Equity firms in bidding war for top insurance firm

The bank has been ordered to sell its insurance arm, whose brands include Churchill and breakdown recovery service Green Flag, after taking a £45bn Government bail-out. It had been expected to float the business later this year.

However the Sunday Times yesterday reported that two consortia of private equity firms are planning rival bids, which would scupper a flotation in what is gearing up to be “the takeover battle of the year”.

However, a bidding war could be good for RBS it as it seeks to rebuild its battered finances in order to help the Government, which owns an 82 per cent stake, get back some of the billions it pumped into the lender.

Direct Line Group is the UK’s biggest car insurer by number of policies and a leading provider of home insurance. Earlier this year, it changed its name from RBS Insurance to prepare for independence.

The paper said an official intention to list on the stock exchange is expected to be filed next month, with the float of 30 per cent likely in September.

However the private equity groups could pounce this month.

Two American buy-out giants, Blackstone and Bain Capital, are expected to team up for one bid, while Kohlberg Kravis Roberts, Apax and BC Partners are hatching a rival offer.

Direct Line is thought to be worth £3bn to £4bn after big losses in 2010 sparked by soaring claims from car accidents.

However, it swung back into the black in 2011 with operating profits of £454m last year, boosted my milder weather, compared to a £295m loss in 2010.