FANews
FANews
RELATED CATEGORIES

Liberty announces year end 2008 results

26 February 2009 Liberty

GOOD OPERATIONAL PERFORMANCE, STRONGER BALANCE SHEET AND WEALTH MANAGEMENT STRATEGY ON-TRACK

HIGHLIGHTS

· Group sales up 31% to R174bn

· Group BEE normalised embedded value per share R95.12

· Capital Adequacy Ratio increased to 2.7 times requirements at end-December 2008 (2008 - 2.0 times)

· Group cash flow resilient at R10.5bn

· Insurance indexed new business up 10%

· Asset management net cash flow exceeded R13bn

· Dividend up 11%

· Recurring costs below inflation

SALES UP, COSTS CONTAINED AND CAPITAL PROTECTED

Liberty Holdings announced a good performance in tough market conditions with group sales up 31% to R174bn for the year ended December 2008. The group’s capital adequacy ratio (CAR) cover increased to 2.7 times (up from 2.0 times) despite weak markets. The group also announced that it has made substantial progress in its transformation to a broad-based wealth management company.

The results come against the backdrop of a tumultuous year for global financial and credit markets, and in the face of challenging economic conditions at home and abroad.

In a presentation to investment analysts today, Liberty Chief Executive Bruce Hemphill (pictured) said: “Volatile markets have meant a dual focus of managing through the economic crisis and delivering on long term strategy. I think we achieved both.”

“With capital strength the key driver of confidence in financial companies during this crisis, Liberty’s key CAR cover improved from 2.0 times at December 2007 to 2.7 times at end-2008 – this is the strongest capital position since 2002. Our sales held up well in a tough market and we kept our costs below inflation. ”

“In terms of our growth, we have focused business units and a strong management team to consolidate our transformation into a wealth management firm.”

OPERATIONAL REVIEW

Indexed new business in Liberty’s core insurance operations rose 9.9% in 2008 over 2007, and the new business embedded value margin of 2.6% was good. However, in the brutal bear market of 2H 2008, earnings were negatively impacted by Liberty’s 90/10 book and the mark-to-market effect of asset price movements. Liberty Holdings’ basic headline earnings per share for 2008 fell by 32.6%.

Net cash flows into Liberty Group Ltd remained strongly positive at R10.5billion, though lower than 2007’s exceptional R17.4billion. The costs of Liberty’s recurring life business operations rose at 7.8%, below the 2008 CPIX inflation rate.

Liberty’s asset management operations, Stanlib’s net fee income was up 5% while net cash inflows were a strong R5.1bn. Stanlib’s assets under management now stand at R299bn. Liberty announced a full- year dividend increase of 11%.

KEY STRATEGY ISSUES

Liberty continues to implement its strategy to become the leading wealth management company in Africa and other select emerging markets. The foundations for that diversification and growth are now in place - the Group’s established business units have their own strategic targets, and are accountable for their own profitability.

Liberty continues to invest in promising growth initiatives in its Health and Africa units, and has taken a conservative approach in the current economic environment, expensing all costs associated with these ventures. Liberty Health has seen significant business growth, with lives under management soaring from 12,000 at the start of the year to over 250 000 at the end of 2009.

Liberty’s “3-manager model”- separating liability management, strategic balance sheet management and asset management – provides a risk and capital management framework that enables the group to more effectively align risk management with capital requirements across the group’s businesses.

The establishment of Liberty Financial Services (LibFin) during 2008 has uniquely positioned the group to mitigate both capital risk and earnings impacts, through effective capital management. LibFin was able to efficiently manage market, credit and liquidity risk as the global economic crisis unfolded. As a result, the group’s capital position improved by 31%, and earnings volatility has been reduced by 50%.

OUTLOOK

Hemphill concluded: “We are making great strides in implementing Liberty’s growth strategy. We are firmly focused on maintaining financial strength in the current economic environment, while transforming and diversifying the group for the benefit of customers and shareholders.

Liberty’s diversification - into new geographical markets, product sets and distribution channels - should provide increasing stability in current market conditions. But it is this same broadening of our interests that is also positioning us for future growth – maximising the potential of the business, and creating sustainable long-term value for our customers and shareholders.”

“The environment is so unsettled that even predicting short-term business outcomes is difficult and we expect the volatile economic conditions to continue in 2009. Despite this, Liberty is well capitalised, our approach in 2008 stood us in good stead and we will continue to focus on risk and capital management and prudently continue with our diversification strategy in 2009.”

Quick Polls

QUESTION

How can financial advisers help clients to navigate 2025’s economic and financial market uncertainties?

ANSWER

Asset allocation plus diversification
Increase global exposure, despite volatility
Increase local exposure, despite policy concerns
Stay true to your clients’ investment plans
fanews magazine
FAnews February 2025 Get the latest issue of FAnews

This month's headlines

Unseen risks: insuring against the impact of AI gone wrong
Machine vs human: finding the balance
Is embedded insurance the end of traditional broker channels?
Client aspirations take centre stage as advisers rethink retirement planning
Maximise TFSA contributions before year-end
Subscribe now