RBS to float insurance brands

RBS chief executive Stephen Hester has said that Direct Line and Churchill will “most likely” be floated on the stock market, rather than sold to an industry buyer, the Herald reports.

“The most likely outcome is we will float the insurance business. The brand names of Direct Line and Churchill would make a great flotation,” Hester said.

Hester had wanted to keep RBS’s insurance division but has been ordered by the European Commission to sell it within four years to comply with state aid requirements.

Van Saun says two years

The Telegraph said Bruce Van Saun, who joined the bank as finance director in August, said a flotation in two years time would be a "sensible strategy" for the group.

Chris Hitchings, analyst at KBW, said: "I think RBS will sit and wait for the right market conditions. The indications are though that it will look to float the business."

Snowball interested again?

Hitchings said the insurers and private equity firms that took a look at the assets when they were previously put up for sale for £7bn last year would also be interested.

"Any deal is likely to come from someone outside the UK general insurance market though as the EU commission will be looking to encourage competition," he said.

Potential buyers include Generali, Allstate and Travellers. CVC Partners, the private equity house, is also interested, while BC Partners and Apollo Management could renew their interest.

RBS hired Morgan Stanley to help sell its Asian banking units and the Telegraph said it could be used again.

Investors prefer an IPO

The FT quoted an unnamed analysts saying: “The question for investors is do they give their money for new equity to a company such as Zurich to go and buy Direct Line, or do they just buy new equity in a large, well-run company with a great brand. I think investors will prefer to buy it through an IPO [initial public offering].”