CU says fear of price war has been exaggerated: Pre-tax profits accelerate to pounds 188m despite greater competition in motor insurance sector
Peter Ward, an executive director of CU - which yesterday reported pre-tax profits up from pounds 16m to pounds 188m last year - said: 'We see no evidence other than in the private motor account that we are on the verge of a rate-cutting period . . . we cannot understand how you got the message you got.'
Describing as 'exaggerated' the market's reaction to GRE's statement that the era of fast premium rises was finished, Mr Ward said that in the UK the company was continuing to obtain premium increases in most classes of general insurance. But he acknowledged competition was increasing in motor insurance.
Mr Ward said CU expected a reduction in motor business because it was not prepared to take on insurance if rates were too low. He acknowledged the impact of competition from firms that sell motor insurance direct to the public but said 40 per cent of CU's own private motor insurance was through its direct-selling subsidiary in Preston.
CU said it had made a small provision against the possible cost of compensation for pension transfers, following the Securities and Investments Board review of whether these had been done correctly.
The company had received only a handful of inquiries from clients on the issue, said Mr Ward, who reported a 12 per cent growth in annual premium life assurance business last year and a higher market share.
In marine and aviation business, CU saw the impact of new insurance capacity coming into the Lloyd's insurance market towards the end of the year. But John Carter, chief executive, said this would also force down the cost of reinsurance to companies like CU.
Mr Ward reported the first 'slight reduction' in the fourth quarter of last year in the number of claims notified for theft since the sharp rise in crime began several years ago. But for the year as a whole claim numbers were up 12.5 per cent and the value was up 20 per cent to pounds 112m.
CU total premium income rose 6 per cent to pounds 5.97bn and shareholders' funds increased by more than pounds 1bn to pounds 2.529bn, of which pounds 430m came from a rights issue.
CU cut its underwriting loss to pounds 277m from pounds 431m, while investment income increased from pounds 325m to pounds 363m.
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