Wrap Text
Financial Results for the six months ended 30 June 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 six months ended 30 June 2017
Financial performance indicators for the six months ended 30 June 2017
12 months
30 June 30 June % 31 December
Rm (unless otherwise stated) 2017 2016 change 2016
Liberty Holdings Limited
Earnings
Basic earnings per share (cents) 568,5 666,9 (15) 811,7
Fully diluted basic earnings per share (cents) 553,3 647,6 (15) 788,9
Normalised operating earnings(1) 814 1 100 (26) 1 740
Normalised headline earnings per share (cents)(1) 456,7 650,0 (30) 904,5
Normalised return on IFRS equity (%)(1) 11,7 16,4 11,4
Group equity value
Normalised group equity value per share (R)(1) 143,16 148,44 (4) 145,86
Normalised return on group equity value (%)(1) 2,3 10,3 5,1
Distributions per share (cents)
Normal dividend 276 276 691
Interim dividend 276 276 276
Final dividend n/a n/a 415
Total assets under management (Rbn) 688 679 1 676
Long-term insurance operations
Indexed new business (excluding contractual increases) 3 930 3 569 10 7 892
Embedded value of new business 86 257 (67) 483
New business margin (%) 0,4 1,4 1,1
Net customer cash (outflows)/inflows (665) (353) (88) 1 119
Capital adequacy cover of Liberty Group Limited (times covered) 2,82 2,95 (4) 2,95
Asset management
Assets under management (Rbn) 593 584 2 586
Net cash inflows including money market(2) 6 090 453 >100 5 764
Retail and institutional net cash inflows excluding money market(2) 5 358 3 169 69 4 488
Money market net cash inflows/(outflows)(2) 732 (2 716) >100 1 276
(1) Normalised: operating earnings, headline earnings per share, return on IFRS 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 interim financial results for the six months ended 30 June 2017 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 2017
Normalised headline earnings for the six months to 30 June 2017 are lower than the prior
period but shows an improvement compared to the second half of 2016.
Liberty's results reflect growth in sales and net customer cash
inflows, underpinned by a strong capital position. Prioritised
initiatives are underway to drive short- to medium-term
performance.
Economic growth in South Africa remained weak and the economy
has officially fallen into recession, resulting in a deterioration in both
business and consumer confidence. The downgrade in the country's
sovereign credit rating, the current socio-political environment
and rising unemployment levels continued to place pressure
on consumer disposable income. Weak investment markets,
particularly in June 2017, impacted investment performance for
the period.
These difficult operating conditions and certain operational issues
resulted in a decline in headline earnings compared to the six months
to 30 June 2016 (prior period). The value of new business in the group's
retail operations in South Africa was lower in the period at a reduced
margin due to a weaker business mix. The group's asset management
operations in South Africa also experienced margin pressure due to
the subdued investment performance and product mix.
The group remained resilient during the period, as depicted by the
strong capital position of the group's main long-term insurance
licence, Liberty Group Limited, with the capital adequacy ratio
at 2,82 (31 December 2016: 2,95) times the regulatory minimum.
This remains at the upper end of the target range at 30 June 2017
and underpins our commitment to continue to fulfil our promises
to policyholders and other stakeholders. Group indexed new
business sales grew by 10% to R3,9 billion compared to the
prior period. Group net customer cash inflows of R5,7 billion
(30 June 2016: R0,5 billion) increased substantially compared
to the prior period, driven by strong inflows into our non-money
market products.
Group equity value of R40 billion reduced during the period mainly
due to the final dividend paid in April 2017 exceeding SA covered
business equity value earnings and reduced earnings from the asset
management business.
The SA covered business operating experience variances were
net positive, reflecting a good outcome supporting the core
assumptions underlying the insurance book.
Headline earnings of R1 540 million were down 15% compared to
R1 813 million in the prior period. Headline earnings for the period
were favourably impacted by the accounting mismatch arising from
the consolidation of the Liberty Two Degrees listed REIT (L2D).
Normalising for the IFRS accounting treatment of L2D, normalised
headline earnings reduced to R1 267 million. The shareholder
investment portfolio (SIP) delivered returns in line with benchmark,
but lower than the prior period due to market movements.
Normalised return on equity was 11,7% (30 June 2016: 16,4%) due
to the lower earnings in the current period.
New business margins at 0,4% (30 June 2016: 1,4%) remained
under pressure due to the geared effect of increased costs and a
weaker mix of business sold. The value of new business reduced to
R86 million from R257 million at 30 June 2016. The improvement
of the value of new business and related margin is management's
number one priority in the short term.
Total assets under management increased marginally to R688 billion
(31 December 2016: R676 billion).
Normalised headline earnings
The main items contributing to the decrease in normalised headline
earnings compared to the prior period were as follows:
- New business strain in the group's long-term insurance retail
operations in South Africa increased by R127 million in the current
period, driven primarily by the geared effects of increased costs
relative to new business volumes and a weaker business mix.
Positive variances in the period were offset by assumption and
modelling changes to better reflect the expectation of future cash
flows given policy terms and conditions.
- Earnings from STANLIB South Africa were R134 million below the
prior period. Earnings of R115 million for the period were impacted
by margin pressure due to the weaker investment markets and
product mix.
- Earnings from STANLIB Rest of Africa were R136 million below the
prior period, reflecting a loss of R118 million for the period.
- Lower market returns resulted in the SIP earnings being
R268 million below the prior period.
Strategic execution
Management continues to actively execute on the priorities
highlighted in the 31 December 2016 financial review and is taking
steps to revitalise the group's operations. Expense management
for the group and improving the value of new business and related
margins are priorities for the insurance operations and fund
performance for the asset management business. There are several
initiatives already in execution which are focussed on delivering an
improved short- to medium-term performance.
The group is committed to delivering on its purpose of providing
financial freedom for its customers. This includes a focus on reducing
complexity in our business and improving client service.
Earnings by business unit
12 months
30 June 30 June % 31 December
Rm (Unaudited) 2017 2016 change 2016
Insurance
Individual Arrangements 597 718 (17) 1 119
Group Arrangements 61 68 (10) 149
Liberty Corporate 80 88 (9) 191
Liberty Africa Insurance 20 11 82 41
Liberty Health (19) (11) (73) (45)
Growth initiatives (20) (20) (38)
Balance sheet management 168 130 29 318
LibFin Markets - credit portfolio 138 139 (1) 300
LibFin Markets - asset/liability management portfolio 30 (9) >100 18
Asset management(1)
STANLIB South Africa 115 249 (54) 459
STANLIB Rest of Africa (118) 18 >(100) (97)
Central overheads and sundry income (9) (83) 89 (208)
Normalised operating earnings 814 1 100 (26) 1 740
LibFin Investments - SIP 453 721 (37) 787
Normalised headline earnings 1 267 1 821 (30) 2 527
BEE preference share adjustment (5) (8) 38 (16)
Reversal of accounting mismatch arising on consolidation of L2D(2) 278 (304)
Headline earnings 1 540 1 813 (15) 2 207
(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.
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
amounted to R597 million. Positive variances in the period were
offset by assumption and modelling changes to better reflect the
expectation of future cash flows given policy terms and conditions.
Increased new business strain arising primarily from the geared
effects of increased costs relative to new business volumes and a
weaker business mix negatively impacted earnings. This was also
the main contributor to the reduction of the value of new business
to R62 million reported in the current period. The introduction of
the new tax fund and the 31 December 2016 and current period
modelling and basis changes also impacted the value of new
business. This resulted in the new business margin declining to
0,4% from 1,6% at 30 June 2016.
Net customer cash inflows of R0,8 billion were marginally above
the prior period. Improved premium income was largely offset
by the higher value of policy surrenders and maturities experienced
in the current period.
Indexed new business grew by 4% over the prior period. Strong
demand for the Guaranteed Investment Product and the Bold
Living Annuity continued in the current period.
Group Arrangements
Liberty Corporate
Earnings of R80 million reflected a good underwriting performance,
however asset based fee income growth was muted due mainly to
lower investment market returns over the last year. Indexed new
business was 72% higher at R558 million, with recurring premium
new business up 80% due to strong risk and umbrella enhancement
sales. Net cash outflows amounted to R1,6 billion reflecting low
single premium new business and increased scheme terminations.
Liberty Africa Insurance
Earnings of R20 million were R9 million above the prior period.
This improvement was primarily attributable to improved
performances from the Kenyan life and short-term insurance
businesses. Indexed new business in the long-term insurance
businesses grew by 11% to R167 million with the value of new
business lower at R11 million at a margin of 4,3%. Net customer cash
inflows of R298 million were well up on the R104 million inflows in
the prior period.
The agreement to acquire a life licence in Nigeria has not been
concluded due to the vendor failing to date to meet certain material
conditions precedent.
Liberty Health
The business provides health risk solutions to employers and
their employees across the African continent. Liberty Health's loss
of R19 million is higher than the prior period due to the decline in
risk lives being serviced and higher claims loss ratios particularly
in Nigeria due to sustained naira weakness.
Balance sheet management
LibFin Markets - Asset liability management and
credit portfolio
Earnings from the credit portfolio amounted to R138 million which
was flat on the prior period as a result of slower asset origination
due to lower corporate issuances in the current low growth
environment.
The asset liability management profit amounted to R30 million
due to favourable market positioning in a relatively low volatility
environment during the period.
LibFin assets under management at R58 billion were flat compared
to 31 December 2016.
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 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.
The SIP delivered returns of R453 million in line with benchmark,
but lower than the prior period of R721 million due to market
movements.
Asset management
STANLIB South Africa
STANLIB South Africa earnings were R115 million for the period
(30 June 2016: R249 million). Earnings were impacted by margin
pressure due to the weaker investment markets and product
mix. Costs associated with the termination of the institutional
administration outsourcing programme, the launch of new
franchises and further operational write offs also impacted earnings
for the period.
Total assets under management by STANLIB South Africa increased
by R5 billion to R540 billion at 30 June 2017.
Net customer cash inflows (excluding intergroup) amounted to
R5,6 billion compared to outflows of R0,9 billion in the prior period.
This result was mainly attributable to strong non-money market
inflows. Intergroup cash outflows for the period amounted to
R8,7 billion.
STANLIB Rest of Africa
STANLIB Rest of Africa incurred a loss of R118 million for the period
(30 June 2016: earnings of R18 million). The business continued to
be affected by the curtailment of guaranteed cash mandate business
and provisions raised for client and operational exposures following
efforts to improve the operational and control environment. Several
of these exposures had been provisioned from a group perspective
at 31 December 2016 and were reflected in the STANLIB Rest of
Africa results in the current period.
Total assets under management by STANLIB Rest of Africa increased
by R2 billion to R53 billion at 30 June 2017.
Net customer cash inflows (excluding intergroup) amounted to
R0,4 billion compared to R1,4 billion in the prior period. This result
was mainly attributable to non-money market outflows largely
offsetting positive money market inflows. Intergroup cash inflows
for the period amounted to R9 million.
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 11% to R1,6 billion
for the period. 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 opportunities
where relevant.
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited remained
strong at 2,82 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 (SAM) regime. The group has slowed
down its expansion activities and reduced capital earmarked for
investment in Africa. All other group subsidiary life licences were
adequately capitalised.
Dividends
2017 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, 4 September 2017 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 20% which will result in a net interim
dividend, to those shareholders who are not exempt from paying
dividend tax, of 220,8 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, 29 August 2017
First trading day ex dividend on the JSE Wednesday, 30 August 2017
Record date Friday, 1 September 2017
Payment date Monday, 4 September 2017
Share certificates may not be dematerialised or rematerialised
between Wednesday, 30 August 2017 and Friday, 1 September 2017,
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, 4 September 2017.
Prospects
We depend on our deep relationships with our customers and
advisers which are at the core of our ability to create value for
stakeholders. We will continue to respond to our customers'
changing needs in the current operating environment.
Management's short-term focus is on strategic execution of
initiatives to reduce costs, restore the value of new business
and margin, reduce complexity in the business and improve
customer experience.
David Munro Jacko Maree
Chief Executive Chairman
3 August 2017
These results are available at http://www.libertyholdings.co.za
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
Accounting policies
The unaudited condensed interim consolidated financial statements
of Liberty Holdings Limited for the six months ended 30 June 2017
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 full interim report for the six months ended 30 June 2017 (which
includes IAS 34 16A (j)) is available on the Liberty Holdings Limited
website and upon request from the company's registered offices.
The accounting policies applied in the preparation of these interim
financial statements are in terms of IFRS and are consistent
with those applied in the previous consolidated annual financial
statements except for the early adoption of minor amendments to
IFRS, as set out below.
Amendments to IAS 40 Investment Property: Transfers of
Investment Property, and amendments to IFRS 2 Share-based
payments: Classification and Measurement of Share-based Payment
Transactions, 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
interim disclosures.
For noting, the group voluntarily changed the presentation policies
for policyholder assets and liabilities and reinsurance liabilities
(statement of financial position and statement of comprehensive
income) and collateral deposits payable (statement of cash flows)
for the year ended 31 December 2016. The 30 June 2016
comparative numbers have accordingly been restated and are
explained in the Change in presentation policies note.
Review/audit
These interim results have not been reviewed or audited by the
company's auditors PricewaterhouseCoopers Inc.
Explanation of terms
Normalised: operating 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.
Reversal of accounting mismatch arising on 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.
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.
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.
Consolidated statement of financial position
as at 30 June 2017
Restated
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2017 2016 2016
Assets
Intangible assets 367 303 390
Defined benefit pension fund employer surplus 203 300 215
Properties 34 182 33 760 33 828
Equipment 1 079 1 178 1 105
Interests in joint ventures 1 244 889 1 229
Interests in associates 14 054 19 555 12 995
Deferred taxation 264 315 358
Deferred acquisition costs 741 706 713
Long-term policyholder assets - insurance contracts 7 689 7 661 7 314
Reinsurance assets 1 801 1 735 1 674
Long-term insurance 1 390 1 378 1 352
Short-term insurance 411 357 322
Financial investments 326 976 306 770 316 441
Loans and receivables 1 242 1 247 1 242
Assets held for trading and for hedging 9 459 9 668 8 609
Repurchase agreements, scrip and collateral assets 16 886 17 482 15 483
Prepayments, insurance and other receivables 5 938 7 809 5 300
Cash and cash equivalents 9 327 12 820 14 994
Total assets 431 452 422 198 421 890
Liabilities
Long-term policyholder liabilities 309 200 312 111 307 230
Insurance contracts 203 703 208 792 204 155
Investment contracts with discretionary participation features 11 732 11 691 11 462
Financial liabilities under investment contracts 93 765 91 628 91 613
Reinsurance liabilities 543 615 555
Third party financial liabilities arising on consolidation of mutual funds 48 557 39 147 44 046
Provisions 68 196 191
Deferred taxation 2 675 3 222 2 586
Deferred revenue 285 261 268
Deemed disposal taxation liability 437 879 873
Short-term insurance liabilities 1 016 990 925
Financial liabilities 4 602 3 916 4 601
Liabilities held for trading and for hedging 7 428 7 548 6 798
Repurchase agreements, liabilities and collateral deposits payable 13 962 14 159 11 748
Employee benefits 1 132 1 035 1 369
Insurance and other payables 11 443 11 265 11 213
Current taxation 711 507 481
Total liabilities 402 059 395 851 392 884
Equity
Ordinary shareholders' equity 21 778 22 032 21 676
Share capital 26 26 26
Share premium 5 243 5 495 5 296
Retained surplus 17 400 17 242 16 990
Other reserves (891) (731) (636)
Non-controlling interests 7 615 4 315 7 330
Total equity 29 393 26 347 29 006
Total equity and liabilities 431 452 422 198 421 890
Consolidated statement of comprehensive income
for the six months ended 30 June 2017
Restated Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2017 2016 2016
Insurance premiums 19 438 19 535 41 288
Reinsurance premiums (969) (1 022) (1 922)
Net insurance premiums 18 469 18 513 39 366
Fee income and reinsurance commission 1 812 1 953 3 731
Investment income 11 170 10 122 20 885
Hotel operations sales 253 288 585
Investment gains/(losses) 4 082 6 868 (1 823)
Total revenue 35 786 37 744 62 744
Claims and policyholder benefits under insurance contracts (19 648) (19 111) (39 664)
Insurance claims recovered from reinsurers 868 735 1 450
Change in long-term policyholder assets and liabilities 479 (4 031) 598
Liabilities under insurance contracts 394 (3 662) 1 164
Policyholder assets related to insurance contracts 375 82 (265)
Investment contracts with discretionary participation features (341) (517) (404)
Applicable to reinsurers 51 66 103
Fair value adjustment to long-term policyholder liabilities under investment contracts (2 861) (3 671) (3 891)
Fair value adjustment to financial liabilities (14) (27)
Fair value adjustment on third party mutual fund interests (2 578) 250 619
Acquisition costs (2 532) (2 248) (4 723)
General marketing and administration expenses (5 417) (5 208) (10 733)
Finance costs (652) (716) (1 415)
Profit share allocations under bancassurance and other agreements (486) (482) (1 029)
Equity accounted earnings from joint ventures 14 11 22
Profit before taxation 2 973 3 259 3 951
Taxation(1) (1 171) (1 267) (1 325)
Total earnings 1 802 1 992 2 626
Other comprehensive loss (7) (39) (148)
Items that may be reclassified subsequently to profit or loss (19) (35) (101)
Net change in fair value on cash flow hedges 46 117 218
Income and capital gains tax relating to net change in fair value on cash flow hedges (15) (29) (56)
Foreign currency translation (50) (123) (263)
Items that may not be reclassified subsequently to profit or loss 12 (4) (47)
Owner-occupied properties - fair value adjustment 18 18 (1)
Income and capital gains tax relating to owner-occupied properties fair value adjustment (3) (5)
Change in long-term policyholder insurance liabilities (application of shadow accounting) (6) (13) 1
Actuarial gains on post-retirement medical aid liability 14 4 30
Income tax relating to post-retirement medical aid liability (4) (1) (8)
Net adjustments to defined benefit pension fund(2) (10) (10) (96)
Income tax relating to defined benefit pension fund 3 3 27
Total comprehensive income 1 795 1 953 2 478
Total earnings attributable to:
Shareholders 1 541 1 814 2 209
Non-controlling interests 261 178 417
1 802 1 992 2 626
Total comprehensive income attributable to:
Shareholders 1 549 1 799 2 128
Non-controlling interests 246 154 350
1 795 1 953 2 478
Basic and fully diluted earnings per share Cents Cents Cents
Basic earnings per share 568,5 666,9 811,7
Fully diluted basic earnings per share 553,3 647,6 788,9
(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 shareholders' equity
for the six months ended 30 June 2017
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2017 2016 2016
Balance of ordinary shareholders' equity at 1 January 21 676 21 739 21 739
Ordinary dividends (1 167) (1 241) (2 022)
Total comprehensive income 1 549 1 799 2 128
Share buy-backs(1) (335) (460) (477)
Black Economic Empowerment transaction 10 129 195
Share-based payments 28 67 132
Transaction costs of issuing units in Liberty Two Degrees (78)
Preference dividends (1) (1) (2)
Transactions between owners 9 (40)
Transactions between owners - Liberty Two Degrees 9 101
Ordinary shareholders' equity 21 778 22 032 21 676
Balance of non-controlling interests at 1 January 7 330 4 254 4 254
Total comprehensive income 246 154 350
Acquisition of Liberty Two Degrees 3 000
Transactions between owners - Liberty Two Degrees 170 (101)
Acquisition of unincorporated property partnerships 98
Acquisition of subsidiaries 28 33
Unincorporated property partnerships net distributions (112) (108) (219)
Non-controlling interests' share of subsidiary dividend (30) (13) (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 7 615 4 315 7 330
Total equity 29 393 26 347 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 six months ended 30 June 2017
Restated Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2017 2016 2016
Cash flows from operating activities 1 854 (8 860) 2 443
Cash utilised by operations (3 773) (13 339) (9 157)
Interest and dividends received 9 796 8 739 18 242
Dividends paid (2 174) (1 978) (2 717)
Taxation paid (1 213) (1 444) (2 260)
Other operating cash flows (782) (838) (1 665)
Cash flows from investing activities (8 134) 3 122 (6 607)
Net (purchase)/disposal of investments (9 409) 5 121 (4 937)
Net purchase of other assets (123) (138) (288)
Net advances/(repayments) on collateral deposits payable 1 438 (1 770) (1 236)
Acquisition of subsidiaries (91) (146)
Acquisition of equity accounted joint ventures (40)
Cash flows from financing activities 659 (674) (18)
Net advance of financial liabilities 1 2 687
Net advances/(repayments) on repurchase agreements liabilities 776 (230) (3 175)
Net cash flows from equity transactions with non-controlling interests 217 14 3 063
Transaction costs of issuing units in Liberty Two Degrees (116)
Share buy-backs (335) (460) (477)
Net decrease in cash and cash equivalents (5 621) (6 412) (4 182)
Cash and cash equivalents at the beginning of the period 14 994 19 305 19 305
Cash and cash equivalents acquired through business acquisitions 6 61
Foreign currency translation (46) (79) (190)
Cash and cash equivalents at the end of the period 9 327 12 820 14 994
Headline earnings and earnings per share
for the six months ended 30 June 2017
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm (unless otherwise stated) 2017 2016 2016
Reconciliation of total earnings to headline earnings attributable to shareholders
Total earnings attributable to shareholders 1 541 1 814 2 209
Preference share dividend (1) (1) (2)
Basic and headline earnings attributable to ordinary shareholders 1 540 1 813 2 207
Net income earned on BEE preference shares 5 8 16
Reversal of the accounting mismatch arising on consolidation of L2D(1) (278) 304
Normalised headline earnings attributable to ordinary shareholders 1 267 1 821 2 527
Weighted average number of shares in issue ('000) 270 876 271 873 271 883
Normalised weighted average number of shares in issue ('000) 277 415 280 149 279 373
Fully diluted weighted average number of shares in issue ('000) 278 306 279 957 279 760
Earnings per share Cents Cents Cents
Total earnings attributable to ordinary shareholders
Basic 568,5 666,9 811,7
Headline 568,5 666,9 811,7
Normalised headline 456,7 650,0 904,5
Fully diluted earnings attributable to ordinary shareholders
Basic 553,3 647,6 788,9
Headline 553,3 647,6 788,9
(1) Refer Explanation of terms.
Summary consolidated segment information
for the six months ended 30 June 2017
Individual Group Asset Reporting
30 June 2017 Arrange- Arrange- manage- adjust- IFRS
Rm (Unaudited) ments ments ment(2) Other Total ments(1) reported
Total revenue 28 847 9 084 1 514 1 709 41 154 (5 368) 35 786
Profit before taxation 1 149 238 138 1 307 2 832 141 2 973
Taxation (576) (82) (140) (373) (1 171) (1 171)
Total earnings 573 156 (2) 934 1 661 141 1 802
Other comprehensive income/(loss) 40 (43) (4) (7) (7)
Total comprehensive income 613 113 (2) 930 1 654 141 1 795
Attributable to:
Ordinary shareholders 613 105 (3) 834 1 549 1 549
Non-controlling interests 8 1 96 105 141 246
Reconciliation of total earnings to
headline earnings attributable
to shareholders
Total earnings 573 156 (2) 934 1 661 141 1 802
Attributable to non-controlling interests (23) (1) (96) (120) (141) (261)
Preference share dividend (1) (1) (1)
Headline earnings 573 133 (3) 837 1 540 1 540
Net income earned on BEE preference
shares 5 5 5
Reversal of the accounting mismatch arising
on consolidation of L2D (278) (278) (278)
Normalised headline earnings 573 133 (3) 564 1 267 1 267
(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) 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.
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.
Refer to supplementary information included in the full results announcement available on the Liberty website for the reconciliation of
business unit earnings to segment result.
Individual Group Asset Reporting
Arrange- Arrange- manage- adjust- IFRS
ments ments ment (2) Other Total ments(1) reported
30 June 2016 (Unaudited)
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:
Ordinary shareholders 843 100 248 608 1 799 1 799
Non-controlling interests 4 4 8 146 154
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
Normalised headline earnings 754 96 267 704 1 821 1 821
31 December 2016 (Audited)
Total revenue 56 583 18 050 3 384 1 097 79 114 (16 370) 62 744
Profit before taxation 2 018 446 517 653 3 634 317 3 951
Taxation (950) (162) (148) (65) (1 325) (1 325)
Total earnings 1 068 284 369 588 2 309 317 2 626
Other comprehensive income/(loss) 181 (131) (31) (167) (148) (148)
Total comprehensive income 1 249 153 338 421 2 161 317 2 478
Attributable to:
Ordinary shareholders 1 249 158 331 390 2 128 2 128
Non-controlling interests (5) 7 31 33 317 350
Reconciliation of total earnings to headline
earnings attributable to shareholders
Total earnings 1 068 284 369 588 2 309 317 2 626
Attributable to non-controlling interests (62) (7) (31) (100) (317) (417)
Preference share dividend (2) (2) (2)
Headline earnings 1 068 222 362 555 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 1 068 222 362 875 2 527 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) 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.
Group equity value report
for the six months ended 30 June 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 (31 December 2016 and 30 June 2016: 10 times) multiple of estimated sustainable earnings.
South Africa
STANLIB Valued using a 10 times (31 December 2016 and 30 June 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 30 June 2017, 31 December 2016 and 30 June 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 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 (31 December 2016 and 30 June 2016: 9 times).
3 Normalised group equity value
3.1 Analysis of normalised group equity value
Unaudited Unaudited
30 June 2017 30 June 2016
SA covered Other SA covered Other
Rm business businesses Total business businesses Total
Liberty Group Limited 18 369 18 369 19 096 19 096
STANLIB South Africa(2) 809 809 762 762
STANLIB Rest of Africa(2) (19) (19) 256 256
Liberty Health (including Total Health Trust) 373 373 330 330
Liberty Africa Insurance 815 815 772 772
Liberty Holdings 1 273 1 273 816 816
Liberty Two Degrees consolidation adjustment(1) 158 158
Shareholders' equity reported under IFRS 18 369 3 409 21 778 19 096 2 936 22 032
Difference between statutory and published
valuation methods (7 175) (7 175) (6 867) (6 867)
Negative rand reserves (6 723) (6 723) (6 429) (6 429)
Deferred acquisition costs (725) (725) (682) (682)
Deferred revenue liability 273 273 244 244
Other(3)
Subordinated notes (including accrued interest) 4 602 4 602 3 580 3 580
CAR of subsidiaries (10) (10) (10) (10)
Reverse value of in-force acquired (14) (14) (20) (20)
Inadmissible assets(3) (922) (922) (603) (603)
Statutory excess assets over liabilities 14 850 3 409 18 259 15 176 2 936 18 112
Reverse difference between statutory and
published valuation methods(3)
Reverse CAR of subsidiaries 10 10 10 10
Reverse subordinated notes (including accrued
interest) (4 602) (4 602) (3 580) (3 580)
Reverse inadmissible assets(3) 922 922 603 603
Frank Financial Services allowance for future
expenses (100) (100) (100) (100)
Impact of discounting on deferred tax asset (100) (100) (100) (100)
BEE preference funding 142 142 204 204
Liberty Two Degrees normalisation adjustment(1) (158) (158)
Allowance for employee share rights (33) (38) (71) (50) (44) (94)
Normalised net worth 11 189 3 113 14 302 12 263 2 792 15 055
Value of in-force - Individual Arrangements 21 840 21 840 22 144 22 144
Value of in-force - Group Arrangements: Liberty
Corporate 2 838 2 838 2 659 2 659
Cost of required capital (1 640) (1 640) (1 601) (1 601)
Fair value adjustment - STANLIB South Africa(2) 4 491 4 491 5 238 5 238
Fair value adjustment - STANLIB Rest of Africa(2) 319 319 344 344
Allowance for future shareholder expenses (1 960) (1 960) (1 845) (1 845)
Normalised equity value 34 227 5 963 40 190 35 465 6 529 41 994
(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.
30 June 30 June
(2) STANLIB valuations: (Rm) 2017 2016
STANLIB South Africa 5 300 6 000
STANLIB Rest of Africa 300 600
(3) The adjustments between the IFRS and statutory net asset values for the Liberty Africa subsidiaries are not available for interim
reporting. However, as the group equity value for these entities is set to their IFRS net asset value, these adjustments do not
affect group equity value. The adjustments will be included for full year reporting.
Audited
31 December 2016 SA covered Other
Rm 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 consolidation adjustment(1) (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.
31 December
(2) STANLIB valuations: (Rm) 2016
STANLIB South Africa 5 790
STANLIB Rest of Africa 360
3.2 Normalised group equity value earnings and value per share
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
2017 2016 2016
SA SA
covered Other covered Other
Rm business businesses Total business businesses Total Total
Normalised equity value at the end
of the period 34 227 5 963 40 190 35 465 6 529 41 994 41 221
Equity value at the end of the period 34 085 6 121 40 206 35 261 6 529 41 790 40 743
Liberty Two Degrees normalisation
adjustment(1) (158) (158) 330
BEE preference shares 142 142 204 204 148
Net share buy-backs 335 335 460 460 477
Funding of restricted share plan 112 (112) 136 (136)
Intragroup dividends 1 400 (1 400) 2 000 (2 000)
Dividends paid 1 168 1 168 1 242 1 242 2 024
Normalised equity value at the
beginning of the period (34 470) (6 751) (41 221) (35 268) (6 367) (41 635) (41 635)
Equity value at the beginning of the
period (34 322) (6 421) (40 743) (34 946) (6 367) (41 313) (41 313)
Liberty Two Degrees normalisation
adjustment(1) (330) (330)
BEE preference shares (148) (148) (322) (322) (322)
Normalised equity value earnings 1 269 (797) 472 2 333 (272) 2 061 2 087
Normalised return on
group equity value (%) 7,5 (22,9) 2,3 13,7 (8,8) 10,3 5,1
Normalised number of shares 280 734 282 905 282 615
Number of shares in issue ('000) 269 541 271 517 272 247
Shares held for the employee
restricted share scheme ('000) 4 713 4 578 3 794
Adjustment for BEE shares ('000) 6 480 6 810 6 574
Normalised group equity
value per share (R) 143,16 148,44 145,86
(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.
3.3 Sources of normalised group equity value earnings
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
2017 2016 2016
SA SA
covered Other covered Other
Rm business businesses Total business businesses Total Total
Value of new business written in the
period 75 11 86 241 16 257 483
Expected return on value of in-force
business 1 446 1 446 1 483 1 483 2 997
Variances/changes in operating
assumptions 21 21 213 213 283
Operating experience variances 174 174 277 277 477
Property portfolio liquidity fee/
STANLIB REIT Fund Managers(1) (1) (1) 73
Operating assumption changes (7) (7) (30) (30) (295)
Changes in modelling methodology (146) (146) (33) (33) 28
Development costs (30) (52) (82) (43) (43) (107)
Liberty Holdings shareholder
expenses(3) (156) (156) (123) (123) (228)
Headline earnings of other
businesses/intragroup transfers 46 59 105 247 247 185
Operational equity value profits 1 558 (138) 1 420 1 937 97 2 034 3 613
Economic adjustments (289) (178) (467) 385 (114) 271 (750)
Investment return on net worth(2) 94 (178) (84) 357 (114) 243 86
Investment variances(2) (479) (479) (277) (277) (963)
Change in economic assumptions 96 96 305 305 127
Change in fair value adjustments on
value of other businesses (470) (470) (259) (259) (825)
Change in allowance for share rights (11) (11) 11 4 15 49
Group equity value earnings 1 269 (797) 472 2 333 (272) 2 061 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 (LGL) 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 R17 million (31 December 2016: negative R16 million, 30 June 2016: negative R18 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
R48 million (31 December 2016: R178 million, 30 June 2016: R106 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 R88 million (31 December 2016: R122 million, 30 June 2016: R64 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
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm (unless otherwise stated) 2017 2016 2016
South African covered business:
Individual Arrangements 667 786 1 652
Traditional Life(1) 528 632 1 306
Direct Channel 30 37 96
Credit Life 43 42 86
LibFin Credit uplift to Individual Arrangements 66 75 164
Group Arrangements: Liberty Corporate 66 43 131
Traditional Business 56 39 113
LibFin Credit uplift to Group Arrangements: Liberty Corporate 10 4 18
Gross value of new business 733 829 1 783
Overhead acquisition costs (including underwriting costs) impact on value of new
business(1) (615) (540) (1 243)
Cost of required capital (43) (48) (86)
Net value of South African covered new business 75 241 454
Present value of future expected premiums 20 628 18 226 42 370
Margin (%) 0,4 1,3 1,1
Group Arrangements: Liberty Africa Insurance
Net value of new business 11 16 29
Present value of future expected premiums 266 225 519
Margin (%) 4,3 7,0 5,6
Total group net value of new business 86 257 483
Total group margin (%) 0,4 1,4 1,1
(1) Underwriting costs previously included in Traditional Life business at 30 June 2016 have been reallocated to overhead acquisition costs.
Long-term insurance new business
for the six months ended 30 June 2017
12 months
30 June 30 June 31 December
Rm (Unaudited) 2017 2016 2016
Sources of insurance operations total new business by customer segment
Retail 13 177 12 097 27 435
Single 10 973 9 911 22 916
Recurring 2 204 2 186 4 519
Institutional 915 665 2 296
Single 319 304 1 350
Recurring 596 361 946
Total new business 14 092 12 762 29 731
Single 11 292 10 215 24 266
Recurring 2 800 2 547 5 465
Insurance indexed new business 3 930 3 569 7 892
Sources of insurance indexed new business:
Individual Arrangements 3 205 3 094 6 639
Group Arrangements: 725 475 1 253
Liberty Corporate 558 324 842
Liberty Africa Insurance(1) 167 151 411
(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.
Long-term insurance net cash flows
for the six months ended 30 June 2017
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2017 2016 2016
Net premiums by customer segment
Retail 21 282 20 005 43 150
Single 10 720 9 775 22 522
Recurring 10 562 10 230 20 628
Institutional 5 187 5 668 11 889
Single 588 1 367 3 170
Recurring 4 599 4 301 8 719
Net premium income from insurance contracts
and inflows from investment contracts 26 469 25 673 55 039
Single 11 308 11 142 25 692
Recurring 15 161 14 531 29 347
Net claims and policyholders benefits by customer segment
Retail (20 390) (19 254) (40 924)
Death and disability claims (3 117) (3 249) (6 570)
Policy surrender and maturity claims (14 392) (13 388) (28 870)
Annuity payments (2 881) (2 617) (5 484)
Institutional (6 744) (6 772) (12 996)
Death and disability claims (1 082) (1 186) (1 912)
Scheme terminations and member withdrawals (5 244) (5 211) (10 280)
Annuity payments (418) (375) (804)
Net claims and policyholders benefits (27 134) (26 026) (53 920)
Long-term insurance net cash flows(2) (665) (353) 1 119
Rm (Unaudited)
Sources of insurance operations net cash flows:
Individual Arrangements 774 597 1 948
Group Arrangements: (1 439) (955) (268)
Liberty Corporate (1 609) (905) (751)
Liberty Africa Insurance(1) 170 (50) 483
Asset management:
STANLIB Multi-manager(3) 5 (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 R122 million (31 December 2016: R557 million,
30 June 2016: R129 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 30 June 2017
30 June 30 June 31 December
Rbn (Unaudited) 2017 2016 2016
Managed by group business units 662 648 653
STANLIB South Africa 540 531 535
STANLIB Rest of Africa(2) 53 53 51
LibFin Markets 58 53 58
Other internal managers 11 11 9
Externally managed 26 31 23
Total assets under management(3) 688 679 676
(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 30 June 2017 amounts:
Unit trusts listed (Rbn)
STANLIB Other
managed managed Total
STANLIB South Africa 38 74 112
Gateway 3 4 7
Asset management net cash flows(1)
for the six months ended 30 June 2017
12 months
30 June 30 June 31 December
Rm (Unaudited) 2017 2016 2016
STANLIB South Africa
Non-money market 5 705 1 189 764
Retail 3 345 202 (2 327)
Institutional 2 360 987 3 091
Money market (59) (2 136) 2 037
Retail (1 461) (202) 1 007
Institutional 1 402 (1 934) 1 030
Net STANLIB South Africa cash inflows(3) 5 646 (947) 2 801
STANLIB Rest of Africa(2)
Non-money market (347) 1 980 3 724
Retail 437 (6) (422)
Institutional (784) 1 986 4 146
Money market 791 (580) (761)
Net STANLIB Rest of Africa cash inflows 444 1 400 2 963
Net cash inflows from asset management 6 090 453 5 764
(1) Cash flows exclude intergroup segregated life fund mandates. Cash flows also exclude the Delta LISP with effect from June 2016.
(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) In terms of the first clause of the Agri-Vie Fund II in January 2017, Liberty has committed capital of R673 million, which has not
been included in the above STANLIB South Africa flows.
Short-term insurance indicators
for the six months ended 30 June 2017
Audited
Unaudited Unaudited 12 months
30 June 30 June 31 December
Rm 2017 2016 2016
Net premiums 675 805 1 484
Liberty Health - medical risk 420 508 919
Liberty Africa Insurance - motor, property, medical and other 255 297 565
Net claims (426) (496) (994)
Liberty Health - medical risk (299) (353) (743)
Liberty Africa Insurance - motor, property, medical and other (127) (143) (251)
Net cash inflows from short-term insurance 249 309 490
Unaudited
Claims loss ratio (%)
Liberty Health 71 70 77
Liberty Africa Insurance 50 48 44
Combined loss ratio (%)
Liberty Health 101 99 104
Liberty Africa Insurance 98 91 94
Capital commitments
as at 30 June 2017
Unaudited Unaudited Audited
30 June 30 June 31 December
Rm 2017 2016 2016
Equipment 658 366 823
Investment and owner-occupied properties 1 237 1 760 1 485
Committed capital(1) 1 168 751 636
Total capital commitments 3 063 2 877 2 944
Under contracts 546 714 657
Authorised by the directors but not contracted 2 517 2 163 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,
R55 million (31 December 2016: R60 million, 30 June 2016: R135 million) from non-controlling interests in unincorporated property
partnerships in respect of investment properties and R241 million (31 December 2016: R300 million, 30 June 2016: Rnil million) from
non-controlling interests in Liberty Two Degrees.
Retirement benefit obligations
as at 30 June 2017
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 2017, the Liberty post-retirement medical aid benefit
liability was R482 million (31 December 2016: R493 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 2017
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 2017 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 2017 9 572 1 454 0,60
Purchases 2 393 335
Sales (2 009) (255)
Fair value adjustments (100)
Balance at 30 June 2017 9 956 1 434 0,63
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 R3 982 million
(2016 full year: 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 six months to 30 June 2017 is
R477 million (2016 full year: 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 six months to 30 June 2017 is R66 million (2016 full year:
R150 million).
1.3 Purchases and sales of financial instruments
As per Liberty's 2016 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.
2. Other related party transactions - Liberty Two Degrees (L2D)
In terms of the co-owners agreement concluded at the time of the listing of L2D in December 2016, L2D granted Liberty Group Limited a
continuing put option to sell further portions of its undivided shares in the existing properties (and letting businesses carried on thereon) to
L2D from time to time.
Post the interim reporting date, Liberty Group Limited exercised the put option and finalised the disposal of a further proportional share in
the co-owned property portfolio to the value of R2,5 billion to L2D.
Offsetting, enforceable master netting arrangements
or similar agreements
as at 30 June 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
Repurchase agreements Global master repurchase agreements
in the event of default
Collateral deposits payable Global master securities lending arrangements
Not subject Subject
to MNA to MNA
or similar or similar Financial
Rm Total agreements agreements collateral(1) Net
Unaudited
30 June 2017
Assets
Assets held for trading and for hedging 9 459 (934) 8 525 (6 970) 1 555
Total assets 9 459 (934) 8 525 (6 970) 1 555
Liabilities
Liabilities held for trading and for hedging 7 428 (26) 7 402 (6 970) 432
Repurchase agreements liabilities 7 840 7 840 (7 840)
Collateral deposits payable 6 122 6 122 (6 122)
Total liabilities 21 390 (26) 21 364 (20 932) 432
Unaudited
30 June 2016
Assets
Assets held for trading and for hedging 9 668 (621) 9 047 (7 525) 1 522
Total assets 9 668 (621) 9 047 (7 525) 1 522
Liabilities
Liabilities held for trading and for hedging 7 548 (23) 7 525 (7 525)
Repurchase agreements liabilities 10 009 10 009 (10 009)
Collateral deposits payable 4 150 4 150 (4 150)
Total liabilities 21 707 (23) 21 684 (21 684)
Audited
31 December 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.
Change in presentation policies
for the six months ended 30 June 2017
1 Change in presentation for policyholder assets and liabilities and for reinsurance liabilities
For the year ended 31 December 2016, a change in presentation was adopted to disclose portfolio level negative policyholder liabilities as
policyholder assets.
In addition, to provide more relevant and useful information to the user, reinsurance liabilities were disclosed separately on the face of
the statement of financial position, as this class of liabilities represents the effect of management's risk mitigation action on policyholder
contracts.
The disclosure impact of this change is:
30 June 2017 30 June 2016
Prior to
adoption of Impact of Including the Impact of the
change in change in change in change in
presentation presentation presentation As previously presentation
Rm (Unaudited) policy policy policy reported policy Restated
Statement of financial position
line item(1)
Assets
Long-term policyholder assets -
insurance contracts 7 689 7 689 7 661 7 661
Liabilities
Long-term policyholder liabilities -
insurance contracts (196 557) (7 146) (203 703) (201 746) (7 046) (208 792)
Reinsurance liabilities (543) (543) (615) (615)
(1) Brackets denote credit balances.
Statement of comprehensive
income line item
Change in long-term policyholder
assets and liabilities 479 479 (4 031) (4 031)
Liabilities under insurance
contracts 781 (387) 394 (3 578) (84) (3 662)
Policyholder assets related to
insurance contracts 375 375 82 82
Investment contracts with
discretionary participation features (341) (341) (517) (517)
Applicable to reinsurers 39 12 51 64 2 66
The impact is a presentation change only and there was no resultant change to the group's total earnings, comprehensive income,
shareholders' equity or net asset value.
2 Change in presentation policy regarding collateral deposits payable
Upon review of the financing activities presented in the statement of cash flows, management concluded that collateral deposits payable
(not related to repurchase agreements) included in 'Net proceeds on repurchase agreements liabilities and collateral deposits payable' would
be more accurately presented as part of investing activities. The statement of cash flows has been voluntarily restated to reflect this change
for 30 June 2016.
The disclosure change in the statement of cash flows is as follows:
Reclassification
of net
proceeds
on collateral
30 June 2016 As previously deposits
Rm (Unaudited) reported payable As restated
Cash flows from investing activities 4 892 (1 770) 3 122
Cash flows from financing activities (2 444) 1 770 (674)
For more details regarding the restatements, refer to note 47 in the 31 December 2016 Liberty Holdings Limited annual financial statements.
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Date: 04/08/2017 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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