Supermarket giant buys out insurer in finance joint venture.
RBS will continue to underwrite Tesco’s insurance policies for three years, following the sale of its 50% shareholding in the Tesco Personal Finance joint venture to the supermarket giant for £950m.
The news came as the sale of RBS’s insurance arm (RBSI) began to look unlikely. Leigh Goodwin, analyst at Fox-Pitt Kelton, said last week that it was likely the bank would opt to hold on to the £7bn GWP division given the lack of appetite among potential buyers. He said: “It looks now as if there is a less than 50% chance it will sell the business.”
Tesco refused to comment on who would underwrite its 2.7 million insurance policies once the current agreement expires. Tesco’s general insurance business is currently underwritten by UK insurance (UKI), a wholly owned subsidiary of RBS. RBSI and UKI have committed to provide general insurance related services under a general insurance distribution agreement to Tesco Personal Finance for a three-year period.
Sir Fred Goodwin, RBS group chief executive, said: “Over the past 10 years RBS and Tesco have built a strong and successful joint venture. At this stage of its maturity it is appropriate for Tesco Personal Finance to move to single ownership for the next stage of its growth and we wish it well with its future plans.”