Outlook: GRE appoints an heir apparent

IT DOESN'T pay to leave the management succession open to debate, as Sir Richard Greenbury, chairman of Marks & Spencer is discovering to his cost. John Robins, chief executive of Guardian Royal Exchange, is therefore establishing a likely successor in good time for his own planned retirement towards the end of next year, or so it appears.

The choice is an interesting and a bold one. Peter Owen, who will be eased into the job first by taking over as group executive director for the UK and Ireland, is both an outsider, having joined the group only last February, and a comparative newcomer to the insurance industry.

Mr Owen's background is in airlines - first as operations director at British Airways and later as chief executive of Aer Lingus. He joined GRE this year following the acquisition of the PPP healthcare group, where he was chief executive. All this should stand him in good stead for the challenges that lie ahead in insurance markets - they seem to become more competitive by the minute.

Whether GRE will remain independent long enough for Mr Owen to get to the hot seat is another matter. GRE is the subject of more or less persistent takeover speculation, and with good reason. It is the smallest of the big four general insurers in the FTSE 100 index by a long way, and the only one not to have gone through a big consolidating merger in the last two years. The other three - Allied Zurich, Royal & Sun Alliance, and CGU - are all the product of recent mergers, while at just pounds 2.6bn, GRE's market value is only a third of the next largest player.

So far, Mr Robins has turned his back on these no-premium mergers. GRE has been deliberately positioned for an independent future and Mr Robins believes passionately that it is capable of a achieving one. He's invested heavily in telephone selling and information technology, he's taken GRE into the fast growth healthcare market by acquiring PPP, the largest private medical insurer in Britain after Bupa, with 33 per cent of the market, and he's made an acquisition in the US.

All this is expected to be underlined today with the announcement of ambitious plans for a new range of health and life insurance products. At the same time there are new moves to attack the cost base and improve the profitability of the life business. The old with-profits life fund will be closed and all new business conducted through a recapitalised fund which will be 100 per cent owned by shareholders.

Nobody can accuse GRE of not trying, but is it going to be enough? In the City there is still scepticism; this is an overcapitalised market, both in the UK and the US, many point out. Low inflation and improvements in technology and information, mean that companies can predict their claims costs with a high degree of accuracy.

That, combined with the problem of overcapacity, is leading to an overcrowded and intensely competitive market. Even the big boys with their economies of scale are finding the going exceptionally tough, as results from Royal & Sun Alliance and CGU demonstrate. This is obviously good news for consumers; for investors, the position is a more worrying one. Still, if further consolidation is to be the order of the day, GRE can only be a winner.