Storms hit insurer's profits

CGNU's storm-related claims were much greater than earlier expected

Storms in the UK and France cost CGNU, the UK's largest insurer, £285m ($412m) last year - far more than had earlier been expected.

The extent of the damage was revealed as the firm created by the merger of CGU and Norwich Union unveiled pre-tax operating profit of £1.41bn for 2000, down 7.8% on the year before.

"If we put to one side those exceptional weather costs and also the investment we're making in wealth management, our operating profit would have increased by 17%," chief executive Bob Scott said.

Despite the storm-related problems, this figure was at the top end of analyst expectations.

Earlier this year, CGNU had said its worldwide life and pensions sales had risen faster than expected while overseas businesses in general had also performed well.

US loss on sale

However, the post-tax net figure was dented by a number of other items including a £1.4bn post-tax loss on sales that included a US property and casualty business.

CGNU said it had experienced "difficult conditions" in the US market. Its decision to pull out also reflected the "requirement for substantial investment to achieve a leading market position".

CGNU also sold off South African and German business and closed down its London market operations during the year.

CGNU reported a post-tax net loss of £1.576bn.

Analysts usually concentrate on operating earnings as a performance measure as this excludes the distorting effects of gains or losses on investments.

'Well positioned'

Mr Scott said CGNU had now "successfully refocused" its business.

"We enter 2001 with the business reshaped, the integration process on course and the financial benefits coming through as planned.

"We are well positioned for future vigorous and profitable growth with increased shareholder returns."

Legal & General

Also on Tuesday, Legal & General, the UK life assurer, reported pre-tax operating profit on an achieved basis of £678m for 2000, up 4%.

Chief executive David Prosser said: "In our core UK individual life and pensions business we have achieved volume growth, taken further market share and, in a highly competitive market, maintained margins."

He said the business would be further strengthened by a recent distribution deal with High Street bank Barclays.

This would widen L&G's stakeholder pensions and retail investments operations.

L&G reported lower sales of unit trusts and ISAs in 2000 as well as lower volumes of bulk annuity purchases.

No tech fund

The company said its first-quarter market share was depressed because, despite high demand, it had not offered a fund investing in technology stocks.

L&G said it had taken the view early in 2000 that tech stocks were overpriced. Following the sharp declines in tech stocks that began last March, L&G's business had recovered.

Royal & Sun Alliance - a general insurance-focused company - reports on Thursday.

Like CGNU, it is expected to find profits hit by storms and floods-related claims.

At 0912 GMT, CGNU shares were up 28 pence at 995p, L&G was up 0.75p at 171.25p and Royal & Sun Alliance was nine pence higher at 523p.