Wrap Text
Financial results for the year ended 31 December 2014
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 year ended 31 December 2014
Financial performance indicators
for the year ended 31 December 2014
%
2014 2013 change
Liberty Holdings Limited
Earnings
Basic earnings per share (cents) 1 523,5 1 517,9 –
BEE normalised headline earnings per share (cents) 1 403,3 1 439,6 (3)
BEE normalised operating earnings (Rm) 2 586 2 198 18
BEE normalised return on equity (%) 20,4 23,3 (12)
Group equity value
BEE normalised group equity value per share (R) 139,85 126,08 11
BEE normalised return on group equity value (%) 16,9 16,1 5
Distributions per share (cents)
Normal dividend 634 581 9
Interim dividend 232 212 9
Final dividend 402 369 9
Total assets under management (Rbn) 633 611 4
Long-term insurance operations
Indexed new business (excluding contractual increases) (Rm) 7 789 6 947 12
Embedded value of new business (Rm) 941 839 12
New business margin (%) 2,1 2,2 (5)
Net customer cash inflows (Rm) 9 870 6 316 56
Capital adequacy cover of Liberty Group Limited (times covered) 3,07 2,56 20
Asset management – STANLIB
Assets under management (Rbn) 551 545 1
Net cash (outflows)/inflows including money market (Rm)(1) (7 321) 15 725 (>100)
Retail and institutional net cash inflows excluding money market (Rm)(1) 6 417 13 527 (53)
Money market net cash (outflows)/inflows (Rm)(1) (13 738) 2 198 (>100)
(1)Excludes intergroup life funds.
Preparation and supervision:
This announcement on Liberty Holdings Limited's annual financial results for the year ended 31 December 2014 has been prepared
and supervised by JC Hubbard (Group Chief Financial Officer) BCom CA(SA) and CG Troskie (Executive Director – Finance and Risk)
BCom (Hons) CA(SA).
Financial review
for the year ended 31 December 2014
The group's second half financial performance was significantly improved on most indicators, including operating and equity value earnings.
This supported a full year return on group equity value of 17%, well above our medium-term expectation of 13%.
In the group's long-term insurance operations indexed new business grew 12% to R7 789 million, supported by strong single premium
investment sales. Net customer cash inflows were R11,8 billion (2013: R7,2 billion), including a R1,96 billion contribution from
the recently launched Retail LISP. Corporate business customer flows were substantially positive at R3,4 billion (2013: negative
R0,1 billion) due to several large investment and bulk annuity sales. New business margins improved in the second half but at 2,1% is
slightly below the 2,2% achieved in 2013, largely due to changes in product mix. The insurance business continues to manage well
within the long-term actuarial expense and policyholder behaviour assumptions.
LibFin Markets produced an improved result, due to the ongoing build of the credit book and a positive asset liability management
contribution which benefited from low realised volatility in equity and interest rate markets.
The group's asset manager, STANLIB suffered from the negative sentiment to money market funds following the African Bank
failure as well as investor trends to higher risk asset classes. This contributed to net withdrawals of R13,7 billion from the various
STANLIB money market funds. Both the higher margin retail and institutional mandates however, had net inflows of R5,8 billion and
R0,6 billion respectively. Assets under management across the group grew by 4% from 31 December 2013 to R633 billion.
The Shareholder Investment Portfolio (SIP) gross performance of 10,3% was close to benchmark, supported by solid contributions
from local and international equity markets as well as alternative asset classes.
Group BEE normalised headline earnings of R3 968 million are 3% lower, representing an 18% growth in operating earnings and
a 26% decrease in earnings from the SIP. The growth in operating earnings was achieved by strong performances from Retail SA,
Liberty Corporate and LibFin Markets.
BEE normalised group equity value per share of R139,85 is R13,77 up on 31 December 2013, and reflects R6 031 million of equity
value profits, or an annualised 16,9% return on opening group equity value.
Consistent management of the group's risks within the board approved risk appetite has supported the strengthening of the
group's capital position with the capital adequacy ratio in the group's main long-term insurance licence, Liberty Group Limited,
improving to 3,07 times (31 December 2013: 2,56 times) the regulatory minimum.
The group's positive performance reflects delivery on the strategy agreed with the board, supported by a comprehensive governance
structure. Management and the board have refreshed strategy with a time horizon to 2020. Key elements of this strategy are:
- A greater focus on customer centricity – with three customer facing units formed, namely Individual Arrangements, Group
Arrangements and Asset Management;
- Recognising the significant changes in the regulatory environment and government's social agenda in South Africa
which is likely to lead to a higher demand for products and services of group arrangements;
- Managing the core South African insurance operations within acceptable sustainable long-term assumption sets;
- Launching innovative new products to service targeted customer segments and profitably capture greater market shares;
- Optimising the balance sheet within board approved risk appetite limits;
- Accelerating the asset management strategy into increasing our alternative asset franchise offerings and capturing a greater
share of flows into Africa;
- Expanding our geographical footprint into expected high growth regions of sub-Saharan Africa; and
- Maximising opportunities under the Standard Bank bancassurance agreement.
Liberty is far advanced with the preparation for the implementation of Solvency Assessment and Management (SAM), the proposed
new long-term insurance solvency regime intended to come into effect on 1 January 2016, with a parallel process in 2015.
Our 31 December 2014 capital calculations under the current draft SAM guidelines indicates the group is well positioned from a capital
perspective. A number of other proposed regulatory changes are also facing the industry including tax, retirement and health reform,
protection of information initiatives, retail distribution review and treating customers fairly.
Liberty embraces these changes that are aimed at improving the sustainability of the industry.
Earnings by business unit
for the year ended 31 December 2014
2014 2013 %
Unaudited Rm Rm change
Insurance
Individual arrangements 1 689 1 467 15
Group arrangements 199 133 50
Liberty Corporate 170 121 40
Liberty Africa Insurance(1) 59 52 13
Liberty Health (30) (40) 25
Balance sheet management 220 137 61
LibFin Markets – credit portfolio 189 132 43
LibFin Markets – asset/liability matching 31 5 >100
Asset management
STANLIB 703 677 4
South Africa 603 571 6
Other Africa 59 62 (5)
Liberty Properties 41 44 (7)
Central overheads and sundry income (225) (216) (4)
BEE normalised operating earnings 2 586 2 198 18
LibFin Investments 1 382 1 878 (26)
BEE normalised headline earnings 3 968 4 076 (3)
BEE preference share adjustment (53) (62) 15
Headline earnings 3 915 4 014 (2)
(1)Liberty Africa Insurance includes long-term and short-term insurance products sold to both the retail and institutional markets.
The business unit has been classified under group arrangements as the majority of premiums are derived from institutional clients.
Individual arrangements
Headline earnings from the group's South African retail operations are R1 689 million (2013: R1 467 million) reflecting an earnings
increase of 15%. An increased asset base on which management fees are charged, ongoing good expense management and positive
risk variances are significant contributors to the result.
The Retail LISP, which offers direct investments into a range of collective investment schemes available to retail customers
through a cost-efficient platform and complements the life wrapper investment product range, attracted almost R2 billion in
net new investments. The innovative Evolve investment product range continues to outperform expectations with single premium
investment sales totalling R5,8 billion for the year up 64% on 2013.
Indexed new business sales (excluding the Retail LISP and contractual increases) of R6.4 billion, increased by 6% over 2013
including a 15% increase in single premium business. Recurring premium business is marginally higher by 2,5% on last year partly due
to a slow down in bank lending which has impacted credit life sales under the bancassurance agreement and partly due to
an increasingly demanding consumer environment. The value of new business increased by 7% to R793 million at a margin of 2,3%
(2013: 2,4%) and remains within the medium-term targeted range. The risk discount rate ended at similar levels to 31 December 2013
and therefore had very little impact. The slight decrease in margin is attributable to the relative lower growth of higher margin risk
products to investment products.
Net cash inflows (excluding the Retail LISP) are pleasing at R5,9 billion and were supported by higher contributions from
our sales of single premium investment products offsetting the increase in average policy withdrawal values due to recent good
investment returns.
The comprehensive loyalty programme "Own your life REWARDS" has grown principal membership in excess of 30 000 at 31 December 2014.
Group arrangements
Liberty Corporate
Improved headline earnings of R170 million (up 40%) are mainly a function of higher asset based management fees and cost control.
This is despite absorbing R72 million new business strain relating to the substantial new business volumes written. The continued
innovation in Liability Driven Investment Solutions products has been well received in the market and has resulted in attracting a
number of large investment and bulk annuity mandates.
Indexed new business has consequently grown by 51% to R1 195 million and contributed a value of new business of
R121 million at a margin of 1,1%.
Whilst acknowledging the volatility of investment mandates in reflecting cash flows, management is very encouraged by net
customer cash inflows of R3 438 million which are positive for the first time since 2007.
Liberty Africa Insurance
East and Southern Africa (excluding South Africa) insurance businesses contributed R59 million (2013: R52 million) to Liberty's
headline earnings for the year. The long-term insurance operations have performed to expectation and the short-term business had
a better second half. Net claims loss ratios (after re-insurance) have been consistent with last year in the short-term insurance
business. Long-term insurance new business has been impacted by lower bancassurance sales in Botswana leading to a decrease in
overall margin to 6,5%.
The group continues to evaluate business opportunities throughout the sub-Saharan African region and has reserved capital resources
to take advantage of investment opportunities as they arise.
Liberty Health
Liberty's share of Liberty Health's headline loss for the year is R30 million (2013: R40 million loss). With effect from 1 August 2014,
Liberty acquired the remaining non-controlling shareholder equity interests in Liberty Health (equity and loan claims) for R133 million.
Liberty Health is now a 100% held subsidiary allowing for greater flexibility in executing strategy.
Balance sheet management
Asset liability management and credit portfolio (LibFin Markets)
LibFin Markets contributed R220 million to headline earnings (2013: R137 million).
The Credit Portfolio, a diversified portfolio of government, state owned enterprise and corporate securities backing the
guaranteed investment product set, contributed R189 million (2013: R132 million) in line with the growth of the portfolio and
through diversification away from less efficient legacy assets.
The asset liability management earnings, the result of managing market risk arising from the guaranteed investment product set,
was R31 million for the year (2013: R5 million) benefiting from low realised volatility in equity and interest rate markets during 2014.
LibFin assets under management at 31 December 2014 was R45 billion (2013: R36 billion).
Shareholder Investment Portfolio (SIP) (LibFin Investments) LibFin Investments manages the SIP which comprises the group's
investment market exposure to the 90:10 book of business and the assets backing capital in the insurance operations. The portfolio
which is managed under a low risk balanced mandate produced a gross return of 10,3% (2013: 14,6%) which was marginally behind
benchmark for the year.
This portfolio is managed on a long term basis and in the context of the outperformance during 2013, remains significantly ahead
of the past three years' cumulative benchmarks. The return has followed the favourable performance of local and international
equity markets, a relatively stable interest rate environment during the period as well as the benefit of tactical asset allocations to
infrastructure assets.
The portfolio contributed R1 382 million (2013: R1 878 million) to the group's headline earnings broadly in line with decreased
market returns partially offset by the growth in the average asset base invested.
Asset management
STANLIB
STANLIB's headline earnings of R662 million are 5% higher compared to the equivalent period in 2013. Net cash outflows
(excluding inter group) of R7,3 billion compare to the inflows of R15,7 billion in 2013. The outflows comprise net withdrawals of
R13,7 billion from the various STANLIB money market funds and net inflows of R6,4 billion into higher margin retail and institutional
mandates. The substantial outflows in the second half, associated costs and reduced fee income arising from the African Bank
failure and the decision to cease initial fees has resulted in lower earnings growth in South Africa. The recent investments in
building alternative asset class capabilities are attracting significant investor interest.
Total assets under management increased slightly to R551 billion at 31 December 2014 (2013: R545 billion) reflecting the
impacts of negative net cash flows both from external and intergroup mandates.
STANLIB's unit trusts recently received four Raging Bull awards. The five year performance of over 60% of the STANLIB surveyed
institutional and core retail funds are in the first or second quartiles.
Liberty Properties
Liberty Properties, which comprises property management and development, has contributed R41 million (2013: R44 million) to
headline earnings, reflecting lower development fee income, the reduced portfolio size and one off restructure costs. As part of the
rebalancing of the unlisted property portfolio, several wholly owned hotels valued at R1,1 billion were sold in April 2014 to The Cullinan
Hotel (Pty) Limited, a 40% associate company of the group.
Bancassurance
The commercial bancassurance joint venture relationship with Standard Bank, which is applicable across the group's asset
management and insurance operations, continues to make a considerable contribution to new business volumes and earnings.
The value of new business derived from Liberty insurance products (excluding credit life) for the year from bancassurance channels are
over 30% higher than 2013. STANLIB received a 4% growth in net asset management fees related to assets acquired through the
Standard Bank distribution channel.
The total SA covered business embedded value of in-force contracts sold under the agreement attributable to Liberty at 31 December 2014
increased to R1,5 billion (2013: R1,3 billion).
Tax legislation
The 2014 Taxation Laws Amendment Act, which corrected the applicable legislation in regard to long-term insurers' expense relief
formulas (with retrospective effect), was signed into law in early 2015. All the applicable group's liabilities at 31 December 2014 have
been modelled using this legislation.
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited strengthened to 3,07 times the statutory requirement (2013: 2,56 times). All the
other group subsidiary life licences remain well capitalised.
Capital adequacy requirements in South Africa are set at the higher of the "termination" (TCAR) basis or "ordinary" (OCAR) basis.
Both 2014 and 2013 reflect the higher amount as OCAR.
Dividends
2014 final dividend
In line with the group's dividend policy, the board has approved and declared a gross final dividend of 402 cents per ordinary share.
The final 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, 10 April 2015.
The dividend of 402 cents per ordinary share will be subject to a local dividend tax rate of 15% which will result in a net final
dividend, to those shareholders who are not exempt from paying dividend tax, of 341,7 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 dividend are as follows:
Last date to trade cum dividend Wednesday, 1 April 2015
on the JSE
First trading day ex dividend on Thursday, 2 April 2015
the JSE
Record date Friday, 10 April 2015
Payment date Monday, 13 April 2015
Share certificates may not be dematerialised or rematerialised between Thursday, 2 April 2015 and Friday, 10 April 2015, 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 dematerialised their shares
will have their accounts with their CSDP or broker credited on Monday, 13 April 2015.
Prospects
Our established track record of exceeding our targeted return on group equity value gives us confidence that we can continue to
sustainably grow the business.
Our strategic direction positions us well to adapt to the changing consumer and regulatory environment.
Thabo Dloti Jacko Maree
Chief Executive Chairman
25 February 2015
www.libertyholdings.co.za
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.libertyholdings.co.za
Accounting policies
The 2014 summary consolidated annual financial statements of Liberty Holdings Limited have been prepared in accordance with and
containing information required by:
- International Financial Reporting Standards (IFRS) including IAS 34 Interim Financial Reporting (with the exception of
disclosures required under IAS 34 16A (j) relating to fair value measurement, which are not required by the
JSE Listing Requirements);
- the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee;
- Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council;
- the Listings Requirements of the JSE Limited; and
- the South African Companies Act No. 71 of 2008.
The financial statements have been prepared in compliance with IFRS and interpretations for year ends commencing on or after
1 January 2014. The accounting policies are consistent with those adopted in the previous year except for the mandatory adoption
of minor amendments to IFRS, which are effective for years commencing 1 January 2014. These changes have not resulted
in any material impacts to the group's 2014 reported results, comparative periods or disclosures.
Auditor statement
PricewaterhouseCoopers Inc. (PwC) have audited the consolidated annual financial statements of Liberty Holdings Limited from
which the summary consolidated financial results have been extracted. These summary consolidated financial results comprise
the summary consolidated statement of financial position at 31 December 2014, the summary consolidated statements of
comprehensive income, changes in equity and cash flows for the year then ended and selected explanatory notes. These statements
and related notes are marked as 'audited'.
The financial results contained in this announcement have been prepared in accordance with the requirements of the JSE
Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act applicable to summary financial
statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial Reporting Standards (IFRS), SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and also, as a minimum, to contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the consolidated annual financial statements, from which the summary
consolidated financial results were extracted, are in terms of IFRS and are consistent with the accounting policies applied in
the preparation of the previous consolidated annual financial statements. This announcement does not include the information
required pursuant to paragraph 16A (j) of IAS 34. The full IAS 34 compliant summary consolidated financial results announcement
is available on the company's website and at the company's registered office.
The auditors have expressed an unmodified audit opinion on the consolidated annual financial statements. PwC have also issued an
unmodified assurance opinion on Liberty Holdings Limited's group equity value report, which has also been marked as 'audited' in this
financial results announcement.
Shareholders are advised that in order to obtain a full understanding of the nature of the auditors' engagement, they should obtain a
copy of the auditors' reports together with the accompanying financial information which is available upon request from Liberty
Holdings Limited's registered office.
Directors' responsibility
The summary group financial statements included in this announcement are the full responsibility of the directors.
The directors confirm that the financial information has been correctly extracted from the underlying audited consolidated group
annual financial statements which are available for inspection at the company's registered office on request.
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.
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 CAR 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.
"Liberty" or "group"
Represents the collective of Liberty Holdings Limited and its subsidiaries.
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 – Value of new business and margin
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.
Short-term insurance operations – 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.
Development costs
Represents project costs incurred on developing or enhancing future revenue opportunities.
Consolidated statement of financial position
as at 31 December 2014
2014 2013
Audited Rm Rm
Assets
Equipment and owner-occupied properties under development 975 1 114
Owner-occupied properties 1 464 1 410
Investment properties 27 022 27 299
Intangible assets 368 475
Defined benefit pension fund employer surplus 277 210
Deferred acquisition costs 590 527
Interests in joint ventures 404
Reinsurance assets 1 558 1 609
Long-term insurance 1 302 1 161
Short-term insurance 256 448
Operating leases – accrued income 1 261 1 315
Pledged assets measured at fair value through profit or loss 6 991 1 348
Assets held for trading and for hedging 7 777 6 387
Interests in associates – measured at fair value through profit or loss 16 497 15 361
Financial investments 292 844 279 043
Deferred taxation 455 354
Prepayments, insurance and other receivables 3 668 3 913
Cash and cash equivalents 13 985 9 870
Total assets 375 732 350 639
Liabilities
Long-term policyholder liabilities 287 516 263 944
Insurance contracts 195 356 180 742
Investment contracts with discretionary participation features 10 177 9 056
Financial liabilities under investment contracts 81 983 74 146
Short-term insurance liabilities 683 846
Financial liabilities at amortised cost 3 575 3 167
Third party financial liabilities arising on consolidation of mutual funds 34 501 39 983
Employee benefits 1 371 1 344
Deferred revenue 216 194
Deferred taxation 4 131 3 586
Deemed disposal taxation liability 268 544
Provisions 173 195
Derivative liabilities 5 148 4 860
Insurance and other payables 14 251 9 716
Current taxation 265 904
Total liabilities 352 098 329 283
Equity
Ordinary shareholders' interests 19 487 17 654
Share capital 26 26
Share premium 5 755 5 985
Retained surplus 14 599 12 454
Other reserves (893) (811)
Non-controlling interests 4 147 3 702
Total equity 23 634 21 356
Total equity and liabilities 375 732 350 639
Consolidated statement of comprehensive income
for the year ended 31 December 2014
2014 2013
Audited Rm Rm
Revenue
Insurance premiums 42 139 35 782
Reinsurance premiums (1 415) (1 316)
Net insurance premiums 40 724 34 466
Service fee income from investment contracts 916 900
Investment income 15 796 13 220
Hotel operations sales 673 809
Investment gains 19 274 33 554
Fee revenue and reinsurance commission 2 322 2 324
Total revenue 79 705 85 273
Claims and policyholder benefits under insurance contracts (32 629) (25 904)
Insurance claims recovered from reinsurers 898 1 357
Change in long-term policyholder liabilities (15 469) (20 698)
Insurance contracts (14 559) (15 937)
Investment contracts with discretionary participation features (1 050) (4 941)
Applicable to reinsurers 140 180
Fair value adjustment to policyholder liabilities under investment contracts (7 473) (10 135)
Fair value adjustment on third party mutual fund interests (3 585) (7 832)
Acquisition costs (4 579) (4 233)
General marketing and administration expenses (9 376) (9 079)
Finance costs (407) (327)
Profit share allocations under bancassurance and other agreements (876) (984)
Profit before taxation 6 209 7 438
Taxation(2) (1 926) (2 968)
Total earnings 4 283 4 470
Other comprehensive income (47) 88
Items that may be reclassified subsequently to profit or loss (52) 56
Net change in fair value on cash flow hedges (129) (183)
Income and capital gains tax relating to net change in fair value on cash flow hedges 36 53
Foreign currency translation 41 186
Items that may not be reclassified subsequently to profit or loss 5 32
Owner-occupied properties – fair value adjustment 22 28
Income and capital gains tax relating to owner-occupied properties fair value adjustment (25) (10)
Change in long-term policyholder insurance liabilities (application of shadow accounting) (12) (22)
Actuarial (losses)/gains on post-retirement medical aid liability (16) 24
Income tax relating to post-retirement medical aid liability 4 (7)
Net adjustments to defined benefit pension fund(1) 62 26
Income tax relating to defined benefit pension fund (30) (7)
Total comprehensive income 4 236 4 558
Total earnings attributable to:
Ordinary shareholders' interests 3 917 3 908
Non-controlling interests 366 562
4 283 4 470
Total comprehensive income attributable to:
Ordinary shareholders' interests 3 864 3 936
Non-controlling interests 372 622
4 236 4 558
Basic and fully diluted earnings per share Cents Cents
Basic earnings per share 1 523,5 1 517,9
Fully diluted basic earnings per share 1 392,4 1 393,4
(1)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.
(2)IFRS reqiures both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge
relative to profit before taxation.
Headline earnings and earnings per share
for the year ended 31 December 2014
2014 2013
Audited Rm Rm
Reconciliation of total earnings to headline earnings attributable to equity holders
Total earnings attributable to equity holders 3 917 3 908
Preference share dividend (2) (2)
Basic earnings attributable to ordinary shareholders 3 915 3 906
Derecognition and impairment of intangible assets 126
FCTR recycled through profit or loss (18)
Headline earnings attributable to ordinary shareholders 3 915 4 014
Net income earned on BEE preference shares 53 62
BEE normalised headline earnings attributable to ordinary shareholders 3 968 4 076
Weighted average number of shares in issue ('000) 256 975 257 334
BEE normalised weighted average number of shares in issue ('000) 282 771 283 130
Fully diluted weighted average number of shares in issue ('000) 281 165 280 329
Earnings per share Cents Cents
Total earnings attributable to ordinary shareholders
Basic 1 523,5 1 517,9
Headline 1 523,5 1 559,8
BEE normalised headline 1 403,3 1 439,6
Fully diluted earnings attributable to ordinary shareholders
Basic 1 392,4 1 393,4
Headline 1 392,4 1 431,9
Summary statement of changes in shareholders' funds
for the year ended 31 December 2014
2014 2013
Audited Rm Rm
Balance of ordinary shareholders' interests at 1 January 17 654 15 410
Ordinary dividends (1 719) (1 566)
Special dividend (371)
Total comprehensive income 3 864 3 936
Share buy-backs net of share subscriptions (355) (15)
Black Economic Empowerment transaction 153 171
Share-based payments 133 109
Preference dividends (2) (2)
Transactions between owners (230)
Common control transaction (11)
FCTR recycled through profit or loss (18)
Ordinary shareholders' interests 19 487 17 654
Balance of non-controlling interests at 1 January 3 702 3 101
Total comprehensive income 372 622
Unincorporated property partnerships net distributions (79) (6)
Non-controlling share of subsidiary dividend (38) (17)
FCTR recycled through profit or loss 2
Transactions between owners 190
Non-controlling interests 4 147 3 702
Total equity 23 634 21 356
Summary statement of cash flows
for the year ended 31 December 2014
2014 2013
Audited Rm Rm
Operating activities 5 832 8 196
Investing activities (1 928) (10 014)
Financing activities 179 1 157
Net increase/(decrease) in cash and cash equivalents 4 083 (661)
Cash and cash equivalents at the beginning of the year 9 870 10 418
Cash and cash equivalents acquired through business acquisition 5
Foreign currency translation 27 113
Cash and cash equivalents at the end of the year 13 985 9 870
Summary segment information
for the year ended 31 December 2014
The audited segment results for the year ended 31 December 2014 are as follows:
Short- Asset Reporting
Long-term insurance term manage- Health adjust- IFRS
Rm Retail Corporate insurance ment services Other Total ments(1) reported
Total revenue 62 914 20 407 1 193 3 067 317 1 957 89 855 (10 150) 79 705
Profit/(loss) before taxation 3 944 405 107 944 (73) 587 5 914 295 6 209
Taxation (1 713) (102) (28) (230) 22 125 (1 926) (1 926)
Total earnings/(loss) 2 231 303 79 714 (51) 712 3 988 295 4 283
Other comprehensive
(loss)/income (95) (3) 9 10 32 (47) (47)
Total comprehensive
income/(loss) 2 136 300 88 724 (51) 744 3 941 295 4 236
Attributable to:
Non-controlling interests (39) (23) (39) (8) 14 18 (77) (295) (372)
Equity holders 2 097 277 49 716 (37) 762 3 864 3 864
Reconciliation of total
earnings/(loss) to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) 2 231 303 79 714 (51) 712 3 988 295 4 283
Attributable (to)/from
non-controlling interests (37) (23) (35) (8) 14 18 (71) (295) (366)
Preference share dividend (2) (2) (2)
Headline earnings/(loss) 2 194 280 44 706 (37) 728 3 915 3 915
Net income earned on BEE
preference shares 53 53 53
BEE normalised headline
earnings/(loss) 2 194 280 44 706 (37) 781 3 968 3 968
(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,
the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of
intergroup transactions.
The audited segment results for the year ended 31 December 2013 are as follows:
Short- Asset Reporting
Long-term insurance term manage- Health adjust- IFRS
Rm Retail Corporate insurance ment services Other Total ments(1) reported
Total revenue 66 124 17 319 1 076 3 064 288 1 817 89 688 (4 415) 85 273
Profit/(loss) before taxation 5 161 298 116 926 (274) 653 6 880 558 7 438
Taxation (2 585) (78) (51) (258) 46 (42) (2 968) (2 968)
Total earnings/(loss) 2 576 220 65 668 (228) 611 3 912 558 4 470
Other comprehensive
(loss)/income (44) 2 57 28 45 88 88
Total comprehensive
income/(loss) 2 532 222 122 696 (228) 656 4 000 558 4 558
Attributable to:
Non-controlling interests (46) (17) (52) (9) 57 3 (64) (558) (622)
Equity holders 2 486 205 70 687 (171) 659 3 936 3 936
Reconciliation of total
earnings/(loss) to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) 2 576 220 65 668 (228) 611 3 912 558 4 470
Attributable (to)/from
non-controlling interests (14) (17) (25) (8) 57 3 (4) (558) (562)
Preference share dividend (2) (2) (2)
Intangible assets impairment 27 99 126 126
FCTR recycled through
profit or loss 6 (24) (18) (18)
Headline earnings/(loss) 2 589 203 40 660 (66) 588 4 014 4 014
Net income earned on BEE
preference shares 62 62 62
BEE normalised headline
earnings/(loss) 2 589 203 40 660 (66) 650 4 076 4 076
(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,
the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of
intergroup transactions.
Group equity value report
as at 31 December 2014
1. Introduction
Liberty presents a "group equity value" report to reflect the combined value of the various components of Liberty's businesses.
Section 2 below describes 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 following component parts:
2.1 South African covered business:
The wholly owned subsidiary, Liberty Group Limited, comprises the 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 (2013: 10 times) multiple of estimated sustainable earnings.
Liberty Properties Valued using a 10 times (2013: 10 times) multiple of estimated sustainable earnings.
Liberty Health As Liberty Health has yet to establish a history to support a sustainable earnings calculation, adjusted IFRS
net asset value is applied.
Liberty Africa Insurance Liberty Africa Insurance is an emerging cluster of both long and short-term insurance businesses located
in various African countries outside of 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. At 31 December
2014 and 2013 the combined valuations approximated the group's IFRS net asset value. Therefore the
IFRS net asset value was used.
LibFin Credit LibFin originates appropriate illiquid assets that provide acceptable illiquidity premiums. The value of this
origination is reflected at a 10 times (2013: 10 times) multiple of estimated sustainable earnings adjusting
for related expenses and prudential margin.
Liberty Holdings The net market value of assets and liabilities held by the Liberty Holdings Limited company excluding
investments in any subsidiaries which are valued separately.
2.3 Other adjustments:
These comprise the fair value of share rights allocated to staff not employed by the South African covered businesses, adjusting certain
deferred tax assets to current values and allowance for certain shareholder recurring costs incurred in Liberty Holdings Limited capitalised
at a multiple of 9 times (2013: 9 times).
3. BEE normalised group equity value
3.1 Analysis of BEE normalised group equity value
Value of
in-force:
Audited SA Other Group SA
2014 covered busi- funds Adjust- Net covered
Rm business nesses invested ments worth business Total
SA insurance operations 10 958 10 958 (5 508) 5 450 22 941 28 391
Individual arrangements 20 927
Group arrangements 2 014
Value of in-force acquired 74 74 (74)
Working capital and other assets 6 183 6 183 (466) 5 717 5 717
South African insurance operations 17 215 17 215 (6 048) 11 167 22 941 34 108
Other group businesses:
STANLIB 649 649 5 751 6 400 6 400
South Africa 444 444 5 356 5 800 5 800
Other Africa 205 205 395 600 600
Liberty Properties 45 45 280 325 325
Liberty Health 342 342 342 342
Liberty Africa Insurance 586 586 586 586
LibFin Credit 900 900 900
Liberty Holdings 650 650 (100) 550 550
Cost of required capital (1 456) (1 456)
Net equity as reported under IFRS 17 215(1) 2 272 19 487 783 20 270 21 485 41 755
BEE preference funding 807 807 807 807
Allowance for future shareholders costs (356) (356) (356) (1 952) (2 308)
Allowance for employee share rights (136) (94) (230) (230) (230)
BEE normalised equity value 17 886 1 822 19 708 783 20 491 19 533 40 024
Summary of adjustments:
Negative rand reserves (5 508) (5 508)
Deferred acquisition costs (573) (573)
Deferred revenue liability 207 207
Frank Financial Services allowance for
future expenses (100) (100)
Carrying value of in-force business acquired (74) (74)
Fair value adjustment of non SA covered
business 6 931 6 931
Impact of discounting on deferred tax asset (100) (100)
(6 048) 6 831 783
(1)Reconciliation to SA covered business net worth
as per analysis in supplementary information
Net equity of SA covered business as reported under IFRS 17 215
Adjustments as above (6 048)
Allowance for employee share options/rights (136)
BEE preference share funding 807
Net worth as reported in supplementary information 11 838
Value of
in-force:
Audited SA Other Group SA
2013 covered busi- funds Adjust- Net covered
Rm business nesses invested ments worth business Total
SA insurance operations 10 775 10 775 (5 350) 5 425 21 637 27 062
Individual arrangements 19 830
Group arrangements 1 807
Value of in-force acquired 150 150 (150)
Working capital and other assets 4 145 4 145 (381) 3 764 3 764
South African insurance operations 15 070 15 070 (5 881) 9 189 21 637 30 826
Other group businesses:
STANLIB 570 570 5 080 5 650 5 650
South Africa 396 396 4 854 5 250 5 250
Other Africa 174 174 226 400 400
Liberty Properties 50 50 350 400 400
Liberty Health (including Total Health Trust) 87 87 (87)
Liberty Africa Insurance 488 488 488 488
LibFin Credit 650 650 650
Liberty Holdings 1 389 1 389 (47) 1 342 1 342
Cost of required capital (1 566) (1 566)
Net equity as reported under IFRS 15 070(1) 2 584 17 654 65 17 719 20 071 37 790
BEE preference funding 905 905 905 905
Allowance for future shareholders costs (247) (247) (247) (1 970) (2 217)
Allowance for employee share
options/rights (236) (175) (411) (411) (411)
BEE normalised equity value 15 739 2 162 17 901 65 17 966 18 101 36 067
Summary of adjustments:
Negative rand reserves (5 350) (5 350)
Deferred acquisition costs (513) (513)
Deferred revenue liability 185 185
Internally generated software (53) 53
Carrying value of in-force business
acquired (150) (150)
Fair value adjustment of non SA covered
business 5 993 5 993
Liberty Health loan impairment (100) (100)
(5 881) 5 946 65
(1)Reconciliation to SA covered business net worth
as per analysis in supplementary information
Net equity of SA covered business as reported under IFRS 15 070
Adjustments as above (5 881)
Allowance for employee share options/rights (236)
BEE preference share funding 905
Net worth as reported in supplementary information 9 858
3.2 BEE normalised group equity value earnings and value per share
2014 2013
SA Other SA Other
Audited covered busi- covered busi-
Rm (unless otherwise stated) business nesses Total business nesses Total
BEE normalised equity value at the
end of the year 31 371 8 653 40 024 27 959 8 108 36 067
Equity value at the end of the year 30 564 8 653 39 217 27 054 8 108 35 162
BEE preference shares 807 807 905 905
Adjustments from group restructure (6) 6
Capital transactions 355 355 15 15
Funding of restricted share plan 117 (117) 87 (87)
Intergroup dividends 1 290 (1 290) 1 653 (1 653)
Dividends paid 1 719 1 719 1 939 1 939
BEE normalised equity value at the
beginning of the year (27 959) (8 108) (36 067) (25 574) (7 166) (32 740)
Equity value at the beginning of the year (27 054) (8 108) (35 162) (24 562) (7 166) (31 728)
BEE preference shares (905) (905) (1 012) (1 012)
BEE normalised equity value earnings 4 819 1 212 6 031 4 119 1 162 5 281
BEE normalised return on group
equity value (%) 17,3 15,4 16,9 16,2 16,1 16,1
BEE normalised number of shares (000's) 286 201 286 057
Number of shares in issue (000's) 256 946 257 801
Shares held for the employee restricted
share scheme (000's) 3 459 2 460
Adjustment for BEE shares (000's) 25 796 25 796
BEE normalised group equity value
per share (rand) 139,85 126,08
3.3 Sources of BEE normalised group equity value earnings
2014 2013
SA Other SA Other
Audited covered busi- covered busi-
Rm business nesses Total business nesses Total
Value of new business written in the year 914 27 941 806 33 839
Expected return on value of in-force business 2 131 2 131 1 843 1 843
Variances/changes in operating assumptions 662 (109) 553 (99) (15) (84)
Operating experience variances (including
incentive outperformance) 709 (40) 669 249 (15) 234
Transfer of shareholder expense reserve 69 (69)
Operating assumption changes (62) (62) 54 54
Changes in modelling methodology (54) (54) (204) (204)
One period replacement of shareholder
expenses and inflating expenses (122) (67) (189) (113) (38) (151)
Headline earnings of other businesses 732 732 17 672 689
Operational equity value profits 3 585 583 4 168 2 652 652 3 304
Non headline earnings adjustments (126) (126)
Development costs (52) (25) (77) (53) (29) (82)
Economic adjustments 1 186 (338) 848 1 451 174 1 625
Investment return on net worth 965 (285) 680 1 024 174 1 198
Internally generated software 53 (53)
Credit portfolio earnings 189 189 132 132
Change in fair value on cash flow hedges (93) (93) (130) (130)
Investment variances 14 14 1 028 1 028
Change in economic assumptions 58 58 (603) (603)
Increase in fair value adjustments on value
of other businesses 911 911 484 484
Change in allowance for fair value of
share rights 100 81 181 69 7 76
Group equity value earnings 4 819 1 212 6 031 4 119 1 162 5 281
3.4 Analysis of value of long-term insurance, new business and margins
Audited
Rm (unless otherwise stated) 2014 2013
South African covered business:
Individual arrangements 1 640 1 580
Traditional Life 1 472 1 387
Direct channel 77 91
Credit Life 91 102
Group arrangements 249 141
Gross value of new business 1 889 1 721
Overhead acquisition costs impact on value of new business (874) (833)
Cost of required capital (101) (82)
Net value of South African covered new business 914 806
Present value of future expected premiums 44 916 37 753
Margin (%) 2,0 2,1
Liberty Africa Insurance:
Net value of new business 27 33
Present value of future expected premiums 413 362
Margin (%) 6,5 9,1
Total group net value of new business 941 839
Total group margin (%) 2,1 2,2
Long-term insurance new business
for the year ended 31 December 2014
2014 2013
Unaudited Rm Rm
Sources of insurance operations total new business by customer segment
Retail segment 25 334 22 505
Single 20 987 18 270
Recurring 4 347 4 235
Institutional segment 6 029 2 816
Single 5 207 2 144
Recurring 822 672
Total new business 31 363 25 321
Single 26 194 20 414
Recurring 5 169 4 907
Sources of insurance indexed new business 7 789 6 947
Individual arrangements 6 375 6 000
Group arrangements:
Liberty Corporate 1 195 789
Liberty Africa Insurance(1) 219 158
(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.
Long-term insurance net cash flows
for the year ended 31 December 2014
2014 2013
Unaudited Rm Rm
Premiums
Recurring 26 610 24 936
Retail segment 18 921 17 544
Institutional segment 7 689 7 392
Single 27 806 21 979
Retail segment 12 884 11 463
Immediate annuities 7 627 6 718
Institutional segment 7 295 3 798
Net premium income from insurance contracts and inflows from investment contracts 54 416 46 915
Claims and policyholders benefits
Retail segment (33 209) (29 378)
Death and disability claims (5 613) (4 879)
Policy surrender and maturity claims (22 978) (20 374)
Annuity payments (4 618) (4 125)
Institutional segment (11 337) (11 221)
Death and disability claims (1 966) (1 859)
Scheme terminations and member withdrawals (8 971) (9 007)
Annuity payments (400) (355)
Net claims and policyholders benefits (44 546) (40 599)
Long-term insurance net cash flows 9 870 6 316
Sources of insurance operations cash flows by business unit:
Individual arrangements 5 921 6 111
Group arrangements:
Liberty Corporate 3 438 (83)
Liberty Africa Insurance(1) 437 325
Asset management:
STANLIB Multi-manager 74 (37)
(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)
as at 31 December 2014
2014 2013
Unaudited Rbn Rbn
Managed by group business units 605 586
STANLIB South Africa 510 507
STANLIB Other Africa(2) 41 38
LibFin 45 36
Other internal managers 9 5
Externally managed 28 25
Total assets under management 633 611
(1)Includes funds under administration.
(2)Liberty owns less than 100% of the various entities that make up STANLIB other Africa. The information is recorded at 100%
and is not adjusted for proportional legal ownership.
Asset management net cash flows – STANLIB(1)
for the year ended 31 December 2014
2014 2013
Unaudited Rm Rm
South Africa
Non-money market 6 211 19 433
Retail segment 5 319 17 584
Institutional segment 892 1 849
Money market (11 353) 2 229
Retail segment (3 359) (1 689)
Institutional segment (7 994) 3 918
Net South Africa cash (outflows)/inflows (5 142) 21 662
Other Africa
Non-money market 206 (5 906)
Retail segment 517 1 539
Institutional segment (311) (7 445)
Money market (2 385) (31)
Net other Africa cash outflows(2) (2 179) (5 937)
Net cash (outflows)/inflows from asset management (7 321) 15 725
(1)Cash flows exclude intergroup life funds.
(2)Liberty owns less than 100% of the various entities that make up STANLIB other Africa. The information is recorded at 100%
and is not adjusted for proportional legal ownership.
Short-term insurance indicators
for the year ended 31 December 2014
2014 2013
Audited Rm Rm
Premiums 1 037 930
Liberty Health – medical risk 694 640
Liberty Africa Insurance – motor, property, medical and other 343 290
Claims (612) (559)
Liberty Health – medical risk (471) (438)
Liberty Africa Insurance – motor, property, medical and other (141) (121)
Net cash inflows from short-term insurance 425 371
Unaudited
Claims loss ratio (%)
Liberty Health 68 68
Liberty Africa Insurance 41 42
Combined loss ratio (%)
Liberty Health 96 100
Liberty Africa Insurance 94 98
Capital commitments
as at 31 December 2014
2014 2013
Audited Rm Rm
Equipment 379 563
Investment and owner-occupied property 4 427 3 544
Unconsolidated structured entities(1) 482 509
Total capital commitments 5 288 4 616
Under contracts 3 486 944
Authorised by the directors but not contracted 1 802 3 672
(1)These are undrawn commitments to various unconsolidated structured entities and mainly form part of the ongoing
build of the LibFin credit book. Drawing is subject to covenant checks by Liberty.
The above 2014 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds and
R160 million (2013: R218 million) from non-controlling interests in unincorporated property partnerships.
Corporate actions
for the year ended 31 December 2014
The corporate actions described below have been or will be funded from the group's existing resources and facilities.
Completed transactions
Change in shareholding in The Cullinan Hotel (Pty) Ltd (Cullinan)
As a result of a series of transactions that involved selling a portion (R1,1 billion) of the group's hotel portfolio to Cullinan, the group's
interest in Cullinan reduced from 50% to 40% with effect from 30 April 2014.
Cullinan was a 50% held joint venture (measured at fair value) between the group's wholly-owned subsidiary, Liberty Group Limited, and
Southern Sun Hotel Interests (Pty) Ltd (SSHI), a subsidiary of Tsogo Sun Limited.
As a result of this transaction Liberty has significant influence over Cullinan and the investment is accounted for as an associate held at fair
value (at 31 December 2014 valued at R406 million). The impact to the group's profit and loss of the redesignation (from a joint venture to
an associate) is neutral as Liberty applies the IAS 28 measurement exemption to both joint ventures and associates that back investment-
linked insurance obligations. Therefore, the investment has been measured consistently at fair value throughout the period.
Transaction between owners
Liberty Holdings Limited entered into an agreement with the trustees of the NHA Trust with an effective date of 1 August 2014, in terms
of which it acquired all of the remaining NHA Trust's shares in Liberty Health Holdings Proprietary Limited (Liberty Health) for R40 million
and loan claims of R93 million against Liberty Health at face value. This resulted in an aggregate purchase consideration of R133 million.
As Liberty Health is already a subsidiary of the group, the transaction has been accounted for as a transaction between owners.
Acquisition of Stanbic Investment Management Services Limited (SIMS Ghana)
To continue the group's strategy to extend its market share of the asset management business in Africa, Liberty effective 1 August 2014,
purchased a 100% interest in SIMS Ghana from the Standard Bank group for R15 million.
Transaction in progress at 31 December 2014
Acquisition of a share in an unincorporated property partnership
Liberty Group Limited has entered into a partnership agreement to acquire a 25% undivided share in the developed properties and
associated rental operations of the Melrose Arch precinct in Johannesburg for R1,7 billion.
The transaction is subject to various conditions which are outstanding at the date of this report.
Retirement benefit obligations
as at 31 December 2014
Audited
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 31 December 2014, the Liberty post-retirement medical aid benefit liability was R423 million (2013: R375 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
for the year ended 31 December 2014
Audited
Standard Bank Group Limited and any subsidiary (excluding Liberty) is referred to as Standard Bank in the context of this section.
The following selected significant related party transactions have occurred in the 2014 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 2014 7 062 914 0,44
Purchases 8 765 1 158
Sales (3 583) (498)
Fair value adjustments 183
Balance at 31 December 2014 12 244 1 757 0,77
2. Bancassurance
The Liberty group has extended the joint venture bancassurance agreements with the Standard Bank group for the manufacture, sale
and promotion of insurance, investment and health products through the Standard Bank's African distribution capability. New business
premium income in respect of this business in 2014 amounted to R7 984 million (2013: R7 624 million). In terms of the agreements, Liberty's
group 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 combined net profit share amounts accrued as payable to
the Standard Bank group for the year to 31 December 2014 is R866 million (2013: R868 million).
The bancassurance agreements are evergreen agreements with a 24-month notice period for termination, but neither party could have
given notice of termination until February 2014. As at the date of the approval of these financial statements, neither party had given notice.
A binder agreement was entered into with Standard Bank effective from 31 December 2012. The binder agreement is associated with the
administration of policies sold under the bancassurance agreement, and shall remain in force for an indefinite period with a 90 day notice
period for termination. Fees accrued for the year to 31 December 2014 is R100 million (2013: R94 million).
In December 2013 Liberty Group Limited, a 100% held subsidiary of Liberty, issued 5000 cumulative, participating, non-controlling
redeemable preference shares for a total value of R5 million to The Standard Bank of South Africa Limited in order to facilitate the payment
of profit shares under the bancassurance agreement. This followed the discontinuance of business in Liberty Active Limited, which
previously was contracted to make payment.
3. Sale and repurchase agreements
As described in accounting policies section of this integrated report, the group has entered into certain agreements of sale and repurchase
of financial instruments as part of the group's asset/liability matching process.
As at 31 December 2014 a total of R24 billion in assets (2013: R7,5 billion) have been traded with Standard Bank under a repurchase
agreement with various repurchase dates to 22 January 2015. Open contracts totalled R26 million as at 31 December 2014
(2013: R1,1 billion). Finance costs recognised in respect of these agreements as at 31 December 2014 was R174 million (2013: R52 million).
4. Purchases and sales of other financial instruments
In the normal course of conducting Liberty's insurance business, Liberty deposits cash with Standard Bank, purchases and sells financial
instruments issued by Standard Bank and enters into derivative transactions with Standard Bank. These transactions are at arm's length and
are primarily used to support investment portfolios for policyholders and shareholders' capital.
Offsetting
as at 31 December 2014
Audited
The group does not have any financial assets or financial liabilities that are currently subject to offsetting in accordance with IAS 32 Financial
Instruments: Presentation.
However, of the total assets held for trading and hedging recognised of R7 777 million (2013: R6 387 million) and total derivative liabilities
of R5 148 million (2013: R4 860 million), assets held for trading and hedging of R7 552 million (2013: R6 265 million) and derivative
liabilities of R5 106 million (2013: R4 671 million) are subject to master netting arrangements, with a net asset exposure of R2 446 million
(2013: R1 594 million).
Date: 26/02/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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