Royal & Sun Alliance sells US Viking Insurance for $200 million |
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Published
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Sat, 30 Jul 2005 06:35
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LONDON: Royal & Sun Alliance has announced that it had reached an agreement to sell its US non-standard Auto business wing, Viking Insurance to Sentry Insurance in a deal worth $200 million (114 million pounds) in cash. After taxes, Royal & Sun Alliance will be richer by about $155 million.
The company said that the amount received as a result of this sale would be reinvested in the US arm of its business. However, with the sale of Viking, which specialized in selling car insurance to low and middle-income families in the US, Royal & Sun Alliance's presence on the American mainland has significantly decreased.
Analysts say that the sale of Viking is a shrewd move as it boosts RSA's U.S. capital position by $230 million. The company is now removed from the motor risk area and consequently it's capital reserves increased to 2.3 times the statutory minimum up from the 1.9 times before the sale.
Commenting on the decision to part ways with Viking, RSA Chief executive Andy Haste said, "Today's sale of Nonstandard Auto is in line with the plans and timetable we outlined in March. This disposal further reduces the Group's exposure to the US, while providing the US operation with additional capital support." However, it must be noted that Viking was the last of RSA subsidiaries that was still engaged in writing policies in the US.
This move to sell it's only viable arm in the US follows the successful negotiations under which Royal & Sun Alliance (RSA) staff accepted new and cheaper retirement plans. This agreement would result in bridging the company's pensions deficit by nearly a quarter. The numbers as announced by the firm were pegged at a £126 million ($395m) deduction after tax from its existing £503 million pension deficit.
This was great news for RSA as the firm had announced that its pre-tax profits for the first quarter of the year had trebled to £185 million as compared to £53 million at the same time last year.
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