Life assurer and financial services group Liberty’s headline earnings recovered from a low base in respect of the first six months of last year, increasing by 28,6% from 130 cents to 167,2 cents for the six months until June as a result of a favourable operational performance and better investment returns.
Headline earnings for the half-year were up 29,4% to R460-million. Total new business premiums increased by 16,6% to over R6,3-billion and net cash inflows from insurance operations increased by 37,7% to almost R2,4-billion.
“Liberty Life has made progress over the last six months in those areas of the business which it singled out for focus. These areas of focus include the improvement of service levels, cost reduction, capital management, new market segments and people.
“Notwithstanding these achievements, volatility in local and foreign investment markets and a stronger than expected Rand had a negative impact on investors’ demand for investment products offered by the life insurance industry. Risk product sales were encouraging with recurring premium sales of Lifestyle Protector, launched in September last year exceeding R180-million for the first six months of 2004. Liberty Life produced strong operational results for the half year to 30 June 2004,” the group stated.
The group’s new business margin increased to 20,9% and embedded value per share of R57,59 on 30 June 2004 remained flat compared with 31 December 2003.
In 2003 the Liberty board decided to maintain the interim dividend at 162 cents per share despite the fact that headline earnings per share were considerably lower and on Wednesday it said that the improvement in headline earnings per share during the first half of 2004, coupled with the positive performance of the business, had enabled it to declare an unchanged interim dividend.
Operating profit from life insurance operations rose by 32,6% for the half-year from R252,7-million to R335-million, which the group said largely reflected the impact of improved investment returns on shareholders’ 10% share in policyholders’ capital bonuses on certain classes of business.
At 30 June 2003 the weighted average investment return (on the proxy portfolio used to indicate the level of the 10% participation) was -3,6%, whereas the return at the end of June 2004 was +0,2%.
Revenue earnings attributable to shareholders’ funds were up 12% from R148,2-million to R166-million, while operating income from financial services operations increased by 27,9% from R72,3-million to R92,5-million.
Stanlib’s contribution to Liberty Life’s earnings increased by 37% from R23,5-million to R32,2-million. Assets under management and funds under administration (excluding common assets) increased from R177,5-billion on 31 December 2003 to R1 84,8-billion rand on 30 June 2004.
Headline earnings of Liberty Ermitage increased by 32,3% from R15,8-million to R20,9-million as a result of increases in management fees due to higher assets under management compared to 2003. Assets under management (excluding common assets) increased from $2,8-billion on 31 December 2003 to almost $3,2-billion at 30 June 2004. Income from listed investments increased by 2% from R24,6-million to R25,1-million, reflecting an increase in dividend income from the shareholders’ long-term portfolio established at the end of 2003, offset by a decrease in dividend income from reduced shareholdings in GoldFields and Edcon.
Income from other investments increased by 10,5% from R129-million for the six months until 30 June 2003 to R142,6-million for the six months until 30 June 2004 as a result of increased cash balances.
The group’s capital adequacy requirement (CAR) increased by 2,9% from R3,4-billion at the end of December to R3,5-billion at the end of June. The group capital adequacy multiple decreased marginally from 2,58 times to 2,55 times and, according to Liberty, remains among the highest in the industry.
Looking ahead, Liberty said it would continue to focus on the business (and value) drivers under its control such as growing new business, improving service levels, cost reduction, capital management and people, thereby ensuring sustainable benefits in the short to medium term.
“However, future earnings will continue to be impacted by the performance and volatility of local and international financial markets,” it stated. – I-Net Bridge