Strong H1 retail business growth for Liberty

Indexed new business for retail was up 23%‚ while the group also noted strong net inflows of R7.4bn in its asset management businesses.

Liberty on Thursday, 2 August 2012, reported 23% growth in indexed insurance sales‚ while its cash flows rose by 95% to R2.7bn. Value of new business increased 51% to R203m. Retail gross sales improved by 26% to R8.6bn.

The group's BEE normalised headline earnings were up 41% at R1.7bn‚ while BEE normalised headline earnings per share rose to 587.7 cents from 414.0 cents a year ago.

Headline earnings adjusted for assumption and modelling changes for the six months were 14% up on the comparative period in 2011.

BEE normalised operating earnings of R855m were 6.5% lower than those reported in first-half 2011‚ largely reflecting the cost of the investment in the build initiatives. The 2011 earnings also benefited from one-off noneconomic assumption changes of R112m in the Retail SA business.

The group declared an interim dividend of 192 cents per share.

Liberty noted that Stanlib had achieved solid earnings‚ with net cash inflows of R7.4bn as it continued to benefit from the embedding of the multi-franchise model‚ while LibFin delivered a R920m headline earnings result in a tough economic environment and low interest rates.

"We have delivered another pleasing set of results for the first half of this year. This was done despite difficult market conditions‚" said CEO Bruce Hemphill.

"Consistent focus on our value-creation strategy has placed Liberty on a sustainable growth path. We are seeing the benefits of the quality foundation built within our retail business‚ where we are growing and taking market share. This is on the back of stronger risk management‚ an improved acquisition and retention model that combines a compelling value proposition for our financial advisers and a strong product mix which includes market leading innovation."

Hemphill said the group's asset management business‚ Stanlib‚ was showing the benefits of the multi-franchise model‚ which had attracted significant inflows‚ as investment performance continued to go from strength to strength.

"Our capital adequacy cover of 2.9 reflects the strength of our balance sheet management‚" he said.

Highlights of the Retail SA performance included 26% growth in gross sales to R8.7bn‚ while indexed new business lifted 23% to R2.4bn.

Net customer cash inflows remain strong‚ almost doubling to R2.7bn in 2012.

Corporate headline earnings at R42m indicate an improved risk claims experience‚ though cost ratios remain high due to costs related to a transition‚ begun in 2011‚ to migrate its client base to more cost-efficient umbrella funds and to establish the ability to serve larger corporations and retirement funds.

These costs put headline earnings under pressure‚ Hemphill said.

In addition‚ the business achieved a 4% increase in indexed new business‚ including higher enhancement and sales to existing umbrella clients.

LibFin Markets delivered headline earnings of R99m‚ which flowed mainly from higher credit margins on asset-backed annuities‚ guaranteed capital bonds and lower implied volatilities.

Stanlib generated strong net inflows of R7.4bn‚ with total assets under management increasing to R392bn from the restated R368bn of a year ago‚ as a result of strong inflows and an increase in underlying asset values resulting from market growth.

Headline earnings for the first half were flat at R200m.

Stanlib is the third-largest asset manager in South Africa.

Liberty Africa's progress is in line with expectations‚ with the business posting headline earnings of R16m for the reporting period.

East and Southern Africa (outside SA) delivered solid performances from the various interests in asset management and insurance businesses. Investment markets in East Africa improved in the first half of 2012‚ and offered further opportunities which should benefit both the insurance and asset management businesses in the second half‚ Hemphill said.

Assets under management remain substantial at R39bn.

Management's focus is to drive operational improvement‚ grow the opportunities of bancassurance and to secure additional investment mandates.

Hemphill told a conference call the group had a presence in 14 African countries and would look to grow its presence in Nigeria and in Ghana.

Liberty Health's sales of health risk products in the rest of Africa continued to grow‚ increasing the in-force book to 79‚000 lives from 68‚000 in December 2011.

"The balance sheet is well managed and positioned for the lower interest rate environment‚ we have made significant investment in new and existing capabilities‚ our operating earnings have demonstrated good growth‚ achieved during volatile economic circumstances‚ and the business is well diversified across channel‚ product line and geography. Liberty is well positioned for sustained growth‚ within acceptable risk parameters‚" Hemphill said.