The torturous £5bn+ sale auction process for RBSI - the Royal Bank of Scotland's European P&C insurance operations - will be revisited after the UK government, which is the bank's largest shareholder, decided to place the business up for sale.
RBS - whose chief executive Stephen Hester pulled the long-running auction for RBSI in January 2009 - is in advanced negotiations with the European Commission over what assets will need to be sold in return for approving the £20bn+ state aid that propped the bank up last year.
The UK chancellor, Alistair Darling, is expected to unveil details tomorrow (3 November) over the assets that RBS and fellow state-controlled Lloyd's Bank are likely to sell to appease EU Competition Commissioner Neelie Kroes. However, it is widely acknowledged that RBS' insurance arm will be included.
Last month, The Insurance Insider ("RBSI for sale once again?" - 12 October) revealed that the bank's senior executives were preparing for such an eventuality, as talks with the EU and the UK government gained momentum.
RBSI - which trades through a number of well-run insurance brands, including Direct Line, Churchill and Privilege - generated an operating profit of £217mn on net premium income of £2.14bn in the first half of 2009. Its combined ratio is typically superior to its competition, although higher claims saw the UK figure increase slightly last year from 94.8 percent to 95.3 percent.
RBSI is the second largest UK general insurer employing some 18,000 staff, and the largest UK motor insurer with an estimated 32 percent market share. It was initially put up for sale in the spring of 2008 after private equity firms approached the bank. But an array of potential trade buyers - such as Allianz, Allstate, Berkshire Hathaway, Generali and ZFS - withdrew from the process, not least because of the bank's optimistic £7bn+ price expectations. The newly arrived Hester finally ended talks early this year, while describing the units as "impressive, well-run business".
"It can play an important role as we return the RBS Group to standalone strength," he explained in February.
By then, RBS was in exclusive talks with private equity houses Apollo Partners and BC Partners, who were understood to have tabled a £5bn bid that was being taken seriously by the bank.
The private equity firms' interest was underscored with proposed reinsurance structured finance by Libero Ventures - the London-based boutique that bought itself out of Lehman Brothers earlier this year.
This time round, private equity houses are likely to be more warmly welcomed. Publicly - if not privately - RBS initially restricted negotiations to trade buyers and the mood is moving towards greater competition.