Healthy growth overseas helps CU defy pound

Strong growth in life and overseas general insurance helped Commercial Union shrug off the effects of the strong pound and tough competition at home in the six months to June.

Operating profits rose 9 per cent to pounds 235m, beating market expectations, but the composite insurer said they would have been 25 per cent better at constant exchange rates.

Life assurance, which accounts for almost half group premium income, raced ahead, with profits rising 24 per cent after a 21 per cent increase in new life, pensions and investment sales.

The best performances were recorded in the Netherlands, UK and France, with a fledgling operation in Poland also starting well.

Commercial Union has emphasised its life assurance operations in order to benefit from their more predictable profit streams and the fact that the stock market rates the business more highly than cyclical general insurance.

John Carter, chief executive, said the group remained on the lookout for life acquisitions in eastern and western Europe.

He ruled out the possibility of a larger deal, however, saying he saw no need for the sort of tie-up Commercial Union explored last year with BAT.

A link with ABN Amro hasbeen rumoured recently and analysts said the absence of a large deal was the main reason behind the 1.5p fall in the share price yesterday to 689.5p.

Commercial Union's shares have lagged the rest of the composite insurance sector this year, mainly because of the perception that its high proportion of overseas profits leaves it vulnerable to the soaring pound. The strength of sterling held back the increase in net assets per share, which rose from 545p to 573p.

The success of the life business, together with a recovery in general insurance in the US and higher profits in France and Australia, made up for difficulties in the UK where premium rates were described as "bumping along the bottom".