GA undermined by sewage: City disappointed with insurer's 206m pounds in third quarter

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GENERAL Accident, the Perth- based insurer, disappointed the stock market with a pounds 206m pre-tax profit in the third quarter, an improvement of pounds 241m on the heavy losses of a year earlier.

The gloss was wiped off the results for investors by the pounds 10m cost of weather claims in Canada, where GA paid for the damage by sewage forced into basements by storm water.

This was enough to push third- quarter profits from the middle to the bottom end of market estimates, and the shares slipped 33p to 658p in a generally stable insurance sector. Third-quarter profits slipped back pounds 3m compared with the second quarter to pounds 80m before tax.

Despite fires in California and floods in the Midwest, catastrophe losses were lower than a year ago, when the cost of Hurricane Andrew was coming through. Nelson Robertson, group chief executive, said losses in the Midwest were small, mainly claims for cars caught in the flood, while the California fires were likely to cost dollars 1m in the fourth quarter.

Mr Robertson said he was disappointed by the City reaction, since the results were the best in the sector.

The performance in the UK was outstanding after the second quarter in a row in which underwriting profits had been back in the black, he added.

After rapid increases in premium rates in the past couple of years, householders and motorists should see a levelling off now that underwriting profits were back and competition for business was becoming fierce again. Mr Robertson did not expect further rate increases would be needed.

GA has an offshoot competing with Royal Bank of Scotland's Direct Line, selling insurance directly to the public. This now accounts for 20 per cent of GA's motor insurance business.

In commercial insurance, GA was still seeing increases in premiums of 10-15 per cent that would 'continue for a while at least', Mr Robertson said.

He added that GA was determined to insure for profit rather than to increase the size of its exposure, a policy that had improved the strength of its whole UK portfolio.