Chesnara, the life insurance group that was spun out of Countrywide in May, said it had quadrupled its provision for mortgage endowment mis-selling compensation yesterday, after a spate of media stories and new regulations sent the number of claims rapidly upward.
Releasing its first set of interim results since its flotation, Chesnara said it had increased its compensation provisions by £11.75m to £16.5m, sending the group to a first-half pre-tax loss of £4.9m.
At its initial public offering at the end of May, the group announced it would be putting aside £4.8m for possible claims. However, on the same day the group came to market, the Financial Services Authority announced measures to ensure that insurers tell endowment policyholders how long they have before they need to make their complaints.
Chesnara's chief executive, Graham Kettleborough, said the FSA's move sparked a fresh wave of press coverage over mortgage endowments, leading many more people to file complaints over potential mis-selling.
Mr Kettleborough said: "You can map in the dates that certain things happened, and see the effects. The Treasury Select Committee's report into endowment mortgages earlier this year had a significant effect."
Chesnara's first-half loss compared with a loss of £9.1m in the same period last year. However, the group said its solvency position had improved significantly and prospects remained good.
Mr Kettleborough added: "A healthy surplus emerged from the existing book in the first half and operational costs were in line with expectations. This enabled us to accommodate significant strengthening of provisions, while declaring an interim dividend in line with that targeted in our listing particulars."
An interim dividend of 4.75p a share was declared, giving the group a yield in excess of 10 per cent.
Chesnara runs the closed life business of Countrywide Group, with the majority of its income coming from fees paid by policyholders. Its shares closed down 2.3 per cent at 94p yesterday, giving the company a market value of £80m.Reuse content