Insurer Liberty’s primary customers are less concerned about price and more concerned about value for money, says CEO, Thabo Dloti of its predominantly retail affluent client base. Discussing Liberty’s decision to discontinue its Own Your Life (OYL) Rewards programme, Dloti emphasises that if members are paying a premium for something it has to demonstrate sufficient value to warrant the cost.
The move, effective March 31 next year, has elicited complaints from irate members on hellopeter.com, whose frustrations seem to centre mostly on the cancellation of the gym benefit, which will cease from April 30 this year dependent on the contract status with the gym.
Liberty plans to refund OYL Rewards members 15% of the total subscriptions paid since joining the programme up until February 29.
“Following a comprehensive review of the programme, the rewards landscape, and most importantly, what customers are looking for, we have opted for a clean break from these over-traded offerings,” Liberty said in a communication to members, describing benefits associated with rewards programmes as “increasingly commoditised and therefore fast losing their value as a point of differentiation”.
In an interview with Moneyweb, Dloti explained that too few people were actively using OYL rewards to make it sustainable in the long term. “Those few enjoying the benefits made a killing, while the rest were just funding them. Three years from now we would’ve had to hike the premium quite phenomenally… whittling away the benefit belonging to it,” Dloti said.
Out of a qualifying member base of “a few million”, OYL had some 56 000 members, roughly 10-25% of who were highly active on the programme, Dloti said.
While he would not be drawn on details, he noted, “We are doing something different inside the existing core business to give similar benefits to our members without them having to pay for them”.
Results resilient in tough environment
Dloti said that earnings growth of 11% to R1.9 billion in its individual arrangements business in South Africa is “something to smile about, particularly in the environment we’re in”
He added that Liberty would continue to focus on the affluent market and leverage the strength of its distribution channels and product innovation.
Indexed new business in Liberty’s long-term insurance operations fell 4% to R7.5 billion for the 12 months to December, impacted by the absence of any large single transactions in its corporate business.
New business in long-term insurance group arrangements was down 23%, while individual arrangements grew 1% to R6.4 billion, “off a high base”, Dloti said.
The group’s value of new business (VNB), which fell 23% to R729 million, came under pressure as a function of an increase in the risk discount rate (fuelled by rising interest rates) and lower overall volumes on a sizeable cost base.
The group’s net customer cash flows were substantially higher at R13.9 billion (2014: R2.billion), largely a function of improved flows to its asset manager, Stanlib. Stanlib’s money market funds lost R13.7 billion the prior year, as customers withdrew money following the failure of African Bank Investments Limited (Abil) and the consequent negative sentiment surrounding money market investments.
Over the year, Liberty rationalised its head office by between 200 and 250 individuals. Although there were some retrenchments, Dloti said that freezing new hires for vacated positions and transferring employees to business partners primarily accounted for the drop.
Bullish on Africa
Liberty is looking to build a business of scale in Nigeria, which will act as a hub to support growth in West Africa, in the same way that Kenya is the its hub supporting East Africa. It currently has an asset management business in Ghana.
“Until we have a business of substance in Nigeria we really cannot grow as we would like to in that region,” Dloti said. Having already bought the remaining non-controlling interest in Total Health Trust Limited in Nigeria for R142 million, Dloti said Liberty would continue to look for insurance and asset management opportunities, while also partnering with parent, Standard Bank to grow clients.
Liberty has a R1 billion war chest for acquisitions.
“We will continue operating efficiently in the South African market as things slow down and invest for growth in markets where we believe growth will come from in the long-term,” Dloti said of Liberty’s expansion plans on the continent.
Liberty reported growth in BEE normalised operating earnings of R4.1 billion, up 7% to R2.8 billion on the prior period. The group’s share price ended 5% higher on Friday at R120.01. The JSE’s Life Insurance Index ended the week 1.83% higher.
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