* Metropolitan H1 profit lower as policy lapses rise
* Discovery year profit up as new business climbs 20 percent
* Metropolitan shares down 3 percent, Discovery down 1 percent
(Adds Discovery)
By Serena Chaudhry
JOHANNESBURG, Sept 2 (Reuters) - South African insurer Metropolitan expects its core customer base to remain under pressure as a recession bites, while rival Discovery boosted full-year profit thanks to more new business.
South African insurers' profits have taken a hit from the global slide in equity markets, as well as a reduction in consumer demand due to relatively high interest rates, inflation and rising personal debt.
But Discovery, which owns the country's largest health insurer, has so far outperformed its peers as its life and health units remain relatively robust amidst the downturn.
Metropolitan, South Africa's fourth-biggest insurer by market capitalisation, said diluted core headline earnings per share for the six months to end June fell 12 percent to 61.54 cents as more consumers stopped paying for or cancelled life insurance policies.
The value of its new business fell 7 percent to 104 million rand ($13.2 million), while total new business recurring premiums rose 11 percent to 628 million.
Metropolitan, heavily exposed to the lower end of the retail market which is sensitive to changes in the cost of basic items, said rising food and transport prices as well as increasing unemployment remained its biggest challenges as Africa's largest economy grapples with recession.
Discovery said diluted headline earnings per share for the year to end June rose 31 percent to 224.1 cents from 170.5 cents, matching its forecast of a 25-35 percent increase.
Total new business excluding its U.S. unit Destiny Health, which is being wound down, climbed 20 percent to 5.78 billion rand ($735.3 million).
"I was not expecting earnings to be up quite to the extent that they were and it looks like the health and life business did better than I thought and the losses out of the international businesses were lower," one Johannesburg-based insurance analyst said.
Shares in Metropolitan dropped 2.89 percent to 13.11 rand and Discovery fell 1.2 percent to 27.56 by 0927, underperforming a 1.1 percent weaker Johannesburg All-share index.
NO EASING UNTIL 2010
Discovery, which was unbundled from financial services firm FirstRand in 2007, said the number of lives insured at its U.K. unit PruHealth, climbed 20 percent to 212,000, while the winding down of Destiny Health remained on track.
Rival Metropolitan, which has operations on the African continent, said operating profit at its international business rose to 51 million rand from 49 million, boosted by relatively robust markets in Botswana, Namibia and Nigeria.
Metropolitan Chief Executive Wilhelm van Zyl said he did not expect economic pressure for its core customer market to ease off until "well into 2010", and said new life business at the firm's retail unit would remain tough.
"Even a small relief in food inflation is not necessarily going to make a massive difference in disposable income on very very, very stressed household income," van Zyl said in an interview.
"The real economic life of our core market is not going to look better until well into 2010."
Peer Liberty Holdings, majority-owned by Standard Bank, reported last month it had swung to a first-half loss, while property and casualty insurer Santam Ltd posted a rise in first-half profit thanks to better returns on its investment portfolio.
South Africa's second-biggest insurer Sanlam is expected to report its first-half results on Thursday and predicted in June that volatile market conditions would have a major impact on its full-year earnings after posting a drop in four-month profit. (Editing by Jon Loades-Carter)