Commercial Union's pounds 15bn merger with GA leaves 3,000 UK jobs in jeopardy

Commercial Union and General Accident, two of the UK's largest insurance companies, yesterday attempted to create one of the biggest insurers in Europe with a pounds 15bn merger that will lead to the loss of 3,000 British jobs.

Executives of both companies said the merger would give birth to a world- scale, international insurance group which would rank ninth in continental Europe by market value.

World-wide, 5,000 jobs will go in an effort to extract pounds 225m a year in cost savings after the merger is completed. The two companies yesterday said a one-off sum of pounds 300m would be spent in order to implement the savings.

The combined group, to be known by the three initials CGU, will have a world-wide staff of roughly 53,000. It will be the second biggest general insurer in the UK, after Royal & Sun Alliance, with a market share of 10 per cent, and the fifth biggest life insurer, holding more than 5 per cent of the market.

If shareholders approve the merger, Sir John Carter, chief executive of Commercial Union, will retire in June in favour of Bob Scott, chief executive of General Accident. Pehr Gyllenhammar, currently chairman of CU, will lead a board consisting of four directors from CU and three from GA.

Sir John yesterday said there were significant new opportunities in Europe as private savings and insurance policies were used to top up state protection. "Both companies believe that CGU will be much more strongly positioned to capitalise on these opportunities than either company could on its own," he said.

Unions yesterday gave a tentative welcome to the merger, calling the combined company a "positive force" which could survive in a competitive market. But they warned they would need firm assurances on compulsory redundancies.

Roger Lyons, general secretary of the Manufacturing, Science and Finance union, yesterday said: "The MSF will be seeking urgent consultations and agreement with both GA and CU to avoid any involuntary redundancies arising from this proposed merger.

"Financial sector mergers are threatening too many quality jobs and careers and so the MSF will be taking all necessary steps to safeguard the thousands of jobs in Scotland, York, Stevenage and other centres, while seeking to retain a realistic branch network across the UK."

Executives said they hoped to shed jobs among the 10 per cent of staff that left the companies each year. But they refused to rule out compulsory redundancies. Directors were unable to specify how many of the group's branches would disappear but said closures would be spread across the UK.

Industry observers expect many of the job losses to fall in London, while the group keeps slimmed-down operations in Glasgow, York, Dundee and Croydon.

The merger may lead to an improvement in job prospects in Perth, home of GA's head office, where the new group will house its combined general insurance arms, leading to an expansion of its Scottish staff. General insurance makes up the majority of new business going to both groups.

Mr Scott said the pounds 225m in cost savings would flow from shedding staff, cutting surplus property and by using the same IT systems. IT is the biggest element of capital expenditure at Commercial Union. "It is becoming increasingly complex and increasingly costly to establish IT systems. Merging these two companies will give us what we need to establish common systems to save on IT costs," Mr Scott said.

The City reacted coolly to the deal and sharply marked down the shares in both companies. CU slipped to 1103p from 1130p while GA dropped by 85 points to 1370p.

Outlook, page 21

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe