Chairman’s letter to shareholders
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Business environment |
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| During 2010, a combination of unprecedented monetary
expansion and extensive fiscal stimulus helped most
economies achieve positive growth. Financial market
conditions steadied further during the year, despite
the fears of a sovereign default in the Euro-area. These
improvements, however, disguise the more complex
economic reality of a two-speed global recovery reflected
in a still modest economic improvement in many of the
advanced economies, especially the Euro-area and Japan,
and a much stronger performance in most emerging
economies including China and India. Although the South African economy is out of recession, the pace of recovery has lagged many other emerging economies. However, the latest indicators of consumer activity suggest that South African consumers are in a far better position now than a year ago. This is due to rising incomes, lower debt servicing costs, stable and relatively elevated confidence levels, slightly easier access to credit, an improvement in house prices and a rise in wealth levels. The continuation of these trends in 2011 should be positive for our business. |
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Performance |
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| Supported by low inflation, declining interest rates and
improved financial market conditions globally, South
Africa’s bond and equity markets recorded impressive
gains in 2010. The bond market provided a total return of
15% in 2010 although performance tapered off towards the end of 2010 due to increased fears of higher inflation.
In contrast, the local equity market had a robust end to the
year, providing a total return of 19% for 2010 as a whole. Liberty’s strategies to enhance balance sheet management and improve persistency trends have started to bear fruit. This, together with strong local equity market performance, contributed to the group’s strong earnings performance in 2010. |
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Strategy |
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| Over the past two years, Liberty has been building
a business model and analytical capability that can now
be leveraged for innovation and growth. Positive and
sustainable progress has been made in strengthening the
core insurance business to deliver improved performance.
Liberty will build on the foundations already in place and
utilise its strong commercial partnership with Standard
Bank to facilitate growth in selected African markets. Although 2010 was a year of consolidation of Liberty’s African businesses, the strategy to diversify the business in terms of geography and business lines continues to gain impetus, with Liberty now having a presence in 14 African countries outside of South Africa. |
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Governance and corporate citizenship |
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| Liberty has always maintained high standards of
corporate governance, the detail of which is set out in a
separate section of this report. This, the first integrated
annual report which incorporates additional non-financial
information relating to the group, reflects Liberty’s ongoing
commitment to good corporate governance and the
principles contained in the third King report on corporate
governance in South Africa. The group’s transformation efforts are having the desired effect and we continue to make a positive contribution to South Africa’s previously disadvantaged communities through the products and services offered to our entry level market customers. Corporate social investment activities continue to focus on education, which is absolutely crucial to the development and sustainability of the South African economy. |
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Solvency Assessment and Management |
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| Liberty is focusing on, and has already started work in respect of, the Financial Services Board’s Solvency Assessment and Management programme. The basis of this programme is contained in the principles of the Solvency II Directive, as adopted by the European Parliament, adapted for South African circumstances. The objective is to strengthen policyholder protection by aligning the capital requirements of the insurers with their risk profiles. The programme also aims to instil greater risk awareness into governance, operations and decision making of insurers. | |
Appreciation |
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| I would like to express my thanks to each of my fellow board
members for their contribution, counsel and unwavering
support throughout the year. A particular word of thanks must go to Alan Romanis who retired after an impressive 17 years of service to the board. Alan’s contribution to the board as well the group audit and actuarial and group risk committees over the years has been immense and he will certainly be missed. I wish him well. Hylton Appelbaum resigned from the board, also after 17 years of dedicated service, to pursue other interests. I thank Hylton for his significant contribution over the years, particularly to Liberty’s corporate social investment initiatives. Rex Tomlinson resigned as deputy chief executive to pursue other interests after six years at Liberty. Russell Harte resigned as financial director to take up a position within the Standard Bank group. My thanks go to Rex and Russell for their contribution and I wish them well in their future endeavours. Casper Troskie was appointed financial director in October 2010 and I welcome him to the board. Finally, I must express my sincere appreciation to the management team, staff and intermediaries whose efforts have made this year’s results possible. Every day, their contributions and interactions with the board and other stakeholders keep the group focused, creating sustainable value for our shareholders. |
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| Saki Macozoma | |
| Chairman | |
| 23 February 2011 |
Liberty made strong operational progress during 2010
and delivered a pleasing set of financial results. The
investment made in people, processes and enhanced risk
management over the past two years is having the desired
effect. The challenges are being addressed and a platform
of quality and sustainability from which to secure Liberty’s
future competitiveness and growth has been established.