Royal & SunAlliance reports higher savings

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REUTERS - Royal & SunAlliance, the insurance giant formed from the merger of Royal Insurance and Sun Alliance, yesterday said annual savings from its 1996 tie-up were likely to reach pounds 235m by the end of this year, up sharply from the pounds 175m originally predicted.

An additional 300 jobs, mostly overseas, are to go on top of the 5,000 initially forecast as part of the integration of the two businesses.

While expected savings from the merger have increased, so too have the one-off costs of achieving them, up from pounds 201m to pounds 265m, the increase being charged against 1997 earnings. The group reaffirmed its commitment to keeping a tight control of its capital base as it announced it would return another pounds 145m to shareholders.

The group has already promised to buy back up to 5 per cent of its shares and completed just over 2 per cent last year at a cost of pounds 153m. News of the increased savings accompanied disappointing figures for 1997 which sent the shares sharply lower in early trading. The shares ended the day down 12p at 741p. While pre-tax operating profits for the 12 months rose more than 14 per cent to pounds 809m, they fell well short of analysts' forecasts of pounds 869m-pounds 900m. The dividend was increased by 10.5 per cent to 21p while the net asset value per share was up 16 per cent to 464p.

The shortfall was largely down to a rise in the level of reserves in its international division following a review of businesses in Italy, Australia and the Caribbean.