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LONDON -- The merger of the financial services operations of B.A.T Industries P.L.C. and Zurich Group is on course for completion in September or October, B.A.T Chairman Lord Cairns said last week.
Speaking as the London-based tobacco and financial services group unveiled interim results, Lord Cairns said the target date should be met, "provided that regulatory consents continue to be achieved as expected."
Commenting on the pretax profits for the six months to June 30, 1998, which were 14% lower than in the same period last year at L1.06 billion ($1.77 billion), Lord Cairns said one reason for the decline was a L55 million ($91.7 million) charge for demerger and restructuring costs.
Pretax profits also were lower because of a L152 million ($253.5 million) charge to cover U.S. tobacco settlements by its U.S. subsidiary, Brown & Williamson Tobacco Corp. The legal settlements were in Texas, Florida, Mississippi and Minnesota; they relate to the cost of treating smokers under Medicaid. B.A.T warned that there will be further charges for settlement costs in the remaining quarters of 1998 and that further amounts are payable each year by the U.S. tobacco industry from 1999 onward.
However, B.A.T's results benefited from a one-off recovery after court action in Brazil of L78 million ($130.1 million) of tax on sales levied as social contributions.
Trading profit -- the profit on trading activities before tax and excluding investment income -- from B.A.T's financial service operations improved by 2% to L584 million ($973.9 million). Underwriting results at Eagle Star Holdings P.L.C., B.A.T's principal U.K. multiline insurance subsidiary, deteriorated to a loss of L116 million ($193.5 million) against a L61 million ($101.7 million) loss last year. But compensating in part was a 10% rise in profit at Farmers Group Inc. to L351 million ($585.4 million).
B.A.T and Swiss insurance giant Zurich Group had announced the merger of their financial services operations last October. The new company will be called Zurich Financial Services Group, owned 53% by Zurich Group and 47% by B.A.T. It will have gross written premiums of approximately $40 billion, more than $340 billion in assets under management and 66,000 employees internationally.