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Unfinished business awaits Munro in third year as Liberty’s CEO

Munro is yet to exit some businesses and markets, improve digital offerings and rebuild delivering returns to policyholders.
Liberty Chief Executive Officer, David Munro. Picture: Moneyweb

Liberty Chief Executive Officer David Munro has unfinished business to complete if he is to get investors to take notice of his efforts to accelerate profit growth at the South African life insurer.

This includes exiting some businesses and markets, improving digital offerings and rebuilding a track-record of delivering returns for policyholders.

While profit margins on Liberty’s sales have more than doubled, and outflows stemmed, the share price has lagged behind its larger peers since the 48-year-old career investment banker started two years ago. Munro is looking past the stock’s performance as he reorganises a business that can no longer rely on double-digit equity and bond market returns to buoy its earnings.

“The game we’re playing here is not a flash-in-the-pan turnaround,” he said in an interview at Bloomberg’s Johannesburg office. “You could pull some levers fast and create some high-impact quick wins. But the legacy will be down the line in a few years time.”

Since moving from parent company Standard Bank, Munro has overhauled the insurer’s call centre to make it simpler for clients to get help and formed closer ties with the 3 500 agents that sell its products. He also reduced the number of funds overseen by Stanlib on top of a revamp of the money manager’s leadership.

Back to its roots

Bringing the company back to the principles of founder Sir Donald Gordon, 88, who started the firm in 1958 after watching his father struggle financially after his retirement, is also part of Munro’s mission. Liberty was the first South African insurer to list its shares, and, in 1965 introduced the first mutual fund. Liberty lost its lustre during the 2000s as customers canceled policies, reducing its market share, and a cost-cutting strategy backfired by depleting the insurer of skills.

The stock is down more than 2% since Munro was seconded to the insurer on May 30, 2017, compared with an almost 13% increase in the five-member FTSE/JSE Africa Life Assurance Index.

“The environment hasn’t given us any tailwinds, but more headwinds,” Munro said. Tepid economic growth in South Africa, unemployment of almost 28% and increased competition are making it harder to retain clients, especially in Liberty’s affluent target market. That’s meant Liberty has had to contain costs and improve efficiencies while modernising its digital platforms.

The leadership team is aiming to reduce the 30% discount that the stock trades at relative to its equity value by running the “business well,” Munro said. It is still in the process of selling its health unit and businesses in Africa that don’t fit its strategy, he said, adding that returns from Stanlib’s equity and balanced funds are also improving after underperforming in the five years prior to 2018.

Liberty is now well positioned to benefit from any upswing in markets, currently weighed down by a US-China trade dispute, the CEO said.

“He was able to stabilise the business, strategically he identified what was important, and where they would focus,” said Warwick Bam, the head of research at Avior Capital Markets, who has an outperform rating on Liberty. “He has embarked on a digitisation strategy to get Liberty into a more competitive position from a servicing ability, especially to brokers, and that will feed into the customers’ experience of Liberty.”

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