Royal Liver in talks on merger; Historic city firm could unite with rival in pounds 10bn deal: Owners of Liver Building poised for deal with rival.

Byline: ALISTAIR HOUGHTON

ICONIC Merseyside business Royal Liver is believed to be in talks with larger rival Liverpool Victoria about a potential pounds 10bn merger.

The mutual insurers have been in talks for several weeks over a tie-up that would create a group with a combined customer base of more than 5m, it is understood.

Two years ago, Royal Liver rejected a merger with another rival, Royal London, with the board insisting the company would do better as an independent business.

But Royal Liver, which employs 520 people in Liverpool, has suffered during the financial crisis while Liverpool Victoria - known as LV= after a recent rebrand - has performed strongly.

Both firms refused to comment on the reports last night. Royal Liver posted an operating deficit of pounds 90,000 for the six months to June 30, hit by poor performances at its Park Row and Citadel financial adviser subsidiaries. It also announced the shock departure of chief executive Steve Burnett in August - a move reported to have been down to disagreements over a possible merger with LV=. Royal Liver, which owns the iconic Royal Liver building, was founded in 1850 and now has around almost 2m members and more than pounds 3.7bn in funds under management. LV= was founded as Liverpool Victoria in 1843 to help lowincome families pay their funeral expenses. Today, the Bournemouth-based group employs more than 3,800 people and manages around pounds 7bn in funds. LV= reported in March that annual profits had more than doubled after strong sales and acquisitions helped it ride out volatile markets.

The group, which has around 3.2m members and customers, saw operating profits jump 128% to pounds 62.8m in 2008. The turnaround comes just two years after the mutual posted losses, sparking a decision to pull out of banking to focus on the general insurance market. The group has also expanded through acquisitions, snapping up reinsurer Swiss Re's retirement solutions business in 2007, which drove an 83% growth in life insurance new business income last year. Its pounds 150m takeover of Highway Insurance, the owner of broker Hero, has also pushed it into the UK's top-five biggest car insurers by 2012. The group has meanwhile benefited from tie-ups with building society Nationwide on travel and car insurance. Steve Burnett left Royal Liver in August after spending seven years modernising the business. Speaking to the Daily Post's LDP Business magazine last year, Mr Burnett said Royal Liver's board did not feel that a merger with Royal London was the right thing for the company. He said: "The board had been through five years of hard work and was seeing the results starting to come through.

"To hand the baton on to another company just didn't feel like the right thing to do at that point." Royal Liver has also announced a full strategic review of its businesses. The company out-sourced its IT functions, with 73 staff transferring to ATOS and just 10 staying within Royal Liver. Chairman and acting chief executive David Woods said the move could save pounds 20m over 10 years. The company also axed 29 jobs at Dublin-based financial advice arm Citadel and is restructuring its Park Row financial advisory arm. Any merger deal would have to be approved by Royal Liver's 200 delegates, the group's own "members of Parliament" who are elected by policyholders to scrutinise the company's performance.

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Royal Liver - has also announced a full strategic review of its businesses