D-Day for bids as RBS sells insurance business

Nick Clark
Sunday 23 October 2011 04:14

Royal Bank of Scotland will today learn which of seven suitors are throwing their hats into the ring for its insurance business, potentially sparking a £7.5bn bidding war, as the group looks to offload the asset by the end of the summer.

This comes as rival banking group Barclays announced it was considering selling its life assurance business, after saying it was not a core operation. Today is the deadline for interested parties to lodge indicative proposals for RBS's insurance business, which has been valued at between £6bn and £7.5bn.

With bidders pushing the deadline to the limit, RBS had not received any proposals yesterday. One source close to the group said: "We were told not to expect anything until Wednesday." RBS declined to comment on the timing and identity of potential bidders yesterday.

Front-runners are believed to include Zurich Financial Services, the Italian insurer Assicurazioni Generali and China's Ping An Insurance. Other potential bidders are American Insurance Group (AIG), Allstate and Travelers in the US, and Allianz in Germany.

The source said: "I would be amazed if they all bid. For some of those interested, a deal of this size would be quite a stretch."

The shortlist is expected to be whittled down to two or three in a few weeks. When the business was put up for sale, more than 15 companies showed interest.

Berkshire Hathaway, Warren Buffett's conglomerate, publicly ruled itself out last week. AIG is also thought to be an unlikely bidder as it "wrestles with some pretty hefty problems", according to one source close to the process. The US insurer has $20bn of unrealised losses in the previous two quarters.

This initial round was not open to private equity firms, as RBS targeted insurance companies that could provide a strategic fit. "I'm sure buyout firms will take part at some stage, whether teaming up with a trade buyer or on their own," the source said.

The banking group put the insurance arm up for sale last month, at the same time as it launched a £12bn rights issue to sure up its balance sheet. The asset, which includes the Churchill and Direct Line brands, is expected to be sold "by the end of the summer".

Meanwhile, Barclays announced yesterday that it "is currently reviewing options for the Barclays Life Assurance Company business". It added the operation was "not core to the group's franchise. This review may or may not result in a sale."

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