RSA's fund manager up for sale

INSURANCE giant Royal & SunAlliance is believed have put its fund management business up for auction. The sale is part of a drive to raise cash to expand its core activities. The business is expected to carry a £600m price tag.

Investment bank sources say Royal's financial adviser, Goldman Sachs, has drawn up a sale memorandum in an attempt to create interest in the fund management operation. The business, which was restructured to make disposal easier, has £64bn of funds under management - two-thirds of which are run from its London headquarters.

Royal would not comment on the likely sale, but a spokesman said the company had made no secret that it is exploring all ways to raise money to boost its general insurance operations.

Chief executive Bob Mendelsohn has told investors that he intends to raise about £800m this year through a string of disposals. He did not identify which parts of the business he intended to sell, but the group's fund management arm is now believed to be top of the agenda. A successful sale could satisfy most of Mendelsohn's fund-raising target.

He is keen for the company to take advantage of rising premium rates in the aftermath of 11 September. The terrorist attacks will cost Royal more than £200m in claims, but to capitalise on rising premiums and take on substantial amounts of new business, it needs to increase its reserves.

Mendelsohn has said he would like Royal to underwrite about £2bn of extra premiums this year - an increase of about a quarter. Royal has already sold its life insurance businesses in Spain and Canada and is still hoping to find a buyer for its British life operation.