Sun Alliance faces 'internal stock-taking': New chief executive plans thorough review for low-inflation environment
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Your support makes all the difference.THE NEW chief executive of Sun Alliance will undertake a wide- ranging review of its business to ensure it is able to make the transition to the expected low-inflation environment of the 1990s and beyond.
Roger Taylor, the Sun Alliance director who will take over from Sir Roger Neville in July, said he wanted to perform 'an internal stock-taking'. He said: 'We must make sure that our efforts are focused in the right direction against a background of the changed world economic position.'
This will involve trying to ensure a consistent profit on its underwriting, rather than relying on investment income. The British insurance industry has traded at an underwriting loss for most of the past 20 years, but has been bailed out by the high investment returns during an inflationary era.
Sun Alliance is already making greater use of actuaries and technology to improve its understanding of the risks it is willing to insure. 'We are not going to survive and build our own balance sheet unless we are generating underwriting profits,' Mr Taylor said.
Sun Alliance, the largest UK general insurer with non-life premium income of pounds 3.4bn last year, was the best-regarded of the listed composites in the 1980s. But its image has been tarnished by heavy losses on domestic mortgage indemnity and its reliance on the UK.
Mr Taylor's review is certain to take in Swinton Insurance, the 700- branch chain of insurance advisers that has faced tough competition from Direct Line and similar operations. He suggested that Swinton, which lost pounds 4m last year, will adapt to take account of the increased willingness of customers to arrange insurance over the telephone.
Sun Alliance also wants to expand its savings and investment business, which offers more stable earnings than general insurance.
Sun Alliance reported pre-tax profits of pounds 221.7m, a recovery from a loss of pounds 129.6m in 1992. A final dividend of 9.5p - the first rise since the first half of 1991 - lifted the total by 3.5 per cent to a better-than-expected 14.75p a share. Its shares rose 2p to 316p, having touched 321p.
Life profits increased sharply to pounds 96m thanks to last year's acquisition of the Danish insurer Hafnia. The UK life business contributed pounds 55m. Sun Alliance is not making any special provision to cover the cost of compensating investors who transferred their retirement savings into a personal pension plan.
The group made a pounds 3m underwriting profit on UK personal business. Mortgage indemnity losses halved to pounds 89m. The commercial account incurred a reduced loss of pounds 136m ( pounds 248m), held back by the pounds 23m cost of the Bishopsgate bomb and a pounds 39m loss on marine insurance.
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