Warranty specialist Domestic and General announced an 18 per cent fall in pre-tax profits after an increase in the number of customer claims.

Earlier this year, the company bought call centre firm Inkfish, which employs 420 people in its Brighton office.

The firm, whose policies cover the cost of breakdown and repair work for a range of electrical manufacturers' products, said pre-tax profits fell to £14.7 million in the year to June 30.

Turnover rose 48.6 per cent to £172.2 million but this did not compensate for the rise in claims and the cost of buying Inkfish for an estimated £11.7 million.

Domestic said the rise in claims was within its normal operating tolerance levels and there were also a number of late claims arising from previous financial periods.

Managing director Tim Scrivener said he was confident the number of claims would stabilise and the group's strong turnover performance would feed through to the current year's earnings.

Turbulent stock markets and lower interest rates had affected investment returns.

Domestic invests part of its warranty income on the market.

The company said its confidence in achieving improved results was reflected in a ten per cent rise in its total dividend to 19.03p a share.

The Inkfish deal also included call centres in Slough and Redhill and was part of Domestic's bid to win more business through telemarketing.

The group has also branched out into pet insurance and signed deals with BSkyB and Bosch in recent months.

Chairman Roy Constantine announced he would retire at the annual meeting in November.