Impressive growth for Liberty
Positive results all round
LIBERTY Holdings recorded an impressive growth in its indexed new business in Liberty Corporate in the nine months to end September, up 37 percent to R802 million as compared to last year.
Recurring premiums also reported notable gains, up 38 percent due to strong group risk and umbrella enhancement sales.
In the same period the group said its single premiums were up 31 percent due to improved single premium umbrella sales.
Positive results were also reported in net cash outflows which grew to R1.5 billion during the period, up by 50 percent from last year’s R1bn, and the group said this reflected the loss of certain investment mandates and higher risk claims linked to the economic environment.
Outside of South Africa, Liberty Africa Insurance indexed new business of R232m, 10 percent higher than the prior period and this was attributable to increased single premium business from the southern African long-term insurance operations.
Despite showing some encouraging signs in the period, the group was still concerned about the country’s economic outlook in the year ahead. South Africa’s economy is expected to grow by a disappointing 0.7 percent in 2017.
“Operating conditions are expected to remain challenging in light of the poor outlook for economic growth. 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,” the group said.
The share price traded positively for Friday. By the end of the day it closed 1.07 percent up at R115.
Its long-term insurance indexed new business grew by 6 percent during the period, with the group attributing this to the support gained from good Liberty Corporate new business sales.
It said low economic growth and consequential ongoing pressure on consumers continued to impact retail volumes.
“Heightened political and economic uncertainty saw continued flows into guaranteed products.
“This manifested in a weaker mix of business from a margin perspective and lower value of new business,” the group said.
Assets under management showed a slight improvement, up by 4.73 percent to R708bn, up from R676bn last year.
Commitments The group said its strong capital position underpinned its ability to fulfil its commitments to all its stakeholders.
Other subsidiaries, including Stanlib South Africa, reported an increase in assets under management to R554bn, up from R535bn, reflecting growth from investment market returns and external net cash inflows of R4.6bn.
Retail and institutional, excluding money market, net cash inflows amounted to R4.3bn, while intergroup cash outflows were R12bn.
Stanlib Rest of Africa reported assets under management of R55bn, slightly up from R51bn with external net cash outflows of R0.8bn. Retail and institutional, excluding money market, net cash outflows amounted to R1.6bn. Intergroup cash outflows came in at R77m.
The retail insurance operations indexed new business of R4.9bn. LAST week’s Black Friday frenzy saw a mixed bag for retail shares on the JSE.
Retail stocks were under pressure as the market awaited the release of the reviews of S&P Global Ratings and Moody’s Investor Services on Friday night.
On Thursday, Fitch Ratings affirmed South Africa’s longterm foreign currency issuer default rating at BB+ with a stable outlook.
Fashion retailer Mr Price declined 1.52 percent to R205.70 a share, Woolworths was 3.93 percent higher at R57.43 a share, TFG strengthened 1.62 percent to R154.65 a share, and Truworths moved marginally with 0.52 percent to R76.92 a share.
Damon Buss, an analyst at Electus Fund Managers, said on Friday: “There is a lot of uncertainty. A lot of retail shares that are South African-focused are under pressure.”
Buss said a double-downgrade (S&P and Moody’s) would be negative for the rand.
“A cut by both companies ratings on South Africa’s local currency debt to below investment grade would trigger outflows from rand-denominated bonds and cause higher costs for local banks obliged to hold sovereign debt,” he said.
Many shoppers braved queues to take advantage of specials, including discounts of up to 80 percent on selected products. Retailers had put in a lot of marketing to promote the Black Friday bonanza.
Affordability Brick and mortar stores, for example, tweaked their trading hours in anticipation of the demand, including selected Game outlets which opened their doors at midnight on Thursday.
Black Friday was a threat to Christmas shopping, he said.
“Black Friday brings forward spend from December,” he added, pointing out that retailers made mistakes last year.
“Retailers made the mistake of offering too many products and too many units of each product which boosted revenues, but hurt margins. It also negatively impacted their full price or full margin sales in the lead up to Christmas.”
Buss said the retailers would receive a reprieve once the court case on affordability regulations was finalised, if it was in their favour.
TFG, Truworths and Mr Price took the government and the national credit regulator to court in August over the affordability regulations. The retailers argued that the rules, which require credit providers to validate customers’ income, were forcing them to deny credit to many shoppers.
A ruling is due by year end.