The cash call had been widely rumoured in the City in recent days. It follows other big fund- raising exercises from Asda, Burton and Wessex Water. Numerous smaller companies have also taken advantage of the stock market's near-record levels.
Commercial Union has been expanding strongly over the past year, taking advantage of strengthening premium rates and the turn in the insurance cycle.
It intends to use the money raised to develop its life insurance business, to strengthen its position in the UK general insurance market, and to exploit opportunities overseas.
Tony Wyand, one of the three executive directors who head the insurer, said: 'What we think we have seen is really an unprecedented opportunity which has arisen in the UK to write extremely profitable business, just as the cycle is turning up and as many of our competitors have had to withdraw.'
Commercial Union brought forward publication of its 1992 results to coincide with the announcement of its rights issue. These show a pre-tax profit of pounds 31.4m, a pounds 100m improvement on 1991. Nearly pounds 20m of this advance was the result of the devaluation of the pound.
The insurance industry has been plagued by heavy losses in recent years because of storms, subsidence, home repossessions and other recession-related claims. Commercial Union has avoided the worst of these difficulties and made an early move aggressively to chase new business. It had already raised pounds 200m through the issue of preference shares to support its expansion.
Last year it lifted total premium income from pounds 4.1bn to pounds 5.6bn. Mr Wyand said this was like adding to the group, 'at no cost to the shareholders, a medium-sized insurance company'.
The one-for-five rights issue, priced at 490p a share, was well- received in the City, which has a high regard for Commercial Union and its management. CU shares rose 12p to 610p. The insurer is increasing its final dividend by 5 per cent to 15.1p, lifting the total payout for 1992 by 3 per cent to 24.35p a share. Tony Brend, CU's chief executive, said this was justified by 'the improvements in the operating climate and the company's strong trading position, particularly in the United Kingdom'. This year's payout, which will cost pounds 67.5m, is again not covered by earnings.
The UK turned in pounds 12.8m of general insurance profits after an pounds 85.1m loss in 1991. This was in addition to life insurance profits virtually unchanged at pounds 45.8m.
The UK business was helped by an absence of extreme weather and a reduction in subsidence claims. General insurance premium income grew by 27 per cent to pounds 1.5bn, aided by strong growth in domestic property and private motor accounts.
Although UK underwriting losses were reduced from pounds 226.5m to pounds 161.4m, Peter Ward, managing director of the group's UK business, said the claims costs of motor and property theft continued to rise. The number of such theft claims rose by 18 per cent in the year to cost the insurer pounds 114m, twice as much as two years earlier.
Delta Lloyd, the Dutch business that includes the group's largest life insurance business, contributed slightly lower profits of pounds 78m. Although life profits grew from pounds 59.1m to pounds 65.7m, general insurance profit were lower because of an increase in large claims.
The insurer's US business made strong progress, lifting profits from pounds 32m to pounds 57.6m in what CU described as the worst year on record for catastrophes.
The group realised investment gains of pounds 213.2m ( pounds 49.8m in 1991), which helped to produce a profit attributable to shareholders of pounds 236.1m, a pounds 250m improvement on 1991. Shareholders' funds at the end of the year stood at pounds 1.5bn, up from pounds 1.2bn a year earlier.
Analysts increased their profits forecasts, with estimates ranging from pounds 170m to pounds 208m.
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