BAT beefs up financial arm for faster growth

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BAT yesterday promised faster-than-expected growth in its financial services businesses after the consolidation of its asset management, general and life insurance operations into one division.

Sandy Leitch, chief executive of the newly formed British American Financial Services arm, said the division had targeted an extra 20 per cent growth above previous expectations over the next five years.

Bafs, which brings together Eagle Star, Allied Dunbar and Threadneedle Asset Management, was created recently to give the financial operations greater coherence and to create cost-cutting opportunities. It is estimated that sharing computer and other support services could save Bafs pounds 50m a year.

The consolidation is also expected to help the division target overseas markets. "To become a world-beater we must succeed beyond the white cliffs of Dover. Asia will be a top development priority," Mr Leitch said.

Bafs already has a presence in Hong Kong and Taiwan and expects to be granted licences in India and China within the next two years.

The need to expand overseas was underlined by interim figures showing a reduction in life and investment profits offsetting better general insurance returns. Eagle Star's first-half profit slipped to pounds 108m (pounds 113m) while Allied Dunbar's profits fell 9 per cent to pounds 96m.

Those poor results could not prevent a 12 per cent rise in group pre- tax profits to pounds 1.33bn for the six months to June as one-off business disposals, recovery in US insurance and steady growth in cigarette sales, especially in Asia, made up for the disappointments in UK financial services. In the US, higher selling prices offset lower volumes of cigarettes, while the continuing increase in smoking in the Far East saw profits there rise 14 per cent. BAT accounts for almost a quarter of all foreign cigarettes sold in Japan.

Commenting on a recent upsurge in anti-tobacco industry litigation, Lord Cairns, chairman, said: "Despite the tobacco industry's attempt to get science back into the debate, the climate of opinion remains extremely hostile in the US ahead of the presidential election."

He claimed three important legal victories, however, in the long-running feud between the anti-smoking lobby and the tobacco giants - a class action against the company in the US, a Medicaid reimbursement dispute in Florida, and in the UK the refusal of the Legal Aid Board to grant funding to litigants in tobacco cases.