RBS insurance sale in doubt

by Gill Montia

Story link: RBS insurance sale in doubt

Royal Bank of Scotland (RBS) may be reconsidering plans to raise capital through the sale of its insurance business.

Zurich Financial Services, the latest bidder to withdraw from the sale process, could have been put off by doubts about the future profitability of parts of the unit.

According to reports by Reuters and Insurance Times, RBS’s Direct Line and Churchill brands are facing fierce competition.

They hold over 30% of the UK’s motor insurance market but do not appear on price comparison websites, which now account for around 60% of UK personal lines sales.

Allianz and US firm Allstate remain in the bidding but RBS’s chief executive, Sir Fred Goodwin, has said he will stand firm against a fire sale of the business, which also includes the Privilege, UKI and NIG brands.

RBS says its wants to up its Tier one ratio to over 6% by the end of this year and to achieve this it needs to raise £4 billion, in addition to the £12 billion raised in its rights issue, completed last month.

Analysts are optimistic that this can be achieved without disposing of the insurance business.

The group has already sold Angel Trains and is currently auctioning its ABN Amro assets in Australia and New Zealand, for around £400 million.

Earlier this week, National Australia Bank announced that it was withdrawing its interest but discussions are proceeding with other parties.