Direct Line to sell closed life fund in £62m deal

(Yahoo Finance)

Britain's biggest car insurance company Direct Line has announced that it has agreed to sell the group's UK closed life insurance business, Direct Line Life Insurance (DLL), to Chesnara, an insurance-focused takeover specialist. (Release)

Direct Line, whose brands include Churchill, Green Flag and Privilege, said today that total proceeds of the sale tally to £62m, including a pre-closing dividend of £23m.

The company was floated at a discounted £787m by the Royal Bank of Scotland (RBS) last year, and saw after-tax profit of £6.9m for the year. The purchase will be partly funded by a new RBS loan facility of £73.8m. It follows a concerted trimming down by Direct Line, which is facing competition from online price comparison website, with the company looking to reduce annual costs by £130m by 2014.

Direct Line said today that it expects to gain approximately £12m from the disposal of DLL, and that a special interim dividend of four pence per share would be issued after the sale.