by Sue Allen
New Zealand owned life company Fidelity Life has just announced an interim half-year profit of $1.3 million.
The profit, for the six months to December 31, is more than double that for the same period last year.
No mean achievement in an industry dealing with a drop in investment revenue that has seen bigger players running for cover and regrouping.
Fidelity chief executive, Milton Jennings, says the company’s focus on frugality and cost containment was an important contributor in making a profit.
However, he says like other companies, Fidelity has also taken a hit on investment revenue which dropped from $800,000 in December 2001 to a loss of $2.4 million to December 2002.
A 50% hedge has proven to be a "good choice" over the last six months, to help deal with the rising dollar and temper investment losses, he says.
Founded in 1973 by Gordon Watson, Fidelity Life has made a profit every year since it started.
Last year the company made $60 million from premium income and $145 million assets under management in 2002.
Jennings says Fidelity now has 7% of the superannuation market, 3.5% of the trauma market and 6% of the income protection market.
Premium income was up 7% from the previous year.
"It is a reducing savings market so growing our risk business premiums is important with savings dropping off because of losses in the equity markets and nervousness of investors. We are putting more resources into growing our premium income from risk so hope that will be higher next year."
Jennings says Fidelity has managed to turn a profit in such a hard market because of a reduction in claims, which were down from $5.8 million in 2001 to $4.3 million last year and an 8% drop in expenses on the previous year.
The company has also reduced exposure by shifting investments out of equities unless clients expressly request it.
"I am happy with our result but I still think we can do better. I look back over the past six months and I would like us to be writing more risk business than we are doing and I want equity markets giving big returns."
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