Royal replaces two top executives

Royal & Sun Alliance yesterday took the market by surprise by replacing its two top executives. The decision to relieve Richard Gamble as group chief executive entitles him to a pay-off of up to pounds 750,000, equivalent to two years' pay.

Robert Mendelsohn, chief executive officer of Royal & Sun Alliance in the US, will take Mr Gamble's post. City sources said Mr Mendelsohn's appointment came out of the blue, as either Mr Gamble or Roger Taylor, executive deputy chairman, had been expected to steer the company following the merger of Royal Insurance and Sun Alliance in July last year.

Royal & Sun also announced yesterday that Mr Taylor would relinquish his executive duties, although he would retain a seat on the board and advise the group on external affairs. He will also continue as chairman of the Association of British Insurers.

The company insisted the changes were expected. However, the move came as a pleasant surprise to the market, and Royal & Sun's shares closed up 14p at 560p.

The City has been uneasy about the top-heavy management structure at Royal & Sun since the merger. There have also been suggestions that Mr Gamble and Mr Taylor disagreed on strategic issues.

Patrick Gillam, chairman, said in a statement the move was the natural next step in the development of the group. The merger of Royal Insurance and Sun Alliance had created a strong business. Integration of the two companies was on track and the changes in management "put in place the appropriate structure to build upon the group's demonstrated strength as a world class leader in the financial services industry".