Norwich is itself recuperating from the errors of 1990 and 1991 - too much money in property, excessive bonus payments to policyholders, and the misguided sale of with-profits investment bonds. There have been changes to management - the 1992 accounts show Hugh Scurfield, former chief general manager and a past president of the Institute of Actuaries, was paid pounds 146,633 to take early retirement last year.
The change of investment strategy and bonus cuts implemented by Norwich's Philip Scott have boosted the life office's free (uncommitted) assets from pounds 1.1bn to pounds 1.9bn. This has lifted its free asset ratio, a crude but useful measure of financial strength, from 6 to 9 per cent.
At the same time, Norwich's general insurance business, which contributes about a third of group premium income of nearly pounds 4bn a year, all but eliminated the pounds 270.5m pre- tax loss it suffered in 1991. Higher premiums and better underwriting cut the loss to pounds 17.6m, despite a pounds 52m hit from home repossessions and the pounds 14m cost of the London bombs. After a pounds 32m tax credit, the general business made a pounds 13m profit.
Norwich accepts the reduced availability of mortgage interest tax relief has seriously damaged the merits of mortgage endowment plans. Although the banks and building societies may continue to foist endowments on unsuspecting customers, insurers will increasingly have to concentrate on protection, investment and pensions business. Pensions administration, long the bugbear of Norwich's brokers, is much improved and the company hopes to tackle the remaining difficulties this year.
For all the improvements, there is room for concern about the serious management failures revealed in the court case, reported in this newspaper yesterday, involving a fraud in Norwich's motor salvage unit. The judge's criticism prompted Norwich to offer compensation in the low thousands of pounds to two or three innocent employees who suffered 'considerable trauma and distress' during the course of an unnecessarily aggressive inquiry by outside investigators.
It is astonishing that a department with annual turnover of pounds 17m was being run by someone who, after 20 years working for Norwich, was paid just pounds 12,000 a year. Norwich has since appointed new and more senior management to the motor salvage department. And for the sake of its employees, one must hope that salary is not the typical reward Norwich shows to long-standing and highly regarded staff.Reuse content