JOHANNESBURG – Thabo Dloti, CEO of insurance group Liberty Holdings, says he is pleased that Liberty managed to grow earnings in a tough operating environment, where markets “are not giving us much to play with”.
For the six months to June 30, Liberty, a subsidiary of Standard Bank, reported a 6% climb in BEE normalised headline earnings to R2 billion, representing a 10% growth in operating earnings to R1.3 billion.
Individual arrangements grew earnings 10% to R873 million, with profit in group arrangements up 14% to R103 million.
In a telephonic interview with Moneyweb on Friday, Dloti said Liberty’s results reflect its exposures, namely, emerging markets, where growth has been strained by falling commodity prices and weaker investment markets.
Dloti highlighted strong growth in single premium investment sales, which totalled almost R3 billion for the half year and increased the total book size to R14 billion, driven by sales of the Evolve investment product range.
In its long-term insurance operations, recurring premium business grew 3%, with indexed new business sales (excluding the retail LISP and contractual increases) up 4% to R3.1 billion.
“Growth was impacted by flat credit life sales and risk sales being affected by consumer pressures and banks shifting business to in-house product providers,” Liberty said.
Net customer cash inflows fell 20% to R2.9 billion driven by a 25% drop in new business written by Liberty Corporate.
“Net customer cash outflows [in Liberty Corporate] were R859 million impacted by higher per member withdrawal values following good recent investment performance and the reduced single premium flows,” Liberty said.
“The core retail South Africa book is performing well, with Stanlib trends improving. Outside of that, the picture is less clear,” said Grant Davids, insurance analyst at Nedbank Capital in a written note to clients. Davids said that good retail life earnings were offset by slightly weaker Stanlib earnings, relative to expectations.
The group’s value of new business climbed 6% to R369 million, which Davids said was 5% below his expectations and 8% below consensus.
Stanlib continues to struggle
The 6% growth in earnings by Liberty’s asset manager, Stanlib was slow, admitted Dloti, following strong outflows last year. “Whatever has happened last year will drive earnings now; that gap has come through in the number… reflecting losses incurred,” Dloti said.
Last year, Stanlib suffered net cash outflows of R7.3 billion off the back of withdrawals of R13.7 billion from its money market fund, after African Bank’s failure generated negative sentiment towards the asset class.
In the first half of 2015, Stanlib’s net cash inflows fell 11% to R10.3 billion, with money market net cash inflows falling 35% to R4.9 billion.
Dloti said Stanlib was beginning to attract flows from institutions and retail funds.
Rest of Africa
Earnings from Liberty’s rest of Africa businesses were flat at R28 million, due to lower fees as a result of tepid investment markets. Dloti said Liberty has also had to provide for tax legislation changes in Kenya. He said that sales and lead indicators remained strong in Africa.
Liberty will focus on bedding down existing operations in the rest of Africa, as well as look to complete a transaction in West Africa. Having bought Ghana-based Stanbic Investment Management Services last year, Dloti said Liberty needs to find its way into Nigeria.
On Thursday, rival Old Mutual posted a 20% climb in adjusted operating profit to R18 billion. In a move to protect its mass market share from the likes of Capitec, Old Mutual South Africa announced the launch of its Money Account, a transactional banking product.