Kwik-Fit to branch out into motor insurance

Kwik-Fit, the chain of tyre and exhaust fitters, is close to finalising plans to move into the motor insurance market.

Tom Farmer, chairman, said the launch of a direct insurance service marketed to the company's 4 million annual customers will begin by June. "We have talked to several insurance firms about selling insurance and are close to agreeing details. It will happen," he said.

The direct insurance market is overcrowded and additional competition will cause concern. "Everyone's into direct insurance,'' an analyst said. "Some big players are already seeing their market share shrink.'' Swinton and the AA have seen falls in their customer base.

Kwik-Fit would earn commission by selling motor policies, underwritten by insurers, by telephone using its database of tyre and exhaust customers.

Mr Farmer believed the company's "strong brand name'' would enable it to succeed. "But we are not going to become an insurance company. We are a motor components business.''

Kwik-Fit yesterday reported a 16 per cent rise in full-year profits to £26.7m, on sales of £297.6m, up from £260.1m. The 80 Superdrive centres bought last October should reach break-even point or contribute to operating profits by the end of June, Mr Farmer said.

Kwik-Fit paid Shell £21.5m for 125 tyre and exhaust Superdrive centres and disposed of 45 to Apple Car Clinics for £2.5m cash and a 25 per cent equity stake. At the year-end Kwik-Fit operated 726 centres compared with 626 in 1994.

Mr Farmer said a 5 per cent rise in raw material costs would be passed on to customers over the next few months. The company's stockpile of tyres, which retail for an average £40 each, is 15 per cent higher than at the same time last year in anticipation of a price rise.Tyres and exhausts represent about 70 per cent of Kwik-Fit's turnover.

After investing about £36m during the year, the company has no big spending plans. A final dividend of 2.7p makes 4.4p for the year, against 3.8p.