Direct Line May Cut 2,000 Jobs in Effort to Cut ExpensesJesse Westbrook
Direct Line Insurance Group Plc, the U.K.’s biggest home and motor insurer, said it may cut about 2,000 jobs as part of a plan to further reduce costs to 1 billion pounds ($1.5 billion) by next year.
Direct Line has begun discussing the potential job cuts with staff and groups representing employees, the Bromley, England-based company said in a statement today.
The insurer, which sold shares to the public in October, is cutting costs and seeking to sell more profitable policies amid falling premiums in the U.K., its biggest market, and lower returns on investments due to record-low interest rates. The company has been restructuring its businesses after losing money following the bailout of then-owner Royal Bank of Scotland Group Plc in 2008.
“This is another step in the ongoing transformation of Direct Line Group and an important part of our aim to regain a competitive edge,” Chief Executive Officer Paul Geddes said in the statement. “We have not made these proposed changes lightly and understand the impact they will have on our people.”
The shares rose 3.2 percent to 226 pence at 8:30 a.m. in London, bringing annual gains to 4.5 percent. Edinburgh-based RBS sold a 30 percent stake in the insurer in October and a further holding in March.
Direct Line had expenses of 1.13 billion pounds in 2011, prompting it to announce a target of 100 million pounds in cost cuts for 2014. It’s now targeting annual savings of 130 million pounds by next year compared with the 2011 cost base. The firm estimated restructuring costs at about 180 million pounds, taking into account earlier cost-saving plans.