GRE proves it can go it alone:The Investment Column

GRE is scathing about suggestions that it needs a partner and on yesterday's half-year performance it gained some credibility. At least, unlike one of its recently merged peers, the company does not put out press releases in which the quotes are attributed jointly to the executive deputy chairman and the chief executive.

That quaint formula was in Royal & Sun Alliance's announcement of job cuts and management changes, and was ostensibly to reassure the two lots of staff in the merged companies that all their interests were being looked after. It is hardly a good omen for a smooth integration of the two groups and GRE is arguably better off on its own.

The trading profit before investment gains at pounds 137m was down pounds 42m compared with a year ago. Given the rates wars in the motor business, that was a reasonable performance and signi-ficantly better than forecast.

With investment gains down pounds 45m to pounds 103m, pre-tax profits fell to pounds 231m from pounds 327m, while the interim dividend rose 9.7 per cent to 3.4p a share.

GRE has done a good job of maintaining margins in the UK and Germany during fierce competition. The loss of the Nationwide household account for next year is actually a positive sign at this stage of the cycle - when rates are low and the risk of a new phase of the price war is high - because GRE refused to bid below its minimum rate of return of 12 per cent.

Though it was late into direct selling, GRE is investing heavily and has increased the renewal rate by existing customers since it took over RAC Insurance Services.

John Robins, chief executive, is also putting in proper chief executives to run the three main sectors. So though Royal & Sun Alliance has plenty of scope for cost savings, it will be hard work and, in the meantime, GRE will benefit from the freedom to keep its eye on the ball.

Having decided doggedly to continue with its small, life business, GRE is also about to add pounds 200m to net asset value with a switch at the end of the year to embedded value accounting. The share price this year has lagged too far behind Royal and General Accident. Good value.