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Sun Life may sell off GRE business

SUN LIFE and Provincial Holdings, which last month catapulted itself into third place in the UK general insurance league with the pounds 3.4bn takeover of Guardian Royal Exchange, said yesterday that it is considering selling GRE's life business.

The operation contributed pounds 435m of premium income last year and employs 1,200 staff.

Sun Life, which yesterday posted its offer document to GRE shareholders, has also increased its estimate of annual savings likely to flow from the integration of the GRE businesses from pounds 50m to pounds 55m.

Mark Wood, Sun Life chief executive, said yesterday the group would not be integrating GRE's life activities with its existing life and pensions operations, and has instead placed the business in strategic review.

Sun Life - quoted in London but majority owned by AXA, the French insurance giant - pre-sold GRE's US and German businesses ahead of last month's agreed takeover to Liberty Mutual and AXA Colonia respectively.

Mr Wood said that, while a sale was currently not the most likely outcome, all options were being considered. It is hoped to complete the review in five months. He said: "We have had a chance to consider the options. But at the end of the review we will have a clear view as to how we hope to move forward."

The group is also reviewing its options for GRE's Irish business, which is the biggest general insurer in Ireland. Some observers said it was the most attractive part of the entire GRE operation. The Irish business has total annual premium income of pounds 220m.

Mr Wood said the group believed that by improving the underwriting performance in the GRE businesses to the levels achieved by Sun Life, the group would be able to improve returns and meet the demanding hurdle rates set by AXA. He said the GRE deal would boost earnings even if general insurance rates remained flat for the next two years.

"This is a turnaround story," he said. "What we believe the deal enables us to do is to achieve economies of scale and compete at ever decreasing levels of margins."

Sun Life has now completed the integration of the Sun Life and AXA Equity & Law businesses following the 1997 merger. The group said yesterday that 90 per cent of the original objectives had been met and cost savings were now projected to be running at pounds 47m a year - pounds 10m more than planned.

Year's operating profits for the group as a whole were up by 14 per cent to pounds 247.1m, with cost savings and a strong performance on the life and asset management sides making up for weaker general insurance; this suffered a pounds 35m underwriting loss. The previous year has been restated pro-forma as if Equity & Law had been included for the entire year.

Pre-tax, the group reported profits down from pounds 363.3m to pounds 325.6m, a fall of 11 per cent. The total dividend for the year is 13.5p a share, an increase of 15 per cent.