Johannesburg - Listed insurance company Liberty Holdings closed 4.63 percent lower at R123.50 a share on the JSE on Friday, after the company released a weak trading update for the three months to March.
The group said indexed new business from Liberty Corporate of R131 million was 17 percent lower than in 2015.
Recurring premiums were down 11 percent due to an increasingly competitive group risk market and lower uptake of offered enhancements, while the Liberty Corporate single premiums were down 49 percent as a result of no significant new deals being secured in 2016.
The group attributed this to continued pressure on consumer disposable income, volatile investment markets, lower economic growth, which impacted both net customer cash flows and indexed new business.
Nico Smuts, an analyst at 36ONE Asset Management said investors responded negatively to the quarterly update as it showed a deterioration in Liberty Holdings’ business on several fronts.
“The retail operations, which make up about two thirds of operating earnings, posted a weak performance, particularly the single premium category, which showed negative new business growth,” he said.
“This was a result of distribution challenges and a temporary gap in their guaranteed investment product offering.
“Although management indicated that a replacement product was launched this month, it will be some time before we know whether the new product has succeeded in winning back the lost business,” Smuts said.
Recurring premium investment and risk sales were 5 percent up compared with the equivalent 2015 period, reflecting continued pressure on consumer disposable income.
Single premium new business was down 8 percent, driven by larger distributors shifting business to in-house product providers and a lack of guaranteed investment plan sales.
Liberty Holding showed a slight improvement on the assets under management which amounted to R671 billion for the quarter, up from R668bn reported at the end of December.
“The returns on the shareholder investment portfolio were behind the benchmark for 2016, but remain well ahead of the three-year cumulative benchmark. The retail insurance operations indexed new business was only 1 percent up to R1.5bn compared to the prior period,” the group said.
Business in Africa is also under pressure as Liberty Africa Insurance indexed new business of R69m was 43 percent lower than the comparative period. This was largely due to the non-recurrence of the take on of an existing book in Zambia in the previous year.
Stanlib’s assets under management of R582bn was slightly up compared with R579bn at the end of December, reflecting low incremental growth from investment market returns and external net cash outflows of R2.5bn.
While the update might have failed to please investors, the group is positive about the business and said management was taking steps to address some of the shorter-term challenges.
“The group believes that the longer-term strategy remains appropriate and is intact,” Liberty said.
Smuts said it was difficult to gauge Liberty’s performance against other insurers, because the group was the only large insurer that had published a trading statement this year.
“We don’t know yet how 2016 has treated its competitors. However, Liberty’s performance does not bode well for the rest of the local life insurance industry,” he said.
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