Royal & Sun to hand back another pounds 750m

By Andrew Garfield Financial Editor

SHARES IN Royal & SunAlliance jumped nearly 7 per cent yesterday after the insurance giant announced plans to return pounds 750m - around 10 per cent of its capital - to shareholders through a special dividend of 48p a share.

The group also reported 1998 profits at the top end of City expectations, although 40 per cent down on the previous year.

The payment, which will be accompanied by a 10-for-11 share consolidation, comes on top of the pounds 1.25bn given back to shareholders last year.

Sir Patrick Gillam, the chairman, said, however, that the repayment was on condition that shareholders would be willing to stump up if the group needed the money to fund a deal.

"As we generate further surpluses we will return them to shareholders. But we will not shrink from asking shareholders for capital for well defined uses," he said.

Bob Mendelsohn, Royal's chief executive, said that the process of merging the Royal and Sun Alliance businesses was now complete and the group was on the lookout for takeover and merger deals both at home and abroad.

"Consolidation is a fact of life and will be for some time to come. I think we have some very good consolidation skills. It would be a shame to let these go to waste," he said. " We see lots of cross-border opportunities."

Mr Mendelsohn was unapologetic about wading into the bidding war for Guardian Royal Exchange last month.

The group came under fire from shareholders who objected to the group using its own undervalued paper to fund a bid. GRE eventually fell to the rival Sun Life and Provincial, the French group AXA's UK arm, for pounds 3.4bn last month.

Mr Mendelsohn said it would have been a good opportunity at the right price. "Our own analysis is that although we have some extra capital in the group we didn't have enough to do an all-cash bid."

Group profits for 1998 were down 40 per cent to pounds 602m. The figure includes, for the first time, pounds 195m of investment gains, in line with changes in accounting practice right across the the industry. Royal & SunAlliance acknowledged that last year had been a disappointing year, although Mr Mendelsohn insisted that the group was not alone in being hit by a catalogue of disasters compounded by weak prices across the board.

He said that there were real signs that rates were starting to firm after years of decline.