Drop in property sales hits insurer

BRITISH insurer and real-estate company Countrywide Assured Group plc said first-half profit fell 39% as house sales dropped. The company said it sees earnings improving and its shares rose as much as 8.6%.

Operating profit dropped to £22.1 million ($35.6 million), or 4.78p a share, from £36.4 million, or 7.23p, in the year-earlier half, the England-based company said in a statement.

The number of house sales the company completed fell 16% in the half.

Countrywide said in June that full-year profit will be “significantly below’ analysts’ forecasts following a slump in demand for houses and life insurance.

The number of home sales in England and Wales fell 16% in the second quarter from the year before, the UK Land Registry said.

The Bank of England last month cut its benchmark interest rate to 3.5%, the lowest since 1955.

“For the rest of this year, we expect activity to pick up, despite a possible moderating of average house price increases, and look forward to improved profitability,” chairman Christopher Sporborg said.

Countrywide shares advanced 10.5p to 132p in London.

They have gained 17% this year, compared with the 25% increase in the FTSE 250 Index.

The company will pay an interim dividend of 2.15p a share, up from 2.05p a year ago. Operating profit in the estate agency unit dropped 63% to £5.7 million in the first half.

The company forecast it will earn a record commission income from house sales in the second half.

Expected commissions on sales awaiting completion were £63.4 million at the end of the first half, up 11% from the year before.

If this level of business is sustained, it may push profits “materially higher”, the company said.

The life insurance business, which mainly marketed mortgage endowments, posted a loss of £2.5 million, compared with a profit of £6.4 million.

Countrywide took a charge of £5.6 million partly to compensate customers who were wrongly sold policies.

The unit stopped underwriting new policies this month.

British annual house-price growth slowed for a fourth month in July, as the number of first-time buyers fell by 31%, according to Nationwide Building Society.

Prices climbed 18% from a year ago, compared with a 19% annual rise in June.

Last year, house prices advanced at their quickest pace since 1989, after the Bank of England moved to cut interest rates by a third in 2001.

The company’s operating profit last year soared 46% to £86.2 million, as the lowest borrowing costs in almost four decades spurred more people to buy their own homes.