Royal & SunAlliance offloaded its loss-making estate agency business, the third-largest in the UK, to Skipton building society yesterday in another step towards reshaping its flagging business.
The purchase will make Skipton the second-largest estate agency chain in the UK, taking on RSA's Barnard Marcus, William H Brown and Fox & Sons brands, among others, and its 2,500 staff.
The financial details of the deal were yesterday undisclosed at the request of RSA, but RSA's 323 estate agency branches made an operational loss of £7m last year on a turnover of about £100m. RSA said it would have to take a £221m hit on its profit and loss account from the disposal. The company said, however, that this figure was an accounting device for goodwill it has already written off on the businesses.
It said the move would have no "material effect on the group's funds, capital or net assets", as the same amount will be credited to the group's balance sheet.
Skipton intends to run Sequence, the name of RSA's estate agency division, as a separate business to its Connells estate agency arm. The building society yesterday said all the 4,000 jobs in the enlarged division would be safe and all the brand names would be kept. Skipton will have 480 branches throughout the country.
John Goodfellow, the chief executive of Skipton, said: "As demand in the housing market remains strong, supported by low interest rates, a low volume of newly built homes and increasing demand for owner-occupied properties, estate agency businesses are a sound investment." The building society yesterday said RSA's chains had "lost their way" recently by trying to branch out into utility and van rentals. It will refocus the chains on pure estate agency business.
RSA has been shedding assets in the past year after it revealed a shortfall in the capital it needed to fund its business. It has already sold off assets in the US, shut its UK life companies to new business and floated its Australian arm. But a further shock for investors came last month when it revealed an £800m black hole in its reserves. It has since recently completed a one-for-one deeply discounted rights issue to raise £1bn to strengthen its reserves for liabilities.
"This is not a material transaction for RSA but Andy Haste, the chief executive, is proving that he is, at least, an executor. He has laid out his plan and he is getting on with it," Roman Cizdyn, an insurance analyst at Commerzbank, said. Shares in RSA closed down 1.9 per cent at 90.75p.