Aug. 21 (Bloomberg) -- Lloyds Banking Group Plc, the U.K.’s largest mortgage provider, will book about 330 million-pound ($517 million) loss on its sale of German life insurance business, Heidelberger Lebensversicherung AG.
Cinven Partners LLP and Hannover Re will pay about 300 million euros ($403 million) in cash for the business, London-based Lloyds said in a statement today. The transaction, which requires regulatory approval, is seen to complete early 2014.
Lloyds Chief Executive Officer Antonio Horta-Osorio is shrinking assets and cutting costs as he prepares for the government to start reducing its stake in the lender. The bank earlier this year sold holdings of U.S. mortgage-backed securities for about $5 billion in cash and stakes in wealth manager St. James’s Place Plc, and is considering a sale of its Scottish Widows Investment Partnership and Australian business.
“The sale is in line with the group’s strategy of rationalizing its international presence and ensuring value for shareholders,” Lloyds said in the statement.
Lloyds closed little changed at 73.86 pence in London. The shares have advanced 54 percent this year, while the Bloomberg Europe Banks and Financial Services Index gained 9.1 percent.
Heidelberger, based in Heidelberg, Germany, reported a statutory loss of 38 million pounds for 2012, Lloyds said. Some 7.2 billion pounds in gross assets will be subject to the transaction, according to the statement.
Lloyds began exploring the sale in May 2011, two months after Horta-Osorio’s appointment as CEO. Lloyds acquired the business when it took over HBOS Plc, which bought the insurer in 2005 from financial services broker MLP AG.
Cinven sold shares in U.K annuity provider Partnership Assurance Group Plc in an initial public offering in June on the London Stock Exchange. The deal valued the business at 1.5 billion pounds, giving Cinven a potential seven times return on its original investment.
Separately, Lloyds agreed to sell 283 million pounds of leveraged loans to Goldman Sachs Group Inc.’s ELQ Investors II Ltd. for 254 million pounds in cash and a further 2 million pounds payable within six months “if certain financial conditions are met,” it said in a statement. The holdings generated profits of 11 million pounds in 2012, Lloyds said.
The loan sale will contribute toward a “small” boost of Lloyds’ core Tier 1 ratio, a measure of the bank’s ability to absorb losses, according to the statement. Prices of the senior-ranking debt have risen about 2 percent this year, according to Standard & Poor’s European leveraged loan index.
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