THE merger of General Accident (GA) and Commercial Union (CU) is starting on a dull note as far as trading is concerned, with bad weather causing a sharp increase in the new group's underwriting losses.
The pro forma first-quarter profits from the merged group CGU more than halved from #217m to #103m. Meanwhile, General insurance premium income was flat at #2355m, and life premiums rose by 13% to #1762m.
Both sides said that the merger planning was well advanced and integration would start as soon as all the regulatory approvals had been received.
Approvals from the European Commission and some American states have been given, and CGU expects all the necessary approvals will be through by its end of June target.
Both companies hope to move swiftly to integrate their world-wide operations, although it will take two years for the full annual savings of at least #225m to
be realised.
Upper management posts have been settled and this process is being extended to the second-line positions.
Staff reductions of 5000 across a global workforce of 53,000 have been indicated but CGU is ''nowhere near'' taking decisions on how this will be implemented, according to chief executive Bob Scott.
He said that there would have to be consultations with various staff bodies but he expected natural wastage over two years would account for most of the job losses.
''We are quite a friendly organisation . . . and some people will elect to take early retirement,'' he said.
GA's first-quarter operating profits fell 45% to #63m as underwriting losses increased by 145% to #103m.
The group was caught badly by the spectacular ice storms which took place in Quebec and eastern Ontario.
These cost the group #30m. There were also heavy floods seen in Australia. UK losses were no worse than last year, when the group was hit by windstorm claims.
CU's profits were down by 56% at #40m after doubled weather claims.
The bad news will continue in the second quarter because of the Easter floods, which cost CU #35m and GA #20m. Otherwise, the first quarter saw a large number of commercial fire claims.
Motor premiums are going up 5%, and the weather losses are likely to result in higher household premiums.
Insurance markets generally remain competitive.
The companies are looking to their life and pension operations for growth, and they were not disappointed in the first quarter.
GA Life, which is based in York, achieved a 12% increase in profits to #36m, drawing continuing benefits from the Provident Mutual purchase in 1996. Sales were up 31% and market share expanded.
CU presented a similar picture, with a 22% uplift in profits
to #71m. France was the top
performer.
The company claims growing success in the broker market outside London, based on service and technology.
Comment Page 25
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article