Capital freed by life sale to support general underwriting
The sale of Royal & SunAlliance's (R&SA) UK life arm will allow it to concentrate additional capital on the general insurance business, according to UK chief executive Duncan Boyle.
The sale, to newly formed Resolution Life Group, is conditional on FSA approval and is expected to be completed by the end of October.
The deal is worth £850m - £750m in cash and £100m in preference shares.
Based on these figures, R&SA said the sale will allow for the release of approximately £650m of statutory capital and £500m of risk-based capital.
Boyle said the deal meant that additional "capital can be concentrated on general insurance".
He said the agreement to sell the life business largely signals the end of R&SA's disposal strategy, with only "a few minor international life operations" remaining.
Credit ratings agency Standard & Poor's (S&P) said that while the release of capital will strengthen the group's capital position, the sale did not affect R&SA's credit rating.
S&P said that although the transaction is positive for the ratings, it was not sufficient to remove the negative outlook, which continued to reflect the execution risks in restructuring R&SA's US operations. But S&P said the deal did remove future uncertainty regarding calls on capital.
Of the general insurance business, Boyle said: "I'm pleased with the way the business has been over the last three years."
He said that while "the market is always difficult for general insurance", the company remained "well positioned" in general insurance.
R&SA is due to announce its half-year results next week.