Bottom Line: Slower growth assured at Lloyds Abbey Life

THE STOCK market seemed to like yesterday's interim figures from Lloyds Abbey Life but it is not clear why. Black Horse Financial Services, the embodiment of bancassurance - the link between banks and life assurance - looks to be running out of steam.

Profits from BHFS were up by a healthy 18 per cent to pounds 60m. But selling life insurance to Lloyds Bank customers is becoming more difficult.

Regular premium sales were unchanged at pounds 34.3m and single premiums actually fell by 10 per cent to pounds 193.7m.

Lloyds Abbey can justifiably point to tough market conditions; BHFS has almost certainly increased its market share of the more valuable regular premium business. But the longer-term picture remains one of slowing growth.

Dull old Abbey Life, the group's ugly sister, turned in a creditable performance. Abbey Life's sales force of 3,000 or so restricted the decline in regular premium sales to 7 per cent and lifted single premiums by 30 per cent to pounds 110.7m. Pre-tax profits edged ahead to pounds 69m.

The group total rose 7 per cent to pounds 152.5m but was held back by problems at Trans Leben in Germany, which suffered a pre-tax loss of pounds 10.8m after provisions, for the second time in a row, against commission advances made to brokers and for cancelled policies.

Stephen Maran, Lloyds Abbey's chief executive, said he could not see much in the way of returning consumer confidence, and the mini-boom in the housing market is slowing down. Yet it is Black Horse Estate Agencies, which made a reduced loss of pounds 1.8m, and Lloyds Bowmaker, the lending arm with a shrinking loan book, that offer the best prospects of recovery.

Bowmaker's jump in profits from pounds 4m to pounds 11.5m and declining bad debt charge (down from pounds 40.3m to pounds 24.3m) gave some observers hope that the group will pay a modest increment on the final dividend - hence the shares' rise from 407p to 418p. Don't bet on it. Lloyds Abbey remains tightly constrained on distributable earnings.

Despite their bancassurance status the shares have few short-term attractions since the life insurance sector may be blighted for the rest of the year by the Treasury's demands for better commission disclosure.