| Fri 13 May 2011, 7:30 | | LBH - Liberty Holdings Limited - Overview of trading for the three months |
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LBH
LBH
LBH - Liberty Holdings Limited - Overview of trading for the three months
ended 31 March 2011
Liberty Holdings Limited
Registration number 1968/002095/06
Incorporated in the Republic of South Africa
Share code: LBH
ISIN code: ZAE000127148
("Liberty Holdings" or "the Company")
OVERVIEW OF TRADING FOR THE THREE MONTHS ENDED 31 MARCH 2011
At the annual general meeting to be held later today, chief executive Bruce
Hemphill will make the following comments regarding trading results for the
three months to 31 March 2011 of Liberty Holdings Limited (Liberty Holdings).
The Company continued to make progress on the delivery of its stated
strategic objectives which are to strengthen the insurance business, excel in
balance sheet management and to diversify the Company`s revenue streams.
Life Assurance
Capital
The capital adequacy level of Liberty Group Limited, the entity which
conducts the bulk of the Company`s insurance activities, remains strong at
2.5 times the required cover after the payment to Liberty Holdings of R850m
in respect of the final dividend for 2010 in March 2011. All the other Life
License subsidiaries remain well capitalised and at similar levels to those
reported at 31 December 2010.
Indexed New Business
The Company`s indexed new business (excluding premium escalations) was R1
059m for the period compared to R1 091m in 2010. SA Retail indexed new
business generated in the franchise, agency, and broker channels, excluding
entry level market (ELM) business, is up by 3% on the same period in 2010. SA
Retail single premium new business is up 4% to R2 009m.
Management in the traditional insurance business continues to focus on
increasing the volume and improving the quality of new business and during
the period introduced its new financial advisor value proposition which
introduces differentiated adviser servicing and pricing based on the quality
of the advisor`s book. In addition, management has increased guaranteed
capital bond and property capacity and is currently launching new risk
products which are being well received by the market.
The overall reduction in indexed new business compared to the prior period
was expected given the significant remedial action taken by management in
2010 to address poor lapse experience in the ELM business. During the period,
action has been taken to ensure sustained profitable new business volume
growth in the ELM business and management expects sales volumes to improve
from current levels. This includes the expansion of the successful internal
call centre channel, and the re-pricing of certain products.
Corporate indexed new business volumes were up 8% to R125m for the quarter,
which included strong single premium flows.
New Business Margins
Despite the continuing substantial improvement in policyholder lapse
experience, assumption reviews and changes to assumptions are only considered
half yearly. Consequently new business margins for the quarter have not been
adjusted for improved persistency experience and new business margins remain
at 1,2%.
Cash Flows
Insurance net cash flows of R296m are substantially up on the corresponding
2010 period. Retail SA net cash flows are significantly better demonstrating
the improvement in in-force premiums and single premium new business combined
with consistent claims experience. Corporate net cash flows, whilst
negative, showed an improvement on those experienced in the first quarter of
2010.
LibFin
The return on the Shareholder Investment Portfolio which is effectively a low
equity balanced portfolio, reflected the performance of investment markets
which were challenging during the quarter and hence underperformed the long
term assumption. However, the overall return is ahead of benchmark which
reflects the continued improvement in asset management performance at
Stanlib. The LibFin Markets portfolio performed in line with stated
objectives.
Asset Management
Stanlib
Assets under management for the period increased to R361.3bn compared to
R355.2bn at the end of December 2010, reflecting both an increase in net cash
flows and underlying asset values.
The ongoing market volatility continues to be reflected in customer
investment decisions and flows into money market and fixed interest products
have continued but at slightly lower levels than those experienced in the
same period in 2010.
Stanlib generated net customer cash flows (excluding intergroup life funds)
of R6.3bn for the period. Stanlib`s investment performance continued to
improve during the period.
Liberty Africa
Net customer cash inflows from Liberty Africa amounted to R1.3bn and assets
under management improved to R30.9bn at 31 March 2011.
Liberty Properties
Liberty Properties continues to deliver its projects on schedule and the
unlisted property portfolio continues to deliver competitive returns. Demand
for product containing the unlisted property portfolio remains strong.
Diversification Initiatives
Health
There was a significant improvement in the medical loss ratio during the
period and a number of key contracts in Africa were successfully re-priced.
Strong membership growth in Africa offset some membership attrition in South
Africa.
Frank.net (Frank)
Frank is performing in line with business plan and is making good progress in
establishing its brand in the market.
Bancassurance
Liberty Holdings and Standard Bank Group Limited concluded an amendment to
their existing bancassurance joint venture agreement during the period. The
amendment retains the evergreen status of the original agreement but extends
the notice period from one to two years and stipulates that notice cannot be
given for two years post date of signature. In addition, the amendment
expands the agreement to include new channels, new product lines and new
geographies. The terms relating to the sharing of profit on existing
acquisition models and business lines in South Africa remain materially
unchanged.
CfC Insurance Holdings Limited (CfCIH)
The acquisition of CfCIH which will provide scale to the Company`s African
operations, was finalised during the period and the business was successfully
listed on the Nairobi Stock Exchange on 21 April 2011 with the shares trading
well above the initial listing price.
Conclusion
In conclusion, the operational performance was satisfactorily and capital
levels remain well above minimum requirements.
The intense focus on balance sheet management, investment performance and
persistency in the insurance operations has now been embedded into the day to
day activities as business as usual. Management continues to focus on
generating sustained quality new business and managing its diversification
initiatives to business case.
Audit/Review
The trading overview for the three months ended 31 March has not been audited
or reviewed by the Company`s auditors.
13 May 2011
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 13/05/2011 07:30:01 Produced by the JSE SENS Department.
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