Wrap Text
Financial Results for the six months ended 30 June 2015
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
JSE code: LBHP
ISIN code: ZAE0000127148
Financial results
For the six months ended 30 June 2015
Financial performance indicators
for the six months ended 30 June 2015
30 June 30 June % 31 December
2015 2014 change 2014
Liberty Holdings Limited
Earnings
BEE normalised operating earnings (Rm) 1 296 1 174 10 2 586
Basic earnings per share (cents) 741,1 720,5 3 1 523,5
BEE normalised headline earnings per share (cents) 705,5 664,7 6 1 403,3
BEE normalised return on equity (%) 19,4 19,9 (3) 20,4
Group equity value
BEE normalised group equity value per share (R) 142,63 130,42 9 139,85
BEE normalised return on group equity value (%) 11,8 14,7 (20) 16,9
Distributions per share (cents)
Normal dividend 254 232 9 634
Interim dividend 254 232 9 232
Final dividend n/a n/a 402
Total assets under management (Rbn) 645 639 1 633
Long-term insurance operations
Indexed new business (excluding contractual increases) (Rm) 3 529 3 437 3 7 789
Embedded value of new business (Rm) 369 346 7 941
New business margin (%) 1,9 1,8 6 2,1
Net customer cash inflows (Rm) 2 852 3 583 (20) 9 870
Capital adequacy cover of Liberty Group Limited (times covered) 3,07 2,58 19 3,07
Asset management – STANLIB (Rbn)
Assets under management 559,6 561,4 550,9
Net cash inflows/(outflows) including money market(1) 10,3 11,6 (11) (7,3)
Retail and institutional net cash inflows excluding money market(1) 5,4 4,1 32 6,4
Money market net cash inflows/(outflows)(1) 4,9 7,5 (35) (13,7)
(1) Excludes intergroup life funds.
Preparation and supervision:
This announcement on Liberty Holdings Limited interim financial results for the six months ended 30 June 2015 has been prepared
and supervised by JC Hubbard (Group Chief Financial Officer) BCom CA (SA) and CG Troskie (Financial Director) BCom (Hons) CA (SA).
Financial review
for the six months ended 30 June 2015
The group's 2015 first half performance has been characterised by continued good
growth in operating earnings.
Group BEE normalised headline earnings of R1 991 million were
6% higher, representing 10% growth in operating earnings and
2% decrease in earnings from the SIP. The growth in operating
earnings was supported by strong performances from Individual
Arrangements, Liberty Corporate and LibFin Markets. The BEE
normalised return on equity at 19,4% (30 June 2014: 19,9%) reflects
ongoing efficient capital management.
In the group's long-term insurance operations, indexed new business
reflected modest growth at 3% to R3 529 million. The group's retail
Evolve investment product range continues to deliver good sales
growth and there were strong linked-life annuity sales. Recurring
premium risk product sales were at similar levels to the prior period.
Net customer cash inflows, while lower, remain strong with external
flows of R10,3 billion (30 June 2014: R11,6 billion) into STANLIB asset
management operations and R3,2 billion (30 June 2014: R4,1 billion)
into the group's long-term insurance businesses, which includes
R0,4 billion net inflows into the Retail LISP. There were no large single
premium Corporate business customer flows during the period,
which are typically sporadic in nature. New business margins at 1,9%
(30 June 2014: 1,8%) were broadly consistent with the prior year
despite the increase in the risk discount rate. The insurance business
continues to be managed well within the long-term actuarial expense
and policyholder behaviour assumptions.
LibFin Markets ongoing build of the credit book contributed
R108 million to earnings which is 24% higher than the corresponding
period in 2014. Balance sheet risks were managed within mandate.
STANLIB performed in line with growth in assets under management
with market value growth muted as a result of the higher weighting
of interest rate sensitive assets. Margins achieved improved due to
better product mix.
Total assets under management increased to R645 billion
(31 December 2014: R633 billion).
The SIP gross performance of 4,4% (30 June 2014: 5,1%) was in line
with benchmark, supported by good contributions from assets held
in equities in international developed markets.
BEE normalised group equity value per share of R142,63 was up 9%
on 30 June 2014, and reflected R2 268 million of equity value profits
for the half year. This represents an annualised 11,8% (30 June 2014:
14,7%) return on opening group equity value. The higher risk discount
rates that negatively impacted the value of the in-force book and
lower investment returns were the main reasons for the reduction
compared to 30 June 2014.
The group was managed within the board approved risk appetite and
the capital position of the group's main long-term insurance licence,
Liberty Group Limited, remained strong with the capital adequacy
ratio unchanged from 31 December 2014 at 3,07 times the regulatory
minimum. This has been achieved despite the final dividend
payments and higher capital requirements arising from the planned
increased exposure to credit assets.
Following the maturity of the various BEE ownership schemes,
Liberty ordinary shares held in various financing vehicles reduced
from 25,8 million ordinary shares to 11,4 million ordinary shares.
Using the share price of R140,81 at the date of the release of the
31 December 2014 results as a proxy, significant value of R2,8 billion in
total has been generated for the various participants.
Good progress has been made on transitioning Liberty's organisational
design to a more relevant operating model to support the recently
adopted strategy with a time horizon to 2020. Key elements of this
strategy are:
- A greater focus on customer centricity – with three customer
facing units now formed, namely Individual Arrangements, Group
Arrangements and Asset Management, with the LibFin balance
sheet management competency being retained as a specialist unit;
- 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.
We are well positioned to implement the Solvency Assessment
and Management (SAM) framework (the proposed new long-term
insurance solvency regime) which will become effective during
2016. Our 30 June 2015 capital calculations under the draft SAM
guidelines confirm that the group is well positioned from a solvency
and capital perspective.
We remain actively focused on adapting our business model to
accommodate and take advantage of a number of significant other
regulatory developments, including the recently announced tax
changes for insurance companies, retirement and health reform and
the expected consequences of the Financial Services Board's Retail
Distribution Review.
Earnings by business unit
for the six months ended 30 June 2015
12 months
30 June 30 June % 31 December
Rm 2015 2014 change 2014
Insurance
Individual Arrangements 873 795 10 1 689
Group Arrangements 103 90 14 199
Liberty Corporate 97 84 15 170
Liberty Africa Insurance 28 28 59
Liberty Health (22) (22) (30)
Balance sheet management 125 108 16 220
LibFin Markets – credit portfolio 108 87 24 189
LibFin Markets – asset/liability matching 17 21 (19) 31
Asset management
STANLIB 301 284 6 662
South Africa(1) 271 254 7 603
Other Africa 30 30 59
Central overheads and sundry income (106) (103) (3) (184)
Centre expenses and sundry income (124) (115) (8) (225)
Liberty Properties(1) 18 12 50 41
BEE normalised operating earnings 1 296 1 174 10 2 586
LibFin Investments 695 707 (2) 1 382
BEE normalised headline earnings 1 991 1 881 6 3 968
BEE preference share adjustment (15) (28) 46 (53)
Headline earnings 1 976 1 853 7 3 915
(1) Liberty has entered into a strategic partnership with the retail division of JHI combining the collective property management service capabilities under a new joint venture
entity, JHI Retail (Pty) Ltd. The transaction was effective 1 May 2015 with Liberty's interest in JHI Retail being 49%. The results of operations to 30 April 2015 and the ongoing
portfolio liquidity charge total R18 million were reflected in central overheads and sundry income. The Liberty Properties development capability and the 49% JHI Retail interest,
which contributed R6 million to earnings, are reflected in STANLIB South Africa for the six months ended June 2015.
Individual Arrangements
Headline earnings from the group's South African retail operations
were R873 million (30 June 2014: R795 million) reflecting an
increase of 10%. An increased asset base on which management
fees are charged, ongoing good expense management and positive
risk variances were significant contributors to the result.
The innovative Evolve investment product range continues to be
popular with single premium investment sales totalling almost
R3 billion for the half year, increasing the total book size to R14 billion
at 30 June 2015.
Indexed new business sales (excluding the Retail LISP and
contractual increases) of R3,1 billion, increased by 4% over 2014.
Recurring premium business increased by 3% on the comparative
period. Growth was impacted by flat credit life sales and risk sales
being affected by consumer pressures and banks shifting business
to in-house product providers. The value of new business increased
by 5% to R332 million at a margin of 2,1% (30 June 2014: 2,0%)
which remains within the medium-term targeted range. The
increase in the risk discount rate negatively impacted the total value
by R13 million.
Net cash inflows (excluding the Retail LISP) were pleasing at
R3,5 billion and were supported by lower policy withdrawals
and claims.
Group Arrangements
Liberty Corporate
Higher investment based fees and an improved contribution
from the annuity book supported headline earnings increasing by
15% to R97 million. In contrast to 2014, there were no large single
premium investment mandates written in the first half. These deals
are sporadic in nature and indexed new business has consequently
decreased by 25% to R318 million and value of new business is R10
million compared to R19 million at 30 June 2014. However, the
new business pipeline, supported by our competencies in Liability
Driven Solutions, remains strong. Net customer cash out flows
were R859 million impacted by higher per member withdrawal
values following good recent investment performance and the
reduced single premium flows.
Liberty Africa Insurance
East and Southern Africa (excluding South Africa) insurance
businesses contributed R28 million (30 June 2014: R28 million)
to Liberty's headline earnings for the half year. Both the short-
and long-term business have been negatively impacted by poor
investment markets in East Africa. Net claims loss ratios (after
re-insurance) have been consistent in the short-term insurance
business. The take-on of Standard Bank's credit life book in Zambia,
along with good sales in Botswana and Namibia resulted in value of
new business growing to R27 million (30 June 2014: R12 million) at
a margin of 7,1%.
The group continues to evaluate business opportunities for
acquisition throughout the sub-Saharan African region and has
reserved capital resources for this purpose.
Liberty Health
Liberty's share of Liberty Health's headline loss for the half year was
R22 million (30 June 2014: R22 million loss).
Liberty's medical expense risk product, the Liberty Blue range, is
receiving growing support from corporates across sub-Saharan
Africa and lives covered have increased by 22% to 100 000 from
30 June 2014. Claims loss ratios remain consistent with those
evidenced in 2014.
The profitability of the South African administration business
remains a challenge due to underutilisation of available capacity.
Balance sheet management
Asset liability management and credit portfolio
(LibFin Markets)
LibFin Markets contributed R125 million to headline earnings
(30 June 2014: R108 million).
The Credit Portfolio, a diversified portfolio of government, state
owned enterprise and corporate securities backing the guaranteed
investment product set, contributed R108 million (30 June 2014:
R87 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,
including negative rand reserves and embedded derivatives,
was R17 million for the half year benefiting from favourable
interest rate and equity positioning despite elevated volatility in
investment markets.
LibFin assets under management at 30 June 2015 was R48 billion
(31 December 2014: R45 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 4,4% (30 June 2014: 5,1%) which was in line with
benchmark for the half year period.
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 for the
half year has benefited from favourable positioning to equities in
international developed markets offset by underweight local equity
market positions.
The portfolio contributed R695 million (30 June 2014: R707 million)
to the group's headline earnings in line with expectation.
Asset management
STANLIB
STANLIB's headline earnings of R301 million are 6% higher compared
to the equivalent period in 2014. The group's property development
capability (previously housed under Liberty Properties) and the
49% interest in the JHI Retail partnership were transferred to
STANLIB during the period and contributed R6 million to the
half year earnings. Good net cash inflows (excluding intergroup)
of R10,3 billion (30 June 2014: R11,6 billion), comprise inflows of
R4,9 billion into the various STANLIB money market funds and
R5,4 billion into higher margin retail and institutional mandates.
Total assets under management increased to R560 billion at
30 June 2015 (31 December 2014: R551 billion) reflecting the
net external customer inflows, low incremental growth from
investment market returns, and negative net cash flows of
R6 billion in respect of intergroup flows.
The performance of 60% of the STANLIB surveyed core retail
products is in the first or second quartiles over a five year
time horizon.
Liberty Properties
Liberty has entered into a strategic partnership with the retail
division of JHI combining the collective property management
service capabilities under a new joint venture entity, JHI Retail (Pty)
Ltd. The transaction was effective 1 May 2015 with Liberty's interest
in JHI Retail being 49%. The results of operations to 30 April 2015
and the ongoing portfolio liquidity charge total R18 million and were
reflected in central overheads and sundry income.
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 total SA covered business embedded value of in-force
contracts sold under the agreement attributable to Liberty at
30 June 2015 was R1,5 billion (31 December 2014: R1,5 billion).
The growth in the value through new business has been offset by
the increase in the risk discount rate which has negatively impacted
the current value of the book.
Tax legislation
The 2014 Taxation Laws Amendment Act, has introduced a fifth tax
fund with effect from 1 January 2016. Insurance entities will from the
effective date need to write risk policies in this fund going forward.
A number of details surrounding the transition and application
have been included in the recently issued draft 2015 Taxation Laws
Amendment Bill. We are currently investigating the consequential
impacts to product pricing and profitability. Our initial assessment is
that we do not anticipate significant changes to policyholder liability
assumptions that were used in the 30 June 2015 measurement,
however, it is likely that there will be upward pricing pressure on risk
policies across the industry.
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited remained
strong at 3,07 times the statutory requirement (31 December 2014:
3,07 times). All the other group subsidiary life licences were
adequately capitalised.
Capital adequacy requirements in South Africa are set at the
higher of the "termination" (TCAR) basis or "ordinary" (OCAR) basis.
Both 30 June 2015 and 31 December 2014 reflected the higher
amount as OCAR.
Dividends
2015 interim dividend
In line with the group's dividend policy, the board has approved
and declared a gross interim dividend of 254 cents per ordinary
share. The interim dividend will be payable out of income reserves
and is payable to all ordinary shareholders recorded in the books
of Liberty Holdings Limited at the close of business on Friday,
4 September 2015.
The dividend of 254 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 215,9 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 Friday, 28 August 2015
on the JSE
First trading day ex dividend on Monday, 31 August 2015
the JSE
Record date Friday, 4 September 2015
Payment date Monday, 7 September 2015
Share certificates may not be dematerialised or rematerialised
between Monday, 31 August 2015 and Friday, 4 September 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, 7 September 2015.
Prospects
Our strategy 2020 places significant emphasis on growth
throughout sub-Saharan Africa by enhancing customer value
propositions while better leveraging and developing existing and
new capabilities. Inherent in this strategy is our ability to adapt to
and take advantage of the fast changing regulatory and consumer
environments.
This strategic focus, combined with our proven ability to deliver
return on group equity value in excess of our long-term targets,
supports our confidence that we will continue to sustainably grow
our business.
Thabo Dloti Jacko Maree
Chief Executive Chairman
7 August 2015
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
These results are available at www.libertyholdings.co.za
Telephone +27 11 408 3911
Accounting policies
The unaudited condensed interim consolidated financial statements
for the six months ended 30 June 2015 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 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 full interim report for the six months ended 30 June 2015
(which includes paragraph IAS 34 16A (j)) is available on the Liberty
Holdings Limited website and upon request at the company's
registered offices.
The accounting policies applied in the preparation of these interim
financial statements are in terms of IFRS and are consistent
with those applied in the previous consolidated annual financial
statements, except for the mandatory adoption of minor
amendments to IFRS, which are effective for years commencing
1 January 2015. These changes have not resulted in any material
impacts to the 2015 group's reported results, comparative periods
or interim disclosures.
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.
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 30 June 2015
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2015 2014 2014
Assets
Equipment and owner-occupied properties under development 1 009 948 975
Owner-occupied properties 1 463 1 423 1 464
Investment properties 29 273 25 645 27 022
Intangible assets 314 394 368
Defined benefit pension fund employer surplus 278 215 277
Deferred acquisition costs 643 563 590
Interests in joint ventures 512 6
Reinsurance assets 1 591 1 738 1 558
Long-term insurance 1 293 1 246 1 302
Short-term insurance 298 492 256
Operating leases – accrued income 1 222 1 221 1 261
Pledged assets measured at fair value through profit or loss(1) 16 522 6 364 6 991
Assets held for trading and for hedging 8 593 6 706 7 777
Interests in associates – measured at fair value through profit or loss 16 816 18 778 16 497
Financial investments 307 464 290 810 292 844
Deferred taxation 364 313 455
Prepayments, insurance and other receivables 6 014 5 042 3 668
Cash and cash equivalents 12 297 13 124 13 985
Total assets 404 375 373 290 375 732
Liabilities
Long-term policyholder liabilities 295 353 278 898 287 516
Insurance contracts 199 488 189 034 195 356
Investment contracts with discretionary participation features 10 112 9 867 10 177
Financial liabilities under investment contracts 85 753 79 997 81 983
Short-term insurance liabilities 758 901 683
Financial liabilities 3 906 3 167 3 575
Third party financial liabilities arising on consolidation of mutual funds 41 375 42 456 34 501
Employee benefits 958 1 002 1 371
Deferred revenue 235 206 216
Deferred taxation 4 373 3 827 4 131
Deemed disposal taxation liability 272 268
Provisions 169 155 173
Derivative liabilities 5 933 6 523 5 148
Repurchase agreements liabilities and collateral received(1) 14 880 4 213 5 191
Insurance and other payables 11 455 8 876 9 060
Current taxation 326 678 265
Total liabilities 379 721 351 174 352 098
Equity
Shareholders' interests 20 488 18 351 19 487
Share capital 26 26 26
Share premium 5 593 5 919 5 755
Retained surplus 15 401 13 356 14 599
Other reserves (532) (950) (893)
Non-controlling interests 4 166 3 765 4 147
Total equity 24 654 22 116 23 634
Total equity and liabilities 404 375 373 290 375 732
(1) The increase in pledged assets reflects higher utilisation of asset repurchase agreements and scrip lending.
Consolidated statement of comprehensive income
for the six months ended 30 June 2015
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2015 2014 2014
Revenue
Insurance premiums 18 741 18 541 42 139
Reinsurance premiums (800) (695) (1 415)
Net insurance premiums 17 941 17 846 40 724
Service fee income from investment contracts 483 450 916
Investment income 10 178 7 257 15 796
Hotel operations sales 241 371 673
Investment gains 5 633 15 019 19 274
Fee revenue and reinsurance commission 1 324 1 197 2 322
Total revenue 35 800 42 140 79 705
Claims and policyholder benefits under insurance contracts (16 242) ( 15 821) (32 629)
Insurance claims recovered from reinsurers 501 526 898
Change in long-term policyholder liabilities (4 175) (9 014) (15 469)
Insurance contracts (4 168) (8 286) (14 559)
Investment contracts with discretionary participation features (1) (813) (1 050)
Applicable to reinsurers (6) 85 140
Fair value adjustment to policyholder liabilities under investment contracts (3 389) (5 074) (7 473)
Fair value adjustment on third party mutual fund interests (1 300) (2 196) (3 585)
Acquisition costs (2 228) (2 135) (4 579)
General marketing and administration expenses (4 775) (4 578) (9 376)
Finance costs (397) (291) (407)
Profit share allocations under bancassurance and other agreements (435) (434) (876)
Equity accounted earnings from joint venture 2
Profit before taxation 3 362 3 123 6 209
Taxation (1) (1 225) (1 121) (1 926)
Total earnings 2 137 2 002 4 283
Other comprehensive loss (73) (57) (47)
Items that may be reclassified subsequently to profit or loss (86) (46) (52)
Net change in fair value on cash flow hedges (40) (65) (129)
Income and capital gains tax relating to net change in fair value on cash flow hedges 12 16 36
Foreign currency translation (58) 3 41
Items that may not be reclassified subsequently to profit or loss 13 (11) 5
Owner-occupied properties – fair value adjustment 16 13 22
Income and capital gains tax relating to owner-occupied properties
fair value adjustment (5) (5) (25)
Change in long-term policyholder insurance liabilities
(application of shadow accounting) (11) (8) (12)
Actuarial gains/(losses) on post-retirement medical aid liability 19 (18) (16)
Income tax relating to post-retirement medical aid liability (5) 5 4
Net adjustments to defined benefit pension fund (1) 2 62
Income tax relating to defined benefit pension fund (30)
Total comprehensive income 2 064 1 945 4 236
Total earnings attributable to:
Shareholders' interests 1 977 1 854 3 917
Non-controlling interests 160 148 366
2 137 2 002 4 283
Total comprehensive income attributable to:
Shareholders' interests 1 927 1 797 3 864
Non-controlling interests 137 148 372
2 064 1 945 4 236
Basic and fully diluted earnings per share Cents Cents Cents
Basic earnings per share 741,1 720,5 1 523,5
Fully diluted basic earnings per share 704,7 659,1 1 392,4
(1) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation.
Headline earnings and earnings per share
for the six months ended 30 June 2015
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm (unless otherwise stated) 2015 2014 2014
Reconciliation of total earnings to headline earnings attributable to shareholders
Total earnings attributable to equity holders 1 977 1 854 3 917
Preference share dividend (1) (1) (2)
Basic and headline earnings attributable to ordinary shareholders 1 976 1 853 3 915
Net income earned on BEE preference shares 15 28 53
BEE normalised headline earnings attributable to ordinary shareholders 1 991 1 881 3 968
Weighted average number of shares in issue ('000) 266 646 257 181 256 975
BEE normalised weighted average number of shares in issue ('000) 282 227 282 977 282 771
Fully diluted weighted average number of shares in issue ('000) 280 402 281 138 281 165
Earnings per share Cents Cents Cents
Total earnings attributable to ordinary shareholders
Basic 741,1 720,5 1 523,5
Headline 741,1 720,5 1 523,5
BEE normalised headline 705,5 664,7 1 403,3
Fully diluted earnings attributable to ordinary shareholders
Basic 704,7 659,1 1 392,4
Headline 704,7 659,1 1 392,4
Condensed statement of changes in shareholders' funds
for the six months ended 30 June 2015
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2015 2014 2014
Balance of ordinary shareholders' interests at 1 January 19 487 17 654 17 654
Ordinary dividends (1 150) (1 056) (1 719)
Total comprehensive income 1 927 1 797 3 864
Share buy-backs net of share subscriptions (337) (224) (355)
Black Economic Empowerment transaction 492 95 153
Share-based payments 70 68 133
Preference dividends (1) (1) (2)
Transactions between owners 18 (230)
Common control transaction (11)
Ordinary shareholders' interests 20 488 18 351 19 487
Balance of non-controlling interests at 1 January 4 147 3 702 3 702
Total comprehensive income 137 148 372
Unincorporated property partnerships net distributions (97) (63) (79)
Non-controlling share of subsidiary dividend (21) (4) (38)
Transactions between owners (18) 190
Non-controlling interests 4 166 3 765 4 147
Total equity 24 654 22 116 23 634
Condensed statement of cash flows
for the six months ended 30 June 2015
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2015 2014 2014
Operating activities(1) 20 278 5 164 5 832
Investing activities(1) (21 928) (1 723) (1 928)
Financing activities 1 (188) 179
Net (decrease)/increase in cash and cash equivalents (1 649) 3 253 4 083
Cash and cash equivalents at the beginning of the year 13 985 9 870 9 870
Cash and cash equivalents acquired through business acquisition 5
Foreign currency translation (39) 1 27
Cash and cash equivalents at the end of the period 12 297 13 124 13 985
(1) Both operating and investing activities have increased substantially due to the higher utilisation of asset repurchase agreements and scrip lending transactions.
Condensed segment information
for the six months ended 30 June 2015
The unaudited segment results for the six months ended 30 June 2015 are as follows:
Long-term insurance Short- Asset Reporting
Institu- term manage- Health adjust- IFRS
Rm Retail tional insurance ment services Other Total ments(1) reported
Total revenue 30 473 7 349 658 1 612 179 904 41 175 (5 375) 35 800
Profit/(loss) before taxation 2 270 265 40 429 (44) 276 3 236 126 3 362
Taxation (979) (66) (16) (102) 15 (77) (1 225) (1 225)
Total earnings/(loss) 1 291 199 24 327 (29) 199 2 011 126 2 137
Other comprehensive
(loss)/income (49) 1 (20) (4) (1) (73) (73)
Total comprehensive
income/(loss) 1 242 200 4 323 (29) 198 1 938 126 2 064
Attributable to:
Non-controlling interests (15) 1 (3) 2 4 (11) (126) (137)
Equity holders 1 242 185 5 320 (27) 202 1 927 1 927
Reconciliation of total
earnings/(loss) to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) 1 291 199 24 327 (29) 199 2 011 126 2 137
Attributable (to)/from
non-controlling interests (13) (15) (8) (3) 2 3 (34) (126) (160)
Preference share dividend (1) (1) (1)
Headline earnings/(loss) 1 278 184 16 324 (27) 201 1 976 1 976
Net income earned on BEE
preference shares 15 15 15
BEE normalised headline
earnings/(loss) 1 278 184 16 324 (27) 216 1 991 1 991
(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'.
The unaudited segment results for the six months ended 30 June 2014 are as follows:
Long-term insurance Short- Asset Reporting
Institu- term manage- Health adjust- IFRS
Rm Retail ional insurance ment services Other Total ments(1) reported
Total revenue 33 829 9 636 602 1 582 143 977 46 769 (4 629) 42 140
Profit/(loss) before taxation 2 060 129 61 396 (74) 426 2 998 125 3 123
Taxation (1 002) (30) (11) (104) 12 14 (1 121) (1 121)
Total earnings/(loss) 1 058 99 50 292 (62) 440 1 877 125 2 002
Transfers between
segments(2) (11) 5 (4) 10
Total earnings/(loss)
after transfers 1 047 104 50 288 (62) 450 1 877 125 2 002
Other comprehensive
(loss)/income (59) (1) 1 2 (57) (57)
Total comprehensive
income/(loss) 988 103 50 289 (62) 452 1 820 125 1 945
Attributable to:
Non-controlling interests (23) 2 (20) (4) 17 5 (23) (125) (148)
Equity holders 965 105 30 285 (45) 457 1 797 1 797
Reconciliation of total
earnings/(loss) to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) 1 047 104 50 288 (62) 450 1 877 125 2 002
Attributable (to)/from
non-controlling interests (23) 2 (20) (4) 17 5 (23) (125) (148)
Preference share dividend (1) (1) (1)
Headline earnings/(loss) 1 024 106 30 284 (45) 454 1 853 1 853
Net income earned on
BEE preference shares 28 28 28
BEE normalised headline
earnings/(loss) 1 024 106 30 284 (45) 482 1 881 1 881
(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.
(2) Earnings reallocated as they are attributable to other segments (e.g. bancassurance agreement profit share attributable to asset management and release of regulatory project
reserves to offset related shareholder expenses in "other").
The audited segment results for the year ended 31 December 2014 are as follows:
Long-term insurance Short- Asset Reporting
Institu- term manage- Health adjust- IFRS
Rm Retail ional 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.
Group equity value report
as at 30 June 2015
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 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 (June and December 2014: 10 times) multiple of estimated sustainable earnings.
Liberty Properties No longer a separate business. June and December 2014: 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 30 June 2015 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 (June and December 2014: 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 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 (June and December 2014:
9 times).
3. BEE normalised group equity value
3.1 Analysis of BEE normalised group equity value
Value of
in-force:
Unaudited SA Other Group SA
30 June 2015 covered busi- funds Adjust- Net covered
Rm business nesses invested ments worth business Total
SA insurance operations 13 694 13 694 (5 604) 8 090 23 310 31 400
Individual Arrangements 21 275
Group Arrangements 2 035
Value of in-force acquired 47 47 (47)
Working capital and other assets(2) 4 517 4 517 (501) 4 016 140 4 156
South African insurance operations 18 258 18 258 (6 152) 12 106 23 450 35 556
Other group businesses:
STANLIB 693 693 5 807 6 500 6 500
South Africa(2) 498 498 5 402 5 900 5 900
Other Africa 195 195 405 600 600
Liberty Health 312 312 312 312
Liberty Africa Insurance 604 604 604 604
LibFin Credit 1 100 1 100 1 100
Liberty Holdings 621 621 (100) 521 521
Cost of required capital (1 568) (1 568)
Net equity as reported under IFRS 18 258(1) 2 230 20 488 655 21 143 21 882 43 025
BEE preference funding 340 340 340 340
Allowance for future shareholders costs (365) (365) (365) (1 981) (2 346)
Allowance for employee share rights (123) (92) (215) (215) (215)
BEE normalised equity value 18 475 1 773 20 248 655 20 903 19 901 40 804
Summary of adjustments:
Negative rand reserves (5 604) (5 604)
Deferred acquisition costs (624) (624)
Deferred revenue liability 223 223
Frank Financial Services allowance for
future expenses (100) (100)
Carrying value of in-force business acquired (47) (47)
Fair value adjustment of
non SA covered business(2) 6 907 6 907
Impact of discounting on deferred tax asset (100) (100)
(6 152) 6 807 655
(1) Reconciliation to SA covered business net worth
as per analysis in supplementary information
Net equity of SA covered business as reported under IFRS 18 258
Adjustments as above (6 152)
Allowance for employee share options/rights (123)
BEE preference share funding 340
Net worth as reported in supplementary information 12 323
(2) Liberty Properties was previously valued as a separate business unit. After the transaction with JHI, the development operations and Liberty's interest (49%) in
the JHI Retail (Pty) Limited entity are included in the STANLIB South Africa valuation at R100 million. In addition, the liquidity fee component charge to the property
portfolio is valued (R140 million) as part of the Liberty Group Limited value of in-force and disclosed as an adjustment to working capital and other assets.
Value of
in-force:
Audited SA Other Group SA
31 December 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
3.2 BEE normalised group equity value earnings and value per share
Unaudited 6 months Audited 12 months
30 June 2015 31 December 2014
SA covered Other SA covered Other
Rm business businesses Total business businesses Total
BEE normalised equity value at the
end of the period 32 224 8 580 40 804 31 371 8 653 40 024
Equity value at the end of the period 31 884 8 580 40 464 30 564 8 653 39 217
BEE preference shares 340 340 807 807
Capital transactions 337 337 355 355
Funding of restricted share plan 115 (115) 117 ( 117)
Intergroup dividends 1 150 (1 150) 1 290 (1 290)
Dividends paid 1 151 1 151 1 719 1 719
BEE normalised equity value at the
beginning of the period (31 371) (8 653) (40 024) (27 959) (8 108) (36 067)
Equity value at the beginning of the period (30 564) (8 653) (39 217) (27 054) (8 108) (35 162)
BEE preference shares (807) (807) ( 905) ( 905)
BEE normalised equity value earnings 2 118 150 2 268 4 819 1 212 6 031
BEE normalised return on group
equity value (%) 14,0 3,6 11,8 17,3 15,4 16,9
BEE normalised number of shares ('000) 286 074 286 201
Number of shares in issue ('000) 270 390 256 946
Shares held for the employee restricted
share scheme ('000) 4 308 3 459
Adjustment for BEE shares ('000) 11 376 25 796
BEE normalised group equity value
per share (rand) 142,63 139,85
3.3 Sources of BEE normalised group equity value earnings
Audited
12 months
Unaudited 6 months Unaudited 6 months 31 December
30 June 2015 30 June 2014 2014
SA covered Other SA covered Other
Rm business businesses Total business businesses Total Total
Value of new business written
in the period 342 27 369 334 12 346 941
Expected return on value
of in-force business 1 107 1 107 1 048 1 048 2 131
Variances/changes in
operating assumptions 422 (10) 412 181 (83) 98 553
Operating experience variances
(including incentive
outperformance) 294 (10) 284 170 (19) 151 669
Transfer of shareholder
expense reserve 64 (64)
Operating assumption changes 21 21 8 8 (62)
Changes in modelling
methodology 107 107 (61) (61) (54)
One period replacement
of shareholder expenses
and inflating expenses (58) (29) (87) (58) (21) (79) (189)
Headline earnings of
other businesses 299 299 302 302 732
Operational equity value
profits 1 813 287 2 100 1 505 210 1 715 4 168
Development costs (5) (24) (29) (21) (14) (35) (77)
Economic adjustments 297 (64) 233 603 (2) 601 848
Investment return on net worth 308 (64) 244 356 51 407 680
Internally generated software 53 (53)
Credit portfolio earnings,
hedging remeasurement and
related cost of capital 22 22 38 38 96
Property portfolio liquidity fee 143 143
Investment variances (38) (38) 232 232 14
Change in economic
assumptions (138) (138) (76) (76) 58
(Decrease)/increase in fair value
adjustments on value
of other businesses (51) (51) 236 236 911
Change in allowance for
fair value of share rights 13 2 15 30 (6) 24 181
Group equity value earnings 2 118 150 2 268 2 117 424 2 541 6 031
3.4 Analysis of value of long-term insurance new business and margins
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rm (unless otherwise stated) 2015 2014 2014
South African covered business:
Individual Arrangements 747 712 1 640
Traditional Life 676 623 1 472
Direct channel 32 45 77
Credit Life 39 44 91
Group Arrangements 46 64 249
Gross value of new business 793 776 1 889
Overhead acquisition costs impact on value of new business (402) (392) (874)
Cost of required capital (49) (50) (101)
Net value of South African covered new business 342 334 914
Present value of future expected premiums 18 749 19 442 44 916
Margin (%) 1,8 1,7 2,0
Liberty Africa Insurance:
Net value of new business 27 12 27
Present value of future expected premiums 374 211 413
Margin (%) 7,1 5,7 6,5
Total group net value of new business 369 346 941
Total group margin (%) 1,9 1,8 2,1
Long-term insurance new business
for the six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rm 2015 2014 2014
Sources of insurance operations total new business by customer segment
Retail segment 12 486 11 857 25 334
Single 10 398 9 862 20 987
Recurring 2 088 1 995 4 347
Institutional segment 727 1 721 6 029
Single 362 1 405 5 207
Recurring 365 316 822
Total new business 13 213 13 578 31 363
Single 10 760 11 267 26 194
Recurring 2 453 2 311 5 169
Sources of insurance indexed new business 3 529 3 437 7 789
Individual Arrangements 3 058 2 944 6 375
Group Arrangements:
Liberty Corporate 318 423 1 195
Liberty Africa Insurance(1) 153 70 219
(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 six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rm 2015 2014 2014
Premiums
Recurring 13 346 12 587 26 610
Retail segment 9 332 8 827 18 921
Institutional segment 4 014 3 760 7 689
Single 11 299 12 015 27 806
Retail segment 5 960 6 303 12 884
Institutional segment 988 2 116 7 627
Immediate annuities 4 351 3 596 7 295
Net premium income from insurance contracts and inflows from investment
contracts 24 645 24 602 54 416
Claims and policyholders benefits
Retail segment (15 986) (16 185) (33 209)
Death and disability claims (2 711) (2 715) (5 613)
Policy surrender and maturity claims (10 815) (11 259) (22 978)
Annuity payments (2 460) (2 211) (4 618)
Institutional segment (5 807) (4 834) (11 337)
Death and disability claims (918) (991) (1 966)
Scheme terminations and member withdrawals (4 431) (3 652) (8 971)
Annuity payments (458) (191) (400)
Net claims and policyholders benefits (21 793) (21 019) (44 546)
Long-term insurance net cash flows 2 852 3 583 9 870
Sources of insurance operations cash flows by business unit:
Individual Arrangements 3 509 2 348 5 921
Group Arrangements:
Liberty Corporate (859) 949 3 438
Liberty Africa Insurance(1) 208 214 437
Asset management:
STANLIB Multi-manager (6) 72 74
(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 30 June 2015
Unaudited 30 June 30 June 31 December
Rbn 2015 2014 2014
Managed by group business units 615 610 605
STANLIB South Africa 518 522 510
STANLIB Other Africa(2) 42 39 41
LibFin 48 39 45
Other internal managers 7 10 9
Externally managed 30 29 28
Total assets under management(3) 645 639 633
(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.
(3) Included in total assets under management are the following LISP amounts:
Unit trusts listed (Rbn)
STANLIB
managed Other managed Total
STANLIB 41 62 103
Gateway 2 2 4
Asset management net cash flows – STANLIB(1)
for the six months ended 30 June 2015
Unaudited 30 June 30 June 31 December
Rm 2015 2014 2014
South Africa
Non-money market 5 465 4 778 6 211
Retail segment 5 426 4 425 5 319
Institutional segment 39 353 892
Money market 3 687 9 657 (11 353)
Retail segment (939) (658) (3 359)
Institutional segment 4 626 10 315 (7 994)
Net South Africa cash inflows/(outflows)(1) 9 152 14 435 (5 142)
Other Africa
Non-money market (87) (655) 206
Retail segment 249 85 517
Institutional segment (336) (740) (311)
Money market 1 252 (2 162) (2 385)
Net other Africa cash inflows/(outflows)(1)(2) 1 165 (2 817) (2 179)
Net cash inflows/(outflows) from asset management 10 317 11 618 (7 321)
(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 six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
Rm 2015 2014 2014
Premiums 571 507 1 037
Liberty Health – medical risk 366 338 694
Liberty Africa Insurance – motor, property, medical and other 205 169 343
Claims (343) (297) (612)
Liberty Health – medical risk (251) (224) (471)
Liberty Africa Insurance – motor, property, medical and other (92) (73) (141)
Net cash inflows from short-term insurance 228 210 425
Claims loss ratio (%)
Liberty Health 69 66 68
Liberty Africa Insurance 45 43 41
Combined loss ratio (%)
Liberty Health 100 97 96
Liberty Africa Insurance 96 89 94
Capital commitments
as at 30 June 2015
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2015 2014 2014
Equipment 220 348 379
Investment and owner-occupied property 2 283 2 426 4 427
Unconsolidated structured entities(1) 351 1 957 482
Total capital commitments 2 854 4 731 5 288
Under contracts 2 005 3 637 3 486
Authorised by the directors but not contracted 849 1 094 1 802
(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 2015 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds and
R231 million (31 December 2014: R160 million) from non-controlling interests in unincorporated property partnerships.
Corporate actions
for the six months ended 30 June 2015
Unaudited
Acquisition of a share in an unincorporated joint operation
During 2014, Liberty Group Limited, through a 100% held subsidiary, Liberty PropCo Proprietary Limited, 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 final condition precedent, being the legal transfer of the properties, was met on 9 June 2015.
The partnership is classified as a joint operation and proportionally consolidated in terms of IFRS 11 Joint Arrangements. Liberty will
accordingly recognise in relation to its interest in the joint operation, its share of assets and liabilities, and revenue and expenses relating to
its 25% interest in the joint operation.
The purchase amount was funded through the group's own funds of R1,4 billion and external debt issues of R0,3 billion. The portion funded
by the group is entirely held as matching assets for policyholder obligations. Therefore the group's interests and net share in income of the
joint operation is allocated to policyholders, with shareholders earning contracted fees. The anticipated net investment return yield is in the
region of 7,5%.
2015
Rm
The following is the fair value of the asset acquired in the joint operation:
Investment properties (25% share in Melrose Arch precinct) at fair value 1 744
Cash paid (1 744)
The fair value of the investment properties on acquisition includes any operating leases, accrued income or
expenses. These will be separately disclosed as required under IAS 17 Leases post acquisition. There are no other
assets or liabilities in the joint operation at the date of acquisition and no intangible assets were identified that would
require measurement.
The external debt issues (senior secured debt) were subscribed for by the following related parties:
349
The Standard Bank of South Africa Limited 223
Mutual funds administered and managed by STANLIB:
Liberty Income Fund 20
STANLIB Aggressive Income Fund(1) 20
STANLIB Income Fund(1) 70
STANLIB Flexible Income Fund 16
(1) Designated as interests in associates measured at fair value through profit or loss
The external debt issues attract a funding rate of JIBAR plus a margin of 1,6%, payable quarterly on 5th July, October, January and April
each year.
The annual net revenue (after satisfying policyholder obligations and debt requirements) estimated to be attributable to shareholders is less
than R40 million.
Formation of JHI Retail (Pty) Limited
Liberty has entered into a strategic partnership with the retail management division of JHI (Properties) (Pty) Limited (JHI), which is a
subsidiary of Excellerate Holdings Limited.
In terms of this partnership, Liberty and JHI transferred their property management service capabilities into a new entity, JHI Retail (Pty)
Limited. Liberty Holdings Limited subscribed for 49% and JHI 51% in the shareholding of JHI Retail (Pty) Limited. The cost of the shares held
by Liberty Holdings Limited was R3 million. No gain or loss was incurred in the formation of the partnership.
The rationale for the transaction is that the creation of JHI Retail (Pty) Limited will create additional capacity and enhance Liberty's ability to
deliver world-class property management services through a business solely focused on property management services. The partnership
demonstrates Liberty's strategic intent to focus on its core businesses and become a truly customer focused business, as well as establish
strategic partnerships to grow its non-core, albeit strategic, business.
JHI Retail (Pty) Limited is classified as a joint venture under IFRS 11 Joint Arrangements and has been equity accounted from the effective
date, being 1 May 2015.
Retirement benefit obligations
as at six months ended 30 June 2015
Unaudited
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 2015, the Liberty post-retirement medical aid benefit liability was R411 million (31 December 2014: R423 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 six months ended 30 June 2015
Unaudited
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 30 June 2015 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 2015 12 244 1 757 0,77
Purchases 4 453 699
Sales (2 905) (468)
Fair value adjustments 221
Balance at 30 June 2015 13 792 2 209 0,87
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 2015 amounted to R3 829 million (2014 full year: R7 984 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 six months to 30 June 2015 was R436 million (2014 full year: R866 million).
The bancassurance agreements are evergreen agreements with a 24-month notice period for termination. As at 30 June 2015, neither party
had given notice.
A binder agreement has been 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 six months to 30 June 2015 was R53 million (2014 full year: R100 million).
3. Sale and repurchase agreements
The group has entered into certain agreements of sale and repurchase of financial instruments as part of the group's asset/liability
matching processes.
As at 30 June 2015 a total of R10 billion in assets (2014 full year: R24 billion) have been traded with Standard Bank under a repurchase
agreement with various repurchase dates to 13 August 2015. Open contracts totalled R4 billion as at 30 June 2015 (31 December 2014:
R26 million). Finance costs recognised in respect of these agreements as at 30 June 2015 was R44 million (2014 full year: R174 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.
5. There are no other significant changes to related party transactions as reported in Liberty's 2014 annual financial statements.
Offsetting
as at 30 June 2015
Unaudited
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.
Subject to master netting
Per financial position arrangements
30 June 31 December 30 June 31 December
Rm 2015 2014 2015 2014
Assets held for trading and hedging 8 593 7 777 8 270 7 552
Derivative liabilities (5 933) (5 148) (5 918) (5 106)
Collateral received (263) (263)
Net exposure 2 397 2 629 2 089 2 446
Sponsor
Merrill Lynch
A subsidiary of Bank of America Corporation
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