Royal & SunAlliance disposes US business for £158 million |
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Published
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Thu, 28 Sep 2006 13:55
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LONDON - Insurance firm Royal & SunAlliance (RSA) announced today that it would be selling its US arm to a company set up by its management in that country for a price of £158 million ($300 million). Royal & Sun's US business is making massive losses and has been closed for new business since 2003.
In the six months ending June, the business lost £17 million. RSA said it would now focus on general insurance businesses in the UK as well as in Scandinavia. Chief executive Andy Haste said the move was a significant one that would finally give the group the green signal to exit from the US markets. "The sale of the US operation is the right deal for our shareholders and US policyholders," he said. "The transaction will bring certainty and finality and delivers on our objective of a clean exit from the US."
RSA will be taking a £443 million loss on the sale. This loss includes an injection of £151 million in capital contribution to the US arm in return for £158 million over a four-year period. Royal & Sun said it would be delisting from the New York Stock Exchange and would also terminate its American Depositary Receipt programme.
Analysts say the deal will allow RSA to dispose off what was rapidly turning into a headache and would allow it to concentrate on the European businesses. US ratings agency Standard & Poors said it was a positive move. "The sale of RSA US represents a conclusion to the last, and potentially most pernicious, of the legacy issues inherited by RSA's incumbent management team," the agency said in a note to clients.
RSA shares increased 4 pence at 148-1/2 in early morning trading.
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