Britannic signals dividend rethink

INSURER Britannic has signalled shareholders should brace for lower dividends as it seeks to build a war chest. The company is also considering a merger. 'We would look at a partner that can enable the businesses to grow and prosper and create value for our shareholders,' chairman Harold Cottom added.

The group is holding its final payout at last year's 36.7p a share, bringing the full dividend to 55.2p, from 54p last time. It will hold the first-half dividend for 2002 at last year's level, and will review payouts after that.

Britannic is following in the footsteps of giant rival CGNU, which is holding its dividend and investing the cash to fund growth, and Royal & SunAlliance, which also wants to retain excess capital.

Britannic's dividend growth is underpinned by £1bn of surplus, or orphan assets. The management is to look at the most tax effective way of distributing that money.

Cottom said Britannic could acquire a company or be taken over by a larger player. He added that Britannic could still operate under its current ownership. He declined to say if Britannic had identified suitable merger partners, but said it was already carrying out work in this area. 'This is a process that is at the beginning rather than at the end,' he said.

The insurer's operating profit fell to £145.5m last year, from £174.5m a year earlier. New business sales suffered after Britannic, whose chief executive Danny O'Neil resigned earlier this year, closed its door-to-door sales force last May to cut costs.

The company said 250 posts would go at its Glasgow office, although it will create an extra 150 jobs in Wythall, near Birmingham. It was set to save £82m a year from the restructuring.

But the reduction in the workforce meant first-half sales at its life assurance business would show no growth on the year-earlier period. Britannic said it expected sales in 2003 to match their level of 2000.