RSA continues drive for cash with £147m sale of health insurer

Liz Vaughan-Adams
Friday 17 January 2014 03:12

Royal & Sunalliance yesterday sold its UK health insurance unit for £147m to a management team as part of an ongoing effort to raise cash to restore its financial health.

The troubled insurer said a management buyout team led by Tim Ablett, head of the UK operations of the French mutual insurer Groupama, and backed by Barclays Private Equity, had bought the unit.

Barclays Private Equity is paying £87m for a 90 per cent stake in the business, which provides private medical insurance and personal accident and other specialist insurance. The balance of the £147m asking price is financed by a £70m debt facility.

The remaining 10 per cent of the business will be owned by eight key executives who have invested £750,000 between them. Mr Ablett, who ran the RSA unit three years ago, will be chief executive while Steve Wood, its current head, will be managing director. Both men will own stakes of 1.5 to 2 per cent.

RSA estimated yesterday that the sale would release capital of £247m from a combination of the profit on disposal and the reduction in premium income – which it will use to support its other insurance businesses. Duncan Boyle, RSA's UK chief executive, said: "The disposal of the healthcare business allows Royal & SunAlliance to unlock significant value from the sale of a specialist business that is not strategic to the group."

The disposal is the latest in a line of asset sales it has been carrying out to shore up its balance sheet. It is also in the process of floating its Australian and New Zealand business, called Promina.

Analysts at Credit Suisse First Boston said: "We view this [the disposal] as good unexpected news for RSA. It is a business which the company had not previously identified as one lined up for disposal."

In 2002, the healthcare unit made a profit of £45m which included a one-off profit of £13m relating to releases of prior year claims provisions. As at the end of last year, the healthcare unit's net assets were about £9m and net written premiums for the year were around £273m.

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