Abbey Life, which has been closed to new business since 2000, managed £12 billion of assets held in 1.2 million policies as of 31 December 2006.

Lloyds TSB chief executive Eric Daniels said that following a review the group had decided that the divestment of Abbey Life was in the "best interest of the group, as well as Abbey Life's policyholders and staff".

Also in the bidding race to acquire Abbey Life were the UK insurer Pearl, reinsurance giant Swiss Re and Resolution.

While Swiss Re dropped out, Resolution withdrew last week after announcing its proposed merger with Friends Provident, (See: British insurers Friends Provident and Resolution to merge) leaving Pearl and Deutsche to enter a third round of bidding, drawing out an auction that has been going on for several months Lloyds Bank, one of the oldest banks in the UK, was formed in 1765 in Birmingham. Through a series of mergers Lloyds emerged to become one of the 'big four' banks in the UK and operates

TSB traces its roots to the first savings bank founded by Henry Duncan in Ruthwell, Dumfriesshire in 1810. In 1985, an Act of Parliament merged together all the remaining savings banks in Great Britain under TSB Bank plc.

Lloyds TSB was created in 1995, when the Lloyds Bank and the Trustee Savings Bank agreed to merge their operations, creating at that time the second largest bank in the UK by market capitalisation after HSBC Holdings; and the largest by market share.

In England and Wales it operates as Lloyds TSB; and in Scotland as Lloyds TSB Scotland.

In 2000, the group acquired Scottish Widows, a mutual life assurance company based in Edinburgh in a deal worth £7 billion, emerging as the second largest provider of life assurance and pensions in the UK after the Prudential.

Lloyds TSB, which reported a 12 per cent rise in profits to £1.99 billionn for the six months to 30 June, said it had spent £36 million refunding customers who claimed they had been overcharged bank overdraft fees.

Bank customers have initiated court cases against the UK's top banks, arguing that their overdraft charges were unreasonable and illegal.

The Office of Fair Trading is now challenging fees for unauthorised overdrafts in court in a case, which should set a legal precedent. Lloyds said it had suspended handling complaints on this issue until a court decision had been made.