Liberty plants flag of hope

Johannesburg - Liberty Holdings [JSE:LBH] , a wealth management and insurance group, maintained the dividend of 291c per share in a bold statement to the market that it was positive about its prospects despite a slump in earnings.

"The economic outlook for 2010 is positive as the global economy emerges from recession," said embattled Liberty Group CEO, Bruce Hemphill in comments accompanying the company's financial results published Thursday.

"However, there is still some uncertainty about economic stability in certain developed economies," he added.

Liberty makes a distribution to shareholders through a capital reduction, not strictly a dividend, but it amounts to the same thing with shareholders physically receiving 291c per share held in Liberty.

After a rocky 2009, in which consumers aggressively cut back on spending on insurance and savings products, all eyes were on Liberty to give some indications around the dividend policy when it reported its full year results ended December.

Liberty has traditionally been a good dividend payer, but after earnings slumped to R47m in 2009 from R740m in 2008, there were concerns that this may have been cut.

Said Hemphill: "The capital base has been strengthened, the balance sheet has been significantly derisked, and necessary corrective actions have been taken on persistency.

"In this context, the board has decided that an appropriate balance is achieved by declaring an unchanged cash distribution."

Embedded value, the measure by which insurance companies are valued, slipped to 8 432c from 9 512c in 2008 with the shares trading at a discount of 18% at 6 905c.

Liberty's key domestic focus was to grow its core insurance business, said Hemphill. This would be achieved by improving policyholder persistency and new business margins.

"We believe that this, together with the impact of corrective actions taken at Stanlib, growth in Liberty Africa, the development of Liberty Health and the positive economic climate positions the group favourably for the future," he said.

Asset management business unit Stanlib had a difficult year losing a major mandate with the Public Investment Corporation (PIC) worth R8.3bn. The group recently bolstered the unit with a number of high profile appointments.

A key feature of 2009 was Liberty's increasing number of lapsed policies and surrenders across its product lines, particularly in the first half of the year. Liberty has said that it has taken "corrective action" and is beginning to see some of the benefits coming through.

- Fin24.com