'Loyal' clients aid Metropolitan

Johannesburg - Strong new business growth in a consumer market feeling the recession supported financial services group Metropolitan's income.

The group reported its interim earnings for the six months to end-June on Wednesday.

As important as gaining new business, is keeping it on the books. Relative to other life insurance groups, notably Liberty, Metropolitan's lapse rate held up well.

"Lapses are at a reasonable level, I'm quite pleased with persistency," said group CEO Wilhelm van Zyl. A breakdown of retail business lapses showed that while there has been an increase in no premiums paid - Van Zyl said about 15% of new business is lost before the first premium is paid - and lapses up to 12 months, levels are not very different to a year ago.

"It's relatively stable and that persistency level is similar in other parts of the business. Once a policy is through the first year, lapses become more stable."

Van Zyl ascribed this to the quality of the business, the people selling the policies and effective collection of premiums.

"Ultimately it's targeting the right person through the right channel."

He noted consumer loyalty to life products in Metropolitan's core market, mainly middle to lower income earners, who are often state and local government employees.

"Our experience shows our clients say this policy has value, and they continue paying through tough financial times, even when they might not be good payers in other areas, like loans," Van Zyl said. "The life policy is almost the last thing to go."

Dividend maintained

Metropolitan reported a 12% decline in headline earnings to 61.54c per share, but maintained its interim dividend of 40c per share.

Financial director Preston Speckmann told Fin24.com the group had "a long debate around the quantum of the dividend", but decided it was justified to reward shareholders while the company was making a profit.

A local market analyst who spoke to Fin24.com described Metropolitan's performance as "ok", but said "some people had been expecting more from the company".

The group's share price slumped 3% (40c) to 1 310c at midday trade on Wednesday.

No rush needed on NHI

Speckmann warned SA will not benefit if government rushes through the implementation of a National Health Insurance (NHI) system.

"There will be major problems if it is rushed through," said Speckmann.

Metropolitan's earnings may be affected by the proposed health initiative, with its health division having more than two million beneficiaries. The division saw its earning jump 24% during the reporting period, largely on the back of increased contributions from the Government Employees Medical Scheme (Gems).

- Fin24.com