Royal & Sun Alliance is to lose a tenth of its UK workforce by June 2008 as part of plans to cut 1,550 jobs across its business. Around 1,000 jobs will go in the UK with the remainder to come from RSA's Scandinavian operations.
The insurer said yesterday it needed to cut staff numbers in order to generate annual cost savings of £130m a year. Presenting a first-quarter trading update, Andy Haste, RSA's chief executive, said: "The decision is necessary to ensure we remain as competitive as possible and continue to deliver on our objective of sustainable profitable performance."
Premium income at RSA's UK business was down 7 per cent on 2005 during the first quarter this year as the insurer was hit by price competition in the general insurance markets.
A spokesman for the group said: "What customers want is the best-value insurance package and to give them what they want, we have to cut our costs."
RSA is currently the UK's second largest commercial insurer and the third largest home and motor insurer. Its strategic objective for the next three years is to move to number one in the first of these sectors, while consolidating its retail position.
Mr Haste said that the reductions would be spread across the insurer's 24 UK offices. The 1,000 UK job losses will be split equally between the broker, retail and administrative functions.
The insurer said its UK growth plans rested on the development of partnerships with affinity groups and improvements from More Than, its direct insurance business, which has performed strongly over the past 12 months.
Mr Haste also pledged to improve the performance of RSA's international business. The insurer is to expand its operations in Canada and Latin America and has also made two small acquisitions in Scandinavia.
However, Nick Johnson, an insurance analyst at Numis Securities, said that while he was positive about RSA's prospects, the insurer faced a difficult short-term market environment. He said: "Pressure on underwriting margins from a competitive rating environment in some of RSA's key markets may prevent the benefits of today's cost saving and growth targets reaching earnings in the near term."
RSA said that it hoped to keep the number of compulsory redundancies to a minimum, but Amicus, the biggest trade union at the insurer, said it was "disappointed" by the announcement. Two years ago, RSA faced criticism from trades unions after announcing that it would move 1,100 UK jobs to call centres in Asia.Reuse content