South African life insurer eyes Nigerian market

Chuks Udo Okonta and agency report

Another South African company Liberty Holdings is set to berth in the Nigerian Insurance market, Inspen has learnt

Its Chief Executive Bruce Hemphill, who disclosed this during the life insurer’s interim financial results presentation in South Africa, said the company was in the process of entering the asset management and life insurance markets in Nigeria.

Hemphill said the company was still in the process of setting up these businesses in Nigeria. He said Liberty expected the entry into insurance and asset management to boost its medical scheme administration business, which had not done well since launching on the Nigerian market in 2009.

Once these operations were up and running, Liberty planned to expand the corporate product offering of the health business.

“While the opportunity for the asset management industry in this market is very clear, we believe there is a sizable opportunity for Liberty in long-term insurance,” Hemphill said.

He explained that Liberty saw enormous growth opportunities in its chosen African markets because of the economic growth rates, adding that this boded well for the expansion of the higher end of the consumer market, where the company had been gaining most of its market share.

Liberty caters for retail clients earning between R8 000 and R50 000 a month. Since 2010 it has been growing its market share consistently in South Africa.

Hemphill said by leveraging on its multi-distribution channels, Liberty expected to take further market share. “The market in 2010 felt that our traditional business was in decline and that we were not going to achieve further growth but it’s clear that there has been growth and by expanding our products in Africa we’ll take it further,” he said.

Liberty’s increasing market share has been supported mostly by the innovative products that the company has introduced, such as its new generation Evolve range of investment plans, which has attracted R2.2 billion of funds since its launch in the fourth quarter of last year. In the six months to June, Evolve’s product sales stood at R1.4bn.

Liberty’s insurance operations in the rest of Africa generated headline earnings of R18 million in the six months to June from a restated loss of R5m a year earlier.

The new business margins for long-term insurance in the rest of Africa increased to 11.3 percent from 7.7 percent in the previous corresponding period.

Jean Pierre Verster, an analyst at 36One Asset Management, said Liberty’s insurance and asset management businesses should be more successful in Nigeria than the health business because the company would benefit from the relationship it had with Standard Bank, which was already a significant player in that market.

Justin Floor, an investment analyst at Kagiso Asset Management, said that Liberty remained geared to markets that he believed were at elevated levels and that its longer-term success was very dependent on its ability to execute various growth strategies in Africa, the South African emerging consumer market and the direct marketing segment.

As Liberty increased its market share, Floor said sustaining this would be a critical driver of future performance.

In the six months to June, the company increased its operating earnings by 31 percent to R1.04bn.

Long-term insurance net cash flows were up 81 percent to R2bn. Long-term indexed new business insurance sales of R3.1bn were 12 percent higher year on year. Black economic empowerment normalised headline earnings a share were up by 6 percent to R6.03 and the company declared an interim dividend of R2.12 a share, 10 percent higher than last year. The stock fell 2.94 percent to R119.