Britannic ready to sell mortgage lending arm

Troubled insurer Britannic is in talks to sell its mortgage lending arm, Britannic Money, just six months after it took full ownership of the company.

Britannic said yesterday that it was in negotiations with buy-to-let mortgages specialist Paragon Group regarding the potential sale of Britannic Money. The deal is the latest move aimed at helping to put the insurer on a firmer financial footing.

Paragon is expected to pay up to £50m for Britannic Money. This is less than half the £113m the insurer paid for the company.

Britannic Money specialises in flexible, current account and buy-to-let mortgages and has a £2bn mortgage book.

It has reinvented itself several times - it started life in 1986 as Mortgage Trust Limited, a specialist lender owned by a consortium of Scandinavian banks, then in 1995 became part of First National, an Irish building society. First National demutualised in 1998 and the lender's name was changed to First Active Financial.

Britannic paid £57.2m for a 60% stake in the business in 2000, then another £56.5m for the remaining 40% in November last year.

Just over two years ago the lender's name was changed with much fanfare to Britannic Money and as part of a brand-building exercise the company took over the sponsorship of the Channel 4 sitcom Frasier from Equitable Life. It also sponsored Russell Sage, the fashion designer.

Britannic and Paragon yesterday confirmed they were in talks. Paragon added: "Should these talks progress to a successful conclusion, Paragon would expect to finance the acquisition with a combination of new debt facilities and existing cash resources."

Britannic shocked the stock market in January and highlighted the pressures facing the insurance industry when it said it might defer its annual bonus payment and was unlikely to pay a final dividend. Two months later it confirmed both of these would be happening and announced that its Britannic Assurance arm was closing to new business.

It said at the time that on the sales side it would now be concentrating on its other life and investment businesses, Britannic Retirement Solutions and Britannic Asset Management.