Liberty Q3 lapse rate in line with H1, lags peers

By Serena Chaudhry

JOHANNESBURG (Reuters) - South African insurer Liberty Holdings was profitable in its third quarter, but is lagging its peers as the lapse rate at its units remains in line with its first-half.

Liberty, majority-owned by Standard Bank, Africa's biggest bank by assets, said an increase in investment into equity markets had helped business in the quarter, after it reported in August it had swung to a first-half loss.

However, the insurer said on Friday its life business, which was hit hard in the first half due to rising policy lapses, remained under strain as consumers with lower disposable income struggle to keep up with payments.

"The general improvement is in line. Bit concerned that the lapse turnaround isn't happening yet as we've seen with the other insurers," one Johannesburg-based insurance analyst said.

"In the sales, the retail side looks good, but the corporate business continues to struggle, which is a bit of a concern."

Liberty said its corporate new business remained challenging, with sales down 29 percent for the nine months to end-September. Assets under management rose 6 percent, mainly thanks to gains in foreign and local equity markets.

South African insurers' profits have taken a hit from the global slide in equity markets this year, as well as a reduction in consumer demand due to relatively high interest rates, inflation and rising personal debt.

But equity markets have stablised since huge drops in March, helping boost insurer's investment returns. Liberty's peer Sanlam, one of the country's biggest asset managers, said in September it expected its full-year performance to be better than 2008 thanks to better returns on equity markets.

Premiums for Liberty's individual indexed new business, made up of life and off-balance sheet sales, were down 4 percent, while the firm's embedded value per share -- adjusted for its black economic empowerment deal -- was at 80 rand.

Liberty's units include insurance, asset management, health and property. Its shares rose 0.3 percent to 69.32 rand by 0812 GMT, outperforming a weaker JSE Top-40 index.