A surge in claims and a poor underwriting performance ate into profits at Hibernian Group last year and will trigger big premium increases for its customers.
The firm - which includes Norwich Union, Hibernian and CGU in the Irish market - achieved just a 7 per cent rise in operating profits to £95.8 million (€121.6 million) with progress being hampered by a 70 per cent fall in profits from its general insurance business.
The company has blamed the high incidence of storms, rising legal costs and substantial court awards for the huge drop in profitability in its general insurance business. Mr Tony O'Riordan, Hibernian's chief financial officers, said yesterday customers would face premium increases of 1045 per cent this year as the firm strove to restore profit levels.
Home insurance premiums have already been raised by 25 per cent, motor insurance by 10 per cent and general liability cover by 45 per cent, according to Mr O'Riordan. "These are the sort of level of increases the company will be implementing to put the business back to a level of profitability." Some customers have already been charged higher premiums as they fall due.
Hibernian chief executive, Mr Pat McGorrian, said the results come during a year when there was significant change at the company.
Last week the group was dealt a blow with the announcement that its deputy chief executive, Mr Vincent Sheridan, would leave in April to become chief executive of State-owned health insurer VHI. He was due to succeed Mr McGorrian as chief executive in June. Mr McGorrian will continue to lead the Irish operations. The group's new premium income grew strongly, rising to £1.1 billion (€1.4 billion) in 2000.
Hibernian is the largest player in the Irish insurance sector and was able to capitalise on the strong growth in demand for life and pensions products in the booming Irish economy last year.
The integration of the three businesses is proceeding and Hibernian is confident it is now positioned for further growth.
The disappointing results are the first full-year figures for the newly-merged group, now part of the UK-based CGNU.
Former Norwich Union shareholders in the Republic who now hold CGNU shares will receive a dividend of 29.67p per share which will be paid on May 17th.
