The 2004 life sales of Old Mutual, South Africa’s largest insurer, have been dented by a poor performance in its group sales, with group sales falling 48% for the year to R422-million from R809-million in 2003. This contributed to a 10% decline in the company’s total life sales, which came in at R3,08-billion rand on an annual premium equivalent (APE) basis for the year.
Old Mutual’s annual results, released earlier on Monday, showed that within the total 48% drop in group business sales, annuity products fell the most at 82% to
R42-million from R228-million previously, while savings products posted a 47% decline to R260-million from R495-million. Protection products, meanwhile, saw a 41% rise to R120-million.
Overall, single premiums fell 59% to R240-million from R582-million, and recurring premiums dropped 20% to R182-million from R227-million.
Old Mutual said that the group business single premium sales had arisen principally from restructuring of benefit plans or the movement of existing assets between different providers. The time-consuming nature of pension fund surplus apportionments, and a slow response by companies to provide for post-retirement medical aid liabilities meant that few opportunities had crystallised in 2004 for group business single premium sales.
Meanwhile, the company’s overall individual life business sales were basically flat on 2003 levels, coming in 1% higher (including Old Mutual International) at R2,66-billion from R2,63-billion. However, the mix was different, with single premium sales growing 16% to R792-million, driven by strong sales growth in savings and annuity products.
Recurring premium sales in individual life, however, fell 4% to R1,87-billion from
R1,95-billion a year earlier on an APE basis, with sales through brokers, particularly of savings products, markedly lower. Reasons for the poor performance included the impact of regulatory changes, the establishment of broker networks and media perceptions regarding the value provided by recurring investment products, said Old Mutual.
Commenting on the measures the company was taking to reverse these falls in a conference call earlier on Monday, CEO Jim Sutcliffe said Old Mutual was focusing on various aspects of the business.
On the product side, it had introduced new products in both the life and unit trust operations with appealing features, while also reducing the charges on these products to provide better value to customers. In Employee Benefits (EB), the group was customising with-profit annuities.
On the distribution side, the CEO said, Old Mutual was building up its personal financial advisor (PFA) sales force, which would take another 12 months or so to get to full strength. At the same time, it was improving its relations with brokers, and was largely about “service levels” as the company worked to reverse the impression of poor service levels created during the second quarter of 2004, when it had experienced a “hiccup”.
The company was also steadily building up its pipeline of sales through its improved bancassurance operations with Nedcor.
“In Employee Benefits, we must get in touch with the needs of clients, and on the investment side we must keep up the good performance,” Sutcliffe added.
Earlier, Old Mutual reported a 46% increase in its adjusted operating earnings per share (EPS) for the year to end-December 2004 to 181,1 South African cents versus
123,8 cents the year earlier.
The group declared a final dividend of 3,5 pence, up 13% from 2003 levels, for a total dividend for the year of 5,25 pence.
The London-listed company’s adjusted operating EPS were up 53% in sterling terms to 15,3 pence from 10 pence the previous year.
The results beat South African analysts’ expectations, with a consensus of seven analysts surveyed by I-Net Bridge forecasting EPS of 171,9 cents. – I-Net Bridge