Insurers feed off Liberty woes

Johannesburg - The one's pain is the other's gain, as is evident from the differing fortunes of insurance giants which released trading updates earlier this week.

While Sanlam reported its new business sales for the first 10 months of the year - driven by the uptake of risk products and institutional sales - were up 2% compared to 2008, Liberty disclosed its new business sales were down 4%, with corporate sales off a massive 29%.

However, Sanlam isn't the only insurer to show gains in its new business sales. When Discovery reported its interims to end-June, the company showed its new life insurance business increased by 31%, with profits up 20%. Life insurance now comprises the largest portion of Discovery's revenue.

A key concern for analysts weighing up the merits of large insurance companies has not only been the ability to generate new business but also to retain existing customers and their policies, as the financial downturn prompted many clients to cash in their financial products.

Analysts have attributed the downturn in Liberty's new business sales to its brokers defecting to the likes of Discovery and Sanlam, raising concerns that it could hurt future growth as well.

However, head of Liberty Life Stephen Braudo said the group has managed to grow its broker network since the middle of the year.

Sanlam's growth figure alone has not managed to impress everybody. Stockbrokerage Barnard Jacobs Mellet (BJM) advised clients: "Sanlam trades at a large premium to its peers, therefore we regard the share as demanding."

On Liberty, BJM commented it "may have to cut forecasts for the full year further", but has retained the shares in its high-dividend portfolio.

- Fin24.com