Royal and Sun Alliance nabs Norwich

Royal and Sun Alliance (RSA), as expected, has nabbed Norwich Union's life and fund management businesses. What was not expected though was the price - $153.4 million.

Sunday, March 8th 1998, 12:00AM

Royal and Sun Alliance (RSA), as expected, has nabbed Norwich Union's life and fund management businesses. What was not expected though was the price - $153.4 million.
After Norwich announced last year that it was reviewing the two businesses commentators placed a price tag of between $100 million and $120 million on the assets.
The main reason for the price achieved, which Royal and Sun Alliance managing director Tim Sole describes as a good deal, is that Norwich had a large amount of free assets which were subject to a covenant.

Besides buying the business the purchaser also had to pay for these free assets.
The free assets result from a move by Norwich's United Kingdom parent company to, in 1993, demutualise and domesticate its foreign operations. That is the business in New Zealand became a stand-alone operation instead of a branch office.
That involved the parent company injecting $72 million into the new company. Of that money $37 million went into shareholders' funds and $35 million went into policyholders' funds.
Consequently free assets rose to more than $100 million and they have continued to grow. The covenant restricted the New Zealand company paying dividends that would reduce free assets below the $100 million mark.
The sale, which was announced on Friday, moves RSA from being a middle sized player to a big one, Sole says, as it now has $1.5 billion under management.
Before the acquisition RSA managed in total about $800 million. While it picks up Norwich's $1 billion, only $770 of that will it retain.
The remaining $300 million is money Norwich managed for its associated fire and general business State Insurance.
Norwich keeps State and will make new arrangements for management of this $300 million.
On the risk side RSA jumps one place (over Sovereign) in market share to become the fifth largest player in New Zealand with about 8 per cent.
RSA has about 150,000 policies compared to Norwich's 65,000.
Good Returns understands Guardian Assurance was the underbidder.
Why Norwich was so attractive to Royal and Sun Alliance

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