The U.K.’s Royal & SunAlliance Group announced its nine month results today (see companion article in “International” section) and revealed plans to significantly restructure it U.S. operations.
The plan calls for establishing two divisions, “focusing on mainstream property & casualty business insurance and standard and nonstandard personal insurance.” The company also indicated that it expects to sell “several non-core US businesses that do not align with the company’s long-term goals.”
“Our actions today are required to place Royal & SunAlliance USA in a stronger financial position in the short term and for the future,” stated Steve Mulready, R&SA USA president and CEO. “Like most other insurers, we’ve seen our capital base erode and our financial ratings suffer, due to a wide range of issues including falling equity prices and the impact of the World Trade Center tragedy. After an exhaustive business and capital review, we have arrived at a strategy that we believe will generate the capital necessary to support significant profitable growth in 2003 and beyond.”
R&SA USA said that its Business Insurance Division will “focus on the center of the commercial P&C marketplace, offering differentiation through product design and service in distinct market segments. This division’s two largest businesses will be Risk Management & Global, which provides customized program service and risk management solutions to larger commercial clients, and its Mid-Market Segments, which target mid-size commercial customers in selected industries. The division also will include Grocers Insurance, DPIC, Marsh Advantage America, Asia Operations, Marine, Reverse Flow and ProFin.”
The company’s Personal Insurance Division will consist of its Standard businesses, including Automobile, Homeowners, Umbrella, Boat and Motorhome, as well as its Nonstandard Auto businesses.
The “non-core” activities R&SA USA plans to exit are mainly “other commercial insurance businesses that no longer align with its mainstream P&C focus.” It said it has “begun the sale process for its RSUI, Artis, Affinity Programs, Financial Services and REMi businesses,” and has also decided to discontinue its World Assurance business.
“Our disposal actions should have minimal impact on the customers and distribution systems of our businesses going forward,” Mulready indicated. “As we exit these six businesses, we will reduce the capital dependency associated with them, significantly contributing to the capital program of our worldwide organization.”
The restructuring will also result in the loss of 725 staff positions as well as an additional 800 positions “as part of the overall streamlining, including 400 in infrastructure support for the exited businesses.” The bulletin added that, “The reductions will take place nationwide over the next several months as part of an ongoing evaluation of operations. Consequently, details about specific locations being affected are not available.”
R&SA USA reported underlying net written premium of $2.259 billion for the first three quarters compared to $2.538 billion in the same period last year. “The 2002 net written premium reflects the impact of a 10% quota share reinsurance agreement,” it added.
The combined ratio for U.S. operations “improved to 109.2% for the first nine months of 2002 vs. 116.6% for the same period last year,” said the announcement. It noted that the results reflected losses associated with the WTC attacks, which had “increased the reported combined ratio by 4.5 and 11.1 points in 2002 and 2001, respectively.”
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