RBS insurance bidders to show cards in May: sources

By Mathieu Robbins

LONDON (Reuters) - Insurers and buyout firms mulling bids for Royal Bank of Scotland's (RBS.L: Quote, Profile, Research) insurance unit are set to reveal their cards later this month, said sources familiar with the matter on Tuesday.

First round bids for the unit are due on May 28, said the sources. The business, which includes the Direct Line and Churchill brands, is expected to fetch between 5 billion pounds ($9.7 billion) and 7.5 billion, they said.

Bidders are expected to include European insurer Zurich Financial (ZURN.VX: Quote, Profile, Research) and Warren Buffett's Berkshire Hathaway (BRKa.N: Quote, Profile, Research), said the sources.

Insurers Axa (AXAF.PA: Quote, Profile, Research), Allianz (ALVG.DE: Quote, Profile, Research) and Generali (GASI.MI: Quote, Profile, Research) may also bid, as well as buyout firms keen to expand in financial services, they said.

However the business's size as well as difficulties for buyout firms raising debt in the current market are factors limiting interest in the unit.

"It will be difficult for buyout firms to compete on this one -- there is just not enough debt out there for them to meet their returns," said one source.

The unit's large size however means the successful bidder may yet elect to sell off parts of it, which could be bought by a buyout firm or smaller insurers, said the sources.

RBS is selling the non-core business as part of its attempt to rebuild its capital position.