UK retail general insurer Direct Line Insurance Group plc announced today that it intends to continue its business transformation plan and improve its operational efficiency, with further initiatives that include cutting staff numbers by 2,000.
The group said the redundancies will affect staff at its head office and in support functions, adding that consultations with staff and their representative bodies have begun. The redundancies are expected to be mitigated through redeployment and the group added that it will also do its utmost to assist those affected in seeking new employment opportunities.
A cost savings plan was announced by Direct Line Group in August 2012, which was designed to make gross annual cost savings of GBP100m in 2014, as compared to the cost base of GBP1,134m in 2011. The plan is expected to offset other anticipated increases in expenses, with the intention of keeping the company’s the cost base broadly flat between 2011 and 2014. The cost base for 2014 is now targeted to be around GBP1,000m, reflecting over twice the gross annual cost savings that were estimated last year, as well as an expected net reduction in annual costs of approximately GBP130m in comparison with the 2011 cost base.
Direct Line Group also stated that restructuring costs for its cost reduction initiatives, which include provisions for onerous property leases, are now expected to be approximately GBP180m. Of these restructuring costs, GBP30m was recognised in 2012 and GBP150m is expected to be recognised in 2013 or in 2014, when the phasing will be finalised. The costs for migrating the Group’s IT infrastructure are expected to remain unchanged at GBP100m.
Paul Geddes, Direct Line Group’s chief executive, commented:
“This is another step in the ongoing transformation of Direct Line Group and an important part of our aim to regain competitive edge. While we continue to invest in the business with the aim of winning in a market which is changing fast, it’s clear that we need to become more efficient to deliver the good service and value our customers expect. We have not made these proposed changes lightly and understand the impact they will have on our people. As we have done in the past, we will deal fairly and carefully with those impacted, and do all we can to support them through these changes.”