Direct Line Group severs ties with RBS ahead of float

DIRECT Line Group yesterday gave the strongest indication yet that the firm is ready to float on the London Stock Exchange as it declared its independence from current owner RBS.

“Other than some transitional services provided by RBS Group, we have essentially achieved the goal of operating as a standalone insurance company,” said chief executive Paul Geddes.

Direct Line also issued its first separate interim results statement, confirming first-half operating profit grew seven per cent to £224.2m and said it was setting a target of 15 per cent return on tangible equity – a measure of profitability.

RBS is being forced to sell Direct Line by European regulators as part of its deal that saw it bailed out by the UK government.

Despite interest from private equity firms the bank is pursuing a float – currently pencilled in for October – that is expected to raise at least £3bn and will catapult the group into the FTSE 100 on its own merits.

Meanwhile the insurer, whose brands include Churchill and Green Flag as well as Direct Line, said the number of in-force policies rose four per cent to 20.1m in the first half of the year.

“This could be seen as aggressive growth in a weak market, however the increase is seen coming from commercial and rescue rather than motor and home,” said Oriel Securities analyst Marcus Barnard.

Headline pre-tax profit fell from £187.5m to £106.5m due to costs relating to the restructuring and separation from RBS.