One of South Africa’s largest life insurers, Liberty Holdings has warned that while death claims related to the Covid-19 pandemic have been low to date, they are starting to increase – mostly within the funeral books in the SA Retail and Liberty Corporate businesses.
The Department of Health said on Tuesday that an additional 345 people have died of Covid-19-related illnesses, among them two children.
Of the additional deaths, 116 are from Gauteng, 97 from the Western Cape, 89 from KwaZulu-Natal and 43 from the Eastern Cape, bringing the tally to 8,884.
The KwaZulu-Natal Health Department said two children died from COovid-19, a three-month-old baby girl and a four-year-old boy.
Liberty Holdings said in a trading statement for the six months ended June 2020, that death and disability payments increased by 5.1%, to R5.3 billion, and annuity payments increased by 6.1% to R4.1 billion.
The financial services firm said that it has established a pandemic reserve of R3 billion (before tax). “In addition, we wish to give comfort to shareholders that we are able to fulfil our purpose in these times while still maintaining a focus on delivering against our longer-term strategic goals,” it said.
This reserve, Liberty said, has been calculated to estimate the future effects of the pandemic by estimating excess mortality, excess withdrawals and policy lapses and expenditure directly attributable to the Covid-19 pandemic.
Liberty said it incurred a normalised operating loss for the six-month period to June 2020 of R1 542 million compared to normalised operating earnings of R1 091 million in 2019.
The normalised operating loss includes the R2 175 million net after tax cost of establishing the Covid-19 pandemic reserve which, if excluded from the result, would reflect normalised operating earnings for the period of R633 million.
The SIP incurred a loss of R631 million for the period.
Accordingly, Liberty reported a normalised headline loss for the six-month period ended June 2020 of R2 173 million, compared to normalised headline earnings of R2 013 million in the prior period. Normalised annual return on equity was negative 19.7%, compared to positive 17.7% in 2019.
The headline loss for the period of R2 263 million, compares to headline earnings of R1 996 million for the six-months ended June 2019.
The group value of new business (VoNB) declined to R24 million from R171 million at 30 June 2019. “This decline is mainly attributable to the decrease in the SA Retail VoNB from R134 million in the comparative period to R30 million, due largely to significantly lower sales volumes in the first half of 2020 without a commensurate reduction in acquisition expenses,” Liberty said.
The group said it has decided against an interim dividend for the reporting period.
Looking ahead, Liberty said that financial market volatility will continue to have a material impact on the returns from the Shareholder Investment Portfolio consistent with a balanced portfolio, managed with a long-term through-the-cycle investment horizon.
“We also expect continued pressure on new business volumes and margins given the extended lockdown period and the financial distress that is prevalent in South Africa.
“Notwithstanding these uncertainties, the Group is expected to remain well capitalised and able to provide uninterrupted service to our clients,” it said.