Profits slump at Swinton after ‘add-on’ sales halted

SWINTON, the high street insurer, has announced a sharp fall in profits and revenue after it cut back on an aggressive sales strategy, which led to it being fined more than £7m by regulators in July.

Financial results for 2012 – which don’t include the fine – show the group’s turnover falling 8% to £301.4m, but operating profits diving 43% from £55.6m to £31.7m. Pre-tax profits were £28.7m, compared with £52.1m in 2011.

It said profits were hit by reduced volumes of monthly-adds on products, higher marketing spend and expenditure on external consultancy advice.

The insurer, which has 4,500 staff nationwide and more than 470 branches, said it is consulting with employees on 120 job losses – half in Halifax and 10 in Manchester – but hoped to avoid compulsory redundancies.

In addition it plans to focus on bigger physical branches and willclose more than 150 smaller units, At the end of December 2012 it had 576 branches and it wants to cut this to 400 by the end of 2014 via a branch merger programme.

Chief executive Christophe Bardet said Swinton has a strong platform for growth.

“In 2012, we took significant steps to improve customer outcomes. We acted quickly to mitigate the effects of increased competition through more marketing investment and by strengthening our leadership team.

“We established a long-term growth strategy focused on improving customer outcomes and deepening customer relationships. We renewed our commitment to our unique multi-channel model and stronger and bigger branches. And we started an ambitious £60m investment programme to help us to realise the full potential of the group over the next three to five years.”

As well as the £7m fine the Manchester-based group was told by the Financial Conduct Authority that it must pay back more than £11m to customers affected by the mis-selling scandal.

The insurer’s sales staff sold products such as personal accident or home emergency cover to existing customers.

 In a withering assessment the FCA said Swinton had not acted in customers’ best interests and adopted a strategy “geared to boosting profit at each stage of the process – design, launch and sale.”