Liberty Holdings Limited Interim results 2015 · Group Arrangements 37 31 19 New business margins (%) 1.9 1.8 6 Individual Arrangements 2.1 2.0 5 Group Arrangements 1.3 0.8 63 BOOKLET

financial results

Liberty Holdings Limited 1 Financial results for the six months ended 30 June 2015

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Liberty Holdings LimitedInterim resultspresentation 2015for the six months ended 30 June

Group financial performance reviewLiberty Holdings LimitedCasper Troskie, Group FD

2 Liberty Holdings Limited Financial results for the six months ended 30 June 2015

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Operating environment

Source: I-Net Bridge and Bloomberg1. Indices based to 31 Dec 2014 = 100

All Bond Index JSE All Share Index

11.55

12.17

8.048.41

ZAR/USD 10 year SA bond

SA market performance¹ ZAR/USD and bond yields

Jan 2015 Jun 2015Jan 2015 Jun 2015

• China slowdown, Greek crisis and risk of a Federal Reserve rate hike adds to uncertainty• Weak economic growth prospects continue to impact investment activity by SA private sector• Consumer confidence and sentiment continues to decline, impacting spending

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Group financial summary

Rm (unless stated otherwise) Jun 15 Jun 14 % D

BEE normalised operating earnings 1 296 1 174 10

LibFin Investments 695 707 (2)

BEE normalised headline earnings per share (c) 705.5 664.7 6

BEE normalised headline earnings 1 991 1 881 6

Embedded value of insurance new business 369 346 7

Indexed long-term insurance new business 3 529 3 437 3

Long-term insurance net customer cash flows 2 852 3 583 (20)

Asset management net cash flows 10 317 11 618 (11)

Retail and Institutional excluding money market 5 378 4 123 30

Money market 4 939 7 495 (34)

LGL CAR cover (times covered) 3.07 2.58 19

BEE normalised Group Equity Value per share (R) 142.63 130.42 9

BEE normalised RoGEV (%) 11.8 14.7 (20)

BEE normalised RoE (%) 19.4 19.9 (3)

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financial results


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• Risk discount rate increased to 11.21% (37 basis points)

• Economic assumptions had a negative impact of R138m on Equity Value growth

• Whilst a number of smaller refinements were made to our assumptionsand models, none of these had a material impact on the results

• We remain comfortable with the overall ability of the Group to manageto operational assumptions

Changes in key assumptions

Insurance portfolio managed in line with expectations

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Business unit BEE normalised operating earnings

Rm Jun 15 Jun 14 % D

Individual Arrangements 873 795 10

Group Arrangements 103 90 14

Liberty Corporate 97 84 15

Liberty Africa Insurance 28 28 -

Liberty Health (22) (22) -

STANLIB 301 284 6

LibFin Markets 125 108 16

Credit portfolio 108 87 24

LibFin ALM 17 21 (19)

Central overheads and sundry income (106) (103) (3)

BEE normalised operating earnings 1 296 1 174 10


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Sources of BEE normalised Group Equity Value earnings


Value of long-term insurance new business 369 346 7

Expected return on SA covered business 1 107 1 048 6

Variances / changes in operating assumptions 325 19 >100

Headline earnings of other businesses 299 302 (1)

Operational Equity Value earnings 2 100 1 715 22

Development costs (29) (35) 17

Investment return on net worth and investment variances 206 639 (68)

Credit portfolio earnings, hedging and related cost of capital 22 38 (42)

Changes in economic assumptions – SA covered business (138) (76) (82)

Increase in fair value adjustment on value of other businesses 92 236 (61)

Change in allowance for share rights 15 24 (38)

Group Equity Value earnings 2 268 2 541 (11)

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Long-term insurance indexed new business¹

1. Excludes natural increases

Steady growth in insurance indexed new business off a high base


Individual Arrangements 3 058 2 944 4

Group Arrangements 471 493 (4)

South Africa 318 423 (25)

Rest of Africa 153 70 >100

Total 3 529 3 437 3

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financial results


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Value of new business

Retail margin remains within target range despite higher discount rates

Jun 15 Jun 14 % D

Value of new business (Rm) 369 346 7

Individual Arrangements 332 315 5

Group Arrangements 37 31 19

New business margins (%) 1.9 1.8 6

Individual Arrangements 2.1 2.0 5

Group Arrangements 1.3 0.8 63

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101. Excludes Gateway LISP R0.7bn2. Includes STANLIB multi-manager

Long-term insurance net customer cash flows


Individual Arrangements¹ 3 509 2 348 49

Group Arrangements (657) 1 235 (>100)

South Africa² (865) 1 021 (>100)

Rest of Africa 208 214 (3)

Total 2 852 3 583 (20)

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Assets under management

1. Excludes intergroup

Assets under management impacted by low investment returns

Rbn Jun 15 Dec 14 % D

Assets under management 645 633 2

STANLIB 560 551 2

LibFin 48 45 7

Other internal, external managers & GateWay LISP 37 37 -


STANLIB net cash flows¹ 10 317 11 618 (11)

Retail and Institutional 5 378 4 123 30

Money market 4 939 7 495 (34)

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Gross return (%)

Selection of indices 2011 2012 2013 2014 1H15

SWIX 4.3 29.1 20.7 15.4 6.7ALBI 8.8 16.0 0.6 10.2 1.6STEFI 5.7 5.6 5.2 5.9 3.1R/$ exchange 22.0 4.7 23.8 10.3 5.2SIP gross return 8.1 16.0 14.6 10.3 4.4

LibFin Investments

95

100

105

110

115

120

Dec Jan Feb Mar Apr May JunLocal equity Local bonds Listed propertyForeign Local preference shares Shareholder Investment Portfolio

Asset class performance in 1H15

financial results


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LibFin Investments – Shareholder Investment Portfolio

1. For foreign currency split by asset class refer to supplementary information

Rm Jun 15 % Dec 14 %

South African Rand 20 273 78 20 023 78

Equities 2 727 11 3 823 15

Bonds 6 198 24 5 630 22

Cash 4 112 16 5 483 21

Preference shares 620 2 662 3

Property 4 462 17 3 427 13

Other 2 154 8 998 4

Foreign currency¹ 5 603 22 5 536 22

Total 25 876 100 25 559 100

Assets backing capital 13 694 53 10 958 43

Assets backing life funds 7 477 29 9 844 38

90:10 exposure 4 705 18 4 757 19

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1H15

LibFin Markets – ALM

Increased uncertainty in global markets managed by defensive ALM positioning

SWIX40 10 year swap 3 year SWIX40 implied volatility

Positive market performance despite weak second quarter

1H15

Rates marginally higher after initial bond rally

1H15

Implied volatility slightly lower on the back of positive equity returns

1.5%

1.5%

17%

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LibFin Markets – Credit portfolio

• Growth in asset base of23% largely as a result of increased guaranteed policy sales by business units

• Greater allocation to the corporate sector with increased focus on African exposures outside of SA

Diversification continues to improve the risk adjusted return

Jun 15 Jun 14 % D

LibFin assets under management (Rbn) 48 39 23

Equity Value (Rm) 1 100 720 53

Credit portfolio Jun 15

Banks and Sovereign

Diversifiedcorporates

SOE

Industrials

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Capital position – 30 June 2015

RmLiberty

Holdings LimitedLiberty

Group Limited

IFRS

IFRS shareholder funds 20 488 18 258

BEE preference shares 340 340

BEE normalised shareholder funds 20 828 18 598

Regulatory capital

Shareholder assets 17 243 14 997

Regulatory capital requirement (5 309) (4 879)

Surplus above minimum requirement 11 934 10 118

Target minimum capital coverage ratio 1.50 1.50

Capital buffer 9 280 7 679

Capital ratio at period end 3.25 3.07

financial results


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• Capital management› Fitch rating affirmed at:

- Subordinated debt: ‘A+(zaf)’

- National IFS rating: ‘AA(zaf)’; outlook stable

• Return targets› Cost of equity; risk free rate + 4%

› Return targets (EV based); risk free rate + 5%

› Through the cycle ROE target >19%

• Capital buffer

› Required to attract annuity business

› >R1bn earmarked for acquisitions at LHL

› Maintain a strong capital ratio during the SAM transition

Capital management

Appropriate capital levels – continued focus on capital efficiency

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SA covered business net worth – delivery on assumption

Continued delivery on the actuarial promises

Net worth (Rm) 1H15 2014 2013 2012 2011 2010

Expected net of tax transfer to net worth 1 779 3 266 2 816 2 569 2 324 2 371

Operating experience variances, assumption and modelling changes 175 566 141 52 16 (133)

Development expenses (5) (52) (53) (78) (61) -

Incentives (36) (103) (154) (181) (131) -

Change in allowance for fair valueof share options / rights 13 100 69 (125) 3 (28)

Actual net of tax transfer to net worth 1 926 3 777 2 819 2 237 2 144 2 210

Performance in line with expectation 108% 116% 100% 87% 92% 93%


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Distributions

The interim dividend has been declared in line with Liberty’s dividend policy

Per cycle – cents per share Jun 15 2014 % D

Interim 254 232 9

Final 402 -

Total 254 634 -

Business unitFinancial performance reviewLiberty Holdings LimitedCasper Troskie, Group FD

financial results


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Individual ArrangementsKey performance measures

Good performance in an increasingly difficult consumer environment

Rm (unless stated otherwise) Jun 15 Jun 14 % D

Headline earnings 873 795 10

Gross sales 12 392 11 802 5

Indexed new business 3 058 2 944 4

Insurance net customer cash flows (including LISP) 4 172 3 260 28

Value of new business 332 315 5

Retail margin excluding STANLIB (%) 2.3 2.2 5

STANLIB ‘on balance sheet’ margin (%) 0.0 0.1 -

New business margin including STANLIB (%) 2.1 2.0 5

221. Includes Liberty Health2. Includes STANLIB multi-manager

Group ArrangementsKey performance measuresRm Jun 15 Jun 14 % D


South Africa¹ 75 62 21

Rest of Africa 28 28 -

Indexed new business 471 493 (4)



Value of new business 37 31 19



Long-term insurance net cash flows (657) 1 235 (>100)

South Africa² (865) 1 021 (>100)

Rest of Africa 208 214 (3)


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STANLIBKey performance measuresRm Jun 15 Jun 14 % D


South Africa 271 254 7

Rest of Africa 30 30 -

Net client cash flows 10 317 11 618 (11)

South Africa 9 152 14 435 (37)

Rest of Africa 1 165 (2 817) >100

Rbn Jun 15 Dec 14 % D

AUM 560 551 2

South Africa 518 510 2

Rest of Africa 42 41 2

Operational performance reviewLiberty Holdings LimitedThabo Dloti, Chief Executive

financial results


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Individual Arrangements delivered ongoing strong insurance cash flows and sales with continued good retention • Focus on managing to better than model delivered another period of positive risk, persistency and

recurring expense variances

• Distribution focus on quality sales delivered higher value of new business at an improved margin

Group Arrangements improved earnings and grew new business in the rest of Africa• Continued expansion of distribution channels across the institutional market

• Recent large annuity deals contributed to earnings growth

• Management focus on expanding footprint in rest of Africa bearing fruit

• Strong new business and margin growth in the rest of Africa mainly from expanded footprint

STANLIB attracted good inflows from third party clients• Margin improvement from growth in retail flows

• Africa expansion progressing well

• Poor investment market growth in rest of Africa dampened earnings growth

A good operational performance driven by

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1H10 1H11 1H12 1H13 1H14 1H15

279

315332

2.2 2.2

2.3

1H13 1H14 1H15

VoNB (Rm) Margin (%)

976 949

206

1 064

1 424

180

Agency Broker

1H13 1H14 1H15

Individual Arrangements, focus on quality drives value

• On-going growth in both new and experienced advisers

• Continued good retention of experienced advisors

• Focus to improve productivity of distribution force

• Liberty@work channel reduced headcount due to productivity initiatives

• Focus on quality new business volumes

• Margins benefit from improved product mix offsetting higher risk discount rate

• Growth of in-force policy count supported by new products

• Successful sales efforts and continued focus on retention initiatives in a difficult environment

• Improvement in customer satisfaction levels

Focused distribution efforts grows quality sales

Continued growth in VoNB and margin¹

Growing in-force policy count

Liberty entrepreneur

1. Margin excludes STANLIB


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55%

2%

38%

5%

Broker Bancassurance

Tied Direct

12

19

10

0.40.5

0.4

1H13 1H14 1H15VoNB (Rm) Margin (%)

7882

100

65 66 69

1H13 1H14 1H15

Lives (000) CLR (%)¹

Group Arrangements, continues diversifying revenue

• Improved diversification of sales volumes through multiple channels – a key focus

• Launched new market leading index tracking investment range

• Expanding consulting business

• Slower single premium sales • Stable Growth Fund top

performing fund of its kind• Efficient delivery of umbrella

proposition• Total recurring premiums up

5% in a challenging market

• Blue growth exceeding 20%• Claims loss ratio at targeted

level• 2014 optimisation yielding

operational and cost efficiencies

• SA experienced termination of a key client

Expanded South Africandistribution channels

VoNB and margin impacted byslower large annuity sales

Increased demand for Liberty Blue medical expense risk product

1. Includes THT Medical expenses capitation business

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Liberty Africa – Group Arrangements, driving expansion initiatives

• Transactional channel launched in Standard Bank –diversification from credit driven sales

• 156 experienced agents recruited in Kenya

• Affinity channel sales continue to gain traction

• Promising early results from worksite marketing pilots

Focused strategy to diversifydistribution channels

Significant growth inindexed new business

Value of new businessup by more than 100%

51%

22%

27%

Broker / Affinity Bancassurance

Tied / Direct

71 70

153

1H13 1H14 1H15

16

12

27

11.3

5.7 7.1

1H13 1H14 1H15VoNB (Rm) Margin (%) Rm

New

bus

ines

s

• Premium income growth driven by Botswana, Namibia and Heritage Kenya

• New business in Zambia delivering ahead of expectation

• Earnings in East Africa were negatively impacted by investment markets

• Strong sales performance driven by Botswana, Kenya, Zambia and Uganda

• Margins benefit from volume, product mix and managing cost efficiencies

• New products launched to drive further volume uplift

• Increased distribution footprint planned for 2H15

financial results


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STANLIB

31 31

32

1H13 1H14 1H15

(5 051)

(2 817)

1 165

1H13 1H14 1H15

13 548

515

4 778

9 657

5 465

3 687

Non-money market Money market1H13 1H14 1H15

South African non-money market cash flows¹ improved (Rm)

South African margin growthfrom good retail inflows

Growth in net cash flows¹in the rest of Africa

1. Excludes intergroup

• Good retail flows intonon-money market products

• Money market fund flows are volatile, net inflows have continued

• Passive capability gaining traction, more than R1bnin mandates won

• AUM growth positively impacted by net cash inflows, with marginal market growth

• Retail margins benefited from flows to better margin products

• Investment performance reflective of tough market conditions

• Raised and closed R1.2bn infrastructure fund

Bps Rm

• Positive non-money marketflows from retail andinstitutional funds

• East African operationscontinue to grow

• REIT has received strong initial interest, target properties secured

• Building a visible brand on the African continent

ConclusionLiberty Holdings LimitedThabo Dloti, Group CE


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Diversifying earnings remains a key focus

873

1 296

103

301 19

692

IndividualArrangements

GroupArrangements

STANLIB Other 1H15 Expectedlong-term rateof return – SIP

Contribution to operating earnings 1H15

Contribution to operating earnings 1H14

10% 14% 6% >100% 10%

795

1 174

90

284 5

635

IndividualArrangements

GroupArrangements

STANLIB Other 1H14 Expectedlong-term rateof return – SIP

33% of Coreearnings

33% of Coreearnings

Y-YGrowth %

Rm

Rm

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South Africa

• Persistent low economic growth

• Pressure on disposable income, compounded by higher utility, interest and fuel costs

• Lowest business and consumer confidence in more than a decade

• Changing regulatory landscape

• Weaker global growth and commodity pricing increases currency pressure

Rest of Africa

• Slowing global growth – divergent issues impacting emerging and developed markets

• Commodity price weakness

• Improving regulatory and fiscal landscapes

• Revenue pressure on oil dependent economies

Headwinds expected to continue

We will navigate and adapt to continue driving sustainable value

financial results


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Individual Arrangements• Continue growing in the affluent market where our capabilities and strengths are proven

in distribution, product, risk pricing and cost efficiencies

Group Arrangements• Continue building capabilities and extending rest of Africa footprint using our comprehensive

suite of on- and off-balance sheet solutions

STANLIB• Accelerate the growth strategy to ensure we are able to capture opportunities identified

in alternative assets in South Africa and the rest of Africa

Strategic partners• Focus on opportunities identified with Standard Bank Group in the Rest of Africa

Africa expansion initiatives• Continue pursuing acquisition opportunities on the continent

We remain focused on what we need to deliver

Capture opportunities, leverage capabilities, expand and grow

Questions


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Documents

Liberty Holdings Limited Interim results 2015 · Group Arrangements 37 31 19 New business margins (%) 1.9 1.8 6 Individual Arrangements 2.1 2.0 5 Group Arrangements 1.3 0.8 63 BOOKLET