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Johannesburg - Financial services group Metropolitan has proven to be a remarkably solid investment in comparison to its sector peers and its recent performance might make it attractive for corporate action, says an analyst.
Stephen Meintjes, the head of research at Imara SP Reid, said in a recent note to clients that Metropolitan is "an attractive takeover target, although the usual suspect Sanlam seems to have downplayed expectations for the time being, despite having excess capital".
This view was echoed by another stockbroking firm.
The analyst, who declined to be named, said that since July the potential for corporate action at Metropolitan has "never been higher".
On Wednesday morning, Metropolitan reported a 14% increase in core headline earnings to 70.03c, for the six months to end-June 2008.
Health operations at Metropolitan received a boost, with the company enjoying substantial growth in membership of the Government Employees Medical Scheme (Gems).
The company has recently been awarded the Gems administration contract for a second three-year term from 2009.
Metropolitan Retirement Administrators has also secured the administration of a 10 000-member retirement fund as from October 2008.
Embedded value in Metropolitan saw a slight reduction from 1 857c to 1 838c, compared to the same period last year.
Assets under management passed the R106bn mark during the first six months of the year.
Metropolitan chief executive Wilhelm van Zyl said the company's entrenched position in the low- and middle-income markets continues to give it a competitive edge.
Outperformance
Since the beginning of August 2008, several major insurance sector companies have reported their interim results.
The short-term insurers bemoaned a weak operating environment after being hit by floods and fires.
The life insurance sector saw a number of write-downs after being negatively influenced by weak equity markets.
Since the start of August, the counters in the insurance sector have performed as follows:
Discovery up 2.6%;
Liberty Group up 6.1%;
Metropolitan up 5.1%;
Mutual & Federal up 13.9%;
Old Mutual down 2.3%;
Sanlam up 0.3%;
Santam up 5.3%;
Zurich up 10.3%.
The Mutual & Federal share price has shown some strength ahead of the competitive bidding process that Old Mutual has begun to sell its stake in the company.
Zurich is a highly illiquid stock that typically trades less than 7 000 shares per week.
That leaves Liberty, Metropolitan and Santam as 'outperformers' in the South African insurance sector over August.
Fund managers have been bullish on Metropolitan's prospects, adding over 9.6m shares to unit trust portfolios in the second quarter of 2008.
- Fin24.com