Pre-tax profit rises to £15.4m at Eagle Star

Eagle Star, one of the State's largest insurers, made a pre-tax profit of £15.4 million on a turnover of £132.4 million last year.

This compares with pre-tax profits of £12.2 million in 1996 on a turnover of £66 million. This is the first time the company has given profit figures for its operations in the Republic.

The company says its acquisition of fellow insurer Irish National was one of the reasons for the large increase in turnover between 1996 and 1997. Last year Eagle Star's underwriting losses increased to £8.9 million and shareholders funds were up 24 per cent to £115.1 million, a media briefing in Dublin was told.

The managing director, Mr Ian Stuart, said the insurance industry is facing further mergers, declining investment returns and increasing claims. According to Eagle Star any insurance company with less than 5 per cent of market share "has no future" and will be forced to either withdraw from the market or do a deal with another insurer. Eagle Star is the fifth-largest insurer at present, with 10 per cent market share. It employs 480 people and has an investment portfolio of £374 million.

Mr Stuart said that due to falling investment returns from gilt markets and increasing claims, the pressure on insurance firms would "intensify greatly over the next two to three years". He said this would mean falling employment in the industry and higher premiums on certain products.

Mr Stuart said the arrival of the euro was depressing returns from gilts and greater involvement in equities by insurance companies will not offset this. The company says it cannot envisage investing more than 30 per cent of its funds in equities which it says are more risky than gilts.

He added that increased economic growth was resulting in a higher number of accidents and larger number of cars on the road, which is pushing up claims.

"We have had cases where we paid out £2 million for just the one accident," he said.

He said there are between 20 and 30 companies with less than 5 per cent of the insurance market and the larger players may acquire many of these. Mr Stuart said Eagle Star was actively looking at making an acquisition within the Republic.

Mr Stuart said employers liability insurance was proving "very costly" to insurers and accounts for a significant portion of overall insurance costs.

"The cost per claim is very high for employers liability and we have not made any money in that area for many years," he said.