The Investment Column: United Assurance hit by costs surge

Shareholders in United Assurance were understandably disappointed after yesterday's 1997 figures. New business volumes, the key measure of a life insurer's performance, fell by a massive 26 per cent. Meanwhile, the rest of the sector grew business by at least 10 per cent. It was a worse performance than even the most pessimistic analysts had expected and the shares fell 3 per cent to 536.5p.

United is a "home service" provider which sells policies and collects premiums door-to-door. Sales have suffered as regulators demanded that sales people be fully qualified as financial advisers, sharply increasing costs.

However, United has only itself to blame for some of its problems. Formed from the merger of United Friendly and Refuge Group in October 1996, the new group was heavy-handed in its programme to slash 172 of its 279 branches. It lost a third of its 4,000-strong sales force and retained just 2,900, half of whom are not fully qualified. The management also launched a misguided attempt to appeal to independent financial advisers, called United Friendly Financial Planning. This was so expensive it threatened to erode the pounds 37m of savings so painfully extracted from its staff.

To cap it all, chief executive Dr George Mack, formerly of United, is thought to have fallen out with non-executive chairman, John Cudworth, formerly of Refuge. Dr Mack will leave within the next month and a replacement is still to be found.

However, even with all its apparent problems, United's shares look cheap. With net assets of 478p they are sitting on a modest premium to net assets compared to the rest of the sector. And if United's current management cannot improve the group's performance a predator may be tempted to have a go.

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