Hibernian reports operating profit increase of 86.8%

INSURANCE GROUP Hibernian reported a 86.8 per cent increase in operating profit to €352.9 million in 2007 buoyed by a strong performance in its life and pensions business, which returned to profitability during the year.

The group recorded operating profit of €116 million in its life and pensions division, compared with a loss of €63.3 million in 2006.

Falls in premiums and higher claims pushed operating profit in the group's general insurance division down 6 per cent to €236.9 million, despite the number of policies rising by around 31,000.

Gross premium income fell 9 per cent to €716.7 million in 2007.

Hibernian group chief executive Stuart Purdy described the results of the life and pensions business as "terrific", but said the group could not afford to reduce insurance premiums any further.

"There is not much gas left in the tank on that," he said, adding that the cost of claims and operating costs (combined operating ratio) in the general insurance business had risen from 77 per cent of all income in 2006 to 80 per cent in 2008. The average annual motor premium has fallen from €752 in 2002 to €490 in 2007, the group said.

Mr Purdy declined to comment on Hibernian's reported interest in buying a stake in health insurer Vivas, whose products the group sells. "The reality is that we are the biggest composite insurer in the market and we have got strength in our offering . . . We periodically review what we offer but we haven't made any decision with regards to the health sector."

Mr Purdy said the group had outperformed the market in 2007, with the general insurance business growing to 19.9 per cent of the market and the life business rising to a 17.3 per cent share.

"Overall we are pleased but there are challenges in the market which will be very difficult," he said. "Investor uncertainty and volatility in the market" would affect growth in 2008 but Mr Purdy was still optimistic Hibernian could continue to increase market share.

"We are expecting the market to be relatively flat in 2008. Against that, we would like the Hibernian business to perform at a rate beyond the market," he said.

Hibernian's parent company, Aviva, posted a 1 per cent increase in operating profit to £3.2 billion (€4.1 billion). Earnings were hit by £475 million in claims due to flooding in Britain last summer.

The group plans to build a global asset management business, Aviva Investors, with £316 billion under management. Aviva closed 1 per cent up at 616 pence.