Transport industry mutual TT Club has begun to rebuild its capital position by recording its first technical underwriting surplus in five years.

The mutual posted an overall surplus of £6.8m in 2002, up from a £25.5m deficit in 2001. A technical underwriting surplus of £4.2m combined with an investment surplus of £5.3m to produce the improved 2002 result.

TT Club chief executive Paul Neagle said that the mutual was aiming to record surpluses in both its underwriting and investment results in 2003 and 2004, and could not rely on investments to prop up financial results.

"We have to achieve underwriting surpluses," he said. "That is the only way that the TT Club and others can rebuild financial strength."

As a result of declines in both its underwriting and investment results in 2001, TT Club's free reserves halved from £50.6m in 2000 to £25.1m in 2001.

Its position improved to £31.8m in 2002, but Neagle said that in order to further restore its capital during 2003, the mutual would continue to implement prudent underwriting and investment policies.

These include increasing premiums, establishing quota share deals with reinsurers and reducing investment exposure to the equity markets in favour of more predictable cash and bonds.