Johannesburg - South Africa’s fourth-largest insurer, Liberty Life, intends challenging Old Mutual in the rest of Africa as it announced last week that it had boosted its acquisition war chest on the continent to R1.3 billion.
This is R300 million more than the R1bn the group said earlier this year it had available for acquisitions in Africa.
It intends to conclude the acquisitions of a Nigerian insurer and an asset manager by the end of the year and may also start a short-term insurer in Botswana by November, while it has agreements to buy a similar business in Uganda.
Liberty, which is controlled by Standard Bank, earned R28m in profit for the half year to June from its insurance units in east and southern Africa, excluding South Africa.
Old Mutual, which has spent R3.8bn of its R5bn set aside for acquisitions, earned R400m in profit in the same period from its acquisitions, including 20 percent in Ecobank Transnational Incorporated and its acquisition of UAP, an east and central African financial services company.
Liberty said in its half-year results on Friday that both its short- and long-term business had been negatively impacted by poor investment markets in east Africa. The R28m profit was unchanged from that for the same period last year.
Growth focus
However, Liberty chief executive Thabo Dloti said focusing on expansion across the continent remained a key focus area for the business and the investments that had been made in the past should start contributing to the bottom line.
The taking over of Standard Bank’s credit life book in Zambia, along with good sales in Botswana and Namibia, grew the value of new business to R27m from R12m during the half year to June last year.
“The group continues to evaluate business opportunities for acquisition throughout the sub-Saharan African region and has reserved capital resources for this,” Liberty said.
Africa has not been entirely rosy for Liberty. Headline earnings from group arrangements rose 14 percent on the prior period, with South Africa being up 21 percent and the rest of the continent flat.
Liberty chief financial officer Casper Troskie said: “Our rest of Africa business saw good growth in underwriting profit offset by lower shareholder investment income given lower investment markets in May and June. Earnings in short-term business were also affected by the introduction of a new excise tax in Kenya. The value of new business for group arrangements was up strongly by 19 percent with the value of new business in the rest of Africa more than doubling.”
SA growth
Troskie said corporate business in South Africa was up 15 percent as earnings benefited from increased fee income and higher annuity unwind of 9 percent.
Stanlib’s earnings increased by 6 percent to R301m with a 7 percent increase in South Africa and flat earnings in the rest of Africa.
Revenue in South Africa rose 5.5 percent with costs only growing at 4.5 percent resulting in a positive result for that business. This includes positive cashflows in the rest of Africa of just more than R1bn.
Liberty reported a 6 percent increase in headline earnings to R301m on Friday as strong demand from corporate clients offset a weak showing from its equity investments portfolio.
It said black economic empowerment normalised headline earnings a share came in at 705.5c in the six months to the end of June, up 6 percent on the previous interim period.
The interim dividend rose by 9 percent to R2.54 a share.
Net customer cash flow fell 11.2 percent to R10.3bn as its core middle-class customers felt the pressure of slow economic growth, job losses and higher energy prices.
Liberty shares on the JSE on Friday fell by 1.57 percent to close at R141.
* Additional reporting by Bloomberg
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