US sell-off could put insurer Royal & Sun into play

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The Independent Online

The UK insurer Royal & SunAlliance finally made a clean break from its troubled American business yesterday, selling the division off to its management, and reigniting speculation that the remaining UK group may be the subject of an imminent takeover bid.

The sale completes the list of goals which chief executive Andy Haste set for the company when he took over as chief executive in 2003. These included securing an exit from the UK life insurance industry, rebuilding the balance sheet and reinvigorating the company's core businesses.

Although most of these aims had been achieved more than a year ago, the fragile US business - sitting on billions of pounds worth of potential asbestos claims - had, until now, proved impossible to shake off.

The US chief executive John Tighe and his management team are buying the business for a consideration of £158m, payable out of the company's dividends over a number of years. The first payment will not be made for four years. Even after this consideration has been taken into account, the sale will cost RSA a total of £443m, most of which is accounted for by a £322m capital injection which it has agreed to make into its US division.

The buyers will also take responsibility for the US pension fund, which has a deficit of £100m. Having recently repaired the deficit in its UK pension fund, the group will be left with an overall pensions surplus after the deal.

"Today we've resolved the last of the legacy issues," Mr Haste said. "The deal is good for shareholders, and it's also good for US policyholders - as it offers them the certainty and security of the ongoing management team."

Mr Tighe hopes to turn a profit from the US business by ensuring that outstanding claims are reduced to less than the amount which has been reserved for them.

With the US business sold, Mr Haste said the UK group also planned to terminate its US listing - a move which will save the group about £10m a year.

Shares in RSA shot up more than 4.3 per cent, hitting four-year highs of more than 151p, as investors speculated that the disposal of the troubled US business may open the door for a bid for the group. AIG and Zurich have been linked with potential bids. The group will now hold an extraordinary meeting to approve the transaction during November, and also requires regulatory approval for the deal.

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