Royal & SunAlliance report raises fresh questions over its finances

Odds-on: William Hill looks a safe bet for stock market listing

Shares in Royal & SunAlliance, the insurance group, are expected to come under fresh pressure today in the wake of weekend reports that it may need to launch a rights issue to assuage the Financial Services Authority's (FSA) concern about its financial health. The group's shares fell 20p to 273p last week as it filed its statutory return for 2001.

The return, which underlined figures published in R&SA's recent annual report, reported a surplus on its subsidiary Sun Alliance & London Assurance's £9bn fund of only £194m compared with £352m the year before. And even the lower figure was achieved only after taking £446m of liabilities off its balance sheet through a reinsurance contract. This is entirely legitimate, but has been widely criticised.

Ned Cazalet, atCazalet Financial Consulting, a leading insurance company analyst, said: "You have to add these liabilities back in, otherwise it becomes boomerang finance ­ it comes back and hits you in two or three years."

The FSA has refrained from publicly criticising such tactics in individual cases, but its chairman, Sir Howard Davies, said in January this year: "I believe that a number of companies should be asking themselves some hard questions about the prudence of their reinsurance practices and, indeed ­ on both sides ­ about the business ethics of arrangements of this kind. We believe it is important for the long-term health of the industry, and its clients, that there is some strengthening of the industry's capital base."

As part of this process, it is thoughtR&SA has appointed Deutsche Bank to sell its Australian and New Zealand life insurance and fund management businesses for about £600m.

Mr Cazalet added that all the group's four UK life companies were potentially up for sale. Apart from Sun Alliance and London, R&SA also owns Royal & SunAlliance Life & Pensions, Royal & SunAlliance Linked Insurances and Phoenix Assurance. Last year the group wrote £2.9bn in net life insurance premiums, down £500m on the previous year.

The statutory return also reveals the group is concerned about its guaranteed annuity liabilities. It says: "There are ongoing discussions with the FSA about our treatment of guaranteed annuity rates. These discussions should lead to a change in policy liabilities and the financial support required from the parent company." As Mr Cazalet noted, these changes are more likely to be increases than decreases.

The stock market's deterioration has further increased the pressure on Royal & SunAlliance Life & Pensions.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers