Liberty insurance up but retail flat
• Lack of clear strategy from insurer’s new CEO disappoints analysts
Liberty delivered a mixed performance for the nine months to September, with a strong turnaround in its group insurance business, while its retail unit was relatively flat.
Liberty delivered a mixed performance for the nine months to September, with a strong turnaround in its group insurance business, while its retail unit was relatively flat.
The group arrangements unit, which provides insurance and investment solutions to corporate organisations and pension funds, grew new business 37% to R802m. It overcame the 31% slump in single-premium sales observed during the matching period, selling exactly the same amount in new one-off policies. Recurring-premium sales rose 38%, compared with 14% previously.
The improvement in the group arrangements business was underpinned by strong sales of group risk and umbrella enhancement policies, coupled with higher single-premium umbrella sales.
The retail individual arrangements business failed to keep up with its corporate sibling, delivering a flat 2% rise in new business to R4.9bn. One-off policy sales were up 4% compared with 1% previously as customers flocked to guaranteed products in response to heightened political and economic uncertainty, while growth in sales of recurring policies decelerated to 1%.
“Management’s immediate priority remains the strategic execution of initiatives to restore the value of new business and margin, reduce costs and complexity in the business and improve customer experience,” said Liberty.
Rahima Cassim, a fund manager at Ashburton Investments, said the insurer had failed to unveil a turnaround strategy, even after the abrupt departure of former CEO Thabo Dloti and the appointment in his place of parent Standard Bank’s former corporate and investment bank head, David Munro, in May.
“While they mentioned the need to work on aspects like margins and costs, they did not provide a defined strategy stating how this will be done and the timeline over which we can expect it to occur,” said Cassim.
“I would have expected Munro to have been more forthcoming in terms of a turnaround strategy, as some time has passed since his appointment.
“While flows and business volumes were provided, there was no guidance on margins.”
Margins have been diminishing across Liberty’s business units for some time, hitting 0.4% in the six months to the end of June. Analysts said this profit margin was low and needed to be tackled urgently.
Adrian Cloete, a portfolio manager at PSG Wealth, said Liberty’s management had hinted at margin pressure through references to the economy’s negative pressure on retail sales and higher sales of low-margin guaranteed products.
“This fact that less highermargin guaranteed products were written caused a weaker mix of business from a margin perspective and therefore a lower value of new business in Liberty’s retail operations in SA,” said Cloete.
WHILE FLOWS AND BUSINESS VOLUMES WERE PROVIDED, THERE WAS NO GUIDANCE ON MARGINS