Mercantile Mutual Profit Soars 41% To $67m
The Age
Tuesday December 7, 1993
Mercantile Mutual has continued to power away from the poor conditions affecting the insurance industry, reporting a 41 per cent lift in profit to $66.9 million for the year ending 30September.
The result, which excludes last year's $19.2 million abnormal tax benefit, reveals strong results from all operating divisions. New business rose by 54 per cent, giving Mercantile the third-biggest retail funds inflow for the year, after BT and Lend Lease.
The managing director, Mr Phil Shirriff, said figures for the two months since balance date showed the company was already performing ahead of budget for the 1994 year, although this was before summer, a volatile time for general insurance, which contributed more than half the company's business.
``Insurance cycles right now are very positive," he said. ``We had very soft markets in life and general insurance in the late 1980s and early '90s, but both life and general are now in a profit phase."
He said general insurers had stopped discounting prices, and life insurance had stopped many practices, such as subsidised earnings and loans to agents, which had cost companies money.
Total assets for the Dutch-owned Mercantile Mutual rose by 29 per cent to $7.1 billion, with this including $500 million in Occidental Life assets taken over during the year.
However, the company fell slightly short of its goal of a 12 per cent return on shareholders' funds for the year as it received a capital injection of $235 million from its parent, the ING group. The target for 1994 was now 11.5 per cent, Mr Shirriff said.
He said the capital was to ensure strong reserves ahead of next year's changes to solvency requirements, and to help position the company for growth.
Mercantile Mutual was looking for acquisitions _ with the support of its parent company _ but had ``nothing in mind at present", Mr Shirriff said.
General insurance profit was up by 35 per cent, contributing a net $38.5 million. It gained a strategic stake in the deregulated Victorian WorkCover scheme, and expanded into travel insurance.
Life and funds management contributed $19.6 million, a rise of 48 per cent on last year. Much of this was due to the rise in the sharemarket and fixed-interest market this year.
The accounts were qualified by the accountants Ernst & Young, as the company held provisions for its compulsory third-party business in excess of those recommended, which could have resulted in profit being slightly understated.
Gross written premiums rose by 65 per cent to $1.57 billion.
© 1993 The Age
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