Financial Services Editor

LIBERTY Group's headline earnings declined 11% to R949m for the year to December, but it recorded a net R4,49bn influx of client money, making it the only life assurer so far to report inflows rather than outflows.

In an industry that sees a constant circulation of client money around the various institutions, Liberty's net inflow was just below the R4,5bn it recorded in 2002 and would have been R700m higher, but for two funds that transferred to joint venture asset manager Stanlib.

By contrast, Old Mutual recently reported a R3,7bn net outflow of client money from its South African operation in the year to December, though this represented an improvement on the R4,1bn seen in 2002.

Momentum saw a R3,1bn net outflow in the six months to December, mainly because of large bond mandate withdrawals at RMB Asset Management. Sanlam is due to report its results today.

Liberty, which is SA's third-largest life assurer after Old Mutual and Sanlam, benefited from good investment markets in the second half of the year. But earnings were hit hard by a 19% decline in profits from the group's life insurance operations, which benefited in 2002 from a release of funds resulting from actual expenses coming in lower than actuarial assumptions a release of funds that was not repeated in 2002.

New accounting standard AC133 also hit earnings for 2003.

Liberty, which saw a sharp earnings decline at the halfway stage, said in January that its headline earnings would be 10% to 15% down. The 11% decline came in a bit better than analysts' consensus of 13% down.

New business premiums rose 4,8% on an indexed basis, with the new business margin maintained at 20% with Liberty's market share of new business increasing.

The whole life assurance industry has seen a sharp decline in individual single premium business, reflecting investors' aversion to risk and the poor returns to those who bought offshore-focused policies because of the rand's strength.

Liberty did not escape this, though the 7% decline in individual single premium new business was lower than at some competitors.

Liberty's recurring individual business was up 6%. Corporate new business gained 15% off a relatively low base.

Liberty Personal Benefits, the group's individual life operation, represents 70% of its total business and has grown its market share to 18,8% (16,5% in

2002) of single premium and 18,9% (18,3%) of recurring individual business.

But the group is working to grow its corporate benefits business, which was boosted last year by the R130m acquisition of Investec Employee Benefits

Bancassurance sales, in terms of Liberty's agreement with parent Standard Bank, accounted for 22% of Liberty's new business while Liberty policies made up 84% of the business done by Standard Bank Financial Consultants, the bank's brokerage arm Liberty now manages.

Liberty cut costs by R75m last year and is budgeting for no real increase in costs as it focuses on cost reduction and improving customer service.

The Bottom Line: Page 12

Mar 04 2004 07:36:21:000AM Hilary Joffe Business Day 1st Edition