Sun Alliance sees pounds 15m claims from Hurricane Andrew

SUN ALLIANCE, the UK's largest general insurer, expects to be hit by pounds 10m to pounds 15m of insurance claims arising from damage caused by Hurricane Andrew in the United States.

Its exposure to the hurricane comes through its reinsurance of the giant Chubb Corporation, the US insurance group.

But although the group stands to face some buffeting from the hurricane claims, its half-year results - showing losses reduced from pounds 114.1m to pounds 97.9m - were much better than expected. City analysts had been expecting that it might report losses of between pounds 110m and pounds 140m for the six months ended 30 June this year.

The share price yesterday climbed 31p to 253p.

Announcing the results Roger Neville, chief executive, said: 'While we are disappointed at having to report another pre-tax loss, there are now clear signs of recovery in most of the markets where Sun Alliance operates.'

He added that had it not been for terrorist bomb damage in April in the City, in the second quarter, including mortgage indemnity losses, the group would have broken even.

Sun Alliance has been the largest insurer of mortgage indemnity insurance. In mortgage indemnity insurance schemes, a mortgage lender is insured against an adverse difference in the value of a mortgage and the underlying value of a property that develops in the event of the property having to be repossessed.

Sun Alliance has an estimated 25 per cent of the mortgage indemnity market business and in the first half of its financial year suffered losses of pounds 108m. This is expected to climb to around pounds 200m for the full year. The group said that the monthly rate of repossessions had declined in comparison with the second half of 1991 and there were signs that the average cost of mortgage indemnity claims was slowing down. 'It is,' Sun Alliance added, 'too early to be confident of any sustained improvement.'

Scott Nelson, the group's general manager, said he hoped that the mortgage indemnity claims would decline next year although he did not expect the improvement to be significant.

Meanwhile, the group is seeing an upturn on the underwriting side, reflected in its decision to maintain the dividend payout to shareholders at 5.25p a share.

On the motor account, premium rates are rising at the rate of around 25 per cent, while in the commercial sector premium rates are rising at between 25 and 30 per cent.