Full-year HEPS drop 7%.

JOHANNESBURG (Reuters) - South African insurer Metropolitan Holdings (JSE:MET) posted lower 2009 profit after more consumers defaulted or cancelled life insurance policies and the value of its investment assets dropped.

The country's fourth-biggest insurer said on Wednesday diluted core headline earnings per share for the year to end-December fell 7 percent to 141 cents from 151 cents in 2008, in line with its own forecast of a 5-10 percent drop.

The insurer, heavily exposed to the lower end of the retail market which is more sensitive to changes in the cost of basic items, said food and transport inflation remained its biggest challenges.

Cash-strapped consumers have also been hit by rising unemployment as Africa's largest economy struggles to get back on its feet after a recession.

Metropolitan's total new recurring premium business fell 9 percent to 1.159 billion rand, while its embedded value climbed to 12 billion rand from 11.3 billion rand in 2008.

Rival Liberty, South Africa's No.2 insurer, reported a drop in 2009 profit last month as fewer customers bought its investment products and existing customers, struggling with high levels of personal debt, allowed policies to lapse.

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