Bank will not sell insurer for a long time, he predicts
Patrick Snowball has revealed for the first time how the government scuppered his bid for Royal Bank of Scotland Insurance (RBSI).
Snowball, former chief executive of Norwich Union, now Aviva, had put together a private-equity-backed bid in January for the bank’s insurance business, which includes Direct Line, Churchill, Privilege and NIG. About the same time, RBS received a fresh wave of help from the government to ease its financial difficulties.
A few weeks later chief executive Stephen Hester said selling RBSI would “destroy shareholder value” in the group.
Snowball said: “The Royal Bank of Scotland’s priorities changed during the process and once the government injected capital in the business it no longer needed to raise capital.”
He believed that RBSI would not come up for sale again “for a long time”. He added: “I think what the government money has allowed them to do is to take a much more measured strategy to the group and avoid fire-selling.”
Snowball said RBSI, which announced a £780m pre-tax profit in February, was a “great business”, but had more potential outside a banking influence.
“I have always believed it would be a great business as a standalone, but I respect the fact they decided to retain it within the group.”
The government originally took a 58% stake in RBS in October last year in return for £20bn. That increased to 70% in January when the state eased the bank’s terms of repayment by converting its preference shares into ordinary shares. RBS has also agreed to take part in a state guarantee scheme, in which the bank pays a premium for loans that could go into default.
Since the government intervention, RBSI has undergone a management shake-up. Paul Geddes will replace chief executive Chris Sullivan in late July. Jon Greenwood has replaced interim managing director Nigel Pearce at NIG.
Stepping down from Towergate
Patrick Snowball quit his chairmanship of Towergate Financial Services this week, as it emerged that the group’s plans for its IFA business had been scaled back because of the recession. He said he was leaving to “concentrate on his other business interests”.
Towergate has bought out Towergate Financial Services, which will now report to group chief executive Andy Homer. The decision was taken following a strategic review that concluded the business could not grow as fast as originally planned.
Towergate chairman Peter Cullum said: “The original Towergate Financial Services concept – to replicate the Towergate model in the fragmented IFA market – remains as valid as ever but, given current economic conditions, we must scale back the rate of growth.”
“As a result of the restructuring and modified business plan, we say farewell to Patrick Snowball. I thank him for all he has done for Towergate and wish him the best”.