Royal & SunAlliance (RSA) is to raise £850 million from the sale of the UK life insurance operation it closed to new business two years ago.

The proposed deal with a new company set up to run closed funds will enable Horsham-based RSA to focus on its general insurance business and the More Than brand.

Resolution Life Group - led by General Electric's former head of insurance Clive Cowdery - said it hoped to follow the purchase of RSA with other acquisitions.

Mr Cowdery already has a sound knowledge of RSA from his time at General Electric, which considered buying the insurance provider four years ago.

Resolution said the RSA life fund would provide its business with "immediate scale" as it had £24 billion of funds under management and 2.4 million policies.

The deal will involve Resolution paying £750 million in cash and £100 million in shares.

Since closing its life funds to new business during 2001 and 2002, RSA has been looking to free up capital by selling the operation.

The move is part of a strategy that has also resulted in it raising £960 million from a rights issue last year as it took steps to focus on UK, Scandinavian and Canadian operations.

Most of the company's recent difficulties have stemmed from the United States, where RSA recorded an underwriting loss of £651 million last year, partly because of provisions to cover workers' compensation.

Chief executive Andy Haste said: "The transaction represents a clean exit from the UK life business and provides certainty for our shareholders.

"This is a good deal for the group and clear evidence of our commitment to deliver on our strategy.

"For staff and policyholders, the sale is to a company whose core business focus is the management of closed life operations."

The agreement still requires the approval of shareholders.

Last month RSA, which employs about 1,500 workers in Horsham, reported a 30 per cent rise in operating profits to £100 million but said more restructuring remained to be done.

Cost-cutting resulted in about 1,000 UK job losses in September and job-cutting continued in the first quarter of 2004.

Monday August 02, 2004