Insurer Chesnara to buy Direct Line's closed life fund

Tue Oct 8, 2013 3:06am EDT

Oct 8 (Reuters) - Insurance-focused takeover specialist Chesnara Plc said it would buy Direct Line Insurance Group Plc's domestic closed life insurance business for about 39.3 million pounds ($63.19 million) in cash.

Chesnara, which has been looking to acquire life insurance funds in Western Europe for the past year, said the deal would be partly financed by a new loan facility of 73.8 million pounds from the Royal Bank of Scotland. The company owns mostly closed funds in Britain and Switzerland.

Direct Line, Britain's largest motor insurer spun out of RBS in a 787 million pound float last year, said it expected to gain about 12 million pounds from the disposal of Direct Line Life Insurance Co Ltd.

The unit had about 150,000 policies in force at July 31.

Direct Line, whose brands include Churchill, Privilege and the Green Flag roadside recovery service, has made severe cost cuts this year in a move to remain competitive in the face of intense competition from price-comparison websites.

It said in June that it would axe about 2,000 jobs, as it looked to trim 130 million pounds in annual costs by 2014 and boost profit in a price-competitive market.

Direct Line also said it would issue a special interim dividend of 4 pence per share shortly after the sale of the unit.

Shares in Direct Line were up 1.5 percent, while Chesnara's stock was up 0.7 percent in early trade on the London Stock Exchange.

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