Beleaguered insurer to move away from broker-sold personal lines
Royal & SunAlliance is set to move away from broker-sold personal lines products in an attempt to raise profits and investor confidence.
R&SA finance director Julian Hance said: "We want to move away from mid-market, price-differentiated business. In general, on the personal lines, that means away from intermediated and towards direct.
Hance admitted that the company's plunging share price was "extremely frustrating". It fell 21.54% on 8 August, because of disappointing interim results, the announcement that 1,200 jobs will be cut and the admission that the group needs more money.
The interim results revealed that R&SA's 11 September losses have risen by £66m to £275m, operating profits fell 18% to £301m in the first half of the year and the dividend of 4p was less than the 5.5p most analysts had expected.
With the stock dipping to its lowest level in 17 years, big shareholders were reported to be demanding the head of Hance's boss, chief executive Bob Mendelsohn.
Hance said he was not worried about his job.
"When you start doing that, your eye goes off the ball. I've been too busy trying to manage the position."
He claimed the stock was trading at "very considerably less than tangible asset value", showing the market was influenced by short-sellers and hedge fund activity - people betting the company will be forced into a cash call.
"We are extremely frustrated and feel for the shareholders," he said.
Mendelsohn said if markets stayed low, he would need to raise more money to support underwriting.
A rights issue is one option, but Hance said the group was looking to close less successful lines of business, sell off more non-core operations and use reinsurance or quota share arrangements.
It is closing its life operation to all new business and plans to reinsure part of the remaining life book that will release £100m for general insurance.
As a result, 1,200 jobs will go, mostly at three life offices - Bristol, which will close, Liverpool and Horsham in Sussex.
But the efficiency of the company's book is improving. Its combined ratio for the first half was 104.6%.
If the new developments over the World Trade Centre loss are excluded it would achieve Mendelsohn's target of 103% .
Overall, the group made a £319m loss before tax on ordinary activities in the six months to the end of June.
Its general business result for the period was £232m, down from £335m last year.
Estimates of the deficit in R&SA's staff pension fund range from £400m to £750m. The fund showed a deficit of £128m at the end of last year.
Ratings agency Fitch on Monday affirmed its A- long-term rating for Royal&SunAlliance.