CU hit by soaring theft claims: First quarter back in the black at pounds 16m but still well short of City expectations

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The Independent Online
THE COST of house theft claims to Commercial Union has nearly trebled in three years and the number of claims has doubled in the same period.

The company yesterday blamed the recession for a 41 per cent increase in domestic theft claims to pounds 22m in the three months to the end of March.

The company was hard put to give a precise explanation or to prove recession was the cause.

But it said increased theft claims were emerging throughout Britain, unlike previous recessions when the correlation between theft and economic activity had been restricted to large cities and particularly inner-city areas.

Peter Ward, managing director of the United Kingdom operations, said: 'Recession has to be our subjective view. Why else would the numbers double in three years?'

Since CU has 10 per cent of the market, the insurance industry total for the three months is likely to be at least pounds 220m.

The rise has been far bigger than CU's increase in market share in household insurance, which was no more than 5 to 10 per cent a year, he added.

The number of household theft claims rose 28 per cent in the first quarter compared with a year ago, to 37,000. Altogether, motor and property claims rose 22 per cent. CU was reporting first-quarter profits of pounds 16.2m before taxation against a pounds 19.2m loss a year ago, disappointing the City, which had expected profits twice as high because of a recovery in premiums and more new business.

The second quarter could also look poor since it is to include the expected cost of up to pounds 25m from the bomb in the City of London last month. This is the cost of claims on buildings insured by CU, after allowing for reinsurance. Unlike last year's blast, CU's building was not wrecked.

Mr Ward said the bomb would cost 'several hundred million' leaving a shortfall in Pool Re, the specialist insurance operation set up by the industry to handle terrorist cover.

Among the widespread increases in premium rates reported by CU were substantial improvements in marine and aviation business in the London market as the insurance cycle recovers from the bottom. But, like Lloyd's, CU accounts on a rolling three-year basis for this business, so the benefits will take some time to appear. There was an underwriting loss in marine and aviation business of pounds 23.5m, higher than the pounds 18.9m lost a year ago. Total premium income in the three months rose to pounds 1.609bn from pounds 1.285bn a year ago, while the underwriting loss before investment income was pounds 99.8m against pounds 113.6m. Life assurance profits were pounds 29.8m against pounds 27m a year ago. The shares fell 6p to 574p.

The first quarter has shown encouraging signs, Legal and General told shareholders at its annual meeting.

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