Provident still hunting for buyer following £31m loss

GMAC’s motor insurer Provident, currently up for sale, racked up a £31.1m loss last year, Insurance Times can reveal.

Its latest accounts show that Provident has been badly hit by rising bodily injury claims and plunging investments. The company made £8.4m profit in 2008.

Parent company GMAC, under pressure to repay the US government after receiving a $17.2bn (£11.5bn) bailout, paid £170m for Provident three years ago.

A leading insurance analyst said the losses could force GMAC to abandon the sale. He explained: “These results could suppress the value of the sale. The value GMAC paid for the company is probably unachievable on a sale on that type of result.”

Potential bidders for Provident include Markerstudy, IAG UK and Aviva. It is also believed that Provident’s management is seeking backing for a buy-out.

In a statement, Provident managing director James Reader said: “Significant rating and underwriting action has been taken since mid-2009 to address the challenging conditions in the UK motor insurance market and return Provident to profitability.

“As announced previously, Provident was classified as a discontinued business operation by GMAC in line with US accounting rules in view of an intended sale. We are working to identify a new owner for Provident in the best interest of the business and its employees, while allowing GMAC to focus on its core operations.”

Goldman Sachs is negotiating the sale on behalf of GMAC, which was handed three bailouts by the US government last year.

Provident’s results also revealed an 11% drop in the number of policyholders to 495,000 at the end of 2009, and a 12% fall in gross written premium to £165.3m, compared with an increase of 24% in the previous year. Interest on deposits and UK government securities fell by £11.7m and £1.54m respectively in the year.

The 2009 loss ratio deteriorated to 94.7% from 87.6% in 2008, and the current year combined ratio worsened at 121.2%, from 115.1% in 2008. Provident’s staff numbers increased from 284 to 333 last year.