RBS set to abandon insurance arm sale - reports

Royal Bank of Scotland could abandon efforts to sell its UK insurance operations, it was reported today.

RBS is understood to have been in discussions over its insurance divisions - including Direct Line and Churchill – but the Sunday Times reported it could give up on the £7bn (€7.34bn) sale.

The struggling bank, which is 58% owned by the British taxpayer, is under a new chief executive, Stephen Hester, who has pledged to focus on the group’s UK business.

According to the Sunday Times the insurance divisions, which are cash generative, are considered more valuable now than they were to the previous management.

The report said RBS has already rejected an initial offer from CVC Capital Partners and although it has not ruled out a deal with the firm, the bank is also thought to have sought talks with another private equity company, BC Partners.

But it is considered unlikely that either suitor would make an offer RBS would accept.

The bank is thought to be close to abandoning the deal altogether and while no final decision has yet been taken, an announcement could be made within weeks, the report said.

RBS is the second largest general insurer in the UK and has 18,000 staff. It is the UK’s largest insurer of cars, as well as a major player in travel, home and pet insurance.

The bank put the insurance business up for sale earlier in the year when it unveiled plans for a cash call on its shareholders to weather the credit storm.

In August RBS unveiled its first loss in 40 years as a public company after suffering writedowns of £5.9bn (€6.2bn) as it reported statutory pre-tax losses of £692m (€726m) for the first half of 2008.

RBS investors snubbed its £15bn (€15.74bn) share offer in November, leaving the British government to step in to buy up the unwanted shares and shore up the bank’s ailing finances.