Nine months on the job and David Munro has overhauled Liberty’s strategy and detailed ambitious medium-term targets to “restore” the insurer to its former glory.
Munro, a career banker, took the helm of the insurance group on May 30, 2017 following predecessor Thabo Dloti’s fallout with the board and shock resignation. Under Dloti, the group had been working toward a 2020 strategy, which included a focus on pan-African opportunities intended to diversify Liberty’s business away from its largely South African base.
However, Munro wants to right the ship at home and has cancelled the group’s R160 million plan to acquire a 75% stake in a Nigerian long-term insurer. “In many people’s eyes, Nigeria represents the long-term golden opportunity in Africa [but] Liberty simply couldn’t take on that acquisition. And it signals to everyone [that] we will not do acquisitions until we have restored the health of our company. The line is now drawn in the sand,” he stated. He said one executive would focus on the group’s continental operations – spanning 24 countries excluding South Africa – while the rest focus on its insurance and asset management operations in South Africa.
In South Africa, Liberty is doubling down on its efforts to leverage off its relationship with parent company Standard Bank.

Standard Bank holds a 53.6% stake in Liberty. The bank and insurer, together, aim to form a universal financial services organisation. Image: Moneyweb
Moneyweb previously reported that the long-term insurance specialist had entered into a joint venture with the banking group to develop competencies in personal and commercial lines within the short-term insurance market. That venture is appearing to show progress with Liberty’s bancassurance business reporting a 7% increase in new business premiums to R3.3 billion during the year ended December 31 2017.
Standard Bank and Liberty have long said they leverage off their relationship with, until now, little result. In response to questions from Moneyweb, Munro – the former head of Standard Bank’s Corporate and Investment Banking (CIB) division – said the relationship going forward would be different and based on a more defined strategy.
According to him Standard Bank was, until two or three years ago, built on the premise of three individual, independent businesses: Wealth, Corporate and Investment Banking, and Personal and Business Banking. It then thought of itself as a universal financial services bank and worked to deliver banking services across all the bank’s clients. Now, in becoming a universal financial services organisation, it recognises that building long-term relationships with “real people” lies not just in servicing their banking needs but in being a “life partner” too.
“That’s what Liberty and STANLIB do. Now we look at it and say Standard Bank Group is a better universal financial services organisation by having Liberty and STANLIB plugged in. The opportunity is for us to start being capable of delivering our products and offering into the Standard Bank Group and at the same time start to be able to deliver Standard Bank Group’s product into our customer base. That is the heart of this game plan,” said Munro.
This “game plan” could see the two potentially servicing 14 million customers, of which 12 million belong to Standard Bank and two million to Liberty.
According to Adrian Cloete, a portfolio manager at PSG Wealth, Standard Bank realising the importance of Liberty “came through strongly” with the implementation of a 10-point bancassurance plan after a weak 2016. Liberty was a drag on Standard bank in 2016, with earnings attributable to the insurer falling by 61% to R955 million.
Liberty showed signs of a recovery in 2017 but still missed market expectations. The stock closed 4.35% lower at R128.99 per share, even after it maintained its 2016 dividend of 691 cents per share.
According to Cloete, the movement in the share price was likely in reaction to a lower than expected group equity value per share, which unlike earnings expectations was not disclosed in Liberty’s trading update. It reported a 4% decline in the key metric to R140.31, with the market expecting a figure in the region of R145.
Liberty posted a 9% increase in normalised headline earnings per share (HEPS) to 982.1 cents, of which 525.4 cents was earned under Munro’s stewardship in the second half. Again, analysts’ forecasts were not met, with consensus expecting 1464 cents.
“I think Liberty reached the bottom in 2016 (FY HEPS: 904.5 cents). There was a slight recovery in 2017 from a very low base. Considering where the company was coming from, I think the market expectations were a bit too optimistic, the market was expecting a quicker recovery.
“There is a new chief executive. He’s put the strategy and numbers out there. The market must be a bit more patient and give him a longer-term horizon. Liberty said there will be a slight recovery in the first half of 2018, which will pick up in the second half and that there’ll be a proper in 2019. I think they’re tempering the market a bit to give them time,” said Cloete.
In overhauling the group’s strategy, Munro put forward four targets for the next two years:
- Value of new business margin: 1%-1.5% range
- Growth in embedded value in excess 12%
- Return on Equity: 15%-18% range
- Maintain robust capital within target range: 2.5x-3x
“The strategy appears to be a turnaround initiative focusing on simplifying the business and restoring financial performance in the short term and the bedding down of a platform off of which to grow in the medium to longer term. The previous management team already spent time on laying a foundation off of which to grow, so hopefully it will not be as onerous and costly an initiative as it could have been,” said Rahima Cassim, a fund manager at Ashburton Investments. She added that an expected improvement in the local economic environment, driven by a more positive political backdrop, should provide Liberty with additional tailwinds to recover off a low base.




COMMENTS 12
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Liberty have consistently been the worst company over the years to “invest in”for the average South African wanting an RA. Their broker fees and penalties have bordered on criminal. Like all similar companies, they have brilliant marketing and TV ads that have you reaching for the tissues, which will unfortunately continue to catch people. Terrible company, terrible products, shocking service.
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The risk side of their business also has its problems. Treating customers fairly is an issue that seems to always raise it’s head when it comes to death and disability claims. One cannot help but think that underwriting’s first response to a claim is to protect profits and only pay if there is no other way out. While Munro is drawing lines in the sand he can do no better than adopting a customer focussed culture for this insurer.
9
Big debate in Liberty since Donny Gordon days, who is the customer? It seems it still is the Broker/Intermediary and NOT the Policyholder!??
If and when Liberty acknowledge the Policyholder as the ultimate customer, then things may change?
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My perception is That Liberty is doing MY WAY
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I must say when I think of the Liberty of today versus the Liberty and LIBAM of the past I get miserable. The real winners at Liberty over time have been the advisors who all seem to be living lavish lifestyles while the clients and shareholders get the crumbs. It was a sad day when the large assurers – not just Liberty – decided advisors were more important than clients. There are so many lessons here.
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Agreed, however I think the reason for the demise of Liberty and LIBAM was the selling out to Standard Bank. This caused that ‘entrepreneurial spirit’ to move to Discovery’. Liberty/Stanlib is now just another ‘branch’ of the bank
6
Liberty will eventually be absorbed into another Company.. Cost cutting is not going to work profit margins are trying to be increased by increasing their premiums hugely on their life products when the policies are up for review..
Their life products are way too expensive.
They need to come up with an unusual product on both the life and investment side that will cater for a scale of clients not just your middle to wealthy clients.
Study the other products on the market and find the missing link, stay away from joining up with a bank and then go for it. Only then will Liberty stand a good chance of recovering its way to go Financial House.
My perception is That Liberty is doing MY WAY
The comments regarding advisers, and broker fees confirms some people’s ignorance and lack of knowledge about this highly regulated industry. Commentators are quick to point out the negative, whilst ignoring the fact that Liberty paid R4,3 billion in claims last year. The financial services industry remains one of the largest sectors as far as employment is concerned. Despite what some may think, most Financial services professionals work hard to make a difference.
3
My perception is That Liberty is doing MY WAY
Stanlib until recently took a 5% percent initial charge to track the property index and called it stanlib property income fund , they clearly did not work hard and toke 5 %.
1
yes Tex, spot on about Liberty’s outrageous fees, but trust me, even if Mr Munro reads your comment, they still won’t drop their fees to attract/keep clients.Only tough govt legislation that forces them to do so will have any effect.It’s about time.
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