INSURANCE: Metropolitan's Performance Consistent Despite Economic Downturn
Recent Western Cape Business News
Cape Town-based Metropolitan’s interim financial results for the six months to 30 June, announced yesterday, demonstrate that the group’s ability to generate good cash returns has been sustained during these turbulent times.
“However, in certain respects we have fared better than expected, given the severity and extended duration of the recession and its impact on the financial position of our clients – both their ability to pay and their inclination to buy,” says group chief executive Wilhelm van Zyl.
A salient feature of Metropolitan’s results was the fact that neither the quantity nor the quality of new business production was as adversely affected as anticipated. Total new recurring premium income was 11% higher than in the equivalent six months of 2008, with all the life businesses achieving steady growth in this all-important area. Single premium income of R1.6 billion was collected despite the economic conditions. Very importantly, lapses at inception did not deteriorate as much as it had been envisaged they would.
“Although we are undoubtedly seeing the effects of the recession on the persistency of our in-force book of business, concerted retention efforts have meant that, overall, our persistency rates did not drop as much as we feared they might,” says Van Zyl.
The value of the group’s new life business did, however, fall by 5% as increases in retail business were negated by reductions in corporate (mainly due to reduced risk margins) and international (as a result of expense increases) business.
As Van Zyl points out, Metropolitan’s performance on both the capital and cashflow fronts was also noteworthy.
“Thanks to focused management action we have strengthened our capital position at all levels. Our group capital adequacy requirement (CAR) cover of 3.2 times is generous in the present economic climate. The life companies’ CAR cover of 2.4 times is also entirely appropriate. In addition, with net funds received from clients of R2 billion, we have succeeded in maintaining our positive cashflow status.”
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