Liberty Holdings Limited - For the year ended 31 December 2017

Liberty Holdings Limited

                                 2017
Financial results
presentation
For the year ended 31 December
Liberty Holdings Limited Financial results for the year ended 31 December 2017   1




                                                                                                                                                         FINANCIAL RESULTS PRESENTATION
             Liberty Holdings Limited
             Financial results
             presentation
             For the year ended 31 December
                                              2017




             Taking stock
             Liberty Holdings Limited
             David Munro, Chief Executive




Notes
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2     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS PRESENTATION




                                                                                                          LIBERTY’S PURPOSE
                                                                                         Improving people’s lives
                                                                                 by making their financial freedom possible

                                                                                          Liberty has a broad range of products that
                                                                                          deliver for a large and loyal customer base

                                                   Too many new efforts layered in complexity                                      Customer experience and service to
                                          >                                                                                 >
                                                   and distracted from core capabilities                                           financial advisers needs attention

                                                   Some products have become uncompetitive                                         Poor investment performance
                                          >                                                                                 >
                                                   and difficult for advisers to deliver customer value                            from asset management operations


                                                                                            Operating in a challenging macro environment
                                                                                                 with increased competitor activity


                                       Challenges led to pressure on margins and the ability to generate value from new business
                                                                                                                                                                          3




                                       Addressing the immediate priorities in the next two years


                                                   Value of new business margin                                                 Growth in embedded value
                                          1                                                                             2
                                                   1% - 1.5% range                                                              that exceeds 12%


                                                                                                                                Maintain robust capital
                                          3        RoE 15% - 18% range                                                  4
                                                                                                                                within our target range 2.5 - 3.0 times



                                       This can be achieved by;
                                        • Increasing sales volumes
                                        • Reduction in acquisition and maintenance costs
                                        • Managing to better than assumptions and models
                                        • Efficient management of capital


                                       A journey that will take time and hard work – prioritising the right actions
                                                                                                                                                                          4



                                 Notes
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Liberty Holdings Limited Financial results for the year ended 31 December 2017   3




                                                                                                                                                             FINANCIAL RESULTS PRESENTATION
      Devising the path forward for Liberty


                            Horizon 1                                Horizon 2                                                 Horizon 3
                      Here and now                          The following years                                            Beyond 2020
                  Manage the present                           through to 2020




                                                                                                                                                    5




      Immediate priorities for the leadership team – horizon 1

       • Simplification program
         › Improve customer service, reduce complexity and simplify processes for our clients and financial advisers
         › Reduce costs and improve efficiencies and effectiveness through intelligent automation

       • Modernise and improve reporting systems and processes
       • Enhance the risk and control environment
       • Improve investment performance in asset management operations




      Initiatives to improve short- to medium-term performance reflect early signs of progress
                                                                                                                                                    6



Notes
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4     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS PRESENTATION




                                       Immediate priorities for the leadership team – horizon 1 continued

                                        • Restore financial performance
                                            › Sales force effectiveness
                                            › Margins
                                            › Product and portfolio rationalisation
                                            › Expense management
                                        • Working with Liberty Two Degrees management to assess alternatives to the existing structure
                                        • Terminated the intended acquisition in Nigeria
                                        • Optimise outcomes from Liberty Africa Insurance, Liberty Health and the Short-term insurance
                                          joint venture with Standard Bank Group




                                                                                                                                                     7




                                       Looking at our time frame to 2020 – horizon 2

                                        • Evolve our strategy
                                            › Understand and anticipate the changing market and evolving customer needs
                                            › Leverage unique data sets and invest in technology to shape customer engagement

                                        • Identify opportunities to grow
                                            › Maximise our relationship with Standard Bank Group, leverage capacity and resources to increase
                                              access to customers
                                            › Digitisation, improve the way we support clients and advisers and prioritise existing initiatives
                                            › Modernise Liberty through culture, people and brand




                                                                                                                                                     8



                                 Notes
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Liberty Holdings Limited Financial results for the year ended 31 December 2017   5




                                                                                                                                                              FINANCIAL RESULTS PRESENTATION
              Financial results review
              Liberty Holdings Limited
              Yuresh Maharaj, Financial Director




      Group financial highlights
      Rm (unless stated otherwise)                                                               Dec 17               Dec 16                   %Δ
      Normalised headline earnings                                                                 2 719                2 527                      8

      Long-term insurance net customer cash flows                                                  1 634                1 119                    46

      Long-term insurance indexed new business                                                     8 018                7 892                      2

      Total assets under management (Rbn)                                                             720                 676                      7

      Shareholder Investment Portfolio (SIP) – gross of tax return (%)                                8.5                  5.7

      Liberty Group Limited capital adequacy cover (times covered)                                   2.92                 2.95

      Dividend per share (cents)                                                                      691                 691




      Improved normalised headline earnings, higher investment returns and strong capital position
                                                                                                                                                    10



Notes
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6     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS PRESENTATION




                                       SA insurance operations

                                                             Operating experience variances                             SA covered business net worth (Rm)         Dec 17    Dec 16
                                                         and basis changes remain positive (Rm)
                                                                                                                        Expected transfer to net worth              4 112     4 217

                                                                                                                        Operating experience variances
                                                   109                                                                                                               110       264
                                                                                                                        and basis changes

                                                                                                                        Development expenses                          (55)      (45)
                                                                                                                        Change in allowance for fair value share
                                                                                                             43
                                                                                                                                                                       (3)      28
                                                                                                                        rights
                                                                                 21                                     Actual net of tax transfer to net worth     4 164     4 464

                                                                                                                        Performance in line with expectation (%)     101       106
                                                  2017                         1H17                        2016

                                         • Continued positive risk, persistency and credit variances partially offset by:
                                            › Basis changes to better reflect the expectation of future cash flows given policy terms, conditions and regulatory
                                               landscape
                                         • SA covered business embedded value maintained R34 billion, generating a return of 8.2%


                                       5 year track record since 2013 of consistently managing insurance operations to model
                                                                                                                                                                                   11




                                       Capital position at 31 December 2017
                                                                                                                                            Liberty                         Liberty
                                       Rm (unless stated otherwise)                                                                Holdings Limited                   Group Limited
                                       IFRS
                                           IFRS shareholder equity                                                                             22 444                        18 412
                                           BEE preference shares                                                                                  123                          123
                                           Liberty Two Degrees normalisation                                                                     (340)                            -
                                           Normalised shareholder equity                                                                       22 227                        18 535
                                       Regulatory capital
                                           Shareholder assets                                                                                  19 144                        15 700
                                           Regulatory capital requirement                                                                       6 022                         5 378
                                           Surplus above regulatory requirement                                                                13 122                        10 322
                                           Risk appetite capital coverage ratio                                                                  1.50                          1.50
                                           Capital buffer in excess of risk appetite                                                           10 111                         7 633
                                       Capital ratio at period end (times covered)                                                               3.18                          2.92



                                       Capital levels remain strong post the sovereign credit ratings downgrade
                                                                                                                                                                                   12



                                 Notes
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Liberty Holdings Limited Financial results for the year ended 31 December 2017   7




                                                                                                                                                                                                     FINANCIAL RESULTS PRESENTATION
      Business unit earnings

                                                               Business unit contribution to normalised earnings (Rm)
                                                                                                                                                             1 307               2 719



                                                                             252
                                                        376
                                                                                                                                          1 412
             1 208                  16                                                            (204)
                                                                                                                      (236)




    FY16 (%): 8                    (89)                  18                  (45)                >(100)                (13)                (19)                66                  8
         Individual              Group               LibFin               STANLIB              STANLIB               Central         2017 normalised          SIP           2017 normalised
       Arrangements          Arrangements            Markets                SA                Rest of Africa                        operating earnings                      headline earnings


       • Individual Arrangements earnings largely driven by positive risk variances
       • Group Arrangements had increased IPP claims experience and once-off Nigeria acquisition termination costs
       • STANLIB SA impacted by margin pressure from less favourable sales mix and increased costs
       • Remediation program in STANLIB Rest of Africa continued, with risk of further operational losses significantly reduced

                                                                                                                                                                                           13




      Insurance operations
      Key performance indicators (Rm unless stated otherwise)                                        2H17                1H17                2017                2016                  %Δ
      Value of new business                                                                            147                     86                 233               483                (52)

      New business margin (%)                                                                             0.5                 0.4                 0.5                1.1

      Indexed new business                                                                           4 088               3 930               8 018              7 892                     2

           Individual Arrangements                                                                   3 365               3 205               6 570              6 639                    (1)

           Group Arrangements                                                                          723                    725            1 448              1 253                    16

      Net customer cash flows                                                                        2 299                (665)              1 634              1 119                    46

           Individual Arrangements                                                                   2 072                    774            2 846              1 948                    46

           Group Arrangements                                                                          227              (1 439)             (1 212)                 (268)           >(100)

           STANLIB Multi-manager*                                                                                                                                   (561)


       • Improved persistency in Individual Arrangements risk business, retention initiatives having positive impact on
         withdrawals and maturities
       • Increased new recurring premium sales offset by umbrella scheme outflows in Liberty Corporate


       *   Arrangement terminated in 2016, no flows are recorded for 2017 and going forward                                                                                                14



Notes
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8     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS PRESENTATION




                                       Asset management operations
                                                                                                                        AUM and cash flows              Dec 17    Dec 16    %Δ
                                       South African operations
                                                                                                                        Assets under management (Rbn)     609       586        4
                                        • Improved non-money market inflows:
                                                                                                                            STANLIB SA                    556       535        4
                                            › Fixed income, property, absolute return funds
                                              and LISP                                                                      STANLIB Rest of Africa          53       51        4

                                        • Ongoing initiatives to address investment                                     Net customer cash flows (Rm)     4 251     5 764     (26)

                                          performance and financial control                                                 STANLIB SA                   4 731     2 801      69

                                                                                                                            STANLIB Rest of Africa        (480)    2 963   >(100)
                                       Rest of Africa operations
                                        • Strengthened control environment in East Africa
                                        • Curtailment of cash mandate business
                                        • Other territories performed to expectation




                                       Remediation of operations remains an immediate priority for the new leadership at STANLIB
                                                                                                                                                                                15




                                       Financial performance – focus areas remain

                                        • Value of new business and margins are priorities for the insurance operations:
                                            › Focus on meaningful cost efficiencies with prudent expense management
                                            › Continue to innovate on new higher margin products
                                            › Product enhancements to improve margin – risk, critical illness, investment builder
                                            › Retention initiatives




                                       Committed to deliver on short-term performance targets
                                                                                                                                                                                16



                                 Notes
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Liberty Holdings Limited Financial results for the year ended 31 December 2017   9




                                                                                                                                                          FINANCIAL RESULTS PRESENTATION
             In closing
             Liberty Holdings Limited
             David Munro, Group Chief Executive




      We have diagnosed the challenges and put plans in place to restore Liberty

        • Financial advisers and distribution partners are critical to success
        • Renewed sense of optimism in the organisation
        • Focused on delivering exceptional client and adviser experience
        • Critical capabilities have been replaced
        • Strategy workstreams are driving high levels of engagement
        • Emerging confidence and sentiment in South Africa again




      Early signs of progress are emerging
                                                                                                                                                18



Notes
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10    Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS PRESENTATION




                                       Liberty has all the ingredients for success

                                           1     We have been trusted partners to our clients                                          4   An integral part of Standard Bank Group
                                                 and advisers for over 60 years                                                            with a meaningful bancassurance
                                                                                                                                           arrangement
                                                          More than 2.5 million                          We administer
                                                             in-force policies                 over 10 000 retirement schemes,
                                                              Paid R8.7bn in                      and 500 000 individual and
                                                        death and disability claims           institutional investment customers       5   Staffed by more than 6 000 people who are
                                                                                                                                           passionately committed to the organisation
                                                                 Largest provider of long-term insurance solutions
                                                                          to the SA retail affluent market


                                                 A diversified multichannel distribution capability                                    6   A strong capital base, a unique
                                           2
                                                                                                                                           ability to manage risk, and
                                                                       More than 3 500 tied financial advisers                             disciplined cost management


                                           3     We have a track record of pioneering
                                                                                                                                           Liberty Group Limited               LibFin
                                                 financial solutions in South Africa                                                             CAR cover                   facilitates
                                                                                                                                                 2.92 times               differentiating
                                         First




                                                                       Insurer                        Insurer to
                                                   Retirement                                                           To introduce           the statutory               features in
                                                                       to build        JSE-listed     introduce
                                                    Annuity                                                              Umbrella               requirement             product offerings
                                                                      shopping        Life assurer     Nurses
                                                    offering                                                               Funds
                                                                        malls                        on the Road



                                       Source: 2017 Integrated Annual Report                                                                                                                19




                                                                                                                    Questions




                                 Notes
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Liberty Holdings Limited Financial results for the year ended 31 December 2017   11




                                                                                                                                                                                 FINANCIAL RESULTS PRESENTATION
NOTES
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12      Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS PRESENTATION




                                 NOTES
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FINANCIAL RESULTS
Liberty Holdings Limited

                                  2017
Financial
results
For the year ended 31 D ecember
FINANCIAL RESULTS




                    HIGHLIGHTS                      CONTENTS                                       Page



                                                    Financial performance indicators                15
                    NORMALISED HEADLINE EARNINGS    Financial review                                16


                           R2,7 billion             Accounting policies

                                                    Auditor statement
                                                                                                    20

                                                                                                    20

                                                    Directors’ responsibility                       21

                                                    Explanation of terms                            21

                         LIBERTY GROUP LIMITED      Consolidated statement of financial position    23

                               CAR COVER            Consolidated statement of comprehensive
                                                    income                                          24



                           2,92 times
                                                    Summary consolidated statement of changes
                                                    in equity                                       25

                                                    Summary consolidated statement of cash flows    26

                                                    Headline earnings and earnings per share        27

                                                    Summary consolidated segment information        28
                         LONG-TERM INSURANCE
                                                    Group equity value report                       32
                         INDEXED NEW BUSINESS       Long-term insurance new business                38


                            R8 billion              Long-term insurance net cash flows

                                                    Assets under management
                                                                                                    39

                                                                                                    40

                                                    Asset management net cash flows                 40

                                                    Short-term insurance indicators                 41

                                                    Capital commitments                             41
                    GROUP ASSETS UNDER MANAGEMENT   Retirement benefit obligations                  42


                          R720 billion              Related parties

                                                    Offsetting, enforceable master netting
                                                                                                    42


                                                    arrangements or similar agreements              43
Liberty Holdings Limited Financial results for the year ended 31 December 2017    15




                                                                                                                                                                                              FINANCIAL RESULTS
FINANCIAL PERFORMANCE INDICATORS
for the year ended 31 December 2017

                                                                                                                                                                                   %
Rm (unless otherwise stated)                                                                                                        2017                    2016               change

Liberty Holdings Limited
Earnings
Basic earnings per share (cents)                                                                                              1 152,6                    811,7                          42
Fully diluted basic earnings per share (cents)                                                                                1 120,7                    788,9                          42
Normalised headline earnings(1)                                                                                                 2 719                    2 527                           8
Normalised headline earnings per share (cents) (1)                                                                              982,1                    904,5                           9
Normalised return on IFRS equity (%) (1)                                                                                         12,3                     11,4
Group equity value
Normalised group equity value per share (R) (1)                                                                                140,31                 145,86                            (4)
Normalised return on group equity value (%) (1)                                                                                   1,1                    5,1
Distributions per share (cents)
Normal dividend                                                                                                                      691                    691

Interim dividend                                                                                                                     276                    276
Final dividend                                                                                                                       415                    415

Total assets under management (Rbn)                                                                                                  720                    676                          7

Long-term insurance operations
Indexed new business (excluding contractual increases)                                                                            8 018                  7 892                        2
Embedded value of new business                                                                                                      233                    483                      (52)
New business margin (%)                                                                                                              0,5                    1,1
Net customer cash inflows                                                                                                         1 634                  1 119                          46
Capital adequacy cover of Liberty Group Limited (times covered)                                                                    2,92                   2,95

Asset management
Assets under management (Rbn)                                                                                                       609                    586                        4
Net cash inflows including money market(2)                                                                                        4 251                  5 764                      (26)

Retail and institutional net cash inflows excluding money market(2)                                                               3 659                  4 488                      (18)
Money market net cash inflows(2)                                                                                                    592                  1 276                      (54)

(1)
      Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity value.
      These measures reflect the economic reality of the consolidation of the listed REIT Liberty Two Degrees (L2D) and the Black Economic Empowerment (BEE) transaction,
      as opposed to the required IFRS accounting treatment.
(2)
      Excludes intergroup life funds.




      Preparation and supervision:
      This announcement on Liberty Holdings Limited annual financial results for the year ended 31 December 2017 has been prepared by
      M Natsas CA(SA) and D Wichmann CA(SA) and supervised by Y Maharaj (Financial Director) CA(SA).
16     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS




                    FINANCIAL REVIEW
                    for the year ended 31 December 2017




                    Normalised headline                                                                     margin however ended the year below expectation. Actions are
                                                                                                            being taken to restore the new business margin. The economic
                    earnings increased by 8%                                                                environment favoured flows into guaranteed products,
                                                                                                            which manifested in a weaker mix of business from a margin

                    supported by improving                                                                  perspective. The improvement in VoNB in the second half of
                                                                                                            2017, despite lower volumes, shows signs that the focused
                                                                                                            initiatives commenced in the second quarter 2017 are starting
                    SA retail insurance                                                                     to deliver the desired outcome.


                    earnings and higher
                                                                                                            Group equity value per share was lower at R140,31
                                                                                                            (31 December 2016: R145,86). The lower group equity value
                                                                                                            per share was attributable to weaker earnings from the group’s
                    returns from investment                                                                 non-covered businesses particularly within the STANLIB
                                                                                                            businesses and the resultant capitalisation impact of reduced

                    markets. The group’s                                                                    earnings.

                                                                                                            Group net customer cash inflows, including the Gateway
                    capital position remains                                                                LISP, were positive at R6,5 billion despite the poor economic
                                                                                                            backdrop. Long-term insurance net customer cash inflows of

                    strong. Decisive actions
                                                                                                            R1,6 billion reflected an improvement on the prior year inflows
                                                                                                            of R1,1 billion, supported by lower policy withdrawals and
                                                                                                            maturities in Individual Arrangements.
                    are being taken to                                                                      Long-term insurance indexed new business sales grew

                    improve profitability and
                                                                                                            marginally to R8 billion. Competitive retail market pricing and
                                                                                                            the tough economic environment continued to place significant
                                                                                                            pressure on retail sales volumes, partially offset by growth in
                    place Liberty on a sound                                                                Liberty Corporate recurring premiums during the year.

                                                                                                            Total group assets under management increased to R720 billion
                    strategic footing.                                                                      (31 December 2016: R676 billion).

                                                                                                            Normalised headline earnings for the year ended 31 December
                                                                                                            2017 of R2 719 million were 8% up on 2016, supported by
                                                                                                            a higher contribution of R1 307 million (31 December 2016:
                    The group remained resilient during the year, as evidenced                              R787 million) from the shareholder investment portfolio (SIP).
                    by the stronger capital position of the group’s main long-term                          Normalised operating earnings however were 19% down on the
                    insurance licence, Liberty Group Limited, with a capital adequacy                       prior year. The improved earnings contribution from Individual
                    ratio at 2,92 times the regulatory minimum compared to 2,82 at                          Arrangements was offset by the lower underwriting result
                    30 June 2017. This remains at the upper end of our target range at                      from Liberty Corporate. STANLIB SA’s earnings continued to
                    31 December 2017 despite the impact of downgrades of the South                          be impacted by margin pressure due to a less favourable sales
                    African sovereign credit rating during the year.                                        mix and operational write-offs. STANLIB Rest of Africa earnings
                                                                                                            were impacted by operational losses. Normalised return on
                    The group’s SA covered insurance business continued to                                  equity was 12,3% (31 December 2016: 11,4%).
                    deliver positive operating variances and be managed to better
                    than model supporting the core assumptions underlying the                               Headline earnings for 2017 amounted to R3 252 million, up 47%
                    insurance book. The SA covered business embedded value                                  compared to R2 207 million in 2016. Liberty’s headline earnings
                    was preserved, maintaining embedded value earnings of R2,8                              include the positive earnings impact of R543 million arising from
                    billion compared to the prior year and generating a return of                           the accounting mismatch on the consolidation of the Liberty
                    8,2%. The value of new business (VoNB) and new business                                 Two Degrees listed REIT.
Liberty Holdings Limited Financial results for the year ended 31 December 2017    17




                                                                                                                                                                                           FINANCIAL RESULTS
FINANCIAL REVIEW (CONTINUED)
for the year ended 31 December 2017

Earnings by business unit
                                                                                                                                                                                %
Rm (Unaudited)                                                                                                                   2017                   2016                change

Insurance
Individual Arrangements                                                                                                       1 208                   1 119                        8
Group Arrangements                                                                                                               16                     149                      (89)
Liberty Corporate                                                                                                                   81                   191                     (58)
Liberty Africa Insurance                                                                                                            45                    41                      10
Liberty Health                                                                                                                     (54)                  (45)                    (20)
Nigeria(3) and project support costs                                                                                               (56)                  (38)                    (47)

Balance sheet management                                                                                                          376                    318                         18
LibFin Markets – credit portfolio                                                                                                 330                    300                    10
LibFin Markets – asset/liability management portfolio                                                                              46                     18                  >100

Asset management(1)
STANLIB South Africa                                                                                                             252                     459                  (45)
STANLIB Rest of Africa                                                                                                          (204)                    (97)               (>100)

Central overheads and sundry income                                                                                             (236)                  (208)                     (13)
Normalised operating earnings                                                                                                 1 412                   1 740                      (19)
LibFin Investments – SIP                                                                                                      1 307                     787                       66
Normalised headline earnings                                                                                                  2 719                   2 527                      8
BEE preference share adjustment                                                                                                 (10)                    (16)                    38
Reversal of accounting mismatch arising on consolidation of L2D(2)                                                              543                    (304)                  >100
Headline earnings                                                                                                             3 252                   2 207                          47
(1)
      Asset management customer facing unit includes the asset management capabilities under STANLIB South Africa and STANLIB Rest of Africa business units, which are managed
      separately, with each business having its own accountable executive.
(2)
      Refer Explanation of terms on page 21.
(3)
      Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU.

Commentary on the earnings by business unit follows below. Additional information is contained in the summary consolidated segment
information.


Individual Arrangements
Headline earnings from the group’s South African retail operations                            Indexed new business of R6 570 million was 1% down on 2016.
of R1 208 million were 8% up on the prior year. Positive risk                                 Competitive retail market pricing and the tough economic
variances in the year were partly offset by modelling and                                     environment continued to place significant pressure on sales
assumption changes to better reflect the expectation of future                                volumes. The economic environment favoured flows into
cash flows given policy terms and conditions.                                                 guaranteed products, as evidenced by strong demand for the
                                                                                              Guaranteed Investment Product and the Bold Living Annuity
New business strain arising from the geared effects of increased                              throughout the year.
costs relative to new business volumes with a weaker business mix
continued to place pressure on earnings. This, together with the                              Net customer cash inflows of R2,8 billion were 46% up on prior
impact of the new tax risk fund and basis changes resulted in the                             year inflows of R1,9 billion, driven by lower policy withdrawals and
value of new business reducing to R155 million in the current year                            maturities. This also reflects a significant improvement over the
(31 December 2016: R426 million), while the new business margin                               R0,8 billion inflows reported at 30 June 2017 and confirms that
declined to 0,5% from 1,2% in the prior year. The improvement                                 the ongoing initiatives to improve retention are delivering the
in the value of new business from R62 million for the six months                              required results.
to 30 June 2017 to R155 million for the year to 31 December 2017
indicates that initiatives implemented in 2017 to improve the value                           Despite the tough environment, the business continued to deliver
of new business are starting to have the desired effect.                                      positive operating variances and has been managed to “better
                                                                                              than model” consistently for the last five years.
18     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS




                    FINANCIAL REVIEW (CONTINUED)
                    for the year ended 31 December 2017

                    Group Arrangements
                    Liberty Corporate
                    Earnings of R81 million were impacted by a considerably lower                           Total assets under management by STANLIB Rest of Africa
                    underwriting result due to a high level of risk claims experienced,                     increased by R1,7 billion to R52,5 billion at 31 December 2017.
                    particularly an increase in income protection plan (IPP) claims in
                    the second half of 2017. Indexed new business was 39% higher                            Liberty Two Degrees (L2D)
                    than the prior year at R1 171 million, with recurring premium new                       L2D’s results for the year ended 31 December 2017 were released
                    business up 42% due to good risk and umbrella enhancement                               on 19 February 2018. The operational performance of the property
                    sales. Single premium new business was up 6%. This resulted in the                      portfolio remained strong notwithstanding a difficult consumer
                    value of new business increasing to R57 million. Net cash outflows                      environment. Together with L2D management, we are assessing
                    amounted to R1,5 billion reflecting a small number of high asset                        alternatives to deal with the limitations of the existing structure.
                    value scheme terminations and higher risk and IPP claims linked to
                    the challenging economic environment and associated job losses,
                                                                                                            Bancassurance
                    partially offset by increased recurring premium inflows.
                                                                                                            The bancassurance agreement with Standard Bank, which is
                    Liberty Africa and Liberty Health Insurance                                             applicable across the group’s asset management and insurance
                    Liberty Africa Insurance earnings of R45 million were 10% up on                         operations, continues to make a positive contribution to
                    the prior year despite negative exchange rate movements. Indexed                        new business volumes and earnings. The total indexed new
                    new business in the long-term insurance businesses of R277 million                      business premiums sold under the agreement increased by 7%
                    was 33% down on the prior year due to exchange rate movements                           to R3,3 billion for the year. Good progress is being made with
                    and a large once off deal in 2016. The value of new business was                        the implementation of the 10 point bancassurance plan and
                    lower at R21 million at a margin of 3,9%. The short-term insurance                      we continue leveraging our relationship with Standard Bank to
                    businesses have experienced considerable pricing pressure.                              capture appropriate opportunities.

                    The recessionary environment in Nigeria significantly impacted
                                                                                                            Balance sheet management
                    Liberty Health’s short-term profitability. Management remains
                    focused on growing the operations to scale.                                             LibFin Markets – Asset liability management and credit
                                                                                                            portfolio
                                                                                                            Earnings from the credit portfolio increased by 10% to R330 million
                    Asset management                                                                        as a result of growth in the credit portfolio notwithstanding the
                    STANLIB South Africa                                                                    impact of the sovereign ratings downgrades.
                    STANLIB South Africa earnings were R252 million for the year
                                                                                                            The asset liability management profit amounted to R46 million due
                    (31 December 2016: R459 million). Earnings were impacted                                to favourable market positioning (31 December 2016: R18 million).
                    by margin pressure due to a less favourable sales mix, costs
                    associated with the termination of the institutional administration                     LibFin assets under management were higher at R62 billion
                    outsourcing programme, the launch of new franchises and                                 (31 December 2016: R58 billion).
                    operational write-offs.
                                                                                                            LibFin Investments – Shareholder Investment Portfolio
                    Total assets under management by STANLIB South Africa                                   (SIP)
                    increased by R21 billion to R556 billion at 31 December 2017.                           The SIP includes the assets backing capital in the insurance
                                                                                                            operations as well as the group’s investment market exposure to
                    Net customer cash inflows (excluding intergroup) grew to
                                                                                                            the 90:10 book of business. The current risk profile of the SIP is
                    R4,7 billion from inflows of R2,8 billion in the prior year. This result
                                                                                                            similar to a conservative balanced portfolio and is managed with
                    was mainly attributable to strong non-money market inflows.
                                                                                                            a long-term through the cycle investment horizon.
                    Intergroup cash outflows for the year amounted to R15,9 billion.
                                                                                                            Market returns experienced in 2017 were higher and the portfolio
                    STANLIB Rest of Africa
                                                                                                            accordingly delivered a gross return of 8,5% (31 December 2016:
                    STANLIB Rest of Africa incurred a loss of R204 million for the year                     5,7%) which was marginally below the portfolio benchmark.
                    (31 December 2016: loss of R97 million). The business continued                         The extent of the SIP exposure to investment markets remains
                    to be affected mainly by operational losses identified during                           appropriate in the context of the group’s risk appetite. Earnings
                    the remedial programme in East Africa. Efforts to strengthen                            of R1 307 million were well above 2016 earnings of R787 million
                    the operational and control environments have progressed well                           despite the significant rand appreciation in December 2017 which
                    and risks of further operational losses are significantly reduced.                      reduced the returns on offshore assets.
                    Operations in the other African territories tracked broadly
                    to expectation.
Liberty Holdings Limited Financial results for the year ended 31 December 2017   19




                                                                                                                                                                  FINANCIAL RESULTS
FINANCIAL REVIEW (CONTINUED)
for the year ended 31 December 2017

Capital adequacy cover
The capital adequacy cover of Liberty Group Limited                     Share certificates may not be dematerialised or rematerialised
remained strong at 2,92 times the statutory requirement                 between Wednesday, 4 April 2018 and Friday, 6 April 2018, both
(31 December 2016: 2,95 times). The group remains well                  days inclusive. Where applicable, in terms of instructions received
capitalised at the upper end of its target range in respect             by the company from certificated shareholders, the payment
of the current capital regime and in respect of capital                 of the dividend will be made electronically to shareholders’ bank
requirements under the impending Solvency Assessment and                accounts on payment date.
Management regime.
                                                                        In the absence of specific mandates, cheques will be posted to
All other group subsidiary life licences were adequately capitalised.   shareholders. Shareholders who have dematerialised their shares
                                                                        will have their accounts with their CSDP or broker credited on
                                                                        Monday, 9 April 2018.
Dividends
2017 final dividend
                                                                        Prospects
In line with the group’s dividend policy, the board has approved
and declared a gross final dividend of 415 cents per ordinary share.    Liberty’s business is built on our deep relationships with our
The final dividend will be paid out of income reserves and is payable   customers and advisers which is core to creating value for all
on Monday, 9 April 2018 to all ordinary shareholders recorded in        stakeholders. We are taking decisive actions to improve profitability
the books of Liberty Holdings Limited on the record date.               and place our business on a sound strategic footing. In 2018,
                                                                        management will focus on restoring the financial performance
The dividend of 415 cents per ordinary share will be subject to         of the SA Retail insurance business, improving the investment
a local dividend tax rate of 20% which will result in a net final       performance of STANLIB, simplifying the group’s overall operations
dividend, to those shareholders who are not exempt from paying          and expanding our relationship with the Standard Bank Group.
dividend tax, of 332 cents per ordinary share. Liberty Holdings
Limited’s income tax number is 9050/191/71/8. The number of             We are confident that the group will emerge from this period
ordinary shares in issue in the company’s share capital at the date     of change with significantly greater potential to serve the needs of
of declaration is 286 202 373.                                          all stakeholders.

The important dates pertaining to the dividend are as follows:

Last date to trade cum dividend on the JSE Tuesday, 3 April 2018
                                                                        David Munro                                                             Jacko Maree
First trading day ex dividend on the JSE                Wednesday,      Chief Executive                                                            Chairman
                                                        4 April 2018
                                                                        1 March 2018
Record date                                      Friday, 6 April 2018

Payment date                                  Monday, 9 April 2018




Transfer Secretaries
                                                                                                 www.libertyholdings.co.za
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)                                    Liberty Holdings Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank                           Incorporated in the Republic of South Africa
Johannesburg 2196                                                       (Registration number: 1968/002095/06)
Tel: +27 (11) 370 5000                                                  JSE code: LBH
                                                                        ISIN code: ZAE000012714
Sponsor                                                                 Preference share code: LBHP
                                                                        ISIN code: ZAE000004040
                                                                        Telephone +27 11 408 3911
                                                                        These results are available at www.libertyholdings.co.za
20     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS




                    ACCOUNTING POLICIES
                    The 2017 consolidated annual financial statements of Liberty                            The consolidated annual financial statements have been
                    Holdings Limited have been prepared in accordance with and                              prepared in compliance with IFRS and interpretations for year
                    contains information required by:                                                       ends commencing on or after 1 January 2017.
                    • International Financial Reporting Standards (IFRS) including
                                                                                                            The accounting policies are consistent with those applied in the prior
                      IAS 34 Interim Financial Reporting (with the exception of
                                                                                                            year except for the mandatory adoption of minor amendments or
                      disclosures required under IAS 34 16A (j) relating to fair value
                      measurement, which are not required by the JSE Listing                                early adoption of amendments to IFRS. These amendments have
                      Requirements);                                                                        not resulted in any material impacts to the group’s 2017 reported
                                                                                                            results or comparative periods.
                    • the SAICA Financial Reporting Guides as issued by the Accounting
                      Practices Committee;                                                                  Amendments to IFRS 2 Share-based Payments and
                                                                                                            IAS 40 Investment Properties, effective 1 January 2018, have been
                    • Financial Reporting Pronouncements as issued by the Financial
                                                                                                            early adopted as at 1 January 2017. These amendments have
                      Reporting Standards Council;
                                                                                                            not resulted in any impact to the group’s 2017 reported results,
                    • the Listings Requirements of the JSE Limited; and                                     comparative periods or disclosures.
                    • the South African Companies Act No. 71 of 2008.




                    AUDITOR STATEMENT
                    PricewaterhouseCoopers Inc. (PwC) have audited the consolidated                         The accounting policies applied in the preparation of the
                    annual financial statements of Liberty Holdings Limited from which                      consolidated annual financial statements, from which the summary
                    the summary consolidated financial results have been extracted.                         consolidated financial results were extracted, are in terms of
                    These summary consolidated financial results comprise the                               IFRS and are consistent with the accounting policies applied in
                    consolidated statement of financial position at 31 December 2017,                       the preparation of the prior year’s consolidated annual financial
                    the consolidated statement of comprehensive income, summary                             statements except for the changes outlined in the Accounting
                    consolidated changes in equity and summary consolidated cash                            policies above. This announcement does not include the information
                    flows for the year then ended and selected explanatory notes.                           required pursuant to paragraph 16A (j) of IAS 34. The full IAS 34
                    These statements and related notes are marked as ‘audited’. This                        compliant summary consolidated financial results announcement
                    announcement itself is not audited.
                                                                                                            and a copy of the auditors’ report is available on request or on the
                    The financial results contained in this announcement have                               company’s website and at the company’s registered office.
                    been prepared in accordance with the requirements of the JSE
                                                                                                            The auditors have expressed an unmodified audit opinion on the
                    Limited Listings Requirements for preliminary reports, and the
                                                                                                            consolidated annual financial statements. PwC have also issued an
                    requirements of the Companies Act applicable to summary financial
                                                                                                            unmodified assurance opinion on Liberty Holdings Limited’s group
                    statements. The Listings Requirements require preliminary reports
                    to be prepared in accordance with the framework concepts and                            equity value report, which has also been marked as ‘audited’ in this
                    the measurement and recognition requirements of International                           financial results announcement.
                    Financial Reporting Standards (IFRS), SAICA Financial Reporting
                                                                                                            Shareholders are advised that in order to obtain a full understanding
                    Guides as issued by the Accounting Practices Committee and
                                                                                                            of the nature of the auditors’ engagement, they should obtain a
                    Financial Pronouncements as issued by the Financial Reporting
                                                                                                            copy of the auditors’ reports together with the accompanying
                    Standards Council and also, as a minimum, to contain the
                                                                                                            financial information which is available upon request from Liberty
                    information required by IAS 34 Interim Financial Reporting.
                                                                                                            Holdings Limited’s registered office.
Liberty Holdings Limited Financial results for the year ended 31 December 2017   21




                                                                                                                                                                 FINANCIAL RESULTS
DIRECTORS’ RESPONSIBILITY
The summary consolidated annual financial statements included          Liberty Holdings Limited annual financial statements which are
in this announcement are the full responsibility of the directors.     available for inspection at the company’s registered office on
The directors confirm that the financial information has been          request.
correctly extracted from the underlying 2017 audited consolidated




EXPLANATION OF TERMS
Capital adequacy requirement (CAR)                                     Long-term insurance operations – Value of new business
                                                                       and margin
The capital adequacy requirement is the minimum amount by
                                                                       The present value, at point of sale, of the projected stream of after
which the Financial Services Board requires an insurer’s assets
                                                                       tax profits for new business issued, net of the cost of required
to exceed its liabilities. The assets, liabilities and CAR must be
                                                                       capital. The present value is calculated using a risk adjusted
calculated using a method which meets the Financial Services
                                                                       discount rate. Margin is calculated using the value of new business
Board’s requirements. Capital adequacy cover refers to the amount
                                                                       divided by the present value of future modelled premiums.
of capital the insurer has as a multiple of the minimum requirement.
                                                                       Short-term insurance operations – Claims loss ratio
Development costs
                                                                       This is a measure of underwriting risk and is measured as a ratio of
Represents project costs incurred on developing or enhancing
                                                                       claims incurred divided by the net premiums earned.
future revenue opportunities.
                                                                       Normalised: headline earnings, headline earnings per
FCTR
                                                                       share, return on equity, group equity value per share and
Foreign Currency Translation Reserve.                                  return on group equity value
                                                                       These measures reflect the economic reality of the Black Economic
“Liberty” or “group”
                                                                       Empowerment (BEE) transaction and the consolidation of the
Represents the collective of Liberty Holdings Limited and its          listed REIT Liberty Two Degrees (L2D) as opposed to the required
subsidiaries.                                                          IFRS accounting treatment.

Long-term insurance operations – Indexed new business                  BEE transaction
This is a measure of new business which is calculated as the sum of    IFRS reflects the BEE transaction as a share buy-back. Dividends
twelve months’ premiums on new recurring premium policies and          received on the group’s preference shares (which are recognised
one tenth of single premium sales.                                     as an asset for this purpose) are included in income. Shares in issue
                                                                       relating to the transaction are reinstated.
22     Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS




                    EXPLANATION OF TERMS (CONTINUED)
                    Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return
                    on group equity value (CONTINUED)
                    Reversal of accounting mismatch arising on IFRS profit or loss                          The result of this is an accounting mismatch that represents any
                    consolidation of L2D                                                                    difference in the profit and loss movement in the price at which
                    An accounting mismatch arises on consolidation of L2D in the                            L2D’s listed units trade relative to the underlying net asset value.
                    group annual financial statements, resulting from the different
                    measurement bases applied to L2D’s assets and Liberty Group                             L2D adjustment in group equity value
                    Limited’s (100% subsidiary of Liberty Holdings Limited) policyholder                    In addition to the reversal of the accounting mismatch in IFRS
                    liabilities. Specifically:                                                              profit or loss described above, the group equity value adjusts the
                    • on a consolidated look through basis the investment property                          exposures in the shareholder investment portfolios (SIP) to the
                      assets of L2D are included in the group annual financial                              listed unit price.
                      statements at fair value; whereas
                                                                                                            Summary of impact
                    • the corresponding linked obligations to Liberty Group Limited’s
                                                                                                            Below is a summary of the L2D transaction impact on the ordinary
                      policyholders are required under IFRS to continue to be
                                                                                                            shareholders interest:
                      measured in the group annual financial statements at the listed
                      price of the L2D units.

                                                                                                                              Group equity            IFRS               SIP
                                                                                                                                     value       net asset      equity value
                    Rm                                                                                                               Total           value       adjustment

                    Opening adjustment at 1 January 2017                                                                              (330)          (193)              (137)
                    IFRS profit or loss                                                                                                543            543
                    Group equity value earnings                                                                                        394                               394
                    Transaction between owners                                                                                         (10)            (10)

                    Closing adjustment at 31 December 2017                                                                              597           340                257
Liberty Holdings Limited Financial results for the year ended 31 December 2017   23




                                                                                                                                                                   FINANCIAL RESULTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2017

Rm (Audited)                                                                                                                     2017                    2016
Assets
Intangible assets                                                                                                              231                    390
Defined benefit pension fund employer surplus                                                                                  171                    215
Properties                                                                                                                  34 768                 33 828
Equipment                                                                                                                    1 128                  1 105
Interests in joint ventures                                                                                                  1 244                  1 229
Interests in associates                                                                                                     15 197                 12 995
Deferred taxation                                                                                                              336                    358
Deferred acquisition costs                                                                                                     737                    713
Long-term policyholder assets – insurance contracts                                                                          7 484                  7 314
Reinsurance assets                                                                                                           1 774                  1 674
Long-term insurance                                                                                                            1 481                  1 352
Short-term insurance                                                                                                             293                    322
Financial investments                                                                                                     338 534                316 441
Loans and receivables                                                                                                       1 222                  1 242
Assets held for trading and for hedging                                                                                     7 871                  8 609
Repurchase agreements, scrip and collateral assets                                                                         11 900                 15 483
Prepayments, insurance and other receivables                                                                                6 361                  5 300
Cash and cash equivalents                                                                                                  15 169                 14 994
Total assets                                                                                                              444 127                421 890
Liabilities
Long-term policyholder liabilities                                                                                        322 918                307 230
Insurance contracts                                                                                                       210 554                204 155
Investment contracts with discretionary participation features                                                             11 845                 11 462
Financial liabilities under investment contracts                                                                          100 519                 91 613
Reinsurance liabilities                                                                                                        663                    555
Third-party financial liabilities arising on consolidation of mutual funds                                                  49 713                 44 046
Provisions                                                                                                                      76                    191
Deferred taxation                                                                                                            3 386                  2 586
Deferred revenue                                                                                                               291                    268
Deemed disposal taxation liability                                                                                             436                    873
Short-term insurance liabilities                                                                                               780                    925
Financial liabilities                                                                                                        5 581                  4 601
Liabilities held for trading and for hedging                                                                                 6 311                  6 798
Repurchase agreements liabilities and collateral deposits payable                                                            9 097                 11 748
Employee benefits                                                                                                            1 446                  1 369
Insurance and other payables                                                                                                11 995                 11 213
Current taxation                                                                                                             1 043                    481
Total liabilities                                                                                                         413 736                392 884
Equity
Ordinary shareholders’ equity                                                                                               22 444                 21 676
Share capital                                                                                                                   26                     26
Share premium                                                                                                                5 157                  5 296
Retained surplus                                                                                                            18 166                 16 990
Other reserves                                                                                                               ( 905)                 ( 636)
Non-controlling interests                                                                                                      7 947                  7 330
Total equity                                                                                                                30 391                 29 006
Total equity and liabilities                                                                                              444 127                421 890
24          Liberty Holdings Limited Financial results for the year ended 31 December 2017
FINANCIAL RESULTS




                    CONSOLIDATED STATEMENT OF COMPREHENSIVE
                    INCOME
                    for the year ended 31 December 2017

                    Rm (Audited)                                                                                                                                                  2017               2016
                    Insurance premiums                                                                                                                                       39 970             41 288
                    Reinsurance premiums                                                                                                                                     (1 950)            (1 922)
                    Net insurance premiums                                                                                                                                   38 020             39 366
                    Fee income and reinsurance commission                                                                                                                     3 683              3 731
                    Investment income                                                                                                                                        21 652             20 885
                    Hotel operations sales                                                                                                                                      532                585
                    Investment gains/(losses)                                                                                                                                18 835             (1 823)
                    Total revenue                                                                                                                                            82 722            62 744
                    Claims and policyholder benefits under insurance contracts                                                                                              (38 819)          (39 664)
                    Insurance claims recovered from reinsurers                                                                                                                1 800             1 450
                    Change in long-term policyholder assets and liabilities                                                                                                  (6 829)              598
                    Liabilities under insurance contracts                                                                                                                     (6 504)             1 164
                    Policyholder assets related to insurance contracts                                                                                                           170               (265)
                    Investment contracts with discretionary participation features                                                                                              (521)              (404)
                    Applicable to reinsurers                                                                                                                                      26                103
                    Fair value adjustment to long-term policyholder liabilities under investment contracts                                                                    (9 116)          (3 891)
                    Fair value adjustment to financial liabilities                                                                                                                                (27)
                    Fair value adjustment on third party mutual fund interests                                                                                               (4 619)              619
                    Acquisition costs                                                                                                                                        (4 935)           (4 723)
                    General marketing and administration expenses                                                                                                           (11 345)          (10 733)
                    Finance costs                                                                                                                                            (1 344)           (1 415)
                    Profit share allocations under bancassurance and other agreements                                                                                          (972)           (1 029)
                    Equity accounted earnings from joint venture                                                                                                                 25                22
                    Profit before taxation                                                                                                                                     6 568              3 951
                    Taxation(1)                                                                                                                                               (2 864)            (1 325)
                    Total earnings                                                                                                                                             3 704              2 626
                    Other comprehensive income                                                                                                                                  (233)              (148)
                    Items that may be reclassified subsequently to profit or loss                                                                                                  (95)             (101)
                    Net change in fair value on cash flow hedges                                                                                                                   75                218
                    Income and capital gains tax relating to net change in fair value on cash flow hedges                                                                         (21)               (56)
                    Foreign currency translation                                                                                                                                 (149)              (263)
                    Items that may not be reclassified subsequently to profit or loss                                                                                            (138)                (47)
                    Owner-occupied properties – fair value adjustment                                                                                                               (67)                (1)
                    Income and capital gains tax relating to owner-occupied properties fair value adjustment                                                                        (14)
                    Change in long-term policyholder insurance liabilities (application of shadow accounting)                                                                       (32)                1
                    Actuarial gains on post-retirement medical aid liability                                                                                                         45                30
                    Income tax relating to post-retirement medical aid liability                                                                                                    (13)               (8)
                    Net adjustments to defined benefit pension fund(2)                                                                                                              (41)              (96)
                    Income tax relating to defined benefit pension fund                                                                                                             (16)               27

                    Total comprehensive income                                                                                                                                 3 471              2 478
                    Total earnings attributable to:
                    Shareholders                                                                                                                                               3 118              2 209
                    Non-controlling interests                                                                                                                                    586                417
                                                                                                                                                                               3 704              2 626
                    Total comprehensive income attributable to:
                    Shareholders                                                                                                                                               2 932              2 128
                    Non-controlling interests                                                                                                                                    539                350
                                                                                                                                                                               3 471              2 478
                    Basic and fully diluted earnings per share                                                                                                                   Cents              Cents
                    Basic earnings per share                                                                                                                                1 152,6               811,7
                    Fully diluted basic earnings per share                                                                                                                  1 120,7               788,9
                    (1)
                          IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation.
                    (2)
                          Net adjustments to defined benefit pension fund include actuarial gains or losses, return on plan assets, reduced by the interest on the net defined benefit asset and the effect of
                          the application of the asset ceiling.
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