JSE-listed financial services group Clientèle has reported a double-digit increase in profit for its half-year to the end of December, due mainly to the resilience of its funeral insurance business.
Net profit rose 15% to R254.7 million in the six months to 31 December, the company said on Monday.
Business grew despite the difficult trading environment, which was characterised by low economic growth, load shedding and challenges with premium collections.
The company has said previously it faced challenges with policyholders disputing valid debit orders, to “manage their cash flow”.
It again experienced higher-than-expected policyholder withdrawals, which were the result of “many factors”, including the financial pressures on consumers.
“Withdrawals showed an improvement towards the end of the period. However, should these withdrawal losses continue to year end, a change in the withdrawal assumptions can be expected,” the company said.
“The challenges within the collections environment, together with pressure on disposable income for our customers, continue to negatively impact withdrawals and remain one of management’s key focus areas, together with increasing production of quality business across all of its distribution channels, including funeral parlours.”
Net insurance premiums remained constant at R1.09 billion (2021: R1.09bn), impacted by the relatively poor collection experience and higher-than-expected withdrawals.
Net insurance benefits and claims of R228.4m were 3% higher than the R222.7m in the comparative period.
Long-term business is main contributor
Clientèle Life remained the major contributor to the group’s performance. It recorded a 16% increase in net profit to R180.8m (2021: R155.3m), thanks to the good-quality funeral parlour intermediated business, the company said.
Clientèle Life’s total value of new business (VNB) of R136m (2021: R119.8m), which benefited from the large volumes of single-premium business, increased by 13.5% over the comparative period.
Due to a high client affinity within the funeral parlour industry, and a corresponding lower withdrawal experience, a portion of future funeral parlour business profits were recognised during the period as a result of not eliminating negative reserves. This resulted in an increase in profit after tax of R51.6m.
The above translated into the group’s headline earnings increasing by 14% to R258.8m (2021: R226.8m). Headline earnings per share of 77.18 cents (2021: 67.64c) were 14% higher than in the comparative period.
In its short-term insurance business, Clientèle Legal’s net profit fell 26% to R45.1mn (2021: R61m) because of an increase in acquisition costs, lower investment returns, and the rebating of bank charges in the comparative period. Clientèle Legal’s VNB of R48.6m (2021: R29.7m) increased by 64%.
