Tax Rule Adds Up To Windfall For Mercantile
The Age
Tuesday December 8, 1992
The finance group Mercantile Mutual yesterday announced a 14per cent rise in profit to $47.2million for the year to September.
But a $19.2 million tax benefit arising from a recent income tax ruling boosted profit to a record $66.4 million.
Gross premium income rose 28per cent to $954 million.
For the first time, profit from Mercantile's non-life insurance operations exceeded that earned on life insurance.
Profit for non-life operations came in at $28.2 million compared with $13.2 million for the group's life operations.
Life premium income rose 42per cent to $668 million while non-life income edged four per cent higher to $286 million.
Mercantile's managing director, Mr Phil Shirriff, said the higher profit on general insurance reflected higher general insurance prices.
``The price of general insurance now reflects the risk we take," Mr Shirriff said.
``The excellent general insurance performance resulted from improved underwriting, a period during which there were no significant catastrophes, and a group commitment to ensure that premiums were adequate for insurance exposures." He said the life insurance result had suffered from falling share and property markets.
The controversial accounting standard AASB1023, which requires general insurance companies to value their investments at market value rather than historical values, cost Mercantile $1.6million for the year.
Mr Shirriff said with the accounting change, general insurers had to manage investment risk as well as insurance risk.
Mr Shirriff said yesterday Mercantile had offered to refund money to Aborigines in the Northern Territory who were allegedly sold policies under misleading and deceptive circumstances, before the Trade Practices Commission became involved.
The TPC announced last Friday it had commenced proceedings in the Federal Court in Darwin against Mercantile Mutual and one of its agents for alleged misleading and deceptive conduct in the sale of insurance and superannuation policies to Aborigines.
Mr Shirriff said the agent had been dismissed when the company discovered statements made by the officer were not consistent with the contract.
© 1992 The Age
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