Liberty expects up to R2.4 billion loss as death claims spike

Standard Bank-owned life insurer Liberty [JSE:LBH] expects a loss of between R2 billion and R2.4 billion for the first half of 2020, due to a spike in death claims, policy lapses and harsh brakes on sales of policies and investment products under the hard lockdown.

The insurer, in a trading update on Monday morning, announced it has set aside R3 billion for expected “excess mortality” claims above average investment withdrawals and policy lapses caused by Covid-19.

The company expects a decrease of more than 100% in its earnings per share and headline earnings per share, which will also moved to loss position.

The insurance group will be the first insurer to present financial results showing the extent to which the pandemic has impacted the local insurance industry on 5 August. But the trading update painted a picture of a company squeezed on all fronts, as its death claims rose while sales were under pressure and existing clients struggled to keep up with their premiums.

“The business experienced worsened mortality in the early months of 2020, a continuation of the trend experienced in the second half of 2019. Persistency (lapses and surrenders) experience has also come under pressure in the first half of 2020.

“Liberty has experienced increased pressure on new business volumes and margins since the start of the lockdown period,” wrote Liberty in the update.

Like other insurers, Liberty said the absence of face-to-face sales during lockdown levels 5 and 4 significantly impacted its adviser’s ability to close new sales between March and May. New business volumes started improving in June, when SA moved down to level 3. The group also expects increased retrenchment claims.

Liberty 2 Degrees suffers from rental decline

Liberty’s property division, Liberty 2 Degrees (L2D) which owns iconic shopping centres such as Sandton City, Melrose Arch and Nelson Mandela Square, also bled from reduced footfall, requests for rental relief from tenants and the devaluation of its property portfolio by R1.5 billion.

L2D’s reported revenue for the six months ended on 30 June decreased by 15.9%. Net property income was down 40%.

While at the end of this period L2D had already concluded rental negotiations with a quarter of its retail tenants, it said restaurant tenants require additional support.

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