But the strength of the Perth-based insurer still shone through in results which more than maintained 1994's record. Operating profits, struck ahead of gains on the sale of investments, edged ahead to pounds 436m from a restated figure of pounds 434m. The market was particularly impressed with the 49 per cent uplift in net assets to 653p a share, which helped send the share price 13p higher to 650p yesterday.
The weather was no help to the UK results. The big freeze in the last quarter alone led to pounds 40m of losses on burst pipes and the like. But the rain falls on both the just and the unjust alike and GA continues to outpace its major rivals in the domestic market.
Profitability is higher and the trend in premium income, broadly flat at pounds 1.53bn last year, is significantly better than other groups which have reported so far. Commercial Union, Guardian Royal Exchange and Royal have seen premiums falls averaging around 10 per cent in 1995.
The question is how GA will manage the downturn in the cycle, particularly now that direct insurers have become such a major force. To date, it has avoided a head-on confrontation by building market share in less competitive areas. But its own direct business has been slow to take off, with the motor side still representing less than a fifth of the total policies in force and the newer home side just an eighth. It remains to be seen how easy it will be to get the intended 4 per cent increases in personal motor premiums to stick from April.
Whatever happens at home, GA should be buttressed by most of its other major businesses. As the chart shows, the US cycle is still moving in the right direction and the UK life business has stormed ahead, raising profits 20 per cent to pounds 71m as premiums soared by over a half to pounds 936m. The addition of Provident Mutual's business, mainly pensions, which should start contributing next year, will further strengthen this operation.
NatWest Markets believes profits could rise to around pounds 410m this year, putting the shares on a prospective multiple of 12. Backed by a forward yield of 6.3 per cent, they are amongst the pick of the sector. But any slip in bond markets later in 1996 would undermine the sector. Hold.