RSA makes exit from UK life business in £850m deal

The Royal & SunAlliance insurance group yesterday finalised the sale of its moribund life insurance offshoot, which has been on the block for several months. The buyer is Resolution Life Group, a business newly created with the specific aim of taking over unwanted life operations and floating itself on the stock market.

The Royal & SunAlliance insurance group yesterday finalised the sale of its moribund life insurance offshoot, which has been on the block for several months. The buyer is Resolution Life Group, a business newly created with the specific aim of taking over unwanted life operations and floating itself on the stock market.

Resolution, formed by Clive Cowdery, 41, and backed by some powerful City names, is paying £750m cash plus £100m in Resolution preferred shares. The deal is recommended by the Royal & Sun board but is subject to approval by its shareholders.

About 120 Royal & Sun employees will transfer to a subsidiary of Resolution Life, and the fund will continue to be managed by Isis Asset Management.

Andy Haste, Royal & Sun's chief executive, said: "It represents a clean exit from the UK life business and provides certainty to our shareholders ." The company added that the deal would have only a marginal impact on earnings and after transaction and sale costs there would be a loss on completion.

Royal & Sun shares initially rose but later fell 0.5p to 77.25p.

The deal follows a similar one earlier this month when Swiss Re, the world's second-largest reinsurer, agreed to buy Life Assurance Holding for £333m. As with Royal & Sun's life arm, it was closed to new business and was therefore being run down as policyholders surrendered their policies or died.

The life funds are being closed because of the low returns available from investing policyholders' funds on the stock market, combined with increasingly tough capital requirements laid down by the Financial Services Authority. In the past four years, Royal & Sun's life operation has lost a total of £2.17bn.