Market conditions in 2003 were arguably the most testing on record for the insurance industry. Although there was some recovery in the equity markets during the second half of the year, consumer confidence remains low and the challenge to bridge the UK's 'savings gap' remains a significant one. In spite of this, I am pleased to report that CIS remains one of the UK's more important and respected insurance businesses.
Our total premium and unit trust income decreased to £1,971 million, a fall of 11%. Profit before tax from our general insurance business (excluding short-term investment fluctuations), rose to £61.7 million compared with £27.5 million in 2002. The result, including short-term investment fluctuations, was a pre-tax profit of £134.6 million compared with a pre-tax loss of £257.5 million in 2002.
CIS has achieved these financial results whilst continuing to maintain and strengthen customer focus. This was recognised in June 2003 when CIS was voted 'Best Car Insurance Provider' and runner up in the 'Home Insurance Provider' category at the prestigious Guardian/Observer Consumer Finance Awards. These awards, which follow similar successes in recent years, demonstrate the commitment of our staff to providing the very best service for our customers. The UK insurance industry is in a phase of transition. In responding positively to the many social, political and regulatory challenges facing our industry, I am confident that CIS will map out a sustainable future. We are also able to look forward to a more successful one as part of Co-operative Financial Services (CFS), the Industrial and Provident Society formed in April 2002 to bring CIS and The Co-operative Bank together. CFS is already building on the strong foundations laid down by both The Co-operative Bank and CIS, to offer more than 7 million customers a more extensive choice of co-operative financial products and services. Indeed, the vision of CFS is to provide a consistently high level of service by whichever means the customer chooses, whether in the home, through a network of high street branches, by telephone, post or over the internet.
We have also been working closely with the Co-operative Group on the introduction of a Co-operative Group-wide individual member dividend scheme. Through this scheme many policyholders and customers should be eligible to become members of the Co-operative Group. Membership benefits will include a dividend based on their trading relationship with the whole of the Co-operative Group, including CIS.
CIS continued to strengthen its Board in 2003 with the appointment of two independent
Non-Executive Directors: Graham Stow was appointed in March 2003 and David Davies was appointed in June 2003. Bob Burlton, joined the Board as a Non-Executive Director in March 2003 and Paul Hewitt, Chief Financial Officer of the Co-operative Group, was also appointed to the Board as a Non-Executive Director in May 2003, following the retirement of David Jackson from the same date. John Reizenstein, Executive Director, Finance and Actuarial of CFS was appointed to the Board in June 2003.
Finally, I would like to take this opportunity to thank Sir Graham Melmoth, Bill Brown and Peter Marks for their many years of commitment to CIS. Sir Graham, a Non-Executive Director, retired in May 2003 after 7 years on the Board. Bill Brown resigned as Deputy Chair of the CIS Board in June 2003 after 6 years in the position and 15 years service to the Board and Peter Marks, Non-Executive Director, resigned in November 2003, after 3 years on the Board.
Simon Butler, Chair
