The Highway group lost £2.6m in 2002, compared to a profit of £10.5m in 2001, after restructuring its business and leaving Lloyd's.

Excluding exceptional items and tax, it made £17.7m. But exceptional charges of £13.2m and a £4m loss on discontinued operations brought it down to a profit of just £263,000 from ordinary activities before tax.

The motor insurer incurred reorganisation costs of £1.2m and a £12.1m write-off on an ill-fated investment in New Millennium Techno-logies (NMT), a loss-making software business.

Highway ditched NMT in November after an investment made in 1999 by Highway's former incarnation as Ockham.

Its gross written premiums fell to £134m from £237m, but this was countered by a substantial reduction in the use of reinsurance, so net premiums written were £122m for 2002 compared to £142m the year before.

Avoiding equities helped to keep investment income strong at £12.5m, compared to £18.8m in 2001.

Highway's continuing operations achieved a combined operating ratio of 93.7%, an improvement on the previous year's 102.9%.

Earnings per share before exceptional items was 6.9p, compared to 3.4p in 2001.

Managing director Andrew Gibson said he expected 2003 to be a tougher year, with margins under pressure, but the continuing business was strong.

He said: "Private car comprehensive rates are flat but there are other areas doing well," he said.

"We see our margins being eroded slightly, but we have a strategy and business plan to grow organically."