First-half slide at Royal & Sun Alliance

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The Independent Online
Royal & Sun Alliance, the newly merged UK composite insurer, yesterday reported a slide in first-half pre-tax profits, but added that it was on target to achieve full integration of the two companies by 1998.

The company said it expected to cut pounds 175m in annual costs by then, which it would achieve by making up to 5,000 staff redundant, mostly in the UK.

Royal & Sun said pro forma interim operating profits were pounds 450m, down from pounds 514m separately achieved by both companies at the same time last year. It blamed the dip in profits on a pounds 94m rise in world-wide weather losses.

It added that it expected household and motor premiums to stabilise and even rise slightly by the end of this year, bringing to an end almost two years of steady falls in the cost of insurance. However, commercial lines, based on individual pricing, remain a keenly contested area of the market.

Nick Bunker, insurance analyst at ABN Amro Hoare Govett, said: "These figures are significantly better than expectations. The UK commercial lines account has been much better than I thought."

Roger Taylor, executive deputy chairman at Royal & Sun, said the two companies had made rapid progress in integrating the two groups, creating the UK's biggest insurer with a pounds 5.4bn capitalisation.

Richard Gamble, group chief executive, said the merger would result in more widely-spread profit sources, with the group less dependent on any one area of the world or any one product line.

General insurance in the UK will contribute pounds 110m total annual cost savings already announced, with a further pounds 25m coming from the life side.

"There will obviously be major savings on accommodation," Mr Gamble said. "There will be a reduction in marketing costs, while information technology development will be a big item, where both companies are at the moment developing [separate] IT systems."

The company has announced that it will close 94 branch offices with the loss of around 300 jobs. A further 1,000 jobs will go at head offices in Liverpool and Horsham, near London.

But Mr Gamble said it was not possible to predict exactly where other job losses would come from, beyond the fact that they would be nationwide. The total cost of restructuring will be about pounds 175m.

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