Move follows bank’s rebuttal of private equity suitors
Berkshire Hathaway has ruled itself out of buying RBS’ insurance assets, which include Direct Line and Churchill.
Berkshire, which is owned by the world’s richest man, Warren Buffett told the Financial Times it was not interested in pursuing a bid for the group, which analysts have valued at between £7 and £10bn.
Despite running the rule over RBSI, Buffett’s assistant Debbie Bosanek said: “We have looked at it but we are not participating in the bidding.”
Berkshire recently announced its underwriting earnings in the first quarter had fallen from $601m to $181m year on year.
The move follows the news on Tuesday that RBS had sent a letter rebuffing the interest from potential private equity bidders due to concerns over raising capital in the wake of the credit crunch.
“We have looked at [RBSI] but we are not participating in the bidding.
Sources had increasingly questioned the validity of private equity purchasing a stake in RBSI, given its already efficient business model and its vital strategic positioning in the UK market which would point to a trade buyer.
RBSI controls a third of the private motor market in the UK, and posted operating profits of £683m last year.
AIG - previously tipped as the frontrunner after being repeatedly linked with RBSI’s commercial arm, NIG - is thought to be less likely to launch a bid after it upped its sub-prime writedowns to $20bn following record $7.8bn losses in the first quarter of this year.
RBS, having received interest from 15 potential bidders, recently sent a sales memorandum to eight potential trade buyers, including Berkshire. The other parties are US giants Allstate and Travelers, Italian colossus Generali, Zurich, Allianz, and Chinese insurer, Ping An, which has $20bn earmarked for overseas investments.
Initial bids must be submitted by 28 May.