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Daily Insurance Industry News
Friday 19th of October 2018
December 29, 2008

RBS may abandon insurance arm sale

by David Masters

Story link: RBS may abandon insurance arm sale

RBS may abandon insurance arm sale RBS may abandon insurance arm sale

Royal Bank of Scotland (RBS) may call off the £7 billion sale of its insurance unit, which includes the Direct Line and Churchill brands.

The Sunday Times reported yesterday that RBS, the UK’s second largest banking group, has already rejected an offer for its insurance business from private equity group CVC Capital Partners.

RBS said it was unimpressed with the terms offered, and will only accept a deal if it is in the interests of shareholders.

This strong rejection makes it increasingly unlikely that RBS will secure a deal before its deadline in eight weeks.

If RBS decides to retain its insurance operations, the decision will be announced in February alongside the company’s annual results.

Churchill and Direct Line together contribute a pre-tax profit of around £1 billion per year, meaning that new chief executive Stephen Hester is keen to keep them under RBS control.

Nevertheless, the bank urgently needs to raise funds to counter an estimated £28 billion loss from exposure to bad debt.

The bank’s 4.3% stake in Bank of China, worth around £1.5 billion, may be sold instead of the insurance business as RBS seeks to focus on domestic operations.

RBS declined to comment on the report.

 

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