RBS May Save Insurance Division

Posted by admin

August 18, 2008

The Royal Bank of Scotland may decide not to sell its insurance division, which includes popular name brands in the UK such as Direct Line Insurance and Churchill Insurance.

RBS was looking to raise capital quickly by selling the 2 major insurance companies for the tune of £7 billion. However, the recent sale of risky loans brought in close to £6 billion which could mean the bank may not sell their insurance companies afterall, according to the Sunday Times.

There was a bid offered by American insurer Allstate but the report said it was nearly £1 billion shy of the asking price. A risky portfolio for RBS led to a £691 million first half loss leading to the decision to sell its insurance arm in an effort improve its balance sheet.

The Royal Bank of Scotland is also in talks with investment firms Apollo and Blackstone to discuss the purchase of another set of loans. The sale of a 50% stake in Tesco Personal Finance has also drummed up £1 billion.

Whether RBS keeps Direct Line and Churchill remains to be seen. However, the bank will not sell its insurance assets for “anything other than the right price”.

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