Liberty to swing to a first-half loss


Liberty to swing to a first-half loss

Published Date: 2020-07-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

Liberty to swing to a first-half loss

The life assurer has set aside R3 billion to cover the expected increase in mortality and retrenchment claims as a result of Covid-19.

Liberty Holdings says it will report a first-half loss after setting aside cash to be held in a 'pandemic reserve' as it dealt with the fallout from Covid-19. The life assurer says its earnings for the six months to end-June were materially impacted by Covid-19 and the weakening economic environment.

In a trading statement, Liberty said it expected to report a normalised headline loss of R2 billion to R2.4 billion due to Covid-19 and the impact of related global financial market volatility. This included the R3 billion pandemic reserve it established to cover the expected financial consequences of the pandemic on its current and future results. The reserve was calculated to estimate the future effects by estimating excess mortality, excess withdrawals and policy lapses and expenditure directly attributable to the coronavirus. On a per share basis, it would report a normalised headline loss of between 738.7c and 886.4c, down from headline earnings of 735.8c last year.

Liberty said it experienced worsened mortality at the beginning of the year, while more policyholders either surrendered their policies or allowed they to lapse. It implemented various premium and adviser relief measures to assist retail and corporate clients and advisers experiencing financial hardship. It had experienced increased pressure on new business volumes and margins since the start of the lockdown period. Productivity and new business acquisition was significantly impacted between March and May after its advisers couldn't meet prospective customers face to face. Market volatility was reflected in lower investment returns from its Shareholder Investment Portfolio and the LibFin Markets asset liability management portfolio.

Liberty's shares fell 2.6% to R68.20 yesterday.

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