Merger costs eat into Covéa’s 2012 profit

Pre-tax profits at Covéa Insurance, formerly MMA Insurance, fell 44% in 2012 thanks in part to the cost associated with its formative mergers.

However, the underlying numbers suggest a profitable combination.

Covéa Insurance made a pre-tax profit of £4.1m in 2012, according to a Companies House filing, down 44% on the £7.4m it made in 2011.

Contributing to the drop was £6.4m of costs associated with merging the business MMA Insurance, Provident and the Gibraltar-based Gateway to form Covéa Insurance last year.

After the transfer of their business into Covéa, Provident and Gateway ceased trading on 30 September 2012.

The £6.4m bill comprised professional fees and communication costs associated with the business transfers, the cost of rebranding the operations as Covéa Insurance, and other one-off costs associated with combining the thee businesses.

The merger costs helped boost Covéa Insurance’s operating costs to £124.7m in 2012 from £98.7m in 2011.

Underlying profit

The picture at Covéa is also distorted because the 2012 results include three months of profit from Provident and Gateway.

In the nine months before the transfers, Provident made a pre-tax profit of £13.8m and Gateway a pre-tax profit of £3.6m.

This suggests that had Provident, Gateway and MMA Insurance been running as one for the whole of 2012, the pre-tax profit would have been £21.7m.

The Companies House statement reads: “The integration has been completed successfully and the directors are confident that the company is well placed to deliver its objectives in 2013 and beyond.

“The directors’ intention is to grow the business profitably across all classes, with a particular focus on expanding its commercial lines proposition.”

Covéa Insurance is the UK arm of French mutual insurance group Covéa.