UPDATE 2-Metropolitan says set for further growth in 2009

* Value of new business up 10 percent to 371 million rand

* Core diluted headline EPS up 6 percent to 151 cents

* Food, fuel, transport inflation remain threat to business

* Shares rise 4.3 percent (Adds CEO, analyst comment, shares)

By Serena Chaudhry

JOHANNESBURG, March 11 (Reuters) - South African insurer Metropolitan (METJ.J) said it was set for further progress this year but higher food, fuel and transport inflation may hit new business, as it posted a 6 percent rise in core 2008 earnings.

Chief executive Wilhelm van Zyl said on Wednesday he expected retail operations to continue to do well in 2009 and said the group's operations had held up so far this year.

"Operationally, we see that we are still holding up well, almost in line with the 2008 results at the moment," van Zyl said. "We certainly set out to exceed 2008 achievements."

South Africa's fourth-biggest life insurer by market capitalisation said its diluted core 2008 headline earnings per share rose 6 percent to 151 cents.

The value of new business climbed 10 percent to 371 million rand ($35.5 million). Corprorate new business fell 33 percent, while retail new business rose 23 percent to beat expectations.

Metropolitan shares, which set a 19-week low at 9412 rand on Tuesday, were up 4.3 percent at 994 rand by 0940 GMT, outperforming Johannesburg's All-share index .

The company is more exposed to the lower end of the retail market, which is sensitive to changes in food, fuel and transport inflation.

South African consumers have been battling with higher food and fuel costs, which helped drive inflation to a peak of 13.7 percent in 2008. Food costs remain high and fuel prices have started rising again after a brief reprieve.

FLAT DIVIDEND

New business at the group's established southern Africa operations rose 18 percent, boosted by its individual life business in Lesotho. Metropolitan operates in Botswana, Namibia, Mauritius and Swaziland, as well as Ghana, Nigeria and Kenya.