Despite making money in the second quarter, GRE still lost pounds 39m in the first six months of the year, held back by a pounds 10m provision for the cost of the IRA bombs in London. This was still a 'marked improvement' on the pounds 88m lost in the first half of 1991.
GRE paid an interim dividend of 2.5p a share. Although a cut from last year's 4.4p was anticipated after the company reduced its final dividend for 1991, Sid Hopkins, chief executive, said the 2.5p payment was at the top end of what could have been expected.
He did not rule out an increase in this year's final. 'If we continue as we are, there's scope for us to take a view at the year end.'
GRE's results benefited from the mild winter and the large premium rate increases that all insurers have implemented. The UK underwriting loss was reduced from pounds 180m to pounds 125m thanks to improvements on personal lines business. The loss on household business dropped from pounds 38m to pounds 8m, and private car losses fell from pounds 47m to pounds 19m.
Although GRE has less than 3 per cent of the market for mortgage indemnity insurance, the high level of repossessions cost it nearly pounds 16m. 'House repossessions are not abating,' Mr Hopkins said. 'With unemployment getting worse, the country not coming out of recession and the possibility that the Chancellor will have to put interest rates up, it's easy to see a scenario where mortgage indemnity will get worse.'
UK premium income dropped from pounds 502m to pounds 478m. GRE has for the first time arranged quota share reinsurance for part of its portfolio, enabling it to write more business as the market starts to turn, without having to bear the full risk.
The group's total underwriting loss fell from pounds 236m to pounds 184m on total premium income 7 per cent lower at pounds 1.14bn. GRE suffered a setback in Germany, where its Albingia subsidiary suffered a pounds 28m underwriting loss and an pounds 8m pre-tax loss because of recession-related arson and theft claims.
The UK life business suffered a sharp fall in annual premium sales, which are heavily reliant on the housing market. GRE warned that unless stock market conditions improve substantially it will have to make a significant cut in the bonus rates it pays on its with- profits policies - a move that will cut into life profits, marginally down at pounds 12m for the half.