Strikes may hurt Metropolitan's income

Johannesburg - Posting satisfactory interim figures on Wednesday, Metropolitan Holdings [JSE:MET] told investors it was worried about the effect of strikes on its policy income.

Commenting on the group's results for the six months to end-June, financial director Preston Speckmann warned labour action may leave strikers unable to pay their bills at the end of the month.

"It is still a tough market out there and we need to plug away at it, but we're watching the strikes very carefully," Speckmann said.

With more than a million public workers being on strike for more than two weeks on a no work, no pay basis, Metropolitan expects policy debit orders to go unpaid.

"We have put some plans in place for these situations," Speckmann said.

Many insurance groups have had a significantly better 2010. Metropolitan reported an 11% increase in headline earnings with new business contributing R143m, up 38% from last year. In August, Liberty Holdings recorded a sharp turnaround in its retail business, posting R472m in profit from a loss of R222m. However, its new business decreased by 1.6%.

While Metropolitan's embedded value per share decreased marginally from 1 811c to 1 809c, the dividend went up from 40c to 42c per share. Much of Metropolitan's improvement in earnings came via a 108% increase in new business.

World Cup a 'mini December'
 
Coronation Fund Managers portfolio manager Neill Young said the environment for financial firms continues to improve. "Interest rates are at low levels and consumers are taking time to deleverage personal balance sheets as their disposable incomes increase," he said. "This will come through in improved bad debt ratios for banks and lower lapse rates for life companies."

Asked where he saw opportunities for Metropolitan, Speckmann said the contributions from operations in the rest of Africa delivered R547m in revenue out of a total R5.2bn.

"The established markets closer to SA - Namibia and Botswana - are doing OK, but they are really small markets. For us, Nigeria and Ghana have been good but Kenya has been a bit slow off the mark with all the political battles." He said improved legislation was making it easier for financial services firms on the continent.

Closer to home, Speckmann said he was not convinced that the economy has stabilised. He said the 2010 FIFA World Cup had been "like a small December" for retail businessses, but these same retailers reported a very slow August.

Similarly, he noted some uptick in business rentals earlier in the year, but these had tapered off again.

By Wednesday midday, Metropolitan stocks were up 6c (0.4%) to trade at 1 600c/share.

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