Liberty Holdings CEO David Munro has unfinished business to complete if he is to get investors to take notice of his efforts to accelerate profit growth at the South African life insurer.
This includes exiting some businesses and markets, improving digital offerings and rebuilding a track record of delivering returns for policyholders.
While profit margins on Liberty's sales have more than doubled, and outflows stemmed, the share price has lagged behind its larger peers since the 48-year-old career investment banker started two years ago.
Munro is looking past the stock's performance as he reorganizes a business that can no longer rely on double-digit equity and bond market returns to buoy its earnings.
"The game we’re playing here is not a flash-in-the-pan turnaround," he said in an interview at Bloomberg’s Johannesburg office.
"You could pull some levers fast and create some high-impact quick wins. But the legacy will be down the line in a few years time".
Since moving from parent company Standard Bank Group, Munro has overhauled the insurer's call center to make it simpler for clients to get help and formed closer ties with the 3,500 agents that sell its products.
He also reduced the number of funds overseen by Stanlib on top of a revamp of the money manager's leadership.
Back to its roots
Bringing the company back to the principles of founder Sir Donald Gordon, 88, who started the firm in 1958 after watching his father struggle financially after his retirement, is also part of Munro’s mission.
Liberty was the first South African insurer to list its shares, and, in 1965 introduced the first mutual fund.
Liberty lost its luster during the 2000s as customers canceled policies, reducing its market share, and a cost-cutting strategy backfired by depleting the insurer of skills.
The stock is down 2% since Munro was seconded to the insurer on May 30, 2017, compared with an almost 13% increase in the five-member FTSE/JSE Africa Life Assurance Index.
The shares rallied 5.1% on Thursday, the most in the index and Liberty's biggest one-day gain since September, as most South African financial-services companies rose.
"The environment hasn't given us any tailwinds, but more headwinds," Munro said.
Tepid economic growth in South Africa, unemployment of almost 28% and increased competition are making it harder to retain clients, especially in Liberty's affluent target market.
That meant Liberty has had to contain costs and improve efficiencies while modernizing its digital platforms.
The leadership team is aiming to reduce the 30% discount that the stock trades at relative to its equity value by running the "business well", Munro said.
It is still in the process of selling its health unit and businesses in Africa that don't fit its strategy, he said, adding that returns from Stanlib’s equity and balanced funds are also improving after under-performing in the five years prior to 2018.
Liberty is now well positioned to benefit from any upswing in markets, currently weighed down by a US-China trade dispute, the CEO said.
"He was able to stabilise the business, strategically he identified what was important, and where they would focus," said Warwick Bam, the head of research at Avior Capital Markets, who has an outperform rating on Liberty.
"He has embarked on a digitization strategy to get Liberty into a more competitive position from a servicing ability, especially to brokers, and that will feed into the customers’ experience of Liberty".