Changing with the times
Ialways imagined that shareholder activists would have the personality of rottweilers or, perhaps, of highly strung Irish wolfhounds. So I was surprised at the Liberty AGM to see that role played by Sidney Place, the world traveller and organ player, who is more like a slightly bad-tempered cat.
Place rose through the ranks of the old Liberty Asset Management in the 1990s, so he remembers the glory days of the group — and the unbelievable publicity generated by its founder and chair, Donald Gordon.
Place admitted to me that it was hard to know how well the group was doing as the results were extremely opaque. But Liberty enjoyed a high rating not least because it owned international property and insurance assets at a time when exchange controls made things extremely difficult. And it controlled big chunks of the SA economy through the old SA Breweries, Standard Bank and Gold Fields. So analysts did not pay much attention to the life insurance business itself.
Now that Liberty has shed its empire — which dragged down its return on equity — the insurance results are all that’s left. Current CEO David Munro really has nowhere to hide.
The new business margin of 0.5% means Liberty is in effect giving away business. Place pointed out that in his time, the group couldn’t believe Sanlam was writing business at that margin, yet it is Sanlam that now has a margin of about 2.5%.
Munro says his main aim is to build a full set of solutions for the Standard
Bank group so the banking, life, investments and short-term insurance offerings are fully complementary. He says the upfront return on policies isn’t as significant as the return, and added value to clients, over 30 and even 50 years.
Place also expressed concern about Stanlib, his old shop. It has marginally more assets than Coronation (R609bn vs R588bn), yet it makes less than R50m/year against Coronation’s R1.5bn. This can only partly be explained by the predominance of lower-margin fixed income in the Stanlib book. There has been very poor management of subsidiaries in East Africa, and Munro says the entire management team there has been replaced.
Stanlib has also not been good at retaining talented fund managers: the likes of Richard Middleton, Lo Giyose and Andrew Vintcent have all moved on.
One area that is growing is multimanager funds, as the Liberty distribution force looks for a promising alternative to a mediocre Stanlib.
Staying relevant
Short-term insurance has been set up as a joint venture with Standard Bank, run by former Santam and Telesure boss Leon Vermaak.
Is it really necessary for Liberty to cede half the equity? It might not matter to a solid Standard Bank group man such as Munro, but it is a vital question for Liberty minorities. As I’ve said before, if the bank wants to integrate the Liberty business, it is only fair to buy it out and make it a wholly owned subsidiary.
It would be a mistake to underestimate Munro as some kind of Standard Bank stooge. He is a clear thinker — open-minded. After a year in the job he has grasped the essentials of the life business more thoroughly than predecessors such as Myles Ruck.
Munro knows we are moving into a world in which consumer demands are more intense, and in which product pushing needs to be replaced by helpful advice. He says the key question Liberty agents and brokers need to ask is:
“What are you worried about?” The sales force needs to stay relevant.
Liberty’s new business margin of 0.5% means the company is in effect giving away business