Card insurer racks up £20m loss
The company, which was last year fined £10.5 million by the Financial Services Authority for ''widespread'' mis-selling, warned it continues to face "significant financial challenges" as it looks for funding.%VIRTUAL-SkimlinksPromo%Sales from continuing operations fell 10% to £270 million in 2012 as fewer customers signed up or renewed policies. Exceptional costs of about £44 million wiped out earnings and compared with pre-tax profits of £21.6 million a year earlier.
The York-based company, founded more than 30 years ago by entrepreneur Hamish Ogston, sells products such as wallet, mobile phone and card protection through banks and building societies but has been battered by the mis-selling scandal.
Its rate of customer renewals fell to 73.3% from 75.4% and live policies declined 10% to 9.9 million.
The Financial Services Authority last year slammed CPP for treating customers unfairly, selling them insurance they did not need, automatically renewing policies and exaggerating the risks of not taking out its insurance. That prompted speculation CPP's banking partners, which include Santander, Royal Bank of Scotland, Yorkshire Bank and HSBC, could also be on the hook for compensation.
The mis-selling scandal ran between 2005 and 2011, during which time CPP sold 4.4 million policies and renewed almost 19 million. Of the 4.4 million policies, it is believed only about 300,000 were sold directly by CPP, while lenders were responsible for 4.1 million.
CPP recently set aside £51.7 million to cover the fine, customer compensation and other costs - but warned this figure may rise further. Chief executive Paul Stobart said this uncertainty has hampered its search for long-term funding.
Mr Stobart said: "The fall-out from the investigation has been considerable; our reputation with business partners has been damaged, we have lost a number of important contracts in the UK, and our growth prospects have been impacted."
Mr Ogston is attempting to take the company private with a possible 1p per share offer worth £1.7 million. The entrepreneur, who has 57.2% of CPP's shares, has said an offer would need the backing of CPP's board, plus a new three-year credit line.