Royal & SunAlliance looks at unlocking £1bn orphan assets

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The Independent Online

Royal & Sunalliance, the British composite insurer, is to look at whether to apply to unlock its £1bn inherited estate in the wake of last week's decision to allow its rival Axa to release £1.8bn of orphan assets to boost shareholder funds.

Royal & Sunalliance, the British composite insurer, is to look at whether to apply to unlock its £1bn inherited estate in the wake of last week's decision to allow its rival Axa to release £1.8bn of orphan assets to boost shareholder funds.

Bob Mendelsohn, RSA's chief executive, said yesterday: "Every company has built up their excess assets in different ways. But it is something we are considering."

The initial euphoria about the prospects of the Axa decision opening the way for a flood of similar releases has faded as investors have realised that further complex negotiations will be needed before other companies are ready to follow suit.

RSA shares, one of the sector's weakest performers, yesterday rose 14p to 430p after first-half figures showed the company is starting to reap the benefit of the price rises coming through for general insurance worldwide. The City was also relieved that RSA had avoided the massive French storms claims that hurt CGNU's interims on Wednesday.

Group operating result, including investment returns, was up to £320m from £315m in the first half of 1999. General insurance premiums rose 17 per cent to £4.29bn, boosted by the acquisitions of Orion in the US and Trygg-Hansa in Scandinavia.

Mr Mendelsohn said RSA was not interested in bidding for Equitable Life, the mutual life insurer being auctioned off in the wake of last month's House of Lord ruling on pension rights. But the group is interested in buying on the general insurance side. "We believe we are better positioned to make money out of general insurance," he said.

Life, pensions and investment new business was up 20 per cent to £1.6bn. "For the first time for a very long time all the indicators are pointing in the right direction. For the first time in a long time we are seeing prices going up in every major market," Mr Mendelsohn added.

Group operating ratio, the key industry measure of efficiency, fell from 108 per cent in the first half of 1999 and first quarter of 2000 to 107.6 per cent as a result of tighter control on claims, which account for 70 per cent of costs. This is the first sign of tangible progress towards the group's target of 103 per cent by 2001.

Mr Mendelsohn said the group was confident of turning the internet to its advantage. "An incumbent has a big advantage if they are efficient and alert."

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