The share price of Mutual & Federal, South Africa’s second-biggest short-term insurer, has climbed 10,4% or R2,35 in the first hour of trading on Tuesday after the company indicated late on Monday that its earnings for the six months ended December are likely to be much higher than those forecast in its last trading update in November.
At 9.55am, Mutual & Federal was quoted on the JSE Securities Exchange (JSE) at R25, up from R22,65 at Monday’s close, with 14 595 shares having changed hands. The counter was the best performing on the JSE so far among shares with values of more than 10 cents.
In November, the group said that should the prevailing underwriting performance and the general investment market conditions continue until December 31, the company expected that headline earnings per share would be 25% to 45% above those reported for the prior corresponding period, being December 31 2003.
But late on Monday it stated: “Following a substantial increase in the value of listed equities towards the end of the financial year, the company now expects that the headline earnings for 2004 will be 60% to 75% higher than those of the prior corresponding period.”
One analyst, who asked not to be named, said the update has caught the market by surprise.
“I think most people didn’t realise the extent to which the JSE’s strong year-end performance would help lift Mutual & Federal’s earnings,” he commented. “It’s great for the group and it’s going to be another excellent year for the entire short-term insurance industry.”
The group is expected to release its interim results on February 9. — I-Net Bridge