Despite the pounds 13m cost of floods in the Perth region where the company is based, General Accident converted last year's pounds 15.4m interim loss into a pre-tax profit of pounds 126.2m. Substantially higher premiums, mild weather and a fall in subsidence claims all helped; the pounds 10m cost of the City bomb did not.
Smith New Court, the securities firm, is forecasting General Accident will make pounds 307m by the year end, while SG Warburg Securities is looking for pounds 280m. General Accident's previous best was pounds 294m in 1988.
The strength of GA's recovery was indicated by its pounds 3.5m underwriting profit in the UK. John Chester, Warburg's insurance analyst, said UK insurers had achieved an underwriting profit only once in the last 15 years.
Bob Scott, GA's general manager for the UK, said the company was not implementing any further across-the- board rises in premium rates and more stable pricing was likely to emerge. Car thefts, which rose dramatically after 1990, were also stabilising as more people fitted alarms and immobilising equipment.
Mr Scott said General Accident had increased its rates earlier than most of its rivals. But better profits will soon come through for the the industry.
Some analysts believe insurers may shortly feel under pressure to cut rates in some areas, such as comprehensive motor insurance. The breakdown of the so-called knock-for-knock agreement will put an end to the cross-subsidy between comprehensive and third-party policyholders. Mr Scott said this was worth 'at least 15 per cent and probably a lot more'.
Competition will get tougher as insurers return to healthy profits. Kevin Ryan of Panmure Gordon, the broker, said the leading companies had raised pounds 1.5bn of new money and were all looking to take on more business.
GA's premium income in the six months grew to pounds 2.1bn, from pounds 1.9bn the previous year. UK premiums grew by 14 per cent to pounds 681.5m, and the Canadian business also grew strongly to pounds 322.5m, an underlying increase of almost 44 per cent, reflecting the acquisition of Prudential's Canadian business.
The Pacific business turned in an 'excellent performance' with a pounds 2.5m underwriting profit on premium income of pounds 170.2m. Nelson Robertson, chief general manager, said GA was seeing some improvement in the US, where the group made an underwriting loss of pounds 74.1m ( pounds 81.6m) on virtually unchanged premium income of pounds 679.2m.
The group's investment income rose from pounds 215.1m to pounds 238.8m, helped by the issue of pounds 250m of preference shares during the last year and the Canadian acquisition.
Life insurance profits increased sharply from pounds 14.6m to pounds 20.9m. GA's estate agency business reduced its losses to less than pounds 1m in the second quarter, enabling it to cut its interim loss from pounds 9.9m to pounds 4.5m. 'Firm evidence of sustained recovery in the housing market has yet to appear,' the company said. Net asset value has risen to 394p a share, from 331p at the beginning of the year.
The company disappointed the stock market by paying an unchanged interim dividend of 9.7p a share. Analysts are forecasting an increase of up to 5 per cent in the year's total payout.
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