Royal and Sun Alliance to sell off insurance operation

Royal & Sun Alliance is to raise £850m (€1.3bn) from the sale of the UK life insurance operation it closed to new business two years ago, it emerged today.

The proposed deal with a new company set up to run such closed funds will enable R&SA to focus on its general insurance business and the More Than brand.

Resolution Life Group (RLG) – led by General Electric’s former head of insurance, Clive Cowdery – said it hoped to follow the R&SA purchase with other acquisitions and a public listing to fund medium term growth.

RLG, which is backed by a number of institutional investors, said the R&SA life fund provided its business with “immediate scale” as it had £24bn (€36.2bn) of funds under management and 2.4 million policies.

Today’s deal will see RLG pay £750m (€1.1bn) in cash and £100m (€150.8m) in shares.

Since closing its life funds to new business over 2001 and 2002, R&SA has been looking to free up by capital by selling the operation or through a securitisation.

The move is part of a strategy that has also seen it raise £960m (€1.4bn) from a rights issue last year as it took steps to focus on UK, Scandinavian and Canadian operations.

Most of the company’s recent difficulties have stemmed from the United States, where R&SA recorded an underwriting loss of £651m (€981.5m) in 2003, partly because of provisions to cover workers’ compensation.

R&SA chief executive Andy Haste said: “This is a good deal for the group and clear evidence of our commitment to deliver on our strategy.

“For staff and policyholders, the sale is to a company whose core business focus is the management of closed life operations.”

Today’s agreement still requires the approval of shareholders.