Liberty swings into loss amid COVID-19 hit
Liberty swung to a loss in the year ended December, after posting a profit in the previous comparable period. Total death and disability claims paid during 2020 increased by 11.4 per cent. A pandemic reserve of R3 billion that was established last year, has been re-assessed, resulting in a marginal increase of R73 million before tax. Liberty CEO, David Munro joins CNBC Africa for more.
Thu, 04 Mar 2021 16:41:11 GMT
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AI Generated Summary
- Reassessment of the pandemic reserve and its relatively stable impact on mortality claims
- Decrease in the value of new business volumes attributed to tough second quarter but showing improvement
- Focus on simplifying the organization through digital transformation for enhanced efficiency and agility
Liberty Group, a well-known insurance company, recently reported a loss for the year ending December, in contrast to a profit in the previous comparable period. The CEO of Liberty Group, David Munro, shared insights on the impact of COVID-19 on their business and the path towards profitability in an interview with CNBC Africa. Munro highlighted the challenges faced by the company due to the pandemic and the steps taken to navigate through these turbulent times. The key points discussed in the interview are the reassessment of the pandemic reserve, the increase in death and disability claims, and the focus on simplifying the organization. Munro also touched on the potential for growth in countries outside of South Africa, particularly highlighting Kenya as a key market for expansion. Despite the setback in profitability, Munro expressed confidence in the company's ability to recover and thrive in the future, driven by strategic investments in digital technology and the commitment to customer-centric operations.
One of the key themes addressed in the interview was the reassessment of the pandemic reserve. Munro explained that Liberty Group had set aside three billion rand last year to account for the financial impact of the pandemic pandemic. However, upon reassessment at the end of December, they only needed to add 73 million rand to their initial estimate, indicating that the situation was relatively stable and in line with their projections. Munro emphasized that the impact of the pandemic on mortality claims was significant, with approximately 10% of claims being related to COVID-19 deaths. Despite the challenges, he expressed optimism that the worst might be over in terms of mortality claims, but persistency issues remained a concern.
Another crucial point discussed was the decrease in the value of new business volumes for Liberty Group. Munro clarified that the full-year results reflected a tough second quarter, primarily due to restrictions on face-to-face interactions, impacting the business. However, as the year progressed, particularly in the fourth quarter, there was a noticeable improvement in new business volumes. While some competitors reported marginal increases in new business, Munro attributed Liberty's results to the reporting period and highlighted a positive trajectory in the latter part of 2020. He reassured that there was no significant loss of market share for Liberty Group.
Munro also outlined the company's focus on simplifying the organization to enhance agility and efficiency. He emphasized the need to streamline complex products, portfolios, systems, and infrastructure to adapt to the modern digital landscape. The goal is to leverage technologies like cloud and artificial intelligence to drive simplification and improve operational effectiveness. Munro clarified that the simplification process aimed to eliminate outdated products, consolidate portfolios, and optimize systems to facilitate better responsiveness and decision-making within the organization.
In terms of geographic expansion, Munro highlighted Kenya as a key market for Liberty Group's growth outside of South Africa. He noted the strong performance of their businesses in Kenya, particularly in short-term and life insurance, despite the challenges posed by the pandemic. Munro expressed confidence in the opportunities present in Sub-Saharan Africa and identified Kenya as a strategic focus for future expansion efforts.
Despite the current loss reported by Liberty Group, Munro conveyed a positive outlook for the company's profitability in the future. He attributed the loss to provisioning for the pandemic impact and reiterated the company's commitment to supporting customers in need. Munro expressed confidence in the potential for profitability in 2021, emphasizing the recovery of business volumes as the economy reopens. He highlighted the transformative initiatives underway, leveraging digital technology and tools to drive growth and enhance operational efficiency. Munro's closing remarks reflected a sense of optimism and excitement for Liberty Group's future prospects, underpinned by strategic investments and a customer-centric approach to business.