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Last Updated: Friday, 30 July, 2004, 06:49 GMT 07:49 UK
RSA quits life insurance business
Royal & Sun Alliance office
Insurer Royal & Sun Alliance (RSA) is to sell its UK life insurance division for 850m ($1.54bn).

The group said it was selling the unit to Resolution Life, for 750m cash and 100m in shares.

The news comes two years after RSA closed its life operations to new business in order to focus on its general insurance operations.

"This is a good deal... and clear evidence of our commitment to deliver on our strategy," RSA said.

The sale is expected to be completed by the end of October, subject to approval from the UK Financial Services Authority and RSA shareholders.

RSA added that the sale represented "a clean exit" from the UK life insurance business, subject to a maximum potential liability of 76m for any future mis-selling liabilities.

Hard times

As a result of the sale about 120 RSA staff will transfer to Resolution, the group said.

The decision to sell the business was taken as a result of tough conditions in the life insurance market, with companies hit hard by a slump in share prices which affected their ability to underwrite new and existing policies.

Meanwhile, tighter regulations and a surge in the number of claims in the US market have taken their toll, while RSA itself has been battered by asbestos related claims.

The problems have already prompted RSA to cut about 20,000 staff and sell new shares - worth 960m - in an effort to shore up its balance sheets and boost its profits.

The group's restructuring drive seems to be working, as in May it unveiled a 30% rise in profits to 100m.

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