Barclays PE backs insurance buyout

The mid-market private equity firm has backed the £147m buyout of the healthcare and assistance insurance business of Royal & SunAlliance.

UK private equity firm Barclays Private Equity has agreed terms with UK insurance giant Royal & SunAlliance (R&SA) over a deal to acquire the insurer's healthcare insurance business.


Barclays is backing Tim Ablett and Steve Wood, founder and current managing director respectively of the business, set up by Ablett in 1997. Ablett, who is leaving his role as UK managing director of Groupama Insurances, will be the CEO of Oxfordway, the company formed to lead the acquisition.


Under the terms of the agreement Royal & SunAlliance will sell its healthcare insurance operations and its subsidiaries, FirstAssist Group and R&SA Healthcare Administration, to Oxfordway. These businesses carry out private medical insurance, personal accident insurance, hospital cash plan insurance and travel insurance services, as well as providing a range of related assistance services.


The new company will handle insurance and assistance services worth £300m. The company has net assets of £9m and reported profits last year of £45m. The company employs over 1200 staff. Oxfordway has agreed to pay £147m for the business, with Bank of Scotland providing senior debt. Barclays Private Equity is investing £90m of equity in the deal.


On completion, Royal & SunAlliance will continue to underwrite the business transacted by the new company under transitional arrangements that will continue for up to 18 months after completion. In parallel, a major reinsurer will provide reinsurance for the existing liabilities and future underwriting risk of Healthcare & Assistance with effect from completion.


This is the first part of a disposal programme undertaken by Royal & SunAlliance to resolve funding shortages brought on by the lengthy decline in the stock market. The company is also planning to list its Australian and New Zealand operations, which it is hoped will generate proceeds of around US$1bn.