Royal & SunAlliance keeps quiet on sale rumours

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Royal & SunAlliance's mortgage insurance business, which has just secured a deal with Westpac, is keeping mum on its future.

Wednesday, January 29th 2003, 9:34PM

by Jenny Ruth

Royal & SunAlliance is keeping mum on whether its mortgage insurance business is up for sale ahead of the group's A$2 billion share float.

The Australian Financial Review (AFR) reports the mortgage insurance business is on the block and is worth up to about A$300 million (NZ$322.4 million) and that advisers Goldman Sachs and Macquarie Bank have issued an information memorandum to interested parties.

Matthew Kilburn, who runs the New Zealand branch, says all he knows is that his company is in the middle of an IPO (initial public offer).

His counterpart in Australia is just as forthcoming: "We’re in the middle of an IPO and that’s it. We’re not going to comment about anything in the paper," says Martin Henry.

But if there’s any truth in the Australian paper’s story, the New Zealand mortgage insurance business should be worth considerably more now than it was before last September when it won the tender for Westpac Bank’s business.

Most banks insist that borrowers of more than 80% of the value of a residential property insure the additional amount, usually though a one-off upfront fee to companies such as RSA’s subsidiary or its two rivals PMI and GE Capital.

In New Zealand, National Bank and ASB Bank take care of their own insurance, so snaring Westpac‘s business was a coup for RSA

"It was certainly a good tender to win and it certainly increases our market share quite significantly," Kilburn says.

Other than Westpac, his company’s New Zealand clients are branches of the Australian securitisers, AMS, Origin and Interstar.

Kilburn says his firm now ranks behind PMI here "by some distance," but is probably ahead of GE.

The AFR says US firms Radian and MGIC are possible buyers and Australia’s St George Bank is an outside possibility. It rules out PMI and GE because of competition concerns.

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