RBS's attempt to sell insurance division spark speculation that Tesco may buy out its joint venture.

Speculation continued to surround RBS’s attempt to sell its insurance arm this week, including reports that Tesco is close to announcing a £1bn deal to buy out the bank’s share of the Tesco Personal Finance joint venture.

Chinese insurer Ping An withdrew from the bidding for RBS’s insurance division (RBSI) last week, one day after Italian insurer Generali dropped out. Zurich remains the favourite, while Allstate, Travelers, AIG and Allianz are still in the running. But

it is not considered likely that RBS will get anything close to its asking price of £7bn.

The auction’s deadline was extended from last Wednesday after bidders requested more time to look at the books of the company, which includes household names such as Direct Line, Churchill and Privilege.

RBS share prices jumped over 6% on Tuesday after it was reported that activist investor TCI may be building a stake, making it more likely that shares will remain above the 200p pricing.

Earlier this week, NIG, the broker-only arm of RBSI, announced the resignation of managing director of commercial, Michael Rea.

Commercial director Andy Cornish will assume Rea’s responsibilities while a successor is found.

A spokesman confirmed that Rea had left the business, but would not comment on the details of his departure.

The spokesman said: “We are unable to discuss the matter any further, but it remains business as usual within NIG, and Andy Cornish will be covering this role on an interim basis until a replacement is announced.”

AXA declined to comment on reports that Rea was set to join the insurer.

At an industry conference in Paris this week it was reported that Laura Santori, senior director at Standard & Poor’s and head of its insurance ratings in France, said the credit crunch had reduced the number of bidders for RBS.

She said few companies would be willing to sacrifice their bottom line and share price to make a significant acquisition.