Under-performing motor specialist put up for sale for £230m

Bidders in the Provident Insurance beauty parade have baulked at its £230m price tag, sources said.

It is understood that since Provident Financial announced last month it would sell its insurance division, a number of potential buyers have backed away from the bid.

A market source said: "Lexicon Partners has placed the business at around five times its assets which is way over the odds.

"It seems the amounts insurers are prepared to pay for the likes of Hastings, Carole Nash and Equity have led to the re-pricing of the motor market."

Analysts have valued Provident's motor book at between £150m and £225m.

According to reports, Australian insurer IAG and AXA were both interested in the business.

But AXA markets managing director Mark Cliff told Insurance Times last week that the insurer did not need to buy a motor insurer "when we had 40% organic growth in 2006".

It is understood other names in the frame are French insurer Groupama, HSBC and US giant AIG.

Analysts said Provident's motor book would not be attractive to the large direct writers as it comprises largely non-standard intermediated risks.

Katrina Preston, of Bridgewell Securities, said it would be an attractive purchase for private equity bidders.

Provident's motor insurance division, which specialises in older drivers and young women drivers, has been underperforming for the past two years.

Its first half pre-tax profits for motor in 2006, taking into account the £1.3m start-up cost of direct operation yesinsurance.co.uk, were down 18% to £19m from £23.1m for the same period in the previous year.

The company blamed the soft market for the losses but it also lost 18,000 policyholders in the first half of 2006, due to the heightened competition from direct specialist insurers such as Sheila's Wheels and AXA's push into the grey market.

Provident confirmed that it will not discuss the details of the bidding process until its results in March.