A slide in profits at DAS' legal expenses insurance company last year was due to falling investment returns, the company reported.

Profit before tax fell to £237,000 in 2001 from £6.6m the year before.

After tax, the company made a loss of £268,000.

Unrealised losses on investments shot up to £6.5m last year from £787,000 in 2000, sending investment income falling to £3.7m from £5.3m in 2000.

DAS paid £14.8m for shares during the year only to stand by and watch their value fall to £11.3m.

Falling stock markets undid all DAS's good work over the year, during which time it had been busy writing new business.

And the pain isn't over yet. Finance director Pat Veysey said there would be more investment losses this year for the country's largest legal expenses insurer.

"We will have some further losses as the market goes down [this year], but it won't be to the same extent as last year," he said.

"It will be £1m or £2m, not £6m like last time."

The company halved its exposure to equities to about 15% of its portfolio and brought in Credit Agricole Asset Management to look after its investments.

DAS, which handles more than a million claims a year, increased its gross premiums to £56m from £48.6m in 2000.

This outweighed an increase in claims to £25m net of reinsurance from £21.7m in 2000.

The directors proposed paying a dividend to shareholders of £1.2m.

The company belongs to DAS UK Holdings, which reported a fall in pre-tax profit of 70% to £1.9m from £6.3m in 2000.

Staff are employed by the holding company, which also operates their pension schemes.

Most staff are members of a defined benefit scheme, which was £3.7m short of what it needs to make its payments when it was valued on 31 December 2001.

The deficit leaves it funded to just 77% of its liabilities.

The defined benefit scheme closed to new entrants in January.