LIBERTY Holdings paid out a “staggering” 61 percent increase in death and disability claims to R8.5 billion in the six months to June 30, reflective of the severe toll that the Covid-19 pandemic is taking on clients, the group’s chief executive David Munro said yesterday.
The mortality and impact on clients during the second wave of the pandemic in South Africa had been worse than was expected, while the impact of the third wave was anticipated to be somewhere between the first and second wave’s, he said in a presentation yesterday.
In view of the prevailing uncertainty around the pandemic, the group had increased a special reserve of funds it had set up for the pandemic, by about R1 billion, he said.
The group, which is involved in a transaction that will see parent Standard Bank take 100 percent of its shares, from 54 percent currently, yesterday said headline earnings a share had shot up to 84.3 cents in the six months to June 30 from a previous loss of 855.2c a share. This was after a strong investment performance offset the effects on the group of rising mortality due to the Covid-19 pandemic.
Pre-tax profit came to R1.66bn versus a R4.1bn pre-tax loss previously. Normalised headline earnings came to R288 million versus a R2.2bn loss previously. The interim dividend was passed due to a need to maintain a strong balance sheet in the uncertain environment, said Munro.
The Shareholder Investment Portfolio (SIP) generated R753m profit, compared with a loss of R631m for the same six-month period a year before. After including the cost of increasing the prospective Covid-19 pandemic reserve of R729m, and claims not covered through the pandemic reserve of R388m, Liberty reflected a normalised operating loss of R465m compared with a normalised operating loss of R1.54bn for the comparative period.
Munro said challenging health and economic conditions during the first half of 2021 were continuing, but he hoped to see a more normalised environment, in terms of the pandemic, towards the end of the second half.
He said SIP had benefited from the improving global economic environment, which in turn had positively impacted global and South African financial market conditions and contributed positively to investment returns. Total annuity payments to clients were R4.5bn, a 10.3 percent increase on the comparative period.
A pandemic reserve of R3.1bn was established in 2020 to provide for the expected impact of Covid-19 on Liberty’s business. On December 31, 2020, the reserve amounted to R2.29bn. However, the additional death and funeral claims, adverse persistency experience and pandemic-related expenditure absorbed R1.76bn within the pandemic reserve, during the interim period.
Liberty’s actual experience for the six months to June 30, 2021, together with emerging South African population statistics, were considered when increasing the pandemic reserve at June 30, 2021, by R1.02bn. This month Standard Bank Group (SGB) had proposed to buy 100 percent of Liberty Holdings and to integrate Liberty more closely into the greater group. SBG currently owns 54 percent of Liberty.
Munro said their strategy would be to significantly enhance the quality of client and adviser experience, deliver transparent and intuitive risk and investment solutions suitable for the digital age and simplify the whole organisation.
Progress on this strategy during the current period included R169m of investments to expedite the build of client and adviser engagement and investment platforms. Advice Plus was launched, a financial needs analysis tool to advisers, which had seen more than 8 000 client financial needs analysis reports had been issued since its launch in late May.
Investment solutions had been enhanced through the launch in early 2021 of the Multi-Strategy portfolio range, as well as a portfolio range launched on Stanlib's LISP, built in conjunction with Stanlib Multi-Manager. A more refined approach to pricing and risk selection, based on additional risk factors in commercial and actuarial models was introduced in the second half of 2020 and was being refined. In terms of simplification, legacy products continued to retired, while the streamlining of the SA Retail business continued.
Eighty-one products had been rationalised with more than 200 000 clients migrated to new generation products, and 31 portfolios had been rationalised with assets of R500m in respect of 4 000 clients switched into other suitable portfolios in the first half of 2021.
Group long-term insurance indexed new business of R4.28bn was 24.8 percent above the comparative period of R3.43bn. This was underpinned by a 30.9 percent increase in SA Retail indexed new business.
Liberty shares closed 0.28 percent lower at R82.90 on the JSE yesterday.
BUSINESS REPORT ONLINE