REG - Direct Line Ins GrpRoyal Bk Scot.Grp. - Announcement of Intention to Float

Fri Sep 14, 2012 2:00am EDT

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RNS Number : 2728M
Direct Line Insurance Group PLC
14 September 2012
 

 

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, CANADA OR JAPAN.

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus in its final form to be published by Direct Line Insurance Group plc in due course in connection with the admission of its ordinary shares (the "Shares") to the Official List of the UK Listing Authority (the "UKLA") and to trading on the London Stock Exchange plc's main market for listed securities (the "London Stock Exchange"). Copies of the prospectus will, following publication, be available from Direct Line Insurance Group plc's registered office.

 

14 September 2012

Direct Line Insurance Group plc

Announcement of Intention to Float

 

Direct Line Insurance Group plc ("Direct Line Group" or the "Group") today announces its intention to proceed with an initial public offering of ordinary shares to be sold by RBS Group (the "Offer" or the "IPO").  The Group intends to apply for admission of its ordinary shares to the premium listing segment of the Official List of the UK Financial Services Authority (the "Official List") and to trading on the main market for listed securities of the London Stock Exchange plc (together, "Admission").

 

Direct Line Group is a retail general insurer with leading market positions in the United Kingdom, a strong presence in the direct motor channel in Italy and Germany and a focused position in UK SME commercial insurance. The Group operates under highly recognised brands such as Direct Line and Churchill and is comprised of five primary segments: motor, home, rescue and other personal lines, commercial and international.

 

Offer highlights

·          Direct Line Group to list on the premium segment of the London Stock Exchange.

·          RBS Group to sell a portion of its existing ordinary shares in Direct Line Group as part of its strategy to satisfy its State Aid obligations; no new Direct Line Group shares to be issued.

·          Offer to be made available to institutional investors in qualifying geographies (in the United Kingdom and elsewhere under Regulation S and to QIBs in the United States in reliance on Rule 144A), and to intermediaries in the United Kingdom who will facilitate the participation of their retail investor clients.

 

Business highlights

·          Direct Line Group is the UK's leading personal motor and home insurer in terms of in-force policies with 4.2 million and 4.3 million in-force policies respectively.

·          Key strengths include i) a multi-brand, multi-product and multi-channel distribution strategy, ii) direct relationships with customers, iii) significant scale, and, iv) a conservative investment strategy and robust balance sheet.

·          Strategy focused on building competitive advantage in distribution, pricing, claims and operational efficiency in order to unlock the value in the UK's leading retail general insurance franchise.

·          Targets include a 15% return on tangible equity from ongoing operations(1), a 98% combined operating ratio(2) for the 2013 financial year and £100 million of gross annual cost savings in 2014(3).

·          Intention to pay full final dividend for the 2012 financial year in Q2 2013 (final dividend to represent two-thirds of pro-forma full year dividend). Pro-forma full year dividend pay-out ratio for the 2012 financial year expected to be between 50-60% of any consolidated post-tax profit from the Group's ongoing business(4). Progressive dividend policy thereafter.

 

Commenting on today's announcement, Paul Geddes, Chief Executive Officer of Direct Line Group, said:

 

"We are delighted to be announcing the intention to float Direct Line Group. Our people have worked hard in recent years to transform the business in order to take advantage of our distribution, scale and market leading brands. Our work to maximise these advantages is by no means complete and we have a clear strategy that spans distribution, pricing, claims and operational efficiency. We look forward to being a listed company and are more committed than ever to providing customers with excellent products and service levels, whilst seeking to deliver sustainable returns for our shareholders, targeting a 15% return on tangible equity from ongoing operations."

 

ENQUIRIES

                                                           

Direct Line Group:


Rob Bailhache (Director of Communications)

+44 (0) 20 8313 5850

Neil Manser (Head of Investor Relations)

+44 (0) 20 8285 3134



Brunswick (PR Advisors to Direct Line Group):

+44 (0) 20 7404 5959

Justine Mcllroy


Tom Burns




Goldman Sachs International:

+44 (0) 20 7774 1000

Todd Leland


Paul Miller


Alex Watkins (Corporate broking)




Morgan Stanley & Co. International plc:

+44 (0) 20 7425 8000

William Chalmers


Chris Kaladeen


Ben Grindley (Corporate broking)




UBS Limited:

+44 (0) 20 7567 8000

Patrick Porritt


Simon Lyons


Christopher Smith (Equity Capital Markets)




INTERMEDIARIES OFFER ENQUIRIES




Barclays Bank PLC and Solid Solutions Associates:


Chris Madderson (Barclays Bank PLC)

+44 (0) 20 7773 2500

Nigel Morris (Solid Solutions Associates)

+44 (0) 207549 1613

 

 

Key Strengths

 

The Group utilises a multi-brand, multi-product and multi-distribution channel business model. The Group positions its brands to offer a superior proposition to distinct customer segments.  When combined effectively with its significant scale, the Group believes this allows it to target superior performance in distribution, pricing, claims and operational efficiency, which in turn should position the Group to deliver value to customers and sustainable returns. Direct Line Group believes that it has a number of key business strengths:

 

·      Leading UK retail general insurance franchise with market leading brands and significant scale

The leading personal motor and personal home insurer in the UK in terms of in-force policies with a market share of 19% in motor and 18% in home insurance (as at 31 December 2011).

Direct Line and Churchill are the most highly recognised personal motor and home insurance brands by UK consumers which support strong customer retention rates and cross product holding rates.

The Group has a number of strategic partnerships with other leading brands such as Nationwide, Prudential, RBS/NatWest and Sainsbury's which further enhance customer access.

This, together with the Group's scale, should allow competitive advantage to be built in pricing and claims and enables the leveraging of its brands and experience across the range of its products.

 

·      Multi-channel distribution model allows brand deployment across distinct customer segments

The Group sells direct to consumers over the phone, via the internet, via Price Comparison Websites ("PCWs") and through the branches of partners.

Offers personal customers a combination of brands, channels, product features, prices and services designed to address their needs.

 

 

 

·      Strong direct customer relationships with the Group's brands drive customer lifetime value and provide cross selling opportunities for extensive product offering

The Group believes that its direct relationships help it to attract customers from the most valuable customer segments.  Direct relationships also help increase persistency and give the Group the opportunity to satisfy more customers with a wider range of products.

 

·      New management team returned the Group to profit

Launched initiatives to improve pricing and discontinue unprofitable business lines, streamlined the cost base by reducing the number of operations centres from 34 at the beginning of 2010 to 18 at 30 June 2012, rationalised and simplified the claims operating model, and improved efficiency within sales and service functions.

A key indicator of the team's success is the improvement in the combined operating ratio from ongoing operations from 121% in 2010 to 101% for 1H 2012.

In 1H 2012, the Group generated operating profit from ongoing operations of £224 million and benefited from a further improvement in claims performance with a loss ratio from ongoing operations of 67% in 1H 2012 (compared with 74% in 1H 2011).

 

·      Robust balance sheet and conservative investment strategy

Direct Line Group maintains a level of capitalisation commensurate with its risk appetite, and pursues a conservative investment strategy.

The Group targets a capital coverage ratio in the range of 125-150% of risk-based capital. At 30 June 2012 the coverage ratio was 160%(5).

Estimated reserve margin above independent actuarial best estimate at 30 June 2012 was 7.1%.

Investment portfolio focused on investment grade corporate bonds and gilts.

The Group's principal operating subsidiary, U K Insurance Limited, is rated 'A2' by Moody's Investors Service and 'A' by Standard and Poors.  Both ratings carry a stable outlook.

 

Direct Line Group Strategy

 

Direct Line Group is aiming to build on its transformation plan and unlock the value in the UK's leading retail general insurance franchise. Its financial targets include a 15% return on tangible equity from ongoing operations(1), a 98% combined operating ratio from ongoing operations(2) for the 2013 financial year, and £100 million of gross annual cost savings in 2014(3). Key strategic initiatives for the Group are:

 

·      Distribution - enhance effectiveness to improve customer lifetime value

Focus on developing products and services designed to meet the varying needs of its customers.

Expand the penetration of these products through PCWs and the Group's distribution partnerships.

Improve the efficiency with which the Group attracts, retains and services customers.

 

·      Pricing - build superior pricing capabilities to utilise scale advantage in data

Direct Line Group believes its significant scale, combined with increased sophistication in pricing and underwriting, should enable it to improve risk management, retain customers and generate higher returns for the business.

 

·      Claims - attain a market leading position in claims management

Bring all new UK personal lines claims onto one common system, launched in 2011, by the end of 2013.

Continue to build increased analytical capabilities and enhance operational control.

Combining these with other initiatives such as increased fraud detection and more efficient supply chain management, should result in increased benefits from more proactive claims management.

 

·      Operational efficiency - realise the significant cost opportunity

Continued focus on cost control and efficiency improvement.

Targeting delivery of £100 million gross annual cost savings in 2014(3).

Key elements include simplifying internal organisational structure, optimising procurement, further off-shoring of certain functions and better management of the cost of customer acquisition.

 

·      Commercial and International - leverage core skills to improve performance

Commercial: The Group expects there to be an increasing shift within UK SME/micro business insurance towards e-trading and direct distribution, which should allow the Group to leverage its strengths from personal lines and achieve a target combined operating ratio of less than 100% in commercial in 2014.

International: Build on its positions as the number one direct motor insurer in Italy and number three in Germany, using proven local management experience to complement core Group strengths.

 

Overview of the Offer

 

·          The Offer will comprise existing ordinary shares in Direct Line Group to be sold by RBS Group; no new shares will be issued by Direct Line Group.

·          It is intended that the shares to be sold by RBS Group will represent 25% or more of the issued share capital of the Company, in line with the UKLA's minimum free float requirement, with the IPO prospectus to contain more information in due course.

·          The Offer will be made available to institutional investors in qualifying geographies, in the United Kingdom and elsewhere under Regulation S and to QIBs in the United States in reliance on Rule 144A. Furthermore, shares will be offered to intermediaries in the United Kingdom who will facilitate the participation of their retail investor clients.

·          Over-allotment shares will be made available by RBS Group.

·          Each of the Group, the Selling Shareholder and the Directors will agree to certain shareholding lock-up arrangements.

·          The senior syndicate for the IPO will comprise Goldman Sachs and Morgan Stanley as Joint Global Co-ordinators, Joint Sponsors and Joint Bookrunners, and UBS as a Joint Bookrunner. The remainder of the syndicate comprises BofA Merrill Lynch, Citi and HSBC as Joint Lead Managers, and BNP Paribas, Commerzbank, Investec Investment Banking, Keefe, Bruyette & Woods and RBC Capital Markets as Co-Managers. Barclays has been appointed as Intermediaries Offer Co-ordinator.

 

Reasons for and benefits of the Offer

 

·          In 2009, as a condition to the receipt of State Aid, RBS Group committed to cede control of Direct Line Group by the end of 2013 and make a full divestment by the end of 2014.

·          RBS Group's strategy to satisfy this commitment is a divestment by way of an IPO of the Group.

·          Being a public company will assist Direct Line Group in recruiting and incentivising employees, as well as providing access to new sources of funding should this be important to the Group at a future date.

 



NOTES TO EDITORS

 

About Direct Line Group

 

Direct Line Group is a retail general insurer with leading market positions in the United Kingdom, a strong presence in the direct motor channel in Italy and Germany and a focused position in UK SME commercial insurance. The Group operates under highly recognised brands such as Direct Line and Churchill and is comprised of five primary segments: motor, home, rescue and other personal lines, commercial and international.

 

In the UK, Direct Line Group utilises a multi-brand, multi-product and multi-distribution channel business model that covers most major customer segments for personal lines general insurance. The Group also has a focused presence in the commercial market. The Group occupies leading market positions in terms of in-force policies and has the most highly recognised brands in the UK for personal motor and home insurance including Direct Line and Churchill. Other primary Direct Line Group brands include Privilege and Green Flag; NIG, a provider of insurance solutions to UK SMEs and Direct Line For Business ("DL4B"), the Group's direct commercial brand.  The Group is also a major provider of insurance through a number of strategic partnerships.  In Italy and Germany the Group operates under the Direct Line brand.

 

Separation from RBS Group

 

In 2009, RBS Group committed to the European Commission to sell its insurance business as a condition of its receipt of State Aid. To comply with this requirement, RBS Group must cede control of the Group by the end of 2013 and must have divested its entire interest by the end of 2014. In preparation for the Offer, the Group and RBS Group have undertaken a number of steps to separate their businesses and establish an arm's-length relationship, including the following:

·          The Group has agreed terms to renew and expand its distribution partnership with RBS and NatWest on arm's length terms for a five year period to offer insurance alongside bank accounts, including travel insurance and rescue, as well as home, motor and commercial insurance.

·          In early 2011 the Group commenced a major project to separate its operations from RBS Group, including the transfer, replacement or replication of the essential assets, services, processes and governance, previously provided by RBS Group. Customer facing operations have always been largely separate from RBS Group. Therefore, the principal separation requirements involved head office and control functions, including finance, risk, human resources, company secretariat, legal, internal audit, corporate communications, property and logistics, and purchasing functions.

·          A number of other reorganisation arrangements have been implemented between RBS Group and the Group during 2012, covering property leases, asset transfers and pensions.

·          The Group will continue for a period of time to rely on RBS Group for significant IT services, including IT infrastructure and communications, certain logistics services and certain other services. These services are expected to be provided under an arm's length transitional service agreement between Direct Line Group and RBS Group. Direct Line Group has experienced reliable IT performance over the last 12 months, including during the recent IT issues experienced by RBS Group.

·          As part of preparing for IPO the Group has sought to optimise its capital structure by raising £500 million of hybrid debt in April 2012 and paying £1.0 billion in dividends to RBS Group in 2012.

 

Board of Directors

 

Michael Biggs - Chairman

Mike joined the Board and became Chairman of the Group in April 2012.  Mike has almost 40 years of experience in the UK and international financial services sector.  He is Chairman of Resolution Limited, the FTSE 100 UK life assurance business, and has previously acted as Chief Executive Officer and Group Finance Director of Resolution plc and Group Finance Director of Aviva plc.  Mike was a key member of the senior management team that demutualised and subsequently floated Norwich Union on the London Stock Exchange in 1997, and merged Norwich Union with Commercial General Union to create CGNU in 2000.

 

Paul Geddes - Chief Executive Officer

Paul was appointed as Chief Executive of Direct Line Group in August 2009. Prior to his move to the Group, Paul was the Chief Executive Officer of RBS Group's mainland UK Retail Banking business, having joined that business in 2004 as Managing Director with responsibility for products and marketing. He is currently a member of RBS Group's Executive Committee but intends to step down from this role on or prior to the IPO. Before joining RBS Group, Paul held a number of senior roles in multi-channel retailing in businesses then forming part of the GUS and Kingfisher groups. Paul started his career in marketing with Procter & Gamble in UK and European roles. Paul is a graduate of politics, philosophy and economics from Oxford University. He is a Fellow of the Chartered Institute of Bankers in Scotland, a member of the ABI Board, a member of the Financial Ombudsman Service's insurance industry steering group and a member of the FSA Practitioner Panel.

 

John Reizenstein - Chief Financial Officer

John joined in December 2010. He was previously Managing Director, Corporate and Markets at Co-operative Banking Group (CBG, the group bringing together The Co-operative Bank, Co-operative Insurance Society and CIS General Insurance) and Finance Director at CBG from 2003 to 2007. Prior to joining CBG, John spent more than 20 years in investment banking, with UBS and subsequently with Goldman Sachs. John is an economics graduate from Cambridge University.

 

Andrew Palmer - Independent Non-Executive Director

Andrew joined the Board in March 2011. Andrew is also a Senior Independent Director at Segro plc, the British and European Industrial REIT Company; a Non-Executive Director of the Royal School of Needlework and RSN Enterprises Limited; and a Non-Executive Director at Royal London Mutual Insurance Society Limited. In 2009 he retired from Legal & General Group plc, where he was the Group Finance Director. He is a member of the Financial Reporting Review Panel, of the Financial Reporting Council. Andrew is a Fellow of the Institute of Chartered Accountants in England & Wales.

 

Jane Hanson - Independent Non-Executive Director

Jane joined the Board in December 2011. A Fellow of the Institute of Chartered Accountants in England & Wales, Jane qualified with KPMG, where she spent over 12 years working in the financial sector becoming director responsible for the delivery of corporate governance, internal audit and risk management services in the North of England. Jane has also held executive roles as Director of Audit, and Risk and Governance Director at Aviva's UK Life business. Jane is Chair of the Audit and Risk Committee and Non-Executive Director at Reclaim Fund Limited; an Independent Member of the Fairness Committee at ReAssure Limited and Chair of the Audit Committee and Senior Independent Director at Calderdale and Huddersfield Foundation Trust. Jane has her own financial sector consulting business, delivering audit, enterprise risk management and corporate governance advisory and consulting services and is also a magistrate. Jane is a graduate of York University with a degree in music.

 

Clare Thompson - Independent Non-Executive Director

Clare joined the Board in September 2012. A Fellow of the Institute of Chartered Accountants in England & Wales, Clare became a Partner at PricewaterhouseCoopers (PwC) in 1988. Whilst Clare was at PwC she held several senior and high profile roles, particularly within the insurance sector and retired after 23 years as a Partner in 2011. Clare is presently a Non-Executive on the Partnership Board of Miller Insurance Services LLP. She is also a Non-Executive Director at Autistica and Disasters Emergency Committee.

 

Priscilla Vacassin - Independent Non-Executive Director

Priscilla joined the Board in September 2012. She was most recently Group Human Resources Director at Prudential plc and member of the Audit Committee at the Ministry of Defence.  Priscilla has previously held senior human resources positions across a number of financial services and customer facing industries including roles at Abbey National plc, where she was Executive Director, Human Resources; BAA plc, where she was Group Human Resources Director and Kingfisher plc.

 

Bruce Van Saun  -  Non-Executive Director

Bruce joined the Board in April 2012.  Bruce is also Group Finance Director of RBS and a member of the RBS Group Board and its Executive Committee.  Bruce has over 25 years of financial services experience.  From 1997 to 2008 he held a number of senior positions with Bank of New York and later Bank of New York Mellon, most recently as Vice-Chairman and Chief Financial Officer and before that he was responsible for asset management and market related businesses. Previously he held senior positions with Deutsche Bank, Wasserstein Perella Group and Kidder Peabody & Co.  He has served on several corporate boards as a Non-Executive Director and has been active in numerous community organisations.

 

The Board intends to appoint additional Non-Executive Directors in due course.

 

Footnotes

 

1    Return on tangible equity adjusted to exclude Run-off operations and Restructuring and other one-off costs, and based on average tangible equity (using UK standard tax rate).

2    Combined operating ratio is the sum of loss, commission and expense ratios (all expressed as a percentage of net earned premium). The targeted ratio excludes instalment income, other operating income and investment income, as well as Run-off, Restructuring and other one-off costs.

3    Cost savings expected to be recognised in operating costs from Ongoing operations and claims handling expenses (2011: £1,133 million).

4    Pay-out ratio based on consolidated post-tax profit from the Group's ongoing operations - this excludes Run-off and Restructuring and other one-off costs.

5    Prior to the subsequent £200 million dividend paid on 3 September 2012 to RBS Group.



 

Forward looking statements

 

This announcement contains ''forward-looking'' statements, beliefs or opinions, including statements with respect to the business, financial condition, results of operations and plans of Direct Line Group. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond Direct Line Group's control and all of which are based on the directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "targets", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions.

These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the directors or Direct Line Group with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Direct Line Group's business, concerning, amongst other things, the results of operations, financial condition, prospects, growth and strategies of Direct Line Group and the industry in which it operates.

These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing Direct Line Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this document. Direct Line Group, Goldman Sachs International, Morgan Stanley & Co. International plc and Morgan Stanley Securities Limited, UBS Limited, Citigroup Global Markets Limited, HSBC Bank plc, Merrill Lynch International, BNP Paribas, Commerzbank AG, Investec Bank plc, Keefe, Bruyette & Woods Limited and RBC Europe Limited and Barclays Bank PLC (together, the "Banks") and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statements contained in this document to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure and Transparency Rules of the Financial Services Authority.

 

Disclaimer

 

Neither this announcement, the publication in which it is contained nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the ''United States''). The securities referred to herein have not been and will not be registered under the applicable securities laws of the United States and, subject to certain exceptions, may not be offered or sold within the United States.

Neither this announcement, the publication in which it is contained nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into Canada or Japan or to any persons in any of those jurisdictions or any other jurisdictions where to do so would constitute a violation of the relevant laws of such jurisdiction. The securities referred to herein have not been and will not be registered under the applicable securities laws of Canada or Japan and, subject to certain exceptions, may not be offered or sold within Canada or Japan or to any national, resident or citizen of Canada or Japan.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The Offer and the distribution of this announcement and other information in connection with the listing and Offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

In particular, this announcement does not constitute an offer for sale of, or a solicitation to purchase or subscribe for, any securities in the United States. No securities of Direct Line Group have been, or will be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), and securities of Direct Line Group may not be offered or sold in the United States absent an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offering of the securities in the United States.

The contents of this announcement, which have been prepared and issued by, and is the sole responsibility of Direct Line Group, have been approved solely for the purposes of section 21(2) (b) of the Financial Services and Markets Act 2000 (as amended) by Goldman Sachs and Morgan Stanley.

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus in its final form to be published by Direct Line Group in due course in connection with the admission of its ordinary shares the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc's main market for listed securities.

This announcement does not constitute a recommendation concerning the Offer. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. Information in this announcement or any of the documents relating to the Offer cannot be relied upon as a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Offer for the person concerned.

Any purchase or subscription of Shares in the proposed Offer should be made solely on the basis of the information contained in the final prospectus to be issued by Direct Line Group in connection with the Offer. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information in this announcement is subject to change.

The Banks, each of which is authorised and regulated in the UK by the Financial Services Authority, are acting exclusively for Direct Line Group and no one else in connection with the Offer and will not regard any other person as its client in relation to the Offer and will not be responsible to anyone other than Direct Line Group for providing the protections afforded to their respective clients or for giving advice in relation to the Offer or the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the Offer, the Banks or any of their respective affiliates, acting as investors for their own accounts, may subscribe for or purchase Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Shares and other securities of Direct Line Group or related investments in connection with the Offer or otherwise. Accordingly, references in the prospectus, once published, to the Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, the Banks or any of their respective affiliates acting as investors for their own accounts. The Banks or any of their respective affiliates do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

None of the Banks or any of their respective subsidiary undertakings, affiliates or any of their respective directors, officers, employees, advisers, agents or any other person accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy, completeness or fairness of the information or opinions in this announcement (or whether any information has been omitted from the announcement) or any other information relating to Direct Line Group, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith.

In connection with the Offer, a stabilising manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The stabilising manager will not be required to enter into such transactions and such transactions may be effected on any stock, market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the stabilising manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilising measures, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the offer price. Save as required by law or regulation, neither the stabilising manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly with the total figure given.


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