Article date: 29 November 1999
CGU plc ("CGU") and the Royal Bank of Scotland Group plc ("RBS")have agreed to enter into a strategic partnership to provide longterm life assurance, pensions and investment products to RBS'scustomers.
They have signed a Memorandum of Understanding setting out theprinciples which will underpin their relationship. In particular,CGU have agreed to acquire a 50% shareholding in RBS's lifeassurance subsidiary, Royal Scottish Assurance ("RSA"), forconsideration in the region of £150 million. CGU will replaceScottish Widows in this venture and will provide administration andasset management services to RSA.
CGU also intends to increase its holdings in RBS shares by up to£300 million to cement this new relationship. The purchases will bemade over the next six months at CGU's discretion using its ownvaluation criteria, and they are not governed by any timetable.
The two companies will explore opportunities to develop furtherventures in the financial services sector generally.
Commenting on the announcement, Sir George Mathewson, GroupChief Executive of RBS, said "We are delighted to be forging astrategic partnership with a company of the standing and reputationof CGU. Our customers will benefit from the knowledge and expertiseof CGU in the life and pensions market and their proven trackrecord of low cost administration. This will enable us to focus ondelivering outstanding value to customers, and, in doing so, createvalue for our shareholders."
Bob Scott, Group Chief Executive of CGU added: "We are delightedto join with RBS in this partnership. It gives CGU a substantialopportunity to improve the products and services available to RBS'scustomers and the potential to further reduce our unit costs forthe benefit of all customers and shareholders."