Industry stats restated

25 April 2006 Angelo Coppola

Readers may recall that last week the LOA issued a statement restating some figures from 2005.

It appears that one life company no names, no pack drill - had made a mistake and wrongly classified new single RA premium income as new recurring premiums on two occasions, for the half year ending December 2005 and the adjusted June 2005 half year.

The error was sufficiently big enough for the LOA to restate, as it inflated the numbers, and instead of a small increase in new RA fund recurring premiums in 2005, it decreased by 5%, from R1.4bn in 2004 to R1.3bn in 2005.

So we had a couple of questions for the LOA and the life office that got it wrong twice. Naturally the LOA decided not to name the life office concerned.

Q: How can the life office get it wrong twice?

Unfortunately we have no insight as to how the error happened on their side. The LOA picked up the error when one of the big life companies queried the RA new business statistics as their internal statistics did not portray the same picture. A thorough investigation was launched and the error discovered.

Q: Has the life office been censured?

The LOA says that when working with statistics of this magnitude there is always room for capturing errors. The company has been informed of their error and there is no need for further action since the purpose of the statistics is purely for member companies to compare their performance against the industry average.

In fact, it is through this exercise that the error was picked up in the first place.

Q: So, did the life office benefit in any way from the 'error'?

The life office would not have benefited from the error in any way. In fact, the premium income was still received, although as single premiums.

The industrys total new premium income figure therefore remains unchanged at R23.2bn for the half year ending December 2005. But there has been the slight shift in the new recurring and single premium RA fund business statistics. The same would have been true for the company concerned.

Q: To what does the LOA ascribe the drop in RA fund recurring business between 2004 and 2005?

As you know, 2005 was a watershed year for the life industry, but especially for retirement annuity funds.

The fact that the drop was experienced for recurring premium RA fund business, may be an indication of a drop in consumer confidence last year.

Having said that, it is important to note that there was, however, still an increase of 1% to R652m in new recurring premiums for RA funds in the second half of last year, compared to the first half of 2005.

Editors note:

* If I were a conspiracy theorist I would assume that someone is up to no good. One wonders whether the life company concerned will have to restate their earnings, as it appears that the fluctuation of 5% was due entirely to their two 'mistakes'.

* The amount in question is R100m, significant in anyone's books. If it doesn't appear as a SENS announcement, something which the JSE requires of its members, that probably means that it wasn't a significant number and the culprits are then reduced to the players. Makes you think - doesn't it?

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