Co-op to sell insurance business as one-offs hit profits
THE CO-OPERATIVE has announced plans to sell off its general insurance business, which employs some 1,200 people, the majority in the North West.
The news came as the mutually-owned Manchester-based group said one-off items amounting to £558m had pushed it into the red with operating losses of £535m in 2012 compared with an operating profit of £375m.
At the bottom line the Co-op bank lost £673.7m in the year to 31 December 2012, compared to a profit of £54.2m in the previous year.
Group revenue – was £12.44bn, up from £12.3bn in 2011.
The group said the majority of its one-off costs (£377m) reflected write downs on the value of “non core” banking activities – ostensibly real estate and residential property loans.
The £558m exceptional items also includes further £150m provision for PPI mis-selling, taking the total to £244m, and also a £150m write down on the value of IT assets.
Regarding the sale of the insurance arm, a price of around £600m has been suggested.
The proposed transaction follows the completion this week of the deal to sell the life and saving business to Royal London for £219m.
Advisers have not yet been appointed to sell the business, which has millions of household and motor customers, but the group has received some approaches.
Reports last night said Tungsten Corporation, which is headed by Edmund Truell, founder of the private equity group Duke Street Capital, is interested in making an offer.
Barry Tootell, chief executive of The Co-operative Bank said: “We have a clear view of what is strategically important to ensure that the remarkable transformation of The Co-operative Group over the last five years is fully embedded and can be built upon.
“A part of this strategy is to focus on the Banking Group’s core relationship retail and business banking operations. The Co-operative Insurance remains a strong, profitable business and has undergone a major transformation over recent years, with a thriving distribution strategy and a home product which in particular is delivering excellent underwriting profits.
“It’s on this basis that we will explore options for the sale of our GI business, whilst remaining absolutely committed to continuing to provide general insurance products to The Co-operative Group’s customers and members.”
Group chief executive Peter Marks said 2012 had been a “challenging year” for the group, but said the group had still produced an underlying operating profit of £431m (£523m last year) against the backdrop of a tough economy.
“In Food, there was a marked improvement in the second half of the year, most notably with our like for like sales performance returning to growth in the last quarter. Overall profitability for the year, however, was impacted by the competitive environment and our continued investment in prices, the store estate and our supply chain.
“Our specialist businesses had another good year with underlying sales and profits both up as we again demonstrated a clear point of difference within the professional services markets in which we operate.
“We have a clear view of what is strategically important to ensure that the remarkable transformation of the group over the last five years is fully embedded and can be built upon.”
