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

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

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

Royal Specialty Underwriting, its Atlanta-based excess and surplus underwriting subsidiary, will be sold off to Alleghany Insurance Holdings LLC for some $115 million, while its Puerto Rican unit will be sold to Cooperativa de Seguros Multiples de Puerto Rico for $61 million, the U.K. insurance giant said.

The sale of Royal & SunAlliance's Puerto Rican unit, which posted $140 million in premiums last year, is expected to reduce the U.K. insurer's exposure to catastrophic storm risks, said Kelvin Edwards, managing director of Latin America & Caribbean region.

"This represents another significant step in Royal & SunAlliance's strategic withdrawal from the hurricane-exposed territories of the Caribbean," Mr. Edwards said. "It follows a withdrawal from the Bahamas and Bermuda at the end of 2002, thus significantly reducing potential volatility in results. It will also contribute further to the group's capital release program."

For Cooperativa de Seguros M?ltiples, one of the principal property-casualty insurers in Puerto Rico, the deal represents a positive step not just for the company but for the entire Puerto Rican economy.

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

Separately, the New York-based Alleghany is acquiring the U.K. insurer's Royal Specialty Underwriting, its 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.

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

Royal Specialty Underwriting--which has been operating as a managing general agency, underwriting specialty insurance coverage for some of the Royal & SunAlliance insurance carriers--had posted $83 million in operating profit for the 2003 first quarter.

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

"The Royal Specialty Underwriting sale is a major milestone in the 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 and further strengthens our financial position in the U.S. In addition, it significantly reduces the volatility and catastrophe exposure of our U.S. business."

Mr. Mulready added that from a global perspective, the transaction builds on the success of the initial public offering of Royal & SunAlliance's Australian and New Zealand businesses last month and the sale of its U.K. health care and assistance business last April. "This is exactly in line with the plan we announced in November, and we believe the markets will react accordingly," he said.

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