Sales on way up at CPP in face of FSA move

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CREDIT card insurer CPP Group said sales in the UK continue to grow despite an ongoing investigation by the City watchdog.

The York-based group revealed in March the Financial Services Authority is investigating “alleged failings” in its sales calls for identity theft and credit card products. It had no update on the investigation yesterday, only to say discussions were ongoing and it was uncertain when the probe will conclude.

CPP said higher sales of mobile phone insurance and packaged accounts helped UK sales to grow four per cent since June 30, versus a year earlier.

This contributed to northern European sales growth of five per cent and overall group sales growth of six per cent. This was down on the 10 per cent revenue growth to £172.1m CPP reported in the first six months of the year.

“In the circumstances it’s pretty good,” said chief financial officer Shaun Parker. “Our international businesses continue to develop very well, with further strong performance in the US as we expand our existing business partner relationships.”

Its shares gained 10.4 per cent to close at 130.5p.

CPP said renewal rates edged up 0.2 per cent to 75.2 per cent since the end of June, while the number of live policies has grown one per cent to 11 million.

However, the group’s underlying operating margin is down 0.9 per cent so far this year at 13.8 per cent, versus 2010. It has been squeezed by costs and lost revenues associated with the FSA investigation, as well as growth abroad.

The company said it expects continuing revenue growth for its final quarter, but warned margins and sales into Northern Europe would continue to be hit by the continuing suspension of its identity protection insurance product.

CPP hopes to soon fully launch a non-insured version, Identity Safe, and is talking to its business partners “as we seek to gain their agreement to a full launch”.

Mr Parker admitted there has been some “reticence” among its business partners over possible “reputation consequences” from the FSA probe.

“They like the products,” he said. “We’ve worked with these business partners for many years (but) their stance towards the regulator (FSA) is a lot more cautious than it might have been a few years ago.”

Despite the tough economy, Mr Parker said CPP is well placed to grow. “The risk of fraud increases (during a downturn). In some respects our business could be slightly counter-cyclical.”

However, he added more people are choosing not to renew its products on cost grounds.

Last month CPP parted company with Eric Woolley, the chief executive who led the it onto the stock market, replacing him with former Sage Northern Europe chief executive Paul Stobart.

Mr Stobart said: “(The FSA probe) was a factor I took into consideration (when taking the job) but well outweighed by the longer-term prospects for the group. From a personal point of view my family lives in the North and I did not want to uproot them. But overwhelmingly important to me was the long-term growth opportunity for the business.”