Claims Direct has strongly rejected suggestions that two of its largest backers have performed due diligence on the business prior to a possible takeover.

Abbey National and Bank of Scotland (BoS), which are attempting a friendly merger bid, are both in a strong position to mount a possible acquisition of Claims Direct.

BoS signed a significant contract last October to finance Claims Direct's Accident Assist product for solicitors' personal injury clients.

Meanwhile, Abbey National, through its loans company First National, provides cash advances to Claims Direct claimants to fund their after the event insurance premiums.

A spokesman for Claims Direct said that although both banks had detailed informa-

tion on the company's financial standing, this was only in relation to its specific insurance products.

He dismissed the suggestion that this could lead to a possible takeover of Claims Direct.

“Neither bank has the capability to launch a due diligence inspection as this is undertaken by corporate finance houses, which Bos and Abbey are not,” said the spokesman.

Speculation that the personal accident management company may be ripe for takeover has increased since its recent buffeting on the stock market.

Claims Direct's share price has fallen to 22p from a 52-week high of 360p, four weeks after it issued a profits warning that cost company founder Tony Sullman his job as chairman. Claims Direct chief executive Colin Poole blamed negative publicity concerning the cost of its after the event policy.

BoS said it had no intention of buying Claims Direct.

Claims Direct has warned that it is likely to make a loss in the second half of the year.

It has been forced to make a provision of around £5m.

For the six months up to September 30 last year, the company made a profit of £11.8m. But the anticipated losses will eat into the annual profit margin.