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Commercial banks

CGU Boosts Savings Target, Defends Societe Generale Stake

Strategic Insights

— 1 min read

CGU, the UK's largest composite insurer, has substantially increased the target for savings that will flow from the merger between Commercial Union and General Accident, citing additional cost savings in its UK general insurance business. The estimated annualised cost savings are expected to rise from £270m to £325m by next year, with no changes to the staff reduction target of 6,000, two-thirds of which has been achieved. The company's pre-tax profit before integration costs rose 5% to £420m in the six months to June 30, with a 12% decline in UK general insurance premiums and a £69m improvement in the underwriting result.

Key Takeaways:

  • CGU has substantially increased the target for savings from the merger between Commercial Union and General Accident, citing additional cost savings in its UK general insurance business.
  • The estimated annualised cost savings are expected to rise from £270m to £325m by next year, representing an increase of £55m.
  • CGU's staff reduction target remains unchanged at 6,000, with two-thirds of the reductions already achieved.
  • The company's pre-tax profit before integration costs rose 5% to £420m in the six months to June 30.
  • UK general insurance premiums fell 12% to £1.37bn, while the group lost business after increasing its rates.
  • Statutory life and pensions profits rose to £250m from £226m a year earlier.
  • Achieved profits in the life and pensions business rose 18% on a pre-tax basis to £98m after new business sales rose 23%.
  • Analysts welcomed the strong life and pensions performance, which saw it contribute 53% of total premiums.

Statistics:

  • Estimated annualised cost savings: £270m → £325m by next year
  • Staff reduction target: 6,000
  • Pre-tax profit before integration costs: £420m (6 months to June 30)
  • UK general insurance premiums: £1.37bn (down 12%)
  • Statutory life and pensions profits: £250m (up from £226m)
  • Achieved profits in life and pensions business: £98m (up 18% on pre-tax basis)
  • New business sales: up 23%

Sources:

  • "CGU clears PIB deal hurdle" by Lex in _The Financial Times_, August 18, 1999, page 16.

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