AROUND 500 Liverpool employees of the insurance arm of Royal Bank of Scotland (RBS) are set to become part of a separate stock market-listed company later this year.

RBS is to press ahead with the flotation of the unit in the second half of 2012 despite the tough market conditions created by the eurozone crisis.

However, it is also believed the bank would consider a private sale if a £4bn asking price was met by a potential suitor.

RBS is rebranding the division as Direct Line Group. Its brands include Direct Line, Churchill, Privilege and Green Flag, plus the broker business NIG.

All of the Liverpool employees are based across several floors in Cavern Walks in Mathew Street in the city centre.

The bank is obliged to dispose of its interest in Direct Line by the end of next year under a state aid deal with Brussels following its £45bn rescue by British taxpayers.

In the last few days the flotation has moved a step closer with the appointment of UBS, which will work alongside Goldman Sachs and Morgan Stanley as joint bookrunner on the stock market listing.

In its latest public statement on the move RBS said: “The base case plan is for the RBS Group to dispose of Direct Line Group by way of a public flotation and that is targeted to commence in the second half of 2012, subject to market conditions.

“The process of separation is proceeding on plan.”

Last week RBS held its anual meeting where more than 99% of its shareholders voted in favour of the group’s remuneration report.

Earlier this year, chief executive Stephen Hester waived his £963,000 annual bonus for 2011 following a media outcry.

RBS chairman Sir Philip Hampton also revealed at the annual meeting that the group had taken a £1.3bn write down on its Greek sovereign debt, to which it is no longer exposed.