UK insurer Royal & Sun Alliance has sold its US non-standard auto insurance business to Wisconsin-based Sentry Insurance in a $200 million cash deal.
The sale is expected to generate a post tax gain of $155 million, which according to the firm represents a price of two times the proforma book value. It will also give Royal & Sun Alliance (RSA) $135 million under IFRS accounting rules.
The move is thought to be part of RSA’s strategy to cut costs, improve its capital position and reduce exposure to US risks.
The overall capital benefit of the disposal is estimated at $230 million, which should increase the US statutory RBC ratio of the group’s remaining US business from 1.9 at 30 June 2005 to 2.3 on a proforma basis.
The transaction is subject to regulatory approval.