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Category:
Insurance
News /
Short Term
Insurers /
Mutual & Federal
/ August 2008
Mutual & Federal's R23 Million Underwriting Loss
Mutual
& Federal today (Tuesday, 5 August 2008) announced the group results
for the half-year ended 30 June 2008.
Gross premium income increased by 2% to R4.7 billion (2007: R4.6
billion). Gross premiums in the commercial portfolio grew in line
with inflation; however the personal portfolio contracted following
deliberate action by management to cancel a number of
underperforming blocks of business. Risk Finance premiums also
declined following lower levels of reinsurance received from
insurers in the retail sector.
Claims at R2.83 billion are up 6% on 2007 (R2.66bn) fuelled by a
significant increase in the number of commercial and industrial fire
claims and ongoing difficulties with the motor section of the group
schemes portfolio.
As a consequence the underwriting result declined
to a deficit of R23 million compared to a surplus of R98 million
during the same period in 2007.
It should be noted that the 2007
period was favourably impacted by a R48 million reduction in
technical reserves.
The general insurance result for the period declined to R210 million
(2007: R309 million) reflecting a reduction of 32%, and operating
income decreased by 15% from R516 million to R438 million,
reflecting an all-round disappointing first half of 2008.
Investment income declined by 52% to R278 million (2007: R574
million) following substantially lower returns on listed equities
and reduced holdings subsequent to the disposal of investments to
pay a special dividend of approximately R600 million in December
2007.
In
light of the adverse trading conditions, profit after tax for the
period declined by 66% to R172 million (2007: R501 million).
Commenting on the results, Managing Director Keith Kennedy said:
“The first-half of 2008 has been difficult due to a turn in the
cycle and an unusually large number of fires.
The board recognises
the cyclical nature of short-term insurance results and is satisfied
that the appropriate corrective measures are being taken to improve
underwriting results”.
Looking at the prospects for the remainder of the year, Kennedy said
that he was optimistic that the corrective action underway in the
business together with a positive outlook in the medium-term
investment climate will result in a return to more favourable
financial results.
With regard to a possible sale by Old Mutual of its majority stake
in Mutual & Federal, Keith Kennedy stated that the board had been
informed by Old Mutual plc of its intention to initiate a
competitive sale process in September 2008 to dispose of its entire
shareholding in the company.
Notwithstanding that Kennedy emphasised that the executive and staff
of Mutual & Federal were focused on improving performance and
delivering the best possible results to the shareholders.
The company will be issuing fully paid ordinary shares as a
capitalisation award to ordinary shareholders.
Shareholders not
electing to receive new fully paid ordinary shares will be entitled
to receive a cash dividend alternative of 45 cents per share.
In
conclusion Kennedy thanked staff and management for their dedication
and commitment during the difficult period.
More...
Mutual & Federal Competitive Sale Process
Terminated
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