The Investment Column: United Assurance has more to do

Until yesterday, shareholder confidence in the management of United Assurance, the life company, looked distinctly shaky. It has taken a long time to deliver on a promise that shareholders, not policyholders, would benefit most from pounds 37m of cost savings following United's merger with Refuge Assurance last October. Unwisely, United has also been trying to take itself outside its core business of door-to-door premium collection into more upmarket direct selling. The vehicle set up for this, United Financial Planning has been consistently loss-making.

United may now have partly appeased its critics. The group yesterday said that the Department of Trade had agreed to proposals to shift back office staff into a shareholder-owned company, allowing shareholders to benefit from cost-cutting. The group has also bowed to market pressure and yesterday said it was selling its financial planning arm to Friends Provident and refocusing on its core business.

However the market was justified in marking United's shares down 22p to 491.5p. While most new business in the life sector has grown by at least 10 per cent this year, United's new business in the six months to June fell sharply - by 5 per cent. Group chief executive George Mack puts this down to an absence of the feel-good factor among United's low-income customers.

This explanation does not wash. Other companies in the home service market, like Britannic, have seen new premiums rise sharply, filling a gap left by the Prudential, which has abandoned home service.

With United's price at only a small premium to its embedded value of 455p per share, even a modest growth in anticipated sales would make the shares look cheap. But Mr Mack predicts poor sales for the next half as the group closes 160 of its 279 branches. Not for the impatient.