Screws turn on Liberty

Johannesburg - JSE-listed wealth management firm, Liberty Holdings, has reported an 11% slump in new business sales as the financial crisis continues to weigh on consumers.

On Friday, the R19.8bn life assurance business, published an operational update to investors for the nine-months ended 30 September 2009.

"The Group traded profitably for the quarter as investment earnings from foreign and local equity markets improved, life operating experience was broadly in line with that at the half year and costs remained under control," the company said in its update.

Shares in Liberty were unchanged in early morning trade on the JSE. The share was last trading at R69.10/share.

The group's single premium new life industry business sales were 11% lower while the corporate benefits business dropped 29% to R856m. The company said that this was as a consequence of the effects of the recession on small and medium-sized enterprises.

When Liberty reported its interim results, management indicated it was trying to put in place systems to prevent continued high levels of withdrawals and cashing in of investment and life policies.

These appear to have made only limited impact: "During the third quarter, lapses were broadly in line with the experience seen at half year."

Embedded value, which represents the future profits of all policies were they to be settled today, rose slightly to 8 000c p/share, up slightly from the 7 919c reported at the six month stage.

Stanlib outflows

Assets under management at Stanlib rose 6% over the quarter with the company pointing to the rise in equity markets.

However, much of the inflows were for institutional money market and dividend income funds indicating that investors continue to have a limited appetite for equity market risk.

Year-on-year the net outflows at Stanlib are down with investors having withdrawn R3.7bn. This has been partly offset by R2.4bn in inflows from Liberty Africa's asset management operations.

Despite a rebound in global equity markets, the benefits for Liberty have been limited. The company entered in to a number of large hedges in which it bet on the price of equity markets, interest rates and foreign currency.

It said equity markets would remain under pressure throughout the year and that the rand to weaken against the dollar.

Since March 2009, the local equity market rallied in excess of 30%, and the rand has been one of the best performing currencies globally for the year.

The LibFin unit, which was responsible for the implementation and management of these hedges, said Liberty's investment positions had not changed significantly from those disclosed at half year, and that these had "yielded positive investment returns as local and foreign markets improved."

- Fin24.com