Royal & SunAlliance Sells U.S., Puerto Rican Biz

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NU Online News Service, June 10, 12:21 p.m.EDT?U.K. insurer Royal & SunAlliance Insurance Groupplc. announced it is selling off two pieces of its overseassubsidiaries, the U.S.-based Royal Specialty Underwriting Inc. andits Puerto Rican insurance unit.

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Royal Specialty Underwriting, its Atlanta-based excess andsurplus underwriting subsidiary, will be sold off to AlleghanyInsurance Holdings LLC for some $115 million, while its PuertoRican unit will be sold to Cooperativa de Seguros Multiples dePuerto Rico for $61 million, the U.K. insurance giant said.

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The sale of Royal & SunAlliance's Puerto Rican unit, whichposted $140 million in premiums last year, is expected to reducethe U.K. insurer's exposure to catastrophic storm risks, saidKelvin Edwards, managing director of Latin America & Caribbeanregion.

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"This represents another significant step in Royal &SunAlliance's strategic withdrawal from the hurricane-exposedterritories of the Caribbean," Mr. Edwards said. "It follows awithdrawal from the Bahamas and Bermuda at the end of 2002, thussignificantly reducing potential volatility in results. It willalso contribute further to the group's capital releaseprogram."

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For Cooperativa de Seguros M?ltiples, one of the principalproperty-casualty insurers in Puerto Rico, the deal represents apositive step not just for the company but for the entire PuertoRican economy.

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"At a moment when every day more Puerto Rican companies areacquired by foreign interests, this achievement of the Cooperativade Seguros M?ltiples represents a larger influence of Puerto Ricancapital in the economy of the island," said Ren? Campos Carbonell,president of the Cooperativa de Seguros M?ltiples.

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Separately, the New York-based Alleghany is acquiring the U.K.insurer's Royal Specialty Underwriting, its underwriting platformand access to its distribution channels, including those for excessand surplus property, umbrella and excess casualty, directors andofficers liability, and primary general liability insurance.

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Alleghany will also receive related unearned premium reserveportfolio of some $300 million as part of the transaction. The dealis expected to be completed by next month.

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Royal Specialty Underwriting--which has been operating as amanaging general agency, underwriting specialty insurance coveragefor some of the Royal & SunAlliance insurance carriers--hadposted $83 million in operating profit for the 2003 firstquarter.

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For Royal & SunAlliance, this sale represents a "significantstep" forward in the execution of its U.S. restructuring plan,announced last November.

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"The Royal Specialty Underwriting sale is a major milestone inthe success of our restructuring program," said Steve Mulready,chief executive officer at Royal & SunAlliance USA. Mr.Mulready noted that the sale "greatly improves our capital base andfurther strengthens our financial position in the U.S. In addition,it significantly reduces the volatility and catastrophe exposure ofour U.S. business."

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Mr. Mulready added that from a global perspective, thetransaction builds on the success of the initial public offering ofRoyal & SunAlliance's Australian and New Zealand businesseslast month and the sale of its U.K. health care and assistancebusiness last April. "This is exactly in line with the plan weannounced in November, and we believe the markets will reactaccordingly," he said.

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Both companies announced that current employees of RoyalSpecialty Underwriting will see minimal disruptions in their jobs,as its management and some 280 workers are expected to stay withthe subsidiary after the transaction is completed.

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