Liberty accelerates its digital transformation and improves sales momentum
Focus on significantly improving the client and adviser experience and simplifying the business
Normalised operating earnings before pandemic provision of R652 million
Normalised headline earnings of R288 million
Total pandemic reserve for SA insurance operations R1 520 billion gross of tax
Shareholder Investment Portfolio (SIP) earnings of R753 million
Solvency coverage ratio at 1.73 times covered
Group long-term insurance indexed new business of R4.2 billion
Group net external client cash inflows of R10 billion
Total Group assets under management increased to R823 billion
Commenting on the results, David Munro Liberty Group CEO said:
“The latest set of results reflect the accelerated execution of our plan to simplify and digitise our business, delivering a radically transformed client and adviser experience, despite the impact of COVID-19. The commitment of our colleagues combined with the robustness of our business, meant that we continued to preserve our financial resilience, strengthen our competitive position and keep our promises to our clients. There are visible signs that green shoots are emerging within the business as evidenced by the increase in our overall sales across all distribution channels, and client, adviser and employee satisfaction data.
Looking ahead, we expect that the macro environment will continue to be challenging but we remain committed to the execution of our strategy – at its core is the delivery of an excellent client and adviser experience.”
Results in context
While equity markets have recouped some of the ground lost since March 2020, strained economic conditions have persisted over the past six months. Consumers and businesses alike remain under considerable pressure as a result of increasing unemployment and a decline in household savings.
As anticipated, the significant headwinds facing consumers have had a dampening effect on the Group’s results for the six months, with normalised operating earnings increasing by 3% on 2020’s base.
The COVID-19 Delta variant resulted in a severe third wave of infections with high mortality rates. The roll-out of the national vaccination programme will go some way to mitigate the increase in infections, but the short-term impact remains uncertain.
On this basis Liberty felt it prudent to prioritise the needs of its customers and safeguard the business’s resilience with an increase to the total pandemic reserve by R1 billion (gross of tax), reducing normalised headline earnings. In addition, the Board has retained its prudent approach to capital and liquidity strength and has not declared an interim dividend in line with the dividend policy.
Summary of the Group’s performance
Despite these challenges, good progress has been made in relation to the execution of the Group’s strategy. We have moved Liberty from an analogue interface with clients and advisers, and the way we service them, to a digital based approach, fundamentally transforming the experience they have with Liberty, with the first major release of our Adviser Workbench powered by Salesforce going live in June 2021.
With excellent support from IFAs and our other sales channels, new business sales started moving in the right direction with a 25% increase in insurance indexed new business contributing to the restoration of the overall health of the business. However, the value of new business remains a challenge and management is focused on initiatives to address this.
Progress has been made on the simplification of core solutions, migrating policyholders to newer generation products, and the closure of some mainframe applications, which will continue benefitting the wider group.
Liberty continued to live its purpose and provide for its clients by paying R8,5bn in death and disability claims. This reflects an increase of 61% on the first half of 2020, and R4,5bn in annuities increasing 10%.
The Shareholder Investment Portfolio (SIP) benefited from a recovery in global and local equity markets during the period delivering earnings of R753 million compared to the loss in 2020 of R631 million.
The Group’s capital position remains strong following the pandemic provision with healthy liquidity buffers.
STANLIB continued to cement its long-term investment track record. The asset manager increased its contribution to headline earnings by 7% and was able to maintain good investment performance across its 3-and- 5-year time horizons for their core retail funds. Assets Under Management increased 15% to R652 billion off the back of positive market performance and attracted R12.8 billion in external net client cash flows to non-money market funds.
Liberty Two Degrees reported their results at the end of July 2021 with an encouraging recovery in their trading environment throughout all their assets, underpinned by both the quality of assets and tenants.
Standard Bank proposal
The Standard Bank Group’s proposal to buyout the minority shareholders of Liberty is a strong vote of confidence in the strength of Liberty’s business, its client franchise, and very importantly its adviser networks and teams of people
The strategic benefits are numerous and compelling. A complete integration will enhance both entities’ ability to meet clients’ financial needs, making possible holistic advice and competitive solutions for clients, especially during major transition points in their lives.
Should Liberty’s minority shareholders approve the transaction, it is expected to be finalised in the first quarter of 2022. It’s anticipated that the strong alignment of Standard Bank and Liberty’s goals will allow for an accelerated and seamless integration of the businesses. Until that point, the organisations will function on a business-as-usual basis, offering client service with minimal disruption.
We expect that the challenging macro environment will continue to persist with consumers and small businesses remaining under pressure. Notwithstanding the economic headwinds, we are committed to the execution of our strategy – at its core, the delivery of an excellent client and adviser experience.
“We are committed to the simplification and transformation of our business to ensure its long-term competitiveness. Together with our advisers, we will continue to live by our purpose and play a meaningful role in making our clients financial freedom possible.” Concludes Munro.