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Saturday, September 15, 2012
British taxpayer-backed Royal Bank of Scotland yesterday approved plans to spin off its Churchill and Direct Line insurance arm in a highly-anticipated stock market flotation.
The 80% state-owned lender must sell its interest in Direct Line Group, which also includes the Green Flag and Privilege brands, under a European-imposed condition of the £45bn (€55bn) bailout it received in 2009.
Around 25% or more of Direct Line Group, whose Churchill brand is represented by a nodding dog, will be offered in the initial share sale, with additional tranches to follow.
RBS must sell a majority stake in Direct Line Group by the end of next year, and divest of the entire company by the end of 2014.
Direct Line Group, which has 4.2m personal motor policies and 4.3m home insurer policies in force, should be worth around £3bn, according to analysts.
The announcement comes just over a week after Direct Line Group announced proposals to axe nearly 900 roles and close a site in the north-east. The group, which employs some 15,000 staff in Britain, is planning the redundancies as part of plans to make £100m of cost savings by the end of 2014.
No new shares will be offered in the group, which is already acting as a standalone company.
Direct Line Group 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."
The company, which has a market share of 19% in motor and 18% in home insurance, reported a 7% rise in operating profits to £224.2m in the first half of 2012.
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