Commercial Union cuts back on motor exposure

COMMERCIAL UNION, which aggressively increased its share of motor insurance business as premium rates increased, is cutting its exposure in the face of increased competition.

The insurer is also shunning some London market business because rates are being held back by additional underwriting capacity.

Commercial Union said UK market conditions remained favourable in most areas. It is still increasing rates for its commercial customers.

Commercial Union was reporting first-quarter pre-tax profits of pounds 64m, an increase from pounds 16m in the same period last year.

The group received investment income of pounds 87m ( pounds 84m), while the total underwriting loss fell from pounds 100m to pounds 60m.

Much of the improvement came from the UK, where favourable weather conditions helped CU move from an underwriting loss of pounds 35m to a profit of pounds 4m. Claims from earlier years produced a pounds 20m loss on London market business.

Results from the US were hit by the severe winter, which contributed to pounds 21m of catastrophe claims. John Carter, who recently took over as CU's chief executive, said the US insurance industry had suffered its worst quarter for catastrophe claims.

Life insurance, which represents about a third of the group's premium income, contributed a profit of pounds 32m. Delta Lloyd in the Netherlands made an increased contribution of pounds 17m despite pounds 2m of reorganisation costs. UK sales of both annual and single premium contracts fell.

Weaker investment markets cut the group's shareholders funds by 11 per cent to pounds 2.25bn. The value of CU's investments fell by pounds 331m.

Shareholders funds do not include the full value of the life operations, which CU last valued at pounds 1.7bn.

For the first time, Commercial Union reported separate profits of pounds 3m for its fund management, stockbroking and banking activities.