Broker-only insurer MMA made £7.3m profit in 2002, down from £9.1m the year before.
Including the decline in the value of its investments, as a result of stock market falls, it made a loss before tax of £5.2m compared to a loss of £2.8m in 2001.
The company's combined operating ratio held steady at 101% and MMA managed a 17% increase in gross written premium to £190.8m from £162.8m in 2001.
The company cut its expense ratio to 7.5% from 8.3% and losses in its private motor book fell by four percentage points.
Private motor, which accounts for 45% of MMA's book, grew by 3% over the year. Its construction account grew by 114%, shops and offices grew by 50% and motor traders' road risks grew by 20%.
Chief executive Garry Fearn said that first year sales of MMA's motor breakdown product, launched at the start of 2002, had outstripped expectations.
But he warned: "2003 will be a challenge for all insurance companies. The stock market is unlikely to recover in the short term and this puts an even greater emphasis on the viability of individual products."
MMA is a subsidiary of French international insurer Les Mutuelles du Mans Assurance (MMA Group). The UK operation distributes its products through about 3,500 intermediaries.