Wrap Text
Financial results For the six months ended 30 June 2012
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
ISIN code: ZAE0000127148
Financial results
For the six months ended 30 June 2012
Financial performance indicators
for the six months ended 30 June 2012
30 June 30 June % 31 Dec
2012 2011 change 2011
Liberty Holdings Limited
Earnings(1)
Basic earnings per share (cents) 632,7 443,0 42,8 1 026,1
BEE normalised headline earnings per share (cents) 587,7 414,9 41,6 956,7
BEE normalised operating earnings (Rm) 855 912 (6,3) 1 768
Adjusted core operating earnings (Rm) 1 442 1 454 (0,8) 2 865
BEE normalised return on equity (%) 23,0 18,2 26,4 20,2
Group equity value
BEE normalised group equity value per share (R) 104,31 93,79 11,2 100,15
BEE normalised return on group equity value (%) 15,6 13,0 20,0 15,3
Distributions per share (cents) 192 182 5,5 480
Interim dividend/capital reduction 192 182 5,5 182
Final dividend n/a n/a 298
Total assets under management (Rbn) 484 449 7,8 455
Long-term insurance operations
Indexed new business (excluding contractual increases) (Rm) 2 793 2 289 22,0 5 152
New business margin (%) 1,5 1,3 15,4 1,4
Net customer cash inflows (Rm) 1 062 1 118 (5,0) 4 230
Capital adequacy cover of Liberty Group Limited
(times covered) 2,94 2,88 2,1 2,89
Asset management STANLIB and Liberty Africa
Assets under management (Rbn)(2) 431 412 4,6 407
Net cash inflows/(outflows) including money market (Rm) 5 419 (42) >100 (91)
Retail and institutional net cash inflows excluding money
market (Rm) 5 711 2 673 >100 13 598
Money market net cash outflows (Rm) (292) (2 715) 89,2 (13 689)
(1) 2011 earnings have been restated for the change in accounting policy relating to the adoption of shadow accounting.
(2) 2011 restated to reflect the transfer of the Liberty Properties asset management business to STANLIB from 1 January 2012.
Preparation and supervision:
This announcement on Liberty Holdings Limited's annual results for the six months ended 30 June 2012 has
been prepared and supervised by JC Hubbard (Group Chief Financial Officer) BCom CA(SA) and CG Troskie
(Group Financial Director) BCom (Hons) CA(SA).
Commentary on results
for the six months ended 30 June 2012
Overview
The first half of 2012 reflects the significant operational improvements made across the group. Retail SA, which
successfully remedied the policyholder lapse issues over the last few years, has now demonstrated capability to
deliver innovative products and is achieving significant growth in new business and margin. Growth in net insurance
client cash inflows is increasingly indicative of not only our positive sales performance, but also our improved service
and retention. LibFin continues to demonstrate its ability to manage within appropriate levels of market risk and the
group's capital position is strong. STANLIB has substantially improved its investment fund performance and very good
client inflows have been evidenced into higher margin retail funds. Opportunities under the revised bancassurance
arrangements with Standard Bank are adding significant value. We continue to invest in growth opportunities,
examples of which include the direct selling system build; enhancing property development capability; improving our
emerging consumer market distribution; introducing new investment franchises in STANLIB and developing a product
range and service capability to target the large corporate market. We are confident that these investments, combined
with the operational improvements in the core businesses, position the group well to add sustainable value in the
foreseeable future.
Operational results for the first half of 2012 include growth in indexed insurance sales of 22% and R2,7 billion cash inflows
in our South African retail insurance operations. Our asset management businesses attracted R5,4 billion net inflows.
The core South African insurance operations were managed well within assumptions, producing positive policyholder
behaviour variances. BEE normalised operating earnings of R855 million are slightly lower than those reported in first
half 2011, largely reflecting the cost of the investment in the build initiatives referred to above and noting that the 2011
earnings had benefited from one off non economic assumption changes of R112 million in the Retail SA business. The
value of new business of R232 million is over 60% up on the prior year due to the growth in sales, a positive change in
sales mix and sustainable improvements in persistency.
Despite the ongoing European debt concerns and related volatility, a positive performance from investment markets
has resulted in the shareholder investment portfolio producing a six month gross return of 6,4% to 30 June 2012
(30 June 2011: 2,7%) marginally ahead of benchmark. The group's BEE normalised headline earnings for the six months
to 30 June 2012 are up 41,2% to R1 676 million. This converts to a BEE normalised headline earnings per ordinary share
of R5,88 (30 June 2011: restated R4,15) and reflects an annualised return on equity of 23% compared to the 2011 full year
result of 20%.
The operational improvements in our diversification and growth initiatives have, as expected, not yet translated to an
improvement in earnings, but we are satisfied with the progress of these businesses. We remain committed to these
initiatives and it is encouraging to note various positive developments, for example the Vodacom affinity in Direct Financial
Services, during the period.
The strong half year result, combined with the effective management of the balance sheet, has enhanced the capital
position of the group's main life licence entity, Liberty Group Limited, further strengthening its capital adequacy cover
ratio to 2,94 times. BEE normalised group equity value at R104,31 per share has improved from the R100,15 reported at
31 December 2011. Annualised return on group equity value was 15,6%, which is at the top end of our stated target
range. The group executed share buy-backs of R370 million at an average purchase price of R88,37 per share, well
below the average group equity value during the period.
Our strategic focus remains unchanged which can be summarised as:
- managing the core South African insurance operations within acceptable sustainable long-term assumption sets,
whilst profitably capturing greater shares of both the existing and developing markets;
- developing innovative products to service targeted customer segments;
- managing the balance sheet within board approved risk appetite limits;
- improving asset management capability, leveraging off the strong property, fixed income and money market franchises
to ensure a larger share of the retail and institutional fund flows; and
- achieving the business cases of the recent investments in diversification and growth initiatives.
Further progress has been made towards our readiness for the proposed new long-term insurance solvency regime and
at this early stage we do not anticipate significant changes to our existing capital position.
Business unit financial review
Restated Restated
30 June 30 June 31 Dec
2012 2011 % 2011
Contributions to earnings by business unit Rm Rm change Rm
South African long-term insurance
Retail SA(1) 648 656 (1,2) 1 377
Corporate(1) 42 48 (12,5) 47
LibFin Markets 99 70 41,4 155
Asset management
STANLIB(2) 200 201 (0,5) 435
Liberty Properties(2) 25 33 (24,2) 75
Growth initiatives
Liberty Africa 16 16 21
Liberty Health (45) (10) (>100) (65)
Direct Financial Services (36) (18) (100,0) (47)
Central overheads and sundry income (94) (84) (11,9) (230)
BEE normalised operating earnings 855 912 (6,3) 1 768
LibFin Investments 821 275 >100 969
BEE normalised headline earnings 1 676 1 187 41,2 2 637
BEE preference share adjustment (33) (34) 2,9 (66)
Headline earnings 1 643 1 153 42,5 2 671
(1) 2011 earnings have been restated for the change in accounting policy relating to the adoption of shadow accounting.
(2) 2011 restated to reflect the transfer of the Liberty Properties asset management business to STANLIB from 1 January 2012.
South African long-term insurance
Retail SA
Headline earnings for the period were R648 million compared to the restated R656 million in 2011 which included
significant positive assumption and modelling changes. Adjusting for these items in both periods, headline earnings would
be R618 million compared to R544 million, which is a 14% increase. This increase is supported by positive persistency
and mortality experience variances. Earnings have also absorbed the build cost of the transactional joint venture with
Standard Bank and investment in our emerging consumer market (ECM) business during the period.
The value proposition for financial advisers, which recognises the important balance between persistency, book size and
quality of new business, is producing the ideal balance of selling quality new business and enhancing the value of the
existing client base. Various significant developments in the product and distribution area continue, including the May
launch of a South African product first, being an innovative annuity product incorporating a longevity bonus feature.
Indexed new business sales (excluding contractual increases) of R2,4 billion have improved by 23% over 2011. Increases
in our flagship and ECM risk products and the credit life sales under the bancassurance agreement with Standard Bank
reflect considerable improvement. Our investment business, particularly single premium guaranteed products, have also
performed well. The new business margin of 1,7% is an improvement from the 1,5% achieved for the first half of last
year. The increased volume of quality sales combined with our focus in recent years on retention has resulted in our in-
force policy book size marginally increasing for the first time since 2005. This has meant that better maintenance and
acquisition cost efficiency was evidenced. We continue to focus on margin improvement and cost efficiency.
Net cash inflows are also encouraging at R2,7 billion supported by strong contributions from our sales of single premium
investment products and good extensions of maturing policies.
Corporate
Liberty Corporate is in a process of transition to migrate its client base to more cost efficient umbrella funds whilst
establishing a service and product capability to larger corporates and retirement funds.
Corporate headline earnings at R42 million indicate an improved risk claims experience, however, cost ratios remain
high due to the transitional related costs. A 4% increase in indexed new business was achieved, including higher
enhancement sales to existing umbrella clients. The business unit lost a substantial single investment mandate of R1,4
billion contributing to net cash outflows of R1 850 million for the year.
We have substantially completed the retirement fund administration project well ahead of schedule allowing the business
to have improved capacity to focus on executing future business strategy.
LibFin
Over the period under review, our low risk balanced shareholder investment portfolio returned a gross 6,4%,
marginally ahead of benchmark and reflecting the improvement in investment returns. LibFin Markets continued
to manage market risk exposures within a narrow range, however, volatilities and significant instantaneous changes
in interest rates are difficult to hedge effectively. Headline earnings of R99 million flowed mainly from higher credit
margins on assets backing annuities and guaranteed investment plans and lower implied volatilities. We continue to
be successful in investing in acceptable illiquidity premium assets using the advantage of our ability to hold longer
term assets, with the key objectives of steadily increasing net earnings and improving the competitiveness of our
policyholder investment product proposition. LibFin directly manages R30 billion of asset portfolios at 30 June 2012
(31 December 2011: R25 billion).
Asset management
The Liberty Properties asset management business was transferred to STANLIB with effect from 1 January 2012.
Prior year comparative amounts have been restated to reflect this change.
STANLIB
STANLIB experienced substantial net inflows of R7,4 billion during the first half of 2012. Inflows into institutional money
market collective investments of R1,6 billion, retail collective investments of R4,6 billion and linked investments and
structured products of R2,0 billion were particularly good. Total assets under management increased to R392 billion at
30 June 2012 (31 December 2011: restated R368 billion) as a result of the inflows as well as the increase in underlying
asset values resulting from market growth.
Following implementation of the multi-specialist franchise operating model, the majority of funds under management are
now reflecting significantly improved investment performance across several investment horizons. STANLIB's performance
in the Alexander Forbes Global Best Investment View Survey for global balanced funds has placed STANLIB in the
1st quartile over one and three years.
STANLIB's headline earnings for the six months to 30 June 2012 at R200 million are at similar lends to the prior period. First
half earnings have been impacted by one-off costs associated with embedding investment processes and disciplines
to ensure the sustainability of short-term improvements over the longer term as well as the costs of establishing further
investment capabilities.
Liberty Properties
Liberty Properties, which comprises property management and development, has benefited from growth in property
management fees supported by increases in rental areas at the flagship shopping centres. However, investment in
development capabilities has increased costs, and delays in securing development mandates has resulted in reduced
development fee income resulting in first half headline earnings reducing to R25 million compared to restated R33 million
in 2011. The focus for the remainder of 2012 remains on increasing our third party development mandates in key markets
in Africa.
Fountainhead
Liberty Holdings has entered into agreements to sell its 50% joint venture in Fountainhead Property Trust Management
Limited and Evening Star Trading 768 (Pty) Limited to Redefine Properties Limited for R330 million. The IFRS book value at
30 June 2012 of these interests is R200 million. At 30 June 2012 the sale was subject to outstanding regulatory approvals.
Subsequently, the Competition Tribunal of South Africa approval has been received.
Growth initiatives
Liberty Africa
Liberty's share of headline earnings from the various interests in asset management and insurance businesses in
East and Southern Africa (outside of South Africa) are R16 million (2011: R16 million) for the reporting period.
Investment markets in the East Africa region improved in the first half of 2012 and should benefit both the insurance and
asset management businesses in the second half.
Assets under management remain at R39 billion. Management's focus is driving operational improvement, growing the
opportunities of bancassurance as well as securing additional investment mandates.
Liberty Health
Liberty's share of Liberty Health's headline loss for the first six months of 2012 was R45 million. Whilst operational
efficiencies have been implemented, the business does not, as yet, have a sufficient client base to leverage the investment
in systems and processes. The acquisition of client mandates as well as assisting the medical scheme administration
clients to grow their membership is management's top priority.
Sales of health risk products in the rest of Africa continue to grow, increasing our in-force book to 79 373 lives
(December 2011: 67 901). Remedial actions taken on pricing and risk management have improved the medical claims
loss ratio to 93% (2011 full year: 114%) during the period.
Direct Financial Services (incorporating FRANK.NET)
The direct IT platform capability built for FRANK.NET is now being leveraged to support a broader direct strategy. The
Direct Financial Services business unit is now additionally supporting the recently launched joint ventures with Vodacom
and Standard Bank. Whilst these initiatives have only recently been launched, both are performing to plan.
FRANK.NET, which currently provides simple life cover products through an alternative direct distribution channel, has
achieved pleasing brand presence, however, the conversion of leads and persistency of the business need to continue
to be improved.
The R36 million losses for the period include net set up costs of R20 million related to the Vodacom and transactional
initiatives.
Bancassurance
The revised terms of the commercial bancassurance joint venture relationship with Standard Bank, which broaden the
available distribution channels, product sets and geographies are making an increased contribution to new business
volumes and earnings. Sales on an indexed basis of insurance products from bancassurance channels were 23% higher
than 2011. Attributable Liberty earnings from credit life were R68 million, up 17% from last year, and STANLIB received
a 9% growth in net asset management fees (total R191 million) related to assets acquired through the Standard Bank
distribution channel. The total embedded value of in-force contracts sold under the agreement attributable to Liberty at
30 June 2012 is R1,2 billion (31 December 2011: R1,1 billion).
Pending tax legislation
The South African Minister of Finance, as part of the Budget 2012 tax proposals, announced increases to the inclusion
rates and therefore effective capital gains tax (CGT) rates for taxpayers, with effect from 1 March 2012. The group has
applied the new effective CGT rates with effect from 1 March 2012 and, as estimated in the 31 December 2011 results
announcement, the impact on shareholder funds and earnings of attributed unrealised investment gains or second order
impacts on policyholder liability valuations has not been significant and is less than R100 million.
However, any change in the effective CGT rates for policyholder funds creates complexities for insurers as trustees and will
adversely impact policyholders due to misallocations of the capital gains amongst different generations of policyholders.
As a result, The South African National Treasury has proposed, with agreement from the industry, that a deemed disposal
and re-acquisition be applied to all policyholder fund assets on 29 February 2012. The draft Taxation Laws Amendment
Bill issued for comment on 5 July 2012 incorporates this proposal. In our opinion the changes to the taxation law under
this bill are substantively enacted and therefore the group has applied these amendments in producing the 30 June 2012
results. The impact on earnings and shareholder funds has not been significant.
In addition, new expense relief ratios applicable to the policyholder funds for life companies have been proposed in
the latest draft tax legislation. A revised deduction formula will consequently be applicable for selling, administration
and indirect expenses. This change is proposed to apply for years of assessment commencing on or after
1 January 2013. The changes proposed will require substantial policyholder liability modelling changes which practically
were not possible prior to the release of interim results. However, the impact has been assessed and while it is likely to be
positive to earnings and shareholder funds, it will not be material to the group's reported results.
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited remains strong at 2,94 times the statutory requirement
(31 December 2011: 2,89 times). All the other group subsidiary life licences are well capitalised.
2012 interim dividend
In line with the group's dividend policy, the board has approved and declared a gross interim dividend of 192 cents per
ordinary share. The interim dividend will be payable out of income reserves and payable to all ordinary shareholders
recorded in the books of Liberty Holdings Limited at the close of business on Friday, 31 August 2012.
The total STC credits utilised for this dividend amounts to R74 737 793 and consequently the STC credits utilised per
share amounts to 26,11 cents per ordinary share. The dividend will be subject to a local dividend tax rate of 15% which
will result in a net dividend, to those shareholders who are not exempt from paying dividend tax, of 167,1165 cents per
ordinary share. Liberty Holdings Limited's income tax number is 9050/191/71/8. The number of ordinary shares in issue
in the company's share capital at the date of declaration is 286 202 373.
The important dates pertaining to the interim dividend are as follows:
Last date to trade cum dividend on the JSE Friday, 24 August 2012
First trading day ex dividend on the JSE Monday, 27 August 2012
Record date Friday, 31 August 2012
Payment date Monday, 3 September 2012
Share certificates may not be de-materialised or re-materialised between Monday, 27 August 2012 and Friday,
31 August 2012, both days inclusive. Where applicable, in terms of instructions received by the company from certificated
shareholders, the payment of the dividend will be made electronically to shareholders' bank accounts on payment date.
In the absence of specific mandates, cheques will be posted to shareholders. Shareholders who have de-materialised
their shares will have their accounts with their CSDP or broker credited on Monday, 3 September 2012.
Issue of R1 billion bond
Liberty Group Limited intends to issue a fixed rate R1 billion bond on 13 August 2012. The bond will be a five year fixed
rate subordinated debt issuance. The final issuance and rate will be determined on 3 August 2012. The bond will be used
to fund working capital in Liberty Group Limited and will serve to maintain Liberty Group Limited's capital strength and
improve the group's cost of capital.
The existing R2 billion capital bond is callable by Liberty from 12 September 2012. Subject to regulatory approval, it is
Liberty's intention to call this bond.
Prospects
Despite the lower interest rate environment, the ongoing pressure on consumer disposable income is likely to continue for
some time. However, our core insurance and asset management businesses are performing well and we anticipate that
they will continue to attract higher levels of new business at improved margin. We believe our balance sheet management
capability will enable us to continue managing what is expected to be a protracted period of volatility in investment
markets and low interest rates.
Bruce Hemphill Saki Macozoma
Chief Executive Chairman
1 August 2012
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
ISIN code: ZAE0000127148
Telephone +27 11 408 3911
Transfer Secretaries
Computershare Investor Services (Pty) Limited
(Registration number: 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Telephone +27 11 370 5000
Sponsor
Merrill Lynch
A subsidiary of Bank of America Corporation
These results are available at www.liberty.co.za
Accounting policies
The 2012 interim results have been prepared in accordance with and containing information required by International
Financial Reporting Standards (IFRS) including full compliance with IAS 34: Interim Financial Reporting as well as the
AC500 Standards as issued by the Accounting Practices Board. They are also in compliance with the Listings Requirements
of the JSE Limited and the South African Companies Act No. 71 of 2008.
The accounting policies adopted in the preparation of the consolidated financial statements are in terms of IFRS and are
consistent with those adopted in the previous year except for the following:
The group has adopted for the first time, effective 1 January 2011, an accounting policy for shadow accounting as
permitted under IFRS 4: Insurance Contracts. The shadow accounting will be applied to the allocation of changes to
policyholder liabilities arising from fair value re-measurement of owner occupied properties held to match obligations under
insurance contacts. Previously a mismatch was created as the change to the insurance policyholder liability was reflected
in profit or loss whilst the matching asset re-measurement is reflected in other comprehensive income as required by
IAS 16: Property, Plant and Equipment. The adoption of shadow accounting will allow the relevant change in the insurance
liability to also be reflected in other comprehensive income thereby eliminating the mismatch in presentation.
The adoption of the shadow accounting policy has been applied retrospectively with the impact being that total
earnings for the six months ended 30 June 2012 have increased by R7 million (30 June 2011: R7 million, full year to
31 December 2011: R74 million) with other comprehensive income decreasing by the same amount. There is no impact
to the financial position or shareholders' funds of the group.
Several other amendments to IFRS standards or interpretations were made by the International Accounting Standards
Board, which are effective for the period under review. These amendments or interpretations are either not significant or
not applicable to the 2012 interim results of the group.
Review/Audit
These interim results have not been reviewed or audited by the company's auditors, PricewaterhouseCoopers Inc.
Definitions
BEE normalised: 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 Black Economic Empowerment (BEE) transaction as opposed to the
required technical accounting treatment that reflects the BEE transaction as a share buy-back. Dividends received on the
group's BEE preference shares (which are recognised as an asset for this purpose) are included in income. Shares in
issue relating to the transaction are reinstated.
Adjusted core operating earnings
This represents the group's BEE normalised headline earnings adjusted for the expected long-term rate of return on the
shareholder investment portfolio and excludes LibFin Markets portfolio performance.
Capital adequacy requirement (CAR)
The capital adequacy requirement is the minimum amount by which the Financial Services Board requires an insurer's
assets to exceed its liabilities. The assets, liabilities and capital adequacy requirement must be calculated using a method
which meets the Financial Services Board's requirements. Capital adequacy cover refers to the amount of capital the
insurer has as a multiple of the minimum requirement.
Health lives
This reflects the number of natural persons covered for medical risk insurance (either through medical aids or directly)
for which Liberty Health provides administration services and/or IT system support.
Long-term insurance operations Indexed new business
This is a measure of new business which is calculated as the sum of twelve months' premiums on new recurring premium
policies and one tenth of single premium sales.
Long-term insurance operations New business margin
This is the value of new business as defined below, expressed as a percentage of the present value of future expected
premiums at the point of sale.
Long-term insurance operations Value of new business
The present value, at point of sale, of the projected stream of after tax profits for new business issued, net of the cost of
required capital. The present value is calculated using a risk adjusted discount rate.
Short-term insurance claims loss ratio
This is a measure of underwriting risk and is measured as a ratio of claims incurred divided by the net premiums earned.
FCTR: Foreign Currency Translation Reserve.
Statement of financial position
as at 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Assets
Equipment and owner-occupied properties under development 881 956 897
Owner-occupied properties 1 445 1 508 1 598
Investment properties 23 032 22 095 23 470
Intangible assets 909 1 034 933
Defined benefit pension fund employer surplus 219 194 199
Deferred acquisition costs 432 387 403
Interests in joint ventures 395 630 626
Reinsurance assets 1 148 862 1 104
long-term insurance 938 862 902
short-term insurance 210 202
Operating leases accrued income 1 271 1 186 1 085
Held for trading assets 5 557 2 992 3 790
Held for sale assets 200
Interest in associates mutual funds 12 630 15 745 11 697
Financial investments 207 055 185 642 197 959
Deferred taxation 188 161 183
Prepayments, insurance and other receivables 3 623 4 859 2 620
Cash and cash equivalents 6 665 6 024 6 664
Total assets 265 650 244 275 253 228
Liabilities
Long-term policyholder liabilities 217 252 199 744 208 565
Insurance contracts 151 905 140 040 145 558
Investment contracts with discretionary participation features 3 516 2 567 3 447
Financial liabilities under investment contracts 61 831 57 137 59 560
Short-term insurance liabilities 536 208 466
Financial liabilities at amortised cost 2 190 2 182 2 195
Third party liabilities arising on consolidation of mutual funds 12 007 12 126 11 164
Employee benefits 866 747 1 082
Deferred revenue 169 146 159
Deferred taxation 1 848 2 513 2 819
Provisions 389 145 371
Operating leases accrued expense 63 120 93
Held for trading liabilities 4 890 2 341 3 113
Insurance and other payables 6 513 8 031 6 304
Current taxation 2 253 1 010 614
Total liabilities 248 976 229 313 236 945
Equity
Ordinary shareholders' interests 13 777 12 107 13 211
Share capital 26 26 26
Share premium 6 113 6 662 6 133
Retained surplus 8 609 6 231 7 683
Other reserves (971) (812) (631)
Non-controlling interests 2 897 2 855 3 072
Total equity 16 674 14 962 16 283
Total equity and liabilities 265 650 244 275 253 228
Statement of comprehensive income
for the six months ended 30 June 2012
Restated Restated
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Revenue
Insurance premium revenue 14 400 12 366 27 302
Reinsurance premiums (556) (424) (909)
Net insurance premiums 13 844 11 942 26 393
Service fee income from investment contracts 484 416 863
Investment income 6 184 5 705 11 079
Hotel operation sales 347 320 679
Investment gains 9 701 661 8 148
Fee revenue 819 801 1 560
Defined benefit pension fund employer surplus 9 (9) (4)
Total revenue 31 388 19 836 48 718
Claims and policyholders' benefits under insurance contracts (11 992) (10 950) (22 897)
Insurance claims recovered from reinsurers 360 288 627
Change in long-term policyholder liabilities (6 340) (86) (6 136)
Insurance contracts (6 329) (167) (6 262)
Investment contracts with discretionary participation features (47) 67 73
Applicable to reinsurers 36 14 53
Fair value adjustment to policyholders' liabilities under investment
contracts (3 773) (1 300) (4 089)
Fair value adjustment on third party mutual fund interests (901) (755) (1 230)
Acquisition costs (1 778) (1 497) (3 268)
General marketing and administration expenses (3 568) (3 048) (6 498)
Finance costs (125) (135) (271)
Profit share allocations under bancassurance and other agreements (395) (292) (628)
Equity accounted earnings from joint ventures 16 17 9
Profit before taxation 2 892 2 078 4 337
Taxation (1 129) (832) (1 383)
Total earnings 1 763 1 246 2 954
Other comprehensive income 15 (26) 84
Owner occupied properties fair value adjustment 15 17 115
Income and capital gains tax relating to owner occupied properties fair
value adjustment (8) (10) (41)
Change in long-term policyholder insurance liabilities (application of
shadow accounting) (7) (7) (74)
Net change in fair value on cash flow hedges 3 14
Income and capital gains tax relating to net change in fair value on
cash flow hedges (1) (4)
Foreign currency translation 13 (26) 74
Total comprehensive income 1 778 1 220 3 038
Total earnings attributable to:
Liberty shareholders' interests 1 642 1 154 2 673
Non-controlling interests 121 92 281
1 763 1 246 2 954
Total comprehensive income attributable to:
Liberty shareholders' interests 1 654 1 142 2 736
Non-controlling interests 124 78 302
1 778 1 220 3 038
Headline earnings and earnings per share
for the six months ended 30 June 2012
Restated Restated
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Reconciliation of total earnings to headline earnings attributable
to equity holders
Total earnings attributable to equity holders 1 642 1 154 2 673
Adjustments
Preference share dividend (1) (1) (2)
Basic earnings attributable to ordinary shareholders 1 641 1 153 2 671
FCTR recycled through profit or loss 2
Headline earnings attributable to ordinary shareholders 1 643 1 153 2 671
Net income earned on BEE preference shares 33 34 66
BEE normalised headline earnings attributable
to ordinary shareholders 1 676 1 187 2 737
Weighted average number of shares in issue ('000) 259 371 260 298 260 306
BEE normalised weighted average number of shares in issue ('000) 285 167 286 094 286 102
Fully diluted weighted average number of shares in issue ('000) 274 808 270 965 272 113
Cents Cents Cents
Earnings per share attributable to ordinary shareholders
Basic 632,7 443,0 1 026,1
Headline 633,5 443,0 1 026,1
BEE normalised headline 587,7 414,9 956,7
Fully diluted earnings per share attributable to ordinary shareholders
Basic 597,1 425,5 981,6
Headline 597,9 425,5 981,6
Condensed statement of changes in shareholders' funds
for the six months ended 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Balance of ordinary shareholders' interests at 1 January 13 211 11 716 11 716
Dividend/capital reduction(1) (851) (832) (1 353)
Total comprehensive income 1 654 1 142 2 736
Share buy-back (370) (40)
Subscription for shares 30 8 21
Black Economic Empowerment transaction 75 67 112
Share-based payments 36 27 55
Payment on settlement of share options/rights (9) (1) (2)
Acquisition of additional interests in subsidiaries (3)
Preference dividend (1) (1) (2)
FCTR recycled through profit or loss 2
Profit on partial disposal of a subsidiary 8
Acquisition of Liberty Holdings Kenya Limited(2) (19) (37)
Ordinary shareholders' interests 13 777 12 107 13 211
Balance on non-controlling interests at 1 January 3 072 2 663 2 663
Total comprehensive income 124 78 302
Unincorporated property partnerships (91) (21) 4
Non-controlling share of subsidiary dividend (7) (7) (13)
Acquisition of interest in Total Health Trust Limited 33
Disposal of Alberton City unincorporated property partnership (234)
Acquisition of additional interests in subsidiaries (24)
Profit on partial disposal of a subsidiary 10
Acquisition of Liberty Holdings Kenya Limited(2) 142 130
Non-controlling interests 2 897 2 855 3 072
Total equity 16 674 14 962 16 283
(1) 30 June 2012: 2011 final dividend of 298 cents per share, 30 June 2011: 2010 final dividend of 291 cents per share,
31 December 2011: 2010 final dividend of 291 cents per share and 2011 interim capital reduction of 182 cents per share.
(2) Formerly CfC Insurance Holdings Limited
Condensed statement of cash flows
for the six months ended 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Operating activities 612 1 645 5 469
Investing activities (72) (1 731) (5 008)
Financing activities (575) 57 148
Net (decrease)/increase in cash and cash equivalents (35) (29) 609
Cash and cash equivalents at the beginning of the year 6 664 5 858 5 858
Foreign currency translation 7 (15) 29
Cash and cash equivalents acquired through business acquisition 29 210 168
Cash and cash equivalents at the end of the period 6 665 6 024 6 664
Condensed segment information
for the six months ended 30 June 2012
The unaudited segment results for the six months ended 30 June 2012 are as follows:
Long-term insurance Short-
term Asset Reporting
manage- Health adjust- IFRS
Rm Retail Corporate insurance ment services Other Total ments(1) reported
Total revenue 26 301 6 618 411 1 027 137 758 35 252 (3 864) 31 388
Profit/(loss) before
taxation 2 021 93 52 343 (68) 329 2 770 122 2 892
Taxation (1 000) (21) (8) (92) 2 (10) (1 129) (1 129)
Total earnings/(loss) 1 021 72 44 251 (66) 319 1 641 122 1 763
Other comprehensive
income 7 3 1 4 15 15
Total comprehensive
income/(loss) 1 028 72 47 252 (66) 323 1 656 122 1 778
Attributable to:
Non-controlling
interests 12 (6) (21) (3) 16 (2) (122) (124)
Equity holders 1 040 66 26 249 (50) 323 1 654 1 654
Reconciliation of
total earnings/(loss)
to headline earnings/
(loss) attributable
to equity holders
Total earnings/(loss) 1 021 72 44 251 (66) 319 1 641 122 1 763
Attributable (to)/from
non-controlling
interests 16 (8) (20) (3) 16 1 (122) (121)
Preference dividend (1) (1) (1)
FCTR recycled
through profit or loss 2 2 2
Headline earnings/
(loss) 1 037 64 24 248 (48) 318 1 643 1 643
Net income earned
on BEE preference
shares 33 33 33
BEE normalised
headline earnings/
(loss) 1 037 64 24 248 (48) 351 1 676 1 676
(1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual
fund liabilities, the classification of long-term insurance into defined IFRS investment' and insurance' products, and the elimination
of inter-group transactions.
The unaudited segment results for the six months ended 30 June 2011 are as follows:
Restated
Long-term insurance Asset Reporting
manage- Health adjust- IFRS
Rm Retail Corporate ment services Other Total ments(1) reported
Total revenue 16 731 4 748 987 155 596 23 217 (3 381) 19 836
Profit/(loss) before taxation 1 468 97 356 (45) 114 1 990 88 2 078
Taxation (701) (27) (95) (9) (832) (832)
Total earnings/(loss) 767 70 261 (45) 105 1 158 88 1 246
Other comprehensive
income/(loss) (28) (3) 5 (26) (26)
Total comprehensive
income/(loss) 739 70 258 (45) 110 1 132 88 1 220
Attributable to:
Non-controlling interests 11 (6) 13 (8) 10 (88) (78)
Equity holders 750 70 252 (32) 102 1 142 1 142
Reconciliation of total earnings
to headline earnings/(loss)
attributable to equity holders
Total earnings/(loss) 767 70 261 (45) 105 1 158 88 1 246
Attributable (to)/from non-
controlling interests (1) (8) 13 (8) (4) (88) (92)
Preference dividend (1) (1) (1)
Headline earnings/(loss) 766 70 253 (32) 96 1 153 1 153
Net income earned on
BEE preference shares 34 34 34
BEE normalised headline
earnings/(loss) 766 70 253 (32) 130 1 187 1 187
(1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual
fund liabilities, the classification of long-term insurance into defined IFRS investment' and insurance' products, and the elimination
of inter-group transactions.
The audited segment results for the year ended 31 December 2011 are as follows:
Restated Long-term insurance Short- Asset Reporting
term manage- Health adjust- IFRS
Rm Retail Corporate insurance ment services Other Total ments(1) reported
Total revenue 41 649 10 836 319 2 064 279 1 174 56 321 (7 603) 48 718
Profit/(loss) before
taxation 3 113 88 (88) 751 (117) 292 4 039 298 4 337
Taxation (1 269) 19 (7) (209) 7 76 (1 383) (1 383)
Total earnings/(loss) 1 844 107 (95) 542 (110) 368 2 656 298 2 954
Other comprehensive
income 43 (5) 15 8 1 22 84 84
Total comprehensive
income/(loss) 1 887 102 (80) 550 (109) 390 2 740 298 3 038
Attributable to:
Non-controlling
interests (31) (19) 26 (16) 36 (4) (298) (302)
Equity holders 1 856 83 (54) 534 (73) 390 2 736 2 736
Reconciliation of
total earnings/(loss)
to headline earnings/
(loss) attributable
to equity holders
Total earnings/(loss) 1 844 107 (95) 542 (110) 368 2 656 298 2 954
Attributable (to)/from
non-controlling
interests (23) (14) 33 (15) 36 17 (298) (281)
Preference dividend (2) (2) (2)
Headline earnings/
(loss) 1 821 93 (62) 527 (74) 366 2 671 2 671
Net income earned
on BEE preference
shares 66 66 66
BEE normalised
headline earnings/
(loss) 1 821 93 (62) 527 (74) 432 2 737 2 737
(1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual
fund liabilities, the classification of long-term insurance into defined IFRS investment' and insurance' products, and the elimination
of inter-group transactions.
Group equity value report
1. Introduction
Liberty presents a "group equity value" report to reflect the combined value of the various components of Liberty's
businesses.
Sections 2 and 3 below describe the valuation bases used for each reported component. It should be noted the
group equity value is presented to provide additional information to shareholders to assess performance of the
group. The total equity value is not intended to be a fair value calculation of the group but should provide indicative
information of the inherent value of the component parts.
2. Component parts of the group equity value and valuation techniques used
Group equity value has been calculated as the sum of the various component parts:
2.1 South African covered business:
The wholly owned subsidiary, Liberty Group Limited, comprises the cluster of South African long-term insurance
entities and related asset holding entities. The embedded value methodology in terms of Actuarial Practice Note
107 issued by the Actuarial Society of South Africa continues to be used to derive the value of this business
cluster described as "South African covered business". The embedded value report of the South African covered
business has been reviewed by the group's statutory actuary. The full embedded value report is included in the
supplementary information section.
2.2 Other businesses:
STANLIB: Valued using a 10 times (2011: 10 times) multiple of estimated sustainable earnings.
Liberty Properties: Valued using a 10 times (2011: 10 times) multiple of estimated sustainable earnings.
Fountainhead: Fountainhead has been valued at Liberty's share of the contracted sale price.
Liberty Health: As Liberty Health has yet to establish a history to support a sustainable earnings calculation,
IFRS net asset value is applied.
Liberty Africa: Liberty Africa is an emerging cluster of wealth businesses located outside South Africa.
A combination of valuation techniques including embedded value, discounted cash flow and earnings multiples
have been applied to value these businesses. The combined value of this cluster is not material relative to
the other components of group equity value and therefore a detailed analysis of this valuation has not been
presented.
2.3 Other adjustments:
These comprise the net market value of assets and liabilities held by the Liberty Holdings Limited company
excluding investments in subsidiaries valued separately, the fair value of share options/rights allocated to staff
not employed by the South African covered businesses and allowance for certain shareholder recurring costs
incurred in Liberty Holdings Limited capitalised at a multiple of 9 times (December 2011: 9 times).
3. BEE normalised group equity value
3.1 Analysis of BEE normalised group equity value
Value of
in-force:
SA Other Group SA
Unaudited covered busi- funds Adjust- Net covered
30 June 2012 (Rm) business nesses invested ments worth(1) business Total
SA insurance operations
(excluding Frank) 7 357 7 357 (4 041) 3 316 18 373 21 689
Retail SA 16 743
Corporate 1 630
Frank 98 98 98 57 155
Value of in-force acquired 274 274 (274)
Working capital 4 720 4 720 (383) 4 337 4 337
South African insurance
operations 12 449 12 449 (4 698) 7 751 18 430 26 181
Other group businesses:
STANLIB 235 235 3 865 4 100 4 100
Properties (including Fountainhead) 231 231 549 780 780
Liberty Health (including Total Health
Trust) 34 98 132 132 132
Liberty Africa 33 384 417 417 33 450
Liberty Holdings 313 313 97 410 410
Cost of capital (1 367) (1 367)
Net equity as reported under IFRS 12 516 1 261 13 777 (187) 13 590 17 096 30 686
BEE preference funding 1 044 1 044 1 044 1 044
Allowance for future shareholders
costs (150) (150) (150) (1 661) (1 811)
Allowance for employee share
options/rights (186) (158) (344) (344) (344)
BEE normalised equity value 13 374 953 14 327 (187) 14 140 15 435 29 575
Summary of adjustments:
Negative rand reserves (4 041) (4 041)
Deferred acquisition costs (419) (419)
Deferred revenue liability 160 160
Internally generated software (97) 97
Carrying value of in-force business
acquired (274) (274)
Fair value adjustment of
non SA covered business 4 414 4 414
Impact of discounting on deferred
tax asset (27) (27)
(4 698) 4 511 (187)
(1) Reconciliation to SA covered business
net worth.
Net equity of SA covered business as reported
under IFRS 12 516
Adjustments as above (4 698)
Allowance for employee share
options/rights (186)
BEE preference share funding 1 044
Net worth as reported in supplementary
information 8 676
3. BEE normalised group equity value
3.1 Analysis of BEE normalised group equity value
Value of
in-force:
SA Other Group SA
Audited covered busi- funds Adjust- Net covered
31 December 2011 (Rm) business nesses invested ments worth(1) business Total
SA insurance operations
(excluding Frank) 7 227 7 227 (3 857) 3 370 17 789 21 159
Retail SA 16 175
Corporate 1 614
Frank 116 116 (14) 102 38 140
Value of in-force acquired 325 325 (325)
Working capital 3 994 3 994 (291) 3 703 3 703
South African insurance
operations 11 662 11 662 (4 487) 7 175 17 827 25 002
Other group businesses:
STANLIB 234 234 3 566 3 800 3 800
Properties (including Fountainhead) 270 270 684 954 954
Liberty Health (including Total Health
Trust) 81 97 178 178 178
Liberty Africa 31 354 385 385 33 418
Liberty Holdings 482 482 54 536 536
Cost of capital (1 167) (1 167)
Net equity as reported under IFRS 11 774 1 437 13 211 (183) 13 028 16 693 29 721
BEE preference funding 1 075 1 075 1 075 1 075
Allowance for future shareholders
costs (145) (145) (145) (1 690) (1 835)
Allowance for employee share
options/rights (180) (142) (322) (322) (322)
BEE normalised equity value 12 669 1 150 13 819 (183) 13 636 15 003 28 639
Summary of adjustments:
Negative rand reserves (3 857) (3 857)
Deferred acquisition costs (389) (389)
Deferred revenue liability 152 152
Internally generated software (54) 54
Frank allowance for future expenses (14) (14)
Carrying value of in-force business
acquired (325) (325)
Fair value adjustment of
non SA covered business 4 250 4 250
(4 487) 4 304 (183)
(1) Reconciliation to SA covered business
net worth.
Net equity of SA covered business as reported
under IFRS 11 774
Adjustments as above (4 487)
Allowance for employee share
options/rights (180)
BEE preference share funding 1 075
Net worth as reported in supplementary
information 8 182
3.2 BEE normalised group equity value earnings and value per share
Unaudited Audited
30 June 2012 31 December 2011
SA Other SA Other
covered busi- covered busi-
business nesses Total business nesses Total
Rm Rm Rm Rm Rm Rm
BEE normalised equity value at end
of the period 24 111 5 464 29 575 23 185 5 454 28 639
BEE preference shares 1 044 1 044 1 075 1 075
Equity value at the end of the period 23 067 5 464 28 531 22 110 5 454 27 564
Adjustments from group restructure 15 (15)
Capital transactions 340 340 19 19
Intergroup dividends 750 (750) 1 283 (1 283)
Dividends paid 852 852 1 353 1 353
BEE normalised equity value at beginning
of the year (23 185) (5 454) (28 639) (21 504) (4 526) (26 030)
Equity value at beginning of the year (22 110) (5 454) (27 564) (20 385) (4 526) (24 911)
BEE preference shares (1 075) (1 075) (1 119) (1 119)
BEE normalised equity value earnings 1 676 452 2 128 2 979 1 002 3 981
BEE normalised return on group equity value 15,0% 18,5% 15,6% 13,9% 22,1% 15,3%
BEE normalised number of shares (000's) 283 535 285 961
Number of shares in issue (000's) 256 582 260 165
Shares held for the employee restricted
share scheme (000's) 1 157
Adjustment for BEE ordinary shares (000's) 25 796 25 796
BEE normalised group equity value per share
(Rand) 104,31 100,15
3.3 Sources of BEE normalised group equity value earnings
Unaudited Audited
30 June 2012 31 December 2011
SA Other SA Other
covered busi- covered busi-
business nesses Total business nesses Total
Rm Rm Rm Rm Rm Rm
Value of new business 216 16 232 389 21 410
Expected return on value of
in-force 851 851 1 640 1 640
Operating assumptions (16) (22) (38) 949 (55) 894
Operating experience variances 99 (9) 90 286 (11) 275
Operating assumption changes (70) (13) (83) 273 (44) 229
Changes in modelling methodology (45) (45) 390 390
Headline earnings of other businesses (81) 239 158 (108) 527 419
Operational equity value profits 970 233 1 203 2 870 493 3 363
Development costs (16) (16) (61) (61)
Investment return on net worth 453 87 540 458 174 632
Investment variances 151 151 (279) (279)
Changes in economic assumptions 133 133 (12) (12)
Increase in fair value adjustments on value of
other businesses 148 148 145 145
Change in allowance for share options/rights (15) (16) (31) 3 (67) (64)
Change in STC allowance 257 257
Group equity value earnings 1 676 452 2 128 2 979 1 002 3 981
3. BEE normalised group equity value (continued)
3.4 Analysis of value of long-term insurance, new business and margin
Unaudited Audited
30 June 31 Dec
Rm 2012 2011
South African covered business:
Retail SA
Traditional Life 455 793
Emerging Consumer Markets 82 111
Credit Life 41 86
Liberty Corporate 47 95
Frank 22 51
Gross value of new business 647 1 136
Overhead acquisition costs impact on value of new business (385) (687)
Cost of required capital (46) (60)
Net value of South African covered new business 216 389
South African life licences 214 381
Liberty Africa subsidiaries 2 8
Present value of future expected premiums 15 211 28 329
Margin 1,4% 1,4%
Liberty Africa:
Net value of new business 16 21
Present value of future expected premiums 205 229
Margin 7,8% 9,2%
Total group net value of new business 232 410
Total group margin 1,5% 1,4%
3.5 Notes and definitions
BEE normalised:
These measures reflect the economic reality of the Black Economic Empowerment (BEE) transaction as
opposed to the required technical accounting treatment that reflects the BEE transaction as a share buy-back.
Value of new business and margin
Value of new business is the present value, at point of sale, of the projected stream of after tax profits for new
business issued, net of the cost of required capital. The present value is calculated using a risk adjusted
discount rate. Margin is calculated using the value of new business divided by the present value of future
modelled premiums.
Development costs
Represents project costs incurred on developing or enhancing future revenue opportunities.
Negative rand reserves
A portion of expected future management and administration fees are present valued at and recognised at
point of sale. Prospective measurement takes place at each valuation date until received.
Long-term insurance new business
for the six months ended 30 June 2012
30 June 30 June 31 Dec
2012 2011 2011
Unaudited Rm Rm Rm
Retail SA 8 699 6 903 16 229
Single 6 957 5 475 13 171
Recurring 1 742 1 428 3 058
Corporate 665 644 1 586
Single 433 422 1 053
Recurring 232 222 533
Liberty Africa(1) 117 49 140
Single 52 14 32
Recurring 65 35 108
Frank Life 11 13 28
Recurring 11 13 28
Total new business 9 492 7 609 17 983
Single 7 442 5 911 14 256
Recurring 2 050 1 698 3 727
Sources of insurance operations total new business by customer
segment:
Retail 8 766 6 954 16 367
Single 6 967 5 488 13 198
Recurring 1 799 1 466 3 169
Corporate 726 655 1 616
Single 475 423 1 058
Recurring 251 232 558
Total new business 9 492 7 609 17 983
Indexed new business 2 793 2 289 5 152
Sources of insurance indexed new business by business unit:
Retail SA 2 437 1 976 4 375
Corporate 275 264 638
Liberty Africa(1) 70 36 111
Frank Life 11 13 28
(1) Liberty owns less than 100% of the various entities that make up Liberty Africa. The information is recorded at 100% and is not
adjusted for proportional legal ownership.
Assets under management(1)
for the six months ended 30 June 2012
30 June 30 June 31 Dec
2012 2011 2011
Unaudited Rbn Rbn Rbn
Managed by group business units 461 427 432
STANLIB 392 381 368
Transferred from Properties(3) 26 26 27
Other core assets under management 366 355 341
Liberty Africa(2) 39 31 39
LibFin 30 15 25
Externally managed 23 22 23
Total assets under management 484 449 455
(1) Includes funds under administration.
(2) Liberty owns less than 100% of the various entities that make up Liberty Africa. The information is recorded at 100% and is not
adjusted for proportional legal ownership.
(3) Properties asset management business was transferred to STANLIB on 1 January 2012.
Long-term insurance net cash flows
for the six months ended 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Premiums
Recurring 11 193 10 217 20 853
Retail 7 903 7 195 14 817
Corporate 3 290 3 022 6 036
Single 7 560 6 169 14 858
Retail 4 211 3 406 8 561
Corporate 529 693 1 629
Immediate annuities 2 820 2 070 4 668
Net premium income from insurance contracts and inflows from
investment contracts 18 753 16 386 35 711
Claims and policyholders benefits
Retail (11 995) (11 199) (23 086)
Death and disability claims (2 256) (2 072) (4 199)
Policy surrender and maturity claims (8 178) (7 440) (15 471)
Annuity payments (1 561) (1 687) (3 416)
Corporate (5 696) (4 069) (8 395)
Death and disability claims (832) (787) (1 745)
Scheme terminations and member withdrawals (4 707) (3 135) (6 349)
Annuity payments (157) (147) (301)
Net claims and policyholders benefits (17 691) (15 268) (31 481)
Long-term insurance net cash flows 1 062 1 118 4 230
Sources of insurance operations cash flows by business unit:
Retail SA 2 747 1 408 4 767
Corporate (1 850) (323) (661)
STANLIB Multi-manager (30) (50) (109)
Frank Life 6 1 17
Liberty Africa(1) 189 82 216
(1) Liberty owns less than 100% of the various entities that make up Liberty Africa. The information is recorded at 100% and is not
adjusted for proportional legal ownership.
Short-term insurance net cash flows
for the six months ended 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Premiums 358 138 343
Liberty Health medical risk 215 76 162
Liberty Africa motor, property and other 124 39 179
medical risk 19 23 2
Claims (216) (87) (235)
Liberty Health medical risk (152) (53) (144)
Liberty Africa motor, property and other (53) (17) (85)
medical risk (11) (17) (6)
Net cash inflows from short-term insurance 142 51 108
Asset management net cash flows Stanlib and
Liberty Africa
for the six months ended 30 June 2012
30 June 30 June 31 Dec
2012 2011 2011
Unaudited Rm Rm Rm
STANLIB before money market 6 856 1 821 7 919
Retail 6 177 4 177 10 004
Institutional 679 (2 356) (2 085)
Money market 571 (2 933) (13 407)
Retail (1 021) (696) 1 027
Institutional 1 592 (2 237) (14 434)
Net STANLIB cash inflows/(outflows)(1) 7 427 (1 112) (5 488)
Liberty Africa before money market (1 145) 852 5 679
Retail 695 173 295
Institutional (1 840) 679 5 384
Money market (863) 218 (282)
Net Liberty Africa cash (outflows)/inflows(1)(2) (2 008) 1 070 5 397
Net cash inflows/(outflows) from asset management 5 419 (42) (91)
(1) STANLIB and Liberty Africa cash flows exclude intergroup life funds.
(2) Liberty owns less than 100% of the various entities that make up Liberty Africa. The information is recorded at 100% and is not
adjusted for proportional legal ownership.
Capital commitments
as at 30 June 2012
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2012 2011 2011
Rm Rm Rm
Business acquisitions 38 57
Equipment 247 180 300
Investment and owner-occupied property 965 1 515 1 486
Total capital commitments 1 212 1 733 1 843
Under contracts 574 961 646
Authorised by the directors but not contracted 638 772 1 182
Under agreement with material conditions outstanding 15
The group's share of commitments of joint ventures amounts to R18 million (31 December 2011: R12 million) and is to be
financed by the existing facilities in the joint venture operations.
The above 2012 capital commitments will be financed by available bank facilities, existing cash resources, internally
generated funds and R130 million (31 December 2011: R122 million) from non-controlling interests in unincorporated
property partnerships.
Retirement benefit obligations
as at 30 June 2012
Post-retirement medical benefit
The group operates an unfunded post-retirement medical aid benefit for permanent employees who joined the group
prior to 1 February 1999 and agency staff who joined prior to 1 March 2005.
As at 30 June 2012, the Liberty post-retirement medical aid benefit liability was R423 million (31 December 2011:
R459 million).
Defined benefit retirement funds
The group operates a number of defined benefit pension schemes on behalf of employees. All these funds are closed
to new membership and are well funded with no deficits reported.
Related parties
as at 30 June 2012
The following selected significant related party transactions have occurred in the 30 June 2012 financial period:
1) Summary of movement in investment in ordinary shares held by the group in the group's holding company is
as follows:
Fair
Number value Ownership
'000 Rm %
Standard Bank Group Limited
Balance at 1 January 2012 12 156 1 201 0,77
Purchases 4 963 558
Sales (4 830) (521)
Fair value adjustments 120
Balance at 30 June 2012 12 289 1 358 0,77
2) Bancassurance
Liberty has entered into joint venture bancassurance agreements with the Standard Bank group for the manufacture,
sale and promotion of insurance, investment and health products through Standard Bank's African distribution
capability. New business insurance premium income in respect of this business in 2012 amounted to R2 890 million
(2011 full year: R5 404 million). In terms of the agreements, Liberty's subsidiaries pay joint venture profit shares to
various Standard Bank operations. The amounts to be paid are in most cases dependent on source and type of
business and are paid along geographical lines. The total net profit share calculated as payable to the Standard
Bank group for 2012 is R382 million (2011 full year: R608 million).
During 2010 Liberty and Standard Bank conducted a detailed review of the existing bancassurance agreement and
agreed with effect from 1 January 2011, to expand the scope thereof to include asset management, investment and
health products in addition to the insurance products. The agreements are evergreen agreements with a 24-month
notice period for termination, but neither party may give notice of termination until February 2013. As the joint
venture bancassurance relationship provides commercial benefits to both Liberty and Standard Bank, a governance
framework is in place to protect the interests of minority shareholders.
In order to provide enhanced transparency and further detail in respect of Liberty's joint venture bancassurance
arrangements with Standard Bank, a summary document has been published on the investor relations page of
Liberty's website (www.liberty.co.za).
Business acquisition
as at 30 June 2012
Acquisition of Total Health Trust Limited (THT)
To continue the execution of the group's strategy to extend its market share of the wealth management business in
African countries outside of South Africa, Liberty has acquired a 51,2% controlling stake in THT. The effective date of
the transaction was 1 January 2012.
THT is a Nigerian health expenses insurance group servicing both government employees and corporate customers.
THT previously was accounted for as a joint venture of the group and the transaction to acquire control was in terms of
a staggered purchase agreement, with the final tranche of 5% to increase the shareholding to 51,2% being completed
on 1 January 2012 at a cost of R4 million.
The assets and liabilities arising from the acquisition are as follows:
2012
Rm
Equipment and owner-occupied properties under development 7
Investment properties 11
Intangible assets 40
Prepayments, insurance and other receivables 17
Short-term insurance liabilities (16)
Insurance and other payables (16)
Deferred taxation (1)
Current taxation (4)
Net assets and liabilities assumed 38
Cash acquired 29
Non-controlling interests(1) (33)
Net asset value attributable to ordinary shareholders 34
Acquisition cost (measured at fair value on 1 January 2012) 34
Previously held as a joint venture 30
Additional cash paid 4
Excess purchase price
(1)Non controlling interests represent their proportionate share of the assets and liabilities assumed.
Since acquisition date, THT has contributed R80 million to the group's total revenue and Rnil million to the group's total
earnings for the six months ended 30 June 2012.
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Date: 02/08/2012 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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