Wrap Text
Financial Results for the six months ended 30 June 2016
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
ISIN code: ZAE0000127148
Preference share code: LBHP
ISIN Code: ZAE000004040
(Liberty or Group)
Telephone +27 11 408 3911
Financial results for the six months ended 30 June 2016
Financial performance indicators
for the six months ended 30 June 2016
12 months
30 June 30 June % 31 December
2016 2015 change 2015
Liberty Holdings Limited
Earnings
BEE normalised operating earnings (Rm) 1 100 1 296 (15) 2 772
Basic earnings per share (cents) 666,9 741,1 (10) 1 493,5
BEE normalised headline earnings per share (cents) 650,0 705,5 (8) 1 464,5
BEE normalised return on IFRS equity (%) 16,4 19,4 (15) 19,5
Group equity value
BEE normalised group equity value per share (R)(2) 148,44 141,30 5 145,96
BEE normalised return on group equity value (%)(2) 10,3 10,8 (5) 10,5
Distributions per share (cents)
Normal dividend 276 254 9 691
Interim dividend 276 254 9 254
Final dividend n/a n/a 437
Total assets under management (Rbn) 679 645 5 668
Long-term insurance operations
Indexed new business (excluding contractual increases) (Rm) 3 569 3 529 1 7 515
Embedded value of new business (Rm)(2) 257 380 (32) 729
New business margin (%)(2) 1,4 2,0 (30) 1,8
Net customer cash (outflows)/inflows (Rm) (353) 2 852 >(100) 5 402
Capital adequacy cover of Liberty Group Limited (times covered) 2,95 3,07 (4) 3,03
Asset management - STANLIB
Assets under management (Rbn) 584 560 4 579
Net cash inflows including money market (Rm)(1) 453 10 317 (96) 8 454
Retail and institutional net cash inflows excluding money market (Rm)(1) 3 169 5 378 (41) 7 343
Money market net cash (outflows)/inflows (Rm)(1) (2 716) 4 939 >(100) 1 111
(1) Excludes intergroup life funds.
(2) To better align to future statutory guidance on expense modelling, with effect from 1 January 2015 the method to value
the contribution of LibFin Markets - credit portfolio (LibFin Credit) and the treatment of certain recurring shareholder
costs was revised. In order to improve the analysis of certain financial performance indicators the 30 June 2015
numbers were restated to reflect the change.
Preparation and supervision:
This announcement on Liberty Holdings Limited interim financial results for the six months ended 30 June 2016 has been prepared
and supervised by Y Maharaj (Executive: Group Finance) CA (SA) and CG Troskie (Financial Director) CA (SA).
Financial review
for the six months ended 30 June 2016
Capital position remains strong notwithstanding
weaker sales and earnings in the first six months -
16,4% return on equity at half year
Operating conditions during the first six months of 2016 were
difficult with the continuation of the challenging macro-economic
environment and trends observed in the final quarter of 2015.
Whilst the weaker sales and earnings are below expectation, the
group's capital position remains strong.
Liberty's performance and cash flows were impacted by specific
developments which compounded the negative impact of the
challenging market conditions on the group's performance for the
first half of the year. These are discussed below.
Management implemented two key changes which had once-off
negative impacts on the period's earnings. The first relates to a
modelling change implemented by strengthening the expense
inflation assumption on investment business and moving to a full
yield curve for discounting our risk product cash flows given the
favourable interest rate levels during the period. This change will
significantly improve risk management and reduce the expected
future hedging costs. This resulted in a negative earnings
impact of R120 million in the period. In addition, the longevity
improvement factor in the group annuity book was strengthened
in line with international trends and resulted in a R22 million
impact on Liberty Corporate earnings.
Following the new tax legislation effective 1 January 2016, Liberty
transferred eligible risk policies to the new risk tax fund. This decision
was taken to benefit existing policyholders. All new risk policies from
that date were required to be written in the risk fund, but the re-
pricing of new policies could only be operationally implemented
from March 2016. As a result of pipeline business, most of the risk
policies in the first half were contracted at historical rates. This had
a negative impact on earnings and value of new business through
higher new business strain and lower margins respectively.
The actions taken by management discussed later will lessen the
impact of these developments going forward.
Group BEE normalised headline earnings of R1 821 million were
9% lower, representing a 15% decline in BEE normalised operating
earnings and an 4% increase in earnings from LibFin Investments -
Shareholder Investment Portfolio (SIP). The SIP gross performance
of 4,0% (30 June 2015: 4,4%) was below benchmark as a result
of the impact of the rand strengthening over the period on the
overweight exposure to foreign assets. The three year cumulative
return however remains ahead of the benchmark. BEE normalised
return on equity was 16,4% (30 June 2015: 19,4%) due to lower
earnings in the period.
Net customer cash inflows amounted to R0,5 billion (30 June 2015:
R13,8 billion). Long-term insurance net customer cash outflows of
R0,4 billion (30 June 2015: inflows of R2,9 billion) resulted from
lower single premium inflows, increased individual policy surrenders
and scheme member withdrawals. STANLIB net cash inflows were
lower than the prior period inflows as a result of increased consumer
pressure and net cash outflows of money market products.
In the group's long-term insurance operations, indexed new business
was 1% higher at R3 569 million. Recurring premium business was
higher, increasing by 4% over the prior half year. Single premium
investment business was down 8%. This was the result of an
inability to meet the demand for guaranteed investment products
in the Individual Arrangements business and the lack of any large
single premium investment mandates in Liberty Corporate.
New business margins at 1,4% (30 June 2015 restated: 2,0%) were
lower, mainly as a result of the writing of new business in the new
risk tax fund prior to re-pricing the risk products, an increase in the
risk discount rate to 11,79% (30 June 2015: 11,21%) and a changed
new business mix reflecting lower single premium volumes. The
insurance business continues to be managed within the long-term
actuarial expense and policyholder behaviour assumptions.
Total assets under management increased moderately to
R679 billion (31 December 2015: R668 billion), due to positive, albeit
lower, market returns offset by net external customer outflows.
BEE normalised group equity value per share of R148,44 was up 5%
on the 30 June 2015 restated amount, and reflected R2 061 million
of equity value profits for the period. This represents an annualised
10,3% (30 June 2015 restated: 10,8%) return on opening group
equity value. Lower investment returns and reduced operating
earnings from Individual and Group Arrangements as well as
STANLIB accounted for the lower return compared to 2015.
The group was managed within the board approved risk appetite
throughout the first half of 2016 and the capital position of
the group's main long-term insurance licence, Liberty Group
Limited, remained strong with the capital adequacy ratio at 2,95
(31 December 2015: 3,03) times the regulatory minimum.
Given the demanding conditions experienced in the first half,
management has taken active steps to address some of the shorter
term challenges. These include:
- The lack of capacity to provide guaranteed investment products
has been addressed with a new guaranteed product option
launched in May 2016 with over 40% of Liberty's first half
guaranteed investment product volumes sold in June 2016,
reflecting strong support for this product;
- A more competitive offshore domiciled investment product
offering will be launched in the second half of 2016;
- Continued close monitoring of customer persistency trends with
appropriate management action where necessary;
- Continued focus on ensuring cost efficiency; and
- Ongoing focus on ensuring that the group remains within
risk appetite.
Whilst tough market conditions will continue to impact the business,
these actions are expected to address the shorter term challenges
within management's control.
Our 31 March 2016 capital calculations under the draft
SAM guidelines confirm that the group is well positioned from a
solvency and SAM capital perspective, which is expected to become
effective during 2017.
Earnings by business unit
12 months
30 June 30 June % 31 December
Rm (unaudited) 2016 2015 change 2015
Insurance
Individual Arrangements 718 873 (18) 1 869
Group Arrangements 68 88 (23) 204
Liberty Corporate 88 97 (9) 219
Liberty Africa Insurance 11 28 (61) 25
Liberty Health (11) (22) 50 (19)
Growth initiatives (20) (15) (33) (21)
Balance sheet management 130 125 4 260
LibFin Markets - credit portfolio 139 108 29 260
LibFin Markets - asset/liability management portfolio (9) 17 >(100)
Asset Management 267 301 (11) 629
STANLIB South Africa(1) 249 271 (8) 567
STANLIB Other Africa 18 30 (40) 62
Central overheads and sundry income (83) (91) 9 (190)
Centre overheads and sundry income (103) (109) 6 (233)
Liberty Properties(1) 20 18 11 43
BEE normalised operating earnings 1 100 1 296 (15) 2 772
LibFin Investments - SIP 721 695 4 1 356
BEE normalised headline earnings 1 821 1 991 (9) 4 128
BEE preference share adjustment (8) (15) 47 (26)
Headline earnings 1 813 1 976 (8) 4 102
(1) Liberty entered into a strategic partnership with the retail division of JHI combining the collective
property management service capabilities under a joint venture entity, JHI Retail (Pty) Ltd. The transaction
was effective 1 May 2015 with Liberty's interest in JHI Retail being 49%. Earnings from the 49% interest in
JHI Retail are included in the STANLIB South Africa's earnings, together with the Liberty Properties development
capability. The results of the operations to 30 April 2015 and the ongoing portfolio liquidity charge were reflected
in central overheads and sundry income.
Commentary on the earnings by business unit follows on the pages below. Additional information is contained in the summary consolidated
segment information.
Individual Arrangements
Headline earnings from the group's South African retail operations
of R718 million was 18% down compared to 2015. Increased new
business strain, worsening investment and early duration risk
persistency together with lower positive risk variances were the
primary contributors to this result. In addition, modelling changes
were made to utilise a term structure of interests rates to value the
risk business. This facilitates improved future risk management but
had a negative once-off earnings effect.
Net customer cash inflows were positive at R0,6 billion
(30 June 2015: R3,5 billion). The decrease compared to 2015 is
mainly attributable to a higher value of surrenders and maturities
and lower single premium new business volumes. The lack of
capacity to provide a guaranteed investment product solution
together with a challenging consumer environment led to lower
growth in indexed new business sales of 1% compared to the first
half of 2015.
Value of new business of R242 million was below the prior year
restated amount of R343 million mainly due to the delayed re-
pricing of the risk products, the increase in the risk discount rate
and a changed new business mix reflecting lower single premium
volumes. The new business margin declined to 1,6% from 2,1% at
30 June 2015.
Despite the tough environment, the business continued to
deliver positive variances and was managed to better than model,
continuing a five year trend.
Group Arrangements
Liberty Corporate
Earnings of R88 million included a once-off R22 million charge
related to strengthening of longevity improvement assumptions.
Stable underwriting experience and good expense control
continued during the period. Indexed new business was 2% higher
at R324 million reflecting no significant single premium investment
or annuity mandates and an extremely competitive group risk
environment. Recurring premium sales into the umbrella offering
however grew by 13%. Net cash outflows amounted to R905 million
(30 June 2015: R859 million), reflecting low single premium new
business and a noticeable trend of higher member withdrawals in
participating employer funds linked to the challenging economic
environment and associated job losses.
Liberty Africa Insurance
Higher claims experience and investment in capacity to support
expansion negatively impacted earnings which, at R11 million, were
lower than the prior period. Indexed new business in the long-term
insurance businesses was broadly flat relative to the prior period
at R151 million, with value of new business lower at R16 million
(30 June 2015: R27 million) but at a good margin of 7%. Economic
conditions across the continent have deteriorated and placed
pressure on pricing and new business flows. Customer cash flows
were impacted by the loss of a Namibian investment mandate on
maturity of R175 million. Despite more difficult conditions in the
short term, the longer term GDP growth forecasts in our targeted
jurisdictions remain attractive and management is continuing to
execute on growth and geographic expansion strategies.
Liberty Health
The half year loss of R11 million reflects an improvement on the
prior half year loss of R22 million. Management are strategically
repositioning the business to focus primarily on providing health
risk value solutions to employers and their employees across the
African continent. Growth of 15% per annum in the number of
Liberty Health Cover product lives has been achieved over the last
three years. Total lives serviced now amount to 113 thousand. Claims
loss ratios experienced remain steady and in line with expectation.
Balance sheet management
LibFin Markets - Asset liability management and
credit portfolio
The credit portfolio, a diversified portfolio of government, state
owned enterprise and corporate securities backing the guaranteed
investment product sets, contributed R139 million (30 June 2015:
R108 million) in line with the growth of the portfolio and improved
portfolio diversification.
The asset liability management portfolio, which consists of the
market and liquidity risk exposures arising from the guaranteed
investment product set, produced a loss of R9 million for the half
year (30 June 2015: earnings of R17 million) resulting from the
establishment of a risk provision post the implementation of the
new yield curve hedging approach.
LibFin assets under management were higher at R53 billion
(31 December 2015: R50 billion).
LibFin Investments - Shareholder Investment
Portfolio
The SIP includes the assets backing capital in the insurance
operations as well as the group's investment market exposure to the
90:10 book of business. This portfolio has a conservative balanced
mandate and is managed with a long-term investment horizon.
During the period, the portfolio had an overweight exposure
to foreign assets (particularly developed market equity) and an
underweight exposure to the local equity market, resulting in a
gross return of 4,0% (30 June 2015: 4,4%), which was below the
strategic benchmark for the year. The SIP contributed R721 million
(30 June 2015: R695 million) to the group's headline earnings.
Asset Management
STANLIB
Continued market volatility and lower than anticipated market
growth resulted in STANLIB's headline earnings of R267 million
being 11% lower than the prior period. First half earnings were
impacted by once-off costs relating to the shared services
outsourcing programme. Total assets under management by
STANLIB increased by 1% to R584 billion (31 December 2015:
R579 billion), as a result of incremental growth from investment
market returns and net cash outflows.
Net customer cash inflows (excluding intergroup) amounted to
R0,5 billion compared to R10,3 billion in the prior period. This
result was mainly driven by lower cash flows from group channels
and third party independent financial advisors. Money market
outflows of R2,1 billion offset positive non-money market inflows of
R1,2 billion in the South African business. Inflows of R1,4 billion were
received in the Africa businesses. Intergroup cash outflows for the
period amounted to R8,1 billion.
In respect of short term investment performance, 87% of
STANLIB's core retail funds performed in the top two quartiles
compared to 13% in the previous period, showing a marked
improvement. STANLIB's alternative franchises continue to
perform ahead of benchmark.
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 indexed new business premiums sold under the
agreement amounted to R1,4 billion (30 June 2015: R1,5 billion).
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited remained
strong at 2,95 times the statutory requirement (31 December 2015:
3,03 times). All 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 2016 and 31 December 2015 reflected OCAR as the
higher amount.
Dividends
2016 interim dividend
In line with the group's interim dividend policy of paying 40% of
the prior full year dividend, the board has approved and declared a
gross interim dividend of 276 cents per ordinary share. The interim
dividend will be paid out of income reserves and is payable on
Monday, 5 September 2016 to all ordinary shareholders recorded in
the books of Liberty Holdings Limited on the record date.
The dividend of 276 cents per ordinary share will be subject to
a local dividend tax rate of 15% which will result in a net interim
dividend, to those shareholders who are not exempt from paying
dividend tax, of 234,6 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 Tuesday, 30 August 2016
on the JSE
First trading day ex dividend on Wednesday, 31 August 2016
the JSE
Record date Friday, 2 September 2016
Payment date Monday, 5 September 2016
Share certificates may not be dematerialised or rematerialised
between Wednesday, 31 August 2016 and Friday, 2 September
2016, 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, 5 September 2016.
Prospects
Management is taking active steps to address shorter term
challenges relating to sales, the competitiveness of Liberty's
product suite, persistency and cost pressures.
Operating conditions are expected to remain tough and the
ongoing pressure on consumer disposable income is likely to
continue in the short term. However, we are resolute in developing
competitive value propositions for our customers, managing risk
appropriately, deploying capital effectively and pursuing profitable
growth opportunities over the long term.
Thabo Dloti Jacko Maree
Chief Executive Chairman
28 July 2016
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 http://www.libertyholdings.co.za
Accounting policies
The unaudited condensed interim consolidated financial
statements of Liberty Holdings Limited for the six months ended
30 June 2016 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 full interim report for the six months ended 30 June 2016
(which includes IAS 34 16A (j)) is available on the Liberty
Holdings Limited website and upon request from the company's
registered offices.
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.
Development costs
Represents project costs incurred on developing or enhancing
future revenue opportunities.
FCTR
Foreign Currency Translation Reserve.
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 and early adoption of amendments to IFRS, as
set out below. The minor amendments have not resulted in any
material impacts to the group's 2016 reported results, comparative
periods or interim disclosures.
Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative
and IAS 12 Income Taxes: Recognition of Deferred Tax Assets for
Unrealised Losses, effective 1 January 2017, have been early adopted
on 1 January 2016. These amendments are not expected to impact
significantly on the group results, however increased disclosure
will be required under the Disclosure Initiative amendments for the
annual financial statements.
Review/audit
These interim results have not been reviewed or audited by the
company's auditors PricewaterhouseCoopers Inc.
"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.
Consolidated statement of financial position
as at 30 June 2016
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2016 2015 2015
Assets
Equipment 1 178 1 009 1 178
Owner-occupied properties 1 551 1 463 1 540
Investment properties 30 955 29 273 30 508
Intangible assets 303 314 317
Defined benefit pension fund employer surplus 300 278 301
Deferred acquisition costs 706 643 673
Interests in joint ventures 889 512 979
Reinsurance assets 1 735 1 591 1 658
Long-term insurance 1 378 1 293 1 317
Short-term insurance 357 298 341
Operating leases - accrued income 1 254 1 222 1 273
Pledged assets measured at fair value through profit or loss 17 482 16 522 19 225
Assets held for trading and for hedging 9 668 8 593 11 890
Interests in associates measured at fair value through profit or loss 19 555 16 816 16 967
Financial investments 308 017 307 464 308 818
Deferred taxation 315 364 326
Prepayments, insurance and other receivables 7 809 6 014 4 360
Cash and cash equivalents 12 820 12 297 19 305
Total assets 414 537 404 375 419 318
Liabilities
Long-term policyholder liabilities 305 065 295 353 298 232
Insurance contracts 201 746 199 488 198 523
Investment contracts with discretionary participation features 11 691 10 112 11 250
Financial liabilities under investment contracts 91 628 85 753 88 459
Short-term insurance liabilities 990 758 937
Financial liabilities 3 916 3 906 3 914
Third party financial liabilities arising on consolidation of mutual funds 39 147 41 375 46 329
Employee benefits 1 035 958 1 400
Deferred revenue 261 235 247
Deferred taxation 3 222 4 373 4 436
Deemed disposal taxation liability 879
Provisions 196 169 168
Derivative liabilities 7 548 5 933 11 125
Repurchase agreements liabilities and collateral received 14 159 14 880 16 159
Insurance and other payables 11 265 11 455 10 041
Current taxation 507 326 337
Total liabilities 388 190 379 721 393 325
Equity
Shareholders' interests 22 032 20 488 21 739
Share capital 26 26 26
Share premium 5 495 5 593 5 524
Retained surplus 17 242 15 401 16 615
Other reserves (731) (532) (426)
Non-controlling interests 4 315 4 166 4 254
Total equity 26 347 24 654 25 993
Total equity and liabilities 414 537 404 375 419 318
Consolidated statement of comprehensive income
for the six months ended 30 June 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2016 2015 2015
Revenue
Insurance premiums 19 535 18 741 39 245
Reinsurance premiums (1 022) (800) (1 673)
Net insurance premiums 18 513 17 941 37 572
Service fee income from long-term policyholder investment contracts 615 483 1 145
Investment income 10 122 10 178 19 634
Hotel operations sales 288 241 524
Investment gains 6 868 5 633 12 425
Fee revenue and reinsurance commission 1 338 1 324 2 695
Total revenue 37 744 35 800 73 995
Claims and policyholder benefits under insurance contracts (19 111) (16 242) (34 362)
Insurance claims recovered from reinsurers 735 501 1 203
Change in long-term policyholder liabilities (4 031) (4 175) (3 725)
Insurance contracts (3 578) (4 168) (2 933)
Investment contracts with discretionary participation features (517) (1) (802)
Applicable to reinsurers 64 (6) 10
Fair value adjustment to long-term policyholder liabilities under investment contracts (3 671) (3 389) (6 181)
Fair value adjustment to financial liabilities (14) (14)
Fair value adjustment on third party mutual fund interests 250 (1 300) (7 301)
Acquisition costs (2 248) (2 228) (4 760)
General marketing and administration expenses (5 208) (4 775) (10 149)
Finance costs (716) (397) (1 196)
Profit share allocations under bancassurance and other agreements (482) (435) (933)
Equity accounted earnings from joint venture 11 2 13
Profit before taxation 3 259 3 362 6 590
Taxation(1) (1 267) (1 225) (2 303)
Total earnings 1 992 2 137 4 287
Other comprehensive (loss)/income (39) (73) 62
Items that may be reclassified subsequently to profit or loss (35) (86) 71
Net change in fair value on cash flow hedges 117 (40) (150)
Income and capital gains tax relating to net change in fair value on cash flow hedges (29) 12 37
Foreign currency translation (123) (58) 184
Items that may not be reclassified subsequently to profit or loss (4) 13 (9)
Owner-occupied properties - fair value adjustment 18 16 54
Income and capital gains tax relating to owner-occupied properties fair value adjustment (5) (5) (17)
Change in long-term policyholder insurance liabilities (application of shadow accounting) (13) (11) (37)
Actuarial gains/(losses) on post-retirement medical aid liability 4 19 (34)
Income tax relating to post-retirement medical aid liability (1) (5) 10
Net adjustments to defined benefit pension fund(2) (10) (1) 20
Income tax relating to defined benefit pension fund 3 (5)
Total comprehensive income 1 953 2 064 4 349
Total earnings attributable to:
Shareholders' interests 1 814 1 977 4 011
Non-controlling interests 178 160 276
1 992 2 137 4 287
Total comprehensive income attributable to:
Shareholders' interests 1 799 1 927 4 010
Non-controlling interests 154 137 339
1 953 2 064 4 349
Basic and fully diluted earnings per share Cents Cents Cents
Basic earnings per share 666,9 741,1 1 493,5
Fully diluted basic earnings per share 647,6 704,7 1 428,0
(1) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the
effective tax charge relative to profit before taxation.
(2) Net adjustments to defined benefit pension fund include actuarial gains or losses, return on plan assets, reduced by the
interest on the net defined benefit asset and the effect of the application of the asset ceiling.
Summary consolidated statement of changes in
shareholders' funds
for the six months ended 30 June 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2016 2015 2015
Balance of ordinary shareholders' interests at 1 January 21 739 19 487 19 487
Ordinary dividends (1 241) (1 150) (1 874)
Total comprehensive income 1 799 1 927 4 010
Share buy-backs(1) (460) (337) (444)
Black Economic Empowerment transaction 129 492 520
Share-based payments 67 70 140
Preference dividends (1) (1) (2)
Transactions between owners (98)
Ordinary shareholders' interests 22 032 20 488 21 739
Balance of non-controlling interests at 1 January 4 254 4 147 4 147
Total comprehensive income 154 137 339
Acquisition of interest in East African Underwriters Limited 28
Unincorporated property partnerships net distributions (108) (97) (144)
Non-controlling interests share of subsidiary dividend (13) (21) (43)
Non-controlling interests capital reduction (1)
Transactions between owners (44)
Non-controlling interests 4 315 4 166 4 254
Total equity 26 347 24 654 25 993
(1) Share buy-backs are purchases of shares from the market to meet employee share-based payment obligations.
Summary consolidated statement of cash flows
for the six months ended 30 June 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2016 2015 2015
Operating activities (8 860) 20 278 13 489
Investing activities 4 892 (21 928) (19 298)
Financing activities (2 444) 1 10 937
Net (decrease)/increase in cash and cash equivalents (6 412) (1 649) 5 128
Cash and cash equivalents at the beginning of the period 19 305 13 985 13 985
Cash and cash equivalents acquired through business acquisition 6
Foreign currency translation (79) (39) 192
Cash and cash equivalents at the end of the period 12 820 12 297 19 305
Headline earnings and earnings per share
for the six months ended 30 June 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm (unless otherwise stated) 2016 2015 2015
Reconciliation of total earnings to headline earnings attributable
to shareholders
Total earnings attributable to shareholders 1 814 1 977 4 011
Preference share dividend (1) (1) (2)
Basic earnings attributable to ordinary shareholders 1 813 1 976 4 009
Impairment of intangible assets 110
Tax on headline earnings adjustable item (17)
Headline earnings attributable to ordinary shareholders 1 813 1 976 4 102
Net income earned on BEE preference shares 8 15 26
BEE normalised headline earnings attributable to ordinary shareholders 1 821 1 991 4 128
Weighted average number of shares in issue ('000) 271 873 266 646 268 423
BEE normalised weighted average number of shares in issue ('000) 280 149 282 227 281 864
Fully diluted weighted average number of shares in issue ('000) 279 957 280 402 280 736
Earnings per share Cents Cents Cents
Total earnings attributable to ordinary shareholders
Basic 666,9 741,1 1 493,5
Headline 666,9 741,1 1 528,2
BEE normalised headline 650,0 705,5 1 464,5
Fully diluted earnings attributable to ordinary shareholders
Basic 647,6 704,7 1 428,0
Headline 647,6 704,7 1 461,2
Summary consolidated segment information
for the six months ended 30 June 2016
In line with the implementation of the new operating model in 2015 and the stated intention to manage the business primarily around
customer groupings, the group's reportable operating segments have been aligned to the new organisational design, namely Individual
Arrangements, Group Arrangements and Asset Management. In order to assist in comparison, the segment information for the six months
ended 30 June 2015 has been restated. The customer facing unit is supported by shared service functions (Group Enablement) and LibFin
(incorporating LibFin Markets and LibFin Investments), which are strategic competency units. The impact of LibFin Markets is disclosed in
the relevant customer grouping.
The unaudited segment results for the six months ended 30 June 2016 are as follows:
Individual Group Asset Reporting
Arrange- Arrange- Manage- adjust- IFRS
Rm ments ments ment Other Total ments(1) reported
Total revenue 31 992 10 275 1 755 1 139 45 161 (7 417) 37 744
Profit before taxation 1 619 235 359 900 3 113 146 3 259
Taxation (865) (111) (88) (203) (1 267) (1 267)
Total earnings 754 124 271 697 1 846 146 1 992
Other comprehensive income/(loss) 89 (20) (19) (89) (39) (39)
Total comprehensive income 843 104 252 608 1 807 146 1 953
Attributable to non-controlling interests (4) (4) (8) (146) (154)
Shareholders 843 100 248 608 1 799 1 799
Reconciliation of total earnings to
headline earnings attributable to
shareholders
Total earnings 754 124 271 697 1 846 146 1 992
Attributable to non-controlling interests (28) (4) (32) (146) (178)
Preference share dividend (1) (1) (1)
Headline earnings 754 96 267 696 1 813 1 813
Net income earned on BEE preference shares 8 8 8
BEE normalised headline earnings 754 96 267 704 1 821 1 821
(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 unaudited restated segment results for the six months ended 30 June 2015 are as follows:
Individual Group Asset Reporting
Arrange- Arrange- Manage- adjust- IFRS
Rm ments ments ment Other Total ments(1) reported
Total revenue 30 254 8 412 1 650 898 41 214 (5 414) 35 800
Profit before taxation 2 076 253 401 506 3 236 126 3 362
Taxation (1 069) (70) (97) 11 (1 225) (1 225)
Total earnings 1 007 183 304 517 2 011 126 2 137
Other comprehensive loss (16) (52) (4) (1) (73) (73)
Total comprehensive income 991 131 300 516 1 938 126 2 064
Attributable to non-controlling interests (8) (3) (11) (126) (137)
Shareholders 991 123 297 516 1 927 1 927
Reconciliation of total earnings to headline
earnings attributable to shareholders
Total earnings 1 007 183 304 517 2 011 126 2 137
Attributable to non-controlling interests (31) (3) (34) (126) (160)
Preference share dividend (1) (1) (1)
Headline earnings 1 007 152 301 516 1 976 1 976
Net income earned on BEE preference shares 15 15 15
BEE normalised headline earnings 1 007 152 301 531 1 991 1 991
The audited segment results for the year ended 31 December 2015 are as follows:
Individual Group Asset Reporting
Arrange- Arrange- Manage- adjust- IFRS
Rm ments ments ment Other Total ments(1) reported
Total revenue 57 694 18 527 3 436 2 169 81 826 (7 831) 73 995
Profit before taxation 3 427 499 842 1 599 6 367 223 6 590
Taxation (1 737) (193) (205) (168) (2 303) (2 303)
Total earnings 1 690 306 637 1 431 4 064 223 4 287
Other comprehensive (loss)/income (136) 138 44 16 62 62
Total comprehensive income 1 554 444 681 1 447 4 126 223 4 349
Attributable to non-controlling interests (106) (10) (116) (223) (339)
Shareholders 1 554 338 671 1 447 4 010 4 010
Reconciliation of total earnings to headline
earnings attributable to shareholders
Total earnings 1 690 306 637 1 431 4 064 223 4 287
Attributable to non-controlling interests (45) (8) (53) (223) (276)
Preference share dividend (2) (2) (2)
Impairment of intangible assets 51 21 21 93 93
Headline earnings 1 741 282 629 1 450 4 102 4 102
Net income earned on BEE preference shares 26 26 26
BEE normalised headline earnings 1 741 282 629 1 476 4 128 4 128
(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 2016
1. Introduction
Liberty presents a "group equity value" report to reflect the combined value of the various components of Liberty's businesses.
Section 3 below describes the valuation bases used for each reported component. It should be noted that 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 Change in measurement basis of LibFin Markets - credit portfolio (LibFin Credit) and certain
shareholder recurring costs
In order to improve relevance of sources of equity value earnings and to better align to future statutory guidance on expense modelling, with
effect from 1 January 2015 the method to value the contribution of LibFin Credit and the treatment of certain recurring shareholder costs
was changed as described in the 31 December 2015 annual financial statements.
These changes have been applied retrospectively with the cumulative effect recognised at 1 January 2015. The effect of these changes at
1 January 2015 was a decrease in the BEE normalised group equity value of R189 million. The 30 June 2015 results have been restated to
reflect this change in the measurement basis to facilitate comparison of the 30 June 2016 figures.
3 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:
3.1 South African (SA) 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 Advisory 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.
3.2 Other businesses:
STANLIB Valued using a 10 times (June and December 2015: 10 times) multiple of estimated sustainable earnings.
Liberty Health As Liberty Health has yet to establish a history to support a sustainable earnings calculation, an adjusted IFRS net
asset value is applied.
Liberty Africa Liberty Africa Insurance is an emerging cluster of both long and short-term insurance businesses located in
Insurance 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. The combined valuations approximated the cluster's
IFRS net asset value. Therefore the IFRS net asset value was used.
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.
3.3 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 (June and December 2015: 9 times).
4 BEE normalised group equity value
4.1 Analysis of BEE normalised group equity value
Value of
in-force
SA Group SA
covered Other funds Adjust- covered
Unaudited business businesses invested ments Net worth business Total
30 June 2016 Rm Rm Rm Rm Rm Rm Rm
SA insurance operations 13 815 13 815 (6 429) 7 386 24 627(3) 32 013
Individual Arrangements 21 968
Liberty Corporate 2 659
Value of in-force acquired 20 20 (20)
Working capital and other assets(2) 5 261 5 261 (538) 4 723 176 4 899
South African insurance operations 19 096 19 096 (6 987) 12 109 24 803 36 912
Asset Management(4) 1 018 1 018 5 582 6 600 6 600
STANLIB South Africa(2) 762 762 5 238 6 000 6 000
STANLIB Other Africa 256 256 344 600 600
Liberty Health 330 330 330 330
Liberty Africa Insurance 772 772 772 772
Liberty Holdings 816 816 (100) 716 716
Cost of required capital (1 601) (1 601)
Net equity reported under IFRS 19 096(1) 2 936 22 032 (1 505) 20 527 23 202 43 729
BEE preference funding 204 204 204 204
Allowance for future shareholder costs (1 845) (1 845) (1 845) (1 845)
Allowance for employee share rights (50) (44) (94) (94) (94)
BEE normalised equity value 19 250 1 047 20 297 (1 505) 18 792 23 202 41 994
Summary of adjustments:
Negative rand reserves (6 429) (6 429)
Deferred acquisition costs (682) (682)
Deferred revenue liability 244 244
Frank Financial Services allowance for future
expenses (100) (100)
Carrying value of in-force business acquired (20) (20)
Fair value adjustment of non SA covered
business(2) 5 582 5 582
Impact of discounting on deferred tax asset (100) (100)
(6 987) 5 482 (1 505)
(1) Reconciliation to SA covered business net worth as per
analysis in supplementary information
Net equity of SA covered business as reported under IFRS 19 096
Adjustments as above (6 987)
Allowance for employee share rights (50)
BEE preference share funding 204
Net worth as reported in supplementary information 12 263
(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 Proprietary Limited entity are included in the STANLIB South Africa valuation.
In addition, the liquidity fee component charge to the property portfolio is valued as part of the Liberty Group Limited value
of in-force and disclosed as an adjustment to working capital and other assets.
(3) Includes the value of LibFin Credit, previously disclosed separately in group equity value.
(4) Valued using a ten times multiple of estimated sustainable earnings after normalising for once-off items.
Value of
in-force
SA Group SA
covered Other funds Adjust- covered
Unaudited and restated business businesses invested ments Net worth business Total
30 June 2015 Rm Rm Rm Rm Rm Rm Rm
SA insurance operations 13 694 13 694 (5 990) 7 704 23 993(3) 31 697
Individual Arrangements 21 731
Liberty Corporate 2 262
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 (6 538) 11 720 24 133 35 853
Asset Management(4) 693 693 5 807 6 500 6 500
STANLIB South Africa(2) 498 498 5 402 5 900 5 900
STANLIB Other Africa 195 195 405 600 600
Liberty Health 312 312 312 312
Liberty Africa Insurance 604 604 604 604
Liberty Holdings 621 621 (144) 477 477
Cost of required capital (1 568) (1 568)
Net equity reported under IFRS 18 258(1) 2 230 20 488 (875) 19 613 22 565 42 178
BEE preference funding 340 340 340 340
Allowance for future shareholder costs (1 882) (1 882) (1 882) (1 882)
Allowance for employee share rights (123) (92) (215) (215) (215)
BEE normalised equity value 18 475 256 18 731 (875) 17 856 22 565 40 421
Summary of adjustments:
Negative rand reserves (5 990) (5 990)
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)
Change in measurement basis: recurring
shareholder expenses (44) (44)
Fair value adjustment of non SA covered
business(2) 5 807 5 807
Impact of discounting on deferred tax asset (100) (100)
(6 538) 5 663 (875)
(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 (6 538)
Allowance for employee share rights (123)
BEE preference share funding 340
Net worth as reported in supplementary information 11 937
Value of
in-force
SA Group SA
covered Other funds Adjust- covered
Audited business businesses invested ments Net worth business Total
31 December 2015 Rm Rm Rm Rm Rm Rm Rm
SA insurance operations 14 427 14 427 (6 216) 8 211 23 857(3) 32 068
Individual Arrangements 21 353
Liberty Corporate 2 504
Value of in-force acquired 30 30 (30)
Working capital and other assets(2) 4 806 4 806 (517) 4 289 168 4 457
South African insurance operations 19 263 19 263 (6 763) 12 500 24 025 36 525
Asset Management(4) 805 805 5 825 6 630 6 630
STANLIB South Africa(2) 546 546 5 454 6 000 6 000
STANLIB Other Africa 259 259 371 630 630
Liberty Health 373 373 373 373
Liberty Africa Insurance 736 736 736 736
Liberty Holdings 562 562 (100) 462 462
Cost of required capital (1 518) (1 518)
Net equity reported under IFRS 19 263(1) 2 476 21 739 (1 038) 20 701 22 507 43 208
BEE preference funding 322 322 322 322
Allowance for future shareholder costs (1 786) (1 786) (1 786) (1 786)
Allowance for employee share rights (61) (48) (109) (109) (109)
BEE normalised equity value 19 524 642 20 166 (1 038) 19 128 22 507 41 635
Summary of adjustments:
Negative rand reserves (6 216) (6 216)
Deferred acquisition costs (651) (651)
Deferred revenue liability 234 234
Frank Financial Services allowance for future
expenses (100) (100)
Carrying value of in-force business acquired (30) (30)
Fair value adjustment of non SA covered
business(2) 5 825 5 825
Impact of discounting on deferred tax asset (100) (100)
(6 763) 5 725 (1 038)
(1) Reconciliation to SA covered business net worth as per
analysis in supplementary information
Net equity of SA covered business as reported under IFRS 19 263
Adjustments as above (6 763)
Allowance for employee share rights (61)
BEE preference share funding 322
Net worth as reported in supplementary information 12 761
4.2 BEE normalised group equity value earnings and value per share
Audited
12 months
Unaudited Unaudited and restated 31 Dec
30 June 2016 30 June 2015 2015
SA
SA covered Other covered Other
Rm business businesses Total business businesses Total Total
BEE normalised equity value at the end
of the period 35 465 6 529 41 994 34 502 5 919 40 421 41 635
Equity value at the end of the period 35 261 6 529 41 790 34 162 5 919 40 081 41 313
BEE preference shares 204 204 340 340 322
Net share buy-backs 460 460 337 337 444
Funding of restricted share plan 136 (136) 115 (115)
Intergroup dividends 2 000 (2 000) 1 150 (1 150)
Dividends paid 1 242 1 242 1 151 1 151 1 876
BEE normalised equity value at the
beginning of the period (35 268) (6 367) (41 635) (33 562) (6 273) (39 835) (39 835)
Equity value at the beginning of the
period (34 946) (6 367) (41 313) (30 564) (8 653) (39 217) (39 217)
Change in measurement basis:
recurring shareholder expenses (1 315) 1 480 165 165
Change in measurement basis:
LibFin Credit (876) 900 24 24
BEE preference shares (322) (322) (807) (807) (807)
BEE normalised equity value
earnings 2 333 (272) 2 061 2 205 (131) 2 074 4 120
BEE normalised return on group
equity value (%) 13,7 (8,8) 10,3 13,6 (4,3) 10,8 10,5
BEE normalised number of shares
(000's) 282 905 286 074 285 259
Number of shares in issue (000's) 271 517 270 390 270 371
Shares held for the employee restricted
share scheme (000's) 4 578 4 308 3 780
Adjustment for BEE shares (000's) 6 810 11 376 11 108
BEE normalised group equity value
per share (R) 148,44 141,30 145,96
The 30 June 2015 comparative figures have been restated to allow for the change in measurement bases for LibFin Credit and certain
recurring shareholders expenses. Refer to section 2 above.
4.3 Sources of BEE normalised group equity value earnings
Audited
12 months
Unaudited Unaudited and restated 31 Dec
30 June 2016 30 June 2015 2015
SA SA
covered Other covered Other
Rm business businesses Total business businesses Total Total
Value of new business written in the
period 241 16 257 353 27 380 729
Expected return on value of in-force
business 1 483 1 483 1 242 1 242 2 538
Variances/changes in operating
assumptions 213 (123) 90 623 (135) 488 627
Operating experience variances
(including incentive outperformance) 276 35 311 496 13 509 789
Operating assumption changes (30) (158) (188) 22 (148) (126) (265)
Changes in modelling methodology (33) (33) 105 105 103
Headline earnings of other businesses 247 247 307 307 635
Operational equity value profits 1 937 140 2 077 2 218 199 2 417 4 529
Non headline earnings adjustments (93)
Development costs (43) (43) (24) (24) (41)
Economic adjustments 385 (114) 271 (26) (57) (83) (145)
Investment return on net worth 357 (114) 243 306 (57) 249 696
Investment variances(1) (277) (277) (153) (153) 37
Change in economic assumptions 305 305 (179) (179) (878)
Change in fair value adjustments
on value of other businesses (259) (259) (251) (251) (251)
Change in allowance for share rights 11 4 15 13 2 15 121
Group equity value earnings 2 333 (272) 2 061 2 205 (131) 2 074 4 120
(1) Includes effect of R106 million (31 December 2015: negative R133 million, 30 June 2015: negative R28 million) in respect of
the change in fair value of cash flow hedges supporting LibFin Credit.
The 30 June 2015 comparative figures have been restated to allow for the change in measurement bases for LibFin Credit and certain
recurring shareholders expenses. Refer to section 2 above.
4.4 Analysis of value of long-term insurance new business and margins
Unaudited Audited
Unaudited and restated 12 months
30 June 30 June 31 December
Rm (unless otherwise stated) 2016 2015 2015
South African covered business:
Individual Arrangements 734 833 1 761
Traditional Life 580 661 1 463
Direct Channel 37 31 54
Credit Life 42 39 71
LibFin Credit uplift to Individual Arrangements 75 102 173
Group Arrangements: Liberty Corporate 43 46 134
Traditional business 39 40 117
LibFin Credit uplift to Group Arrangements 4 6 17
Gross value of new business 777 879 1 895
Overhead acquisition costs impact on value of new business (488) (477) (1 116)
Cost of required capital (48) (49) (95)
Net value of South African covered new business 241 353 684
Present value of future expected premiums 18 226 18 749 38 886
Margin (%) 1,3 1,9 1,8
Group Arrangements: Liberty Africa Insurance
Net value of new business 16 27 45
Present value of future expected premiums 225 374 679
Margin (%) 7,0 7,1 6,6
Total group net value of new business 257 380 729
Total group margin (%) 1,4 2,0 1,8
The 30 June 2015 comparative amounts for value of new business for South African covered business have been restated to allow for the
change in measurement bases for LibFin Credit and certain recurring shareholders expenses. Refer to section 2 above.
Long-term insurance new business
for the six months ended 30 June 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2016 2015 2015
Sources of insurance operations total new business by product type
Retail 12 097 12 486 25 790
Single 9 911 10 398 21 392
Recurring 2 186 2 088 4 398
Institutional 665 727 2 114
Single 304 362 1 262
Recurring 361 365 852
Total new business 12 762 13 213 27 904
Single 10 215 10 760 22 654
Recurring 2 547 2 453 5 250
Insurance indexed new business 3 569 3 529 7 515
Unaudited
Sources of insurance indexed new business:
Individual Arrangements 3 094 3 058 6 421
Group Arrangements: 475 471 1 094
Liberty Corporate 324 318 790
Liberty Africa Insurance(1) 151 153 304
(1) Liberty owns less than 100% of certain 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 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2016 2015 2015
Net premiums by product type
Retail 20 005 19 643 40 532
Single 9 775 10 311 21 146
Recurring 10 230 9 332 19 386
Institutional 5 668 5 002 12 139
Single 1 367 988 3 915
Recurring 4 301 4 014 8 224
Net premium income from insurance contracts and inflows from investment
contracts 25 673 24 645 52 671
Single 11 142 11 299 25 061
Recurring 14 531 13 346 27 610
Net claims and policyholders benefits by product type
Retail (19 254) (15 986) (33 917)
Death and disability claims (3 249) (2 711) (5 947)
Policy surrender and maturity claims (13 388) (10 815) (22 682)
Annuity payments (2 617) (2 460) (5 288)
Institutional (6 772) (5 807) (13 352)
Death and disability claims (1 186) (918) (2 305)
Scheme terminations and member withdrawals (5 211) (4 431) (10 358)
Annuity payments (375) (458) (689)
Net claims and policyholders benefits (26 026) (21 793) (47 269)
Long-term insurance net cash flows(2) (353) 2 852 5 402
Unaudited
Sources of insurance operations net cash flows:
Individual Arrangements 597 3 509 6 288
Group Arrangements: (955) (651) (496)
Liberty Corporate (905) (859) (891)
Liberty Africa Insurance(1) (50) 208 395
Asset Management:
STANLIB Multi-manager 5 (6) (390)
(1) Liberty owns less than 100% of certain of the entities that make up Liberty Africa. The information is
recorded at 100% and is not adjusted for proportional legal ownership.
(2) This excludes net cash inflows attributed to the off balance sheet Gateway LISP of R129 million (30 June 2015: R663 million).
Assets under management(1)
as at 30 June 2016
30 June 30 June 31 December
Rbn (Unaudited) 2016 2015 2015
Managed by group business units 648 615 641
STANLIB South Africa 531 518 529
STANLIB Other Africa(2) 53 42 50
LibFin 53 48 50
Other internal managers 11 7 12
Externally managed 31 30 27
Total assets under management(3) 679 645 668
(1) Includes funds under administration.
(2) Liberty owns less than 100% of certain of the 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 (June 2016) amounts:
Unit trusts listed (Rbn)
STANLIB Other
managed managed Total
STANLIB 36 70 106
Gateway 2 3 5
Asset management net cash flows - STANLIB(1)
for the six months ended 30 June 2016
12 months
30 June 30 June 31 December
Rm (Unaudited) 2016 2015 2015
South Africa
Non-money market 1 189 5 465 6 366
Retail 202 5 426 8 511
Institutional 987 39 (2 145)
Money market (2 136) 3 687 (672)
Retail (202) (939) (1 413)
Institutional (1 934) 4 626 741
Net South Africa cash (outflows)/inflows (947) 9 152 5 694
Other Africa(2)
Non-money market 1 980 (87) 977
Retail (6) 249 (62)
Institutional 1 986 (336) 1 039
Money market (580) 1 252 1 783
Net Other Africa cash inflows 1 400 1 165 2 760
Net cash inflows from asset management 453 10 317 8 454
(1) Cash flows exclude intergroup segregated life fund mandates and Delta LISP with effect from June 2016.
(2) Liberty owns less than 100% of certain of the 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 2016
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2016 2015 2015
Net premiums 805 571 1 249
Liberty Health - medical risk 508 366 778
Liberty Africa Insurance - motor, property, medical and other 297 205 471
Net claims (496) (343) (771)
Liberty Health - medical risk (353) (251) (554)
Liberty Africa Insurance - motor, property, medical and other (143) (92) (217)
Net cash inflows from short-term insurance 309 228 478
Unaudited
Claims loss ratio (%)
Liberty Health 70 69 71
Liberty Africa Insurance 48 45 46
Combined loss ratio (%)
Liberty Health 99 100 101
Liberty Africa Insurance 91 96 97
Capital commitments
as at 30 June 2016
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2016 2015 2015
Equipment 366 220 401
Investment and owner-occupied properties 1 760 2 283 1 495
Unconsolidated structured entities(1) 351
Total capital commitments 2 126 2 854 1 896
Under contracts 714 2 005 903
Authorised by the directors but not contracted 1 412 849 993
(1) These were undrawn commitments to various unconsolidated structured entities and mainly form part of the ongoing
build of LibFin Credit asset portfolio. Drawing was subject to covenant checks by Liberty.
The above 2016 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds
and R135 million (31 December 2015: R225 million) from non-controlling interests in unincorporated property partnerships in respect of
investment properties.
Corporate actions
for the six months ended 30 June 2016
Unaudited
Acquisition of East African Underwriters Limited (EAUL)
Effective 12 January 2016, Liberty Holdings Limited acquired a 51% stake in EAUL for R45 million. EAUL is a short-term insurance business in
Uganda. This transaction has an insignificant impact on the group financial results.
Retirement benefit obligations
as at 30 June 2016
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 2016, the Liberty post-retirement medical aid benefit liability was R497 million (31 December 2015: R480 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 2016
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 or have been contracted in the 30 June 2016 financial period:
1. Summary of related party transactions with Standard Bank
1.1 Summary of movement in investment in ordinary shares held by the group in the group's holding
company is as follows:
Number Fair value Ownership
'000 Rm %
Standard Bank Group Limited
Balance at 1 January 2016 10 501 1 192 0,66
Purchases 3 228 361
Sales (3 250) (387)
Fair value adjustments 173
Balance at 30 June 2016 10 479 1 339 0,66
1.2 Bancassurance
The Liberty group has 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 2016 amounted to R3 108 million (2015 full year: R7 503 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 2016 is R470 million (2015 full year: R896 million).
The bancassurance agreements are evergreen agreements with a 24-month notice period for termination - as at the date of the approval of
these financial results, 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 six months to 30 June 2016 is R61 million (2015 full year: R110 million).
1.3 Purchases and sales of financial instruments
As per Liberty's 2015 annual financial statements, in the normal course of conducting business, Liberty deposits cash with Standard Bank,
purchases and sells financial instruments issued by Standard Bank and enters into sale and repurchase agreements and 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.
2. Summary of related party transactions with other group entities
2.1 Acquisition of investment from an interest in associate
As at 30 June 2016, Liberty held an investment in the South Africa Infrastructure Fund Trust (SAIF), which was accounted for as an interest
in associate measured at fair value through profit or loss.
SAIF has commenced a process to realise its assets. Through this process Liberty, on 4 July 2016, purchased a share in Trans African
Concessions (TRAC) Proprietary Limited from SAIF for an amount of R1,5 billion. This purchase is part of an agreed arrangement with several
partners that will facilitate the establishment of a STANLIB managed infrastructure fund holding various non-controlling interests in toll road
concessions. This fund is likely to be accounted for as a mutual fund subsidiary of Liberty.
2.2 Proposed sale of hotels businesses to The Cullinan Hotel Proprietary Limited (Cullinan)
Liberty has entered into a sale of business agreement with Cullinan to dispose of the interests in the two investment properties and
accompanying hotel businesses for an aggregate cash consideration of R310 million. Liberty has a 40% interest in Cullinan, which is
accounted for as an associate measured at fair value through profit or loss.
There will be no significant financial impacts to Liberty's results or statement of financial position arising from this disposal.
There are no other significant changes to related party transactions as reported in Liberty's 2015 annual financial statements.
Offsetting, enforceable master netting
arrangements or similar agreements
as at 30 June 2016
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. Master netting arrangements (MNA) or similar agreements entered into only allow setoff on default. However,
related amounts not offset in the statement of financial position that are subject to MNA or similar agreements are disclosed in the
table below:
Total per Not subject Subject
statement to MNA to MNA
of financial or similar or similar Financial
Rm position agreements agreements collateral Net amount
Unaudited
30 June 2016
Assets
Assets held for trading and for hedging 9 668 (621) 9 047 (7 525) 1 522
Pledged assets measured at fair value through profit
or loss 17 482 17 482 (14 159) 3 323
Total 27 150 (621) 26 529 (21 684) 4 845
Liabilities
Derivative liabilities 7 548 (23) 7 525 (7 525)
Repurchase agreements liabilities and collateral
received 14 159 14 159 (14 159)
Total 21 707 (23) 21 684 (21 684)
Audited
31 December 2015
Assets
Assets held for trading and for hedging 11 890 (163) 11 727 (10 982) 745
Pledged assets measured at fair value through profit
or loss 19 225 19 225 (16 153) 3 072
Total 31 115 (163) 30 952 (27 135) 3 817
Liabilities
Derivative liabilities 11 125 (143) 10 982 (10 982)
Repurchase agreements liabilities and collateral
received 16 159 16 159 (16 153) 6
Total 27 284 (143) 27 141 (27 135) 6
Sponsor
Merrill Lynch
A subsidiary of Bank of America Corporation
Date: 29/07/2016 07:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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