Norwich Union, the UK's largest life insurer, announced plans to raise £1.7bn through the securitisation of its equity release and protection books yesterday, as it laid out plans to increase its market share by more than 50 per cent over the next few years.
Speaking to analysts at its UK life headquarters in York, Gary Withers, the UK chief executive, painted a bullish outlook for the UK life and pensions sector, saying that the group would use the funds from the securitisation to capitalise on the growth in the sector.
About £1.5bn will be raised from the securitisation of the company's lifetime mortgage book, the largest ever securitisation of an equity release portfolio. The remaining £200m will be raised by the securitisation of the company's new protection business.
The company plans to increase its market share from its current 12 per cent of the UK life and pensions market to as much as 20 per cent by the end of the decade.
As well as announcing its growth plans, Mr Withers also said the company planned to slash costs by a further £130m a year by 2007.
Having already made cost savings of £140m in 2003, driven by the group's strategy to move an increasing number of jobs to India, Mr Withers said the company plans to achieve savings of a further £130m a year within the next three years.
He said the anticipated that savings, which would be achieved through further offshoring and better use of technology, would be £32m in 2004, rising to £76m next year and £108m in 2006, before hitting £130m in 2007.
The savings would be less in the early years due to one-off costs incurred by the cuts, including retraining and redundancy payments, Mr Withers said. Aviva, which owns Norwich Union, has announced more than 5,000 UK job cuts over the past 18 months, as it has moved more jobs offshore and closed down its insurance broking division, Hill House Hammond.
In its presentation, the company said it believed the main part of the current recovery in the UK life and pensions sector would take place in 2006 and 2007. On average, over the next three years, however, it said it believed the market would grow at about 8 per cent a year.
Speaking yesterday, Peter Hales, the sales and marketing director for Norwich Union Life, said: "I think the main engine for growth is going to be the investment market, where we expect to see about 40 per cent growth in the next three years. Confidence is slowly returning to the market, and for companies like ours, there is a flight to quality returning."
Mr Hales added that he believes the pension market will pick up once the pensions simplification measures have been introduced after April 2006.
Shares in Aviva rose more than 1 per cent on the news yesterday, before closing up 1.5p at 568p, giving the company a market value of £12.77bn.