AXA Sun Life, which recently took over Guardian Royal Exchange (GRE), has decided to retain GRE's motor and general insurance business in the Republic but is reviewing its life insurance arm.
GRE's motor and general insurance operations are the largest part of its Irish business employing the majority of its 800 staff. Some 70 people are understood to work in GRE's life section. A decision on whether it will be sold is expected in the coming months. Mr Aidan Cassells, operations director of GRE/PMPA, said the group's workforce was relieved by AXA's decision and was looking forward to benefiting from being part of one of the largest insurance groups in the world. Mr Cassells said the decision would not lead to any job losses on the general insurance side.
"Our first objective is to resolve what is going to happen to the life business. A range of options are currently under review and a decision should be forthcoming by the end of the third quarter," he said.
AXA Sun Life also announced the sale of GRE's British life insurance business to the Dutch group Aegon for €1.05 billion (£830 million). Group chief executive, Mr Mark Wood, said it had decided to keep Sun Life's PPP Healthcare business after a strong performance in the first half. Sun Life reported stronger-than-expected operating profits for the first six months of 1999, showing a 32 per cent increase to £162.6 million sterling (€245.92 million). This result includes two months contribution from GRE, which it bought this year for £3.4 billion sterling. During the six months, GRE's Irish operation achieved a 20 per cent increase in premium income to £135.7 million up from £113.2 million last year. Mr Cassells said he was very happy with the group's performance this year and was confident of a strong full-year out-turn. Sun Life said the GRE British sale price included a pre-sale dividend of £57 million sterling. The price was above the £600 million sterling figure most analysts had pencilled in. Sun Life said it was retaining GRE's investment management operation but would ultimately close this with 200 job losses.
Net assets of the businesses being sold were £147 million and they produced pre-tax profit of £67 million sterling last year.
Sun Life said Guardian Royal Exchange's group businesses had contributed £21.6 million sterling in profit in the two months since they were integrated into Sun Life, after a £3.45 billion sterling takeover earlier this year.
But it was Sun Life's prediction that its cost savings forecast from its merger with GRE were conservative that was seen as pleasing investors most.
Its comments echo those of Britain's largest composite insurer, CGU, which said on Wednesday it had raised its cost savings target for its own merger of Commercial Union and General Accident by 30 per cent.
The potential for cost savings has been the driving force behind a recent spate of consolidation in British general insurance.
Sun Life has increased its annual savings target once, lifting it to £65 million sterling from £50 million on May 10th. Mr Wood said Sun Life would formally review the figures at the end of the year.
In the 10 weeks since taking over GRE, he said Sun Life had already closed six personal insurance distribution channels, four commercial distribution channels and was integrating the claims systems.
"We're now beginning to see the impact of that work and, on the back of that experience, we're saying that the estimates for savings are looking increasingly conservative." Sun Life said an improved underwriting performance from its own general insurance operations and strong growth in both profits and new business from its life and pensions operations drove the result higher.
Underlying earnings per share rose 26 per cent to 12.6p, while the dividend was lifted 11.4 per cent to 4.9p per share, which was in line with expectations.
