Looking north as Africa rises
We have heard of the strength of the life industry and the fact that companies who look hard enough for growth will find it.
The latest results from Liberty, for the first half of 2015, is an example of this as the company pushes further ahead with its expansion into Africa as a major growth market. FAnews spoke to Liberty Financial Director Casper Troskie to discuss the company’s results in a bit more detail.
Growth in AUM
A major highlight during the period was a growth in Assets Under Management (AUM) to R645 billion. We asked Troskie how this has changed over the past decade.
During the first six months of 2015, Stanlib’s AUM was impacted by low incremental growth from investment market returns, but reflected good inflows of R4,9 billion into various money market funds, and R5,4 billion into higher margin retail and institutional mandates.
He pointed out that Stanlib performed in line with growth in AUM with market value growth muted as a result of the higher weighting of interest rate sensitive assets. Margins achieved improved due to a better product mix.
We also asked Troskie how this will evolve in the future. “Stanlib manages assets for over 400 000 retail and institutional clients across the African continent. Our strategy is to accelerate growth by increasing our alternative asset franchise offerings and capture a greater share of flows into Africa. Stanlib currently has operations in eight African countries outside of South Africa,” said Troskie.
He adds that as part of its product offering, Stanlib has set up a Direct Property Investment Franchise. This franchise aims to be a popular asset manager with a long-term investment appetite in quality real estate among economically growing nodes on the African continent.
Value of new business
Another highlight of Liberty’s results was a significant increase in the value new business, which increased by 7%.
“During the first six months of 2015, the Group’s overall value of new business was mainly driven by individual arrangements which comprises our South African retail operations that increased by 5% to R332 million at a margin of 2,1%. Group arrangements was another major contributor. This grew by 19% in total. However, the growth was mostly attributable to Liberty Africa that grew by more than 100% to R27 million compared with the similar period in 2014,” said Troskie.
He added that the company’s “Strategy 2020” places significant emphasis on growth throughout Sub-Saharan Africa by enhancing customer value propositions while better leveraging and developing existing and new capabilities. “Inherent in this strategy is our ability to adapt to and take advantage of the fast changing regulatory and consumer environments. This strategic focus, combined with the company’s ability to deliver return on group equity value in excess of long-term targets, supports our confidence that we should continue to sustainably grow our business.”
Better understanding
Companies who are achieving growth in the market have reported that a better understanding of their client’s needs has been a catalyst of this growth.
“Our ability to understand our clients refer to our business model to sustainably utilise and renew available capital resources to create value by providing solutions to individuals (or represented groups of individuals) with respect to their financial risks and investment needs. In return we either charge an appropriate fee or derive underwriting profits through pooling similar insurable risks, enhanced by optimising offsetting risks. We maximise our ability to generate revenue through research, identifying customer needs and producing product solutions and effective distribution and servicing,” says Troskie.
Africa rising
“Over the last few years, Africa has been a major focus area for Liberty. Through its arrangement with Standard Bank, Troskie says that this growth will most likely continue,” Troskie added
“The African continent has a population in excess of 1,1 billion. A number of African countries have sustained economic growth in excess of 5% for over a decade. This has helped reduce poverty and improve disposable incomes in many countries. According to the International Monetary Fund’s Regional Outlook for Sub-Saharan Africa published in April 2014 several countries stand to reap the benefits of investments in transport and telecommunications, an expansion of production capacity - most notably in extractive industries and energy generation - and increased productivity in agriculture over the next few years.”
“This economic growth, together with retirement reform, micro insurance legislation and increased urbanisation offers market penetration opportunities in a region that has extremely low insurance penetration rates currently. Most countries also lack a social security network, or the resources to provide one, which requires individuals and employers through group schemes to make their own arrangements in this regard,” concludes Troskie.
Editor’s Thoughts:
Tailor making products to suit a specific market may not be easy, but it is an important ingredient if one is looking for growth. Many companies are already embracing this model and it won’t be long before South African companies lead the way into Africa. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
