RBS holds out for full price on insurance business

by Gill Montia

Story link: RBS holds out for full price on insurance business

In a statement following Royal Bank of Scotland’s (RBS) successful fundraising (in the form of a £12 billion rights issue), the group’s chief executive, Sir Fred Goodwin, said that he is confident of getting a full price for the group’s insurance business.

RBS was caught short when the credit squeeze turned into a crisis because of its acquisition of Dutch bank, ABN Amro, last year.

It has since mounted the biggest rights issue in UK corporate history and is also in the process of selling its insurance business, which includes Churchill and Direct Line.

Sir Fred is expecting up to £7 billion for the division and believes there are a number of potential buyers who could match the price.

The chief executive made it clear he is determined not to sell the business under value but the price is viewed as ambitious by some, given the difficulty of raising funds for acquisitions and mergers in the current market climate.

A number of informal bids have so far been received by RBS; Zurich, Allianz and Travellers are tipped as likely contenders.

Sir Fred also announced that RBS’ trading in the first six months of the year had been in line with expectations, adding that the group will be taking a cautious approach to business in the second half.