CGU plc to acquire Royal Bank of Scotland preference shares

CGU plc ("CGU") announces that it has agreed to subscribe for up to Ł900 million of 9 per cent. non-cumulative convertible preference shares ("the convertible preference shares"). The convertible preference shares will only be issued by Royal Bank of Scotland ("RBS") if its offer for NatWest becomes unconditional in all respects.

As previously announced, CGU has signed a Memorandum of Understanding with RBS to enter into a strategic partnership to provide long term life, pensions and investment products to RBS. CGU has agreed in principle to acquire a 50 per cent. interest in RBS's life insurance subsidiary, Royal Scottish Assurance plc and, on successful completion of RBS's offer for NatWest, has agreed in principle to acquire 50 per cent. of NatWest Life. It is intended that the convertible preference shares will be redeemed, subject to the consent of the FSA, upon completion of RBS's announced disposals. In the event that the convertible preference shares are not redeemed upon the completion of the asset disposals, CGU has the right on 30 September 2001 to convert the convertible preference shares into RBS ordinary shares at the prevailing market price. Any convertible preference shares which remain outstanding in 2003 will automatically convert into RBS ordinary shares.

CGU's stated intention to increase its holding in RBS ordinary shares by up to Ł300 million remains unchanged. To date, CGU has purchased approximately Ł156 million of RBS ordinary shares.