Liberty Life - A good year despite the regulatory pressures

06 March 2006 Angelo Coppola

* Indexed new business 12%
* Net cash inflows from insurance operations 80%
* Headline earnings per share 59%
* Embedded value per share 17%
* Statutory capital adequacy requirement cover (times covered) 2,0
* Final dividend per share 46%
* Return on embedded value (%) 22
* PFA SOI one-off impact R599m on the groups embedded value

Net cash inflows from insurance operations amounted to R5,7 billion the highest level to date. In addition, STANLIB and Liberty Ermitage net cash inflows amounted to R13,3 billion and R0,4 billion ($69 million) respectively.

Recurring management expenses of the group were flat on a like for like basis and maintenance costs per policy for all the life insurance companies in the group were largely within actuarial assumptions.

Liberty Life's renewal cost per policy increased by 4% to R258 from the R248 reported at 31 December 2004. Liberty Active's cost per policy decreased from R154 per policy to R139.

Capital Alliance's cost per policy for complex products increased by 2% from R217 at 31 March 2005 to R221 and for simple products from R80 at 31 March 2005 to R98.

Restructuring and integration costs amounted to R184 million for the year, R36 million lower than the projection given to analysts and investors in November 2005.

Other non-recurring costs of R15m include, inter alia, the increase in the post retirement medical liability and fees paid in respect of the bond issue.

Capital management issues were highlighted and Ruck said that they could have realised R4bn at close to 9%, in their bond issue, but their application with the FSB was only for half of that. In terms of investment return, they closed out the SAB shareholding and this gave them R107m, which was significantly better that they did on their Edcon shares, says Ruck.

CAR was calculated at 2 times, which excluded the BEE capital.

Looking for the moral high ground Liberty

We won't develop products that we wouldn't sell to our mothers..

Speaking at their results presentation, Bruce Hemphill, newly appointed CEO of Liberty says the depth and level of insurance skills at Liberty, is significant.

There hasn't been a great deal of disruption and the integration process is almost complete. The question of continuity was also raised, and Hemphill says that there is no rush to change the management team. There will be changes although Hemphill undertook not to rush in and make changes.

In terms of the year ahead, he said that there were a couple of priorities, including customer service, moral high ground, product innovation and providing real value to policy holders.

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