General Accident back in the black

GENERAL ACCIDENT yesterday became the first of the big composite insurers to report a return to the black, after a strong improvement in the UK enabled it to make a second-quarter profit of pounds 9.5m.

The company also announced plans to raise up to pounds 300m by the issue of preference shares in a move similar to the recent fund- raising by Commercial Union.

The second-quarter profit reduced the pre-tax loss for the half- year to pounds 21.2m, an pounds 84m improvement on last year's pounds 105.2m loss. Underwriting losses in the UK dropped from pounds 178.4m to pounds 104.8m. The home-owners' account showed an underwriting profit for the second quarter.

Nelson Robertson, chief general manager, said all the improvement had come from General Accident's own actions rather than from any improvement in the economy. 'We know there's a lot more work to do but we are pleased we are moving in the right direction,' he said.

In addition to implementing sharp increases in premium rates, General Accident has cut costs by shedding 2,000 of its 8,000 UK staff over the last 18 months. The company has nearly completed its redundancy programme. Bob Scott, general manager for the UK, said future rate rises 'won't be nearly so severe' and will target high-risk classes of business.

General Accident intends to use the proceeds from its preference share issue to repay part of its pounds 610m of debt, some of which becomes repayable next spring.

Although the insurer is seeking shareholders' authority to issue pounds 300m of preference shares, it has still to decide the size, timing and terms of any such issue. The issue of the whole pounds 300m would add nearly 10 points to the group's solvency ratio, which has fallen back to 37.6 per cent.

The interim dividend is unchanged at 9.7p a share.