Warren Buffett, "the Sage of Omaha" who turns 80 today, is one of the bidders seeking to buy Royal Bank of Scotland's Direct Line insurance business at a knock-down price. The European Union is forcing RBS, the state-controlled bank, to sell the division as punishment for taking public money during the financial crisis.
RBS held a beauty parade last week for advisers keen to run the sale of Direct Line. Mr Buffett's investment vehicle, Berkshire Hathaway, and the US insurer Allstate are among the potential bidders that are interested in RBS's insurance unit.
Stephen Hester, the chief executive of RBS, said earlier this year that floating Direct Line was "still the preferred option". But its deteriorating performance means a sale is now more likely.
The EU has given RBS a deadline of the end of 2012 to offload Direct Line.
The division, which includes the Churchill brand, has been hit by the rapid growth of no-win, no-fee legal firms that have led to soaring injury claims for road-traffic accidents. The value of claims paid out by Direct Line rocketed by 36 per cent to £2.1bn in the first half of this year, which led to an annual loss of £231m.
Direct Line at the division is now likely to be sold for substantially less than the £4.5bn offer submitted by the private-equity firm CVC in 2009. Sir Fred Goodwin, the former chief executive of RBS, is reported to have wanted £9bn for Direct Line and would not consider bids for less than £6bn. CVC, Berkshire Hathaway and Allstate were all involved in the previous process.Reuse content