RBS unveils plans for Direct Line float

By GARETH MACKIE
Published on 14/09/2012 09:40

Royal Bank of Scotland today confirmed plans to push ahead with the flotation of its Direct Line insurance division in what could be the biggest listing on the London Stock Exchange for more than a year.

The group, which is 82 per cent owned by the taxpayer, will offer at least 25 per cent of Direct Line in the initial share sale, with additional tranches to follow.

No new shares will be offered in the UK’s largest car insurer, which also owns the Churchill, Green Flag and Privilege brands and is already operating as a standalone company.

RBS is required to sell Direct Line by the end of 2014 in return for its government bailout. European regulators had told the bank that it must cede control of the insurance business by the end of 2013 and sell its entire shareholding by the end of the following year.

Direct Line, which has 4.2 million personal motor policies and 4.3 million home insurer policies in force, should be worth around £3 billion, according to analysts.

Chief executive Paul Geddes said: “Our people have worked hard in recent years to transform the business in order to take advantage of our distribution, scale and market leading brands.

“Our work to maximise these advantages is by no means complete and we have a clear strategy that spans distribution, pricing, claims and operational efficiency.”

Bruce Van Saun, group finance director of RBS, said: “Direct Line was launched more than 25 years ago as a pioneer of direct motor insurance and it has grown to become the market leader in UK personal lines insurance.

“We believe it has a strong future as a standalone insurance group continuing to serve its customers well while delivering attractive returns to investors.”

Direct Line has set itself a target of delivering a 15 per cent return on tangible equity, up from 10.2 per cent reported for the first half of this year.