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Insurance firm Bradford & Bingley (B&B) has warned that its annual profits could be hit by endowment mortgage policy payouts.

The buy-to-let specialist, forecasting its half-year results today, warned that profits would be dampened but nevertheless predicted it was on-track for a six per cent profit growth.

B&B said its profits would be helped by sustained high levels of mortgage lending, comparable to those occurring in the second half of 2005 when £4.7 billion was lent on the property market.

"New business volumes have continued to be very healthy and the credit quality of our fully secured lending book remains sound and within our expectations," said group chief executive Steven Crawshaw.

"We have a strong pipeline and believe our specialist markets will continue to grow well in the second half of the year."

Despite Mr Crawshaw's optimism B&B's statement also refers to a threat on the horizon in the form of higher than average endowment payouts.

Endowment mortgages are used in conjunction with interest-only mortgages to allow homebuyers to save the capital over their mortgage term. Insurance firms like B&B, which provides nearly a quarter of loans for landlords, offer policies protecting against market downturns to save customers from worrying about a potential devaluation of their property's price.

"The volume of claims for compensation related to endowment and investment products has increased markedly, reversing the downward trend established in the second half of 2005," the B&B statement said.

"At this stage, it is not clear whether the recent increase in claims is temporary and reflects only an acceleration of future claims or whether this is a new trend."