RBS confirms Direct Line float

RBS this morning confirmed plans to float its Direct Line insurance business on the London Stock Exchange in the largest share listing this year.

RBS, which is 83 per cent-owned by the government, had to either sell or float the business by next year as a condition of its bailout in 2008.

"We believe it has a strong future as a standalone insurance group, continuing to serve its customers well while delivering attractive returns to investors," RBS finance director Bruce Van Saun said in a statement this morning.

Analyst expect that the IPO could value Direct Line at more than £3bn, although banks advising on the deal have got a valuation range that goes as low as £1.5bn, according to City A.M sources.

Barrie Cornes, analyst at Panmure Gordon, said today that the valuation needs to be "in the £2.7bn to £2.9bn range to get away".

He pointed to Talanx, the German insurer which had to ditch its IPO several days ago due to being over-valued, as reason for caution.

Cornes added: "Lastly we think that there is still a good possibility that private equity will make a play for Direct Line which would make an interesting dilemma for RBS and the UK government."

Direct Line Group is the UK's leading personal motor and home insurer, with 4.2m and 4.3m in-force policies respectively.