CGU rides storms to report profit of pounds 435m
Thursday 12 November 1998
The country's biggest life and general insurer reported nine-month profits of pounds 435m, at the top end of analysts' expectations.
Brokers had feared that CGU would be hit by claims stemming from Hurricanes Georges and Bonnie in the US, which contributed to an 84 per cent fall in profits at its closest rival, Royal & SunAlliance.
Instead, CGU reported a 16 per cent surge in profits from its life and pensions business. This helped to offset tough conditions in the general insurance market, where profits more than halved.
CGU escaped exposure to the hurricanes in the US, but was hit hard by industrial catastrophe losses. Severe weather claims cost pounds 126m in the first nine months. The insurer said that the British floods and storms last month would cost it a further pounds 25m by the end of the year.
However, one of the biggest hits came from the effect of price competition, which wiped pounds 242m from its bottom line. The insurer has boosted premiums on private and commercial motor insurance to maintain profits, resulting in a loss of market share. Further rises in premiums are a strong possibility, CGU said.
Bob Scott, chief executive, said the integration of Commercial Union and General Accident, which merged to form CGU in June, was on target to achieve annual savings of pounds 270m by the year 2000.
Peter Foster, the group's finance director, said the insurer was still looking at acquisitions but hinted that they were more likely to be made abroad than at home. "We would not enter into any acquisition that would jeopardise the integration process [of GA and CU]," he said.
CGU is considering buying Hibernian insurance group in Ireland, in which it already owns a minority stake.
However, Mr Foster said: "We have had no discussions and there have been no decisions as yet. We are constantly reviewing - this is something we are going through with all our businesses."
Analysts welcomed CGU's results but said the insurer had been lucky to escape heavier claims for weather losses. CGU has a big exposure to general insurance risks worldwide, but had little exposure to the hurricane damage in the US state, Florida. "At this stage I'd say their results were largely down to a bit of luck," one analyst said.
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