Wrap Text
Financial Results for the year ended 31 December 2017
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
ISIN code: ZAE000012714
Preference share code: LBHP
ISIN code: ZAE000004040
Financial Results
For the year ended 31 December 2017
FINANCIAL PERFORMANCE INDICATORS
for the year ended 31 December 2017
%
Rm (unless otherwise stated) 2017 2016 change
Liberty Holdings Limited
Earnings
Basic earnings per share (cents) 1 152,6 811,7 42
Fully diluted basic earnings per share (cents) 1 120,7 788,9 42
Normalised headline earnings(1) 2 719 2 527 8
Normalised headline earnings per share (cents) (1) 982,1 904,5 9
Normalised return on IFRS equity (%) (1) 12,3 11,4
Group equity value
Normalised group equity value per share (R) (1) 140,31 145,86 (4)
Normalised return on group equity value (%) (1) 1,1 5,1
Distributions per share (cents)
Normal dividend 691 691
Interim dividend 276 276
Final dividend 415 415
Total assets under management (Rbn) 720 676 7
Long-term insurance operations
Indexed new business (excluding contractual increases) 8 018 7 892 2
Embedded value of new business 233 483 (52)
New business margin (%) 0,5 1,1
Net customer cash inflows 1 634 1 119 46
Capital adequacy cover of Liberty Group Limited (times covered) 2,92 2,95
Asset management
Assets under management (Rbn) 609 586 4
Net cash inflows including money market(2) 4 251 5 764 (26)
Retail and institutional net cash inflows excluding money market(2) 3 659 4 488 (18)
Money market net cash inflows(2) 592 1 276 (54)
(1) Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and
return on group equity value.
These measures reflect the economic reality of the consolidation of the listed REIT Liberty Two Degrees (L2D) and
the Black Economic Empowerment (BEE) transaction, as opposed to the required IFRS accounting treatment.
(2) Excludes intergroup life funds.
Preparation and supervision:
This announcement on Liberty Holdings Limited annual financial results for the year ended 31 December 2017 has been prepared by
M Natsas CA(SA) and D Wichmann CA(SA) and supervised by Y Maharaj (Financial Director) CA(SA).
FINANCIAL REVIEW
for the year ended 31 December 2017
Normalised headline earnings increased by 8% supported by improving
SA retail insurance earnings and higher returns from investment
markets. The group's capital position remains strong. Decisive actions
are being taken to improve profitability and place Liberty on a sound
strategic footing.
The group remained resilient during the year, as evidenced
by the stronger capital position of the group's main long-term
insurance licence, Liberty Group Limited, with a capital adequacy
ratio at 2,92 times the regulatory minimum compared to 2,82 at
30 June 2017. This remains at the upper end of our target range at
31 December 2017 despite the impact of downgrades of the South
African sovereign credit rating during the year.
The group's SA covered insurance business continued to
deliver positive operating variances and be managed to better
than model supporting the core assumptions underlying the
insurance book. The SA covered business embedded value was
preserved, maintaining embedded value earnings of R2,8 billion
compared to the prior year and generating a return of 8,2%.
The value of new business (VoNB) and new business margin
however ended the year below expectation. Actions are being
taken to restore the new business margin. The economic
environment favoured flows into guaranteed products,
which manifested in a weaker mix of business from a margin
perspective. The improvement in VoNB in the second half of
2017, despite lower volumes, shows signs that the focused
initiatives commenced in the second quarter 2017 are starting
to deliver the desired outcome.
Group equity value per share was lower at R140,31
(31 December 2016: R145,86). The lower group equity value
per share was attributable to weaker earnings from the group's
non-covered businesses particularly within the STANLIB
businesses and the resultant capitalisation impact of reduced
earnings.
Group net customer cash inflows, including the Gateway
LISP, were positive at R6,5 billion despite the poor economic
backdrop. Long-term insurance net customer cash inflows of
R1,6 billion reflected an improvement on the prior year inflows
of R1,1 billion, supported by lower policy withdrawals and
maturities in Individual Arrangements.
Long-term insurance indexed new business sales grew
marginally to R8 billion. Competitive retail market pricing and
the tough economic environment continued to place significant
pressure on retail sales volumes, partially offset by growth in
Liberty Corporate recurring premiums during the year.
Total group assets under management increased to R720 billion
(31 December 2016: R676 billion).
Normalised headline earnings for the year ended 31 December
2017 of R2 719 million were 8% up on 2016, supported by
a higher contribution of R1 307 million (31 December 2016:
R787 million) from the shareholder investment portfolio (SIP).
Normalised operating earnings however were 19% down on the
prior year. The improved earnings contribution from Individual
Arrangements was offset by the lower underwriting result
from Liberty Corporate. STANLIB SA's earnings continued to
be impacted by margin pressure due to a less favourable sales
mix and operational write-offs. STANLIB Rest of Africa earnings
were impacted by operational losses. Normalised return on
equity was 12,3% (31 December 2016: 11,4%).
Headline earnings for 2017 amounted to R3 252 million, up 47%
compared to R2 207 million in 2016. Liberty's headline earnings
include the positive earnings impact of R543 million arising from
the accounting mismatch on the consolidation of the Liberty
Two Degrees listed REIT.
Earnings by business unit
%
Rm (Unaudited) 2017 2016 change
Insurance
Individual Arrangements 1 208 1 119 8
Group Arrangements 16 149 (89)
Liberty Corporate 81 191 (58)
Liberty Africa Insurance 45 41 10
Liberty Health (54) (45) (20)
Nigeria(3) and project support costs (56) (38) (47)
Balance sheet management 376 318 18
LibFin Markets - credit portfolio 330 300 10
LibFin Markets - asset/liability management portfolio 46 18 >100
Asset management(1)
STANLIB South Africa 252 459 (45)
STANLIB Rest of Africa (204) (97) (>100)
Central overheads and sundry income (236) (208) (13)
Normalised operating earnings 1 412 1 740 (19)
LibFin Investments - SIP 1 307 787 66
Normalised headline earnings 2 719 2 527 8
BEE preference share adjustment (10) (16) 38
Reversal of accounting mismatch arising on consolidation of L2D(2) 543 (304) >100
Headline earnings 3 252 2 207 47
(1) Asset management customer facing unit includes the asset management capabilities under STANLIB South Africa
and STANLIB Rest of Africa business units, which are managed separately, with each business having its own
accountable executive.
(2) Refer Explanation of terms.
(3) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs
of the Group Arrangements CFU.
Commentary on the earnings by business unit follows below. Additional information is contained in the summary consolidated
segment information.
Individual Arrangements
Headline earnings from the group's South African retail operations
of R1 208 million were 8% up on the prior year. Positive risk
variances in the year were partly offset by modelling and
assumption changes to better reflect the expectation of future
cash flows given policy terms and conditions.
New business strain arising from the geared effects of increased
costs relative to new business volumes with a weaker business mix
continued to place pressure on earnings. This, together with the
impact of the new tax risk fund and basis changes resulted in the
value of new business reducing to R155 million in the current year
(31 December 2016: R426 million), while the new business margin
declined to 0,5% from 1,2% in the prior year. The improvement
in the value of new business from R62 million for the six months
to 30 June 2017 to R155 million for the year to 31 December 2017
indicates that initiatives implemented in 2017 to improve the value
of new business are starting to have the desired effect.
Indexed new business of R6 570 million was 1% down on 2016.
Competitive retail market pricing and the tough economic
environment continued to place significant pressure on sales
volumes. The economic environment favoured flows into
guaranteed products, as evidenced by strong demand for the
Guaranteed Investment Product and the Bold Living Annuity
throughout the year.
Net customer cash inflows of R2,8 billion were 46% up on prior
year inflows of R1,9 billion, driven by lower policy withdrawals and
maturities. This also reflects a significant improvement over the
R0,8 billion inflows reported at 30 June 2017 and confirms that
the ongoing initiatives to improve retention are delivering the
required results.
Despite the tough environment, the business continued to deliver
positive operating variances and has been managed to "better
than model" consistently for the last five years.
Group Arrangements
Liberty Corporate
Earnings of R81 million were impacted by a considerably lower
underwriting result due to a high level of risk claims experienced,
particularly an increase in income protection plan (IPP) claims in
the second half of 2017. Indexed new business was 39% higher
than the prior year at R1 171 million, with recurring premium new
business up 42% due to good risk and umbrella enhancement
sales. Single premium new business was up 6%. This resulted in the
value of new business increasing to R57 million. Net cash outflows
amounted to R1,5 billion reflecting a small number of high asset
value scheme terminations and higher risk and IPP claims linked to
the challenging economic environment and associated job losses,
partially offset by increased recurring premium inflows.
Liberty Africa and Liberty Health Insurance
Liberty Africa Insurance earnings of R45 million were 10% up on
the prior year despite negative exchange rate movements. Indexed
new business in the long-term insurance businesses of R277 million
was 33% down on the prior year due to exchange rate movements
and a large once off deal in 2016. The value of new business was
lower at R21 million at a margin of 3,9%. The short-term insurance
businesses have experienced considerable pricing pressure.
The recessionary environment in Nigeria significantly impacted
Liberty Health's short-term profitability. Management remains
focused on growing the operations to scale.
Asset management
STANLIB South Africa
STANLIB South Africa earnings were R252 million for the year
(31 December 2016: R459 million). Earnings were impacted
by margin pressure due to a less favourable sales mix, costs
associated with the termination of the institutional administration
outsourcing programme, the launch of new franchises and
operational write-offs.
Total assets under management by STANLIB South Africa
increased by R21 billion to R556 billion at 31 December 2017.
Net customer cash inflows (excluding intergroup) grew to
R4,7 billion from inflows of R2,8 billion in the prior year. This result
was mainly attributable to strong non-money market inflows.
Intergroup cash outflows for the year amounted to R15,9 billion.
STANLIB Rest of Africa
STANLIB Rest of Africa incurred a loss of R204 million for the year
(31 December 2016: loss of R97 million). The business continued
to be affected mainly by operational losses identified during
the remedial programme in East Africa. Efforts to strengthen
the operational and control environments have progressed well
and risks of further operational losses are significantly reduced.
Operations in the other African territories tracked broadly
to expectation.
Total assets under management by STANLIB Rest of Africa
increased by R1,7 billion to R52,5 billion at 31 December 2017.
Liberty Two Degrees (L2D)
L2D's results for the year ended 31 December 2017 were released
on 19 February 2018. The operational performance of the property
portfolio remained strong notwithstanding a difficult consumer
environment. Together with L2D management, we are assessing
alternatives to deal with the limitations of the existing structure.
Bancassurance
The bancassurance agreement with Standard Bank, which is
applicable across the group's asset management and insurance
operations, continues to make a positive contribution to
new business volumes and earnings. The total indexed new
business premiums sold under the agreement increased by 7%
to R3,3 billion for the year. Good progress is being made with
the implementation of the 10 point bancassurance plan and
we continue leveraging our relationship with Standard Bank to
capture appropriate opportunities.
Balance sheet management
LibFin Markets - Asset liability management and credit
portfolio
Earnings from the credit portfolio increased by 10% to R330 million
as a result of growth in the credit portfolio notwithstanding the
impact of the sovereign ratings downgrades.
The asset liability management profit amounted to R46 million due
to favourable market positioning (31 December 2016: R18 million).
LibFin assets under management were higher at R62 billion
(31 December 2016: R58 billion).
LibFin Investments - Shareholder Investment Portfolio
(SIP)
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. The current risk profile of the SIP is
similar to a conservative balanced portfolio and is managed with
a long-term through the cycle investment horizon.
Market returns experienced in 2017 were higher and the portfolio
accordingly delivered a gross return of 8,5% (31 December 2016:
5,7%) which was marginally below the portfolio benchmark.
The extent of the SIP exposure to investment markets remains
appropriate in the context of the group's risk appetite. Earnings
of R1 307 million were well above 2016 earnings of R787 million
despite the significant rand appreciation in December 2017 which
reduced the returns on offshore assets.
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited
remained strong at 2,92 times the statutory requirement
(31 December 2016: 2,95 times). The group remains well
capitalised at the upper end of its target range in respect
of the current capital regime and in respect of capital
requirements under the impending Solvency Assessment and
Management regime.
All other group subsidiary life licences were adequately capitalised.
Dividends
2017 final dividend
In line with the group's dividend policy, the board has approved
and declared a gross final dividend of 415 cents per ordinary share.
The final dividend will be paid out of income reserves and is payable
on Monday, 9 April 2018 to all ordinary shareholders recorded in
the books of Liberty Holdings Limited on the record date.
The dividend of 415 cents per ordinary share will be subject to
a local dividend tax rate of 20% which will result in a net final
dividend, to those shareholders who are not exempt from paying
dividend tax, of 332 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 on the JSE Tuesday, 3 April 2018
First trading day ex dividend on the JSE Wednesday,
4 April 2018
Record date Friday, 6 April 2018
Payment date Monday, 9 April 2018
Share certificates may not be dematerialised or rematerialised
between Wednesday, 4 April 2018 and Friday, 6 April 2018, 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, 9 April 2018.
Prospects
Liberty's business is built on our deep relationships with our
customers and advisers which is core to creating value for all
stakeholders. We are taking decisive actions to improve profitability
and place our business on a sound strategic footing. In 2018,
management will focus on restoring the financial performance
of the SA Retail insurance business, improving the investment
performance of STANLIB, simplifying the group's overall operations
and expanding our relationship with the Standard Bank Group.
We are confident that the group will emerge from this period
of change with significantly greater potential to serve the needs of
all stakeholders.
David Munro Jacko Maree
Chief Executive Chairman
1 March 2018
Transfer Secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue, Rosebank
Johannesburg 2196
Tel: +27 (11) 370 5000
These results are available at http://www.libertyholdings.co.za
ACCOUNTING POLICIES
The 2017 consolidated annual financial statements of Liberty
Holdings Limited have been prepared in accordance with and
contains 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 consolidated annual financial statements have been
prepared in compliance with IFRS and interpretations for year
ends commencing on or after 1 January 2017.
The accounting policies are consistent with those applied in the prior
year except for the mandatory adoption of minor amendments or
early adoption of amendments to IFRS. These amendments have
not resulted in any material impacts to the group's 2017 reported
results or comparative periods.
Amendments to IFRS 2 Share-based Payments and
IAS 40 Investment Properties, effective 1 January 2018, have been
early adopted as at 1 January 2017. These amendments have
not resulted in any impact to the group's 2017 reported results,
comparative periods or disclosures.
AUDITOR STATEMENT
PricewaterhouseCoopers Inc. (PwC) have audited the consolidated
annual financial statements of Liberty Holdings Limited from which
the summary consolidated financial results have been extracted.
These summary consolidated financial results comprise the
consolidated statement of financial position at 31 December 2017,
the consolidated statement of comprehensive income, summary
consolidated changes in equity and summary consolidated cash
flows for the year then ended and selected explanatory notes.
These statements and related notes are marked as 'audited'. This
announcement itself is not audited.
The financial results contained in this announcement have
been prepared in accordance with the requirements of the JSE
Limited Listings Requirements for preliminary reports, and the
requirements of the Companies Act applicable to summary financial
statements. The Listings Requirements require preliminary reports
to be prepared in accordance with the framework concepts and
the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting
Standards Council and also, as a minimum, to contain the
information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the
consolidated annual financial statements, from which the summary
consolidated financial results were extracted, are in terms of
IFRS and are consistent with the accounting policies applied in
the preparation of the prior year's consolidated annual financial
statements except for the changes outlined in the Accounting
policies above. This announcement does not include the information
required pursuant to paragraph 16A (j) of IAS 34. The full IAS 34
compliant summary consolidated financial results announcement
and a copy of the auditors' report is available on request or on the
company's website and at the company's registered office.
The auditors have expressed an unmodified audit opinion on the
consolidated annual financial statements. PwC have also issued an
unmodified assurance opinion on Liberty Holdings Limited's group
equity value report, which has also been marked as 'audited' in this
financial results announcement.
Shareholders are advised that in order to obtain a full understanding
of the nature of the auditors' engagement, they should obtain a
copy of the auditors' reports together with the accompanying
financial information which is available upon request from Liberty
Holdings Limited's registered office.
DIRECTORS' RESPONSIBILITY
The summary consolidated annual financial statements included
in this announcement are the full responsibility of the directors.
The directors confirm that the financial information has been
correctly extracted from the underlying 2017 audited consolidated
Liberty Holdings Limited annual financial statements which are
available for inspection at the company's registered office on
request.
EXPLANATION OF TERMS
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.
"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.
Normalised: headline earnings, headline earnings per
share, return on equity, group equity value per share and
return on group equity value
These measures reflect the economic reality of the Black Economic
Empowerment (BEE) transaction and the consolidation of the
listed REIT Liberty Two Degrees (L2D) as opposed to the required
IFRS accounting treatment.
BEE transaction
IFRS reflects the BEE transaction as a share buy-back. Dividends
received on the group's preference shares (which are recognised
as an asset for this purpose) are included in income. Shares in issue
relating to the transaction are reinstated.
Reversal of accounting mismatch arising on IFRS profit or loss
consolidation of L2D
An accounting mismatch arises on consolidation of L2D in the
group annual financial statements, resulting from the different
measurement bases applied to L2D's assets and Liberty Group
Limited's (100% subsidiary of Liberty Holdings Limited) policyholder
liabilities. Specifically:
- on a consolidated look through basis the investment property
assets of L2D are included in the group annual financial
statements at fair value; whereas
- the corresponding linked obligations to Liberty Group Limited's
policyholders are required under IFRS to continue to be
measured in the group annual financial statements at the listed
price of the L2D units.
The result of this is an accounting mismatch that represents any
difference in the profit and loss movement in the price at which
L2D's listed units trade relative to the underlying net asset value.
L2D adjustment in group equity value
In addition to the reversal of the accounting mismatch in IFRS
profit or loss described above, the group equity value adjusts the
exposures in the shareholder investment portfolios (SIP) to the
listed unit price.
Summary of impact
Below is a summary of the L2D transaction impact on the ordinary
shareholders interest:
Group equity IFRS SIP
value net asset equity value
Rm Total value adjustment
Opening adjustment at 1 January 2017 (330) (193) (137)
IFRS profit or loss 543 543
Group equity value earnings 394 394
Transaction between owners (10) (10)
Closing adjustment at 31 December 2017 597 340 257
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2017
Rm (Audited) 2017 2016
Assets
Intangible assets 231 390
Defined benefit pension fund employer surplus 171 215
Properties 34 768 33 828
Equipment 1 128 1 105
Interests in joint ventures 1 244 1 229
Interests in associates 15 197 12 995
Deferred taxation 336 358
Deferred acquisition costs 737 713
Long-term policyholder assets - insurance contracts 7 484 7 314
Reinsurance assets 1 774 1 674
Long-term insurance 1 481 1 352
Short-term insurance 293 322
Financial investments 338 534 316 441
Loans and receivables 1 222 1 242
Assets held for trading and for hedging 7 871 8 609
Repurchase agreements, scrip and collateral assets 11 900 15 483
Prepayments, insurance and other receivables 6 361 5 300
Cash and cash equivalents 15 169 14 994
Total assets 444 127 421 890
Liabilities
Long-term policyholder liabilities 322 918 307 230
Insurance contracts 210 554 204 155
Investment contracts with discretionary participation features 11 845 11 462
Financial liabilities under investment contracts 100 519 91 613
Reinsurance liabilities 663 555
Third-party financial liabilities arising on consolidation of mutual funds 49 713 44 046
Provisions 76 191
Deferred taxation 3 386 2 586
Deferred revenue 291 268
Deemed disposal taxation liability 436 873
Short-term insurance liabilities 780 925
Financial liabilities 5 581 4 601
Liabilities held for trading and for hedging 6 311 6 798
Repurchase agreements liabilities and collateral deposits payable 9 097 11 748
Employee benefits 1 446 1 369
Insurance and other payables 11 995 11 213
Current taxation 1 043 481
Total liabilities 413 736 392 884
Equity
Ordinary shareholders' equity 22 444 21 676
Share capital 26 26
Share premium 5 157 5 296
Retained surplus 18 166 16 990
Other reserves ( 905) ( 636)
Non-controlling interests 7 947 7 330
Total equity 30 391 29 006
Total equity and liabilities 444 127 421 890
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
for the year ended 31 December 2017
Rm (Audited) 2017 2016
Insurance premiums 39 970 41 288
Reinsurance premiums (1 950) (1 922)
Net insurance premiums 38 020 39 366
Fee income and reinsurance commission 3 683 3 731
Investment income 21 652 20 885
Hotel operations sales 532 585
Investment gains/(losses) 18 835 (1 823)
Total revenue 82 722 62 744
Claims and policyholder benefits under insurance contracts (38 819) (39 664)
Insurance claims recovered from reinsurers 1 800 1 450
Change in long-term policyholder assets and liabilities (6 829) 598
Liabilities under insurance contracts (6 504) 1 164
Policyholder assets related to insurance contracts 170 (265)
Investment contracts with discretionary participation features (521) (404)
Applicable to reinsurers 26 103
Fair value adjustment to long-term policyholder liabilities under investment contracts (9 116) (3 891)
Fair value adjustment to financial liabilities (27)
Fair value adjustment on third party mutual fund interests (4 619) 619
Acquisition costs (4 935) (4 723)
General marketing and administration expenses (11 345) (10 733)
Finance costs (1 344) (1 415)
Profit share allocations under bancassurance and other agreements (972) (1 029)
Equity accounted earnings from joint venture 25 22
Profit before taxation 6 568 3 951
Taxation(1) (2 864) (1 325)
Total earnings 3 704 2 626
Other comprehensive income (233) (148)
Items that may be reclassified subsequently to profit or loss (95) (101)
Net change in fair value on cash flow hedges 75 218
Income and capital gains tax relating to net change in fair value on cash flow hedges (21) (56)
Foreign currency translation (149) (263)
Items that may not be reclassified subsequently to profit or loss (138) (47)
Owner-occupied properties - fair value adjustment (67) (1)
Income and capital gains tax relating to owner-occupied properties fair value adjustment (14)
Change in long-term policyholder insurance liabilities (application of shadow accounting) (32) 1
Actuarial gains on post-retirement medical aid liability 45 30
Income tax relating to post-retirement medical aid liability (13) (8)
Net adjustments to defined benefit pension fund(2) (41) (96)
Income tax relating to defined benefit pension fund (16) 27
Total comprehensive income 3 471 2 478
Total earnings attributable to:
Shareholders 3 118 2 209
Non-controlling interests 586 417
3 704 2 626
Total comprehensive income attributable to:
Shareholders 2 932 2 128
Non-controlling interests 539 350
3 471 2 478
Basic and fully diluted earnings per share Cents Cents
Basic earnings per share 1 152,6 811,7
Fully diluted basic earnings per share 1 120,7 788,9
(1) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge
relative to profit before taxation.
(2) Net adjustments to defined benefit pension fund include actuarial gains or losses, return on plan assets, reduced by the interest on the net
defined benefit asset and the effect of the application of the asset ceiling.
SUMMARY CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
for the year ended 31 December 2017
Rm (Audited) 2017 2016
Balance of ordinary shareholders' equity at 1 January 21 676 21 739
Ordinary dividends (1 942) (2 022)
Total comprehensive income 2 932 2 128
Share buy-back(1) (350) (477)
Black economic empowerment transaction 32 195
Share-based payments 99 132
Transaction costs of issuing units in Liberty Two Degrees (78)
Preference dividends (2) (2)
Transactions between owners 9 (40)
Transactions between owners - Liberty Two Degrees (10) 101
Ordinary shareholders' equity 22 444 21 676
Balance of non-controlling interests at 1 January 7 330 4 254
Total comprehensive income 539 350
Acquisition of Liberty Two Degrees 3 000
Transactions between owners - Liberty Two Degrees 351 (101)
Acquisition of unincorporated property partnership 87 98
Acquisition of subsidiaries 33
Unincorporated property partnerships net distributions (238) (219)
Non-controlling interests' share of subsidiary distributions (133) (21)
Non-controlling interests' share of shares issued in subsidiary 2 3
Transaction costs of issuing units in Liberty Two Degrees (38)
Transactions between owners 9 (29)
Non-controlling interests 7 947 7 330
Total equity 30 391 29 006
(1) Share buy-backs are purchases from the market to meet employee share-based payment obligations.
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
Rm (Audited) 2017 2016
Cash flows from operating activities 5 121 2 443
Cash utilised by operations (7 082) (9 157)
Interest and dividends received 18 841 18 242
Distributions paid (3 075) (2 717)
Taxation paid (1 946) (2 260)
Other operating cash flows (1 617) (1 665)
Cash flows from investing activities (3 581) (6 607)
Net purchase of investments (2 906) (4 937)
Net purchase of other assets (375) (288)
Repayment of collateral deposits payable (258) (1 236)
Acquisition of subsidiaries (146)
Acquisition of equity accounted joint ventures (42)
Cash flows from financing activities (1 280) (18)
Net advance of financial liabilities 980 687
Net repayment of repurchase agreements liabilities (2 393) (3 175)
Net cash flows from equity transactions with non-controlling interests 483 3 063
Transaction costs of issuing units in Liberty Two Degrees (116)
Share buy-back (350) (477)
Net increase/(decrease) in cash and cash equivalents 260 (4 182)
Cash and cash equivalents at the beginning of the year 14 994 19 305
Cash and cash equivalents acquired through business acquisitions 61
Foreign currency translation (85) (190)
Cash and cash equivalents at the end of the year 15 169 14 994
HEADLINE EARNINGS AND EARNINGS PER SHARE
for the year ended 31 December 2017
Rm (unless otherwise stated) (Audited) 2017 2016
Reconciliation of total earnings to headline earnings attributable to shareholders
Total earnings attributable to shareholders 3 118 2 209
Preference share dividend (2) (2)
Basic earnings attributable to ordinary shareholders 3 116 2 207
Impairment of intangible assets 164
Tax on headline earnings adjustable item (28)
Headline earnings attributable to ordinary shareholders 3 252 2 207
Net income earned on BEE preference shares 10 16
Reversal of the accounting mismatch arising on consolidation of L2D(1) (543) 304
Normalised headline earnings attributable to ordinary shareholders 2 719 2 527
Weighted average number of shares in issue ('000) 270 348 271 883
Normalised weighted average number of shares in issue ('000) 276 847 279 373
Fully diluted weighted average number of shares in issue ('000) 278 030 279 760
Earnings per share Cents Cents
Total earnings attributable to ordinary shareholders
Basic 1 152,6 811,7
Headline 1 202,9 811,7
Normalised headline 982,1 904,5
Fully diluted earnings attributable to ordinary shareholders
Basic 1 120,7 788,9
Headline 1 169,7 788,9
(1) Refer Explanation of terms.
SUMMARY CONSOLIDATED SEGMENT INFORMATION
for the year ended 31 December 2017
The audited segment results for the year ended 31 December 2017 are as follows:
Group Arrangements
Individual Liberty
Arrange Liberty Africa Liberty Asset Reporting IFRS
Rm (Audited) ments Corporate Insurance Health management Other Total adjustments(1) reported
Total revenue 68 161 15 676 2 420 929 3 085 4 625 94 896 (12 174) 82 722
Profit before taxation 2 957 223 121 (134) 263 2 793 6 223 345 6 568
Taxation(3) (1 819) (62) (74) 28 (212) (725) (2 864) (2 864)
Total earnings 1 138 161 47 (106) 51 2 068 3 359 345 3 704
Reconciliation of total earnings to headline
earnings attributable to shareholders
Total earnings 1 138 161 47 (106) 51 2 068 3 359 345 3 704
Attributable to non-controlling interests (1) (58) (3) (179) (241) (345) (586)
Preference share dividend (2) (2) (2)
Impairment of intangible assets 13 71 52 136 136
Headline earnings 1 150 232 (11) (54) 48 1 887 3 252 3 252
Net income earned on BEE preference shares 10 10 10
Reversal of the accounting mismatch arising on consolidation of L2D (543) (543) (543)
Normalised headline earnings 1 150 232 (11) (54) 48 1 354 2 719 2 719
Reconciliation of business unit earnings to segment result
Individual Arrangements 1 208 1 208
Group Arrangements 81 (11) (54) 16
Liberty Corporate 81 81
Liberty Africa Insurance 45 45
Liberty Health (54) (54)
Nigeria(2) and project support costs (56) (56)
LibFin (Markets and Investments) (138) 151 1 670 1 683
LibFin Markets - credit portfolio 192 138 330
LibFin Markets - asset/liability matching 35 1 10 46
LibFin Investments - SIP (365) 12 1 660 1 307
Asset management
STANLIB South Africa 252 252
STANLIB Rest of Africa (204) (204)
Central overheads and sundry income 80 (316) (236)
Normalised headline earnings 1 150 232 (11) (54) 48 1 354 2 719
(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) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the
Group Arrangements CFU.
(3) 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.
The customer facing units are 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 audited segment results for the year ended 31 December 2016 are as follows:
Group Arrangements
Individual Liberty
Restated(4) Arrange- Liberty Africa Liberty Asset Reporting IFRS
Rm (Audited) ments Corporate Insurance Health management Other Total adjustments(1) reported
Total revenue 56 583 13 963 2 811 1 276 3 384 1 097 79 114 (16 370) 62 744
Profit before taxation 2 018 376 144 (74) 517 653 3 634 317 3 951
Taxation(3) (950) (112) (79) 29 (148) (65) (1 325) (1 325)
Total earnings 1 068 264 65 (45) 369 588 2 309 317 2 626
Reconciliation of total earnings to headline
earnings attributable to shareholders
Total earnings 1 068 264 65 (45) 369 588 2 309 317 2 626
Attributable to non-controlling interests (62) (7) (31) (100) (317) (417)
Preference share dividend (2) (2) (2)
Headline earnings 1 068 264 3 (45) 362 555 2 207 2 207
Net income earned on BEE preference shares 16 16 16
Reversal of the accounting mismatch arising on consolidation of L2D 304 304 304
Normalised headline earnings 1 068 264 3 (45) 362 875 2 527 2 527
Reconciliation of business unit earnings to segment result
Individual Arrangements 1 119 1 119
Group Arrangements 191 3 (45) 149
Liberty Corporate 191 191
Liberty Africa Insurance 41 41
Liberty Health (45) (45)
Nigeria(2) and project support costs (38) (38)
LibFin (Markets and Investments) 6 103 996 1 105
LibFin Markets - credit portfolio 197 103 300
LibFin Markets - asset/liability matching 15 3 18
LibFin Investments - SIP (206) (3) 996 787
Asset management
STANLIB South Africa 459 459
STANLIB Rest of Africa (97) (97)
Central overheads and sundry income (57) (30) (121) (208)
Normalised headline earnings 1 068 264 3 (45) 362 875 2 527
(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) Costs associated with the possible acquisition of a long-term licence in Nigeria and project management costs of the Group Arrangements CFU.
(3) 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.
(4) The segment results for the year ended 31 December 2016 have been restated to provide more information on the three distinct segments within
Group Arrangements, in order to better align to the information reported to the chief operating decision maker.
GROUP EQUITY VALUE REPORT
for the year ended 31 December 2017
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 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 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 (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.
2.2 Other businesses:
STANLIB Valued using a 10 times (2016: 10 times) multiple of estimated sustainable earnings.
South Africa
STANLIB Valued using a 10 times (2016: 10 times) multiple of estimated sustainable earnings.
Rest of Africa
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 various
Insurance African countries outside of South Africa. A combination of valuation techniques including embedded value, discounted
cash flow and earnings multiples have been applied to value these businesses. The combined value of this cluster is not
material relative to the other components of group equity value and therefore a detailed analysis of this valuation has
not been presented. At 31 December 2017 and 31 December 2016 the combined valuations approximated the group'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.
2.3 Liberty Two Degrees normalisation adjustment:
This represents the difference between Liberty's share of the net asset value of L2D as at the reporting date and the listed price of L2D
units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is
required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the
L2D shares held within the shareholder investment portfolio.
2.4 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 expenses incurred in Liberty Holdings Limited
capitalised at a multiple of 9 times (2016: 9 times).
3 Normalised group equity value
3.1 Analysis of normalised group equity value
31 December 2017 SA covered Other
Rm (Audited) business businesses Total
Liberty Group Limited 18 412 18 412
STANLIB South Africa(2) 795 795
STANLIB Rest of Africa(2) 100 100
Liberty Health (including Total Health Trust) 299 299
Liberty Africa Insurance 813 813
Liberty Holdings 1 428 1 428
Liberty Two Degrees adjustment to net asset value 597 597
Shareholders' equity reported under IFRS 18 412 4 032 22 444
Difference between statutory and published valuation methods (7 253) (7 253)
Negative rand reserves (6 806) (6 806)
Deferred acquisition costs (730) (730)
Deferred revenue liability 283 283
Subordinated notes (including accrued interest) 5 581 5 581
CAR of subsidiaries (10) (10)
Reverse value of in-force acquired (12) (12)
Inadmissible assets (1 018) (1 018)
Statutory excess assets over liabilities(3) 15 700 4 032 19 732
Reverse CAR of subsidiaries 10 10
Reverse subordinated notes (including accrued interest) (5 581) (5 581)
Reverse inadmissible assets 1 018 1 018
Frank Financial Services allowance for future expenses (100) (100)
Impact of discounting on deferred tax asset (100) (100)
BEE preference funding 123 123
Liberty Two Degrees normalisation adjustment(1) (597) (597)
Allowance for employee share rights (36) (36) (72)
Normalised net worth 11 134 3 299 14 433
Value of in-force - Individual Arrangements 22 088 22 088
Value of in-force - Group Arrangements: Liberty Corporate 3 049 3 049
Cost of required capital (1 690) (1 690)
Fair value adjustment - STANLIB South Africa(2) 3 655 3 655
Fair value adjustment - STANLIB Rest of Africa(2) 50 50
Allowance for future shareholder expenses (2 217) (2 217)
Normalised equity value 34 581 4 787 39 368
(1) This represents the difference between Liberty's share of the net asset value of L2D as at the reporting date
and the listed price of L2D units multiplied by the number of units in issue to Liberty at the reporting date.
Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder
liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the
shareholder investment portfolio.
(2) STANLIB valuation: Rm
STANLIB South Africa 4 450
STANLIB Rest of Africa 150
Total 4 600
(3) The adjustments between the IFRS and statutory net asset values for the Liberty Africa subsidiaries have not been included.
This is because the group equity value for these entities is set to their IFRS net asset value and so these adjustments do
not affect group equity value.
31 December 2016 SA covered Other
Rm (Audited) business businesses Total
Liberty Group Limited 18 505 18 505
STANLIB South Africa(2) 777 777
STANLIB Rest of Africa(2) 104 104
Liberty Health (including Total Health Trust) 404 404
Liberty Africa Insurance 808 808
Liberty Holdings 1 408 1 408
Liberty Two Degrees adjustment to net asset value (330) (330)
Shareholders' equity reported under IFRS 18 505 3 171 21 676
Difference between statutory and published valuation methods (6 786) (58) (6 844)
Negative rand reserves (6 344) (6 344)
Deferred acquisition costs (698) (698)
Deferred revenue liability 256 256
Other (58) (58)
Subordinated notes (including accrued interest) 4 601 4 601
CAR of subsidiaries (10) (10)
Reverse value of in-force acquired (17) (17)
Inadmissible assets (807) (85) (892)
Statutory excess assets over liabilities 15 486 3 028 18 514
Reverse difference between statutory and published valuation methods 58 58
Reverse CAR of subsidiaries 10 10
Reverse subordinated notes (including accrued interest) (4 601) (4 601)
Reverse inadmissible assets 807 85 892
Frank Financial Services allowance for future expenses (100) (100)
Impact of discounting on deferred tax asset (100) (100)
BEE preference funding 148 148
Liberty Two Degrees normalisation adjustment(1) 330 330
Allowance for employee share rights (33) (27) (60)
Normalised net worth 11 717 3 374 15 091
Value of in-force - Individual Arrangements 21 635 21 635
Value of in-force - Group Arrangements: Liberty Corporate 2 759 2 759
Cost of required capital (1 641) (1 641)
Fair value adjustment - STANLIB South Africa(2) 5 013 5 013
Fair value adjustment - STANLIB Rest of Africa(2) 256 256
Allowance for future shareholder expenses (1 892) (1 892)
Normalised equity value 34 470 6 751 41 221
(1) This represents the difference between Liberty's share of the net asset value of L2D as at the reporting date and the listed price of
L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to
share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market
consistent valuation of the L2D shares held within the shareholder investment portfolio.
(2) STANLIB valuation: Rm
STANLIB South Africa 5 790
STANLIB Rest of Africa 360
Total 6 150
3.2 Normalised group equity value earnings and value per share
2017 2016
SA SA
covered Other covered Other
Rm (Audited) business businesses Total business businesses Total
Normalised equity value at the end of the year 34 581 4 787 39 368 34 470 6 751 41 221
Equity value at the end of the year 34 458 5 384 39 842 34 322 6 421 40 743
Liberty Two Degrees adjustment(1) (597) (597) 330 330
BEE preference shares 123 123 148 148
Net share buy-backs 350 350 477 477
Funding of restricted share plan 92 (92) 92 (92)
Intragroup dividends 2 600 (2 600) 3 500 (3 500)
Dividends paid 1 944 1 944 2 024 2 024
Normalised equity value at the beginning of
the year (34 470) (6 751) (41 221) (35 268) (6 367) (41 635)
Equity value at the beginning of the year (34 322) (6 421) (40 743) (34 946) (6 367) (41 313)
Liberty Two Degrees adjustment(1) (330) (330)
BEE preference shares (148) (148) (322) (322)
Normalised equity value earnings 2 803 (2 362) 441 2 794 (707) 2 087
Normalised return on group equity value (%) 8,2 (36,4) 1,1 7,9 (11,8) 5,1
Normalised number of shares 280 573 282 615
Number of shares in issue ('000) 270 120 272 247
Shares held for the employee restricted share
scheme ('000) 4 014 3 794
Adjustment for BEE shares ('000) 6 439 6 574
Normalised group equity value per share (R) 140,31 145,86
(1) This represents the difference between Liberty's share of the net asset value of L2D as at the reporting date and the listed price of
L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to
share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market
consistent valuation of the L2D shares held within the shareholder investment portfolio.
3.3 Sources of normalised group equity value earnings
2017 2016
SA SA
covered Other covered Other
Rm (Audited) business businesses Total business businesses Total
Value of new business written in the year 212 21 233 454 29 483
Expected return on value of in-force business 2 926 2 926 2 997 2 997
Variances/changes in operating assumptions 109 109 43 240 283
Operating experience variances 330 330 477 477
Property portfolio liquidity fee/STANLIB REIT
Fund Managers(1) (167) 240 73
Operating assumption changes 30 30 (295) (295)
Changes in modelling methodology (251) (251) 28 28
Development costs (55) (166) (221) (45) (62) (107)
Liberty Holdings shareholder expenses(3) (584) (584) (228) (228)
Headline earnings of other businesses/
intragroup transfer 46 100 146 185 185
Operational equity value profits 3 238 (629) 2 609 3 449 164 3 613
Economic adjustments (432) (139) (571) (683) (67) (750)
Return on net worth(2) (14) (139) (153) 153 (67) 86
Investment variances(2) (594) (594) (963) (963)
Change in economic assumptions 176 176 127 127
Change in fair value adjustments on value
of other businesses (1 585) (1 585) (825) (825)
Change in allowance for share rights (3) (9) (12) 28 21 49
Group equity value earnings 2 803 (2 362) 441 2 794 (707) 2 087
(1) Following the listing of Liberty Two Degrees in December 2016, STANLIB REIT Fund Managers (RF) Proprietary Limited (the Manager),
a 100% held subsidiary of Liberty Holdings Limited (LHL), was appointed as the Manager of L2D. The property portfolio liquidity fee
which was previously earned in Liberty Group Limited will be used to fund the asset management fee paid to STANLIB REIT Fund Managers.
STANLIB REIT Fund Managers has been valued using a 10 times multiple of the estimated sustainable earnings.
(2) The investment return on net worth includes an amount of negative R7 million (2016: negative R16 million) in respect of the change in the
fair value of cash-flow hedges supporting LGL subordinated notes. Similarly, the investment variances include an amount of R61 million
(2016: R178 million) in respect of the change in the fair value of cash-flow hedges supporting LibFin Credit.
(3) This includes the actual shareholder expenses incurred by Liberty Holdings of R259 million (2016: R122 million) plus the change in the
allowance for future shareholder expenses over the period.
3.4 Analysis of value of long-term insurance new business and margins
Rm (unless otherwise stated) (Audited) 2017 2016
South African covered business:
Individual Arrangements 1 445 1 652
Traditional Life 1 159 1 306
Direct Channel 67 96
Credit Life 83 86
LibFin Credit uplift to Individual Arrangements 136 164
Group Arrangements: Liberty Corporate 162 131
Traditional Business 137 113
LibFin Credit uplift to Group Arrangements: Liberty Corporate 25 18
Gross value of new business 1 607 1 783
Overhead acquisition (including underwriting) costs impact on value of new business (1 305) (1 243)
Cost of required capital (90) (86)
Net value of South African covered new business 212 454
Present value of future expected premiums 42 782 42 370
Margin (%) 0,5 1,1
Group Arrangements: Liberty Africa Insurance
Net value of new business 21 29
Present value of future expected premiums 528 519
Margin (%) 3,9 5,6
Total group net value of new business 233 483
Total group margin (%) 0,5 1,1
Rm (Unaudited) 2017 2016
Sources of insurance operations total new business by product type
Retail 27 132 27 435
Single 22 660 22 916
Recurring 4 472 4 519
Institutional 2 034 2 296
Single 838 1 350
Recurring 1 196 946
Total new business 29 166 29 731
Single 23 498 24 266
Recurring 5 668 5 465
Insurance indexed new business 8 018 7 892
Sources of insurance indexed new business:
Individual Arrangements 6 570 6 639
Group Arrangements: 1 448 1 253
Liberty Corporate 1 171 842
Liberty Africa Insurance(1) 277 411
(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.
The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under
long-term insurance new business by distribution channel arises mainly from different treatment for extensions of matured policies,
reinvestment of fund withdrawals, conversions of standalone funds to umbrella funds and fund member movements within Liberty
administered funds.
LONG-TERM INSURANCE NET CASH FLOWS
for the year ended 31 December 2017
Rm (Audited) 2017 2016
Net premiums by product type
Retail 43 467 43 150
Single 22 191 22 522
Recurring 21 276 20 628
Institutional 10 673 11 889
Single 1 416 3 170
Recurring 9 257 8 719
Net premium income from insurance contracts and inflows from investment contracts 54 140 55 039
Single 23 607 25 692
Recurring 30 533 29 347
Net claims and policyholders benefits by product type
Retail (40 436) (40 924)
Death and disability claims (6 567) (6 570)
Policy surrender and maturity claims (27 984) (28 870)
Annuity payments (5 885) (5 484)
Institutional (12 070) (12 996)
Death and disability claims (2 118) (1 912)
Scheme terminations and member withdrawals (9 139) (10 280)
Annuity payments (813) (804)
Net claims and policyholders benefits (52 506) (53 920)
Long-term insurance net customer cash flows(2) 1 634 1 119
Rm (Unaudited)
Sources of insurance operations net cash flows:
Individual Arrangements 2 846 1 948
Group Arrangements: (1 212) (268)
Liberty Corporate (1 536) (751)
Liberty Africa Insurance(1) 324 483
Asset Management:
STANLIB Multi-manager(3) (561)
(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 R350 million (2016: R557 million).
(3) The arrangement whereby funds were placed with external asset managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows
in 2017 and going forward.
ASSETS UNDER MANAGEMENT(1)
as at 31 December 2017
Rbn (Unaudited) 2017 2016
Managed by group business units 684 653
STANLIB South Africa 556 535
STANLIB Rest of Africa(2) 53 51
LibFin Markets 62 58
Other internal managers 13 9
Externally managed 36 23
Total assets under management(3) 720 676
(1) Includes funds under administration.
(2) Liberty owns less than 100% of certain of the entities that make up STANLIB Rest of 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 December 2017 amounts:
Unit trusts listed STANLIB Other
(Rbn) managed managed Total
STANLIB 42 80 122
Gateway 3 5 8
ASSET MANAGEMENT NET CASH FLOWS(1)
for the year ended 31 December 2017
Rm (Unaudited) 2017 2016
STANLIB South Africa
Non-money market 4 815 764
Retail 8 249 (2 327)
Institutional (3 434) 3 091
Money market (84) 2 037
Retail (1 400) 1 007
Institutional 1 316 1 030
Net South Africa cash inflows 4 731 2 801
STANLIB Rest of Africa
Non-money market (1 156) 3 724
Retail 738 (422)
Institutional (1 894) 4 146
Money market 676 (761)
Net Rest of Africa cash (outflows)/inflows (480) 2 963
Net cash inflows from asset management 4 251 5 764
(1) Cash flows exclude intergroup segregated life fund mandates.
SHORT-TERM INSURANCE INDICATORS
for the year ended 31 December 2017
Rm (Audited) 2017 2016
Net premiums 1 297 1 484
Liberty Health - medical risk 777 919
Liberty Africa Insurance - motor, property, medical and other 520 565
Net claims (886) (994)
Liberty Health - medical risk (637) (743)
Liberty Africa Insurance - motor, property, medical and other (249) (251)
Net cash inflows from short-term insurance 411 490
Unaudited
Claims loss ratio (%)
Liberty Health 82 81
Liberty Africa Insurance 48 44
Combined loss ratio (%)
Liberty Health 102 104
Liberty Africa Insurance 99 94
CAPITAL COMMITMENTS
as at 31 December 2017
Rm (Audited) 2017 2016
Equipment 741 823
Investment and owner-occupied properties 1 432 1 485
Committed capital(1) 1 071 636
Total capital commitments 3 244 2 944
Under contracts 430 657
Authorised by the directors but not contracted 2 814 2 287
(1) Liberty has committed capital to certain infrastructure and development funds. The committed funds are only drawn down when required.
The above 2017 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds and
R452 million (2016: R360 million) from non controlling interests in respect of investment properties.
Throughout the group there are various short term leases (less than one year) for office and computer equipment. The obligations
outstanding at 31 December are not material.
RETIREMENT BENEFIT OBLIGATIONS
as at 31 December 2017
Audited
Post-retirement medical benefit
The group operates an unfunded post-retirement medical aid benefit for permanent employees who joined the group prior to 1 February 1999
and agency staff who joined prior to 1 March 2005.
As at 31 December 2017, the Liberty post-retirement medical aid benefit liability was R495 million (2016: R493 million).
Defined benefit retirement fund
The group operates a defined benefit pension scheme on behalf of employees. The fund is closed to new membership and is well funded.
RELATED PARTIES
for the year ended 31 December 2017
Audited
Standard Bank Group Limited and any subsidiary (excluding Liberty) is referred to as Standard Bank in the context of this section.
The following selected significant related party transactions have occurred or have been contracted in the 31 December 2017 financial year:
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 2017 9 572 1 454 0,60
Purchases 12 496 2 117
Sales (5 888) (1 020)
Fair value adjustments 615
Balance at 31 December 2017 16 180 3 166 1,02
1.2 Bancassurance
The bancassurance business agreements with the Standard Bank
group caters 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 2017 amounted to R9 129 million
(2016: R7 973 million). In terms of the agreements, Liberty's group
subsidiaries pay profit shares to various Standard Bank operations.
The amounts to be paid are in most cases dependent on source
and type of business and are paid along geographical lines. The
total combined net profit share amounts accrued as payable
to the Standard Bank group for the year to 31 December 2017 is
R948 million (2016: R1 005 million).
The bancassurance business agreements are evergreen
agreements with a 24-month notice period for termination - as at
the date of the approval of these financial statements, neither party
had given notice.
A binder agreement was entered into with Standard Bank effective
from 31 December 2012. The binder agreement is associated with
the administration of policies sold under the bancassurance business
agreement, and shall remain in force for an indefinite period with a
90-day notice period for termination. Fees accrued for the year to
31 December 2017 is R206 million (2016: R150 million).
1.3 Purchases and sales of financial instruments
As per Liberty's 2017 group 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.
There are no other significant changes to related party transactions
as reported in Liberty's 2017 annual financial statements.
OFFSETTING, ENFORCEABLE MASTER
NETTING ARRANGEMENTS OR SIMILAR AGREEMENTS
as at 31 December 2017
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. The table below sets out the nature of agreements and the types of rights relating to items which do not qualify
for offset but that are subject to a master netting arrangement (MNA) or similar agreement.
NATURE OF AGREEMENT RELATED RIGHTS
Derivative assets and liabilities International swaps and derivatives associations
The agreement allows for offset in the event
Repurchase agreements Global master repurchase agreements
of default
Collateral deposits payable Global master securities lending arrangements
Not subject Subject
to MNA to MNA
or similar or similar Financial
Rm (Audited) Total agreements agreements collateral(1) Net
2017
Assets
Assets held for trading and for hedging 7 871 (1 356) 6 515 (6 016) 499
Total assets 7 871 (1 356) 6 515 (6 016) 499
Liabilities
Liabilities held for trading and for hedging 6 311 (56) 6 255 (6 016) 239
Repurchase agreements liabilities 4 671 4 671 (4 671)
Collateral deposits payable 4 426 4 426 (4 426)
Total liabilities 15 408 (56) 15 352 (15 113) 239
2016
Assets
Assets held for trading and for hedging 8 609 (595) 8 014 (6 532) 1 482
Total assets 8 609 (595) 8 014 (6 532) 1 482
Liabilities
Liabilities held for trading and for hedging 6 798 (49) 6 749 (6 532) 217
Repurchase agreements liabilities 7 064 7 064 (7 064)
Collateral deposits payable 4 684 4 684 (4 684)
Total liabilities 18 546 (49) 18 497 (18 280) 217
(1) Financial collateral relates to these instruments that are subject to MNA or similar agreements.
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Date: 02/03/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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