Allianz Ireland has blamed weak investment returns for a 74 per cent drop in pre-tax profits to £9.6 million (#12.2 million) in 2000 compared with £36.5 million the previous year. The insurer, which is 30.4 per cent owned by Irish Life & Permanent, is one of the largest players in commercial liability and also has a significant share of the home and motor insurance industry in Ireland.

Chief executive Mr John O'Hanlon said the sharp fall in pre-tax profits was due to the reduced value of its investment earnings in depressed stock markets. He insists the group has achieved a better balance between insurance and financial earnings over the past two years but suggests further premium increases are likely.

Mr O'Hanlon said Allianz had increased premium rates for its commercial business earlier and by more modest amounts for customers who were committed to reducing claims through risk management improvements. Insurers were now being forced to respond to the squeeze on margins from weaker financial earnings and the higher incidence and cost of claims, he said.

Motor insurance premiums are also set to rise in line with the continuing increase in road accidents. "The continuing toll of accidents on our roads demands an urgent response. In particular, the market faces a very large increase in the cost of uninsured liabilities through the Motor Insurance Bureau of Ireland which will have to be recovered through pricing," he said.

Motorists' premiums already reflect this cost which is expected to continue to increase.

The group's gross premiums rose by 11 per cent to £388 million and operating profits increased by 54 per cent to £16.5 million. Allianz Ireland employs 850 people in the Republic and is 66.3 per cent owned by the international Allianz group.