NOT FOR PUBLICATION OR DISTRIBUTION IN THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA.

Direct Line Insurance Group plc (“Direct Line Group” or “DLG”) announces it expects to complete a £500m issue of Fixed/Floating rate Guaranteed Subordinated Notes due 2042 and intends to seek a listing of the securities on the London Stock Exchange. Guaranteed by U K Insurance Limited on a subordinated basis, the Notes are scheduled to be issued by Direct Line Group on or about 27 April 2012. Coupon payments, initially at 9.25 per cent, per annum, will be semi-annual with the first coupon due on 27 October 2012. The notes are rated BBB+ by Standard and Poor’s and Baa1 by Moody’s Investor Services.

This inaugural issuance is one of a number of steps being taken by management to create a more efficient capital structure. DLG consolidated its four underwriting entities into one on 10 December 2011 and paid a dividend of £300 million to RBS Group (RBSG) on 27 March 2012. DLG intends to pay further dividends up to £700 million prior to its divestment, subject to FSA non-objection. The notes are intended to be treated as tier 2 capital, which is consistent with DLG's overall objective of maintaining a level of capitalisation consistent with a senior credit rating in the "A" range.

This comes ahead of DLG’s required divestment from RBSG, as mandated by the European Commission as a result of RBSG receiving state aid.

Paul Geddes, CEO of Direct Line Group, commented:
“The transaction builds on the strengths of Direct Line Group: our leading brands, our transformation plan, well-capitalised balance sheet, and conservative approach to investment. Following the completion of the first phase of our transformation plan, with the return to profit in 2011, we are progressing with the second phase of rebuilding our competitive advantage. Delivery of this strategy, together with work to optimise our capital base, is focused on our objective of delivering a sustainably profitable business and on completing our separation from RBS Group.”

This notice is not an offer of securities for sale in the United States or in any other jurisdiction. The Notes have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to or for the account or benefit of US persons absent registration or an exemption from registration under the Securities Act. There will be no public offering of the Notes in the United States.