TPG considers bid for RBS insurance arm-source

LONDON (Reuters) - Private equity firm Texas Pacific Group is considering a bid for Royal Bank of Scotland's (RBS.L) insurance arm, a source familiar with the matter said on Friday. The unit could be worth 8 billion pounds ($15.9 billion).

"TPG is doing its homework on the business now," the source said. "It is very premature and no decision has yet been made to bid for it, but TPG is interested."

TPG [TPG.UL] declined to comment.

Britain's second biggest bank said last week it would sell assets to generate 4 billion pounds in core capital this year, mostly from the possible disposal of all or a stake in its insurance arm, which includes brands Direct Line and Churchill.

The move is designed to help rebuild its capital reserves, which have been stretched by its part in last year's takeover of Dutch bank ABN AMRO and ongoing turmoil in financial markets.

The bank also announced a 12 billion pound rights issue last month as part of its capital-raising plans.

Bankers have said private equity is likely to find the units under sale attractive, although they added rival insurers could outbid buyout firms in any auction.

The UK, as a large market, is attractive to any insurer operating on continental Europe, and such companies might view recent falls in insurer values as presenting a good opportunity to buy.

"If you are in business in Europe, the UK's a place where you would like to have a presence, as it's a big market and asset prices are lower than they were so it may be a good opportunity to buy businesses," said one banker.

Separately, the Financial Times quoted an Allianz executive as saying the German insurer was interested in a UK acquisition.

Allianz declined to comment on the matter.

(Additional reporting by Simon Challis; Reporting by Mathieu Robbins and Mark Potter; Editing by John Irish)