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Johannesburg - Investors have seen dismal results come through from large life and wealth groups Old Mutual and Liberty Group.
It has been even more painful on the short-term insurance side, with Mutual & Federal (M&F) reporting a 69% decline in interim headline earnings per share and Santam warning headline earnings per share were expected to be a whopping 85% to 95% lower when it reports interim results on Wednesday.
Against this background expected declines in headline earnings per share between 20% to 25% and 25% to 35% signalled by Sanlam and Zurich Insurance respectively might offer some hope that both the life and short-term insurance cycles are bottoming.
Sanlam's trading statement made it clear that despite a tough business climate there was not much wrong operationally.
When CEO Johan van Zyl presents interim results on September 4 he will probably show some growth in core earnings per share.
The decline at the headline level seems largely attributable to under-performance in local and global equity and debt markets, as well as Sanlam's relative underweight exposure to resources.
Zurich is expected to show growth in premium income, but pressure on underwriting from the usual suspects - weather claims and the troublesome motor book.
Its trading statement also noted the "less than expected performance on the bond portfolio".
Still, compared to its listed competitors it seems Zurich's results should be quite good. Pity is the share hardly trades, so the lack of liquidity offers no reflection of relatively good (or poor) results.
With Old Mutual due to actively start its "auction" of M&F next week, the name of a potential foreign buyer has cropped up - Zurich Insurance SA's international parent, Zurich Financial Services.
We assumed bundling together Zurich and M&F had little chance of getting through the Competition Commission, but perhaps not if a possible deal is cleverly structured.
The Royal Bafokeng Nation, second largest shareholder in Zurich (who earlier walked away from a prospective deal with Old Mutual to buy M&F), could be key.
It's also worth noting that in terms of market share, a merged Zurich and M&F would have a similar share to market leader Santam, roughly 20% each.
But such a deal would probably result in respective offers to (the few) minorities and delistings from the JSE of Zurich and M&F. That would almost close down the listed short-term sector, great investments when the cycle turns up.
- Fin24.com