African delays

Liberty, the insurer, has failed to make acquisitions crucial to future growth, leading to a selloff which ended only last week and saw its share price drop more than 2%.

The share has since pared its losses. Liberty reported that BEE normalised earnings fell 9% to R1.8bn in the half-year to June. Embedded value of new business written dropped 32% to R257m, which disappointed investors as it is an indicator of future profits. This reversed an earlier, albeit small, gain of 7% in the same period last year — to R369m — which the company has since restated to R380m. This did not please the market, which sent Liberty’s share down more than 12% in the month shortly after its June 2015 results were released.

WJ de Vries, an analyst at Avior Capital Markets, said at the time that Liberty’s growth was dependent on its African acquisitions. But the company has not made any significant acquisitions during the year, resulting in a “deferred acquisitions costs” balance of R706m on its balance sheet, against R643m a year ago.

It spent R45m buying Ugandan short-term insurer East African Underwriters during the half year, which it admitted had an “insignificant impact on the group’s financial results”.

Its expected big entry into Nigeria, which CEO Thabo Dloti has been talking about for years, and for which the company had previously set aside US$80m, has been delayed again. Dloti told the Financial Mail’s sister publication Business Day that Liberty would still like to enter Nigeria, as well as Ghana.

It has set aside R2bn for that purpose. Nigeria is an attractive market — research firm BMI Research estimates gross written life insurance premiums will rise more than 10% in the next five years as the country’s middle class grows. The National Insurance Commission of Nigeria has also introduced capital requirements — a stumbling block for smaller domestic firms, but an opportunity for large foreign firms, says BMI.