Insurance giant's interim results loom
This is a busy week for life insurance industry analysts as two of South Africa's largest life insurers present half year results. Analysts and investors alike will watch with interest to see how recent global and domestic economic events are reflected in the numbers.
In a recent FAnews Online newsletter we discussed the trend of convergence on the life insurance industry. The consensus is that life insurance companies will continue to expand their product offerings to ensure greater exposure to the general financial services industry.
More support for the convergence theory
Today's global insurance companies rely heavily on income from other sections of the financial services industry. A quick look at the latest full-year after-tax earnings for the Liberty Group reveals that nearly 50% of total earnings came from non-life activities (including asset management, shareholder operations and disposals).
Old Mutual is a global insurance company with a primary listing on the London stock exchange. Apart from dominating the South African landscape through Old Mutual SA, Nedbank and Mutual & Federal, the company also has significant global interests including the recent acquisition of Skandia, Sweden.
Both Liberty Group and Old Mutual have substantially diversified their business activities in recent years and we expect the latest interims to reflect the change from life insurance only to diversified financial services providers.
Liberty expects a 45% surge in headline earnings
Liberty Group Limited will present their interim results for the six months to June 2007 on Wednesday, 8 August 2007.
In anticipation of this presentation, FAnews Online took a quick look at Liberty Group's 2006 results. Under the heading 'prospects' Liberty Holdings predicted a solid performance for 2007. The group expects big things from their Stanlib purchase: "The acquisition of 100% of StanLib provides additional revenue growth opportunities and should add value for our shareholders going forward," states the report.
Citigroup analyst Johny Lambridis supports this view and believes that the contribution from the StanLib purchase may be the main reason behind Liberty's recent trading update. Toward the end of July, Liberty released a SENS announcement in which they advised shareholders that headline earnings per share would be between 45% and 55% higher than the corresponding period in 2006.
Basic earnings per share attributable to ordinary shareholders are expected to be between 5% and 15% higher. This lower 'increase' is due to profits on the sale of Ermitage and Prefsure which appear in the 2006 half year results, but not in 2007.
Tougher times for Old Mutual as pound gains momentum
Investors will have to wait a bit longer to find out how Old Mutual fared over the six month period ending 30 June 2007. Group Chief Executive, Jim Sutcliffe will host the satellite presentation from London on Friday, 10 August 2007. Old Mutual plc will probably have a tougher time of things due to the strength of the UK currency against the dollar and Euro.
In their 2006 Annual Report, Old Mutual was quick to admit the changing landscape in the life insurance industry in South Africa. The group "is managing the continuing move by customers from life products to other investment products such as unit trusts." This was one of the main factors behind the launch of the Old Mutual Investment Group's boutique investment 'franchises' in South Africa. The group was cautious about outlooks for 2007 due to rising costs but remained positive for the longer-term outlook. Old Mutual plc believes they are on track to reaching the 300 billion of funds under management early in 2008.
This week's results look set to confirm that the contribution of life insurance to the big industry players continues to dwindle. Both Old Mutual and Liberty look set to enhance their asset management activities in the years ahead.
Editor's thoughts:
The contribution of life insurance to the insurance industry giant's is either on the decline or showing only moderate growth. Will this trend continue, or can we expect life insurance business to pick up again in the future? Send your comments to [email protected]
