THE Scottish insurer, General Accident, has said it is increasingly looking to conclude alliances with some of Britain's biggest financial institutions to grow in the fiercely competitive personal insurance business.
Although well capitalised, General Accident (GA) said it would prefer to use the cash available to its personal, motor and house hold business for organic growth rather than expanding by acquisition.
"Anything which brings a lot of scale into the business brings a lot of pain," said GA's UK general manager for personal insurance, Mr Bob Newton.
Mr Newton said he doubted whether buying another insurer would add much to the £900 million sterling personal business GA already extracts from its existing British operations.
The company believes joint ventures like that between insurance rival Commercial Union and bank Abbey National are one of the best ways for it to grow.
By doing this, it can also implement another stated strategy balancing the higher risk elements of its portfolio with a bigger source of more stable income, according to Mr Newton.
New alliances could see GA acting as insurer, reinsurer, joint venture partner or administrative services provider. The agreements would last five years or longer. The personal lines market in Britain is an area where many insurers are struggling to underwrite profitably.
Intense competition after a period of exceptionally strong market conditions has slashed motor and household insurance rates and there is little sign yet of an industry wide upturn.
GA is the only leading composite to have raised personal motor rates this year by 4 per cent in April. The increase is holding with an 80 to 90 per cent retention rate for new business over the last 12 months still intact, Mr Newton said.
GA could raise rates by as much again before the year is out, he added, although there are no plans to do so as yet.
The professed commitment to organic growth dampens speculation GA might be poised to make a big general insurance purchase in Britain and thus trim some of the excess capacity within the industry.
"The weak are going to have to do something," he said. But he thinks GA's position is different. It has already slashed staff numbers, shedding 2,500 employees over three years from 1990. For this reason, he does not see GA getting involved in a merger like that between Royal Insurance and Sun Alliance. They plan to shed 5,000 jobs in the wake of their impending union.
