Liberty's profit falls

Liberty's profit fallsWeak economy contributes to weak performance South Africa's economy slipped into recession in the first quarter and unemployment is close to 28%, adding to pressure on a government grappling with corruption allegations and credit rating cuts. Liberty Holdings Limited, South Africa's fourth-largest insurer, said on Friday its first-half profit had dropped 30%, hurt by weak investment markets and lower economic growth that dented business and consumer confidence.

Liberty's normalised headline earnings - a key profit measure that strips out certain one-off items - fell to 456.7 cents per share for the six months ended June from 650 cents a year earlier, the company said in a statement.

Liberty's new chief executive, David Munro, is trying to manage costs, improve the value of new business and related margins for the insurance operations and fund performance for the asset management business. Munro, former head of Standard Bank's investment banking unit, was named to the top job in May, replacing Thabo Dloti, who abruptly left the company following a clash with the board.

“The results for the six months reflect difficult market conditions and the challenges we face as a business. We have prioritised initiatives to make an immediate impact on our service to customers and financial performance,” Munro said.

Insurers in South Africa have been bulking up their presence elsewhere to offset slowing growth at home, but Africa's prospects have been hit by a collapse in commodity prices.

Headline earnings at Liberty Africa insurance business were R9 million above the prior period, while earnings in the asset management business Stanlib South Africa were lower at R115 million from R249 million.

“The asset management business in South Africa experienced margin pressure due to weaker investment markets and product mix. In addition, higher costs associated with the termination of the administration outsourcing programme impacted earnings,” Liberty said.

The company declared an interim dividend of 276 cents per share.

Group new business sales rose by 10% to R3.9 billion, while the value of new business fell to R86 million from R257 million at a reduced margin. Liberty said its capital adequacy ratio, a key measure of financial strength, was at 2.82 times statutory requirement from 2.95.

NAMPA/REUTERS