Direct Line putting ‘all efforts’ into IPO amid private equity talk

Direct Line group is putting “all its efforts” into plans for an initial public offering [IPO], says chief executive Paul Geddes.

This is despite persistent talk that a private equity firm will make a swoop for the company. The latest firm rumoured to be interested in the insurer is Tungsten, and reports suggest the company has received a number of approaches.

Direct Line Group’s current patent, Royal Bank of Scotland, has to sell the majority of the insurer by the end of 2013 and its entire stake by the end of 2014 under the terms of its 2008 bail-out but the UK government.

“We and the [RBS] group have a plan, which is the IPO, and that is what we are putting all our efforts into,” Geddes told Insurance Times following the release of the company’s first-quarter results this morning.

“There will be lots of speculation, I’m sure, which we don’t want to get into a habit of individually commenting on  because we want to get on with improving and separating the business.”

RBS was originally pursuing a dual plan for its divestment of Direct Line, comprising a trade sale or an IPO, but the company’s statements recently are favouring flotation.

While hinting that the group has not entirely ruled out the possibility of a sale, Geddes said: “We need a plan and the IPO is our plan.”

Direct Line made an operating profit of £84m in the first quarter of 2012, up 25% on the £67m it reported in the same period last year. The company has also made further progress in migrating claims to its new claims system, and has pushed ahead with its separation plans. Notable recent moves include the appointment of Mike Biggs as chairman and the receipt of stand-alone ratings ahead of its £500m bond issue.

Geddes said that the company is not resting on its laurels despite the progress. “I see encouraging progress on all of the fronts, but we are in the middle of a very busy and important 2012, so we are not relaxing in Bromley as we share these results.”