Londiwe Buthelezi
Local insurer Liberty Holdings was looking to gain market share in its retail insurance business after a strong performance in the six months to June, chief executive Bruce Hemphill said yesterday.
The group’s basic earnings a share rose 18.4 percent to R4.402 from a year earlier.
Hemphill said the firm was now managing its balance sheet the way it wanted to after it resolved its customer management and retention issues.
“We have resolved the persistency and entry level market issues, but what is really important is that we are taking back market share at the right price,” Hemphill said.
Liberty’s retail insurance sales were up 14 percent to R6.9 billion. Indexed new business rose to R1.97bn, 6 percent higher than R1.85bn a year earlier. Liberty as a whole saw an 18.4 percent increase in headline earnings, which jumped to R1.14bn from R968 million in the comparable period last year.
Accompanied by strong operational earnings in Stanlib, performance from the two core divisions drove the group’s black economic empowerment normalised headline earnings to R1.18bn, 17.2 percent higher than in the first six months of last year.
Stanlib’s headline earnings rose to R190m from R164m in 2010. The group’s new business margin increased to 1.3 percent from 1.1 percent.
“Sales from our retail channels have made a good recovery from the 2010 performance and it is pleasing to see increased support from our broker channels,” Hemphill said.
He added that even though there was a level of uncertainty, the insurance business was now better positioned to deal with the deteriorating environment and should be able to increase its business margins further.
But Dimitri Mitropapas, an analyst at PSG Konsult, said Liberty did not have the best name in the market and although it might be better positioned to regain its lost market share, it was unlikely to capture new space.
Jean Pierre Verster, an analyst at 36ONE Asset Management, said Liberty was in a better position due to attractive products launched recently.
“They’ve improved on retaining their clients, which is one issue that has impacted them negatively in the past. But more importantly, they’ve also learnt that they shouldn’t try to gain market share at the cost of profitability,” he said.
Verster said it should also be noted that Liberty’s retail insurance business benefited from assumption changes. In addition, LibFin contributed to the result through prudent management of capital. “The issue that investors might have been disappointed with is the announcement of the change in Liberty’s dividend policy to a cover of between 2 and 2.5 times, which will lead to a lower dividend paid at their financial year end than previously expected,” Verster said.
Health risk sales improved by 80 percent in Africa, but Liberty Health continued to face challenges at home as clients moved to the Government Employees’ Medical Scheme.
“Within our growth cluster, aimed at diversifying Liberty’s geographical spread and client and product base, we have seen good results from Africa this year, with headline earnings substantially exceeding targets, as well as healthy growth in Liberty Health’s risk sales.
“Our new direct insurance operation Frank.net continues to progress well, while our bancassurance agreement with Standard Bank continues to deliver significant value to both parties,” said Hemphill.
Shares closed 0.08 percent lower at R73.19.