Lloyds Abbey Life, the financial services arm of Lloyds Bank, yesterday warned that the UK insurance industry's sales slump had still not bottomed out. The warning came despite the company recording a 31 per cent rise in pre-tax profits in 1995 to pounds 421.5m, up from pounds 322m the previous year.
The scale of the company's profits rise in the past year was caused largely by its decision in 1994 to set aside almost pounds 60m to fund compensation payments to pension transfer victims.
Stephen Maran, chief executive at Lloyds Abbey Life, said yesterday that, excluding this sum, the company's profits, which reached pounds 421m last year, would have risen by about 10 per cent. Mr Maran said: "Are there going to be queues of customers waiting to buy personal pensions and all that business? I don't think so. I do not believe the market has bottomed out yet, although we are near the bottom."
Lloyds Abbey Life's response to the sales downturn of recent years had been to cost-cut dramatically and concentrate on better-quality business with a better retention rate. He added that once the recovery did come, it would happen quickly, with the company poised to take advantage of the upturn.
Sales of Lloyds Abbey Life regular premium products fell by 8 per cent to pounds 121m in 1995. Single-premium sales rose by 36 per cent overall, to pounds 665m. However, about half of that increase was linked to the company's launch of a series of guaranteed bond products.
Lloyds Bank Insurance Services, a subsidiary selling household, motor and other personal lines of insurance to its own client base, returned a 31 per cent profits increase, up to pounds 92m. Mr Maran said a large slice of the profits came from improved claims experience, leading to increased profit-sharing with underwriters.
He said while direct insurershad won a large slice of the market, Lloyds' business remained firm because it sold to its own client base. Policy renewals contributed a larger share of the division's profits, at pounds 19m, than in the previous year.
Black Horse Agencies, the company's 388-strong estate agency chain, suffered increased losses of pounds 9.5m, up from pounds 3.7m in 1994. The company has reacted by closing 12 of its less profitable branches. But Mr Maran ruled out an exit from the estate agency market.
Lloyds Bowmaker, the finance company, increased profits slightly to pounds 74.5m. The company has sold off its mortgage portfolio, netting a pounds 35.7m profit. This had to be offset against the loss of pounds 35m from the sale of Lloyds Abbey Life's German life company subsidiary, Trans Leben.
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