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July 11, 2008

RBS’s sale of insurance business suffers setback

by Gill Montia

Story link: RBS’s sale of insurance business suffers setback

Royal Bank of Scotland’s (RBS) plans to raise capital by auctioning its insurance business have suffered a setback.

Zurich Financial Services Group has confirmed that it is withdrawing from any further discussion with the bank over the sale of the division, which comprises the Churchill, Direct Line, Privilege, UKI and NIG brands.

The business, which holds around one-third of the UK motor insurance market, is valued at up to £7 billion and initial interest from 15 prospective purchasers has now whittled down to three: Allianz, Allstate and Travelers.

Other potential buyers to have lost interest include Generali of Italy, Ping An of China and Warren Buffett’s Berkshire Hathaway.

RBS is reported to have rejected a £6 billion bid from Berkshire Hathaway two months ago and in a trading update last month, the group’s chief executive, Sir Fred Goodwin, made it clear that the bank would be holding out for what it considers to be a good price.

Zurich’s withdrawal will increase speculation that the business will be broken up and RBS has not ruled this out in achieving a sale.

 

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