R&SA's new chief executive has a clean slate and a clear strategy. But to lift return on capital he will have to improve claims performance fast, says Andy Cook

So what is the future for Royal & SunAlliance (R&SA) in the UK now that its well-respected chief executive Paul Spencer is free to tend his garden?

In all honesty, it seems the impact will be minimal. Duncan Boyle is highly thought of by his peers and his technical knowledge is reputed to be second to none.

Spencer, a former finance director, was more of a numbers man. So there will be some tinkering with senior management to reflect the different skills of the two bosses.

But, overall, strategy will be little changed. And Boyle inherits a clear strategy: 10% return on capital and a focus on claims.

He also inherits a clean slate. R&SA decided to take a major asbestosis hit on its 2001 balance sheet. Many others have yet to bite the bullet. Boyle's problem is how to raise performance from 6-7% return on capital (the company's underlying performance in 2001) to 10%.

Or in terms of combined ratio, turn 104.7% into 102% or thereabouts.

R&SA is pinning its hopes on improving claims performance.

Group chief executive Bob Mendelsohn is evangelic about claims. "Handle a claim well and you have a customer for life," is his mantra.

To do this with maximum control, 85% of claims will be handled by internal staff, including loss adjusters. The problem is that employing loss adjusters, rather than contracting them, hits the balance sheet. The theory is that your claims are handled more efficiently, bringing a medium to long-term gain. But bringing PCS on to the balance sheet is immediate.

So Boyle's biggest challenge is clear: turn the PCS cost into a balance sheet benefit soon - before the stock market loses its remaining patience with the company.

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