Royal & Sun offloads US arm
Insurer Royal & Sun Alliance put its US woes behind it today by agreeing to sell the American business to a group of senior managers.
R&SA said the disposal was a “significan step” for the group after it deemed the US business non-core in 2003, following heavy underwriting losses.
The UK-based company will sell the business to Arrowpoint Capital – a vehicle set up by US management – for £158m (€234m). However, Royal will make a loss on the disposal of £443m (€656m), reflecting a £151m (€223m) capital contribution into US regulated entities and a write-off of assets.
Royal added that payment from Arrowpoint and the US management team would come from the future performance of the US operation.
Chief executive Andy Haste said: “Today’s announcement is a significant step for the group. The sale of the US operation is the right deal for our shareholders and US policyholders.”
He added the proposed sale met the company’s objective of a “clean exit” from the United States.
Since 2003 Royal has restructured its operations to focus on its general insurance businesses in the UK and Scandinavia and an international arm.
It has worked to derisk the US business, with the improvement shown in results last month when half-year losses from the region reduced to £17m (€25m) from £54m (€80m) a year earlier.
The US operation has been closed to new business and a restructuring plan instigated with the objective of “bringing certainty and finality to the group’s US exposure”.
Royal added today: “In the last three years the group has taken significant action to deliver this objective.”
