Liberty Group delivered poor results this week.   Picture: SUPPLIED
Liberty Group delivered poor results this week. Picture: SUPPLIED

Friday was not a stellar debut for David Munro, the new chief of the Donald Gordon-founded insurer Liberty Group. The group's share price fell as much as 7% on the day he delivered his first set of interim results.

Just more than two months into the job, the former head of Standard Bank's corporate and investment bank knows he faces a huge challenge trying to change sentiment on a group that continues to underperform.

Over the past five years Liberty's stock has weakened 5.9% compared with an All Share index that has gained more than 39%. It has underperformed rivals Sanlam and Old Mutual and has lost some of its higher- end customers to them and to Discovery.

An analyst said that the group seemed to hit a roadblock every way it turned.

Munro took control of the 60-year-old insurer at the end of May after the abrupt departure of former CEO Thabo Dloti, following a disagreement with the board over the direction of the company.

As part of his plans to put Liberty on a better trajectory, Munro believes strengthening relations with big brother and controlling shareholder Standard Bank is an important step. The bank owns 53.6% of the insurer.

Graphic: RUBY-GAY MARTIN
Graphic: RUBY-GAY MARTIN

In an interview with Business Times, Munro said that in the past there might have been a disconnect between the lender and Liberty, but said his more than two decades at Standard Bank did not leave room for the disconnect. "I don't think the room for misunderstanding between me and Standard Bank, therefore Liberty and Standard Bank, really exists anymore," said Munro.

On the relationship with Standard Bank, Munro said more emphasis needed to be placed on "the things that are over real mutual benefit for both groups".

Dloti wasn't a Standard Bank old boy and was brought in from Old Mutual in 2014 to run Liberty.

Karin Richards, an independent technical share trader and market commentator, said Liberty had a captive audience in Standard Bank because a customer looking for a money market account or life insurance could be referred to Liberty by the parent.

She said she never understood why the group was not doing better out of the relationship. Standard Bank has just under 12 million customers in South Africa, compared with 2.5 million for Liberty.

Further affecting Liberty's earnings has been the sluggish performance of the South African economy, which has fallen into a recession - the second in under a decade.

For the six months to the end of June, the insurer reported that new business dropped to R86-million from R257-million compared with the same period last year.

Increasing competition has been another factor that has weighed on the group.

Munro said there was no net growth in his industry, so all the players were fighting for the same pie.

While Dloti's African expansion plans were slated by the market, Munro has made his immediate task the health of the company's South African business.

"The rest of Africa is much less consequential to Liberty in comparison to our South African operation," he said.

Fixing Liberty's financial performance was the quickest way to profitability and that would be delivered out of South Africa, Munro said.

On operations outside South Africa, he said the issue was whether the insurer had the expertise to make the African business profitable. Small businesses, such as the ones it had across the continent, needed a lot of attention.

Richards said it made sense for Liberty to focus on South Africa because most local companies were having trouble on the rest of the continent.

Liberty's shares ended the day more than 6% lower on R105.50, the weakest level since May 11.

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