Speaking at the interim results of their business in Johannesburg today, Myles Ruck says that they will spend the next 18 months dealing with the bigger issues.
"It has been a good six months, and the next six months will be focused on doing the basic things.
"We will look for the balance between shareholders, policyholders and consumers requirements, and substantial effort is needed to upgrade the image of the industry – and we are prepared to do our bit.
"We also need to provide the appropriate product, and the find an appropriate solution for past and future products and rulings. Anything (product development) going forward, will impact the past."
There are just four PFA rulings, valued at R300 000, some of which they comprehend, “and others we are struggling to get our minds around,” says Ruck.
As it turns out Ruck says that because each case or ruling is completely separate there is no danger of a North American-style class action. One ruling in particular is confusing, and it seems to be a bit of a one-way bet, according to Ruck.
He confirmed that there is a board sub committee to deal with the PFA issues and valuable time has already been spent to debate the way forward. “We’re not talking about a brief chat. This was a formal agenda item and a comprehensive report.
There is uncertainty in the industry, between players and associations, “We are working together to find a solution. Unfortunately it seems that the PFA doesn’t want to meet with any industry business CEO, individually or collectively,” and this is frustrating Ruck.
In terms of provisioning, they are waiting to get a clearer understanding of the issues. One of their competitors – Old Mutual yesterday announced that they had made a provision of R225m.
But as Ruck points out, this refers to future switching of products for clients. “The provisioning has nothing to do with the past.
“We only want to make one provision, and get it right. We have run the numbers and are comfortable that we can meet any requirements with our balance sheet. The pressure from all for greater transparency is a good thing says Ruck.
Capital Alliance merger
There is also a small challenge to bedding down the Capital Alliance acquisition.
Looking backwards, the silo approach for the business has not been good for the development of the business in the past, especially on the IT side, and products developed were also competing for consumers, with a proliferation of managing directors, HR and financial directors. This has been changed.
“There were also too many customer entry points and this is being simplified. The challenge of a restructure,” according to Ruck, “is keeping informed otherwise there will be some bad surprises.”
In terms of Capital Alliance, there has been a lot going on. The call centres have been consolidated, and there is pressure to show staff that there is action and activity. He expects that the whole merger will be completed in 24 months, although he is aiming for earlier completion.
“The senior guys have got stuck in and there is progress being made.”
Broker relationships
Broker relationships remain a key focus and there is a drive to get to the outlining areas, with some 900 agents on the books now, plus the 300 agents that came with Capital Alliance, there are 245 people via operation Khula, while on the franchise side there are 800 people.
In terms of expanding their reach, Ruck confirmed that there is a regional head office planned for Cape Town. Building at Century City at a cost of more than R200m, has been fast-tracked and is scheduled to start soon.
In terms of Liberty Active they have 245 tied agents and 61 management staff in place, with seven broker networks signed up in the Eastern Cape, and 22 basic branches opened.
On the numbers, the distractions of the PFA, integration issues and the like, didn’t really impact the business, and the results are pretty good, according to Liberty Life finance head Deon de Klerk.
Individual life is still by far the biggest contributor, with some slowing in the RA business, due to the PFA rulings, although interestingly enough single premium RAs showed some growth.
RA sales trends show that the recurring side is down 16%, while individual RAs were up. The net effect is negative however.
In terms of expenses there was R135m in retrenchments, relocation and consultancy costs, with more non recurring merger costs, expected in the next two years.