Some of the gloss was taken off this favourable performance by a pre- tax loss of £75m due to the substantial fall in the paper value of GRE's investment portfolio after the carnage in the bond and equity markets last year.
GRE is the first composite insurer to publish details of these investment gains and losses, applying early a new insurance accounting directive that will become obligatory in Britain later this year.
The pre-tax result was also hit by an exceptional charge of £28m from restructuring in Britain, as well as GRE's other key markets in Germany and the United States.
Premium income rose by 12 per cent last year to £3.7 bn from £3.3bn in 1993, consolidating recent acquisitions in the US, as well as the new operations of Guardian Direct.
James Morley, GRE's finance director, said the group had been able to cut premiums in its retail motor and household insurance operations thanks to a fall in the frequency and severity of claims.
John Robins, chief executive, said there would be further staff cuts as the group continues to restructure its operations. About 450 jobs are expected to go in Britain over the next two years.
He said GRE was placing a much greater focus on writing for profit, paying attention to the quality of business rather than going for volume.
Guardian Direct, which lost about £12m in the first 10 months of operations in 1994, has scaled back its first-year target to 40,000 policies from 50,000, because of the far greater-than-expected competition in this sector.
"We are not going for quantity, but investing for the medium-term in quality of service and expertise in other products and sectors," Mr Robins said.