Shrinking costs for expanding Colonial
Colonial’s Australian Financial Services division has reported a profit of $212 million, up 38 per cent, for the year ending December 31, 1998.
Total new business sales of insurance and superannuation was $6.7 billion, an increase of 20 per cent on the 1997 figure.
The division covers the operations of banking, insurance and superannuation and was boosted with last year's takeover of Legal & General and Prudential.
Colonial chief executive officer Peter Smedley says the acquisitions are driving revenue growth while also providing economies of scale.
"The integration of the insurance and funds management business of Legal & General and Prudential has produced annualised cost savings in excess of $90 million by the end of 1998," he says.
The cost-to-income ratio for the division fell by 500 basis points to 57.9 per cent as existing operations were integrated. Smedley says the cost-to-income ratio in the last quarter of the financial year was running at less than 52 per cent as more savings were being achieved through integration.
The strong performer in the division was master trusts sales which were up 81 per cent. Colonial does not detail the sales of these products separately from superannuation and insurance sales which topped $1.4 billion last year.
The Australian Financial Services business is also reporting stronger growth in product cross-selling. Colonial defines cross-selling as a customer with two or more of their products. A total of 30 per cent of the client base now falls into this category. This has risen from a base of less than 5 per cent in December, 1995.
Colonial First State profits were up 55 per cent to $42 million for the December year end.
Funds under management have increased by $15.8 billion during 1998 to $42.3 billion. The group also has an additional $3.4 billion of funds under management in Tactical Global Management.
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