Liberty CEO David Munro. Picture: ROBERT TSHABALALA/FINANCIAL MAIL
Liberty CEO David Munro. Picture: ROBERT TSHABALALA/FINANCIAL MAIL

The JSE’s worst performance  in a decade in 2018 took the shine off what would have been a strong set of results for Liberty Group and evidence that CEO David Munro’s turnaround strategy for the insurer is working.

On Thursday, the group, which is partly owned by Standard Bank and has a quarter of the South African life insurance market, reported a 17% drop in headline earnings for the year to end-December to R2.26bn.

The decline was due to an 81% decline in investment returns from Libfin Investments, the unit that invests capital
that Liberty has to hold for solvency reasons.

Because it is heavily invested in a balanced fund with local equities, Libfin’s normalised headline earnings decreased
to R250m from R1.3bn due to lower returns.

The JSE all-share index lost 11.37% in 2018, the worst performance since the 2008 financial crisis, when it lost 25.72%.

The company, which has a market capitalisation of about R29.5bn, also suffered damage to its reputation when it fell victim to the biggest corporate hack to date in SA in 2018.

Despite these challenges, Liberty’s operating earnings before the inclusion of LibFin were up 42%, thanks to double-digit growth in its South African insurance and asset management businesses.

The South African retail operations increased earnings 31% to R1.58bn.

Stringent cost management saw the value of new business surge 75% to R271m and the new business margin improve from 0.5% to 0.8%.

But Liberty’s operations outside SA did not fare as well.  The company recorded a R166m loss from businesses it wants to sell, most of which are outside the country.

The insurance business in the rest of Africa was the hardest hit, recording a 300% decline in normalised headline earnings.

Munro said that the loss was attributable to one small country that the group is looking to exit. He, however, declined to name the country.

Even though Stanlib Africa narrowed its loss to R19m from R226m at the end of 2017, Munro said Liberty could not afford to continue investing in it because the division’s prospects did not look good.

The health business in the rest of Africa continued to increase its losses, this time by 44% to R78m.

Munro said the group was in talks to reduce its exposure in these African operations.

"We are at advanced stages to sell a majority stake in our health business, which operates across Africa. And equally, we are actively pursuing various strategic partnerships or
disposal options in respect to our Stanlib operations in both West and East Africa," he said.

In SA, the group announced on Wednesday that it had sold its short-term insurance technology platform to Standard Bank.

The short-term business recorded a R51m loss in 2018. The insurer has been restructuring its business to focus on long-term insurance, Stanlib SA and Liberty Corporate.

Munro said selling or decreasing Liberty’s stakes in the loss-making operations would help the insurer focus its investments on businesses that could make it powerful in SA.

"We were investing in these businesses. We were distracted by them. We’ve now narrowed our focus for a year and we see the impact of that in our operating results.

"The three South African businesses we want to focus
on, working together, are very powerful. We have no grand plan of global expansion,"
Munro said.

"We just want to get really good in SA."

buthelezil@businesslive.co.za