Sovereign Achieves Growthin Difficult Market

MEDIA RELEASE
20 August 2003
Financial result

Sovereign Achieves Growthin Difficult Market

Statement made by Simon Swanson, Managing Director, Sovereign

The retention of existing life and disability insurance business, supported by strong mortgage lending growth and the first signs of revival of the managed funds market, assisted financial services group Sovereign to increase audited after tax appraisal value profit by 12% to $73 million for the 12 months ending 30 June 2003. Sovereign’s margin on services profit1 increased by 24.4% to $54 million.

The result reflects the broad base of Sovereign’s services, and the financial strength and flexibility this gives the Group during periods when world instability distracts investors.

These results reflect a creditable performance for Sovereign during a period of high market uncertainty. Sovereign also retained its AM Best claims paying rating of A (Excellent) 2 during the period, reflecting the Group’s focus on service excellence.

Along with the rest of the world, the insurance market in New Zealand experienced difficult times as the industry faced challenges resulting from terrorist activities and major new liabilities such as those arising from asbestos claims in the United States. Premiums increased, and this saw the overall market decline in size.

Within this environment Sovereign fared better than most, increasing its overall life and disability market share to 28%, and retaining its position as the country’s largest life insurance company.

Of particular note was Sovereign’s success in increasing inforce premium income by 4% to $520 million.

The area most affected by premium increases was new business, with single premium income from new life and disability insurance sales declining by 33% to $120 million, and new regular premium income declining by 14% to $74 million.
At year-end the insurance company’s shareholders’ funds stood at $397 million.

Home mortgage lending for the 12 months at $1.2 billion was up 55% on last year and total home mortgage lending at period end was $2.6 billion, up 30%.

The provision of home mortgage lending is materially assisting Sovereign’s relationship with the country’s independent mortgage brokers and financial advisers, and their relationship with their clients.

Investment funds under management and administration stayed constant at $5.3 billion, which given the difficult environment for managed funds in general is a very positive result.

Investment markets showed an encouraging if modest recovery in the last quarter of the period, and wealth management contributed some $10 million to the overall profit for the year.

With $3.3 billion in Sovereign managed funds and an 8% market share, the company remains the country’s fifth largest funds manager.

Released on behalf of Sovereign by Network PR (Dennis Lynch)

Notes:

1 - Due to the nature of the life insurance business two profit measures have evolved. Appraisal value profit represents the rise in the market value of the company. It capitalises the value of future profits. Margin on services profit is a measure of profits received from policies as they are earned.

2 - Sovereign Assurance Company Limited has achieved an A (Excellent) rating assigned by AM Best Company, Inc of New Jersey, United States of America (AM Best). This rating was last confirmed by AM Best as at 24 October 2002. AM Best is an approved ratings agency in terms of the Insurance Companies (Ratings and Inspections) Act 1994. A copy of the schedule of ratings is available from Sovereign, 33-45 Hurstmere Road, Takapuna, North Shore.

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