Royal London has acquired the asset management and life insurance arms of UK-headquartered The Cooperative Banking Group (Co-op) in a deal worth up to £219m ($331m).
Royal London will take over The Co-operative Asset Management and The Co-operative Insurance Society (CIS), and initially operate them as subsidiaries.
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Royal London said the acquisition will benefit Royal London and CIS with-profits policyholders as it will increase scale, enhance profitability and contribute towards future bonuses and mutual dividends.
Approximately £180m of the £219m sale price will be deferred and become payable when assets of the same value within CIS are made available to Royal London.
The deal will make Royal London’s funds under management increase from approximately £50bn to £70bn and its customer base increase from 4 million to 6 million.
Royal London will maintain the CIS Long Term Business Fund for CIS with-profits policyholders, which will be transferred into Royal London at some point in the future. Upon completion, Royal London will provide policy administration services, asset management services and governance under an agreed expenses arrangement with the CIS Fund.
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By GlobalDataIn July 2011, the Co-op announced it had entered into exclusive talks with Royal London to sell its life insurance subsidiary, including the £15bn of assets in the CIS Fund and The Co-operative Asset Management, which manages the fund.
In January, media reports suggested that an FSA steering committee was meeting to consider whether to grant a waiver that would allow Royal London to acquire CIS.
The waiver was required to allow Royal London to make a profit from the administration of the Co-op’s life assurance unit, which manages about £20bn of assets for 2 million customers. The Co-op does not make a profit from administering the assets.
The deal is subject to shareholder and regulatory approval.
Co-op chief executive, Barry Tootell, said the completion of this agreement "is expected to generate a significant release of capital".
"The transfer of our life assurance and asset management businesses to Royal London will ensure the continued protection of our policyholders, within a strong, mutual business with the necessary scale and focus on the long-term savings sector," he said.
