RSA sale speculation mounts

Speculation has resurfaced that British-based Royal & SunAlliance Insurance Group is trying to sell its New Zealand subsidiary. The latest rumour is that at least one potential buyer is taking a look close at the Kiwi company.

However, RSA’s New Zealand chief executive, Alan Bradley, says he won’t comment on rumours.

Talk of a sale has been rife since February, and has been partly fuelled by the UK company’s financial difficulties, which have seen its earnings and share price nosedive this year. The company has publicly said it wants to sell off non-core assets to raise capital, including the profitable New Zealand operation. It's has sold its funds management business in the UK so it can concentrate on its core fire and general operations.

Buying RSA New Zealand would be a great way for a bank or a small insurer to acquire a substantial market presence, one industry player said. "It has a good product range and has done a reasonable job of penetrating the adviser market," he said.

"It would be an opportunity for someone like ING/ANZ to become a mainstream insurer, or for someone like State Insurance to round out its book."

But talk of a sale has spooked advisers, with one complaining that the uncertainty has affected RSA NZ’s performance in recent months, causing the company to lose its edge.

"There’s lots of excellent people there but they seem to have become side-tracked and are losing their way."

However, one industry source dismissed talk of a sale, saying RSA NZ’s ownership was unlikely to change in the near future.

The sticking point in any sale appears to be that RSA wanted to sell its Australasian operations as job lot, however no buyer was keen to pick up the complete business at the price being asked. That leads to the likelihood that RSA, which includes Guardian Trust, will be broken up.

If RSA UK does decide to reveal its intentions for the Kiwi company an announcement might come in early November, when the UK parent is due to announce its third quarter profit.

The profit announcement will come just three weeks after RSA UK fired its chief executive Bob Mendelsohn. His departure came after RSA UK’s share price slumped 69% between January and mid-September.