Strategy
delivering growth and value
Salient features
- Operating earnings up 31% to R1 048 million
- Group asset management net cash inflows up 66% to R9
billion
- Long term insurance net cash flows up 81% to R2 billion
- Long-term indexed new business insurance sales up by
12% to R3 122 million
- BEE normalised headline earnings up 5% to R1 704
million
- BEE normalised headline earnings per share up by 6% to
602.7 cents
- BEE normalised group equity value per share increased
12% to R117,16
- Interim dividend per share increased 10% to 212 cents
- Liberty Group capital adequacy ratio (CAR) strong at
2,75 times the regulatory requirement
Overview
Liberty’s
2013 half year financial results continue to reflect good performance in the
core insurance and asset management businesses. An increase in operating
earnings of 31% to R1 048 million was achieved without any significant
assumption or modelling changes and despite a volatile interest rate
environment. This, combined with a gross investment return of 5.5% on the
group’s shareholder investment portfolio resulted in BEE normalised headline
earnings increasing by 5%.
Group asset
management net cash inflows of R9 billion were 66% higher than the inflows for
the first half the previous financial year. Long-term indexed new business
sales were up 12% to R 3 122 million and long-term insurance net customer cash
flows increased by 81% to R2bn.
Liberty’s
capital cover remains strong at 2,75 times the statutory requirement.
Commenting on these results
the CEO of Liberty Holdings, Bruce Hemphill said:
“Our performance for the first
half shows delivery against our strategic objectives across the business. We
continue to grow market share within our retail business and the asset
management business continues to attract impressive higher margin cash flows.
Liberty’s focus on improving operational efficiencies, product innovation, multi-channel
distribution and leveraging the advantage of the commercial bancassurance
agreement in both South Africa and chosen African markets is delivering growth
and value for stakeholders.”
Insurance – Retail and
Institutional
Retail SA
The largest contributor to group
earnings, Retail SA continued with its pleasing performance during the period.
Net cash flows were strong at R2 billion. Headline earnings for the half year
were R798 million, with performance underpinned by good annual contract increases,
ongoing positive persistency and risk variances, higher management fees due to
the 2012 growth in underlying investment portfolios and expense control.
Indexed new business sales increased 13% to R2,7 billion in comparison to the
same period last year.
Ongoing product innovation and
continuing to build on the strength of multi-channel distribution channels are
key pillars of Retail SA’s growth strategy. Already leaders in risk products,
the investment offering was enhanced, through inter alia, the launch
of a new linked investment service provider (LISP), which offers consumers the
option to invest in a wide range of collective investment schemes and on
balance sheet investment products using a single source.
Corporate
Liberty Corporate has produced a commendable
set of results, demonstrating a significant turnaround in the business. Legacy
issues have been addressed through deliberate management action and Liberty
Corporate is a business which is now positioned for future growth in both the
SMME and large fund markets. Following last year’s launch of the new flagship
investment product, the Liberty Stable Growth Fund, as well as a unique index
tracking fund, Liberty Corporate was recognised by the Financial Intermediary
Association as the best employee benefits product supplier.
Improved
claims experience and cost efficiency contributed to an improvement in headline earnings of 37% to R52 million. Indexed new
business was R292 million, 6% higher than the comparable period.
LibFin
LibFin’s
superior risk management capability represents a key competitive advantage for
Liberty. The unit continued to make a valuable contribution to group earnings,
while managing market risk exposures within a narrow range despite significant
volatility in interest rate markets towards the end of the six month
period. LibFin directly manages R39 billion of asset portfolios at 30
June 2013.
The
shareholder investment portfolio managed by LibFin Investments produced a gross
return of 5.5% which is ahead of benchmark.
Asset Management
Effective 1 January 2013, STANLIB
began to manage all the group’s asset management businesses in the rest of
Africa. Prior year comparatives have been restated to reflect this change.
STANLIB South Africa
Overall, STANLIB South Africa
continued on its positive growth trajectory, generating headline earnings
growth of 22% to R243 million. This is significant given the costs associated
with establishing and growing the multi-franchise business and investment
capabilities. STANLIB South Africa also managed to attract substantial net cash
inflows of R14 billion into higher margin investment offerings and structured
products. As at 30 June, total assets under management increased to R468
billion.
Performance expertise was
recognised with five Raging Bull Awards won by the business.
STANLIB Africa
Assets under management as of 30
June 2013 were R36 billion (31 December 2012: R36 billion), despite the
expected drawdown of funds under a sovereign mandate in East Africa. Headline
earnings for the half year were R27 million, up by 29% (30 June 2012: R21
million).
Bancassurance
Liberty’s
commercial bancassurance joint venture relationship with Standard Bank provides
the group with a competitive advantage. Bancassurance continued to contribute
to embedded value and earnings, particularly for the insurance and asset
management operations. STANLIB’s net asset management fees from the Standard
Bank distribution channel increased by 12,0%. The total embedded value of
in-force contracts sold under the agreement attributable to Liberty at 30 June
2013 is R1.3 billion (31 December 2012: R1.2 billion).
Liberty Insurance operations
in the rest of Africa
Liberty’s
businesses in the rest of Africa generated headline earnings of R18 million for
the reporting period. This is up significantly compared to the similar period
in 2012.
Expansion
into other strategic markets in sub-Saharan Africa remains a priority. The
economic outlook for the region and growth potential in the middle and mass
affluent segments present ideal investment opportunities for Liberty.
Health
Liberty Health continues to
demonstrate its positive growth potential. During the reporting period, the
business decreased on its headline loss by 42%. New products and increased
group collaboration in sales and distribution are beginning to bear fruit.
Looking ahead, Bruce Hemphill
said:
“Our strategy, capabilities
and the markets we are targeting are clear. We have delivered significant
improvements in core operating earnings, insurance indexed new business, assets
under management, and group embedded value earnings over the last three years.
We will continue to leverage our partnership with Standard Bank to maximise on
growth opportunities in strategic markets across Sub-Saharan Africa. The operational
efficiencies implemented across the group, together with the positive growth
trajectory of our major businesses, positions the Group for continued growth.”
