RBC seeks to sell US life insurance arm

Royal Bank of Canada is seeking a buyer for a bulk of its US life-insurance arm a decade after it acquired the unit as part of an ambitious strategy to sell financial services in the world’s largest economy.

The bank has been working with Goldman Sachs for several months on selling the unit, which trades as RBC Insurance but is legally registered as Liberty Life Insurance, according to people familiar with the matter.

RBC, Canada’s largest bank by assets, said on Tuesday that it would not comment on speculation about the future of the insurance unit, based in South Carolina. Goldman Sachs also declined to comment.

Apart from a small travel insurance business, Liberty makes up all of RBC Insurance. The potential sale of the unit was first reported by Bloomberg.

People familiar with the sector said that RBC could struggle to attract interest in the business, as companies that had previously been buyers of individual life insurance businesses were now scaling back in that area.

RBC has said that its focus in the US is on expanding its capital markets and wealth management business. The bank is already among the world’s top 20 money managers and almost three-quarters of its capital markets business is outside Canada.

Gordon Nixon, chief executive, told the Financial Times last year that there was “no hurry because there are going to be lots of opportunities and lots of restructuring in the financial services industry over the next five years.

“So if you do something, you want to make sure it’s very sensible and very strategic.”

RBC bought Liberty in 2000 as part of a drive to expand south of the border across a broad range of activities, including retail banking, wealth management and capital markets.

The US contributed 22 per cent of RBC’s total revenues but less than 3 per cent of net income in the three months to April 30.

Its retail banking operations, centred in the south-eastern US, have been through several restructurings in a bid to staunch losses.

The insurance arm, which has assets of about $4bn and employs some 200 full-time agents, has been too small to make an impact. Revenues totalled $733m in the six months to April 30, up from $549m a year earlier. The unit has gone through several chief executives under RBC’s ownership.

Like Canada’s four other biggest banks, RBC has been relatively unscathed by the financial crisis.