LONDON (Reuters) - Credit card insurer CPP Group Plc said its performance in 2013 would be hit by a regulatory probe that is affecting new business and will result in customer compensation payouts.
The probe by the Financial Services Authority (FSA) into the way in which CPP sold protection against identity theft, launched in March last year, has already rocked the company and battered its shares price.
CPP, which reported a decline in underlying operating profit and a 6 percent drop in group revenue for the period since June 30, said on Friday it had made a 24.9 million pounds provision for customer redress and associated costs of the FSA probe.
Renewal rates had fallen by 0.6 percent since June 30, with live policies down by 500,000.
The group said that while it was still uncertain about the duration and outcome of the probe, it had agreed with the FSA a framework for the operation of its regulated UK entities.
Under the framework, restrictions on new retail sales of its regulated card protection and identity protection products will continue and will be extended to other business areas including mobile phone insurance.
Restrictions on asset dispositions will be extended to cover both Card Protection Plan Ltd (CPPL) and Homecare Insurance Ltd.
CPP said it had also agreed with the FSA that CPPL would not participate in future group borrowing arrangements or offer its assets as security related to the group's borrowings. It is expected that this will come into effect in 2013, the firm said.
The company said these measures would not affect the security for its revolving credit facility, which is due to expire in March 2013, but that the measures could impact its ability to raise debt finance.
It was assessing a range of financing options with its lenders.
(Reporting by Neil Maidment and Rhys Jones; Editing by David Holmes)
Source: http://news.yahoo.com/cpp-expects-tough-2013-probe-rumbles-071303030--sector.html
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