GRE moves back into black with interim pounds 65m

GUARDIAN Royal Exchange is paying an increased interim dividend on the back of a strong recovery in its pre-tax profits.

Before investment gains, GRE made a pre-tax profit of pounds 65m, a pounds 104m improvement on last year's loss. The dividend rises by 6 per cent to 2.65p a share.

GRE wants investors to concentrate on the pounds 307m profit it made after including investment gains, arguing investment management is a crucial part of its business. The pounds 307m profit is a pounds 299m improvement on the first half last year.

James Morley, finance director, said the new method of reporting results should not in principle make any difference to the running of GRE's business. But it would allow the insurer's investment managers to invest in low-yielding assets without fear of damaging profits.

'More importantly, it enables us to focus on the two very distinct methods of generating wealth in the company,' Mr Morley said.

This is encouraging GRE to manage its shareholders' funds more aggressively, he added. Putting an extra pounds 50m or more into Japan and pulling dollars 125m out of the US were two early examples.

GRE claims its recent investment performance is much better than that of its closest rivals, particularly Commercial Union and Royal Insurance. However, GRE benefited significantly from its big Irish business - the accompanying large bond portfolio gained pounds 40m in the wake of last year's currency crisis - and its holding in Liberty Life, Donald Gordon's South African insurance group.

Higher premiums and fewer motor, subsidence and mortgage indemnity claims enabled GRE's UK operation to reduce underwriting losses from pounds 125m to pounds 40m, giving it a pounds 72m profit after investment gains. Its car and property insurance are showing underwriting profits.

The group has also reduced losses at Albingia, its big German subsidiary.

GRE's problem life company again made a reduced contribution of pounds 11m (pounds 12m).