Royal Bank of Scotland Insurance (RBSI) – the insurance arm of the Royal Bank of Scotland – is set to return as much as £1 billion ($1.54 billion) to its parent company in the short term before providing an even greater windfall when the insurance business floats at the end of next year.

RBSI CEO Paul Geddes told investors that a dividend of between £500 million ($770 million) and £1 billion ($1.54 billion) will be paid to the parent company “to create a strong and efficient capital structure” for the insurance business on a stand-alone basis.

The dividend will be subject to regulatory approval from the UK Financial Services Authority and depends on the final approved structure, with Mr Geddes saying the insurance arm will look at the possibility of taking on hybrid capital to fund the dividend prior to its divestment.

The RBSI business is currently valued on the bank’s books at £4.3 billion ($6.63 billion), and the bank must divest a majority stake in RBSI by the end of 2013 under a competition ruling by the European Commission.

The European decision followed the state bailout of the bank, which is now majority-owned by the UK Government, during the 2008 global financial crisis.

The company is expected to float a minority stake in RBSI on the UK stock exchange by the end of next year, before following up with further share sales in 2013, but it has also said it is open to offers from rival insurers.

RBSI includes some of the UK’s biggest personal lines brands including Direct Line, Churchill and Privilege, as well as affinity specialist UKI and commercial insurer NIG.