Hapless Liberty makes excuses

Johannesburg - Liberty Holdings executives - CEO Bruce Hemphill and Russell Harte, group financial director - were hauled over the coals by disgruntled analysts on Thursday in the wake of Liberty's R1.2bn interim loss, a performance Hemphill said was "unfortunate".

Presenting to analysts, Liberty Holdings, which controls life assurance firm Liberty Group, told off market misjudgements, slumping sales and policy lapses and then defended itself against criticism that its management team was lightweight.

"I am not sure you should be taking risks on currency positions given your capital position," said JP Morgan analyst Francois du Toit. He was commenting on Liberty's decision to play the rand against fears of continued market volatility.

Hemphill's decision to hedge the market was aimed at protecting policy holders against interest rate movements, foreign currency fluctuations and equity markets. But the rand strengthened while the equity markets, including the JSE, bounced back 30% since March.

Said Hemphill: "The timing was unfortunate."

Although media and analysts had been zeroing in on the foreign exchange losses, the positions had been built "since the early 2000s" and had been disclosed in previous financial reports, said Harte.

Michael Christelis, an analyst at UBS, took Liberty to task on the guidance it had provided at the previous reporting period.

Liberty said it had been conservative regarding expectations for policy lapse rates, and yet the company had exceeded these. "That is fair comment," said Harte. "We set aside what we thought was adequate."

David Danilowitz, an analyst with Merrill Lynch South Africa, said the broker channel - including Libertys' - was continuing to churn its life assurance products even though it was accepted that financial institutions should rather focus on developing long-term client relationships.

This was "a key issue," Hemphill said. Liberty would be looking at different ways to incentivise and retain quality brokers.

A strategic focus was to establish closer relationships with clients and perform a series of business intelligence activities to change the sales model and ultimately bring down policy lapses, Hemphill said.

The depth of Liberty's team and staff retention came under the microscope, especially since financial services firms were jockeying for premium skills amid the economic crisis.

"I am confident that they [senior management] will stay and we will find ways in which to incentivise them," said Hemphill.

On Thursday at midday Liberty Holdings was trading 0.08% lower at 6 170c on the JSE, while the broader financial index was up 0.45%.

- Fin24.com