Friday, 25 March 2011

RBS to provide insurance to Sainsbury's

Sainsbury's is in talks with RBS  to provide insurance to the supermarket's customers for the next five years. The deal is expected to be announced in June.

This is an interesting move on the part of Sainsbury's since RBS has to dispose of RBS Insurance as part of the price for taking state funding due to the financial crisis. RBS Insurance has been on the market for some time, but there are no indications of a deal any time soon. This is hardly surprising at a time when personal lines insurance, and particularly motor, is proving to be so unprofitable for insurers with the increase in claims for injuries fuelled by the no-win, no fees, ambulance-chasing claims companies. Whilst a few years ago RBS Insurance business, including such well known brands as Direct Line and Churchill, would have sold for a significant premium, now it would be quite the opposite.

Sainsbury's is obviously demonstrating confidence in RBS Insurance being around for at least the next five years, so presumably with so little interest from acquirers RBS must be exploring the idea of a flotation for the business.

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