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Co-op seeks to allay job fears in insurance sale

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The Co-op Group is seeking to allay fears that the sale of its insurance arm will lead to a wave of job cuts by seeking to ensure that the prospective buyer retains its Manchester base.

Sky News has learnt that Britain’s most prominent mutual is negotiating with Markerstudy Group to secure a commitment to the majority of its 1,200-strong insurance division workforce as part of the deal.

Sources said that Markerstudy had now entered a formal period of exclusivity to buy the business for about £300m.

The jobs commitment, which would be informal rather than legally binding, would mean at least 800 jobs being preserved under the new owners, according to people close to the talks.

The discussions with Markerstudy, which operates through brands such as Zenith and works with more than 1,000 brokers and intermediaries, come several months after the Co-op put its general insurance operations up for sale.

The AA, Aviva, RSA Insurance and Saga also expressed an interest in a deal with the Co-op.

If completed, Markerstudy would commit to a long-term deal to sell insurance products under the Co-op brand as the mutual attempts to expand the proportion of its 4.5 million-strong membership base who buy at least one of its policies.

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

It also sells pet insurance plans with Allianz, the German insurer.

The decision to examine a sale comes more than five years after the Co-op put the division on the block in contrasting circumstances.

Board members hired Rothschild, the investment bank, in 2013 to oversee an auction as the Co-op scrambled to fill the £1.5bn black hole in its balance sheet created by the crisis at the bank it owned at the time.

Its life insurance business was sold to Royal London, another mutual, but the general insurance sale process was abandoned in early 2014 after directors concluded that the additional proceeds were no longer required.

The mutual has engineered a remarkable recovery from its near-death experience five years ago, when it launched a corporate governance overhaul and brought in new leadership to stabilise its finance and restore public trust after the scandal involving Paul Flowers, its former bank chairman.

Since then, it has disposed of several businesses, including its farming operations and its remaining stake in the Co-op Bank, which is now controlled by a consortium of American hedge funds but continues to use the brand.

The Co-op has set a target of 80% of its membership base becoming insurance customers within about five years, up from just one-third today.

Last year, the insurance arm reported revenue of £331m but terminated a contract with IBM to upgrade its IT systems after a series of problems.

More broadly, the Co-op Group’s financial performance has improved substantially under Allan Leighton, its chairman, and Steve Murrells, who took over as chief executive last year.

The Co-op and Markerstudy declined to comment.

(c) Sky News 2018: Co-op seeks to allay job fears in insurance sale