Direct Line 42 Regulatory News (12QN)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, CANADA OR JAPAN.

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus dated 28 September 2012 (the "Prospectus") together with the pricing statement dated 11 October 2012 (the "Pricing Statement") published by Direct Line Insurance Group plc in connection with the admission of its ordinary shares (the "Ordinary Shares") to the Official List of the UK Listing Authority (the "UKLA") and to trading on the London Stock Exchange plc's main market for listed securities (the "London Stock Exchange"). Copies of the Prospectus are available from Direct Line Insurance Group plc's registered office and the Pricing Statement is available on the website of Direct Line Insurance Group plc.

11 October 2012

RBS Group plc

IPO of Direct Line Insurance Group Plc (the "Offer") - Announcement of Offer Price

RBS Group plc ("RBS Group") today announces the successful pricing of the initial public offering of Direct Line Insurance Group plc ("Direct Line Group").

The offer price has been set at 175 pence per Ordinary Share, implying a total market capitalisation of Direct Line Group £2,625 million.

The Offer comprises 450 million existing Ordinary Shares being sold by RBS Group (prior to the exercise of the 15% over-allotment option), representing 30 per cent of the 1,500 million Ordinary Shares that will be in issue at Admission. Gross proceeds realised by RBS Group will be £787 million (prior to the exercise of the over-allotment option).

Following admission, RBS Group will continue to hold 65.3 per cent. of Direct Line Group's ordinary shares assuming exercise of the over allotment option, which are subject to a 180 day lock-up.

Conditional dealings will commence on the London Stock Exchange at 8.00 am today (11 October 2012).

Commenting on today's announcement, RBS Group Finance Director, Bruce Van Saun said:

"We are very pleased to have successfully completed the Direct Line Group IPO as the first phase in our EU mandated disposal. This is another important milestone in RBS Group's restructuring plan. The successful offering rests on outstanding effort by the Direct Line management team to re-position the business, while also gearing up to the demands of being a separate public company. We believe Direct Line is on the path to a bright future."

For more detail, please see the separate announcement from Direct Line Group,

also released today.

ENQUIRIES:

RBS Group Media Relations

0131 523 4205

Forward looking Statements

This announcement contains ''forward-looking'' statements, beliefs or opinions, including statements with respect to the business, financial condition, results of operations and plans of Direct Line Group. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the RBS Group's control and all of which are based on the directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "targets", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions.

These forward-looking statements include all matters that are not historical facts. Forward looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the directors or the RBS Group with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Direct Line Group's business, concerning, amongst other things, the results of operations, financial condition, prospects, growth and strategies of Direct Line Group and the industry in which it operates.

These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing Direct Line Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this document. The RBS Group, Direct Line Group and Goldman Sachs International, Morgan Stanley & Co. International plc and Morgan Stanley Securities Limited, UBS Limited, Citigroup Global Markets Limited, HSBC Bank plc, Merrill Lynch International, BNP Paribas, Commerzbank AG, Investec Bank plc, Keefe, Bruyette & Woods Limited and RBC Europe Limited and Barclays Bank PLC (together, the "Banks") and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward looking statements contained in this document to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure and Transparency Rules of the Financial Services Authority.

Disclaimer

Neither this announcement, the publication in which it is contained nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the ''United States''). The securities referred to herein have not been and will not be registered under the applicable securities laws of the United States and, subject to certain exceptions, may not be offered or sold within the United States.

Neither this announcement, the publication in which it is contained nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into Canada or Japan or to any persons in any of those jurisdictions or any other jurisdictions where to do so would constitute a violation of the relevant laws of such jurisdiction. The securities referred to herein have not been and will not be registered under the applicable securities laws of Canada or Japan and, subject to certain exceptions, may not be offered or sold within Canada or Japan or to any national, resident or citizen of Canada or Japan.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The Offer and the distribution of this announcement and other information in connection with the listing and Offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions.

Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, this announcement does not constitute an offer for sale of, or a solicitation to purchase or subscribe for, any securities in the United States. No securities of Direct Line Group have been, or will be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), and securities of Direct Line Group may not be offered or sold in the United States absent an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offering of the securities in the United States.

The contents of this announcement, which have been prepared and issued by, and is the sole responsibility of the RBS Group, have been approved solely for the purposes of section 21(2) (b) of the Financial Services and Markets Act 2000 (as amended) by Goldman Sachs International and Morgan Stanley & Co. International plc.

This announcement does not constitute a recommendation concerning the Offer. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. Information in this announcement or any of the documents relating to the Offer cannot be relied upon as a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Offer for the person concerned.

Any purchase of or subscription to Ordinary Shares in the proposed Offer should be made solely on the basis of the information contained in the Prospectus and the Pricing Statement published by Direct Line Group in connection with the Offer. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information in this announcement is subject to change.

The Banks, each of which is authorised and regulated in the UK by the Financial Services Authority, are acting exclusively for Direct Line Group and no one else in connection with the Offer and will not regard any other person as its client in relation to the Offer and will not be responsible to anyone other than Direct Line Group for providing the protections afforded to their respective clients or for giving advice in relation to the Offer or the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the Offer, the Banks or any of their respective affiliates, acting as investors for their own accounts, may subscribe for or purchase Ordinary Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Ordinary Shares and other securities of Direct Line Group or related investments in connection with the Offer or otherwise. Accordingly, references in the Prospectus or the Pricing Statement to the Ordinary Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, the Banks or any of their respective affiliates acting as investors for their own accounts. The Banks or any of their respective affiliates do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

None of the Banks or any of their respective subsidiary undertakings, affiliates or any of their respective directors, officers, employees, advisers, agents or any other person accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy, completeness or fairness of the information or opinions in this announcement (or whether any information has been omitted from the announcement) or any other information relating to Direct Line Group, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith.

In connection with the Offer, Goldman Sachs International, as stabilisation manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Ordinary Shares or effect other transactions with a view to supporting the market price of the Ordinary Shares at a higher level than that which might otherwise prevail in the open market. Goldman Sachs International will not be required to enter into such transactions and such transactions may be effected on any stock, market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Ordinary Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on Goldman Sachs International or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilising measures, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Ordinary Shares above the offer price. Save as required by law or regulation, neither Goldman Sachs International nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.