| Thu 19 Jun 2003, 10:24 | | Capital Alliance leaves peers licking wounds |
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Three-year record sets tough task ahead
Financial Services Correspondent
CAPITAL Alliance shares boomed on the JSE Securities Exchange SA yesterday, rising 8% as the life assurance company reported a 40% jump in its headline earnings for the year to March.
Punting itself as the most empowered life assurer in SA, Capital Alliance has been one of the main benefactors of the financial sector fallout during the past two years.
As its competitors fell, Capital Alliance snapped up parts of both Saambou's life assurance business and that of Fedsure Life.
Largely on the back of these acquisitions, its 40% headline earnings jump translated into a 22% increase in headline earnings a share to 288,5c from 237,3c.
This exceeded analysts' expectations of about 264c a share and sparked an 8,38% rise in its share price yesterday to 1038c.
Embedded value, the main denominator of value for life assurance companies, increased by 13,43c a share from 11,98c a share.
"We are very pleased with these results, especially in an exceptionally difficult new business market," said CE Ian Kirk.
Although Capital Alliance's total premiums increased, its new business premiums dropped in the year.
"Our new business premiums did go down, but this was largely due to one of our distribution partners, a medical aid company, closing off its new business sales during the year," Kirk said.
This was the third year in which Capital Alliance has reported earnings growth of more than 40%.
With new business volumes on the wane and few acquisition opportunities, how will it repeat this year's operational profit of R420m over the coming years?
Kirk concedes it is a tough task. "But we think new business volumes will increase in the coming year and that we will be able to maintain our margins. Along with that, the company believes the investment market will be kinder to us during the coming year and so far, it's looking good on that front."
At the same time, there were still opportunities to buy other life companies. "There are a number of limited opportunities locally, which we plan to follow. The market hasn't dried up but we will wait for the right opportunities," he said.
Kirk said Capital Alliance would look to grow by way of signing up contracts with offshore life assurance companies to perform their back-office functions.
"We have an efficient back office operation here in SA and we have a real cost advantage. We're not looking to run life assurers overseas, but we are happy to do the administration work for these foreign companies," he said.
Despite the current fever for empowerment deals in the financial sector, Capital Alliance believes it is already on the mark. Black-owned Peu Investments holds 10,4% of Capital Alliance. A third of its board is now black and Kirk says these directors have made a "major contribution to our strategic direction, empowerment and transformation".
Jun 19 2003 06:10:46:000AM Rob Rose Business Day 1st Edition
Thursday
19 June 2003
