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EDWARD WEST
Finance Editor
LIFE assurance group Metropolitan Holdings raised its final dividend after growing embedded value by about 6% to R17,09 per share in the year to December.
Life companies struggled to grow profit meaningfully last year as new or existing premium growth slowed in line with slumping consumer spending, while volatile markets caused assurers’ investment incomes to fluctuate.
A final dividend of 60c a share was declared, 9% higher than the year-end declaration in 2008.
“The dividend is a signal that we’re through a lot of the worst, but that it’s also not the time to make a big jump yet,” said CEO Wilhelm van Zyl.
“Dynamic asset allocation and capital protection strategies such as hedging, together with other de-risking activities, enabled us not only to maintain adequate levels of capital but also to strengthen our balance sheet in the face of unprecedented market volatility.”
Food and transport inflation as well as rising unemployment remained the biggest challenges to the group’s core target market, although Metropolitan is shielded to an extent from factors such as job losses by the fact that about half of its retail clients are in the public sector.
“Further deterioration in the above factors will reduce new business prospects and possibly challenge the persistency of the inforce book,” said Van Zyl.
An important factor this year will be the outcome of public service wage negotiations. Van Zyl said this could be one of only two factors to have a positive effect on their target market; the other could be some economic growth from the Soccer World Cup.
He said a great deal of uncertainty remained over the direction markets would move next. Many determining factors were in the hands of foreign and local policy makers.
New business and outflows had come under pressure in the past year due to the tough environment, but costs had been trimmed and some unprofitable product lines eliminated. This would place the group in a good position to take advantage of a firm uptick in consumer fortunes, something that may only happen next year, Van Zyl said.
“A prudent approach to capital management plus the fact we are generating strong cash returns is continuing to pay dividends, literally and figuratively.”
Core headline earnings per share fell 7% to 141c from 151c in 2008. Diluted headline earnings came in at R1,3bn compared with a loss of R137m the year before. Net income grew sharply after a turnaround in fair value gains and losses to a R4,6bn gain from an R8,5bn loss the previous year.
There had been an increasing propensity by consumers to lapse or surrender their policies over the past year because of the tough economy, but management action resulted in better persistency.
In the medical scheme administration business, total members under administration grew to 855000 at year-end from 782000, with growth being fuelled by membership of the Government Employees Medical Scheme, at a rate of about 550 members a day.
weste@bdfm.co.za
METROPOLITAN HOLDINGS
Full-year20092008
Revenue (Rbn) 20,06 7,39
Pretax (Rbn) 1,67 (372m)
Earnings (Rbn)1,15 (295)
Headline EPS (c)141 151
Dividend PS (c) 100 95
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