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Liberty Group results

02 March 2004 Angelo Coppola

The Liberty group results today look reasonable, considering the circumstances. Myle Ruck - CEO.

Here is more detail on the various businesses and what the issues are.

Liberty Personal Benefits

Operationally Ruck focussed on the success stories, sighting the Liberty Personal Benefits market share on recurring individual increasing from 15.7% to 18.9%, and single individual policies increasing from 11.5% to 18.8%.

"This sector will be particularly hard hit by the partial uncapping of commissions, due to be released later this year," says Ruck.

Liberty Corporate Benefits

Staff cut by 9% while the IEB purchase price is worked in at R130m, and Ruck says that it has been a smooth integration so far, with another two to three years to rationalise fully.

"There is still long a way to go, in terms of systems integration."

Properties

Value of properties in the portfolio has increased by 9% to R10 449.8m from R9 601.8m. The portfolio is fairly consistent with last year with a small drop in office buildings from 22% to 20%, a 1% increase in shopping malls and hotels.

Vacancies were up to 13.9%, up from 12.1% for 2002, a bit of an issue in some areas like Sandton office towers.

The major question occupying the group at the moment is how much property they are prepared to hold. "We have almost reached the limit, with some scope to grow slightly. We are actively managing the portfolio.

Stanlib

Assets under management showed a general increase over the period. Life funds were up 12% to R59bn; segregated funds were up 15% to R55bn; unit trusts were up 38% to R40bn; while structured products and others were up 26% to R24bn; money market funds as a percentage of the total increased to 14%, up slightly from 11%.

Ruck says that there were net inflows of R12bn, while investment performance was mixed, with good fixed interest performance, offset by the balanced portfolios under-performing.

They took a wrong bet on the direction of the rand, and Ruck is critical of the timing, however it seems to be working its way through the system. The first two months of this year were good though.

He did explain that integration and other once-off costs were higher than expected, and staff numbers were reduced by 98. Liberty staff numbers have also been cut by 135 people.

There will still be some confusion for consumers when they look for unit prices under the old names.

Ermitage

Assets under management increased by 30% to $2 952.5m. This was made up of an increase of 60% in hedge funds to $1 292.7m; long-only funds up 34% to $1 059.5m; while money funds dropped 10% to $600.3m. "Still a bit much coming form the Liberty area. I would like to see more coming from elsewhere.

The hedge fund announcement by the FSB, this last week, in terms of the life offices, is concerning and they are evaluating the decision.

Expenses

There were non-recurring costs to the group of R111.3m. These were broken down into retrenchment salary costs; corporate activity costs; pension fund provision; post-retirement medical liability increase; retention bonuses; renovation cost; and other provisions.

The group boasts an IT spend of between R450m and R500m. It is being centralised again, and policing the processes and developments, will deliver efficiencies.

Quick Polls

QUESTION

The shocking crime and motor vehicle accident statistics shared during a recent SHA presentation suggests that group personal accident and personal accident cover are a no-brainer. Do you agree?

ANSWER

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