Sparkling results for life insurers
New business boosts growth
THE share prices of the three main South African life insurers have had a barnstorming past 12 months — Liberty up 26.4%, Sanlam 27.9% and Old Mutual 40%.
Clearly investors have rewarded the big three for excellent recent performance.
Old Mutual reported that earnings a share increased 22% in the first half.
Liberty Holdings posted a 6% rise in half-year earnings on strong growth in new insurance business.
Sanlam, which will report its results in a few weeks, said it expected headline earnings a share for the six months to June would exceed those reported in the corresponding period last year by between 35% and 45%.
Herman van Velze, head of the Stanlib Balanced Fund, said he liked Sanlam’s “ability to consistently generate cash” as a pure African and emerging-market player.
“We think the group is a better proposition than the other life assurers.”
Matthew Warren, financial analyst at First Avenue Investment Management, said he rated Sanlam as the better investment in the sector due to its discipline in writing business and controlling costs.
“Sanlam performs the best in terms of the lapse rate throughout the cycle. They are very disciplined in how they write their insurance business. Liberty had a big problem with their lapse rate in the last downturn.
“Old Mutual is somewhat similar to Sanlam in that a big portion of its new business profit comes from the lowerincome segment of the population as the underwriting margins are better.”
According to an analyst at a local subsidiary of a leading US bank, who did not want to be named, Old Mutual’s winning card was its diversified operations.
“With institutional investors limited to taking out [of South Africa] only 25% of their funds, a good way of getting non-SA exposure is through buying Old Mutual, as they can buy as much as they want to without falling foul of the allowable offshore allocation,” said the analyst.
“Old Mutual has exposure to US value funds, which is performing very well at the moment. It also has exposure to the UK and European markets through its wealth management business in the UK, which is a sizable business and it’s growing nicely through inflows.”