1,200 redundancies as Royal & Sun Alliance decides to exit UK life market
Royal & Sun Alliance (R&SA) is to close its UK life operation to new business. However, the business is to remain open to service the needs of existing life and pensions customers.
Although the move will result in 1,200 job losses, closing its books to new life business is not necessarily a sign the business is in trouble, according to Paul Casey, marketing analyst at GE Frankona RE.
He said: 'Closing to new business is a strategic decision, and R&SA will have their reasons. If you look back there are a number of businesses ongoing with existing customers that have closed their books to new business for various reasons. It is down to the core strategy of the business.'
R&SA said the decision reflects the company's strategy of focusing its resources in the general insurance market, which it sees as offering the best opportunities for long-term profit and growth. The provider has recently been involved in selling off a number of assets in order to plough £800m into its core business.
Most recently this involved the sale of R&SA's group risk business, which has a 17% share of the UK market, to Canada Life for £60m.
The announcement was made as the insurer released its half-year results. Duncan Boyle, UK chief executive at R&SA, said: 'Our decision to close our UK life operations to new business makes strategic sense. In a market that is experiencing increasing margin and regulatory pressures, investment volatility and, we believe, significant consolidation in the future, substantial capital would have been needed to develop our UK life new business operations going forward.'
Despite R&SA's move, Casey said the life market remains fairly healthy: 'In comparison to the general insurance market, life business is relatively unscathed by 11 September. One effect is people now have renewed focus on having protection products in place, giving increased interest in both individual life and business protection.'
He added that it is likely more insurers will be attracted to the general insurance market: 'There may be a number of new entrants or re-entrants to the general insurance market, purely because it is entering a harder market as premiums have come back to a realistic level. The focus was on writing business for market share, but now there is a re-focus on having the right price for the business and the right risks on the books. This is attractive to a number of companies,' he said.
