Guardian shines on strength of motor insurance

INCREASINGLY profitable motor insurance business has pushed Guardian PMPA Insurances operating profit up to £51.4 million from £41 million a year ago. The key factor behind this was a better underwriting result and cost cutting, mainly through non-replacement of staff.

As a result, Ireland's largest general insurer, with 40 per cent of the private motor market, is planning to cut premiums on motor policies by between 4 and 10 per cent.

The group made a record pretax profit of £105.1 million from £4.7 million a year ago. However, most of these gains come from unrealised investment appreciation.

Guardian's newly launched reinsurance operation in the IFSC took in premiums of £75 million out of a total for the group of £85 million.

Investment returns were also buoyant with a realised gain of £37 million in investment income. Unrealised capital gains of £20 million and a mostly unrealised gain of £30.1 million on shareholders' funds boosted pretax profits.

The company said this was a result of buoyant global stock and bond markets. But, if the markets were to fall, all these gains could disappear in a matter of weeks.

Guardian Direct, the newly-launched telephone sales arm, took in £1.5 million of premium income which is exactly on target Mr Healy said. However, the total market for a telephone-based operation is only about 3 per cent of the £400 million private motor market, he said.

The company is planning on moving into household insurance over the phone later this year. But it is still trying to discourage policyholders from switching between its different companies as this "just raises costs", according to Mr Healy.

Guardian has still not made any significant inroads in the life side of the market. It still has only about a 2 per cent market share, despite having about a 40 per cent share of the term insurance market including mortgage protection.

Mr Healy said the company was bullish on life operations. He did not rule out a possible acquisition. "We have been talking to people and no doubt we will be talking to people again," he said.

Surging values of shares and bonds powered a major turnaround at the company's parent Guardian Royal Exchange in 1995, writes Sebastian Taylor, from London.

Profits after including in vestment gains of £570 million sterling hit as much as £812 million. This compares with 1995 losses of £75 million after debiting investment losses of £223 million, mainly due to weak bond markets, and restructuring costs of £28 million. Powering stock market values also lifted end-year net asset value by 44 per cent to £2.23 billion. Total dividend payments are 9.1 per cent higher at 9p per share.