JSE Securities Exchange-listed Liberty Life has been on the operational high road for the past year — and it shows in its interim results to end-June. Headline earnings are up by 29,4% to R460,4-million, and headline earnings per share increased to 167,2c from 130c.
Operating profit from life insurance business is up 32,6% to R335-million — but it’s not all good news. All-important recurring premium income is up by a meagre 8%, to R109,7-million, with the main culprit a collapsing corporate market.
In his first full financial year in charge, chief executive Myles Ruck is clearly making his presence felt. Ruck’s turnaround strategy is focused on reducing costs — 364 jobs have been cut — and restructuring top management.
On the marketing front Ruck’s focus is on product development for new market segments as well as notching up service levels.
Because Liberty has shareholders, its policyholders do not benefit from operational surpluses in the same way as those of a mutual assurer. Liberty’s chief actuary, Andrew Lonmon-Davis, explains: “Most of our policies are linked to the return on the underlying investment portfolio. Bonuses track these returns closely as per the policy contract. In addition our policyholders can receive a guaranteed bonus.
“Liberty shareholders’ position is best illustrated with annuities. If the annuant [policyholder] dies before the contract is up, the shareholder reaps the profit. But if the annuant lives longer than projected, the shareholder takes the loss.”
Being in the Standard Bank stable, Liberty’s compliance with the Financial Sector Charter is second only to Sanlam.
On the charter’s employment equity side, Ruck points to success with more junior employees, but concedes that the assurer has not done enough with more senior personnel.
Shaky investment returns, strain with investment guarantee reserves, due mostly to Liberty’s exposure to hedge fund policies and the lower than anticipated contribution of cost savings to operating profit are some of the weaknesses facing Ruck and his team.