Barclays' insurance division suffers £240m premium drop
BARCLAYS' controversial Dublin payment protection insurance (PPI) business suffered a £240m (€290m) collapse in premiums last year after the bank agreed to axe the division's core product.
The sharp collapse in gross written premiums is revealed in accounts just filed for Barclays Insurance (Dublin) and Barclays Assurance (Dublin), which make up the Dublin PPI empire.
The duo have generated massive profits for Barclays since their 1997 inception, sending home dividends of £510m in 2007 alone as they reaped the rewards of selling PPI and life insurance to Barclays' borrowers.
But the massive profits came in for sharp scrutiny from UK consumer groups, with the UK's Citizen's Advice group deeming the cover a "rip-off" and thousands complaining about mis-selling.
The main city regulator waded into the row in early 2005, asking all banks and lenders to stop selling single premium PPI products "as soon as possible" and by no later than May 29, 2009.
The stark impact of this request is evident in the latest sets of accounts from Barclays' Dublin units, which cover the year to the end of October 2009.
Gross written premiums at the life insurance PPI division, Barclays Assurance (Dublin) fell from £213m to £28m. Premiums at the non-life arm, Barclays Insurance (Dublin), tumbled from £135m to £78m.
Both sets of accounts attribute the fall to axing of the single premium policies, which had made up the bulk of sales.
"In June 2009, the company ceased selling its single premium product and in its place launched a new standalone regular premium product in July 2009," the companies' directors said in identical statements.
The UK authorities also tightened rules on regular premium PPI offerings, forcing banks to wait for seven days after loans are taken out before offering PPI products to clients.
Barclays is appealing some aspects of the new rules, but a spokeswoman yesterday admitted the new regular premium products were unlikely to restore business at the Irish units to their past levels.
"Given the economic climate, a fall in gross written premiums is inevitable but it is likely to improve over time," she added, stressing that the change had no implication for the 43 Dublin PPI staff.
Profits at the Dublin companies were somewhat insulated from the collapse in turnover last year, since both divisions booked massive gains from changing their provisions for unearned premiums.
Those gains helped Barclays Assurance (Dublin) keep its technical profits at £46.7m against £65.1m a year earlier, while Barclays Insurance (Dublin) lost £1.8m on the technical account last year against a £22m profit in 2008.