RBS planning float for Direct Line business

By GARETH MACKIE
Published on 27/08/2012 00:00

ROYAL Bank of Scotland is set to press ahead with the flotation of its Direct Line insurance arm within weeks after ending sale talks with private equity buyers.

Two rival consortia of private equity firms were understood to have shown an interest in the business, which also includes Churchill and Green Flag, but RBS is said to favour a stock market listing.

The group, which is 82 per cent owned by taxpayers, believes a public listing is the best option despite continuing turbulence in equity markets, and a move towards flotation could come in October.

Private equity firms have been waiting to pounce on the business, attracted by its strong cashflows and market leading position, and bidders were expected to pay between £3 billion and £4bn.

RBS is required to sell the business, which also includes the Privilege brand and broker business NIG, by the end of 2014 in return for its taxpayer bailout.

The bank said earlier this year it would list the insurance arm in three separate tranches – one this year, one in 2013 and the remainder in 2014 – to maximise returns for shareholders. It could be worth up to £5bn, according to recent reports.

Direct Line saw its quarterly operating profits rise 6 per cent to £219 million and increased the number of its in-force policies by 
2 per cent to 20.1 million.

Ernst & Young recently said that tough conditions in the car insurance market could see half of the players in the industry change hands over the next three years.