As part of a scheduled meeting with investors and analysts the U.K. ‘s Royal & Sun Alliance Insurance Group plc has issued a bulletin detailing how it plans to “drive profitable performance” and how it plans to achieve its new targets.
R&SA hopes to realize a further £130 million ($240 million) of annualized expense savings, which, it said represents approximately 9 percent of the 2005 cost base, to be delivered by mid 2008. “These savings will be driven in part by a reduction in headcount of 1,550, including 1,000 in the UK,” said the announcement. The other cuts include 350 in Scandinavia, 160 in International units and 40 in its Corporate Center.
R&SA said it has “consulted fully with its union partners in the UK and Scandinavia and will continue to work closely with them over the next two years to minimize the number of compulsory redundancies. The costs of realizing the expense savings of around £100 million ($1.842 million) will be funded by the expected savings over the next two years and will not adversely impact profitability.”
The bulletin referred to R&SA’s 2003 plan to restructure the Group, which it said has now been achieved. It is now concentrated on “businesses in the UK, International and Scandinavia with strong market positions, market leading underwriting and claims expertise, and best in class technology. The Group target of achieving £270 million [$497.2 million] of annualized expense savings by the end of 2006 has now been delivered ahead of schedule.” The Company announced new targets for these core regions including: “annual double digit growth in International, doubling premiums in the Baltics and growing its UK affinity business by more than 50 percent.”
Group CEO Andy Haste commented, who has largely been credited with turning R&SA around, commented: “We have a clear strategy of running general insurance businesses with strong market positions to deliver sustainable profitable performance. The decision to reduce headcount is always a difficult one but necessary to ensure we remain as competitive as possible and to continue to deliver on our objective of sustainable profitable performance.
Over the last three years we have built an excellent platform for growth with exciting opportunities. We have developed a strong track record of delivery and we will be pursuing these new opportunities with the same drive, energy and ambition as we have applied to the restructuring of the business. We are confident that we will deliver on our plans and that we will strengthen our position as one of the best general insurers.”
“In the UK, R&SA is the second largest commercial insurer and the third largest personal motor and household insurer,” the bulletin continued. “While the market remains competitive, actions taken over the last three years provide the business with a strong foundation for growth. Premiums at the end of the first quarter 2006 were 7 percent down on prior year reflecting the Group’s commitment to maintaining technical price. During the first five months of the year, R&SA has entered a number of significant new partnerships, which when fully on stream will bring annualized premium of £200 million [$368.4 million]. Through a combination of these new partnerships, continued growth in and expansion in targeted commercial segments and channels, the UK business is building momentum and will go into 2007 in a good position.”
R&SA said its “objective by 2010 is to be number one in the broker market by choice, reputation, capability and profitability, to strengthen its number three retail position and grow the affinity business by more than 50 percent.”
In the International sector, which “accounts for approximately 25 percent of the Core Group’s premiums and earnings and has a strong balance of businesses in emerging and mature markets, R&SA is targeting continued annual double premium digit growth. This comprises around 10 percent from mature markets and 15 percent from emerging markets.”
Specifically R&SA is looking to double its premiums in Latin America by 2010 and to continue to drive strong double digit growth from Johnson, its direct operation in Canada. As part of these plans, the Group announced that it has signed a purchase agreement to acquire the personal lines business of Shillington Insurance Brokers and its subsidiary, which it said “will add approximately £20 million [$36.83 million] of premium to the Johnson business.”
R&SA also discussed its leading position in Scandinavia, where it has seen the market grow steadily over the last 10 years. “In the first quarter of 2006, the Group’s Scandinavian operations delivered underlying premium growth of 4 percent, said the bulletin. “The Group’s expectation is that it will continue to deliver low single digit underlying premium growth for the remainder of 2006. R&SA’s longer term objectives in the region are to strengthen its number three market positions in Denmark and Sweden and double premiums in the Baltics by 2010.”
R&SA noted that the Baltics – Latvia, Lithuania and Estonia – “are attractive emerging markets where the Group already has number one positions and delivered premium growth of 44 percent in the first quarter of 2006. As part of its Baltic expansion plan, R&SA’s Scandinavian subsidiary (Codan) announced the buy out of the minority interests in its Latvian and Lithuanian businesses for £53 million [$97.6 million] as well as its intention to enter the Estonian market in early 2007.”
Codan has also announced the retirement of Jens Erik Christensen, its CEO, who will retire at the end of this year. He has been with the Group for 13 years and been CEO of Codan since 2003. Haste stated: “Jens Erik has made a great contribution to the Group and led Codan successfully through an important phase of its development, delivering consistently strong results.”
R&SA also announced that Codan will be undertaking a buy back of shares in the market through a continuous buy back process of up to a maximum of £100 million ($1.842 million). R&SA does not intend to participate in the buy back.
Was this article valuable?
Here are more articles you may enjoy.