Ping An drops out of bidding for RBS's insurance business

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Ping An, the Chinese insurer, dropped out of the running to buy Royal Bank of Scotland's insurance business yesterday, leaving five potential buyers for the parent of Direct Line, Churchill and Privilege.

Ping An joined Warren Buffett's Berkshire Hathaway and Generali of Italy in turning down the chance to buy the business, which RBS values at about £7bn excluding joint ventures. It had been thought that Ping An might want to buy RBS Insurance to diversify and to copy its top-notch systems for selling through the internet and other direct channels for use in China.

Those remaining in the bidding process are Zurich Financial Services; Allstate, Travelers, American International Group of the US; and Germany's Allianz.

Royal Bank of Scotland shares fell to an eight-year low on a bad day for UK banking stocks. The stock dropped 2.6 per cent to 231.75p, getting closer to the strike price for the bank's £12bn rights issue and hitting a level not seen since soon after the bank bought NatWest in March 2000.

Sir Fred Goodwin, RBS's chief executive, has insisted that the insurance business will not be sold on the cheap. But rival insurers have questioned whether RBS will find a bidder willing to pay its asking price.

With no UK rivals in the running to slash costs, overseas bidders would be paying top price for an efficient business with little scope for improvement and a big exposure to the cut-throat UK car insurance market, competitors said.

Sources close to RBS have said that interested parties inevitably drop out of any bidding process, leaving one or two serious players, and that the whittling down of potential buyers is to be expected.

The sale attracted more than 15 expressions of interest after the information memorandum was sent out earlier this month.

RBS is trying to sell the insurance business and Angel Trains, its rolling-stock leasing operation, to raise an additional £4bn of capital on top of its record rights issue. Britain's second-biggest bank by assets has said that it will consider selling parts of the insurance business as well as offers for the whole operation.