| Thu 12 Aug 2004, 9:20 | | Liberty to give shareholders reason to cheer |
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Liberty to give shareholders reason to cheer
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Group flush with cash after strong results
Financial Services Editor
LIBERTY Life shareholders could receive a special dividend at the end of the year, as the group reviews its capital situation.
Announcing Liberty`s results for the six months to June yesterday, CE Myles Ruck said that after the group`s empowerment deal with Safika and Millennium Consolidated Investments had been completed, Liberty would formulate its dividend policy and decide what to do with any surplus capital.
Ruck said the group could either buy assets with the money, return it to shareholders as a special dividend, or increase dividend payments over a period of time.
He estimated that after last month`s R1,3bn deal with Saki Macozoma`s Safika and Cyril Ramaphosa`s Millennium Consolidated Investments (now Shanduka Group) , Liberty would have between R1,5bn and R2bn in surplus capital.
`I cannot see anything they would be acquiring in SA,` said David Barnes, insurance analyst at Nedcor Securities.
`I would prefer to see a special dividend payment, so that shareholder s can decide what to do with the cash.`
For the six-month period, Liberty beat expectations with a 29% increase in headline earnings a share to 167,2c.
`They were a good set of results, ` Barnes said. `They have been capturing market share in a very tough environment. At 21%, their margins are currently the highest in the sector.`
Total new business improved 17% to R6,34bn, on the back of a 28% improvement in individual business to R5,36bn.
Corporate new business shrank 22% to R981m, in a period Ruck said was disappointing. He said, however, that the group was working on a new strategy to target customers through its bancassurance relationship with Standard Bank.
`It`s not the major part of our business, the major part is individual, but that doesn`t mean we are going to just sit back and accept that we are happy with those levels,` Ruck said.
Barnes said Liberty`s employee benefits business was his main concern.
` This division has been facing various difficulties over the past few years. However, it appears that Liberty Corporate Benefits stands to benefit over the next year or so from integration activities and certain distribution alternatives, which should make it more profitable.`
Andrew Vintcent, portfolio manager at RMB Asset Management, said although the results from its employee benefits business were disappointing, there was a lot of scope to grow this part of the business through Standard Bank.
`The whole industry is under pressure with corporate benefits,` Vintcent said. `I think the reason we like Liberty is because it is the one life company that has consistently shown positive net flows on its life book; it has been growing new business quite consistently.`
Liberty had increased its share of the individual business market from below 20% at the end of 2000 to just under 30% at the end of March this year.
The group`s embedded value a share increased 8% from a year ago to R57,59, largely unchanged from December`s figure of R57,58.
Total expenses grew 4% to R926,5m, excluding the R40,3m associated with the Investec Employee Benefits books Liberty bought in the second half of last year.
The Bottom Line: Page 14
Aug 12 2004 07:09:33:000AM Stephen Gunnion Business Day 1st Edition
