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Guardian Assurance looks to expand its range

There was no quiet introduction to the top job at Guardian Assurance for Tom Jackson when he took over the reigns of the business at the start of the year.

Monday, May 18th 1998, 12:00AM

by Philip Macalister

There was no quiet introduction to the top job at Guardian Assurance for Tom Jackson when he took over the reigns of the business at the start of the year.
First up the company was hotly bidding to buy Norwich Union's life insurance and funds management businesses, while at the same time it had to prepare itself for the abolition of the superannuation surcharge which, once gone, would potentially have a big impact on tax-paid funds which make up a large chunk of the company's business.
Both of these were significant events that would have a significant bearing on the future of the company and both were to a degree inter-related.
The Norwich business was attractive to Guardian for two reasons; the most obvious is that it was the acquisition of market share, which is vital in such a highly competitive market as New Zealand. Secondly Norwich had a range of unit trusts - something that is missing from Guardian's fund line up and something which is vitally important to growth, as unit trusts become more favoured with the abolition of the surcharge.
The importance of unit trusts is borne out in the latest fund flow figures which show that in the March quarter that insurance bonds continue to haemorrhage and superannuation funds joined bonds for the first time in three years and experienced outflows.
Unit trusts are product area showing the most growth.
While Guardian bid competitively for Norwich's business the outcome was a case of history repeating itself. Just as happened several years ago when Oceanic's insurance bond business was put up for sale, Royal & SunAlliance won the bidding and Guardian was runner-up.
Jackson says that since Guardian missed out on Norwich many people ask him if it's the end of the line for the company in New Zealand.
His answer to that is an empathic no. Although the company has been unable to grow through the acquisition route, the organic growth option is still open.
Guardian has had a good track record over the past year or so of successfully developing new product and getting funds in the door.
According to IPAC Securities Guardian had the fifth highest inflows in the year ending March 31, pulling in $64.2 million. In its other businesses Guardian increased its regular premium business 18.1 per cent to $10.2 million in the year to December 31, while its single premium business was down 1.8 per cent to $110.7 million.
An example of its fund gathering activities are the Wise bond series which is proving popular with investors who want to protect their capital, while sharing in the higher returns offered by the sharemarket.
To date about $50 million has been invested in the funds, which exceeds management's expectations.
Jackson acknowledges removal of the surcharge will impact on some product lines, however he doesn't think it will be the end of the road for tax-paid products.
"Tax-paid products are useful simple, stress-free types of products," he says, and there will always be demand for them.
However, he is aware of the growing popularity of unit trusts and says Guardian will introduce a range of new funds later this year to complement its current product range.
"I believe going forward unit trusts will continue to get the greatest share of the market."
Guardian's unit trust range hasn't yet been finalised, but it's likely to be five funds initially, some of those will mirror some of its existing funds.
Back to the question about Guardian's future. Jackson puts it into perspective by saying the New Zealand business is currently performing well and paying healthy dividends to its listed parent company in the United Kingdom.
In the year ending December 31, Guardian reported a tax-paid profit of $18.9 million compared to $22.1 million the previous year. It paid its shareholders a dividend of $16 million this year, and $8.2 million in 1996.
This year's dividend was bolstered by the inclusion of part of the staff super fund surplus (which was shared with staff).
Jackson says the parent company is doing well at present so it isn't focused on New Zealand.
However, in the United Kingdom Guardian is the odd one out at the moment, as all the big listed insurers have become bigger by merger activity. For example Royal merged with Sun Alliance to create Royal & SunAlliance which has a market capitalisation of more than £12,136 million, Commercial Union and General Accident have got together to create a company which will have a combined market capitalisation of £13,700 million, Prudential is big already at £17,722 and then there is Guardian Assurance with a capitalisation of £4 million.
The question being asked in England is when will Guardian come into play, which begs the question what happens in New Zealand?
Until something happens, it's business as usual for Jackson and his team based in Takapuna.
Guardian Assurance is in someways a mixture of the quaint past and the latest in management styles. On one hand it is wedded, and proud to be wedded, to its 136 person tied agency force.
"We are unashamedly, and will stay, an adviser lead company."
On the other it has adopted many management practices which are currently in vogue.
For instance its mission statement is focussed on providing customers with excellent service and value for money, its shareholders are to get an attractive profit and return on capital, and employees have to get the opportunities and encouragement to fulfil their potential.
For Jackson these are important issues and not just warm fuzzy marketing material.
On the customer service front Guardian says if it can't solve a telephone inquiry immediately, it promises to get back to that customer either that day, if the call is a morning one, or within 24 hours. Replies to letters are promised within three days of being received.
Likewise it has developed a number of innovative products, such as the Wise bonds, and is committed to further improving its product range, and producing good returns.
Also Jackson wants to make sure customers are buying products which met their needs; "we don't want to write business for the sake of writing business."
Jackson is big on internal staff issues, and culture that he attributes to his keen interest in sport.
"Sport teaches you a thing called teamwork," he says. "Teamwork allows people to work together to achieve a common goal."
He sees management playing an important role as team leaders and says its actions beget the outcomes and type of organisation Guardian is.
Also he wants the company to treat its staff fairly and equally so they perform. An example of this is an incentive scheme that has been established.
"We had a lot of input into how the scheme was put together," he says. "We said (to London) that a schemes couldn't be just for senior executives, it had to be across the company."
Jackson says that happened and staff now have an incentive scheme which is benchmarked to how much value has been added to the company.
He describes Guardian as having a family culture, one where there are good relationships between people, and he could take any of the staff home to have a Sunday roast.
While a company listed in England may own Guardian Assurance, there's nothing more traditional than the Sunday roast in New Zealand.
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