RSA walks away from life policies

ROYAL & SunAlliance has pulled out of the life assurance business after agreeing an £850m sale with privately-owned Resolution Life Group.

More than two million bond, pension and endowment policies will transfer to RLG, which has been set up specifically to hoover up and manage closed funds. RSA will get £750m in cash and £100m of preference shares.

It has been looking to ditch the troubled life arm, home to a £24bn with-profits fund, for three years after seeing its finances ravaged by the bear market.

Chief executive Andy Haste wants to focus exclusively on general insurance such as motor and home policies. He said: 'This is clear evidence of our commitment to deliver on our strategy.'

A sale was possible only after RSA struck a deal with City watchdog the Financial Services Authority over potential liabilities at the division.

It has set aside £76m for outstanding mis-selling claims that may yet arise from savers holding life policies.

RSA has faced a stream of criticism over its handling of the life business. It closed the with-profits fund to new business and has starved it of capital to shore up other divisions.

RLG, run by former GE Insurance Holdings chief Clive Cowdery, now faces a fight to convince policyholders it is not in the business just to make money for shareholders. Chairman Sir Brian Williamson said the group would manage the fund in an 'orderly and stable way'.