Royal Bank of Scotland Group plc, the government-controlled U.K. bank that reported a pretax loss of 2.1 billion pounds (2.34 billion euros) in the third quarter of 2009, has restated its intention to sell its insurance arm.

The sell-off of RBS Insurance, the group said, would be in line with its previously announced strategic plan and meet European Union rules regarding government aid to businesses. RBS also will sell its Global Merchant Services and RBS Sempra Commodities operations. The disposals are due to take place over the next four years.

Its third-quarter results contrasted with a pretax profit of 1.9 billion pounds in the third quarter of 2008.

Stephen Hester, RBS's group chief executive, said the third-quarter results provided reasons for optimism about the bank's eventual return to financial health.

"The results also show the headwinds we face and the legacy we are purposefully working out of," Hester said in a statement. "As I have repeatedly said, the journey will take some years."

RBS's plan to sell its insurance operation has been on, then off, then on since the group announced in April 2008 that it was considering a "whole or partial disposal" of RBS Insurance (BestWire, Feb. 27, 2009).

The company said in a statement that RBS Insurance "achieved strong growth in its brand policy numbers, both through direct brands and the bank branch channel. Direct-own brand policies were up 11% in motor and 13% in home, compared with 3Q08. Bank channel home policies have risen 13% from 3Q08."

RBS Insurance had an operating profit of 11 million pounds in the third quarter, down 95% from 150 million pounds in the third quarter of 2008. The operating profit for the first nine months of 2009 was 228 million pounds, down 48% from 450 million pounds.

The company sells motor and non-motor policies under such brands as Churchill, Direct Line and Privilege. It distributes by telephone, the Internet and through brokers, and operates in the United Kingdom, Germany, Italy and Spain.

Earlier this year, the RBS group, which had become ensnared in the credit crunch amid its own unsuccessful acquisitions strategy, reported a 2008 loss of 24.14 billion pounds. At the time, RBS said it was sticking to its decision not to sell RBS Insurance, calling it "the leading U.K. personal lines insurer." RBS Insurance "provides high-quality earnings, which are differentiated from the group's banking businesses, providing valuable diversity and strong returns," the group said then.

Alistair Darling, then the Treasury secretary and now the chancellor of the exchequer, criticized the "excesses" of RBS in light of "such a failure of this magnitude."

Fiona MacRae, an RBS spokeswoman, declined further comment on the quarterly results.

(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)

Copyright (C) 2009 by A. M. Best Company, Inc.