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R&SA ready to sell its life and fund business for£2bn

Royal & Sun Alliance is understood to be gearing up to start offering its life and fund management business for sale to rivals, with a£2bn price tag.

The outcome of the review of its life business is expected next week, according to a senior industry source. This report will then be used as a sale document to offer the business to potential buyers.

The sale is expected to be a limited auction with only five bidders. The auction process is likely to begin in August.

Aegon is thought likely to be a major player in the bidding. It is known that talks between the companies have already taken place.

The review is expected to show a need to strengthen the life business&#39s solvency substantially. R&SA has a significant exposure to guaranteed annuities. In 1999, R&SA had to reserve£448m for guarantees and its Sun Alliance & London fund had£616m of guarantees.

But the fund management arm, which has£40bn under management, and R&SA&#39s strengths in the group protection market should prove attractive.

Money Marketing revealed in March that investment bankers had been called in to start valuing the life business as a separate operation to the general side. R&SA then confirmed that a review of the life business was taking place.

Cazalet Financial Consult-ing principal Ned Cazalet says: “The sensible plan would be to sell the business in one go. It would give the purchaser a mass of business. An existing player would get economies of scale, particularly in the stakeholder market. But the guaranteed annuity liabilities are not insignificant.”

R&SA spokesman Paul Atkinson says: “We do not comment on speculation and we are not going to comment further on the review until it is more appropriate. The next time that an update is likely is when our half-year results come out in August. We are looking at a range of options, of which a sale is one.”

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