Billionaire Buffet lines up to bid for RBS insurance arm

Royal Bank of Scotland has brought in a team of advisers to help sell its insurance business Direct Line after a flurry of interest from potential buyers - including American billionaire Warren Buffett, it was claimed today.

Royal Bank of Scotland has brought in a team of advisers to help sell its insurance business Direct Line after a flurry of interest from potential buyers - including American billionaire Warren Buffett, it was claimed today.

The European Commission ordered the bank – which is 83% owned by the taxpayer - to sell Direct Line by 2013 to soothe competition concerns following its Government bail-out.

Berkshire Hathaway, the investment vehicle owned by philanthropist Mr Buffett, who turns 80-years-old tomorrow, is among a line-up of potential bidders interested in the business, the Sunday Times said.

American insurer Allstate is also one of the potential buyers, it was claimed.

RBS would not comment on speculation over potential buyers, but did confirm it had brought in a team of advisers to handle the sale.

Direct Line was being lined up for a stock market flotation, but significant losses made by the business are thought to have derailed this plan.

Direct Line paid out £2.1bn (€2.6bn) in claims between January and June, a 36% increase over the previous year. That pushed it into a loss of £231m (€281m) for the first half, compared with a profit of £217m (€264m) a year earlier.

As a result any bidder is likely to pay less than the £4.5bn (€5.5bn) offered by private equity giant CVC in 2009.

The offer came in an earlier sale process instigated by former chief executive Fred Goodwin, who refused to accept offers of less than £6bn (€7.3bn). Berkshire Hathaway were involved in that process.

Earlier this week, RBS announced plans to axe 14 of the 27 offices in its Churchill and Direct Line business under existing plans to cut 2,000 jobs.

Two offices will be shut in Glasgow, impacting more than 640 staff, while the raft of closures will also see offices shut in locations including Peterborough, Cardiff and Bristol in England.

The part-nationalised bank delivered the blow to staff as part of a previously announced move to shed jobs at the insurance division.

It said in May that 2,000 jobs would go at its insurance arm, which as well as Direct Line and Churchill, includes the Green Flag and Privilege businesses, and employs 16,000 people.

The group speeded up the plans after the European Commission said it must sell 318 branches as well as the insurance business. It has already reached a deal to sell the branches to Spanish banking giant Santander for a premium of £350 million on the value of the assets.

RBS has already said it aims to reduce the number of roles in the group by a mammoth 23,100 globally.

Around 17,100 of these will be in the UK.

More in this section

Lunchtime
News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up
Revoiced
Newsletter

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up