Colonial In $1bn Rebound

Colonial Group is on track to join the ranks of Australia's stock exchange-listed insurance companies next year after a dramatic improvement in its investment performance boosted it to a $726 million net profit for 1995.

The result compared with a $261 million loss in 1994 and was boosted by the contribution from its takeover of the State Bank of NSW last year.

Colonial Mutual is now the sixth largest financial institution in Australia, ranked behind the four big banks and the AMP Society.

This remarkable improvement was mainly due to the turnaround in bond and equity markets in 1995 after the poor year suffered by most insurance and funds management groups in 1994.

This brought a lift in interest income to $1.9 billion (up from $325 million in 1994) while investments appreciated by $1.1 billion compared with a fall of $1 billion in 1994.

But while the markets did their bit, Colonial's managing director Mr Peter Smedley also attributed the turnaround to the effects of the major restructuring process commenced in mid-1993.

This has resulted in the group moving away from selling traditional superannuation and life insurance products and its re-emergence as a broadly based "relevant and competitive Australian-based international financial services group". It now offers superannuation, banking, funds management, data administration and consulting services.

"The group can now offer a full range of financial services across a broad range of distribution channels. This places us in a very strong position to consolidate and build long-term customer relationships across a wide range of financial services products," Mr Smedley said.

A strategic cross-selling program between the State Bank of NSW and other members of the group commenced last year and the early signs are encouraging, Mr Smedley observed. The group's financial advisers are selling State Bank home loans and the bank has produced 9 per cent of the group's home insurance business.

At the end of 1995 assets under management, including retail trusts, were $33.4 billion, $2 billion more than a year earlier. Reserves have been boosted from $1.5 billion to $2 billion and, at 37 per cent of capital guaranteed liabilities (compared with 29 per cent in 1994), are among the highest in the life insurance industry.

Sales of new products turned around spectacularly with a 48 per cent lift in retail sales, excluding banking products. Total group new business increased $1.1 billion to $1.8 billion.

On the life insurance front, premiums grew at the slower rate of 8 per cent to $1.16 billion last year but policy cancellations have dropped from $893 million to $599 million. Mr Smedley said that results for the first two months of this year have shown similar improvements on both the sales and policy cancellation fronts.

The UK operation has been streamlined with the number of branches reduced from 70 to 10 in the space of a little more than a year without loss of market share. The Asian footprint has been broadened with sales in Asia jumping by 26 per cent, ranging from an 80 per cent lift in Indonesia to an 8 per cent rise in the Philippines.