Royal & Sun Alliance (RSA) has confirmed it is in talks to sell the UK life insurance operation it closed to new business almost two years ago.

The company, now focused on general insurance and its More Than brand, is thought to have attracted a £900 million approach from Resolution Life.

Resolution, led by General Electric (GE)'s former head of insurance Clive Cowdery, was set up earlier this year with the intention of managing life assurance funds closed to new business.

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

Horsham-based RSA said it was involved in discussions but did not reveal the identity of the bidder or the price being offered.

It said in a statement: "These discussions are at an early stage and the amounts referred to in the Press are purely speculative. The group is reviewing options for its UK life insurance operations with respect to releasing capital."

It has been reported Resolution had offered RSA £750 million in cash and a further £150 million in deferred payments. In order to protect policyholders, any deal would need to be cleared by the Financial Services Authority.

Arguments over the scale of potential misselling liabilities are likely to play a key part in the negotiations.

Since closing its funds to new business during 2001 and 2002, RSA said it would free up capital by selling the operation or through a securitisation.

In 2003, it raised £960 million through a rights issue and took steps to focus on its UK, Scandinavian and Canadian operations.

Most of the company's recent difficulties stemmed from the United States, where it recorded an underwriting loss of £651 million in 2003.

In the UK, RSA, which has roughly 550,000 with-profit policies, exceeded targets for performance improvements with the general insurance division achieving underwriting profits of £21 million in 2003.

Last month, the insurer reported a 30 per cent rise in operating profits to £100 million but said more remained to be done on its restructuring programme.

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

Tuesday June 22, 2004