RBS abandons insurance division sale

Royal Bank of Scotland today abandoned plans to sell its insurance arm, which includes the Direct Line, Churchill and Privilege brands.

RBS put the division up for sale in April last year ago when it unveiled plans for a £12bn (€13.72bn) cash call on its shareholders to shore up its finances.

It was originally hoping to fetch a reported £7bn (€8bn) for the insurance arm, which made more than £400m (€457m) in profits during the first half of 2008.

But early interest in a potential deal waned as tighter credit conditions gave way to a full-blown financial crisis last autumn, which left more than two-thirds of RBS in public hands.

Chief executive Stephen Hester said: “Given RBS’ broader considerations, it was important to test the market for this business, which has demonstrated that a sale on terms currently available would destroy value for RBS shareholders.”

Mr Hester is carrying out a review of the entire business to focus RBS on areas where it has a clear advantage and where credible growth opportunities exist.

He said it was in the bank’s interest to hang on to the insurance arm.

“It is an impressive, well-run business with great people and excellent customer franchises. It can play an important role as we return the RBS Group to standalone strength,” he added.