Royal & SunAlliance yesterday took another important step on the road to recovery, making the long-awaited sale of its high-risk property and casualty insurance business in the US for £72m.
Alleghany Insurance Holdings has bought RSA's US surplus lines business, Royal Specialty Underwriting Inc (RSUI). The company underwrites speciality insurance for very high-risk properties, such as those in hurricane zones.
RSA was forced to embark on an ambitious disposal programme at the end of last year, after flooding, the World Trade Centre attacks and asbestosis claims led to record losses for the company. It was left with a £700m capital shortfall, but last month succeeded in pulling off a £540m flotation of its Australian business to help to eradicate its funding gap.
RSA will retain RSUI's profits for the first half of the year. It made an operating profit of £51m in the first quarter of 2003, but is likely to only break-even by July as bad weather events increase. Disposing of RSUI, which needs significant amounts of capital to back the high risks its takes on, will release £198m for the group.
Andy Haste, RSA's chief executive, said: "This transaction significantly reduces the volatility and catastrophe exposure of our US business. Taken in combination with the recent IPO and sale of our UK healthcare business, it means that our risk-based capital position has substantially improved."
Mr Haste took the helm at RSA in April after the departure of Bob Mendelsohn, who was ousted after the group's capital problems were revealed.
One insurance analyst said: "The company's capital shortfall has gone, so the focus will now be on what the new management's strategy will be. What is Mr Haste and his team going to do with the rest of the business and can they turn it into a coherent company?"
RSA is this week expected to return to the FTSE 100.
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