Liberty is to focus on restoring the financial performance of the local retail insurance business.Photo: Bhekikhaya Mabaso/African News Agency (ANA)
JOHANNESBURG - Liberty Holdings yesterday downplayed its 18percent increase in operating earnings for the six months to end June, saying that it wanted to improve its business further in the medium term.

The group said its executives would focus on restoring the financial performance of the local retail insurance business, improving the investment performance of Stanlib, simplifying the group's overall operations and expanding its relationship with the Standard Bank Group.

Chief executive David Munro said they would continue to prioritise their business in South Africa, where they have a robust core franchise.

“We have a clear strategy, which is progressing to plan, and we believe the real evidence of our actions will come through in 2019 and 2020,” Munro said. “We are confident that we are on track to deliver.”

The group's operating earnings increased to R958million, up from R814m last year, supported by the South African insurance operations and the Stanlib businesses.

Headline earnings for the SA Retail insurance business also rose 18percent to R704m.

The group said pressure on sales volumes would continue in the short term as the economic and operating environment in South Africa remained subdued this year.

“We remain confident that the group is on track to emerge from this period of change with significantly greater potential to create value for all stakeholders,” the group said.

Liberty reported a 5percent increase in normalised headline earnings to R1.33billion from R1.27bn last year. Group long-term insurance net customer cash inflows amounted to R262m in contrast to prior period outflows of R665m, supported by lower policy withdrawals and maturities in individual arrangements and lower scheme terminations in Liberty Corporate.

Stanlib South Africa net customer cash inflows rose to R8.4bn, while Stanlib Africa experienced outflows of R7bn, mainly related to the termination of one large institutional mandate.

Net insurance premiums came in at R17.37bn, down from last year’s R18.47bn, while headline earnings per share (Heps) declined by 0.88percent to 563.5 cents a share, down from last year’s 568.5c.

The company declared a gross interim dividend of 276c a share.

Munro said the group had made meaningful progress in its turnaround strategy in the past six months.

“Our results reflect a stabilisation of our business, but we are still some distance from where we need to be, especially given weak new business volumes,” he said. “While the tough economic environment is impacting the recovery of our South African businesses, we are making significant strategic shifts to support our financial advisers and deliver excellent customer experience.”

Ron Klipin, a senior analyst at Cratos Capital, said the turnaround was still in the early stages and Liberty could still contend with macro headwinds. He said the industry’s growth in terms of savings and investment products eased because of pressure on its clients’ disposable income.

“In addition, a lacklustre equity market has also resulted in low returns on shareholders' equity funds,” Klipin said. “However, the recent appointment of Munro, a high-profile chief executive, previously managing the corporate and investment division of Standard Bank, seems a positive move.”

Klipin said Munro’s strategic overview and fresh eyes brought a degree of stabilisation to Liberty which has suffered from poor returns by Stanlib and some legacy insurance products.

“New business margins have increased while customers’ cash inflows have turned positive, which could be due to inflows from parent Standard Bank. The consolidation of the newly listed Property Reit, which was partially unbundled from the Liberty Property portfolio, could also have been instrumental in the turnaround strategy,” Klipin said.

Liberty Holdings shares gained 1.69percent on the JSE yesterday to close at R118.37.