Liberty’s turnaround strategy has helped it deliver double-digit growth in its SA insurance and asset management businesses. However, bad investment returns and a R166m loss from operations the company wants to dispose of dented the group’s headline earnings.
On Thursday morning, Standard Bank’s insurance subsidiary reported a 17% decline in net profit for the year to end-December.
Liberty’s normalised headline earnings for its 2018 financial year decreased to R2.26bn, even though operating earnings were up 42% before the inclusion of LibFin Investments. Libfin, which is a large balance fund that invests capital Liberty has to hold for solvency reasons, reported an 81% decline in earnings.
Most of Liberty’s operations outside SA recorded losses. Its rest of Africa insurance business was the hardest hit, recording a 300% decline in normalised headline earnings. Stanlib Africa narrowed its loss to R19m from R226m at the end of 2017. The health business continued to increase its losses by 44% to R78m.
Liberty CEO David Munro said the group is in talks to reduce its exposure African operations.
“We are at advanced stages to sell a majority stake in our health business, which operates across Africa. And equally, we are actively pursuing various strategic partnerships or disposal options in respect to our Stanlib operations in both West and East Africa,” said Munro.
In SA, the group announced on Wednesday that it has sold its short-term insurance technology platform to Standard Bank. The insurer, which has been restructuring its business to focus on core operations — long-term insurance and investment businesses in SA.
The turnaround strategy, which Munro said is now complete, delivered impressive results in the SA retail operations, which increased earnings by 31% to R1.58bn, despite a 1% decline in new business sales. Stringent cost management saw the value of new business go up 75% to R271m and the new business margin improve from 0.5% to 0.8%.
The new business margin shows profitability of new policies sold by the insurers in 2018. This margin is, however, still at the lower range of the group’s medium-term target of between 1% and 1.5%.
Munro said these financial results, despite the earnings decline, indicate and provide evidence that the turnaround strategy is working. “I feel that we delivered on our commitments and I’m confident that we prioritised the things and taken the right steps. I’m pleased with the progress w’ve made.”
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