Strategy delivering growth and value.
Salient features
• Operating earnings up 31% to R1 048 million
• Group asset management net cash inflows up 66% to R9 billion
• Long term insurance net cash flows up 81% to R2 billion
• Long-term indexed new business insurance sales up by 12% to R3 122 million
• BEE normalised headline earnings up 5% to R1 704 million
• BEE normalised headline earnings per share up by 6% to 602.7 cents
• BEE normalised group equity value per share increased 12% to R117,16
• Interim dividend per share increased 10% to 212 cents
• Liberty Group capital adequacy ratio (CAR) strong at 2,75 times the regulatory requirement
Overview
Liberty’s 2013 half year financial results continue to reflect good performance in the core insurance and asset management businesses. An increase in operating earnings of 31% to R1 048 million was achieved without any significant assumption or modelling changes and despite a volatile interest rate environment. This, combined with a gross investment return of 5.5% on the group’s shareholder investment portfolio resulted in BEE normalised headline earnings increasing by 5%.
Group asset management net cash inflows of R9 billion were 66% higher than the inflows for the first half the previous financial year. Long-term indexed new business sales were up 12% to R 3 122 million and long-term insurance net customer cash flows increased by 81% to R2bn.
Liberty’s capital cover remains strong at 2,75 times the statutory requirement.
Commenting on these results the CEO of Liberty Holdings, Bruce Hemphill said:
“Our performance for the first half shows delivery against our strategic objectives across the business. We continue to grow market share within our retail business and the asset management business continues to attract impressive higher margin cash flows. Liberty’s focus on improving operational efficiencies, product innovation, multi-channel distribution and leveraging the advantage of the commercial bancassurance agreement in both South Africa and chosen African markets is delivering growth and value for stakeholders.”
Insurance – Retail and Institutional
Retail SA
The largest contributor to group earnings, Retail SA continued with its pleasing performance during the period. Net cash flows were strong at R2 billion. Headline earnings for the half year were R798 million, with performance underpinned by good annual contract increases, ongoing positive persistency and risk variances, higher management fees due to the 2012 growth in underlying investment portfolios and expense control. Indexed new business sales increased 13% to R2,7 billion in comparison to the same period last year.
Ongoing product innovation and continuing to build on the strength of multi-channel distribution channels are key pillars of Retail SA’s growth strategy. Already leaders in risk products, the investment offering was enhanced, through inter alia, the launch of a new linked investment service provider (LISP), which offers consumers the option to invest in a wide range of collective investment schemes and on balance sheet investment products using a single source.
Corporate
Liberty Corporate has produced a commendable set of results, demonstrating a significant turnaround in the business. Legacy issues have been addressed through deliberate management action and Liberty Corporate is a business which is now positioned for future growth in both the SMME and large fund markets. Following last year’s launch of the new flagship investment product, the Liberty Stable Growth Fund, as well as a unique index tracking fund, Liberty Corporate was recognised by the Financial Intermediary Association as the best employee benefits product supplier.
Improved claims experience and cost efficiency contributed to an improvement in headline earnings of 37% to R52 million. Indexed new business was R292 million, 6% higher than the comparable period.
LibFin
LibFin’s superior risk management capability represents a key competitive advantage for Liberty. The unit continued to make a valuable contribution to group earnings, while managing market risk exposures within a narrow range despite significant volatility in interest rate markets towards the end of the six month period. LibFin directly manages R39 billion of asset portfolios at 30 June 2013.
The shareholder investment portfolio managed by LibFin Investments produced a gross return of 5.5% which is ahead of benchmark.
Asset Management
Effective 1 January 2013, STANLIB began to manage all the group’s asset management businesses in the rest of Africa. Prior year comparatives have been restated to reflect this change.
STANLIB South Africa
Overall, STANLIB South Africa continued on its positive growth trajectory, generating headline earnings growth of 22% to R243 million. This is significant given the costs associated with establishing and growing the multi-franchise business and investment capabilities. STANLIB South Africa also managed to attract substantial net cash inflows of R14 billion into higher margin investment offerings and structured products. As at 30 June, total assets under management increased to R468 billion.
Performance expertise was recognised with five Raging Bull Awards won by the business.
STANLIB Africa
Assets under management as of 30 June 2013 were R36 billion (31 December 2012: R36 billion), despite the expected drawdown of funds under a sovereign mandate in East Africa. Headline earnings for the half year were R27 million, up by 29% (30 June 2012: R21 million).
Bancassurance
Liberty’s commercial bancassurance joint venture relationship with Standard Bank provides the group with a competitive advantage. Bancassurance continued to contribute to embedded value and earnings, particularly for the insurance and asset management operations. STANLIB’s net asset management fees from the Standard Bank distribution channel increased by 12,0%. The total embedded value of in-force contracts sold under the agreement attributable to Liberty at 30 June 2013 is R1.3 billion (31 December 2012: R1.2 billion).
Liberty Insurance operations in the rest of Africa
Liberty’s businesses in the rest of Africa generated headline earnings of R18 million for the reporting period. This is up significantly compared to the similar period in 2012.
Expansion into other strategic markets in sub-Saharan Africa remains a priority. The economic outlook for the region and growth potential in the middle and mass affluent segments present ideal investment opportunities for Liberty.
Health
Liberty Health continues to demonstrate its positive growth potential. During the reporting period, the business decreased on its headline loss by 42%. New products and increased group collaboration in sales and distribution are beginning to bear fruit.
Looking ahead, Bruce Hemphill said:
“Our strategy, capabilities and the markets we are targeting are clear. We have delivered significant improvements in core operating earnings, insurance indexed new business, assets under management, and group embedded value earnings over the last three years. We will continue to leverage our partnership with Standard Bank to maximise on growth opportunities in strategic markets across Sub-Saharan Africa. The operational efficiencies implemented across the group, together with the positive growth trajectory of our major businesses, positions the Group for continued growth.”
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