Posted on Sep 07, 2010 by Sergio Ulloa
UK-based Royal Bank of Scotland (RBS) may be in the process of selecting advisers for the sale of their insurance unit. Previously, the company had been considering a public listing rather than a trade sale. This unit of the RBS Group has to be disposed of as part of the rescue package extended by the European Union when the bank ran into trouble during the global financial meltdown.
The insurance division of RBS reported a loss amounting to US$428 million (EUR 334.4 million) for the first-half of 2010, which contrasts sharply to the US$367 (EUR 286.7 million) operating profit achieved during the same period a year earlier.
Besides the negative financial results reported during the first half of this year, there appears to be a number of potential buyers interested in this insurance unit of RBS, including Berkshire Hathaway, the company run by US billionaire Warren Buffett.
RBS management had reportedly favoured a public listing for the insurance business unit by 2012. Popular products offered by RBS Insurance include the products Direct Line and Churchill, the former even achieving the recognition as the most trusted insurance brand by Consumer Intelligence. RBS Insurance also has the biggest market share as a provider of home insurance in the UK.
Started in the mid- and late-1980s respectively, the Direct Line brand was the first to use the telephone as its main channel of communication to provide motor, home, travel and pet insurance cover direct to customers by phone or on-line; whilst Churchill has become one of the UK's leading providers of general insurance, offering award-winning car, home, travel and pet insurance, and breakdown cover, also making use of the phone or through Internet on-line sales.
The deadline given to RBS, which is 83 percent state-owned, for the sale of this insurance division is December 2013, as per the bailout-mandated sales schedule defined by European Union regulators.
Insurance Company mentioned:
RBS Insurance is the UK's number 2 general insurer and the number 1 personal lines insurer by gross written premiums. It sells and underwrites personal lines and SME insurance over the telephone and online, as well as through brokers, RBS group bank branches and partnerships.