Dave Munro: Liberty’s fortunes have improved under the former investment banker. Picture: Freddy Mavunda
Dave Munro: Liberty’s fortunes have improved under the former investment banker. Picture: Freddy Mavunda

Few people are expecting any fireworks from the midyear financial results of the big four banks — Standard Bank, Nedbank, Absa and FirstRand. Growth in revenue is likely to be minimal.

One of the few pockets of growth is likely to be Standard Bank’s life insurance subsidiary Liberty Holdings, which gets the ball rolling on August 1. In a trading update, Liberty has already flagged a 45%-55% increase in its headline EPS.

After a rough few years in which it went nowhere, Liberty’s fortunes have improved markedly in the two years since former Standard Bank investment banker David Munro took charge.

Investors will be hoping Munro can help Liberty catch up with rivals that have left it in the dust.

Over the past three years, Liberty’s share price has fallen 13%, while Sanlam’s has risen 16% and Discovery’s has gained 10%

Operating earnings have improved, and it has made some progress in regaining market share. Liberty also introduced a (belated) copy of the Outsurance Outbonus through a "wellness bonus". It gives back 40% of premiums on protection policies such as critical illness for people who remain in an approved wellness programme for five years.

But Warwick Bam, head of research at Avior Capital Markets, says the main driver of Liberty’s recovery has been its gearing to the market rather than any major operational improvement.

In Liberty’s case, the returns made by its shareholder investment portfolio are a significant part of its headline earnings. Unlike rival MMI, for example, which has its shareholder funds in cash and fixed income, Liberty still has a large portion of equities in its shareholder funds — typically between 40% and 50%.

Apart from the improved equity market — the all share index returned 12.2% over the first half of the year — the performance of the group’s fund manager, Stanlib, has also improved.

But Munro’s strategy has been mainly to refocus the business on its core competence: the SA retail business. Even during the poor years, Liberty maintained a high-quality sales agency force.

But its businesses in Africa have underperformed, despite the perceived benefit of working with the Standard Bank network across the continent. Munro has remained committed to the employee benefits market, even though it accounts for less than 5% of earnings.

Bam says Liberty might be one of the top five umbrella fund providers, which will benefit from the consolidation of subscale funds into umbrellas. "But it is the slowest-growing of the top five and needs to improve to remain a serious player," he says.

And recent attempts to merge Liberty Corporate with pension administration specialist Alexander Forbes fell through.

Depending on how other business units perform, Liberty’s share of Standard Bank’s profits could increase from 6% to about 10%. Liberty now has an opportunity to distribute Standard Bank’s range of short-term insurance products, developed by former Sanlam and Telesure CEO Leon Vermaak.