Liberty Holding, the Standard Bank-owned wealth-management group that offers among other things life insurance, has reported a 1.2 billion headline loss in the first six months of this year. Nevertheless the company's CEO Bruce Hemphill underlined that the company remains operationally strong.

Liberty intends to make a few changes to make up for the loss. The plan is to reverse the rising trend of insurance policy lapses, continue to manage market risk, protect policyholder funds and strengthen the balance sheet.

Insurance analysts say that the group’s results could not get worse in the second half. In an interview with Business Day, one said: “there is no other scenario except an aggressive recovery in the second half. It all depends whether they can wipe out the first half loss”.

Another analyst said he was disappointed that hedging had limited the group’s upside exposure to the market: “The potential upside (for earnings) could be big if they get the persistence issue right, but fixing persistence in a weak economy may take some time,” he said.

According to Hemphill Liberty's capital position is healthy. "We have maintained our cash distribution; costs have been well controlled; new business sales are satisfactory and retail cash flows are good. Our diversification strategy is on track and our product and geographical expansion is progressing well,” he said in Business Day.

Liberty's headline loss was largely a result of the 690 million rand effect on after-tax earnings of strengthened actuarial assumptions in response to an increase in policy withdrawals as disposable income among consumers was hurt by the recession.

Source: Business Day