Axa's figures for the first half of this year show the contribution made to net income by property and casualty insurance is down by 14.1% at £195m, compared with the first half of 1999.

The UK's contribution fell by £31m. This was due to an increase of £39m in reserves – £28m for motor insurance and £11m for third-party liability.

These increases in reserves result from a deterioration in claims experience and higher costs for bodily injury claims in the British market. Guardian's offer of “free” insurance with new cars is a major factor for this.

Another cost was the alignment of claims management processes, following the merger of Axa and GRE.