Royal Bank of Scotland buys Churchill insurance

Click to follow
The Independent Online

Royal Bank of Scotland announced today that it is buying Churchill Insurance in a £1.1 billion deal.

Royal Bank of Scotland announced today that it is buying Churchill Insurance in a £1.1 billion deal.

Royal Bank, which already owns insurance firm Direct Line and NatWest bank, said the deal with Churchill's current owner Credit Suisse would make it the third largest general insurer in the UK.

Churchill which employs 8,500 people across the UK and has seven million policies in force, made pre-tax profits of £86 million on premium income of £1.6 billion last year.

Fred Goodwin, chief executive Royal Bank of Scotland, said: "Churchill is an excellent acquisition for us, it will fit well alongside Direct Line, and will bring several advantages to the group.

"In direct channels, Churchill's strength in home insurance will balance Direct Line's strong position in motor insurance.

"Both Churchill and Direct Line have expertise in the distribution of general insurance products through partners, under their brands."

Royal Bank said it would retain both Direct Line and Churchill brands and said it would ensure minimum disruption to staff selling policies directly to customers.

It added that the deal would enable it to combine information technology, claims, and other central functions. The deal will now be subject to regulatory approval.

Mr Goodwin said that there would be some job losses but the number would be in the region of "hundreds rather than thousands".

On top of its own strong presence in the home insurance market, Churchill also owns NIG, which sells commercial insurance through a network of 5,000 high street brokers.

The Royal Bank of Scotland is the fifth largest banking group in the world and number two in Europe after HSBC.

As well as Royal Bank of Scotland and NatWest, the group also includes Coutts, Tesco Personal Finance and Ulster Bank and Citizens in the US.

The enlarged general insurance operator will be ranked third after Aviva, which owns Norwich Union, and Royal & Sun Alliance.

Royal Bank will fund the £1.1 billion cash payment from within its own resources and expects the acquisition to be earnings-enhancing within a year - excluding integration costs and goodwill.

Oswald J Grubel, co-chief executive of Credit Suisse, said: "The strength of The Royal Bank of Scotland's proposal together with the commercial fit with its direct insurance operation were central factors behind our decision to sell."