A joint £8bn (€11.9bn) bid has been made for Scottish Widows, the life insurance arm of Lloyds TSB, it was reported today.
European insurers Axa and Swiss Re have put together a break-up proposal which would see France's Axa take control of most of Scottish Widows, including its fund management arm, according to the Sunday Telegraph.
Swiss Re would acquire the group's life assurance funds.
The proposal was put to the Lloyds TSB board last week but rejected, the paper said.
A spokeswoman for Lloyds TSB said: "We cannot comment on market rumours or speculation. Scottish Widows is a core part of the group and we are committed to it."
Lloyds is understood to have received several previous approaches for its closed life assurance funds from a number of parties but the latest move is thought to be the first recent approach for the whole Scottish Widows group.
It is believed the two bidders could come back with a higher bid although it is management reluctance that is thought to be the major sticking point, the paper reports.
Lloyds paid £7.3bn (€10.8bn) for Scottish Widows in 2000. Around £5bn (€7.4bn) was paid out in windfalls to the former mutual's members and the remaining injected into the company's balance sheet.
Although the bank has been accused of overpaying, the acquisition has finally begun to reap dividends for the group. Scottish Widows paid about £1bn (€1.4bn) back to Lloyds TSB last year and analysts expect a similar amount to be paid back this year.
Axa has been linked to bids for Aviva and Prudential.
On Friday, Swiss Re paid £465m (€689.9m) for GE Life, the UK arm of General Electric's life and pensions business.
In August, Lloyds TSB reported half-year profits of £1.78bn (€2.6) after cost controls helped it overcome a 20% jump in provisions to cover bad debts. The 4% gain in pre-tax profits was in line with market expectations.