Outlook: GRE proves that consolidation isn't the only way

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The Independent Online
Phew! That's a relief. For a moment there it looked as if all that fevered stock market speculation about consolidation in financial services was going to come to nought. Now someone's finally gone and done one. No matter that it was dull, boring and predictable. Commercial Union and General Accident have taken the plunge and others must surely follow.

Assuming their respective bosses don't do a Richard Sykes, 3,000 people will find themselves out of a job and those fine old names will disappear behind the suitably anonymous sounding initials, CGU. Well anything's better than Commercial Accident, isn't it? As a sop to the tartan lobby, general insurance is to be based in General Accident's home town of Perth, but the head office comes to London as usual - so much more handy for the globe trotting aspirations of the new model CGU executive.

It's easy to be cynical. To be fair, it's also hard to fault the industrial logic of this merger. The moment Sun Alliance and Royal Insurance got together, the pressure was on Commercial Union and General Accident to respond. CU is known to have flirted with alternatives, notably the collective insurance interests of BAT Industries, but for reasons never explained, those talks fell through at the eleventh hour. General Accident seemed the natural partner after that. Its chief executive, Bob Scott, a no nonsense Australian, also provides a solution to the succession problem at Commercial Union.

But it doesn't have to be this way. Round at Guardian Royal Exchange, John Robins doggedly sticks to ploughing an independent furrow, refusing to contemplate all the many offers he must have had to merge or be taken over. Judging by yesterday's reported 40 per cent leap in profits and a promised pounds 189m buyback, the approach is beginning to work like a dream. Under Mr Robins, Guardian Royal has been almost wholly reconstructed. Rather than trying to be all things to all people, GRE has played to its strengths, growing rapidly in direct insurance, private health insurance and various other specialist areas of the market.

The rush to consolidation isn't everyone's cup of tea, nor, as Mr Robins is proving, is it necessarily the best route to corporate success.