Insurers fail to impress City

Investors reacted unfavourably to new premium business results for 1996 announced yesterday by General Accident and Commercial Union, two of the UK's largest composite insurers. Shares in General Accident slipped 18p to 801p, while CU was down 13p at 702.5p.

The slump came despite a 40 per cent rise in annualised new premium income to pounds 184m for last year unveiled by GA, which said pension sales had doubled and all areas had improved. Annualised sales are calculated by adding all new annual premiums and 10 per cent of single, one-off premiums. Annual premium income soared by 101 per cent to pounds 84.8m, while single premium income was up 12 per cent at pounds 996m.

Meanwhile, Commercial Union revealed that annual premium income from its new 1996 life, investment and pensions business jumped 22 per cent as contributions from newer territories increased. New annual premium income rose to pounds 253m, while single premiums grew a fifth to pounds 2.36bn. Total new premium income was 25 per cent higher at pounds 2.89bn.

The figures are part of an improving trend for the UK insurance industry, which has been reporting better new premium income for last year on the back of growing consumer confidence and the reducing impact of regulatory and training requirements introduced in the last few years.

According to Peter Hale, assistant general manager of General Accident Life: "New business growth is well in line with our long-term growth strategy and has been achieved profitably across all business areas.

But analysts at Kleinwort Benson told clients to sell GA shares, moving them down from a hold recommendation, citing the strong price rise over recent weeks and the outlook for the industry.

HSBC James Capel said it was advising institutions running active funds to sell the stock because the shares were trading at 114 per cent of net asset value. It was giving similar advice on Commercial Union, now trading at 121 per cent of net asset value.