RSA 'delighted' with £750m Australian IPO

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The Independent Online

Royal & SunAlliance, the troubled insurer, floated its Australian operation, Promina, today on the Sydney stock market at a value of A$1.9bn (£750m), which is the world's biggest flotation so far this year and will release £540m of risk-based capital for the parent company.

Royal & SunAlliance, the troubled insurer, floated its Australian operation, Promina, today on the Sydney stock market at a value of A$1.9bn (£750m), which is the world's biggest flotation so far this year and will release £540m of risk-based capital for the parent company.

The initial public offer (IPO) was three times subscribed. The institutional offer was pitched at A$1.80 a share. Individual investors, who were allocated 272 million of the 900 million shares on offer, paid A$1.70. Half the company's stock was sold to Australian and New Zealand investors, with the rest mostly from the UK, the United States and Asia.

This is a more successful result than was feared a few weeks ago, when AMP said it was demerging its UK operations, including Henderson and Pearl Assurance, to produce a rival package. Promina owns Australia's third biggest car and home insurer, New Zealand's biggest combined general and life insurer and the Tyndall funds management business. The company insures more than 2 million cars and almost 1 million homes.

Andy Haste, RSA's group chief executive, said: "I am delighted by the success of the IPO and the excellent demand for Promina shares. There was a strong level of oversubscription and the register is of high quality. The IPO will deliver a major component of the actions we are taking to reshape the group and to strengthen our capital position. The capital release from the IPO, together with the release of capital from the sale of our UK Healthcare and Assistance business last month, will significantly improve our risk based capital position. It will also greatly increase our statutory surplus."

Depending on how options are exercised, RSA could collect as much as £662m, or it might end up with a 10 per cent stake in Promina. "The IPO will certainly improve sentiment for Royal & Sun," said David Bradbury, a fund manager for Canada Life Financial in the UK.

RSA has had to sell large swathes of its business after heavy losses from the World Trade Centre attacks, asbestosis claims and the impact of the struggling stock market. Analysts believe that the success of Promina may tempt RSA to sell its US business.

Goldman Sachs and Macquarie Bank were joint global managers of the sale, helped by ABN Amro Rothschild, JB Were, JP Morgan Chase and Merrill Lynch. They will receive 2.25 per cent of sale proceeds, about A$42m. RSA may pay Goldman Sachs and Macquarie Bank an additional success fee.

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