Liberty acts on its weak share price
Life insurer narrows focus on local retail market and correct retail pricing
Liberty Holdings says it is confident the narrowing of its focus to the local retail market and correct product pricing will help arrest the weakness of its shares, which have traded at a 40% discount to its underlying value.
Liberty Holdings says it is confident that narrowing its focus to the local retail market and correct product pricing will help arrest weakness in its shares, which have traded at a 40% discount to underlying value.
SA’s third-largest life insurer, with a market capitalisation of about R30.9bn, has been on a renewal journey, offloading its medical-scheme business and is in the process of exiting some African operations to focus more on SA’s retail market.
“We’ve fixed the business from where it used to be,” said Liberty managing executive for customer and adviser experience Johan Minnie.
“There are no major cracks any more. We are now into horizon two, where we want to take the share price to the level where the value of Liberty is reflected for what it is.”
Speaking at the company’s intermediary conference on Thursday, Minnie said the insurer acknowledged that people were concerned about its performance, particularly the share price movement. It also did not help Liberty that it underperformed the life-insurance index by 10% in 2018, although the index’s aggregate performance was largely attributable to the unbundling of Old Mutual and the special dividend that accompanied it.
Minnie said Liberty planned in its renewal strategy to show the market that its cost-toincome ratio would be steady in future and that it was selling its products at the right margin.
At one point, Liberty was virtually giving away its insurance business. In 2015, its retail margin stood at 0.5% although the insurer managed to increase it to 0.8% in the 2018 financial year after tighter cost management and repricing of some products. In contrast, the new business margin of competitors such as Sanlam was above 3%.
“We’ve made some inroads. We are writing the right products to the right market at the right margin,” said Minnie.
“We know we are trading at a discount of about 40%, but once we get a few things right it’s going to go up and I don’t know what critics are going to say.”
Minnie said that Liberty managing to increase its operating earnings 42% in 2018 although a decline in investment returns as a result of JSE losses caused net profit to fall 17% showed that it was “a business on the up”.
One of the offerings Liberty is hoping it will get right is shortterm insurance. In its 62-year history, Liberty has focused on the long-term insurance and investment sector, leaving the short-term business to its parent company, Standard Bank.
On Thursday, the insurer said it would now offer insurance for motor vehicles, buildings, home contents and other valuables to its clients in partnership with Standard Bank.
“Standard Bank’s capability is mainly in the home-loan space, doing building and home contents insurance. We are adjusting it for our client base. I think it’s possible for us to have a bigger uptick than the rest because we have the client base already,” said Minnie.
He said it was important for Liberty to be a one-stop-shop for its clients to regain lost market share. The insurer’s market share shrank from 29% to 25% from 2005 to 2017.