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Operational Update for the three-month period ended 31 March 2020
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 Group")
OPERATIONAL UPDATE FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2020
LIBERTY’S CAPITAL COVER REMAINS STRONG DESPITE INVESTMENT MARKET VOLATILITY
Current business environment
A voluntary announcement was released on SENS on 21 April 2020 updating the
market on the impact of volatile market conditions during the quarter ended
31 March 2020.
The COVID-19 pandemic is a health crisis which is impacting humanity globally
and as such we remain committed to the wellbeing, health and safety of our
employees, clients and financial advisers during these unprecedented times.
Liberty has been open for business, supporting clients and advisers
throughout the lockdown period and has embedded work from home capabilities
for our staff and advisers by equipping them with digital tools. We have
continued to pay clients’ claims as they have arisen. There has been
significant uptake of the various measures implemented to provide relief to
clients, advisers and tenants of our retail shopping malls.
Operational update to 31 March 2020
As was indicated in the voluntary update, we confirm that the Solvency Capital
Requirement cover of Liberty Group Limited, the Group’s main long-term
insurance licence, remained strong at 1,90 times at 31 March 2020. The
distressed financial markets have had minimal impact on the Group’s capital
ratio for the quarter. This strong capital position underpins the Group’s
ability to fulfil its promises to clients and other stakeholders.
Group total assets under management amounted to R668 billion compared to
R738 billion at 31 December 2019, with the decrease largely attributable to
negative investment market returns during the quarter and transfers to other
external managers in respect of the discontinuation of Kenyan and Ugandan
segregated mandates in the STANLIB Africa operations.
South African Insurance Operations
SA Retail
Indexed new business sales of R1 581 million were 4,2% above the comparative
period. Recurring premium new business sales increased relative to the
comparative period by 3,2% mainly due to good growth in the embedded credit
sales offset by weaker recurring investment business sales. Single premium
new business sales increased by 6,5%, mainly driven by conventional annuity
sales.
Net customer cash outflows amounted to R701 million compared to R252 million
in the comparative period, mainly attributable to increased annuity payments,
higher death and disability claims and increased outflows in respect of
investment policies in the current period.
Focus remains on supporting and enabling financial advisers through digital
capabilities to engage and advise clients during these uncertain times.
Liberty Corporate
Liberty Corporate indexed new business of R103 million was below the
comparative period of R209 million due to lower recurring new business sales
in the current period. Single premium new business of R246 million reflected
good growth over the comparative period amount of R173 million. Recurring
premium sales amounted to R78 million (31 March 2019: R192 million)
reflecting a slower start to the current year. Net cash outflows of
R401 million (31 March 2019: outflows of R173 million) mainly reflect higher
member withdrawals experienced in line with the South African economic
environment.
South African Asset Management
STANLIB South Africa
In the STANLIB South Africa business, assets under management amounted to
R521 billion compared to R568 billion at 31 December 2019. This decrease is
largely attributable to the net impact of negative investment market returns
during the period. Net external third-party client cash inflows of
R5,3 billion remained strong (31 March 2019: R7,8 billion) as a result of
increased money market inflows from institutional clients in a more risk
averse environment.
Africa regions
Liberty Africa Insurance
Indexed new business of R112 million increased by 10,9% over the comparative
period, reflecting a shift in mix towards recurring premium business. Net
customer cash inflows of R155 million were lower than comparative period
inflows of R176 million due to higher claims in the current period.
STANLIB Africa
Discontinued segregated mandates transferred to other external managers of
R8,9 billion, as a result of the execution of the sales of the Kenyan and
Ugandan businesses, was the main reason for assets under management by
STANLIB Africa reducing to R18,3 billion (31 December 2019: R28,4 billion).
Net external third-party client cash outflows amounted to R1,3 billion
compared to outflows of R0,8 billion in the comparative period.
Operations under ownership review
The finalisation of the sales of the asset management businesses in Kenya
and Uganda are progressing positively, however timelines for finalisation
are extending due to governments’ imposed lockdowns. We remain confident
that these sales will be completed by the time of release of our interim
results in August 2020. These disposals will not have a material impact on
the financial results of the Group.
Activities to deliver suitable outcomes for the Liberty Health business
continue but have slowed due to the implications of the various lockdown
measures.
Liberty Two Degrees (L2D)
On 16 March 2020, L2D released a voluntary update on SENS dealing with the
impact of the COVID-19 pandemic following the declaration of a National State
of Disaster in South Africa. A further update was released on SENS on 30
March 2020 following the South African government’s announcement of a
national lockdown, dealing with the operational impacts of the lockdown and
the withdrawal of the 2020 financial year distribution guidance. The L2D
annual general meeting will take place on 20 May 2020.
Further details are available on the L2D website.
Outlook
The COVID-19 pandemic has generated an unprecedented health, economic and
financial crisis causing high levels of anxiety and uncertainty for our
clients, advisers and staff. This crisis is creating significant uncertainty
for Liberty’s financial performance for the 2020 financial year.
Changes in economic conditions, mortality experience, rental income,
investment markets, exchange rates and long-term interest rates are key
factors that may have a material impact on the Group’s earnings and group
equity value for the 30 June 2020 and 31 December 2020 reporting periods.
Investment market volatility will continue to have a material impact on the
returns from the Shareholder Investment Portfolio consistent with a
conservative balanced portfolio managed with a long-term through-the-cycle
investment horizon. We also expect increased pressure on new business volumes
and margins given the extended lockdown period which commenced in South
Africa on 27 March 2020.
Notwithstanding these uncertainties, the Group is expected to remain well
capitalised and able to provide a normal service to our clients.
We remain confident in our strategy and committed to its execution. While
significant management time and resources have been diverted to dealing with
this crisis, the transformation of our business towards a digital, platform
based enterprise has been successfully accelerated through the many measures
adopted to handle the new ways of working and remote engagement for staff,
advisers and clients. The majority of our staff and advisers have continued
to work productively during the lockdown and there has been a significant
increase in the adoption of digital channels.
We would like to thank all our staff and advisers for their commitment and
hard work in these times, and our clients for their continued support.
This operational update for the three-month period ended 31 March 2020 has
not been audited or reviewed by the Group's auditors.
Queries:
Investor Relations
Sharon Steyn
Email: sharon.steyn@liberty.co.za
14 May 2020
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 14-05-2020 07:05:00
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