Liberty withholds dividend as it reports a loss

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Liberty withholds dividend as it reports a loss

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Published Date: 2021-03-08 | Source: Stephen Gunnion | Author: Stephen Gunnion

Liberty withholds dividend as it reports a loss

The insurance group has been impacted by its Covid-19 reserve fund and pressure on new business volumes as a result of the pandemic.

Liberty Holdings has tumbled into a loss for its 2020 financial year after new business came under pressure and it set up a Covid-19 reserve fund to deal with the fallout of the pandemic. It hasn't declared a dividend for the year.

Releasing results for the year to end-December, the life insurer and asset manager said new business came under pressure after its agents couldn't conduct face-to-face sales due to the pandemic. Other major factors included the impact of adverse and volatile equity and interest rate market movements on its insurance book and on the LibFin Markets asset liability management portfolio. It provided some customers with relief on their premiums and incurred unplanned pandemic-related expenses to protect its employees and advisers so they could continue servicing clients.

Last June, Liberty established a R3 billion pandemic reserve to cover the expected increase in mortality and retrenchment claims together with reduced persistency and increased expense impacts directly attributable to the pandemic. It increased it by R73 million, before tax, at the end of December.

The group reported an 11.4% rise in death and disability claims for the year to R11.7 billion. Total annuity payments to clients increased by 9.3% to R8.6 billion. The embedded value of new business shrank 94% over the year to R24 million, mainly due to the decline in the value of new SA retail business to R30 million from R290 million a year earlier.

Total group assets under management increased to R776 billion from R738 billion due mainly to the increase in STANLIB South Africa assets under management. This was partly offset by the exit of asset management operations in other African territories and the associated transfers of mandates to other external managers of R3.9 billion.

The group reported a normalised operating loss of R1.6 billion compared to normalised operating earnings of R2.2 billion in 2019. This included the R2.28 billion net after tax cost of establishing the pandemic reserve which, if excluded from the result, would reflect normalised operating earnings for the year of R628 million. The SIP generated a profit of R27 million.

Its normalised loss amounted to R1.57 billion, down from earnings of R3.21 billion in 2019, which translated into a normalised headline loss per share of 582.9c. It hasn't declared a final dividend.

Liberty said its life insurance operations remained financially sound and well capitalised, with a Solvency Capital Requirement cover ratio of 1.81 times, down from 1.99 times in December 2019.





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