology platform, marks The Co-op’s return into the healthcare sector providing the basis for a future digitally enabled healthcare service for our members and customers.

Steve Murrells

Steve Murrells, chief executive of the Co-op, said: “We’re moving forward at pace with our Stronger Co-op, Stronger Communities plan, which we set out at the beginning of the year.

“We know that in order to make a difference, we have to be commercially successful and our performance in the first half shows that we’re delivering on that ambition.

“Our investment in products, price and distribution channels has seen us grow revenue, profit and member value in the first six months.

“We are also back to responding quickly and decisively to the issues which affect our members and customers. Funeral affordability is clearly an issue affecting many and our guarantee not to be beaten on price re-affirms our commitment, as market-leader, to also lead the market.

“Furthermore, our acquisition of Dimec allows us to accelerate the development of our healthcare proposition, and provides the digital platform required to help customers in the future conveniently access and link their healthcare needs, including interacting with their NHS GP.”

Allan Leighton, independent non-executive chair of the Co-op, said: “Against a backdrop of increasing national uncertainty, I’m pleased that the Co-op has continued to perform successfully during the first half of the year.

“It is in these times of volatility that our way of doing business, which gives back to our members and the communities we operate in, becomes even more important. These results show that we are growing our business and increasing the positive impact we can have on our members and the causes they care about in their communities.

“We’ve got exciting plans to continue transforming our Co-op to make it even more competitive, relevant and innovative in both existing and new markets.

“We’ll continue to grow our current businesses and through our Ventures team we’ll move into new areas where we can deliver even more value for our members and their communities.”