Revenues tumble 38pc at crisis-hit CPP group

The York-based group, which recently agreed a compensation deal where seven million customers could share up to £1.3bn, said its performance this year will be “significantly” worse than 2012.

CPP is writing to customers who were sold and renewed around 23 million policies, after regulators found it gave misleading and unclear information about credit card and identity theft insurance.

CPP said the publicity and communication surrounding the scandal has seen the proportion of UK customers renewing their policies slip by 0.6 per cent from 70.7 per cent at the end of June, and may fall further.

It now has 7.6 million live policies, down from 7.9 million at the end of June and 10.1 million in June 2012.

The compensation deal with 13 high street banks and credit card companies is worth up to £1.3bn and was agreed in August, and followed its £10.5m fine last year from the City watchdog.

CPP’s shares fell about 12 per cent after it revealed the year-on-year July to October revenue slide, which the group said reflects the “challenges of its operating environment”.

Meanwhile, CPP said its cost-cutting plan is on track. Its workforce had shrunk to 1,100 by August from more than 1,500 during 2012.

Customers must approve the compensation deal, which then needs High Court approval, before the redress scheme can begin paying out next year.

CPP added its own charge for compensation and associated costs has increased by £1.8m to £55.8m.

The mis-selling scandal ran from 2005 to 2011, during which time CPP sold 4.4 million policies and renewed almost 19 million.

Of the 4.4 million, it is believed that only around 300,000 were sold directly by CPP, while lenders were responsible for around 4.1 million.

Many customers were sent new bank cards which they had to activate by going through a CPP call centre, where they were offered insurance.

The group said it is committed to a “fair and reasonable outcome” for customers.

In an interim management statement issued yesterday, CPP said: “The group is in the early stages of repositioning the business and developing its longer-term strategy.

“Significant risks and uncertainties remain in the short to medium term, particularly in relation to the scheme, liquidity and the on-going challenges of the operating environment.

“In line with previous guidance, the group’s performance for 2013 is expected to be significantly lower than 2012.”

The group appointed a new chief executive, Brent Escott, and chief financial officer Craig Parsons, on September 1. It has also appointed a group commercial director and a group IT transformation director.

Mr Escott said: “Our immediate priority is to strengthen the group as we enter the next phase of our development.

“We are working towards rebuilding CPP’s reputation and repositioning our business model to provide longer-term stability, continuing the improvements required to operate in a regulated environment and create a sustainable business proposition for the long-term.”

Overhaul of management team

Brett Escott joined CPP as interim deputy chief executive in June and has 20 years’ experience in the insurance industry.

He previously ran the commercial insurance business of Capita and has also worked for Brit Insurance and Club Direct.

The appointment formed part of CPP’s restructuring plans, which saw Paul Stobart, chief executive, and Shaun Parker, chief financial officer, announce their intention to step down from their respective roles following a transition period.

Shares rose 12 per cent following the announcement of Mr Escott’s appointment as chief executive, which came into effect on September 1.