Royal Bank of Canada Considers Sale of U.S. Insurance Unit

Royal Bank of Canada is exploring a sale of its U.S. insurance business, Liberty Life Insurance Co., acquired for $650 million a decade ago, according to sources. The move is part of CEO Gordon Nixon's plans to reorganize the lender's U.S. operations, which have contributed to eight straight quarterly losses at the bank's international unit. Nixon has been cutting jobs and paring commercial lending in the region, and has said that everything is on the table to fix the U.S. consumer bank, including a sale, merger, or acquisition.

Key Takeaways:

• Royal Bank of Canada is considering the sale of its U.S. insurance unit, Liberty Life Insurance Co., which was acquired for $650 million a decade ago.
• The sale is expected to fetch less than $1 billion in the United States, according to sources.
• The U.S. business has contributed to eight straight quarterly losses at the bank's international unit.
• Royal Bank's U.S. insurance profit fell 5.3 per cent to $107 million in the fiscal second quarter, due in part to higher claims costs.
• The U.S. unit accounted for almost a third of the bank's insurance revenue of $1.33 billion in the period.
• Royal Bank's overall U.S. banking business contributed about a quarter of the lender's 2009 revenue of $29 billion.
• The lender has spent over $7 billion on U.S. acquisitions since 1998, including the purchases of Dain Rauscher Corp. and Centura Banks Inc. in 2001.
• Royal Bank's CEO, Gordon Nixon, has been reorganizing the U.S. operations, cutting over 1,000 jobs and paring commercial lending.
• Analyst Craig Fehr at Edward Jones & Co. in St. Louis says Royal Bank's strategy of fixing the U.S. business is on the right track.

Statistics:

• Royal Bank of Canada's U.S. insurance unit is expected to fetch less than $1 billion in a sale.
• The lender has spent over $7 billion on U.S. acquisitions since 1998.
• Royal Bank's U.S. insurance profit fell 5.3 per cent to $107 million in the fiscal second quarter.
• The U.S. unit accounted for almost a third of the bank's insurance revenue of $1.33 billion in the period.
• Royal Bank's overall U.S. banking business contributed about a quarter of the lender's 2009 revenue of $29 billion.

Sources:

• Bloomberg News
• Bloomberg News 2010
• Toronto Star