United Friendly unable to satisfy DTI on life fund: Inquiry continues into size of shareholders' stake

Click to follow
United Friendly Insurance has been unable to satisfy the Department of Trade and Industry about the value of its shareholders' stake in its pounds 2.6bn life fund, writes Paul Durman.

The life insurer had hoped to publish details of its shareholders' interest in the fund - forecast to be worth up to pounds 500m - by the end of last year. However, actuarial analysis and discussions with the DTI took longer than expected.

George Mack, financial director, said: 'We had not foreseen that the work would be (so) extensive.'

Dr Mack said he was 'most reluctant to be optimistic' about completing the investigation. He would not predict when it would be completed satisfactorily.

Shareholders accumulate an interest in insurers' policyholder funds when more money is available than is needed to meet the 'reasonable expectations' of policyholders. The DTI wants to ensure policyholders are treated fairly.

United Friendly reported a pre-tax profit for 1993 down pounds 3m at pounds 20.4m. This reflected a much-increased pounds 6.6m loss on its general insurance business, contrary to the experience of other general insurers.

Dr Mack said United Friendly ran into problems after starting to sell motor insurance through its 2,400-strong field force. Claims experience has been worse than on business sold through brokers. Dr Mack said the company had tightened its underwriting and raised premiums.

A final dividend of 11p lifts the total payout by 13.8 per cent to 16.5p a share.