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LBH
LBH
LBH - Liberty Holdings Limited - Interim results presentation for the six months
ended 30 June 2010
Liberty Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1968/002095/06)
JSE code: LBH
ISIN code: ZAE0000127148
("Liberty" or "Company" or "Group")
Financial results
Interim results presentation
For the six months ended 30 June 2010
Financial performance indicators
for the six months ended 30 June 2010
30 June 30 June 31 Dec
2010 2009 % change 2009
Liberty Holdings Limited
Earnings
Basic earnings per share
(cents) 371,9 (483,3) >100 16,4
BEE normalised headline
earnings per share (cents) 351,9 (421,9) >100 47,2
Group Embedded Value
BEE normalised Group Embedded
Value per share (R) 84,62 79,19 6,9 84,32
BEE normalised return on
Group Embedded Value (%) 7,8 (25,5) >100 (6,5)
Distributions per share (cents) 164 164 455
Interim capital reduction 164 164 164
Final capital reduction n/a n/a 291
Capital adequacy cover of
Liberty Group Limited
(times covered) 2,79 2,48 12,5 2,81
Long-term insurance operations
Indexed new business
(excluding contractual
increases) (Rm) 2 135 2 111 1,1 4 412
New business margin (%) 1,1 1,0 10,0 1,3
Net customer cash
(outflows)/inflows (Rm) (265) 584 (>100) 1 267
Asset management
Assets under management (Rbn) 373 330 13,0 363
Net cash inflows/(outflows)
including money market (Rm) 11 733 (2 000) >100 2 755
Health (`000 lives)
Under administration 561 461 21,7 460
Licensed on proprietary
information technology
platforms 1 101 1 192 (7,6) 863
Insured 26 4 >100 17
n/a: not applicable.
Definitions
BEE normalised headline earnings per share, Group Embedded Value per share and
return on Group 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 requirement (CAR)
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.
Lives under administration
This reflects the number of natural persons covered for medical risk insurance
(either through medical aids or directly), for which Liberty Health provides
administrative services.
Commentary on results
Overview
Liberty has produced positive 2010 half year earnings against a backdrop of low
GDP growth and financial market volatility.
BEE normalised headline earnings were R1 007 million for the six months to 30
June 2010 compared to the R1 207 million loss reported for the same period in
2009, a significant improvement indicating a return to more normal levels of
earnings from core insurance operations.
Particularly pleasing has been the progress made by Retail SA in improving
policyholder persistency across the risk books. Whilst it is too early to
adjust long-term persistency assumptions, operating variances were considerably
improved. Management is confident of ongoing progress in this area.
Insurance new business embedded value margins of 1,1% were below expected
levels. This will be addressed, over the next 24 months, through planned
acquisition cost efficiencies, sales volume increases and lower lapse
assumptions.
LibFin`s balance sheet management continued as planned during the period -
returns on the shareholder investment portfolio were satisfactory given market
performance and LibFin Markets continued to manage asset/liability positions
within risk limits.
Capital ratios remain strong.
Despite a difficult operating environment, STANLIB and Liberty Africa asset
management operations continued to attract net cash inflows, totalling R11,7
billion, with particular strength in the fixed interest franchise. Total assets
under management have reached a credible R373 billion, with growth achieved by
all asset managers (STANLIB, Liberty Properties and Liberty Africa). The new
senior management team at STANLIB has been mandated to strengthen the
investment process and ensure an appropriate long-term platform is in place to
grow a sustainable third party asset manager.
Expansion into Africa is an investment in Liberty`s long-term future and is
still in a build phase. Good progress has been made in Namibia and Botswana.
The acquisition of the non-banking entities of CfC Stanbic in Kenya (CfC
Insurance Holdings) has been delayed to the fourth quarter of 2010 due to the
extended process of obtaining regulatory approval.
A capital reduction in lieu of an interim dividend of 164 cents (2009: 164
cents), has been declared.
Contributions to earnings by business unit
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm % change Rm
South African long-term
insurance
Retail SA 472 (222) >100 (82)
Corporate 65 25 >100 (29)
LibFin 358 (1 159) >100 (8)
Asset management
STANLIB 164 158 3,8 360
Liberty Properties 43 34 26,5 80
Business development
Liberty Africa 2 14 (85,7) 29
Liberty Health (11) - (>100) (47)
Central overheads and sundry
income (125) (108) (15,7) (261)
Headline earnings 968 (1 258) >100 42
BEE preference share adjustment 39 51 (23,5) 93
BEE normalised headline earnings 1 007 (1 207) >100 135
BEE normalised headline earnings per ordinary share is 351,9 cents (2009: loss
of 421,9 cents).
South African long-term insurance
Retail
The focus on the retention of existing clients and the quality of new business
has been maintained. As a result, headline earnings of R472 million for the
period have recovered well compared to the 2009 loss of R222 million.
In addition to the ongoing difficult consumer environment, limited guaranteed
capital bond capacity and the decision to close a channel selling unprofitable
entry level market (ELM) business has led to indexed new business (excluding
contractual increases) decreasing by 1,6% to R1 857 million (2009: R1 888
million). However, good growth was recorded in retirement savings products. The
new business embedded value profit margin of 1,3% (31 December 2009: 1,5%) has
decreased slightly, mainly due to proportionately higher sales of lower margin
investment products.
Net cash flows were positive at R418 million for the period (2009: R1 713
million), lower than 2009 as a result of higher per policy claim values
following the recovery of the investment markets in the second half of 2009.
Premium income inflows of R10,7 billion were 1,7% lower than 2009, mainly due
to the reduction in sales of guaranteed capital bonds.
Persistency of flagship risk products has improved ahead of expectations,
leading to positive operating variances. Experience on investment products is
broadly in line with that in the second half of 2009. To cover negative ELM
variances, R50 million was released from the short-term persistency provision of
R407 million held at the beginning of the period.
Costs are within acceptable levels and continue to be a key focus for
management with the objective of managing increases within actuarial inflation
assumptions.
Experience investigations performed on major product lines for the 30 June 2010
policyholder liability valuations indicated that no changes to long-term
persistency or mortality assumptions were required.
Corporate
Corporate had a good first half, with improved risk claim ratios and lower costs
resulting in headline earnings improving to R65 million (2009: R25 million). A
20% increase in indexed new business was achieved but at a lower embedded value
profit margin.
Although consumer confidence increased in the first half of the year, consumer
job losses continued, impacting withdrawal levels on corporate funds. This
resulted in net cash outflows for the period of R742 million (2009: outflow of
R1 162 million).
LibFin
LibFin is delivering on its stated objectives and is progressing well. Over the
six month period, a shareholder investment portfolio of approximately R16
billion was held. The balanced portfolio, designed in the second half of 2009,
has now been implemented and contributed R322 million before tax to headline
earnings. This represents a return of 2,0% for the period; performance was
slightly lower than the weighted benchmark due mainly to the timing of the
transition to the new portfolio construct.
Benchmark return for
six months ended
Asset class Benchmark index 30 June 2010
Local assets:
Equity SWIX TR (2,2%)
Bonds ALBI TR 5,6%
Cash STEFI 3,5%
Preference shares J251T 7,7%
Property J253T 7,6%
Foreign Assets:
Equity, bonds, cash MSCI All countries, BCGAI and SDR (3,6%)
LibFin Markets continued to manage market risk exposures within the risk
framework implemented over the last 18 months. The capabilities of LibFin are
particularly welcome in difficult market conditions. Work proceeds on improving
the management of equity and interest rate volatilities and interest rate basis
risk.
Earnings of R203 million flowed from positive credit margins and good fixed
income performance on assets backing the guaranteed capital bond and annuity
portfolios.
Asset management (STANLIB and Liberty Properties)
STANLIB`s headline earnings totalling R164 million (2009: R158 million) were
satisfactory, given the impact of lower performance fees.
STANLIB net cash inflows for the period were R6,5 billion (2009: R4,7 billion
outflow), net of the withdrawal of R6,5 billion of PIC funds. Money market
attracted strong net inflows of R11,3 billion (2009: R8,7 billion) resulting in
total assets under management (including inter-company life funds) increasing
to R321 billion at 30 June 2010 compared to the R318 billion reported at 31
December 2009.
Liberty Properties` earnings after taxation increased by 26,5% to R43 million,
driven mostly by increased property development fees. Liberty Properties is
currently managing extensions to the Eastgate and Sandton City complexes, as
well as the development of a third party owned shopping complex in Lusaka,
Zambia.
Business Development initiatives
Liberty Health
Lives serviced by Liberty Health increased significantly over the six months.
Sales of health risk products in the rest of Africa continue to
grow. Strong revenue growth was offset by the cost of capacity build and
initial negative claims experience. Liberty`s share of the Health operation`s
loss for the period was R11 million.
As part of the diversification strategy to invest in Liberty`s long-term
future, Liberty Health has made significant progress in a short period of
time. Positive earnings are expected to flow from revenue growth, lower costs
and better claims experience.
Liberty Africa
Liberty Africa`s asset management operations enjoyed positive net cash inflows
of R5,2 billion for the period (2009: R2,7 billion) bringing assets under
management to R29 billion. However, attributable headline earnings of R2
million were down on 2009 (R7 million normalised) as a result of lower earnings
from insurance operations.
Progress on establishing Liberty`s footprint outside of South Africa was
satisfactory and appropriate returns on investment are expected in the medium
term. This will be driven by the combined effects of integration of these
businesses with Liberty`s management processes and the resumption of GDP growth
in Africa.
Group Embedded Value
BEE normalised Group Embedded Value per share at 30 June 2010 is R84,62,
compared to R84,32 at 31 December 2009. Positive earnings were offset by the
impacts of lower than expected financial market performance and the capital
reduction of R832 million paid in lieu of the 2009 final dividend.
Capital adequacy cover
The capital adequacy cover of Liberty Group Limited is 2.79 times the
statutory requirement (31 December 2009: 2.81). The CAR cover of the subsidiary
life licences has increased, resulting in all licences being well capitalised.
Capital reduction out of share premium in lieu of an interim dividend
In terms of the general authority granted to the directors at the 2010 annual
general meeting, the directors have approved a capital reduction out of share
premium of 164 cents per ordinary share in lieu of an interim dividend.
The impact of the capital reduction on the Company as at 30 June 2010 is a
reduction of equity attributable to ordinary shareholders and cash and
cash equivalents of R469 million. The following table illustrates the effect of
the capital reduction on Liberty`s reported results. These financial effects are
prepared for illustrative purposes only. Due to their nature, the financial
effects may not give a true reflection of the Company`s financial position.
The financial effects are as follows:
As reported at Expected impact of
Cents per ordinary share 30 Jun 2010 capital reduction % change
Net asset value 4 143 3 979 (4,0)
Tangible net asset value 3 660 3 496 (4,5)
Headline earnings per share 371,9 367,4 (1,2)
Earnings per share 371,9 367,4 (1,2)
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, 27 August 2010
First trading day ex capital distribution on the
JSE Monday, 30 August 2010
Record date Friday, 3 September 2010
Payment date Monday, 6 September 2010
Share certificates may not be de-materialised or re-materialised between
Monday, 30 August 2010 and Friday, 3 September 2010, both days inclusive. Where
applicable, in terms of instructions received by the Company from certificated
shareholders, the payment of the capital reduction 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 de-
materialised their shares will have their accounts with their CSDP or broker
credited on Monday, 6 September 2010.
Prospects
The improvement in the half year result should be seen in the context of some
improvement in trading conditions, although the strength and sustainability of
the economic recovery remains uncertain. In the second half, our focus will
remain on strengthening the insurance business, stabilising STANLIB,
effective balance sheet management and growing returns from developing
businesses.
Bruce Hemphill Saki Macozoma
Chief Executive Chairman
5 August 2010
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
A subsidiary of Bank of America Corporation
These results are available at www.liberty.co.za
Accounting policies
The interim results have been prepared in accordance with International
Financial Reporting Standards (IFRS) including full compliance with IAS 34
Interim Financial Reporting as well as the AC 500 standards as issued by the
Accounting Practices Board or its successor. They are also in compliance with
the Listings Requirements of the JSE Limited and the Companies Act of South
Africa.
Liberty`s principal accounting policies have been prepared in terms of IFRS
and have been applied consistently over the current and prior financial years.
Several amendments to IFRS standards or interpretations were made by the
International Accounting Standards Board which are effective for the period
under review, but these are either not applicable or significant to Liberty`s
operations or Liberty has already complied with the changes.
These interim results have not been reviewed by the Company`s auditors,
PricewaterhouseCoopers Inc.
Statement of financial position
as at 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Assets
Equipment and owner-occupied properties
under development 913 866 1 176
Owner-occupied properties 1 712 1 303 1 345
Investment properties 19 520 17 695 19 058
Intangible assets 1 255 1 333 1 210
Defined benefit pension fund employer
surplus 162 139 170
Deferred acquisition costs 355 345 337
Interests in joint ventures 597 550 575
Reinsurance assets 856 792 788
Operating leases - accrued income 1 143 973 1 156
Pledged assets 1 572 1 510 1 559
Interests in associates - mutual funds 4 849 4 365 4 979
Financial instruments 174 235 159 800 173 603
Deferred taxation 193 121 152
Prepayments, insurance and other
receivables 4 775 5 480 2 655
Cash and cash equivalents 8 316 6 784 10 637
Total assets 220 453 202 056 219 400
Liabilities
Policyholder liabilities 181 593 168 733 183 544
Insurance contracts 127 720 119 256 129 254
Investment contracts with discretionary
participation features 2 431 2 519 2 692
Financial liabilities under investment
contracts 51 442 46 958 51 598
Financial liabilities at amortised cost 2 139 2 278 2 211
Third party financial liabilities
arising on consolidation of mutual funds 10 281 8 143 10 557
Employee benefits 552 548 660
Deferred revenue 128 117 126
Deferred taxation 2 806 2 314 2 755
Provisions 206 50 204
Operating leases - accrued expense 166 201 185
Derivative financial liabilities 533 707 58
Insurance and other payables 8 399 6 475 5 604
Current taxation 368 574 561
Total liabilities 207 171 190 140 206 465
Equity
Ordinary shareholders` interest 10 780 9 660 10 515
Share capital 26 26 26
Share premium 7 127 8 442 7 965
Retained surplus 4 353 1 996 3 304
Other reserves (726) (804) (780)
Minority interests 2 502 2 256 2 420
Total equity 13 282 11 916 12 935
Total equity and liabilities 220 453 202 056 219 400
Statement of comprehensive income
for the six months ended 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Revenue
Insurance premium revenue 10 991 11 226 22 630
Reinsurance premiums (334) (302) (632)
Net insurance premiums 10 657 10 924 21 998
Service fee income from investment
contracts 388 307 823
Investment income 5 401 6 424 12 255
Hotel operations sales 286 329 620
Investment (losses)/gains (2 122) (9 052) 7 125
Fee revenue 727 676 1 404
Defined benefit pension fund employer
surplus 13
Total revenue 15 337 9 608 44 238
Claims and policyholders` benefits
under insurance contracts (10 879) (9 824) (20 488)
Insurance claims recovered from
reinsurers 278 269 603
Change in policyholder liabilities
under insurance contracts 1 863 2 929 (7 246)
Insurance contracts 1 534 2 835 (7 163)
Investment contracts with
discretionary participation features 261 129 (44)
Applicable to reinsurers 68 (35) (39)
Fair value adjustment to policyholder
liabilities under investment contracts (555) (724) (5 949)
Fair value adjustment on third party
mutual fund interests (96) 716 (835)
Acquisition costs associated with
insurance and investment contracts (1 374) (1 409) (3 114)
General marketing and administration
expenses (2 689) (2 492) (5 434)
Finance costs (128) (176) (343)
Preference dividend in subsidiary (216) (173) (366)
Equity accounted earnings from joint
ventures 14 19 47
Profit before taxation 1 555 (1 257) 1 113
Taxation (478) 73 (877)
Total earnings 1 077 (1 184) 236
Other comprehensive income 10 3 (11)
Owner-occupied properties - fair value
adjustment 20 20 25
Foreign currency translation (8) (15) (27)
Income tax relating to components of
other comprehensive income (2) (2) (9)
Total comprehensive income 1 087 (1 181) 225
Total earnings attributable to:
Equity holders 969 (1 257) 44
Minority interest 108 73 192
1 077 (1 184) 236
Total comprehensive income
attributable to:
Equity holders 981 (1 251) 37
Minority interest 106 70 188
1 087 (1 181) 225
Cents Cents Cents
Earnings per share
Basic 371,9 (483,3) 16,4
Fully diluted 358,2 (472,2) 15,9
Distributions paid per share 291,0 291,0 455,0
Headline earnings and earnings per share
for the six months ended 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Reconciliation of total earnings to
headline earnings attributable to equity holders
Total earnings/(loss) attributable to
equity holders 969 (1 257) 44
Adjustments
Preference share dividend (1) (1) (2)
Headline earnings/(loss) attributable
to ordinary equity holders 968 (1 258) 42
Net income earned on BEE preference shares 39 51 93
BEE normalised headline earnings/(loss)
attributable to ordinary equity holders 1 007 (1 207) 135
Weighted average number of shares in
issue (`000) 260 216 260 223 260 222
BEE normalised weighted average number
of shares in issue (`000) 286 012 286 019 286 018
Fully diluted weighted average number
of shares in issue (`000) 270 165 266 327 267 378
Cents Cents Cents
Earnings/(loss) per share attributable
to ordinary equity holders
Basic 371,9 (483,3) 16,4
Headline 371,9 (483,3) 16,4
BEE normalised headline 351,9 (421,9) 47,2
Fully diluted earnings/(loss) per share
attributable to ordinary equity holders
Basic 358,2 (472,2) 15,9
Headline 358,2 (472,2) 15,9
Condensed statement of changes in shareholders`
funds for the six months ended 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Ordinary shareholders` funds at 1 January 10 515 11 633 11 633
Increase in ownership of Liberty Health
Holdings (9)
Total comprehensive income 981 (1 251) 37
Preference dividend (1) (1) (2)
Capital reduction (832) (832) (1 301)
Acquisition of additional interest in
subsidiary (3)
Profit on partial disposal of subsidiary 18
Share buy-back (19) (10) (34)
Black Economic Empowerment transaction 80 76 101
Subscription for shares 11 6 23
Section 311 Liberty transaction costs 2 1
Share based payments 31 37 68
Payment on settlement of share options (1) (2)
Ordinary shareholders` funds 10 780 9 660 10 515
Minority interests at 1 January 2 420 2 193 2 193
Increase in ownership of Liberty Health
Holdings (1)
Issue of shares in subsidiary 40
Acquisition of additional interest in
subsidiary (14)
Profit on partial disposal of subsidiary (18)
Total comprehensive income 106 70 188
Unincorporated property partnerships (31) (7) 42
Minority share of subsidiary dividend (1) (2)
Minority interests 2 502 2 256 2 420
Total shareholders` funds 13 282 11 916 12 935
Condensed statement of cash flows
for the six months ended 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Operating activities 1 041 1 933 5 006
Investing activities (3 333) 686 562
Financing activities (31) (947) (43)
Net (decrease)/increase in cash
and cash equivalents (2 323) 1 672 5 525
Cash and cash equivalents acquired
through business acquisition 2
Cash and cash equivalents at the
beginning of the period 10 637 5 112 5 112
Cash and cash equivalents at the end of
the period 8 316 6 784 10 637
Condensed segment information
The unaudited segment results for the six months ended 30 June 2010 are as
follows:
Asset
Long-term insurance manage-
Rm Individual Corporate ment
Total revenue 13 892 3 547 862
Profit/(loss) before taxation 902 114 300
Taxation (354) (32) (82)
Total earnings 548 82 218
Other comprehensive
income/(loss) 14 2 (2)
Total comprehensive
income/(loss) 562 84 216
Attributable to:
Minorities (7)
Equity holders 562 84 209
Reconciliation of total
earnings to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) 548 82 218
Attributable (to)/from minorities (1) (8)
Preference dividend
Headline earnings/(loss) 547 82 210
Net income earned on
BEE preference shares
BEE normalised
headline earnings/(loss) 547 82 210
Health
Rm services Other Total
Total revenue 152 465 18 918
Profit/(loss) before taxation (33) 165 1 448
Taxation 2 (12) (478)
Total earnings (31) 153 970
Other comprehensive
income/(loss) (4) 10
Total comprehensive
income/(loss) (31) 149 980
Attributable to:
Minorities 8 1
Equity holders (23) 149 981
Reconciliation of total
earnings to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) (31) 153 970
Attributable (to)/from minorities 8 (1)
Preference dividend (1) (1)
Headline earnings/(loss) (23) 152 968
Net income earned on
BEE preference shares 39 39
BEE normalised
headline earnings/(loss) (23) 191 1 007
Reporting
adjust- IFRS
Rm ments(1) reported
Total revenue (3 581) 15 337
Profit/(loss) before taxation 107 1 555
Taxation (478)
Total earnings 107 1 077
Other comprehensive
income/(loss) 10
Total comprehensive
income/(loss) 107 1 087
Attributable to:
Minorities (107) (106)
Equity holders - 981
Reconciliation of total
earnings to headline
earnings/(loss) attributable
to equity holders
Total earnings/(loss) 107 1 077
Attributable (to)/from minorities (107) (108)
Preference dividend (1)
Headline earnings/(loss) - 968
Net income earned on
BEE preference shares 39
BEE normalised
headline earnings/(loss) 1 007
(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 recognise
premiums on investment contracts as revenue in the long-term insurance segment.
Unaudited for the six months ended 30 June 2009
Asset
Long-term insurance manage-
Rm Individual Corporate ment
Total revenue 9 857 3 738 804
(Loss)/profit before
taxation (625) (59) 276
Taxation 50 16 (82)
Total earnings (575) (43) 194
Other comprehensive
income/(loss) 16 3
Total comprehensive
(loss)/profit (559) (40) 194
Attributable to:
Minorities (2) (5)
Equity holders (561) (40) 189
Reconciliation of total
earnings to
headline (loss)/
earnings attributable
to equity holders
Total (loss)/profit (575) (43) 194
Attributable (to)/from
minorities (2) (5)
Preference dividend
Headline (loss)/earnings (577) (43) 189
Net income earned on
BEE preference shares
BEE normalised
headline (loss)/ earnings (577) (43) 189
Health
Rm services Other Total
Total revenue 177 (889) 13 687
(Loss)/profit before
taxation (30) (894) (1 332)
Taxation 12 77 73
Total earnings (18) (817) (1 259)
Other comprehensive
income/(loss) (16) 3
Total comprehensive
(loss)/profit (18) (833) (1 256)
Attributable to:
Minorities 9 3 5
Equity holders (9) (830) (1 251)
Reconciliation of total
earnings to
headline (loss)/
earnings attributable
to equity holders
Total (loss)/profit (18) (817) (1 259)
Attributable (to)/from
minorities 9 2
Preference dividend (1) (1)
Headline (loss)/earnings (9) (818) (1 258)
Net income earned on
BEE preference shares 51 51
BEE normalised
headline (loss)/ earnings (9) (767) (1 207)
Reporting
adjust- IFRS
Rm ments(1) reported
Total revenue (4 079) 9 608
(Loss)/profit before
taxation 75 (1 257)
Taxation 73
Total earnings 75 (1 184)
Other comprehensive
income/(loss) 3
Total comprehensive
(loss)/profit 75 (1 181)
Attributable to:
Minorities (75) (70)
Equity holders - (1 251)
Reconciliation of total
earnings to
headline (loss)/
earnings attributable
to equity holders
Total (loss)/profit 75 (1 184)
Attributable (to)/from
minorities (75) (73)
Preference dividend (1)
Headline (loss)/earnings - (1 258)
Net income earned on
BEE preference shares 51
BEE normalised
headline (loss)/ earnings (1 207)
Audited for the year ended 31 December 2009
Asset
Long-term insurance manage-
Rm Individual Corporate ment
Total revenue 36 443 11 243 1 663
Profit/(loss) before taxation 186 (35) 636
Taxation (594) 2 (185)
Total earnings (408) (33) 451
Other comprehensive
(loss)/income 11 2 (6)
Total comprehensive
(loss)/income (397) (31) 445
Attributable to:
Minorities (3) (7)
Equity holders (400) (31) 438
Reconciliation of total
earnings to headline
(loss)/earnings attributable
to equity holders
Total (loss)/earnings (408) (33) 451
Attributable (to)/from minorities (4) (10)
Preference dividend
Headline (loss)/earnings (412) (33) 441
Net income earned on
BEE preference shares
BEE normalised
headline (loss)/earnings (412) (33) 441
Health
Rm services Other Total
Total revenue 332 819 50 500
Profit/(loss) before taxation (161) 243 869
Taxation 51 (131) (857)
Total earnings (110) 112 12
Other comprehensive
(loss)/income (2) (16) (11)
Total comprehensive
(loss)/income (112) 96 1
Attributable to:
Minorities 46 36
Equity holders (66) 96 37
Reconciliation of total
earnings to headline
(loss)/earnings attributable
to equity holders
Total (loss)/earnings (110) 112 12
Attributable (to)/from minorities 46 32
Preference dividend (2) (2)
Headline (loss)/earnings (64) 110 42
Net income earned on
BEE preference shares 93 93
BEE normalised
headline (loss)/earnings (64) 203 135
Reporting
adjust- IFRS
Rm ments(1) reported
Total revenue (6 262) 44 238
Profit/(loss) before taxation 244 1 113
Taxation (20) (877)
Total earnings 224 236
Other comprehensive
(loss)/income (11)
Total comprehensive
(loss)/income 224 225
Attributable to:
Minorities (224) (188)
Equity holders - 37
Reconciliation of total
earnings to headline
(loss)/earnings attributable
to equity holders
Total (loss)/earnings 224 236
Attributable (to)/from minorities (224) (192)
Preference dividend (2)
Headline (loss)/earnings - 42
Net income earned on
BEE preference shares 93
BEE normalised
headline (loss)/earnings 135
Group Embedded Value report
1. Introduction
Following regulatory approval, phase two of Liberty Holdings` legal entity
reorganisation was implemented effective 1 January 2010. This entailed the
transfer of non long-term insurance legal entities from Liberty Group Limited
to Liberty Holdings Limited. In addition, as part of the strategy to expand the
geographical footprint in chosen African countries, a sub group of both
insurance and asset management entities has been established in Namibia
controlled by Liberty Holdings Namibia (Pty) Limited, in which Liberty Holdings
Limited owns 75%.
Liberty will now present a "Group Embedded Value" report to reflect the
combined value of the various components of Liberty`s businesses. Group
Embedded Value as described below has been calculated on a basis consistent
with that used in past reporting periods.
This Group Embedded Value report at 30 June 2010 has not been audited.
2. Component parts of the Group Embedded Value and valuation techniques used
Group Embedded Value has been calculated as the sum of three component parts:
Liberty Group Limited
After the reorganisation, Liberty Group Limited (LGL) comprises the cluster of
South African long-term insurance entities and related asset holding entities.
The embedded value methodology applied historically in terms of Professional
Guidance Note 107 issued by the Actuarial Society of South Africa will continue
to be used to derive the value of this business cluster. The embedded value
report of the covered business of LGL has been reviewed by the company`s
statutory actuary (refer 3 below).
Liberty Africa
Liberty Africa is an emerging cluster of wealth businesses located outside of
South Africa. A combination of valuation techniques including embedded value
and discounted cash flow have been applied to value these businesses.
The combined value of this cluster is not material relative to the other
components of Group Embedded Value and therefore it is not considered necessary
to present a detailed analysis of this valuation.
Balance of Liberty Holdings
This comprises the following:
STANLIB: Valued on a 10 times multiple of estimated sustainable earnings.
Liberty Properties: Valued on a 10 times multiple of estimated sustainable
earnings.
Liberty Health: Liberty Health is in a growth phase and has yet to establish a
history to support a sustainable earnings calculation. The valuation has
therefore been based on the discounted cash flow forecasts utilised for
Liberty`s acquisition in late 2009 of 24,8% of the equity of Liberty Health, to
bring its ownership to 74,9%.
Liberty Holdings` net asset value: The net market value of assets and
liabilities held by Liberty Holdings Limited company excluding investments in
subsidiaries valued separately.
Other adjustments: This comprises the present value of future secondary tax on
companies at 10% on future anticipated dividends, the fair value of share
options/rights allocated to staff not employed by LGL and allowance for certain
shareholder recurring costs capitalised by a multiple of 6 times.
3. Description of embedded value of covered business of Liberty Group Limited
The current version of Professional Guidance Note PGN107 came into force for
all financial years ending on or after 31 December 2008. PGN107 governs the way
in which embedded values of life assurance companies are reported.
The embedded value consists of:
- The net worth; plus
- The value of in-force covered business; less
- The cost of required capital.
The net worth represents the excess of assets over liabilities on the statutory
valuation method, adjusted for the elimination of the carrying value of covered
business acquired and for the fair value of share options/rights granted to
Liberty Group Limited employees.
The value of in-force covered business 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, which differs from the release of
profits on the published accounting basis. 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 written in Liberty Group Limited or its subsidiary life
companies.
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 for
distribution to shareholders. This comprises the statutory CAR calculated in
accordance with PGN104 plus any additional capital considered by the Board
appropriate given the risks in the business. For Liberty Group Limited,
required capital has been calculated at 1,7 x CAR. For subsidiary life
companies a multiple of 1,5 x CAR has been used. 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 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 reporting period. Risk policies with an
inception date prior to the reporting date where no premium has been received
are included in the embedded value and value of new business. The contractual
terms of these policies state that Liberty Group Limited is on risk from the
inception date, even though a premium may not have been received. 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 date of reporting have been used.
No adjustment has been made for the discounting of tax provisions in the
embedded value.
4. Group Embedded Value
30 June 2010
Liberty Balance
Group Liberty of Liberty
Limited Africa Holdings Total
Rm Rm Rm Rm
4.1 Group Embedded Value
Group Embedded Value 19 005 110 3 960 23 075
Adjustment for BEE
preference shares 1 124 1 124
BEE normalised Group Embedded
Value 20 129 110 3 960 24 199
Number of applicable shares (`000) 260 196
Adjustment for BEE ordinary shares 25 796
BEE normalised number of
applicable shares (`000) 285 992
Group Embedded Value per share (R) 88,68
BEE normalised Group Embedded
Value per share (R) 84,62
2009
Total
31 Dec 30 June
Rm Rm
4.1 Group Embedded Value
Group Embedded Value 22 959 21 491
Adjustment for BEE preference shares 1 159 1 159
BEE normalised Group Embedded
Value 24 118 22 650
Number of applicable shares (`000) 260 226 260 220
Adjustment for BEE ordinary shares 25 796 25 796
BEE normalised number of applicable
shares (`000) 286 022 286 016
Group Embedded Value per share (R) 88,23 82,59
BEE normalised Group Embedded
Value per share (R) 84,32 79,19
30 June 2010
Liberty Balance
Group Liberty of Liberty
Limited Africa Holdings Total
Rm Rm Rm Rm
4.2 BEE normalised Group Embedded
Value profits
Group Embedded Value at
the end of the period 20 129 110 3 960 24 199
Adjustments arising from group
restructure 3 979 (108) (3 871) -
Intergroup dividends 641 (641) -
Less capital raised (11) (11)
Plus impact of share buy backs 19 19
Plus net capital reduction paid 832 832
Less Group Embedded Value
at the beginning of the period(24 051) (67) (24 118)
Group Embedded Value
profit/(losses) 698 2 221 921
Return on Group Embedded
Value 7,1% 7,8%
4.3 Group Embedded Value of new
business and new business margins
Gross value of new business 118 3 121
Cost of required capital (6) - (6)
Net value of new business written
in the period 112 3 115
Individual 111 3 114
Corporate 1 1
Present value of future
expected premiums 10 356 60 10 416
Margin 1,1% 5,6% 1,1%
2009
Total
31 Dec 30 June
Rm Rm
4.2 BEE normalised Group Embedded
Value profits
Group Embedded Value at the end
of the period 24 118 22 650
Adjustments arising from group restructure
Intergroup dividends
Less capital raised (23) (6)
Plus impact of share buy backs 34 10
Plus net capital reduction paid 1 301 832
Less Group Embedded Value at the
beginning of the period (27 207) (27 207)
Group Embedded Value profit/(losses) (1 777) (3 721)
Return on Group Embedded Value (6,5%) (25,5%)
4.3 Group Embedded Value of new
business and new business margins
Gross value of new business 323 151
Cost of required capital (22) (29)
Net value of new business written in the period 301 122
Individual 288 116
Corporate 13 6
Present value of future expected premiums 23 082 12 075
Margin 1,3% 1,0%
30 June 31 Dec 30 June
2010 2009 2009
Rm Rm Rm
4.4 Balance of Liberty Holdings
STANLIB 3 600
Liberty Properties 700
Liberty Health 30
Liberty Holdings` net asset value 86 67 43
Other adjustments (456)
3 960 67 43
4.5 Analysis of balance of Liberty Holdings
Group Embedded Value profits
Change in STC allowance (72)
Change in capitalised value of non-financial
service subsidiaries 50
Change in allowance for fair value of
employee share option/rights (16)
Change in shareholder expense allowance (70)
Investment return including earnings of non
long-term insurance subsidiaries 329
221
30 June 2010
BEE
normalised
Embedded embedded
value value
Rm Rm
4.6 Liberty Group Limited embedded value
Risk discount rate(a) 11,83% 11,83%
Net worth 6 363 7 487
Ordinary shareholders` funds on published basis 10 246 11 370
Adjustment of ordinary shareholders`
funds from published basis(b) (3 173) (3 173)
Financial services subsidiaries fair
value adjustment(c) - -
Adjustment for carrying value of
in-force business acquired(d) (497) (497)
Allowance for fair value of share options (213) (213)
Net value of life business in-force 12 642 12 642
Value of life business in-force 14 076 14 076
Cost of required capital (1 434) (1 434)
Embedded value 19 005 20 129
31 December 2009
BEE
normalised
Embedded embedded
value value
Rm Rm
4.6 Liberty Group Limited embedded value
Risk discount rate(a) 12,10% 12,10%
Net worth 10 345 11 504
Ordinary shareholders` funds
on published basis 10 446 11 605
Adjustment of ordinary shareholders`
funds from published basis(b) (3 021) (3 021)
Financial services subsidiaries fair
value adjustment(c) 3 703 3 703
Adjustment for carrying value of
in-force business acquired(d) (555) (555)
Allowance for fair value of share options (228) (228)
Net value of life business in-force 12 547 12 547
Value of life business in-force 13 957 13 957
Cost of required capital (1 410) (1 410)
Embedded value 22 892 24 051
30 June 2009
BEE
normalised
Embedded embedded
value value
Rm Rm
4.6 Liberty Group Limited embedded value
Risk discount rate(a) 12,00% 12,00%
Net worth 9 476 10 635
Ordinary shareholders` funds
on published basis 9 617 10 776
Adjustment of ordinary shareholders`
funds from published basis(b) (2 759) (2 759)
Financial services subsidiaries fair
value adjustment(c) 3 433 3 433
Adjustment for carrying value of
in-force business acquired(d) (612) (612)
Allowance for fair value of share options (203) (203)
Net value of life business in-force 11 972 11 972
Value of life business in-force 12 698 12 698
Cost of required capital (726) (726)
Embedded value 21 448 22 607
Value of
in-force Cost of
covered required Embedded
Net worth business capital(l) value
Rm Rm Rm Rm
4.7 Analysis of Liberty
Group Limited embedded value profits
for the period ended 30 June 2010
Embedded value profits
for the period
Embedded value at the
end of the period 6 363 14 076 (1 434) 19 005
Plus dividends paid 561 561
Adjustments arising from
group restructure 4 074 (93) (2) 3 979
Embedded value at the
beginning of the period (10 345) (13 957) 1 410 (22 892)
Embedded value profits 653 26 (26) 653
Components of embedded
value profits
Value of new business
written in the period (453) 571 (6) 112
Expected return on value
of life business(e) 832 (83) 749
Expected net of tax
profit transfer to net worth 1 116 (1 199) 83 -
Operating experience
variances(h) 47 141 (42) 146
Operating assumption
changes(i) (129) 7 18 (104)
Embedded value profits
from operations 581 352 (30) 903
Investment return on
net worth 224 224
Investment variances (106) (482) 11 (577)
Changes in economic
assumptions(j) 31 14 (7) 38
Changes in modelling
methodology (19) 142 - 123
Change in allowance for
fair value of share
options/rights(k) (58) - - (58)
Embedded value profits 653 26 (26) 653
BEE preference dividends 45 45
BEE normalised embedded
value profits 698 26 (26) 698
Notes to Liberty Group Limited embedded value
a) Future investment returns on the major asset classes and other economic
assumptions have been set with reference to the market yield on medium-term
South African government stock.
Investment return p.a.
30 June 31 Dec 30 June
2010 2009 2009
% % %
Government stock 9,03 9,30 9,25
Equities 12,53 12,80 12,75
Property 10,03 10,30 10,25
Cash 7,53 7,80 7,75
The risk discount rate has been set equal to
the risk free rate
plus 80% of the equity risk premium 11,83 12,10 12,00
Maintenance expense inflation rate 6,03 6,30 6,25
b) Adjustment of shareholders` funds from the published basis
This amount represents the change in the amount of shareholder funds as a
result of moving from a published valuation basis to the statutory valuation
basis. 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.
c) Financial service subsidiaries fair value adjustment
As a result of the legal entity reorganisation of Liberty Holdings, the non
long-term insurance legal entities were transferred to Liberty Holdings
Limited. Therefore, this adjustment is no longer applicable to Liberty Group
Limited (refer 4.4).
d) Adjustment for carrying value of business acquired
The carrying value of business acquired by Liberty Life has been deducted from
shareholders` funds in order to avoid double counting. For embedded value
purposes, the value in respect of this acquired business is included in the
value of life business in-force.
30 June 31 Dec 30 June
2010 2009 2009
Rm Rm Rm
Investec Employee Benefits (30) (36) (41)
Capital Alliance Holdings Limited (CAHL) (442) (491) (540)
Business previously acquired by CAHL (25) (28) (31)
(497) (555) (612)
e) 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 period and the current year`s discount rate for half a year to
the value of new business.
f) 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.
g) 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
basis, the embedded value makes allowance for automatic premium and benefit
increases.
h) Operating experience variances consist of the combined effect on net worth
and value of in-force of operating experience being different to that
anticipated at the prior year end.
The net 2010 operating experience variance of R146 million (June 2009: negative
R238 million) is comprised of:
Operating experience variances Rm
Mortality and Morbidity 171
Persistency 116
Expenses (81)
Cost of capital (42)
Other (18)
Total 146
i) The amount of negative R104 million (June 2009: negative R1 746 million)
shown for operating assumption changes mainly comprises the raising of a
provision for remedial action on Entry Level Market products.
j) The amount of R38 million (June 2009: negative R857 million) relates to
changes in economic assumptions as described in note a).
k) The amount of negative R58 million (June 2009: negative 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 for staff employed by
Liberty Group Limited and the increase in the market value of Liberty Holdings
Limited share price over the reporting period.
l) The assets backing the required capital are consistent with the long-term
strategic mix of shareholder funds approved by the Liberty Holdings Board in
November 2009.
New business
for the six months ended 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Insurance operations (1)
Individual 6 083 6 565 13 700
Single 4 662 5 178 10 748
Recurring 1 421 1 387 2 952
Corporate 676 722 1 467
Single 477 573 1 202
Recurring 199 149 265
Total new business 6 759 7 287 15 167
Single 5 139 5 751 11 950
Recurring 1 620 1 536 3 217
Indexed new business 2 135 2 111 4 412
Sources of insurance operations indexed
new business by business unit:
Retail SA 1 857 1 888 3 995
Corporate 247 206 385
Liberty Africa(3) 31 17 32
Asset management operations
Total STANLIB sales excluding money
market(2) 24 935 17 741 37 712
Retail sales 22 697 15 863 32 952
Institutional sales 2 238 1 878 4 760
Money market sales(2) 85 112 55 938 113 446
Total STANLIB sales(2) 110 047 73 679 151 158
Total Liberty Africa sales excluding
money market (3) 8 577 4 762 10 643
Retail sales 209 174 574
Institutional sales 8 368 4 588 10 069
Money market sales (3) 3 749 2 931 5 866
Total Liberty Africa sales(3) 12 326 7 693 16 509
Total asset management sales 122 373 81 372 167 667
(1) Includes Liberty Africa.
(2) Excludes intercompany life fund sales.
(3) Liberty 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 customer cash inflows
for the six months ended 30 June 2010
30 June 30 June 31 Dec
2010 2009 2009
Unaudited Rm Rm Rm
Insurance operations (1)
Individual 477 1 746 3 031
Inflows and premiums 11 566 11 592 23 291
Claims and benefits (11 089) (9 846) (20 260)
Corporate (742) (1 162) (1 764)
Inflows and premiums 3 240 3 261 6 784
Claims and benefits (3 982) (4 423) (8 548)
Net cash (outflows)/inflows from
insurance operations (265) 584 1 267
Sources of insurance operations cash
flows by business unit:
Retail SA 418 1 713 2 764
Corporate (742) (1 162) (1 776)
STANLIB Multi-manager 4 (3) 202
Liberty Africa(3) 55 36 77
Asset management
STANLIB net cash outflows
excluding money market(2) (4 854) (13 387) (12 344)
Retail net cash inflows 2 693 3 656 6 178
Institutional net cash outflows (7 547) (17 043) (18 522)
Money market inflows(2) 11 304 8 667 10 772
Net STANLIB cash inflows/(outflows)(2) 6 450 (4 720) (1 572)
Liberty Africa net cash inflows
excluding money market(3) 4 290 2 052 3 668
Retail net cash inflows 109 85 306
Institutional net cash inflows 4 181 1 967 3 362
Money market inflows(3) 993 668 659
Net Liberty Africa inflows (3) 5 283 2 720 4 327
Net cash inflows/(outflows) from asset
management 11 733 (2 000) 2 755
Total net customer cash
inflows/(outflows) 11 468 (1 416) 4 022
(1) Includes Liberty Africa.
(2) Excludes intercompany life fund cash flows.
(3) Liberty owns less than 100% of the various entities that make up
Liberty Africa. Cash flow information is recorded at 100% and is not
adjusted for proportional legal ownership.
Assets under management
for the six months ended 30 June 2010
30 June 30 June 31 Dec
2010 2009 2009
Unaudited Rbn Rbn Rbn
Life funds 110 115 126
Segregated funds 49 45 54
Unit trusts (including money market) 148 113 120
Linked investment and structured products 43 37 41
Properties 23 20 22
Total assets under management(1) 373 330 363
Total assets under management split by
business unit:
STANLIB 321 290 318
Liberty Africa 29 20 23
Liberty Properties 23 20 22
373 330 363
(1) Includes funds under administration.
Capital commitments
as at the six months ended 30 June 2010
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2010 2009 2009
Rm Rm Rm
Capital commitments 2 489 3 922 3 141
Business acquisitions(1) 292 423 360
Equipment 198 310 296
Investment and owner-occupied property 1 999 3 189 2 485
Under contracts 1 390 2 654 1 385
Authorised by the directors but not
contracted 1 099 1 268 1 756
2 489 3 922 3 141
The above 30 June 2010 capital commitments will be financed by available bank
facilities, existing cash resources, internally generated funds, R345 million
(31 December 2009: R403 million) from minorities in unincorporated property
partnerships, and R2 million (31 December 2009: R7 million) from minorities in
Liberty Health Holdings (Pty) Limited.
(1) The board has approved an allocated amount towards possible business
acquisitions related to its stated strategy of broadening Liberty`s financial
services offerings.
Related parties
as at 30 June 2010
The following selected significant related party transactions have occurred in
the 2010 financial period:
1) Summary of movement in investment in ordinary shares held by Liberty in
Liberty`s holding company is as follows:
Number Market value Ownership
`000 Rm %
Standard Bank Group Limited
Balance at 31 December 2009 25 724 2 624 1,65
Purchases 4 830 529
Sales (5 384) (605)
Fair value adjustments 29
Balance at 30 June 2010 25 170 2 577 1,59
2) Acquisition of CfC Insurance Holdings Limited
As announced on SENS on 3 December 2009, Liberty has entered into agreements
subject to completion of outstanding conditions precedent in terms of which it
will acquire control of CfC Insurance Holdings Limited (CfCIH), which is a
subsidiary of Standard Bank Group Limited. CfCIH is a leading Kenyan wealth
company that comprises life, general and health insurance businesses in Kenya
and Tanzania. Liberty will acquire approximately 57% ownership through
subscribing for KES880 million of new equity capital and an initial payment of
USD14 million with deferred payments capped at an additional USD4,9 million. At
30 June 2010 exchange rates, the rand equivalent of these transactions is R230
million. The CfCIH acquisition is a related party transaction, as Standard Bank
Group Limited is both a majority shareholder of Liberty and the ultimate
controlling shareholder of CfCIH.
3) Bancassurance
Liberty has entered into profit share agreements (renegotiated on 25 April 2002
for a period until 31 December 2010, thereafter the contract continues
indefinitely with either party having the right to give 12 months notice) with
Standard Bank of South Africa Limited for the sale and promotion of insurance
products. New business premium income in respect of this business for the six
months to 30 June 2010 amounted to R2 044 million (2009: R2 382 million).
In terms of the agreement Liberty pays between 80% and 90% of risk profits on
simple products and 50% of embedded value profits on complex products through a
preference share dividend to Standard Bank of South Africa Limited. The
preference dividend accrued at 30 June 2010 is R216 million (2009: R173
million).
Retirement benefit obligations
as at 30 June 2010
Post-retirement medical benefit
Liberty operates an unfunded post-retirement medical aid benefit for
employees who joined Liberty prior to 1998.
As at 30 June 2010, the Liberty post-retirement medical aid benefit liability
was R365 million (31 December 2009: R354 million).
Defined benefit retirement funds
Liberty 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: 05/08/2010 07:05:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
