| Thu 6 Aug 2009, 7:05 | | LBH - Liberty Holdings - Unaudited Interim Results For the Six Months |
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LBH
LBH
LBH - Liberty Holdings - Unaudited Interim Results For the Six Months
Ended 30 June 2009
Liberty Holdings Limited
(Liberty Holdings)
Registration number 1968/002095/06
Incorporated in the Republic of South Africa
Share code: LBH
ISIN code: ZAE000127148
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
Contents
Financial performance indicators
Definitions
Commentary on results
Accounting policies and restatements
Statement of financial position
Statement of comprehensive income
Headline earnings and earnings per share
Condensed statement of changes in shareholders` funds
Condensed statement of cash flows
Condensed segment information
Group embedded value report
New business
Net cash (outflows)/inflows
Assets under management
Analysis of ordinary shareholders` funds invested
Capital commitments
Related parties
Retirement benefit obligations
Financial performance indicators
for the six months ended 30 June 2009
June June
2009 2008
Liberty Holdings Limited
Earnings
Basic (loss)/earnings per share (cents) (483,3) 294,4(1)
BEE normalised headline (loss)/earnings per
share (cents) (421,9) 321,8(2)
Embedded value
BEE normalised embedded value per share (R) 79,19 94,08(2)
BEE normalised return on embedded value (%) (25,5) 4,8(2),(3)
Distributions per share (cents) 164 -
Interim capital reduction 164 -
Final capital reduction n/a n/a
Extraordinary dividend - -
Capital adequacy cover of Liberty Group Limited
(times covered) 2,48 2,49
Long-term insurance operations(4)
Indexed new business (excluding contractual
increases) (Rm) 2 111 2 172
New business margin (%) 1,0 1,9(3)
Net cash inflows/(outflows) (Rm) 584 (1 486)
Asset management
Assets under management (Rbn)(5) 330 352
Net cash (outflows)/inflows (Rm)(6) (2 000) (545)
Health services
Lives under administration (`000) 461 12
December
% change 2008
Liberty Holdings Limited
Earnings
Basic (loss)/earnings per share (cents) (>100) 709,3
BEE normalised headline (loss)/earnings per
share (cents) (>100) 574,6(2)
Embedded value
BEE normalised embedded value per share (R) (15,8) 95,12
BEE normalised return on embedded value (%) (>100) 3,7(2)
Distributions per share (cents) >100 312
Interim capital reduction -
Final capital reduction 291
Extraordinary dividend 21(2)
Capital adequacy cover of the principal
life licence subsidiaries (times covered)
Liberty Group Limited (0,4) 2,66
Capital Alliance Life Limited (19,7) 1,42
Liberty Active Limited (7,9) 1,48
Long-term insurance operations(4)
Indexed new business (excluding contractual
increases) (Rm) (2,8) 4 782
New business margin (%) (47,4) 2,6
Net cash inflows/(outflows) (Rm) >100 (2 861)
Asset management
Assets under management (Rbn)(5) (6,2) 337
Net cash (outflows)/inflows (Rm)(6) (>100) 13 374
Health services
Lives under administration (`000) >100 267
(1) Restated to adjust for the 3:1 share split in 2008 as if it occurred at
the beginning of 2008.
(2) Comparatives disclosed as published for Liberty Group Limited as a
comparable basis to Liberty Holdings Limited in 2009.
(3) Restated on application of revised actuarial practice guidance note 107.
(4) Includes insurance business written under all of the group`s life
licences.
(5) Includes STANLIB, Liberty Africa and Liberty Properties asset management
operations.
(6) Includes STANLIB and Liberty Africa excluding intergroup life fund cash
flows.
Definitions
BEE normalised headline earnings per share, embedded value per share and
return on embedded value
These measures reflect the economic reality of the Black Economic Empowerment
(BEE) transaction as opposed to the required technical accounting treatment
that reflects the BEE transaction as a share buy-back. Dividends received on
the group`s BEE preference shares (which are recognised as an asset for this
purpose) are included in income. Shares in issue relating to the transaction
are reinstated.
Capital Adequacy Cover
Capital Adequacy is the minimum amount by which the Financial Services Board
requires an insurer`s assets to exceed its liabilities. The assets,
liabilities and capital adequacy requirement 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.
Long-term insurance operations - Indexed new business
This is a measure of new business in insurance operations which is calculated
as the sum of twelve months of recurring premium policies and one tenth of
single premium sales.
Long-term insurance operations - New business margin
This is the embedded value of new business in insurance operations expressed
as a percentage of the present value of future expected premiums.
Commentary on results
Operational and strategic update
Economic activity in South Africa has slowed substantially over the past
twelve months and consumers have seen a marked decline in their disposable
income. This has impacted on Liberty Holdings Limited`s (`Liberty` or
`group`) policyholder persistency and mark-to-market positions, with a
consequent negative result on earnings.
Despite the economic challenges, Liberty remains operationally strong. New
business sales and cash flows are satisfactory and management expenses have
been well controlled.
Policyholder persistency
Liberty is experiencing declining policyholder persistency, essentially as a
result of the weaker economy and certain internal business structures and
practices, which are receiving urgent attention. The group is committing
considerable resources to address these matters.
Various operational initiatives have been implemented to arrest the rate of
policy withdrawals in Individual Life, which are producing positive results.
Longer term strategies have been devised and will be implemented within the
next twelve months. The group expects to see the full benefit of the
initiatives over the next twelve to eighteen months.
Management is confident that they will be successful in limiting the loss of
in-force policies and is preparing the business to take maximum advantage of
the next economic upturn.
Mark-to-market investment losses
In line with its board approved risk appetite, Liberty de-risked interest
rate and equity risk in late 2008 and early 2009. The board firmly believes
that this risk mitigation action was necessary as Liberty`s first priority is
to protect policyholders` funds. This has been achieved, as is evident by the
robust capital adequacy level of 2,5 times cover in the group`s main life
licence.
Liberty`s foreign assets form part of its balanced shareholder portfolio and
are also available to fund acquisition opportunities in other African
markets, as and when these are approved. The stronger rand at 30 June
impacted negatively on earnings.
Diversification strategy
Liberty continues to focus on its strategy to be a leading wealth management
company in Africa, and activities in the first half of 2009 have included
progress on the extension of the group`s reach into other Africa geographies
as well as broadening of the group`s product and service offerings.
The group will in the next few months conclude phase two of the group
restructure which entails transferring existing non long-term insurance
legal entities from Liberty Group Limited to direct ownership by Liberty
Holdings Limited. This will allow for optimisation of the group`s capital
structure. Certain of these transactions will require regulatory approval.
No specific Liberty Holdings Limited shareholder approvals are required.
Looking forward, management is committed to reverse the persistency trend and
remain focussed on managing market risk. Protecting policyholder funds and
the strength of the group`s balance sheet remains key in these volatile
times.
The group will continue to execute on the long term strategy of diversifying
in terms of product, services and geography.
Financial performance to 30 June 2009
Overview
The group`s reported BEE normalised headline loss of R1 207 million (2008:
R409 million headline earnings) for the six months to 30 June 2009 is
essentially as a result of three unrelated circumstances. The first is the
estimated R520 million impact of the timing of the group`s actions to reduce
equity market risk in order to protect capital. These transactions were
explained to shareholders in the overview of operations for the first quarter
released on SENS on 15 May 2009. The second relates to the required
strengthening of policyholder withdrawal, paid up and lapse assumptions on
certain blocks of business following detailed actuarial experience
investigations. The combination of negative experience variances and the
strengthening of actuarial assumptions has meant a R685 million expense in
earnings and a decrease to embedded value of R1 719 million. Thirdly,
currency markets remain volatile and the strong rand at 30 June 2009 has
created an estimated R530 million unrealised loss on the group`s foreign
currency investments over the six month period. The group`s BEE normalised
headline loss per share is therefore 421,9 cents (2008: headline earnings of
294,4 cents per share).
The asset management earnings and the other key indicators relating to the
core insurance business are satisfactory in the circumstances. South African
insurance production is down by 2,1%, with indexed new business from
insurance operations declining by 2,8%, although indexed retail sales are
0,8% up on 2008.
The net cash flows of the group`s asset management operations benefited from
strong money market and dividend income fund flows. As anticipated the Public
Investment Corporation (PIC) reduced their mandate with STANLIB by R8,3
billion. Excluding the PIC withdrawal, group net cash inflows were R6,3
billion (2008: net cash outflows R0,5 billion).
Earnings from the group`s South African asset management operations (STANLIB,
Liberty Properties and Fountainhead) are 20,9% lower than last year
reflecting the lower average values of assets under management and reduced
fee income.
Good cost discipline partially offset this effect.
Capital adequacy of the group`s main life licence entity, Liberty Group
Limited, has benefited from the market risk mitigation strategies and despite
the IFRS earnings loss, remains strong at 2,5 times the required cover. The
group`s BEE normalised return on embedded value per share for the six months
is 25,5% negative and the BEE normalised embedded value per share has
decreased by 16,7% to R79,19 from the R95,12 reported at 31 December 2008.
Liberty Health and Liberty Africa continue to progress against their stated
strategies and contributed R9 million loss (after intangible amortisation)
and R14 million earnings respectively to the group result.
Contributions to earnings
30 June 30 June
2009 2008
Rm Rm
South African insurance operations (636) 744
Individual Life excluding market investment
exposures (75) 605
Corporate excluding market investment exposures 36 56
Market risk exposures(1) (597) 83
Shareholder investment returns(1) (650) 1
Income 388 312
Capital (1 038) (311)
Asset management (STANLIB, Liberty Properties
and Fountainhead) 193 244
Diversification initiatives (Liberty Africa and
Liberty Health) 5 (15)
Treasury share adjustment 6
Shareholder expenses and sundry income (169) (149)
Attributed to minority shareholders in Liberty
Group Limited(2) (421)
Preference share dividend (1) (1)
Headline (loss)/earnings (1 258) 409
31 December
% 2008
change Rm
South African insurance operations (>100) 885
Individual Life excluding market investment
exposures (>100) 1 255
Corporate excluding market investment exposures (35,7) 152
Market risk exposures(1) (>100) (522)
Shareholder investment returns(1) (>100) 382
Revenue 24,4 652
Capital (>100) (270)
Asset management (STANLIB, Liberty Properties
and Fountainhead) (20,9) 459
Diversification initiatives (Liberty Africa and
Liberty Health) >100 (1)
Treasury share adjustment (>100) 2
Shareholder expenses and sundry income (13,4) (269)
Attributed to minority shareholders in Liberty
Group Limited(2) >100 (346)
Preference share dividend - (2)
Headline (loss)/earnings (>100) 1 110
(1) Managed by the LibFin business unit.
(2) Prior to the group restructure on 1 December 2008, Liberty Holdings
Limited owned approximately 51% of Liberty Group Limited.
South African long-term insurance (excluding investment market exposures)
Individual Life
Indexed new business (excluding contractual increases) increased by 0,8% to
R1 825 million. Whilst good growth was recorded in risk and entry level
products, individual investment product sales are down 13,6%, reflecting the
current distressed consumer disposable income environment. The new business
embedded value profit margin of 1,4% (31 December 2008: 2,1%) has decreased,
mainly as a result of strengthened withdrawal, paid up and lapse assumptions
and the 175 bps increase in the risk discount rate.
Net cash flows were positive R1 713 million for the period, with lower per
claim values contributing to an 18,3% lower overall claim outflow. Premium
income flows at R11,5 billion were marginally 0,6% lower than 2008.
The increasingly difficult consumer conditions, combined with the impacts of
new commission regulations on investment products from 1 January 2009, which
initially seem to be having the unintended consequence of worsening churn in
risk products, and the increased ability of policyholders to transfer or make
paid up their policies, have contributed to negative persistency experience
variances. This is despite the strengthening of these assumptions at 31
December 2008. Consistent with ongoing improvements in the valuation process,
actuarial experience investigations were conducted for the first time for
half year on the major books of business. In prior years the practice was
only to perform these investigations in the second half of the year. In
accordance with the board approved policy of setting assumptions, the lapse,
paid up and withdrawal rates have consequently been strengthened. This
resulted in a net R685 million earnings strain.
Risk claim experience remains positive and no changes to mortality
assumptions were made at 30 June 2009. Cost control remains effective and no
further strengthening of actuarial assumptions in this regard was required at
the half year.
As a consequence of the persistency strain, the attributable loss is R75
million compared to a R605 million profit in 2008.
Corporate
Corporate, which represents 9,8% of total insurance indexed new business
(excluding contractual increases), experienced a 24,0% decrease in indexed
new business compared to 2008.
Net cash outflows for the half year are R1 162 million (2008: R1 155 million)
and were impacted by further scheme terminations and member withdrawals,
particularly those associated with the small business segment which has
experienced higher levels of liquidations in the current depressed economic
climate.
Corporate earnings, mainly due to higher expenses, are down 35,7% to
R36 million.
Asset management (STANLIB, Liberty Properties and Fountainhead)
STANLIB contributed R159 million (June 2008: R206 million) to the group`s
headline earnings. Operating profit before investment income and taxation is
R207 million which is 27,4% lower than the R285 million achieved for half
year 2008. This is as a consequence of the decline in net service fees earned
off the lower value of assets under management (decrease of 9,1% to R290
billion compared to the R318 billion at 30 June 2008) and lower performance
management fees.
STANLIB net cash outflows for the period were R4,7 billion, including the
loss of R8,3 billion of PIC funds. Money market and dividend income products
attracted strong net inflows of R11,4 billion.
Liberty Properties, which earns development and management fees from managing
the group`s property portfolio, performed relatively well. However due to
slightly higher operating expenses being incurred on various growth
initiatives and timing of recognising development fees, earnings after
taxation decreased by 20,0% to R28 million. Liberty Properties are currently
managing significant extensions to the flagship Eastgate and Sandton City
complexes.
The acquisition of Fountainhead, a 50% joint venture, was effective from 1
April 2008. Attributable earnings amounted to R6 million (R3 million
attributable to the group for the three months ended 30 June 2008).
Investment markets
LibFin was formed in 2008 to manage the group`s balance sheet. Given the
recent volatility of investment markets following the global credit crisis,
LibFin`s initial mandate was to reduce the levels of market risk in order to
lower earnings volatility and strengthen capital. These strategies commenced
during the second half of 2008 and have continued in 2009.
The South African equity market performance as measured by the SWIX index was
4,7% higher than the 31 December 2008 level. However, in the early part of
March 2009 the SWIX had declined by 17,6% (refer graph) reflecting the
ongoing nervousness following the financial crisis that emerged in 2008. As
advised in the overview of operations published via SENS on 15 May 2009, the
group`s equity exposure was reduced in the first quarter as a result of this
sharp fall in markets triggering risk stop loss levels, which resulted in a
one off R520 million loss.
The bond market has been characterised by increasing yields off the low
levels evidenced in the latter part of 2008. The group has substantially
maintained the levels of interest rate protection implemented at the end of
2008. The rebasing of a slightly long position in early 2009 and basis risk
as the bond rate rose above the swap rate, being the difference between the
reference
curves used to value policyholder liabilities and the instruments available
to practically apply hedging, has been net negative to earnings for the six
months.
The currency market was relatively stable until early April when a
combination of renewed foreign investment inflows and general weakness in
major currencies resulted in a significant strengthening of the rand. The
rand at 30 June 2009 ended at R7,73 to the US$ representing a 17,0% increase
over the six months.
The group remained exposed to currency risk on shareholder foreign currency
investments and the stronger rand resulted in unrealised foreign exchange
adjustments of approximately R530 million at 30 June 2009.
REFER TO WEBSITE FOR GRAPHS
Diversification initiatives
Liberty Health
Liberty Health remains on track in its build initiatives particularly into
other African countries. The group acquired a 35% interest in Total Health
Trust Limited, a leading health management organisation in Nigeria, for an
amount of R31 million. Both Liberty Africa and Liberty Health will benefit
from this entry into the Nigerian market.
There has been a successful launch of the Liberty Blue and Optimum Global
medical insurance benefit products aimed at multi nationals operating in
African countries outside of South Africa.
The health operations reflected an R18 million loss (R6 million loss
excluding amortisation of intangible assets) for the half year of which the
group`s share is R9 million. Delays in targeted business acquisitions and
administrative mandates have contributed to the loss. Lives under
administration total 461 000 and lives under software licence fees are 1 192
000 at 30 June 2009.
Liberty Africa
Liberty Africa`s asset management operations continue to enjoy positive net
cash inflows which were R2 720 million for the first six months. Margins in
both the insurance and asset management operations improved resulting in a
group earnings contribution of R14 million against the R2 million in 2008.
The business unit is working on closing certain targeted acquisitions and has
yet to reach critical mass.
Group embedded value
The group`s BEE normalised embedded value per share is R79,19, compared to
R95,12 at 31 December 2008. Embedded value has been affected by the 175 bps
increase in the risk discount rate, the half year loss, the capital reduction
of R832 million paid in lieu of a final 2008 dividend, a reduction in
STANLIB`s entity valuation and the consequences of poorer persistency. The
negative
return on BEE normalised embedded value of 25,5% compares to the published
Liberty Group Limited`s 31 December 2008 positive return of 3,7%.
Capital adequacy cover (CAR)
The capital adequacy cover of the group`s main life licence, Liberty Group
Limited, has decreased marginally from 2,66 at 31 December 2008 to 2,48 at 30
June 2009. This decrease in cover is mainly due to the payment of the 2008
final capital reduction and the year to date loss. After taking into account
the interim shareholder distribution and the expected strategic spend, the
CAR cover is still well above Liberty Group Limited`s historic target of 1,7
times.
The other group life licences` capital adequacy requirement covers remain
adequately capitalised within targeted coverage ratios.
Capital reduction out of share premium in lieu of an interim dividend
In terms of the general authority granted to the directors at the 2009 annual
general meeting and in accordance with the group`s dividend policy, the
directors have approved a capital reduction out of share premium of 164 cents
per ordinary share in lieu of an interim dividend.
The important dates pertaining to the capital reduction of 164 cents per
ordinary share are as follows:
Last date to trade cum capital distribution
on the JSE Friday, 28 August 2009
First trading day ex capital
distribution on the JSE Monday, 31 August 2009
Record date Friday, 4 September 2009
Payment date Monday, 7 September 2009
Share certificates may not be dematerialised or rematerialised between
Monday, 31 August 2009 and Friday, 4 September 2009, both days inclusive.
Where applicable, the capital reduction payment in respect of certificated
shareholders will be transferred electronically to shareholders` bank
accounts on payment date. In the absence of specific mandates, capital
reduction cheques will be posted to shareholders. Shareholders who have
dematerialised their shares will have their accounts with their CSDP or
broker credited on Monday, 7 September 2009.
Prospects
The duration of the challenging business environment and volatile investment
markets remains uncertain. The board is however confident that management is
focussed on the main issues facing the group, being policyholder persistency
and capital management.
The group is well capitalised and committed to its growth strategy.
Bruce Hemphill
Chief Executive
Saki Macozoma
Chairman
5 August 2009
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
ISIN code: ZAE0000127148
Transfer Secretaries
Computershare Investor Services (Pty) Limited
(Registration number: 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Telephone +27 11 370 5000
Sponsor
Merrill Lynch South Africa (Pty) Limited
These results are available at www.liberty.co.za
Accounting policies and restatements
The results have been prepared in accordance with International Financial
Reporting Standards (IFRS) including full compliance with IAS 34 Interim
Financial Reporting.
The accounting policies are consistent with those adopted in the previous
year with the exception of investment property under development. There were
various amendments to IFRS standards as part of the IASB`s annual
improvements project, which are effective for periods beginning on or after 1
January 2009. The only amendment which is applicable to the group is that
investment property under development for future use now falls within the
scope of IAS 40 Investment Property, and no longer IAS 16 Property, Plant and
Equipment.
Consequently the measurement of investment property under development changes
from cost to fair value at the measurement date. This amendment has
prospective application.
The group early adopted IFRS 8 Operating Segments for the year ended 31
December 2008. The 30 June 2008 segment report has been restated to reflect
the segments as reported at year end.
As detailed in the annual financial statements for the year ended 31 December
2008, the group was restructured in the last quarter of 2008. As part of the
restructure Liberty Holdings Limited`s ordinary shares were split 3:1. The 30
June 2008 shares in issue and earnings per share figures have been restated
to adjust for the 3:1 share split as if it occurred at the beginning of 2008.
Neither the restatements nor the change in accounting policy have any impact
on earnings or equity as reported for the period under review.
Statement of financial position
as at 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Assets
Equipment and owner-occupied properties
under development 866 538 946
Owner-occupied properties 1 303 1 272 1 282
Investment properties 17 695 15 405 16 771
Intangible assets 1 333 1 047 1 444
Defined benefit pension fund
employer surplus 139 165 144
Deferred acquisition costs 345 347 344
Interests in joint ventures 550 493 505
Reinsurance assets 792 742 827
Operating leases - accrued income 973 1 080 1 067
Pledged assets 1 510 5 448 1 622
Interest in associates - mutual funds 4 365 10 121 4 726
Financial instruments 159 800 170 804 170 968
Deferred taxation 121 24 131
Prepayments, insurance and other
receivables 5 480 3 941 5 884
Cash and cash equivalents 6 784 3 739 5 112
Total assets 202 056 215 166 211 773
Liabilities
Policyholders` liabilities 168 733 180 493 172 069
Insurance contracts 119 256 126 846 122 091
Investment contracts with
discretionary participation features 2 519 3 233 2 648
Financial liabilities under
investment contracts 46 958 50 414 47 330
Financial liabilities at amortised
cost 2 278 2 267 2 430
Third party financial liabilities
arising on consolidation of mutual
funds 8 143 8 326 10 481
Employee benefits 548 468 642
Deferred revenue 117 105 114
Deferred taxation 2 314 3 246 2 897
Provisions 50 37 64
Operating leases - accrued expense 201 227 215
Derivative financial instruments 707 113 77
Insurance and other payables 6 475 6 153 8 210
Current taxation 574 886 748
Total liabilities 190 140 202 321 197 947
Equity
Ordinary shareholders` interest 9 660 5 433 11 633
Share capital 26 14 26
Share premium 8 442 903 9 276
Retained surplus 1 996 5 018 3 166
Other reserves (804) (502) (835)
Minority interests 2 256 7 412 2 193
Total equity 11 916 12 845 13 826
Total equity and liabilities 202 056 215 166 211 773
Statement of comprehensive income
for the six months ended 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Revenue
Insurance premium revenue 11 226 11 015 22 986
Reinsurance premiums (302) (362) (727)
Net insurance premiums 10 924 10 653 22 259
Service fee income from
policyholders` investment contracts 307 403 799
Investment income 6 424 5 532 13 552
Hotel operations sales 329 346 714
Investment losses (9 052) (4 644) (15 476)
Fee revenue 676 552 1 144
Total revenue 9 608 12 842 22 992
Claims and policyholders`
benefits under insurance contracts (9 824) (11 757) (23 596)
Insurance claims recovered from
reinsurers 269 240 535
Change in policyholder
liabilities under insurance
contracts 2 929 4 748 10 173
Insurance contracts 2 835 4 706 9 461
Investment contracts with
discretionary participation features 129 120 705
Applicable to reinsurers (35) (78) 7
Fair value adjustment to
policyholders` liabilities under
investment contracts (724) (218) 1 025
Fair value adjustment on third
party mutual fund interests 716 (286) (134)
Acquisition costs associated
with insurance and investment
contracts (1 409) (1 263) (2 822)
General marketing and
administration expenses (2 492) (2 432) (5 151)
Finance costs (176) (161) (356)
Preference dividend in subsidiary (173) (172) (308)
Equity accounted earnings from
joint ventures 19 16 40
(Loss)/profit before taxation (1 257) 1 557 2 398
Taxation 73 (604) (607)
Total (loss)/earnings (1 184) 953 1 791
Other comprehensive income 3 32 (20)
Owner-occupied properties -
fair value adjustment 20 22 26
Foreign currency translation (15) 17 (40)
Income tax relating to
components of other
comprehensive income (2) (7) (6)
Total comprehensive (loss)/income (1 181) 985 1 771
Total (loss)/earnings
attributable to:
Equity holders (1 257) 410 1 112
Minority interest 73 543 679
(1 184) 953 1 791
Total comprehensive
(loss)/income attributable to:
Equity holders (1 251) 425 1 072
Minority interest 70 560 699
(1 181) 985 1 771
Restated(1)
Cents Cents Cents
(Loss)/earnings per share
Basic (483,3) 294,4 709,3
Fully diluted (472,2) 294,4 709,3
Distributions per share(2) 291,0 238,3 259,3
(1) Restated to adjust for the 3:1 share split as if it occurred at the
beginning of 2008.
(2) Distributions paid during the period.
Headline earnings and earnings per share
for the six months ended 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Reconciliation of total earnings
to headline earnings attributable
to ordinary equity holders
Total (loss)/earnings
attributable to equity holders (1 257) 410 1 112
Adjustments
Preference share dividend (1) (1) (2)
Total and headline (loss)/earnings
attributable to ordinary equity
holders(1) (1 258) 409 1 110
Net income earned on BEE
preference shares 51 n/a(3)
n/a(3)
BEE normalised headline loss
attributable to ordinary Restated(2)
equity holders (1 207) n/a(3)
n/a(3)
Weighted average number of shares
in issue (`000) 260 223 138 968 156 530
BEE normalised weighted average
number of shares in issue (`000) 286 019 n/a(3)
n/a(3)
Cents Cents Cents
(Loss)/earnings per share
attributable to ordinary equity
holders
Basic (483,3) 294,4 709,3
Headline (483,3) 294,4 709,3
BEE normalised headline (421,9) n/a(3)
n/a(3)
Fully diluted
Basic (472,2) 294,4 683,3
Headline (472,2) 294,4 683,3
(1) Liberty applies the long-term insurance industry exemption contained in
circular 8/2007 which allows for no headline earnings adjustment in
respect of realised or unrealised remeasurements of investment properties.
(2) 2008 shares in issue and earnings per share figures have been restated to
adjust for the 3:1 share split in 2008 as if it occurred at the beginning of
2008.
(3) BEE normalised headline earnings or earnings per share were not provided
at 31 December 2008. The BEE normalised measure only became relevant for
Liberty Holdings Limited for a full reporting period at 30 June 2009
following the group restructure which was effective from 1 December 2008.
Condensed statement of changes in shareholders` funds
for the six months ended 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Balance of ordinary shareholders`
funds at 1 January 11 633 5 288 5 288
Total comprehensive income (1 251) 425 1 072
Ordinary dividends (341) (372)
Preference dividend (1) (1) (2)
Capital reduction (832)
Share buy-back (10)
Black Economic Empowerment transaction 76 30 57
Subscription for shares 6 8 395
Section 311 Liberty transaction costs 2 (10)
Excess purchase price over NAV of
Liberty Group Limited (3 145)
Share-based payments 37 17 31
Treasury shares 14 324
Change in effective ownership 1 (5)
Ordinary shareholders` funds 9 660 5 433 11 633
Balance on minority interests at 1
January 2 193 7 203 7 203
Total comprehensive income 70 560 699
Sale of Nelson Mandela Square (230)
Issue of shares in subsidiary 50
Capital reduction in subsidiary (369) (368)
Minority share of subsidiary dividend (230)
Black Economic Empowerment
transaction 30 56
Unincorporated property partnerships (7) (49) (90)
Change in effective ownership (1) 5
Share-based payments 16 30
Treasury shares 22 318
Liberty Group Limited minorities
acquired by ordinary shareholders (5 250)
Minority interests 2 256 7 412 2 193
Total shareholders` funds 11 916 12 845 13 826
Condensed statement of cash flows
for the six months ended 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Operating activities 1 933 (622) 1 907
Investing activities 686 152 (1 702)
Financing activities (947) (479) 203
Net increase/(decrease) in cash and
cash equivalents 1 672 (949) 408
Cash and cash equivalents at
beginning of period 5 112 4 688 4 688
Cash and cash equivalents acquired
through business acquisition 16
Cash and cash equivalents at end of
period 6 784 3 739 5 112
Condensed segment information
The unaudited segment results for the six months ended 30 June 2009 are as
follows:
Asset
Long-term insurance manage- Health
Rm Individual Corporate ment services
Segment revenue 9 857 3 738 804 177
(Loss)/profit before
taxation (625) (59) 276 (30)
Taxation 50 16 (82) 12
Total (loss)/profit (575) (43) 194 (18)
Other comprehensive
income/(loss) 16 3
Total comprehensive
(loss)/profit (559) (40) 194 (18)
Attributable to:
Minorities (2) (5) 9
Equity holders (561) (40) 189 (9)
Reconciliation of total
(loss)/earnings to
headline (loss)/
earnings attributable
to equity holders
Total (loss)/profit (575) (43) 194 (18)
Attributable (to)/from
minorities (2) (5) 9
Preference dividend
Headline loss (577) (43) 189 (9)
Net income earned on
BEE preference shares
BEE normalised
headline (loss)/ earnings (577) (43) 189 (9)
Reporting
adjust- IFRS
Rm Other Total ments(1) reported
Segment revenue (889) 13 687 (4 079) 9 608
(Loss)/profit before
taxation (894) (1 332) 75 (1 257)
Taxation 77 73 73
Total (loss)/profit (817) (1 259) 75 (1 184)
Other comprehensive
income/(loss) (16) 3 3
Total comprehensive
(loss)/profit (833) (1 256) 75 (1 181)
Attributable to:
Minorities 3 5 (75) (70)
Equity holders (830) (1 251) - (1 251)
Reconciliation of total
(loss)/earnings to
headline (loss)/
earnings attributable
to equity holders
Total (loss)/profit (817) (1 259) 75 (1 184)
Attributable (to)/from
minorities 2 (75) (73)
Preference dividend (1) (1) (1)
Headline loss (818) (1 258) - (1 258)
Net income earned on
BEE preference shares 51 51 51
BEE normalised
headline (loss)/
earnings (767) (1 207) (1 207)
(1) Reporting adjustments include the consolidation of unincorporated
property partnerships, the consolidation of third party mutual fund
liabilities, providing additional deferred taxation on investment property
revaluations, the classification of long-term insurance into defined IFRS
`investment` and `insurance` products, and the elimination of inter-group
transactions. The effect of the classification of long-term investment
products as IFRS defined `investment` contracts in the reporting adjustments
column is to recognize premiums on investment contracts as revenue in the
long-term insurance segment.
Unaudited for the six months ended 30 June 2008 - restated
Asset
Long-term insurance manage- Health
Rm Individual Corporate ment services
Segment revenue 11 728 3 593 786 7
Profit before taxation 1 193 63 343 (17)
Taxation (489) (14) (103)
Total earnings 704 49 240 (17)
Other comprehensive income 13 2
Total comprehensive income 717 51 240 (17)
Attributable to:
Minorities (351) (25) (121) 8
Equity holders 366 26 119 (9)
Reconciliation of total
earnings to headline
earnings attributable
to equity holders
Total earnings 704 49 240 (17)
Attributable (to)/from
minorities (344) (24) (119) 8
Preference dividend
Headline earnings 360 25 121 (9)
Reporting
adjust- IFRS
Rm Other Total ments(1) reported
Segment revenue (32) 16 082 (3 240) 12 842
Profit before taxation (142) 1 440 117 1 557
Taxation 2 (604) (604)
Total earnings (140) 836 117 953
Other comprehensive
income 17 32 32
Total comprehensive
income (123) 868 117 985
Attributable to:
Minorities 46 (443) (117) (560)
Equity holders (77) 425 - 425
Reconciliation of total
earnings to headline
earnings attributable
to equity holders
Total earnings (140) 836 117 953
Attributable (to)/from
minorities 53 (426) (117) (543)
Preference dividend (1) (1) (1)
Headline earnings (88) 409 - 409
(1) Reporting adjustments include the consolidation of unincorporated
property partnerships, the consolidation of third party mutual fund
liabilities, providing additional deferred taxation on investment property
revaluations, the classification of long-term insurance into defined IFRS
`investment` and `insurance` products, and the elimination of inter-group
transactions. The effect of the classification of long-term investment
products as IFRS defined `investment` contracts in the reporting adjustments
column is to recognize premiums on investment contracts as revenue in the
long-term insurance segment.
Audited for the year ended 31 December 2008
Asset
Long-term insurance manage- Health
Rm Individual Corporate ment services
Segment revenue 22 304 5 928 1 699 57
Segment profit before
taxation 1 143 217 649 (65)
Taxation (399) (61) (198) 46
Total earnings 744 156 451 (19)
Other comprehensive income (24) 2
Total comprehensive income 720 158 451 (19)
Attributable to:
Minorities (187) (38) (114) 19
Equity holders 533 120 337 -
Reconciliation of total
earnings to headline
earnings attributable
to equity holders
Total earnings 744 156 451 (19)
Attributable (to)/from
minorities (178) (37) (114) 19
Preference dividend
Headline earnings 566 119 337 -
Reporting
adjust- IFRS
Rm Other Total ments(1) reported
Segment revenue 625 30 613 (7 621) 22 992
Segment profit before
taxation 88 2 032 366 2 398
Taxation 30 (582) (25) (607)
Total earnings 118 1 450 341 1 791
Other comprehensive income 2 (20) (20)
Total comprehensive income 120 1 430 341 1 771
Attributable to:
Minorities (38) (358) (341) (699)
Equity holders 82 1 072 - 1 072
Reconciliation of total
earnings to headline
earnings attributable
to equity holders
Total earnings 118 1 450 341 1 791
Attributable (to)/from
minorities (28) (338) (341) (679)
Preference dividend (2) (2) (2)
Headline earnings 88 1 110 - 1 110
(1) Reporting adjustments include the consolidation of unincorporated
property partnerships, the consolidation of third party mutual fund
liabilities, providing additional deferred taxation on investment property
revaluations, the classification of long-term insurance into defined IFRS
`investment` and `insurance` products, and the elimination of inter-group
transactions. The effect of the classification of long-term investment
products as IFRS defined `investment` contracts in the reporting adjustments
column is to recognize premiums on investment contracts as revenue in the
long-term insurance segment.
Group embedded value report
1. Introduction
The embedded value is a determination of the economic value of a life
insurance company before making allowance for any value which may be
attributed to future new business. The embedded value and value of new
business have been prepared in accordance with Professional Guidance Note
(PGN) 107, the guidance note on embedded values and value of new business
issued by the Actuarial Society of South Africa.
2. Group structure
The structure of the group changed with effect from 1 December 2008. Prior to
that date Liberty Holdings Limited housed Standard Bank Limited`s controlling
interest in Liberty Group Limited. Both Liberty Holdings Limited and Liberty
Group Limited were listed on the Johannesburg Stock Exchange (JSE). The
restructure resulted in Liberty Group Limited becoming a wholly owned
subsidiary of Liberty Holdings Limited.
In order to enhance comparability several tables in this section (as
indicated) have the previously disclosed Liberty Group Limited embedded value
information.
3. Description of embedded value
The current version of PGN 107 came into force for all financial year ends on
or after 31 December 2008. PGN 107 governs the way in which embedded values
are reported.
The embedded value consists of:
- The free surplus attributed to the covered business;
- Plus the required capital identified to support the in-force covered
business;
- Plus the present value of future shareholder cash flows from in-force
covered
business (PVIF); and
- Less the cost of required capital.
The PVIF is the discounted value of the projected stream of after tax
shareholder profits arising from existing in-force covered business. These
shareholder profits arise from the release of margins under the statutory
basis of valuing liabilities. This value is reduced by the present value of
after tax future shareholder recurring and non-recurring expenses. Covered
business is defined as business regulated by the FSB as long-term insurance
business. This business comprises life assurance policies, investment
policies (smooth bonus, reversionary bonus, market-related and linked),
annuities and group pensions business.
For reversionary and smoothed bonus business, the value of in-force covered
business has been calculated assuming that bonuses are changed over time so
that the full amount of the bonus stabilisation reserves are distributed to
policyholders over the lifetime of the in-force policies.
The required capital is defined as the level of capital that is restricted
from distribution to shareholders. This comprises the statutory CAR
calculated in accordance with PGN 104 plus any additional capital considered
appropriate by the board given the risks in the business. For Liberty Group
Limited, required capital is calculated as 1,7 x CAR. The cost of required
capital is the present value, at the risk discount rate, of the projected
release of the required capital allowing for investment returns on the assets
supporting the projected required capital.
The value of new business written over the period is the present value at the
point of sale of the projected stream of after tax profits from that
business, reduced by the cost of required capital. New business is defined as
covered business arising from the sale of new policies and once off premium
increases in respect of in-force covered business during the period. Only
policies where at least one premium has been received are included. This
definition is consistent with that used in the financial statements.
The value of new business has been calculated on the closing assumptions.
Investment yields at the point of sale have been used for new fixed annuities
and Guaranteed Capital Bonds; for all other business the investment yields at
the end of the period have been used.
No adjustment has been made for the discounting of tax provisions in the
embedded value.
In the tables below, numbers as at 30 June 2008 have been restated from the
numbers previously published for the impact of moving to the current version
of the actuarial guidance.
4. Liberty Holdings Limited
4.1 Embedded value and embedded value per share
30 June 2009 31 December 2008
Unaudited Audited
BEE BEE
Unaudited normalised Audited normalised
Embedded embedded Embedded embedded
value value value value
Rm Rm Rm Rm
Risk discount rate 12,00% 12,00% 10,25% 10,25%
Net worth 9 519 10 678 11 860 13 019
Ordinary shareholders`
funds on published basis 9 660 10 819 11 633 12 792
Adjustment of ordinary
shareholders` funds
from published
basis(a) (2 759) (2 759) (3 012) (3 012)
Financial service
subsidiaries fair value
adjustment(b) 3 433 3 433 4 107 4 107
Adjustment for
carrying value of
in-force business
acquired(c) (612) (612) (683) (683)
Allowance for fair
value of share
options/rights (203) (203) (185) (185)
Net value of life
business in-force 11 972 11 972 14 188 14 188
Value of life
business in-force 12 698 12 698 14 640 14 640
Cost of required
capital (726) (726) (452) (452)
Embedded value 21 491 22 650 26 048 27 207
Number of applicable
shares (`000) 260 220 286 016 260 226 286 022
Embedded value per
ordinary share (R) 82,59 79,19 100,10 95,12
4.2 Embedded value and value of new business
Value of new business and new business margins
Restated(1)
Unaudited unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Gross value of new business 151 288 763
Cost of required capital (29) (39) (39)
Net value of new business written
in the period 122 249 724
Individual 116 229 701
Corporate 6 20 23
Indexed new business excluding
natural increases 2 111 2 172 4 782
Present value of future expected
premiums 12 075 12 964 28 180
New business margin 1,0% 1,9% 2,6%
(1) Refer to notes (d), (e) and (f) in section 4.5 for details of the
restatement.
The value of new business is the value at the point of sale derived from the
new business premium income net of contractual increases. The new business
margin is the value of new business (less the cost of required capital) as a
percentage of the present value of future expected premiums.
4.3 Embedded value (loss)/profit
The embedded value (loss)/profit is equal to the change in the embedded value
over the period increased by any dividends paid, capital reductions or share
buy-backs made during the period and decreased by any capital raised during
the period. The embedded value (loss)/profit provides a measure of the
group`s financial value added over the period.
Embedded value
Restated(1) Audited
Liberty Liberty Liberty
Holdings Group Group
Limited Limited Limited
30 June 30 June 31 December
30 June 2009 and 2008 2009 2008 2008
Unaudited Rm Rm Rm
Embedded value at the end
of the period 21 491 25 991 25 889
Less capital raised (6)
Plus impact of share buy-backs 10
Less share options/rights
exercised (8) (18)
Plus net capital reduction paid 757 694 694
Plus dividends paid 412
Less embedded value at the
beginning of the year (26 048) (26 091) (26 091)
Embedded value (loss)/profit (3 796) 586 886
Annualised return on
embedded value (27,0%) 4,5% 3,4%
BEE normalised
Restated(1) Audited
Liberty Liberty Liberty
Holdings Group Group
Limited Limited Limited
30 June 30 June 31 December
30 June 2009 and 2008 2009 2008 2008
Unaudited Rm Rm Rm
Embedded value at the end
of the period 22 650 27 150 27 048
Less capital raised (6)
Plus impact of share buy-backs 10
Less share options/rights
exercised (8) (18)
Plus net capital reduction paid 832 754 754
Plus dividends paid 466
Less embedded value at the
beginning of the year (27 207) (27 250) (27 250)
Embedded value (loss)/profit (3 721) 646 1 000
Annualised return on
embedded value (25,5%) 4,8% 3,7%
(1) Refer to notes (d), (e) and (f) in section 4.5 for details of the
restatement.
4.4 Analysis of embedded value (loss)/profit
An analysis of the components of the embedded value (loss)/profit for the six
months ended 30 June 2009 is summarised below.
Value of
in-force Cost of
covered required Embedded
Net worth business capital value
Unaudited Rm Rm Rm Rm
Embedded value loss for
the period
Embedded value at the end
of the period 9 519 12 698 (726) 21 491
Less capital raised (6) (6)
Plus impact of share buy-backs 10 10
Plus net capital
reduction paid 757 757
Embedded value at the
beginning of the period (11 860) (14 640) 452 (26 048)
Embedded value loss (1 580) (1 942) (274) (3 796)
Components of embedded
value profits
Value of new business
written in the period (559) 710 (29) 122
Expected return on value
of life business(g) 699 (23) 676
Expected net of tax
profit transfer to net worth 924 (948) 24 -
Operating experience
variances(j) 7 (264) 19 (238)
Operating assumption
changes(k) (275) (1 470) (1) (1 746)
Embedded value loss from
operations 97 (1 273) (10) (1 186)
Investment return on net
worth (1 211) (1 211)
Investment variances (239) (298) 22 (515)
Changes in economic
assumptions(l) (236) (335) (286) (857)
Changes in modelling
methodology 28 (36) (8)
Change in allowance for
fair value of share
options/rights(m) (19) (19)
Total embedded value loss (1 580) (1 942) (274) (3 796)
4.5 Bases, assumptions and additional information
a) The amounts of R2 759 million and R3 012 million, reflected as the
adjustment of shareholders` funds from the published basis, represent the
change in these assets as a result of moving from a published valuation
basis to the statutory valuation method. This is largely due to the
elimination of certain negative rand reserves on the statutory valuation
basis. The reduction in net worth results in a corresponding increase in
the value of in-force.
b) The value of financial service subsidiaries is calculated for embedded
value purposes at a multiple of net after-tax earnings. The increase from
the published value is shown as the "financial service subsidiaries fair
value adjustment".
This adjustment consists of the following:
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Liberty Group Properties (Proprietary)
Limited 476 500 504
STANLIB Limited 2 957 3 836 3 603
3 433 4 336 4 107
For STANLIB Limited a multiple of 10 is consistently used, less the embedded
value of its life business which has been included in the value of life
business in-force. For Liberty Group Properties (Proprietary) Limited a
multiple of 10 is consistently used.
c) The carrying value of business acquired (analysed below) has been
deducted from shareholders` funds in order to avoid double counting. For
embedded value purposes the value in respect of this is included in the
net value of life business in-force.
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Investec Employee Benefits (41) (65) (58)
Capital Alliance Holdings Limited (CAHL) (540) (639) (590)
Business previously acquired by CAHL (31) (37) (35)
(612) (741) (683)
d) Future investment returns on the major asset classes were set with
reference to the market yield on medium-term South African government stock.
The investment returns used are:
Investment return p.a. (%)
Restated(1)
30 June 30 June 31 December
2009 2008 2008
Government stock 9,25 11,00 7,50
Equities 12,75 14,50 11,00
Property 10,25 12,00 8,50
Cash 7,75 9,50 6,00
e) The risk discount rate has been
set equal to the risk free rate plus
80% of the equity risk premium 12,00 13,50 10,25
f) Maintenance expense inflation
rate 6,25 7,50 4,50
(1) Assumptions as at 30 June 2008 have been restated from the numbers
previously published for the impact of moving to the latest version of PGN
107.
g) The expected return on the value of life business is obtained by applying
the previous year`s discount rate to the value of life business in-force at
the
beginning of the year and the current year`s discount rate for a quarter of a
year to the value of new business.
h) Taxation has been allowed for at rates and on bases applicable to section
29A of the Income Tax Act. Full taxation relief on expenses to the extent
permitted was assumed. Capital gains taxation has been taken into account
in the embedded value. Allowance has been made for future secondary taxation
on companies at 10%.
No allowance has been made for the likely replacement of STC
with a withholding tax on shareholders.
i) Other bases, bonus rates and assumptions:
Parameters reflect best estimates of future experience, consistent with the
valuation bases used by the statutory actuaries, excluding any compulsory or
discretionary margins. However, in contrast to the assumptions in the
valuation bases, the embedded value does make allowance for automatic premium
and benefit increases.
j) Operating experience variances consist of the combined affect on net worth
and value of in-force of operating experience proving different from that
anticipated at the prior year end.
The net 2009 operating experience variance of negative R238 million is mainly
made up of three principal components being a positive variance of R168
million in respect of mortality experience, offset by a negative variance of
R311 million arising from mainly lapses, paid up and surrenders and a
negative R40 million of non-recurring expenses.
Long-term assumptions have been strengthened in line with experience
investigations.
k) Operating assumption changes of R1 746 million comprise:
Rm
Shareholder expenses (244)
Withdrawal, paid up and lapses (1 408)
Other (94)
(1 746)
l) The amount of R857 million shown for changes in economic assumptions
arises from the change to a higher level of economic assumptions.
m) The amount of R19 million in respect of the change in the fair value of
share options/rights arises from the change in the number of shares under
option/share rights and the decrease in the market value of Liberty Holdings
Limited share price over the reporting period.
n) The assets backing the required capital are assumed to be 60% equities,
25% preference shares, 10% cash and 5% gilts.
New business
for the six months ended 30 June 2009
30 June 30 June 31 December
2009 2008 2008
Unaudited Rm Rm Rm
Insurance operations(1)
Individual 6 565 6 956 14 911
Single 5 178 5 616 11 891
Recurring 1 387 1 340 3 020
Corporate 722 1 013 1 984
Single 573 824 1 567
Recurring 149 189 417
Total new business 7 287 7 969 16 895
Single 5 751 6 440 13 458
Recurring 1 536 1 529 3 437
Indexed new business 2 111 2 172 4 782
Asset management operations
Total STANLIB sales excluding money
market(2) 17 741 21 280 42 880
Retail sales excluding money market 15 863 18 245 37 551
Institutional sales excluding money
market 1 878 3 035 5 329
Money market 55 938 40 781 95 266
Total STANLIB sales 73 679 62 061 138 146
Total Liberty Africa sales excluding
money market(2) 4 762 5 473 14 695
Retail sales excluding money market 174 2 177 2 954
Institutional sales excluding money
market 4 588 3 296 11 741
Money market 2 931 2 125 4 809
Total Liberty Africa sales(3) 7 693 7 598 19 504
Total asset management sales 81 372 69 659 157 650
(1) Includes Liberty Africa.
(2) Excludes intercompany life fund sales.
(3) Liberty group owns less than 100% of the various entities that make up
Liberty Africa. Sales information is recorded at 100% and is not adjusted for
proportional legal ownership.
Net cash (outflows)/inflows
for the six months ended 30 June 2009
30 June 30 June 31 December
2009 2008 2008
Unaudited Rm Rm Rm
Insurance operations(1)
Individual 1 746 (331) 458
Inflows and premiums 11 592 11 665 24 387
Claims and benefits (9 846) (11 996) (23 929)
Corporate (1 162) (1 155) (3 319)
Inflows and premiums 3 261 3 316 6 959
Claims and benefits (4 423) (4 471) (10 278)
Net cash inflows/(outflows) from
insurance operations 584 (1 486) (2 861)
Asset management
STANLIB before money market (13 387) (10 137) (14 157)
Retail net cash inflows/(outflows) 3 656 (3 872) (3 830)
Institutional net cash outflows (17 043) (6 265) (10 327)
Money market inflows 8 667 7 083 19 272
Net STANLIB cash (outflows)/inflows (4 720) (3 054) 5 115
Liberty Africa before money market 2 052 2 715 7 468
Retail net cash inflows 85 1 962 2 046
Institutional net cash inflows 1 967 753 5 422
Money market inflows/(outflows) 668 (206) 791
Net Liberty Africa inflows(2) 2 720 2 509 8 259
Net cash (outflows)/inflows from
asset management (2 000) (545) 13 374
Total net cash (outflows)/inflows (1 416) (2 031) 10 513
(1) Includes Liberty Africa.
(2) Liberty group owns less than 100% of the various entities that make up
Liberty Africa. The cash flow information is recorded at 100% and is not
adjusted for proportional legal ownership.
Assets under management (AUM)
for the six months ended 30 June 2009
30 June 30 June 31 December
2009 2008 2008
Unaudited Rbn Rbn Rbn
Life funds 115 142 111
Segregated funds 45 69 62
Unit trusts (including money market) 113 83 109
Linked Investment and structured
products 37 40 36
Properties 20 18 19
Total assets under management(1) 330 352 337
STANLIB 290 318 299
Liberty Africa 20 16 19
Liberty Properties 20 18 19
330 352 337
(1) Includes funds under administration.
Analysis of ordinary shareholders` funds invested
for the six months ended 30 June 2009
Group
funds invested
30 June 31 Dec
2009 2008
Unaudited Rm Rm
Ordinary shareholders` interests
Analysis of shareholders` interests:
South African insurance operations 612 681
Insurance operating surplus
Present value of in-force business 612 681
Liberty Active preference dividend
Working capital charge(1)
Asset management operations 521 576
Liberty Properties 74 46
STANLIB 254 343
Fountainhead 193 187
Diversification initiatives 391 321
Liberty Africa 137 87
Liberty Health 254 234
Shareholder investment returns 8 136 10 055
Financing of South African
insurance operations (1 353) (314)
Fixed assets and working capital(1) 647 1 686
Callable capital bonds (2 000) (2 000)
Investment portfolios 9 489 10 369
Listed equities 2 536 1 934
Equity hedges (505)
Interest bearing deposit instruments 4 809 4 831
Preference shares 1 340 1 323
Mutual funds 760 1 788
Share of pooled portfolios 275 285
Unlisted investments 274 208
Related taxation
Capital gains taxation on shareholder
specific assets
Net investment (losses)/gains
Shareholder expenses and sundry income
Administration expenses -
shareholder allocation
Sundry income - other operations
Secondary tax on companies
Related taxation
Treasury shares adjustment
Preference share dividend
Attributed to minority shareholders
in Liberty Group
Headline (loss)/earnings
Preference share dividend
Liberty Holdings shareholders`
funds/total (loss)/earnings 9 660 11 633
Contribution
to earnings
30 June 31 Dec
2009 2008
Unaudited Rm Rm
Ordinary shareholders` interests
Analysis of shareholders` interests:
South African insurance operations (636) 885
Insurance operating surplus (274) 1 511
Present value of in-force business (69) (118)
Liberty Active preference dividend (173) (308)
Working capital charge(1) (120) (200)
Asset management operations 193 459
Liberty Properties 28 58
STANLIB 159 395
Fountainhead 6 6
Diversification initiatives 5 (1)
Liberty Africa 14 (1)
Liberty Health (9)
Shareholder investment returns (650) 382
Financing of South African
insurance operations 31 21
Fixed assets and working capital(1) 120 200
Callable capital bonds (89) (179)
Investment portfolios 405 752
Listed equities 61 92
Equity hedges
Interest bearing deposit instruments 218 433
Preference shares 64 108
Mutual funds 24 38
Share of pooled portfolios 33 76
Unlisted investments 5 5
Related taxation (48) (121)
Capital gains taxation on shareholder
specific assets
Net investment (losses)/gains (1 038) (270)
Shareholder expenses and sundry
income (169) (269)
Administration expenses -
shareholder allocation (134) (296)
Sundry income - other operations (3) 16
Secondary tax on companies (69) (63)
Related taxation 37 74
Treasury shares adjustment 2
Preference share dividend (1) (2)
Attributed to minority shareholders
in Liberty Group (346)
Headline (loss)/earnings (1 258) 1 110
Preference share dividend 1 2
Liberty Holdings shareholders`
funds/total (loss)/earnings (1 257) 1 112
Capital
investment
(losses)/gains
30 June 31 Dec
2009 2008
Unaudited Rm Rm
Ordinary shareholders` interests
Analysis of shareholders` interests:
South African insurance operations
Insurance operating surplus
Present value of in-force business
Liberty Active preference dividend
Working capital charge(1)
Asset management operations
Liberty Properties
STANLIB
Fountainhead
Diversification initiatives
Liberty Africa
Liberty Health
Shareholder investment returns - -
Financing of South African
insurance operations
Fixed assets and working capital(1)
Callable capital bonds
Investment portfolios (1 192) (373)
Listed equities (63) (633)
Equity hedges (716)
Interest bearing deposit instruments (424) 113
Preference shares (1) (18)
Mutual funds 14 101
Share of pooled portfolios 15 (89)
Unlisted investments (17) 153
Related taxation 18 42
Capital gains taxation on shareholder
specific assets 136 61
Net investment (losses)/gains 1 038 270
Shareholder expenses and sundry
income
Administration expenses -
shareholder allocation
Sundry income - other operations
Secondary tax on companies
Related taxation
Treasury shares adjustment
Preference share dividend
Attributed to minority shareholders
in Liberty Group
Headline (loss)/earnings
Preference share dividend
Liberty Holdings shareholders`
funds/total (loss)/earnings
(1) With effect from 1 July 2005 Liberty Group Limited established a working
capital funding loan between insurance operations and shareholder assets,
subsequently supported by the callable capital bonds issue. Inter-divisional
interest is charged at 8,77% nacm which is equivalent to the callable capital
bond`s interest rate.
Capital commitments
as at 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 December
2009 2008 2008
Rm Rm Rm
Capital commitments 3 922 1 228 3 843
Business acquisitions(1) 423 263
194
Equipment 310 302 391
Investment and owner-occupied
property 3 189 663 3 258
Under contracts 2 654 566 1 767
Authorised by the directors but not
contracted 1 268 662 2 076
3 922 1 228 3 843
Funding for the 30 June 2009 commitments will be from shareholders` funds and
where applicable with proportionate recovery of R475 million from minority
interests. Capital commitments in respect of investment and owner-occupied
property and a portion of equipment (R60 million) is intended to be used to
match policyholder liabilities.
(1) The board has approved an allocated amount towards possible business
acquisitions related to its stated strategy of broadening the group`s
financial services offerings.
Related parties
as at 30 June 2009
The nature of the related party transactions is consistent with those
transactions described in note 39 to the 31 December 2008 annual financial
statements.
Investments in ordinary shares held by subsidiaries of Liberty Holdings
Limited in the group`s holding company are as follows:
Number Market value Ownership
`000 Rm %
Standard Bank Group Limited 34 259 3 039 2,20
Retirement benefit obligations
as at 30 June 2009
Post-retirement medical benefit
The group operates an unfunded post-retirement medical aid benefit for
employees who joined the group prior to 1998.
As at 30 June 2009, the Liberty post-retirement medical aid benefit liability
was R343 million (31 December 2008: R344 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.
Date: 06/08/2009 07:05:08 Produced by the JSE SENS Department.
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