Johannesburg -
Liberty Holdings [JSE:LBH] is likely to shake off discontent about its underwhelming performance in 2009 when it reports interim results on August 5.
The company had a torrid time last year when it suffered from large-scale policy lapses as well as a variety of currency, equity and interest rate hedge positions which backfired.
According to recent research from auditing firm Ernst & Young, the life insurance industry has proved more resilient than the banking sector. In its survey of the industry, the confidence index jumped from 77 points in the previous quarter to its current level of 91.
"One area where life insurers appear to have made significant progress is in reducing lapses and in slowing the level of policy surrenders," said Ernst & Young life insurance sector specialist Tim Rutherford.
"The slower lapse rate has surely boosted the level of inflow growth, while flat surrender levels helped contribute to slower growth in outflows."
This was reflected in comments by Liberty Holdings CEO Bruce Hemphill when Liberty provided its quarterly trading update in May.
"The management of policy holder persistency in the Retail SA business unit has been further enhanced. Experience has remained broadly stable with that seen in the latter part of 2009, with encouraging signs that retention strategies in the major book of risk business are proving effective," Hemphill told analysts and investors.
Comings and goingsLiberty's asset management business Stanlib has also seen assets under management increase by 4% since the end of 2009.
"We have definitely seen an improvement since last year, in which we experienced a slowdown in the form of outflows," said Stanlib chief operating officer Anthony Katakuzinos. "Over the past six months or so, we have seen a marked increase in flows into unit trusts, to the value of about R1bn."
Stanlib has had mixed fortunes on the personnel front. During the year it snapped up the highly regarded Thabo Dloti from Old Mutual to take charge as CEO. Stanlib has also secured portfolio manager Andrew Vintcent from Rand Merchant Bank (RMB), and analysts Kate Rushton from Absa Capital and Shawn Stockigt from Achelon.
However, it has also lost Mike Galloway who headed up retail operations as well as analysts Hlelo Giyose, Aadila Manjra and Bonolo Magoro.
While Liberty shareholders missed out on the early part of the stock market rally, the share has done relatively well in the last few months.
Since early February, the share has ticked up from 6 515c to trade around 7 400 cents per share (13.6%). In contrast, over the same period
Old Mutual [JSE:OML] and
Sanlam [JSE:SLM] returned 10.8% and 6.1% respectively.
"The share still trades at a significant discount to its underlying embedded value, which provides a margin of safety for the counter. Based on next year's estimated dividend, at a yield of 6% Liberty is very attractive in our view," said portfolio manager Thiru Chetty who runs the RMB Financial Services Fund.
The I-Net analyst consensus forecast is a "hold" recommendation on Liberty Holdings, while JP Morgan analysts recommend an "underweight" position in the company.
- Fin24.com