Domestic & General said its costs increased and loss ratios were up as it sold more policies to people buying electric appliances.
Turnover from its insurance and warranty business in the UK increased by 23% in the last six months of 2001 compared to the same period the year before, the company reported.
But income earned from its warranties increased by just 8% in the period although it would increase over the period of the contracts.
The profit on continuing operations before tax fell to £7.4m from £8.3m in the same period the year before.
Operating profits, including equity returns using a long term rate of return, increased by 6.7% to £9.5m.
Profit from activities, excluding investment income, increased by 12.5% to £5.4m.
D&G's policies cover the cost of breakdown and repair work for household goods made by manufacturers including Dyson, Hoover and Zanussi.
It has branched out into pet insurance, bought call centre business Inkfish and signed deals with BskyB and Bosch.
It received £56.1m in premiums from policy holders and paid out £26.1m in claims over the six months.
Commissions amounted to £4.3m. It has £107m of unearned premiums in the pipeline and £5.9m of outstanding claims.
