JOHANNESBURG - JSE-LISTED financial services group Liberty Holdings yesterday reported a spike in mortality claims and announced plans to assess its pandemic reserve at the end of next month on the possibility of a third wave of Covid-19.
Liberty, whose subsidiaries include Stanlib, Liberty Life and Liberty Two Degrees, flagged that significant uncertainty related to the evolution and impact of the pandemic.
“The reserve will be assessed at June 30, 2021, taking account of the possibility of further waves and other developments relating to the pandemic,” said the group in its operational update for the quarter to the end of March.
Liberty established the R3bn pandemic reserve a year ago as a means of assuring clients that Covid-19 claims and costs, which could arise in future, would be adequately covered. Liberty said mortality claims had surged during the first quarter, while persistency had not yet worsened, as anticipated when the pandemic reserve was reassessed at the end of December last year.
Liberty said the pandemic reserve had so far been used only to absorb the relevant risk experiences across SA Retail, Liberty Corporate and Liberty Africa. “However, Liberty Corporate profitability in the current period has been adversely affected by the elevated risk claims exceeding the pandemic reserve set up for this business, given the IFRS accounting treatment of short contract boundary business,” said the group.
Last year, Liberty dealt with an increase in life cover claims and saw a rise in mental and incapacitation claims. As a result, death and disability claims rose to R11.7bn lst year, an 11.4 percent increase on claims in 2019. Indexed new business from Liberty Corporate fell to R89 million, down from R103m in the comparative period.
“Recurring premium new business of R78m was in line with the prior period, while single premium new business was below the comparative period, due to the Liberty Corporate target market being impacted by the economic consequences of dealing with Covid-19,” said the group
A standout performance was recorded in the SA Retail business, where indexed new business sales increased by 17.8 percent to R1.86bn, reflecting an improvement in new business inflows. Recurring premium new business sales increased by 20.6 percent compared to a year earlier to R1.3bn, because of strong growth in the sales of embedded banking products, while recurring risk and investment business sales were lower than in the comparative period.
Liberty said assets under management in the Stanlib Africa business amounted to R18.6bn compared to R18.1bn at December 31 last year, with net external third-party client cash outflows of R78m, reflecting an improvement over outflows of R1.3bn in the comparative period.
Liberty shares closed 0.64 percent lower at R61.88 on the JSE yesterday.