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Old Mutual leads impressive charge in life insurance

The life insurance index has gained 87.9 percent since bottoming out in March last year thanks to Old Mutual’s share price performance, which shot the lights out after the company improved its capital position.  Neil Young, a portfolio manager at Coronation Fund Managers, said Old Mutual had gained more than 150 percent since March last year. With a R67.9 billion market capitalization, Old Mutual is the biggest company on the index, accounting for 46 percent of the index.

“The US corporate credit spreads have since recovered, the group’s capital position has improved and this has driven a strong rebound in Old Mutual’s share price,” Young said. During yesterday’s early trade, the Old Mutual shares were trading at R12.08 after having hovered at about R4 in March last year.

Young said the share price came under pressure last year as there was concern over its US life business’ bond portfolio and the insurance group’s overall position. Alwyn van der Merwe, the director of investments at Sanlam Private Investments, said it was not essential that the market prepare for a correction in the life insurance index.

“I do not see any reason why the share prices should not continue to go up. These shares were cheap when investors thought that Old Mutual would not survive the global financial crisis,” Van der Merwe said.
Insurance is a grudge purchase and insurance policies are often the first to be relinquished when households are faced with economic pressures. “But those concerns have waned as policyholders held on to their insurance,” he said. Analysts said there were opportunities for insurance firms that held tight control over their balance sheets.

This entry was posted on Wednesday, July 14th, 2010 at 9:45 am and is filed under Life Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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