Libhold recovers from its half-year loss

2/26/2010 12:40:01 PM

EDWARD WEST

Finance Editor

LIBERTY Holdings’ net profit fell in the year to December, but management was upbeat yesterday as steps taken to resume profit growth have shown success.

Net income fell to R44m last year compared with R1,1bn in the 2008 financial year, but indications of swift action to deal with the performance were evident in the second half, when the life assurer moved into the black, helped by stronger investment markets. Further evidence of board confidence in the future was the decision to maintain the final dividend at 291c, bringing the payout for the year to 455c, the same as last year.

CEO Bruce Hemphill said the focus this year would continue to be customer retention, addressing distribution costs, balance sheet management, investment performance at asset management subsidiary Stanlib, and continuing the diversification strategy, which was already starting to reap benefits.

Liberty made a R1,2bn loss at the half-year. But solid second-half performances from the Stanlib, Africa, health and property operations — and no further big adjustments in assumptions about the rate of policy lapses — saw second-half normalised headline earnings rise to R1,34bn.

The group did a strategic review after the half-year and realigned the business structure for “end-to-end accountability”.

In the insurance operations, a strategy was mobilised fast to deal with policy persistency problems. Product flexibility was addressed, distribution was improved by, for example, changing the remuneration of tied advisers, and premium collection processes were enhanced and plumbed for client retention opportunities.

Customer affinity was addressed by, among other things, more television and radio marketing. A defence against worsening persistency ratios was set up, such as mapping out processes for policy withdrawal triggers for all customers.

A support team was made available to help advisers protect their books.

The insurance division is in the fifth month of its 18-month retention programme — which claims to have saved an average 14000 policies a month in the second half, versus 10000 in the first half.

At Stanlib new leadership appointments were made, investment processes were reviewed, equity research processes were standardised, accountability for investment strategy was tightened and risk management was improved. The investment team was also more stable.

Stanlib’s investment performance issues in the second half were limited to certain equity funds, notably those with a high weighting of high-quality stocks that delivered a relatively lower level of return.

Liberty Africa moved into profit, contributing about R29m to earnings, with support from parent Standard Bank.

Liberty Health, in its first year of operation, operated in eight African countries, and planned to expand to 17 countries in which Standard Bank operates. It had posted a R65m loss in the year to December 31, but was expected to make a profit in the 2010 financial year, said Hemphill.

weste@bdfm.co.za

LIBERTY HOLDINGS

Full year20092008

Revenue (Rbn) 22,6322,97

Pretax (Rbn) 1,112,39

Net income (Rm) 44 1110

Headline EPS (c) 47,2 740,8

Dividend PS (c) 455455