Royal & Sun's life business valued at £600m as bids close

Today is the last day for bidders to lodge an offer for the life insurance arm of the cash-stretched insurer Royal & SunAlliance. It is understood that several bids have been received, valuing the business at about £600m.

Today is the last day for bidders to lodge an offer for the life insurance arm of the cash-stretched insurer Royal & SunAlliance. It is understood that several bids have been received, valuing the business at about £600m.

A spokesman said: "We never comment on rumour or speculation." But in the past the company has made it clear that it wants to concentrate on general insurance covering areas such as house, motor and other accidents, and is therefore looking for opportunities to release the capital tied up in its life arm so that it can re-invest it elsewhere.

The process of the bidders undertaking a due diligence examination of the life business is expected to begin after Christmas, so no formal bids will be delivered until the new year. Royal's is one of several life companies that have been hit by falling stock markets and the lowest interest rates for 40 years. At the same time the Financial Services Authority has been making tougher demands on life companies to improve their reserves.

In October, Royal raised £1bn through a heavily discounted rights issue to bolster its fading reserves. In the first nine months of this year the group paid 8 per cent more in claims than it received in premiums, a performance described by the chief executive, Andy Haste, as "not an adequate level of performance".

Following record losses at Royal, Mr Haste has had to cut nearly 12,000 jobs world-wide. Roman Cizdyn, the insurance analyst at Commerzbank, said recently: "There are lots of problems in the company that still need to be sorted out - it is still a bit of a mess and there are many questions over what its future holds."

Royal's life business is closed to new customers, so it will gradually run down as policyholders cash in or die. This will have been reflected in the bids that have been received. Part of the life operation is involved in with-profits policies, which analysts believe may be difficult to sell. But the larger part is unit-linked and may find buyers.

On its general side, Royal & SunAlliance has had to contend with weather-related claims for flooding and subsidence in the past year or more. The hot weather this summer sent subsidence claims soaring from £50m to £120m.

Royal is being advised by Goldman Sachs and Lehman Brothers, which have set today's deadline for offers. But the advisers have also been asked to evaluate other methods of releasing value.