INSURANCE: Metlife Well Capitalised Despite Turmoil
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Cape Town-based financial services group Metropolitan released its financial results for the year ended 31 December 2009 showing a healthy capital position.
“We are particularly pleased with our success in monitoring and managing our equity market exposure, given the roller-coaster ride that was 2009,” says Wilhelm van Zyl, group chief executive. “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 equity market volatility.”
With its statutory capital adequacy requirement (CAR) covered 3.7 times (2008: 3.1 times) at group level and 2.8 times (2008: 2.0 times) at life company level, Metropolitan ended 2009 in an even healthier capital position than it began the year, a reassuring achievement in the light of the market turbulence experienced throughout the year.
Metropolitan also uses its own internal capital model to determine the appropriate level of capital that it should hold, known as its economic or long-term capital requirement. This amount remained virtually unchanged during the year despite ongoing refinements to ensure that all its underlying risks had been taken into account and properly addressed.
A return of 12% on embedded value is further evidence of how well Metropolitan weathered the volatile economic environment.
The group’s embedded value grew to R12 billion or 1 811 cents per share (2008: R11.3 billion or 1 709 cents per share) despite the fact that Metropolitan paid out 95 cents per share in dividends during 2009. Embedded value comprises a life assurer’s net asset value plus the value of its in-force book of business and is widely regarded as an appropriate base for measuring the current value of such a business.
Metropolitan declared a final dividend of 60 cents per share, 9% higher than the year-end declaration in 2008. “Our prudent approach to capital management plus the fact that we are generating strong cash returns is continuing to pay dividends, literally and figuratively speaking,” is how Van Zyl puts it.
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