| Tue 27 May 2003, 15:11 | | New Africa Capital - Trading Update |
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New Africa Capital - Trading update
NEW AFRICA CAPITAL
Company registration number
2000/031756/06
Share code : NAC
NEW AFRICA CAPITAL FINANCIAL SERVICES GROUP
New in-force business
The group new business figures for the quarter ended 31 March 2003 are shown
below.
New business premiums # 3 months to 3 months to %
31 Mar 03 31 Mar 02 change
Recurring premiums
Retail business 125 126 (1)
Gross premiums 149 150 (1)
Lapses at inception (24) (24) -
Employee benefits business 67 16 319
International business 35 29 21
Individual life 33 28 18
Gross premiums 36 30 20
Lapses at inception (3) (2) 50
Employee benefits 2 1 100
227 171 33
Single premiums
Retail business 217 162 34
Employee benefits business 133 209 (36)
International business 6 29 (79)
356 400 (11)
Total new business premiums 583 571 2
Annual premium equivalent 263 211 24
(APE)
Lapses as a % of gross 14.6 14.4 1
premiums
Retail business 16.1 16.0 1
International business 8.3 6.7 25
# Provisional new business premiums subject to adjustment at the year-end
valuation.
Retail business
Despite extremely tough trading conditions, perhaps the most challenging ever,
first quarter new recurring premium income for both Metropolitan Life and
Metropolitan Odyssey was significantly higher than in the same period last year.
Most pleasing is that this growth is also underpinned, for the first time since
1999, by a very satisfactory growth in the volume of new issued individual life
policies. As anticipated, Metropolitan Direct, which had an exceptional new
business inflow in the first quarter of 2002, did not repeat its performance,
but was still well ahead of its targets.
We attribute this encouraging growth in new recurring premium business to our
more targeted approach, and the consequent re-alignment of our distribution
channels with specific segments in the low and middle income markets.
In the case of Metropolitan Life, new single premium income was well up although
at Metropolitan Odyssey single premium production showed only a slight
improvement.
Although a seasonal deterioration in lapse experience is to be expected in the
first quarter of the year due to overspending at Christmas, the fact that there
was a slight increase in lapses at inception quarter on quarter was
disappointing. The reasons for the rise are being investigated and the situation
is being managed on an ongoing basis. Amongst other things, our lapse prediction
tool, Predict, is currently being re-calibrated. The latter has made a marked
difference in the level of conservation awareness throughout the group.
As far as expenses are concerned, the strong focus on reducing unit costs is
continuing and should result in improved new business margins during 2003.
While management has not set an absolute cost savings target for 2003 following
on the successful FY02 initiative, the containment of administration expenses
remains a priority, and expenses are projected to remain within budget.
Market share gains in Gauteng ascribable to Project GoldRush have been
sustained. The profile- raising and image-building exercises are continuing, and
are benefiting the group countrywide.
Corporate business
Metropolitan Employee Benefits
Given the fact that there was very little activity in the market generally, the
tripling of new recurring premium income quarter on quarter, while extremely
pleasing, is typical of the erratic nature of employee benefits new business.
Inflows are not smooth, largely due to the fact that business emanates from so
few sources. The 2002 figure was particularly low while the 2003 figure was
boosted by one exceptionally large retirement fund secured during the period.
The opposite was true of single premium business, where first quarter inflows
were substantially below those of last year. Interestingly, inflows in the
second half of the year are normally better than in the first. For example,
there is a substantial amount of new business currently in the pipeline where
the contract has been accepted but premium inflows are still awaited.
Outflows in the first quarter of 2003 were substantial because a R157 million
structured product matured as planned. This particular investment could not be
rolled over as the money was needed to fund retirement benefits for members.
Without any undercutting of prices, risk business continues to flourish, and
reasonable profit margins are being sustained. Our highly rated HIV/AIDS
Workplace Solution is being steadily rolled out, with several substantial
contracts having been successfully negotiated and implemented.
Major product innovations with respect to guaranteed fund business are currently
attracting a lot of interest amongst risk-averse retirement fund trustees and
members. They are looking for benefit payment guarantees that will provide a
measure of protection against the negative impact of volatile investment markets
on their investment fund credits. In response to increased demand, we launched a
new bonus series on 1 May and further developments are nearing completion.
Black economic empowerment (BEE) credentials are playing an increasingly
important part in the awarding of government and parastatal business. Our
strengths in this area definitely open doors for us, but understandably are no
guarantee of our success in securing the contracts out to tender.
Claims experience in the first quarter was in line with budget but higher than
in the first three months of 2002. Expenses have been contained within budget
expectations.
Metropolitan Asset Managers (MetAM)
Administration fee income was flat compared to the first quarter of 2002, but
substantially up on budget. Net inflow of funds received was also flat.
Metropolitan Unit Trusts
Inflows were higher quarter on quarter.
Metropolitan Property Services
Administration fee income was flat, and therefore well below budget.
International business
In total, new individual life recurring premium business for Metropolitan
Namibia and Metropolitan Botswana was substantially higher than in the same
period of 2002, with Metropolitan Botswana responsible for a large part of the
increase. Metropolitan Lesotho made a solid contribution relative to its size,
and bearing in mind that it only gained its independence on I January. No
comparisons with prior years are possible because Lesotho"s production was
previously included in South Africa"s figures.
On the individual life single premium side, there was a marked downturn.
As far as employee benefits business is concerned, there was a slowdown of
inflows into Metropolitan Namibia while Metropolitan Botswana"s production
continued to grow.
Health business
Administration fee income was up quarter on quarter and on budget. Profit
margins have been sustained. All medical schemes under administration have
satisfactory surplus positions and good administration experience. Metropolitan
Health Group has just received a very satisfactory SAS70 review report,
demonstrating the effectiveness of its information systems and business
processes.
Qualsa, our new managed care business, is making good inroads into the market
and is operating profitably.
Investment performance
The most recent surveys of large fund managers rank the performance of MetAM"s
Global Managed Fund (GMF), which is representative of the house view, first out
of the ten large asset managers for the quarter to 31 March 2003, and second for
the six months to that date. The GMF"s 12-month ranking was seven out of ten.
Although real returns remained in negative territory, the GMF outperformed its
benchmark by 2.05% over the three-month period. A sustained recovery in relative
performance since August last year has resulted in a positive 12-month relative
performance to the end of the first quarter of 2003, an improvement that should
help us re-establish our excellent long-term performance track record.
It is very encouraging to note that the good performance of the GMF is reflected
in most of the funds managed by MetAM, including the unit trust funds.
Global managed fund
Aug 02 Jan 03 Feb 03 Mar 03
% % % %
Return Rank Return Rank Return Rank Return Rank
3 mths -7.6 10/10 -1.8 4/10 -6.2 2/10 -6.9 1/10
6 mths -5.7 10/10 0.9 4/10 -4.0 2/10 -6.9 2/10
1 year -2.0 10/10 -6.7 10/10 -9.4 8/10 -13.4 7/10
Source: Alexander Forbes Large Manager Watch, March 2003
(The 1/10 ranking was maintained in April 2003)
Thanks to the aggressive allocation of foreign assets, the implementation of an
innovative global bond structure and the in-house management of international
bonds and cash, performance in this arena is also showing a steady improvement.
Whereas stock-picking was formerly a major detractor from performance, it is now
a significant contributor. Active risk management of individual stock calls is
paying dividends, reinforcing the view that refinements made to our investment
process are bearing fruit.
Capital position and financial results
The continued decline in global equity markets and strengthening of the rand
since 31 December 2002 will impact the capital position and results of the group
for the six months to June 2003. As part of a proactive risk management
programme, the group employed various downside protection measures to dampen,
but not completely eliminate, the effect of the market depreciation -
specifically for the smoothed bonus portfolios. The capital position, funding
levels and ongoing management of the bonus structures are monitored on a regular
basis, and the group remains well capitalised under current circumstances.
On an operational level, we expect the effect of the satisfactory experience in
respect of new business production to offset in part the effect of lower asset
values on fee income.
That our cash flow from clients remained positive for the first quarter of 2003
once again goes against industry trends.
Funds received from clients for the period to 31 March 2003
Gross Gross Net Net %
inflow outflow inflow inflow change
2003 2002
R"m R"m R"m R"m
Metropolitan
Employee Benefits 358 (584) (226) 24 (1 042)
Retail business 882 (567) 315 255 24
International
business 165 (78) 87 76 14
Total 1 405 (1 229) 176 355 (50)
premiums/claims
MetAM & Unit Trusts 423 (414) 9 (311) -
Health business 958 (895) 63 27 133
Total funds received 2 786 (2 538) 248 71 249
Date: 27/05/2003 12:30:07 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
