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Providence to consider selling auto insurance segment

UK home credit provider Provident Financial is considering the sale of its non-core car insurance segment Providence Insurance, following approaches by unnamed third parties interested in purchasing the business.

Provident Financial, which is also in the process of divesting its international business, has revealed that it will review whether greater share value could be achieved through the sale of Provident Insurance.

According to Reuters, Katrina Preston, a London-based analyst at Bridgewell Group, commented: We believe the business could fetch around GBP225 million, based on the net present value of the division’s through-the-cycle earnings. She is also reported as saying that interest is most likely to come from private equity firms or small, intermediated insurers.

Bloomberg has reported Merrill Lynch analyst Philip Middleton as valuing Providence Insurance at an estimated GBP188 million in a research note.

Providence Financial is considering the sale of the business, which reported record profits of GBP40 million in 2005, as it predicts a less prosperous fiscal 2006 amid increasingly competitive premiums.

Providence Financial has said that it will make further announcements about the potential sale, which is being handled on the company’s behalf by Lexicon Partners, as well as the divestiture of its international business, when it announces its 2006 preliminary results on March 7, 2007.