Stephen Cranston Associate editor

Samuel Johnson used to say he was never prepared to compare a flea with a louse. I get a similar reaction when I ask analysts to compare Liberty and MMI — which will soon be renamed Momentum Metropolitan. Both businesses have seen better days. Their business models were built on wining and dining intermediaries, not just locally but on ski slopes and cruise ships. Since these practices have been stopped, both life offices have found it tough to retain business. Life insurance is a sales-driven business. It may have some superficial similarities with banking: it is about collecting premiums (deposits) and paying claims (analogous to providing loans). But bankers rarely understand the long-term nature of life insurance liabilities and sometimes try to sterilise the market risk in shareholders’ funds through hedging. About R1bn went down the drain when the Liberty portfolio was hedged right at the bottom of the market by a confirmed banker. Liberty’s main shareholder, Standard Bank, ke...

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