Growth in middle-class disposable income has helped drive Metropolitan’s new business and strengthen its life insurance arm, said Preston Speckman, financial director of Metropolitan Holdings on Wednesday.
Speckman this week unveiled a 51% growth in new life insurance business, to R103-million. “Our evidence of growth of the [black] middle class is in the growth of our new business,” Speckman said. The group’s headline earnings rose 15% to R434-million.
Speckman attributed the success largely to the group’s ability to contain costs. In the 2002 financial year costs were slashed by R37-million to R862-million, in part through retrenchments and by freezing posts.
Speckman said that in future, cost cutting would centre on improving processes, but did not rule out the possibility of retrenchments. Costs of issuing a policy, for instance, have decreased by 12%.
He also noted the distribution of benefits from growth to stakeholders. Shareholders benefited from a 13% higher dividend of 43c a share, while policyholders saw a 21% growth in returns, because of what group CEO Peter Doyle called “careful stock selection”. They will receive a bonus on their policies.
Importantly Speckman believed Metropolitan can now offer value to an empowerment equity seeker. This week Doyle confirmed that negotiations with a partner “that will add value at both a strategic and an operational level are ongoing”.
Last week Sanlam announced the acquisition by the Buntu-Botho consortium of 10% of its equity. Metropolitan currently has a soon-to-be-unbundled 5% shareholding by New Africa Investments Limited, following the latter’s acquisition by Tiso Capital.
Speckman estimated that between 20% and 25% of the equity is held in institutional black representation such as union pension funds and the Public Investment Commission (PIC), which invests government pension funds.
Brian Molefe, CEO of the PIC, is known to be keen to exercise some control over entities in which the commission has significant holdings. The balance is held by institutional investors.
This suggests that bringing in an empowerment partner will mean ring fencing the Nail stake and issuing new shares.
Metropolitan experienced a net inflow of R3,1-billion. This is the 20th consecutive year it has had positive results.
Speckman noted that two-thirds of the inflows were derived purely from life insurance business. The group’s other divisions are corporate, Metropolitan Asset Managers, Metropolitan International, concentrated in the region and Metropolitan Health, the third-largest administrator in the country.
Doyle confirmed that the group will remain aggressively focused on the middle- and lower-income market, emphasising that growth could be attained without acquisition.