Credit insurer back in profit: Better forecasting aids Trade Indemnity

TRADE Indemnity, the credit insurance group, returned to profit last year after a sharp drop in business failures, which it predicted would continue this year.

The company made pounds 5.8m profit before tax compared with a loss of pounds 4.9m a year ago, and restored its dividend with a token 0.5p a share and a promise to improve it as profits continue to recover.

Last year business failures were 26 per cent down on the previous year at 6,303 and Vic Jacob, chief executive, predicted a further 10 per cent decline this year. All but 500 of the failures were in the UK. Claims paid fell from pounds 166m to pounds 116m.

Mr Jacob said: 'We are certainly not pessimistic. We think it is going to be rather better this year than last.'

A key factor in the improvement was Trade Indemnity's better performance at predicting what sort of companies are likely to go bust. This allowed it to improve the ratio of claims to premium income.

Mr Jacob said the better forecasting record was made possible by a large database, thousands of visits to companies and policyholders, and the staff's expertise in different business sectors. Costs were also cut, with 40 job losses at a cost of pounds 1m.

There were no more losses from the special underwriting unit that was closed at the end of 1992 at a cost of pounds 6.8m.

With tax relief, net profits were pounds 8.2m compared with pounds 1.8m a year earlier. Shareholders' funds rose pounds 13.5m to pounds 64.8m. The shares rose 4p to 94p.