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Liberty Holdings delivers strong financial performance for the six months ended 30 June 2019

01 August 2019 Liberty
David Munro Liberty Group CEO

David Munro Liberty Group CEO

Focused execution of strategy unlocks value and lays foundation for future growth

Financial highlights:

  • Normalised operating earnings increased 13.9% to R1 091 million
  • Normalised headline earnings increased 51.1% to R2 013 million
  • Shareholder Investment Portfolio (SIP) earnings of R922 million
  • Group VoNB increased 20.4% to R171 million
  • Capital adequacy ratio strong at 1.85 times
  • Group net customer cash inflows increased significantly to R10.6 billion
  • Group equity value per share increased to R143.96
  • Total Group assets under management of R758 billion
  • Interim dividend of 276 cents per share

 


 

Commenting on the results, David Munro Liberty Group CEO said:

"We have taken substantial steps to strengthen our business and I am pleased to report a solid first half of 2019. Our strong operational performance, supported by improved market returns, shows the continued progress we are making towards re-building a competitive and sustainable business. This is underpinned by focused execution of initiatives to simplify and re-orientate our business to better serve our financial advisers and clients, in a digital way and as part of the Standard Bank Group.” 

"Notwithstanding our financial progress, we are by no means immune to the economic headwinds being experienced by our customers. Our key priorities for this year are to improve the volume and value of new business, through product enhancements, a differentiated technology strategy and managing our costs in a prudent and responsible manner. I believe Liberty is firmly on track to reclaiming our leading position within the retail affluent market, which is highly geared to any upswing in the South African economy.” 

Group results show significant performance improvement

Headline earnings increased 51.1% largely as a result of better market returns from our Shareholder Investment Portfolio. Normalised operating earnings increased 13.9% which is indicative of the underlying performance of our South Africa Retail and STANLIB South Africa businesses. 

Strong cost discipline together with product and margin enhancements resulted in a 20.4% improvement in the Value of New Business (VoNB) to R171 million with margin improvement to 0.9%. 

Group net external third-party client cash inflows increased significantly to R10.6 billion compared to R1.9 billion for the six months to 30 June 2018 supported mainly by good STANLIB South Africa net external third party client cash inflows. Total group assets under management amounted to R758 billion (31 December 2018: R718 billion). 

Group long-term insurance indexed new business of R3 862 million was 2.4% above the comparative period. Focus remains on sales efforts and new business volumes in the prevailing tough consumer environment in South Africa. 

The group remains well capitalised at 1.85 times at 30 June 2019, which is at the upper end of our target range and underpins our ability to fulfil our promises to policyholders and other stakeholders. 

South African insurance operations

SA Retail

The SA retail business delivered an improvement in earnings up 11.1% to R782 million. This was largely achieved through progress made on a number of initiatives to improve the client and adviser experience, including enhancements in IT infrastructure and the launch of innovative and competitive products.

Indexed new business sales of R3 130 million were 0.6% up on the first half of 2018, with the tough consumer environment in South Africa continuing to impact sales volumes. Growth in sales volumes and VoNB remains management’s highest priority.

VoNB increased by 13.6% to R134 million and the margin improved from 0.8% at 30 June 2018 to 0.9%. This is attributable to the positive impact of product enhancements and margin management combined with an improved new business mix. Notwithstanding continued retention efforts, net client cash outflows of R513 million reflected the impact of increased surrender and maturity values paid on investment policies following improved market returns over the period.

Liberty Corporate

Liberty Corporate recorded earnings of R39 million for the period. The underwriting result was impacted by poor group life mortality experience. The experience on the disability book continues to improve following management actions taken, including selective risk scheme repricing. Costs continue to be well managed. 

Asset Management

STANLIB South Africa earnings increased by 19.4% to R209 million. Fee income was higher in the current period primarily due to strong cash inflows and favourable investment market performance. 

Net external third party client cash inflows grew to R13.3 billion from R8.4 billion in the comparative period. This result was largely attributable to good institutional non-money market and money market inflows. Intragroup cash inflows for the first half of 2019 amounted to R2.8 billion. 

Total assets under management by STANLIB South Africa amounted to R566 billion (31 December 2018: R549 billion). 

Africa Regions

Africa Regions comprise Liberty Africa Insurance and the STANLIB asset management operations in the Southern African region. 

Earnings for the period of R31 million (30 June 2018: R8 million) were positively impacted by return to expected claims experience from the short-term insurance business in Kenya. The asset management operations’ performance was in line with the comparative period. 

Operations under ownership review

The loss of R64 million has reduced compared to the loss of R81 million incurred in the first half of 2018, due mainly to the sale of Liberty’s short-term insurance technology platform to Standard Bank Group effective 2 January 2019. 

Good progress is being made with the disposal of the asset management businesses classified as operations under ownership review. Refer to the separate announcement released on SENS on 31 July 2019 in respect of the disposal of STANLIB Ghana. Efforts continue to find a suitable outcome for the health business, however, these are taking longer than anticipated. 

Shareholder Investment Portfolio (SIP)

The performance of the SIP was mainly attributable to the strong performance of local equities during the first six months of 2019, together with good performances from other emerging and developed market equities as well as local bonds. These conditions resulted in the SIP producing a gross return of 5,9% and delivering earnings of R922 million (30 June 2018: R374 million). The SIP exposure to investment markets remains appropriate in the context of the group’s risk appetite. 

Financial market volatility in both South African and developed markets is likely to continue. This will have a natural consequence for the SIP earnings for the 2019 full year as compared to the first half. 

Liberty Two Degrees (L2D)

The interim distribution declared for the first half of 2019 was maintained at the level of the comparative period. The quality and robust nature of the L2D property portfolio is evident in the company's solid operational performance despite the negative impact of low macroeconomic growth on the consumer. L2D's specialist retail skills and the steadfast execution of its strategic building blocks should continue to ensure that its predominantly retail portfolio will perform well. 

Further details on the results are available on the L2D website and in the L2D results announcement. 

Bancassurance

The bancassurance agreement with Standard Bank Group, which is applicable across the group’s operations, continues to make a positive contribution to new business volumes and earnings. The total indexed new business premiums sold under the agreement increased by 5.8% on the comparative period. We continue leveraging our joint capabilities with Standard Bank to capture appropriate opportunities.

Strategic priorities and outlook

Good progress is being made implementing Liberty's turnaround strategy. Management’s focus for 2019 remains on driving the SA Retail performance and VoNB growth, maintaining STANLIB’s investment performance in the top quartile, conclude outcomes for each of the group's operations under review and continuing to maximise our relationship with the Standard Bank Group.

We remain confident that our focus is on the right areas of the business to create sustainable longer-term value for all stakeholders.

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