City File: Profits to raise a chuckle

THE 'recovery' in profits that BAT Industries is due to declare on Wednesday will raise a chuckle among students of the ridiculous. Of the expected 50 per cent hike in the pre-tax figure, to nearly pounds 1.6bn, more than half will come from reduced losses at BAT's general insurance operation, Eagle Star.

The joke is that Eagle Star is still losing money - its pre-tax loss is estimated to have been around pounds 50m last year - and will continue to do so for at least the first half of this year, because of its exposure to mortgage indemnities. BAT's life assurance arm, Allied Dunbar, is also finding the going tough. The only relief is from the US side, Farmers, which had an excellent 1992.

Tobacco will be strained by US health care reforms, so future prospects depend on when Eagle Star recovers.