Liberty today released its operational update for the 3 months ended 31 March 2013 on SENS. Liberty¡¦s operating performance reflects continued sales momentum.
Group operating performance reflects continued sales momentum
The performance of the group for the three months to 31 March 2013 reflects continued sales momentum in the Retail SA business, strong cash inflows, and a good overall operational performance from the rest of the group¡¦s businesses. Returns on the shareholder investment portfolio benefitted from positive investment markets and good tactical asset allocation.
Key highlights:
* Long-term insurance indexed new business (excluding premium escalations) increased by 17% to R1.5 billion for the period.
* Net customer cash inflows of R6 billion reflecting an improvement on the R5 billion reported for the corresponding 2012 period.
* Total group assets under management increased to R549 billion from the R528 billion at 31 December 2012.
* The shareholder investment portfolio benefited from the portfolio construct and is tracking ahead of benchmark.
The capital adequacy level of Liberty Group Limited (LGL), the entity which conducts the bulk of the company's insurance activities, at 31 March 2013 was unchanged from 31 December 2012 at 2.7 times. The LGL position is after the contribution by LGL to Liberty Holdings Limited (LBH) to fund the declared 2012 final and special dividends which were paid by LBH in early April 2013. All the other life license subsidiaries remain well capitalised.
Retail SA sales up 14%
Retail SA indexed new business was up 14% for the period, with recurring new business up 17% to just under R1 billion and single premium new business up 7% to R3.5 billion. The increase is mainly driven by good growth in single premium investment business as well as credit life sales. ECM risk business up 7%.
Retail SA net cash inflows of R789 million for the quarter further demonstrates the good growth in single premium investment business.
LibFin returns ahead of benchmark
LibFin Investments continue to manage the shareholder investment portfolio within approved asset allocation limits, with returns for the three months ahead of the gross benchmark return.
Libfin Markets has managed the market risk exposures within a narrow range and good progress has been made during the period to further build the credit portfolio.
Institutional and Asset Management
Corporate new business up 57%
Corporate indexed new business increased by 57% to R166 million, mainly as a result of recurring premium business growing by 65% (supported by good risk and existing policy enhancement sales) and single premium investment business by 21%.
Corporate net cash outflows for the quarter remain negative at R168 million but are a considerable improvement on the negative R488 million reported for the same period in 2012. The business remains on track with its strategy to eliminate legacy issues and position the business for growth.
STANLIB AUM grow by 7%
(includes asset management operations in all African regions)
Assets under management (excluding the on-balance sheet property portfolio) at 31 March 2013 increased to R469 billion compared to R438 billion at 31 December 2012. This reflects continued strong inflows for the quarter into retail non money market funds of R4.5 billion. Total cash inflows (excluding intergroup) for the period are R5.4 billion. Underlying asset values continue to benefit from positive growth in investment markets.
STANLIB¡¦s investment performance has been sustained at the recent improved levels.
Liberty Properties benefits from increased rental areas
Liberty Properties, which comprises property management and development has benefited from the increased rentals in the property portfolio and continues to focus on securing further development mandates.
Business Development
Liberty Africa long-term insurance new business up by 6%
Long-term insurance indexed new business increased by 6% compared to the equivalent 2012 period, with strong sales from the bancassurance channel. Short term insurance claims loss ratios remain at good levels and the investment environment in Kenya has remained stable following the election process.
Liberty Health makes steady progress
Growth in the Liberty Medical Scheme membership continues albeit slowly with steady progress being made in improving the operation and building scale to leverage the investment in systems and processes.
Direct Financial Services focused on affinity relationships
Management continues to focus on capitalising on the opportunities inherent in the affinity relationships with Vodacom and Standard Bank. This includes the continued effort to build a scalable solution that leverages the systems infrastructure supporting the direct channel.
Conclusion
The operational improvements delivered in 2012 have continued to benefit the business in the first quarter of 2013. Management¡¦s focus remains on ensuring that the core South African insurance operations are managed within acceptable sustainable long-term assumption sets, whilst gaining profitable market share in all business lines and markets in which the group operates. Liberty¡¦s balance sheet management capability continues to demonstrate the ability to manage the investment market risk exposures within risk appetite.
The operational update for the three months ended 31 March 2013 has not been audited or reviewed by the Company's auditors.