| Fri 27 Nov 2009, 7:05 | | LBH - Liberty Holdings Limited - Overview Of Trading For The Nine Months |
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LBH
LBH
LBH - Liberty Holdings Limited - Overview Of Trading For The Nine Months
Ended 30 September 2009
Liberty Holdings Limited
(Liberty Holdings)
Registration number 1968/002095/06
Incorporated in the Republic of South Africa
Share code: LBH
ISIN code: ZAE000127148
Overview of trading for the nine months ended 30 September 2009
Introduction
The global economy has entered a recovery phase, although growth,
particularly in the developed world, could remain somewhat muted into 2011.
Despite this, large emerging economies are attracting capital flows as their
economic activity accelerates.
In the first six months of 2009, economic activity in South Africa slowed
substantially. The fall-off was significant and broad-based, affecting
almost all sectors of the economy. Very modest signs of economic stability
appeared during the third quarter. This could indicate that the South
African economy has moved through the worst of the decline.
Global and local equity markets have rallied strongly since the low point in
March 2009. The local equity SWIX index rose by 19.2% for the nine months to
September 2009, gaining around 13.5% in the third quarter of 2009.
The Rand has been the second best performing emerging market currency in
2009, supported by strong net foreign portfolio inflows into equity markets,
the trade account moving from a stubborn deficit into a consistent surplus,
and a reduction in foreign dividend outflows due to a reduction in company
earnings.
The combination of lower interest rates, increased fiscal stimulus, the
hosting of the 2010 World Cup, ongoing infrastructural activity and a sound
banking system should provide the basis for economic recovery during the
next 18 months.
Operational highlights
Against this backdrop Liberty Holdings Limited`s (the group`s) operations
have generally performed satisfactorily over the quarter, with life cash
flows being positive and growth in assets in the group`s Asset Management
businesses.
The focus on reversing the negative trend in policy persistency, which was
disclosed at half year, is ongoing, with increased resources being applied
to these activities. Lapse experience in 3Q09 is consistent with that in
1H09, most of which was anticipated in the half year results.
The Group traded profitably for the quarter as investment earnings from
foreign and local equity markets improved, life operating experience was
broadly in line with that at the half year and costs remained under control.
Year to date earnings therefore reflect a reduction in the loss reported at
30 June 2009.
The capital position of the group`s main life licence, Liberty Group
Limited, remains strong with a CAR cover of 2.4 times, in part as a result
of market risk mitigation measures taken prior to 3Q09.
Group Embedded Value
The estimated BEE normalised group embedded value at the end of September
2009 was approximately R80 per share, after paying the 2009 interim cash
distribution of R1,64 per share in September. This compares favourably to
the R79.19 embedded value per share disclosed at the half year.
Life Assurance
Individual Life operations
Life operations continue to be impacted by lower consumer disposable
incomes.
Significant effort, led by a dedicated team drawn from senior management of
the life operations, is being made to improve policy persistency. Management
believes the results of this initiative will begin to show during 2010.
During the third quarter, lapses were broadly in line with the experience
seen at half year.
Indexed individual new business premiums are down 4% on the prior year to
date. The trend noted in the first half of higher risk product sales and
somewhat lower investment product sales has continued. A shift in product
mix to higher margin business has improved new business margins slightly.
Cash flows are positive year to date, reflecting increases in recurring
premium flows, the lower value of redemptions on investment policies and
satisfactory retention of maturing policies.
Costs remain within actuarial assumption and below the current rate of
inflation.
Corporate operations
Corporate`s new business flow remains challenging with sales down 29% on an
indexed basis, mainly as a consequence of the effects of the recession on
small and medium-sized enterprises.
Corporate business net cash flows, though still negative, have shown an
improvement over the prior year.
LibFin
During the quarter the group`s investment positions did not change
significantly from those disclosed at half year and yielded positive
investment returns as local and foreign markets improved.
The current level of market risk being run remains consistent with the
group`s risk appetite as a result of the risk reduction undertaken in the
past 12 months.
Asset Management
Stanlib
Assets under management grew 6% over the quarter largely as a result of
local equity market gains. Stanlib has also experienced good net inflows
into the retail and institutional money market and dividend income funds.
Earnings for 3Q09 were similar to those reported in each of the first two
quarters of the year.
Achieving better investment performance has been the key area of management
attention during the period and progress is being made.
Properties
The Properties business is performing well, with revenues beginning to flow
from the new focus on third party development mandates. The demand for
property-backed investment policies remains strong.
Health
The newly formed business continues to develop, particularly in terms of its
African footprint where it has expanded into another 5 countries, whilst the
business in South Africa remains stable.
The Group remains confident of the potential of its Health business model
which is now showing a positive EBITDA and has therefore increased its share
in Liberty Health Holdings (Pty) Ltd to 75% with effect from 9 November
2009.
Africa
Liberty Africa`s earnings have increased as insurance earnings from group
risk and credit life products improved. Assets under management were up 8%
for the nine months as a result of the steady growth in money market and
segregated fund portfolios.
Expanding the group`s geographic footprint into Africa is still a key
priority for the group.
Conclusion
Satisfactory progress has been made on the group`s persistency initiatives
as well as its market and credit risk investment strategy. The group was
profitable in 3Q09 and remains well capitalised.
Table 1 9 9 9
Liberty new business for the nine months months months
months to 30 September 2009 1 to Sep to Sep %
On balance sheet 2009 2008 change
Rm Rm
Individual life
Single premium new business 8 007 8 967 (11)
Recurring premium new business 2 161 2 158 -
Total new business 10 168 11 125 (9)
Indexed new business 2 962 3 055 (3)
Corporate benefits
Single premium new business 856 1 202 (29)
Recurring premium new business 218 308 (29)
Total new business 1 074 1 510 (29)
Indexed new business 304 428 (29)
Total new business (11)
11 242 12 635
Indexed total new business (6)
3 266 3 483
1 Excluding premium escalations, including Liberty Africa
Table 2 9 9 9
Asset management net cash flows for months months months
the nine months to 30 September 2009 to Sep to Sep %
2009 2008 change
Rm Rm
STANLIB 2
Retail 4 806 (7 418) n/a
Multi-manager 81 758 (89)
Institutional (17 (9 (94)
629) 065)
Money market (retail and 8 955 13 753 (35)
institutional)
Net Stanlib cash inflows/(outflows) (3 787) (1 972) (92)
Liberty Africa
Retail 45 2 053 (98)
Institutional 1 619 2 326 (30)
Money market (retail and 817 134 n/a
institutional)
Net Liberty Africa cash 2 481 4 513 (45)
inflows/(outflows)
Total net cash inflows/outflows from (1 306) 2 541 n/a
asset management
2 Stanlib numbers exclude life funds
Actuarial Valuation
An actuarial valuation was not performed at either 30 September 2009 or 30
September 2008.
Audit/Review
None of the figures have been audited or reviewed by the Group`s auditors.
27 November 2009
Sponsor
Merrill Lynch south Africa (Pty) Limited
Date: 27/11/2009 07:05:01 Produced by the JSE SENS Department.
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