Royal & SunAlliance (R&SA) has sold its UK life operations to Resolution Life Group (RLG) for £850m.
R&SA said the consideration comprised of £750m in cash and £100m in preferred shares.
In addition, the contingent loans currently being provided by R&SA to the UK life operations will be repaid at completion. At 31 December 2003, the contingent loan drawn down was £320m, of which £146m was utilised.
Resolution Life Group, a newly-established company specialising in acquiring life business in run-off, is headed by former GE Insurance Holdings chief executive Clive Cowdery.
R&SA said the disposal completed its strategic withdrawal from the life market and its repositioning as a general insurer, subject to a maximum potential liability of £76m for any future misselling liabilities.
The net proceeds from the disposal would be used to support the capital position of the group and the underwriting of general insurance, said R&SA.
The deal is due for completion by the end of October 2004, although shareholder approval is required.
Based on the sale price, the release of statutory and risk-based capital would be approximately £650m and £500m respectively.
R&SA said it would extract net assets of £131m from the UK life operations prior to disposal.
The proforma net asset value of the UK Life operations at 31 December 2003, after adjusting for this extraction, was £816m, while the value of the long term business was £494m.
R&SA chief executive Andy Haste said: “This is a good deal for the group and clear evidence of our commitment to deliver on our strategy.
“The transaction represents a clean exit from the UK life business and provides certainty for our shareholders.
“For staff and policyholders, the sale is to a company whose core business focus is the management of closed life operations.”
