Promina prepares for market debut

Shares in insurance group Promina have been keenly received by investors as Royal & Sun Alliance prepares to complete the world's biggest Initial Public Offering (IPO) this year.

Royal & Sun, Britain's second largest insurer, is offloading its Australian and New Zealand units in a bid to raise cash after a torrid year.

Promina shares will begin trading on the Australian stock market on Monday.

The company said the offering had been three to four times oversubscribed, and would value Promina at A$1.9bn ($1.2bn ; £760m).

Replenshing the coffers

Promina is the third largest general insurer in Australia and the second largest in New Zealand.

The IPO will deliver a major component of the actions we are taking to reshape the group and to strengthen our capital position

Andy Haste, RSA chief executive

Its businesses include AAMI, Australia's largest vehicle insurer, and the Australian Pensioners Insurance Agency.

Royal & Sun Alliance said the sale was part of its restructuring, which has already seen it slash jobs and close some businesses to counter poor stock markets, the high costs of September 11 and asbestos-related claims.

Chief executive Andy Haste said: "The IPO will deliver a major component of the actions we are taking to reshape the group and to strengthen our capital position."

The insurer admitted in March that it faced a £700m shortfall in the capital it needs to balance potential pay-out and said on Sunday that the Promina sale would raise about £662m, after allowing for costs and the repayment of debt.

Royal & Sun has lost 75% of its stock market value in the past year, and cut up to 12,000 jobs as it struggles to raise cash to pay claims.

Big hit

Institutional investors are paying A$1.80 for each of their shares, while private investors will pay A$1.70 and NZ$1.90 in New Zealand.

Traders said they expect the shares to trade slightly above this on their market debut on Monday.

"I think it'll trade at a modest premium," said Tony Jackson, an analyst at Macquarie Equities.

Promina's chief executive Michael Wilkins said he was "very pleased" with the price and the level of interest, both domestically and internationally.

The IPO will be Australia's largest since 1998.