Insurer Sampo shaves staff, changes tack

The life insurance division of the Finnish financial group Sampo plans to trim its staff numbers further and, as a result, is looking at tweaking its business strategy in an effort to stay competitive in the highly concentrated market, Andrzej Sadkowski, the chief executive officer of Sampo Towarzystwo Ubezpieczeń na Życie, told the WBJ. "I think I won't shock anyone if I say we're going to be looking for efficiencies," Sadkowski said. "We're looking for economies of scale wherever we can. We let go roughly 100 agents over the past months." The life insurance market in Poland is largely governed by two key companies, state-owned PZU Życie, which controls more than half the market, and Commercial Union (CU), which controls about 18.8%. Smaller life insurance companies, such as Sampo, which has less than 1% of the insurance market, must fight for the leftovers, a process exacerbated by the poor economy. Sampo entered the market in 1999 when it bought the insurance businesses of Norwich Union, when the latter firm globally merged with CU. Insurance professionals note that there is a growing disinterest in life insurance among Poles for a variety of social and economic reasons. For Sampo, this means it's high time to rethink business strategies as the market has changed.

"We are trying to keep it simple because the market is difficult right now," Sadkowski said. "You can't get into a situation where you invest huge sums of money, and the prospective on the return is, 'well, maybe it's out there somewhere, but it's foggy.' " Sadkowski added that Sampo plans to move into smaller offices in Warsaw and that it is considering more layoffs. "What you can say is that it is not just Sampo, but many companies are going through a cooldown period right now," Sadkowski said. "(You must) decrease your cost base, rationalize your processes and rationalize your office head count." He declined to say how many more employees Sampo might cut. And as a result of having fewer employe-es and agents, Sadkowski said Sampo is shifting its strategy. But he said he would rather wait until the strategy is fully implemented before revealing details. "We've just presented our strategy to our shareholders for 2002 (and) 2003," he said. "All major points in that strategy were accepted. (But) I can't divulge what that strategy is because I'd be giving my competitors the opportunity to see what we're doing before we've actually implemented it." But even though the cost cuts are meant to make operations cheaper, they do not come without a cost, Sadkowski noted. "I'd like to grow at the market rate," he said of Sampo's 2002 targets. "But having gone through the revolution we've had inside the organization, I don't know if we're going to be able to do that."