Royal & SunAlliance USA announced the sale of Royal Specialty Underwriting Inc. (RSUI), its Atlanta-based excess and surplus lines business, to Alleghany Insurance Holdings LLC, a subsidiary of Alleghany Corp., for approximately $115 million. The transaction is expected to close during July 2003.
The sale is part of Charlotte, N.C.-based Royal & SunAlliance’s U.S. restructuring plan, announced in November 2002. In addition to the up-front purchase price, the transaction will release approximately $500 million of capital into Royal & SunAlliance’s U.S. operation.
The operating profit of the business underwritten by RSUI for the first quarter of 2003 was around $83 million. This profit, and that attributable to the second quarter of the year, will be retained by the company.
“The RSUI sale is a major milestone in the success of our restructuring program,” said Steve Mulready, Royal & SunAlliance USA president and CEO. “It greatly improves our capital base and further strengthens our financial position in the US. In addition, it significantly reduces the volatility and catastrophe exposure of our US business.
“From a global perspective, the transaction builds on the success of the initial public offering of our Australian and New Zealand businesses last month and the sale of our UK healthcare and assistance business in April. This is exactly in line with the plan we announced in November, and we believe the markets will react accordingly.”
Under the terms of the agreement, Alleghany will acquire RSUI’s underwriting platform and access to its distribution channels, including those for excess and surplus property, umbrella and excess casualty, directors and officers liability and primary general liability insurance. As part of the transaction, unearned premium reserves of approximately $300 million relating to business underwritten by RSUI will also transfer to Alleghany.
No leadership changes are expected as a result of the transaction. James Dixon will continue as RSUI chairman. Additionally, 280 existing positions are expected to transfer with the sale.
“This is an exciting opportunity for RSUI and our employees,” Dixon said. “Alleghany Corporation brings significant investment to assist us in the profitable growth of our organization. The transaction should have minimal impact on our customers and distribution systems. We will continue to operate much as we have in the past in terms of risk appetite, limits offered and reinsurance purchasing.”
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