FAI Insurances has 65% slump in profit

Press, 6 September 1989, Page 40

FAI Insurances has 65% slump in profit

NZPA-AAP Sydney FAI Insurances plans to continue its move back to core business activities following a 65 per cent slump in profit to sAust6o.o4 million (SNZ77.2M) in the year ended June .30. Chief executive, Mr Rodney Adler, said that although the result was “obviously disappointing”, it was pleasing when the economic climate of the last 12 months was considered. He cited high interest rates, the falling stock market and floods and cyclones on the east coast of Australia as the main reasons for the profit decline. However, sales revenue increased by 28.4 per cent to $632.40M, which Mr Adler said showed the success of the move back to core business activities — insurance (general and life), stockbroking, financial advice and general financing. Premium income reached a re-

cord $539.04M from $466.45M while the company also recorded an underwriting profit of $4.56M, continuing to buck the general industry trend.

Provision for outstanding claims increased to $655.74M and, combined with the unexpired risks provision, now stands at $937.94M. Mr Adler said the company had virtually completed its sell-off of non-core investments and this would be reflected in next year’s result.

“We firmly belive that it is best to move back to what we know best,” Mr Adler said. “The company does not have much at all invested in equities now and that situation is not likely to change very much in the near future.

“Although it is possible or even likely that we could get left behind or miss out on profit opportunities because of this, we will still concen-

trate on our insurance business.”

Mr Adler said the company was highly cashed with more than S4OOM available

However, he denied suggestions the company was on the acquisition trail despite the purchase of a 5.51 per cent stake in a U.S. insurer last week.

“At the moment our motto is slow and steady and that is the way we like it,” Mr Adler said. “That is not to say, of course, that we will not look at opportunities as they arise and there is still plenty of room for expansion in Australia and New Zealand. i“ln fact we intend to make a strong local push to increase our market share in the next year.” A fully franked final dividend of 4c a share has been declared, unchanged from the previous corresponding period, making an annual fully franked dividend of 14c.