CU's expansion pays off as profits rise 25%
Thursday 10 August 1995
Commercial Union, one of Europe's biggest composite insurers, yesterday unveiled a 25 per cent increase to pounds 246m in half-year profits.
The profit figures, up from pounds 196m over the same period in 1994, were described by the company as proof that its strategy of diversification into new markets has proved a success.
Commercial Union's diversification has involved expansion into overseas markets and into the life insurance sector.
Analysts said CU's final-year profit figures, at about pounds 490m, were likely to remain broadly in line with earlier expectations.
Their predictions came despite warnings of a potential avalanche of subsidence claims from the South-east of England hitting every insurer later this year.
A report yesterday by John Pryke & Partners, a firm of consulting engineers, said the hot and dry weather of the last few months could spark claims running to hundreds of millions of pounds across the industry.
John Carter, Commercial Union's chief executive, said, however, there was no evidence subsidence claims were rising.
A CU spokesman added: "UK subsidence claims for us this half-year were pounds 9m, the same as last year when there was also warm weather. We have had a wet winter, which should help reduce claims."
CU's results in the first six months of 1995 showed 42 per cent of premium income was from life insurance and 58 per cent from the general side. Life operations contributed pounds 105m of CU's profits, compared with pounds 65m at the same point last year.
Worldwide life premium income doubled to more than pounds 1.8bn, although the increase was not evenly spread.
Mr Carter said: "In a number of territories, sales of new annual premiums were again affected by the unwillingness of consumers to commit funds to long-term savings products."
Among the territories affected was Britain, where life profits fell from pounds 24m to pounds 21m in the first six months of 1995.
But the company's recent French acquisition, Groupe Victoire, contributed pounds 33m to overall life profits and pounds 740m in life premium income. Groupe Victoire's overall pre-tax profits were pounds 48m, before pounds 31m interest charges linked to its purchase in October last year.
On the general insurance side, the company said it was continuing to achieve profits despite competitive pressure on rates, which reduced premium income in the UK by 11 per cent to pounds 804m. Profits from UK general insurance rose from pounds 114m to pounds 138m. The company believes household and motor premiums will remain static or even fall slightly in the year ahead.
The shares were down 17p at 626p yesterday.
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