Liberty eyes higher returns from property market

Liberty Insurance, a major shareholder of CfC Insurance Holdings (CfCIH), plans to diversify into commercial property to increase its income streams.

The new strategy is expected to provide stable and reliable returns, a departure from the past where substantial investment in the cyclical equities market has resulted in unpredictable returns.

Investment pillars

“The introduction of a property portfolio will add to the existing investment pillars which will allow for diversification of risks and provide predictable long term returns,” said Mr Mike du Toit, the regional managing director for Liberty Africa.

Mr du Toit is a former managing director of the then Stanbic Bank in Kenya.

Mr du Toit said they will diversify to retail commercial properties, industrial properties and unit management, a practice which Liberty Group has honed in the other markets.

For instance, the famous Sun City Resort in South Africa is owned by Liberty Insurance.

Mr du Toit said Liberty would bring its proven risk management practice to its local operations to enhance service.

The new strategy is informed by the recent past where almost all businesses in the CfC Stanbic stable took a hit following the 2008 bearish run of the Nairobi Stock Exchange (NSE).

In its first half year result, the group recorded an impairment of Sh285 million compared to Sh1.3 billion suffered last year.

Businesses under the CfC Stanbic Holdings include CfC Stanbic Bank, CfC Life, Heritage Insurance, Stanbic Investment Management Services and CfC Stanbic Financial Services

The merger between CfC Holdings and Stanbic Bank resulted in the formation of CfC Stanbic Holdings.

The demerger will see the retention of the commercial banking entity CfC Stanbic Bank and the brokerage arm— the CfC Stanbic Financial Services under CfC Stanbic Holdings.

CfC Insurance Holdings will take over CfC Life, Heritage Insurance and the Stanbic Investment Management Services.

Though the various entities under the CfCIH will continue with their operations, Liberty Insurance will oversee the overall management alongside operations in Tanzania and Uganda.

According to Mr du Toit, Liberty, which has a 55 per cent stake in CIH will handle centralised functions while the different insurance businesses and asset management firm will carry on with their operations.

The decision to focus on property comes at a time the local real estate market has proven resilient even when other sectors of the economy have been hit by the recent economic and financial meltdown.

The sector has been robust in growth, with demand for both commercial and residential properties remaining strong.

Following the 2008 NSE bear market, these firms reported huge losses through impairment of their equities holding as most counters recorded price reduction.

But the recovery of the NSE has enabled them to pick up, with all units posting favourable first half year results.

Liberty Insurance is the main shareholder in CfC Insurance Holdings which has been demerged from CfC Stanbic Holdings.

Liberty Insurance a subsidiary of Standard Bank of South Africa manages the insurance operations of the Standard Group.

“The demerging will not lead to any change in operations but is meant to separate the banking business from wealth management businesses which include insurance and asset management operations,” said Mr du Toit.