Operating profits at Irish insurer Hibernian fell almost 46 per cent during the first six months of the year to €90 million as claims costs and expenses rise, according to its parent, UK group Aviva.
Hibernian said profits from its general insurance division fell 55 per cent to €52.7 million, compared with €118 million over the same period in 2007. Premium income in this division also fell and was over €24 million lower at €351 million compared with the first half of 2007.
Profits in its life and pensions division dropped from €48.9 million in the first six months of 2007 to €36.9 million over the same period this year.
Life and pensions new business under PVMBP fell sharply in the first six months of this year to €842.8 million compared with €1.315 billion during the same period a year earlier.
Stuart Purdy, Hibernian Group chief executive said the economic slowdown has had a clear impact on the savings and investment market generally and that trading conditions remained challenging.
He noted the impact of the maturing Special Savings Incentive Accounts last year and said these had a significant one-off impact on the market. "The slowdown in the housing and property markets and continuing volatility in investment markets are contributing to a reduction in sales."
In light of the changed market conditions he said Hibernian has taken a number of "prudent decisions to improve efficiencies and reduce costs".
Hibernian recently said it would cut more than a quarter of its workforce or 580 Irish-based jobs over the next three years and moving the positions to a lower cost operation in Bangalore, India.
"We are confident that these decisions are the right ones to allow us to maximise the size and strength of Hibernian's business in Ireland," Mr Purdy added.
Hibernian said overall insurance prices in Ireland are now at "unsustainable levels" and that against a steady increase in claims costs and increases in expenses premium income was in decline.
Aviva today reported a 12 per cent rise in first-half profit as the strong euro helped offset the impact of market turmoil and announced a long-awaited deal to reallocate surplus assets held by two with-profit funds.
Aviva said it would make a £1 billion offer to policyholders to reattribute the cash - money built up in the funds over the years above what is needed to meet policyholder commitments.
The Aviva payout, which amounts to roughly half the assets remaining after a distribution announced earlier this year, will be funded from shareholder resources.
Aviva said the reattribution would create a one-off embedded value profit of £25 million, and a one-off statutory profit of £390 million, helping to underpin dividend growth.
Over the first-half, Aviva's operating profit on a European embedded value (EEV) basis rose to £1.72 billion, broadly in line with forecasts and up from £1.54 billion a year ago, when it was hit by the cost of heavy flooding in Britain.
Statutory operating profit was up 7 per cent at £1.23 billion, also in line with analyst estimates. Aviva is the first major UK insurer to report earnings for the first half of the year, and analysts said today its numbers would likely reassure investors and the broader sector.
Aviva's key life division remained a driver of the group's growth with operating profit up 18 per cent, above forecasts, but results were mixed with drops in Ireland and Netherlands, while markets such as Poland and the US division continue to grow.
The strong euro helped lift European life sales 15 per cent, in line with Aviva's 10 per cent target. General insurance, which generates roughly a quarter of sales, saw operating profit dip 4 per cent, despite a 15 per cent rise in Britain, where it said market conditions would remain challenging into 2009.
Additional reporting Reuters
