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Sovereign looks to change its business

It’s been a steady but solid six months for financial services company Sovereign – but just holding ground is not on the company's agenda.

Friday, February 21st 2003, 6:45AM

by Sue Allen

It has been a difficult year for insurance companies as investment income plummeted, but Sovereign’s managing director, Simon Swanson, says that means the time is right to shake up its business model.

So, expect to see banking products and credit cards among a range of new products available through Sovereign later in the year.

Figures released for the six months ended 31 December 2002, show Sovereign’s appraisal value was up 6.7% ($32 million), a performance Swanson describes as "sound" given the current difficult environment.

In the company’s "plus" basket was home-mortgage lending, which was up 68% ($551 million) on the same period last year.

Annual premium income from life, health and other specialist insurance also rose 4%, ($520 million) on the previous six months.

In the "minus" basket was regular premium investment business, which was down 16% ($14 million), and single premium business down 34%, ($71 million).

Total funds under management were also down 4% ($5.1 billion) on the previous six months.

Swanson says given the current tough investment market, he is "happy" with the company’s performance, but is looking for improvement.

He sees challenges to the insurance sector coming from a continued downturn in investment income as well as a reinsurance market which, having been hit by a series of big claims, is putting pressure on insurance companies "to restrict cover and claims".

Companies are also having to come to terms with "fairly poor underwriting globally", and a rise in the popularity of short-term investments which is making it hard for companies to raise capital.

But, he says, recent brand research shows Sovereign is "nicely placed" in the market to take advantage of the growing reliance consumers are placing on advisers.

"The research shows we are seen as an organisation which supports advisors and, as products proliferate, people are turning to advisers to pick their way through them."

Swanson says Sovereign’s growing home-lending business is a reflection of how the company is making good use of its market position.

So broadening the company’s portfolio of products to include credit cards and banking products seems like a natural progression.

"We are building on the advice issue. People will look to advisers to get help with finances, and the advisers need the products to provide the solutions."

« Tax relief - finallySovereign takes regulation bull by the horns »

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