| Fri 2 Mar 2007, 8:00 | | LGL - Liberty Group Limited - Audited preliminary |
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LGL
LIBU
LGL - Liberty Group Limited - Audited preliminary results for the year ended 31
December 2006
Liberty Group Limited
"Liberty Life"
Incorporated in the Republic of South Africa
(Registration number: 1957/002788/06)
Alpha code: LGL
Issuer code: LIBU
ISIN code: ZAE000057360
Audited preliminary results for the year ended 31 December 2006
Financial performance indicators
for the year ended 31 December 2006
2006 2005 % change
New business (Rm) 16 677 16 798 1 -1
New business margin2 (%) 2,5 3,0 3
Net cash inflows (Rm) 3 627 4 922 1 -26
Normalised4 recurring management expenses
for life operations (Rm) 2 069 2 057 +0,6
BEE normalised5 headline earnings per
share (cents) 930,2 694,8 +34
BEE normalised5 embedded value per share
(R) 82,55 73,41 +12
Adjusted for capital reduction of R3,60 per share +17
Capital adequacy requirement cover (times
covered) 2,3 2,0
Final dividend per share (cents) 230 224 +3
Total dividend per share (cents) 370 350 +6
BEE normalised return on embedded value (%) 22,4 20,1
1 Restated to include Capital Alliance for the full twelve months ended
31 December 2005.
2 Embedded value of new business as a percentage of the present value of
future expected premiums.
3 Restated to estimate the impact of the statement of intent (SOI) signed
during 2005 between National Treasury and the life offices regarding minimum
values on savings products.
4 Certain IFRS adjustments and restructuring, integration and other
non-recurring expenses are excluded.
5 This measure reflects the economic reality of the Black Economic Empowerment
(BEE) transaction as opposed to the required technical accounting treatment that
reflects the BEE transaction effectively 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 and shares in issue relating to the
transaction are reinstated.
Commentary on results
In support of the government`s objectives to increase the savings base in South
Africa, and in response to consumer demands for greater flexibility and
transparency in the life assurance industry, Liberty Life has rapidly lead
initiatives to improve product design and service offering for the benefit of
all stakeholders. We remain committed to doing what is right and believe the
long-term benefits of moving decisively will position us well to take full
advantage of the significant opportunities that exist within the savings
industry.
Despite the significant changes the industry is facing, Liberty Life`s overall
financial performance for 2006 was positive, with headline earnings increasing
by 36% to R2 501 million. We are also pleased to report that recurring expenses
directly attributable to insurance operations remained flat year on year. This
means we are well on track to meet the targets stated in 2005 of R300 million
pre tax cost savings by the end of 2008.
Liberty Life`s main yardstick for performance, BEE normalised return on
embedded value, was 22,4%, compared to 20,1% in 2005. Cash of R7,24 per share
was returned to shareholders through dividends and a capital reduction during
2006.
Good operational progress has been made in our retail life operations, with a
significant improvement in customer service response times.
The corporate market has for a number of years experienced tough trading
conditions and the 2006 year was no exception. Systems conversions are
complete, and there is a strong focus on improving service and reducing costs.
STANLIB Limited (STANLIB) performed strongly in 2006, breaking the R500 million
pre interest and tax profit mark for the first time. Assets under management at
31 December 2006 were R294 billion. STANLIB will continue to
focus on further building an equity franchise to complement its strong fixed
interest, money market and property franchises.
In 2006, investment markets remained strong and the weighted average investment
return used as a proxy to calculate shareholders` 10% share of policyholder
capital bonuses on certain classes of business was 33,0% compared with 33,2% in
2005.
Salient financial features are briefly commented on below:
New business sales and margin - improved performance since the half year
Sales showed a strong recovery after the third quarter 2006, as restructuring
initiatives started to bear fruit. Indexed new business sales ended 1% lower
than 2005 at R4,9 billion. This is an improvement on the 3% decline recorded at
the half year. Early indications are that indexed new business sales for 2007
have continued on this growth path.
Factors impacting sales volumes in 2006 included the trend towards off-balance
sheet sales, realignment of the agency force, the removal of the entry level
market savings product, the closure of the Liberty Active service offering and
the expected loss of a certain bank`s insurance business administered by Capital
Alliance.
Total new business retail premiums grew 2%, however new corporate premiums
declined 15% illustrating the volatile nature of corporate new business flows.
The present value of premium new business margin in 2006 was 2,5%, compared to
3,0% for 2005. This was mainly due to the impact of a higher discount rate as
well as lower margins on the new range of investment products and higher
acquisition costs. The margin, has however, increased from the 2,4% recorded at
the 2006 half year.
Embedded value and return on embedded value - real growth returns
BEE normalised return on embedded value increased from 20,1% in 2005 to 22,4%.
This higher return is a consequence of the focus on capital management combined
with the sustained positive investment market performance.
Notwithstanding the cash of R7,24 per share returned to shareholders through
dividends and a capital reduction during the year, the BEE normalised embedded
value per share grew by 12,5% to R82,55. Adjusting for the capital reduction of
R3,60 per share the growth is effectively 17,4%.
Headline earnings - growth in line with investment markets
Headline earnings of R2 501 million increased by 36%, while headline earnings
per share increased by 35%. BEE normalised headline earnings per share of 930
cents, a better measure of the group`s earnings, recorded a 34% increase over
2005. It should be noted that the 2005 earnings were negatively impacted by a
R321 million statement of intent charge.
The group`s 37,4% interest in STANLIB contributed R133 million to headline
earnings, which is 24% higher than 2005, reflecting the increase in fees earned
off the higher average assets under management.
Insurance operations contributed R1,4 billion to headline earnings whilst
earnings from shareholder specific assets and asset management operations
contributed R1,1 billion.
Shareholder earnings increased by 23% mainly due to the performance of the
equity investments within the specific shareholder fund portfolios.
Cash flows from insurance operations remain strong
Net cash flows remain positive at R3,6 billion compared to R4,9 billion in
2005. Retail life cash flows of R3,6 billion were strong, notwithstanding the
ongoing run-off in the Capital Alliance book and contrasting strained industry
cash flows.
STANLIB
On 29 January 2007, shareholders approved the acquisition of the remaining
62,6% of the ordinary shares in STANLIB for a consideration of R1,6 billion.
This acquisition was motivated by the trends to off-balance sheet investment
products. The transaction not only places Liberty Life in a position to take
advantage of this trend, but also increases the opportunity to manage the rate
and extent of asset conversion to new generation products. The acquisition will
also facilitate growth by providing new product and distribution opportunities.
Capital adequacy
The statutory capital adequacy requirement (CAR) was covered 2,27 times at 31
December 2006, well ahead of the group`s target of 1,70 times. It should be
noted that if the STANLIB transaction had occurred at 31 December 2006, the CAR
cover would have reduced to 1,94 times. Allowing for the final dividend at 31
December 2006 will result in the CAR cover reducing to 1,77 times.
Dividends and capital reduction
Cents per share 2006 2005 %
Dividend
Interim 140 126
Final 230 224
Total 370 350
Base for future dividend 360 325 +11
Capital reduction impact 10 25
Capital reduction paid 360
A 2006 final dividend of 230 cents per share has been declared which represents
an 16% increase off the revised 2005 dividend base. On a like for like basis the
total dividend represents a 11% growth on 2005, in line with the group`s
dividend policy.
The important dates pertaining to this dividend are:
Last day to trade cum dividend on the JSE Friday, 23 March 2007
First trading day ex dividend on the JSE Monday, 26 March 2007
Record date Friday, 30 March 2007
Payment date Monday, 2 April 2007
Share certificates
Share certificates may not be dematerialised or rematerialised between Monday,
26 March 2007 and Friday, 30 March 2007 both days inclusive. Where applicable,
dividends in respect of certificated shareholders will be transferred
electronically to shareholders` bank accounts on payment date. In the absence of
specific mandates, dividend cheques will be posted to shareholders. Shareholders
who have dematerialised their shares will have their accounts with their CSDP or
broker credited on Monday, 2 April 2007.
The year ahead
A key focus area will be the implementation and leveraging of the opportunities
provided by the STANLIB acquisition. This forms part of a wider strategy to
expand Liberty Life`s offering from essentially a life insurer, to a broader-
based savings company.
Although there will be significant focus on growing our existing distribution
channels, the development of alternative distribution models to unlock further
growth will be pursued. In addition, the skills and talent pool will be expanded
aggressively.
The restructuring and integration initiatives in both operations and
distribution have already started to deliver results. We expect further progress
in this regard in 2007.
Prospects
The acquisition of 100% of STANLIB provides additional revenue growth
opportunities and should add value for our shareholders going forward.
Liberty Life`s earnings are strongly correlated to the performance of local
investment markets. We remain optimistic about South African economic
conditions and expect reasonable investment performance, in the form of a
reduced, yet positive, weighted average investment performance in 2007.
If actuarial assumptions are met, we are confident that Liberty Life will
achieve real growth in BEE normalised embedded value in line with our medium
term growth expectations.
Bruce Hemphill Derek Cooper
Chief Executive Chairman
1 March 2007
Transfer Secretaries
Computershare Investor Services 2004 (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
Global Markets & Investments Banking Group
Merrill Lynch South Africa (Pty) Ltd
Registration number 1995/001805/07)
Registered Sponsor and Member of the
JSE Securities Exchange South Africa
Audit opinion
The auditors, PricewaterhouseCoopers Inc., have issued their opinion on the
Group`s financial statements for the year ended 31 December 2006. They have
issued an unmodified audit opinion. A copy of their audit report is available
for inspection at the company`s registered office.
Accounting policies and presentation
The results have been prepared in accordance with International Financial
Reporting Standards (IFRS). There have been no changes to accounting policies
from those applied for the year ended 31 December 2005.
Restatements
Prior year comparatives have been restated for the effect of consolidating
unincorporated property partnerships and reclassification of certain mutual
fund investments to associates and subsidiaries. There is no impact to
shareholder earnings or net asset value.
Condensed group balance sheet
as at 31 December 2006
As restated
31 December 31 December
2006 2005
Audited Rm Rm
Assets
Investments 189 263 149 145
Intangible assets 1 331 1 534
Reinsurance assets 1 065 946
Disposal groups held for sale 2 380
Prepayments, insurance and other receivables 3 188 2 839
Cash and cash equivalents 5 237 12 451
Other assets 912 811
Total assets 200 996 170 106
Liabilities
Policyholders` liabilities 168 898 140 835
Financial liabilities 2 357 2 295
Third party liabilities arising on
consolidation of mutual funds 8 559 7 079
Deferred taxation 3 262 2 454
Disposal groups held for sale 1 267
Insurance and other payables 4 242 3 661
Other liabilities 1 185 1 186
Total liabilities 188 503 158 777
Equity
Ordinary shareholders` funds 10 665 9 434
Minority interests 1 828 1 895
Total equity 12 493 11 329
Total equity and liabilities 200 996 170 106
Liberty Group Limited capital adequacy
requirements
Statutory capital adequacy requirement (CAR) 3 945 3 782
Statutory CAR cover 2,3 2,0
Condensed group income statement for the year ended 31 December 2006
As restated
31 December 31 December
2006 2005
Audited Rm Rm
Total revenue 59 281 52 893
Net insurance benefits and claims (38 140) (32 816)
Fair value adjustment to policyholder
liabilities under
investment contracts (8 276) (6 834)
Fair value adjustment on third party mutual
fund liabilities (1 480) (1 879)
Acquisition costs associated with insurance and
investment contracts (2 413) (3 594)
Expenses (3 899) (3 963)
Preference dividend in subsidiary (184) (138)
Goodwill impairment (397)
Profit/(loss) on sale of subsidiaries 374 (2)
Equity accounted earnings from joint ventures 150 91
Profit before taxation 5 413 3 361
Taxation (2 249) (1 623)
Total earnings 3 164 1 738
Attributable to:
Equity holders 2 875 1 442
Minority interests 289 296
3 164 1 738
Weighted average number of shares in issue 252 545 000 251 761 000
Earnings per share Cents Cents
Basic earnings 1 138,3 572,8
Fully diluted 1 091,4 560,3
Headline earnings
for the year ended 31 December 2006
As restated
31 December 31 December
2006 2005
Audited Rm Rm
Reconciliation of headline earnings
Total earnings attributable to equity holders 2 875 1 442
Goodwill impairment 397
(Profit)/loss on sale of subsidiaries (374) 2
Headline earnings 2 501 1 841
Net income on BEE preference shares accounted
for in equity 88 88
BEE normalised headline earnings 2 589 1 929
Headline earnings per share Cents Cents
Basic 990,4 731,2
Fully diluted 949,5 715,3
BEE normalised 930,2 694,8
Condensed statement of changes in group ordinary shareholders` funds
for the year ended 31 December 2006
As restated
31 December 31 December
2006 2005
Audited Rm Rm
Balance at 1 January 9 434 8 524
Total earnings 2 875 1 442
Ordinary dividends (1 013) (773)
Capital reduction (912)
Subscriptions for shares 52 68
Black Economic Empowerment transaction 89 72
Share based payments 51 45
Owner-occupied properties - net fair value
adjustments 35 94
Reversal of fair value adjustment on Capital
Alliance Holdings
Limited existing shares (17)
Treasury shares 6 (25)
Foreign currency translation movement on
subsidiaries 48 4
Ordinary shareholders` funds 10 665 9 434
Minority interests 1 828 1 895
Total shareholder funds at 31 December 12 493 11 329
Condensed group cash flow statement
for the year ended 31 December 2006
As restated
31 December 31 December
2006 2005
Audited Rm Rm
Operating activities 5 125 7 890
Investing activities (11 423) (5 011)
Financing activities (916) 2 070
Net (decrease)/increase in cash and cash
equivalents (7 214) 4 949
Cash and cash equivalents at beginning of year 12 451 6 195
Net cash acquired on business acquisition and
disposals 1 444
Reclassified to disposal groups held for sale (137)
Cash and cash equivalents at end of year 5 237 12 451
Condensed segment information for the year ended 31 December 2006
Group Individual
Pru-
dential
Non- partici-
Non- Partici- parti- pating
Risk risk pating cipating business
Audited Rm Rm Rm Rm Rm
Segment revenue 1 776 7 430 38 184 5 554 2 631
Segment expenses (1 514) (7 293) (35 950) (4 872) (2 424)
Segment result 262 137 2 234 682 207
Profit before
taxation 262 135 2 275 496 207
Taxation (77) (73) (1 504) (176) (150)
Total earnings 185 62 771 320 57
31 December 2005
as restated
Segment revenue 1 563 6 393 32 163 6 057 2 152
Segment expenses (1 277) (6 281) (31 328) (5 007) (1 975)
Segment result 286 112 835 1 050 177
Profit before
taxation 285 110 839 912 176
Taxation (96) (104) (678) (376) (154)
Total earnings 189 6 161 536 22
Other
Share-
Asset holder Dis-
manage- opera- Mutual posal
ment tions funds groups Total
Audited Rm Rm Rm Rm Rm
Segment revenue 87 1 916 1 703 59 281
Segment expenses (3) (234) (1 703) (53 993)
Segment result 84 1 682 - 5 288
Profit before
taxation 185 1 853 5 413
Taxation (15) (254) (2 249)
Total earnings 170 1 599 3 164
31 December 2005
as restated
Segment revenue 114 1 445 2 084 922 52 893
Segment expenses (27) (264) (2 084) (762) (49 005)
Segment result 87 1 181 - 160 3 888
Profit before
taxation 164 717 158 3 361
Taxation (14) (174) (27) (1 623)
Total earnings 150 543 131 1 738
Embedded value and value
of new business
as at 31 December 2006
31 December 31 December
2006 2005
Audited Rm Rm
Group embedded value
Risk discount rate4 10,5% 10,0%
Net worth 9 437 8 279
Ordinary shareholders` funds on published basis 10 665 9 434
Adjustment of ordinary shareholders` funds from
published basis1 (1 470) (1 236)
Financial services subsidiaries fair value
adjustment2 1 406 1 345
Adjustment for carrying value of in-force
business acquired3 (908) (1 019)
Allowance for fair value of share options (256) (245)
Net value of life business in-force 12 420 10 874
Value of life business in-force 13 163 11 563
Cost of solvency capital (743) (689)
Embedded value 21 857 19 153
Embedded value per share information
Embedded value (Rm) 21 857 19 153
Number of shares in issue less shares in
respect of the BEE transaction
(millions) 253,0 252,2
Embedded value per ordinary share (R) 86,38 75,96
Embedded value before BEE impairment (Rm) 23 017 20 404
Number of shares including shares in respect of
the BEE transaction
(millions) 278,8 277,9
BEE normalised embedded value per share (R) 82,55 73,41
Value of new business and new business margins
(31 December 2005 post Statement of Intent)
Net value of new business written in the year 607 777
Gross value of new business 647 858
Cost of solvency capital (40) (81)
Present value of future expected premiums 24 588 26 216
New business margin (1) 2,5% 3,0%
New business index excluding contractual
increases 3 762 3 911
(1) Embedded value of new business as a percentage of the present value of
future expected premiums.
Embedded value profits
for the year ended 31 December 2006
As restated
31 December 31 December
2006 2005
Audited Rm Rm
Embedded value at the end of the year 21 857 19 153
Less capital raised (52) (68)
Plus net capital reduction paid 912
Plus dividends paid 924 701
Less restated embedded value at the beginning
of the year (19 153) (16 319)
Embedded value profits 4 488 3 467
Return on net worth 54,2% 39,5%
Return on embedded value 23,4% 21,2%
BEE normalised return on embedded value 22,4% 20,1%
Analysis of embedded value profits
for the year ended 31 December 2006
Net value of
life business Embedded
Net worth in-force value
Audited Rm Rm Rm
Embedded value profits for the year
Embedded value at the end of the
year 9 437 12 420 21 857
Less capital raised (52) (52)
Plus dividends paid 924 924
Plus net capital reduction paid 912 912
Less embedded value at the
beginning of the year (8 279) (10 874) (19 153)
Embedded value profits 2 942 1 546 4 488
Components of embedded value
profits
Value of new business written in
the year 607 607
1 101 1 101
Expected return on value of life
business 7
Expected net of tax profit
transfer to net worth 10 470 (470)
Operating experience variances 11 231 (256) (25)
Operating assumption changes 12 (99) (32) (131)
Embedded value profits from
operations 602 950 1 552
Investment return on net worth 1 700 1 700
Exchange rate movements 48 48
Investment variances 956 1 022 1 978
Changes in economic assumptions 13 (167) (140) (307)
Changes in modelling methodology (78) 37 (41)
(10) (10)
Change in allowance for fair value
of share options 14
Change in respect of investment
guarantees 15 (109) (323) (432)
Total embedded value profits 2 942 1 546 4 488
Bases, assumptions and additional information
1. The amounts of R1 470 million and R1 236 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.
2. The published value of financial service subsidiaries is enhanced for
embedded value purposes to essentially hold these subsidiaries at a multiple of
earnings. This adjustment is shown as the `financial service subsidiaries fair
value adjustment`.
This adjustment consisted of the following:
31 December 31 December
2006 2005
Liberty Group Properties (Proprietary) Limited 350 300
Liberty Ermitage Jersey Limited 305
Liberty Jersey 140
STANLIB Limited 916 710
Prefsure Holdings Limited 30
1 406 1 345
In the case of Liberty Group Properties (Proprietary) Limited, Liberty Ermitage
Jersey Limited and STANLIB in 2005, a price earnings ratio multiplier was
applied to the net after tax recurring earnings of the subsidiaries. For Liberty
Group Properties a multiplier of 10 was used (2005: 10). Liberty Jersey are
asset managers of certain group offshore investment portfolios arising from the
sale of Liberty Ermitage Jersey Limited. A multiplier of 5 was used.
The R916 million represents Liberty Life`s share of the excess over the net
asset value of STANLIB and effectively values STANLIB at R3 380 million in
total, being the transaction value for STANLIB.
3. The carrying value of business acquired by Liberty Life (analysed below)
has been deducted from shareholders` funds in order to avoid double counting.
For embedded value purposes, the value in respect of this amount is included in
the net value of life business in-force.
31 December 31 December
2006 2005
Investec Employee Benefits (85) (96)
Capital Alliance Holdings Limited (CAHL) (775) (872)
Business previously acquired by CAHL (48) (51)
(908) (1 019)
4. Future investment returns on the major 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.
2006 2005
Government stock 8,00% 7,50%
Equities 10,00% 9,50%
Property 9,00% 8,50%
Cash 6,50% 6,00%
5. The risk discount rate has been set equal to 0,5% in
excess of the
investment return on equity assets. 10,50% 10,00%
6. Maintenance expense inflation rate 4,50% 4,00%
7. 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 half a year to the value of new business.
8. 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
current rates. No allowance has been made for the secondary taxation on
companies and retirement funding taxation changes announced in the budget on 21
February 2007.
9. Other bases, bonus rates and assumptions:
Parameters reflect best estimates of future experience, consistent with the
valuation basis used by the statutory actuary, excluding any compulsory or
discretionary margins. However, in contrast to the valuation basis assumption,
the embedded value does make allowance for automatic premium and benefit
increases.
10. The expected net of tax transfer to net worth includes a negative amount of
approximately R710 million arising due to the new business strain experienced on
the statutory valuation basis.
11. The amount of R25 million shown for operating experience variations arises
from actual risk experience being better than expected but being offset by worse
than expected withdrawal experience on some categories of the individual life
business as well as the termination of a large corporate scheme.
12. The largest component of the amount of R131 million shown for operating
assumption changes is a strengthening of the withdrawal basis on certain
categories of individual life products.
13. The amount of R307 million shown for changes in economic assumptions
arises from the change to a higher level of economic assumptions.
14. The amount of R10 million in respect of the change in the fair value of
share options arises from the change in the number of shares under option and
the increase in the market value of the Liberty Group Limited share price over
the reporting period.
15. In anticipation of the move to a market consistent basis of valuing
investment guarantees, no value was placed on the discretionary margin in
respect of investment guarantees and an additional amount of R148 million was
included in reserves. These items resulted in a reduction in embedded value of
R432 million.
16. The assets backing the Capital Adequacy Requirement (CAR) are assumed to be
60% equities, 20% cash, 15% preference shares and 5% gilts. This mix is the same
as at 31 December 2005.
New business
for the year ended 31 December 2006
Comparatives include continuing operations of Capital Alliance for
twelve months
31 December 31 December
2006 2005
Rm Rm % change
Individual 14 121 13 793
Single 11 172 10 825 3,2
Recurring 2 949 2 968 (0,6)
Group 2 556 3 005
Single 1 905 2 320 (17,9)
Recurring 651 685 (5,0)
Total new business 16 677 16 798 (0,7)
Net cash inflows
for the year ended 31 December 2006
Comparatives include continuing operations of Capital Alliance for
twelve months
31 December 31 December
2006 2005
Rm Rm % change
Individual 3 608 4 308
Inflows and premiums 21 810 21 010 3,8
Claims and benefits (18 202) (16 702) 9,0
Group 19 614
Inflows and premiums 6 092 6 458 (5,7)
Claims and benefits (6 073) (5 844) 3,9
Net cash inflows 3 627 4 922 (26,3)
Analysis of ordinary shareholders` funds invested for the year ended
31 December 2006
Group
funds invested
31 Dec 31 Dec
2006 2005
Rm Rm
Insurance operations 908 1 019
Operating surplus
Present value of in-force
business acquired 908 1 019
Liberty Active preference
dividend
Working capital charge (1)
Statement of Intent
Financing of insurance operations (1 722) 683
Fixed assets and working capital (1) 478 2 883
Callable capital bonds and
preference share liabilities (2 200) (2 200)
Financial services operations 525 449
Liberty Group Properties 35 11
STANLIB 459 406
Liberty Jersey
Other 31 32
Investments 10 954 6 337
Listed equity investments 2 418 1 797
Interest bearing deposits 4 275 2 432
Preference shares 1 361 406
Mutual funds 1 460 1 214
Share of pooled portfolios 943 373
Unlisted investments 497 115
Disposal groups held for sale 946
Prefsure Holdings 400
Liberty Ermitage Jersey 546
Administration expenses -
shareholder allocation
Normal taxation excluding
insurance operations
Secondary tax on companies
Capital gains taxation on
shareholder specific assets
Net investment gains
Goodwill impairment
Profit/(loss) on sale of subsidiaries
Total shareholders` funds 10 665 9 434
Contribution
to earnings
31 Dec 31 Dec
2006 2005
Rm Rm
Insurance operations 1 395 914
Operating surplus 1 822 1 593
Present value of in-force
business acquired (117) (90)
Liberty Active preference
dividend (184) (138)
Working capital charge (1) (126) (130)
Statement of Intent (321)
Financing of insurance operations (68) 65
Fixed assets and working capital (1) 126 130
Callable capital bonds and
preference share liabilities (194) (65)
Financial services operations 247 149
Liberty Group Properties 37 33
STANLIB 133 107
Liberty Jersey 36
Other 41 9
Investments 561 316
Listed equity investments 95 62
Interest bearing deposits 286 99
Preference shares 40 37
Mutual funds 40 21
Share of pooled portfolios 77 54
Unlisted investments 23 43
Disposal groups held for sale 105
Prefsure Holdings 28
Liberty Ermitage Jersey 77
Administration expenses -
shareholder allocation (192) (163)
Normal taxation excluding
insurance operations (57) 38
Secondary tax on companies (90) (74)
Capital gains taxation on
shareholder specific assets
Net investment gains 705 491
Goodwill impairment (397)
Profit/(loss) on sale of subsidiaries 374 (2)
Total shareholders` funds 2 875 1 442
Group investment
gains/(losses)
31 Dec 31 Dec
2006 2005
Rm Rm
Insurance operations
Operating surplus
Present value of in-force
business acquired
Liberty Active preference
dividend
Working capital charge (1)
Statement of Intent
Financing of insurance operations
Fixed assets and working capital (1)
Callable capital bonds and
preference share liabilities
Financial services operations 2
Liberty Group Properties
STANLIB
Liberty Jersey
Other 2
Investments 793 610
Listed equity investments 592 382
Interest bearing deposits 7
Preference shares (14) 2
Mutual funds 90 17
Share of pooled portfolios 104 102
Unlisted investments 21 100
Disposal groups held for sale 12
Prefsure Holdings
Liberty Ermitage Jersey 12
Administration expenses -
shareholder allocation
Normal taxation excluding
insurance operations
Secondary tax on companies
Capital gains taxation on
shareholder specific assets (88) (133)
Net investment gains (705) (491)
Goodwill impairment
Profit/(loss) on sale of subsidiaries
Total shareholders` funds - -
(1) With effect from 1 July 2005 Liberty Life 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 bond interest rate.
Commitments summary as at 31 December 2006
31 December 31 December
2006 2005
Audited Rm Rm
Operating leases - properties and equipment 632 755
Within 1 year 95 110
1 to 5 years 374 377
6 to 10 years 163 268
Capital commitments 1 987 288
STANLIB Limited acquisition 1 575
Investment and owner-occupied property 311
Equipment 101 288
Related parties as at 31 December 2006
The approved STANLIB Limited acquisition is a significant related party
transaction that will occur in 2007 as 37,4% of the shares acquired are held by
the group`s ultimate holding company, Standard Bank Group Limited.
There have been no further significant changes to the nature of the related
party transactions as described in note 44 to the 31 December 2005 annual
financial statements.
Summary of movement in investments in ordinary shares held by the group in the
group`s holding companies is as follows:
Liberty Holdings Limited
Number Market value
`000 Rm Ownership %
Balance at 31 December 2005 2 630 497 5,36
Purchases 404 81
Sales (310) (63)
Fair value adjustments 57
Balance at 31 December 2006 2 724 572 5,54
Standard Bank Group Limited
Balance at 31 December 2005 46 489 3 525 3,44
Purchases 3 346 281
Sales (11 247) (906)
Fair value adjustments 747
Balance at 31 December 2006 38 588 3 647 2,83
Date: 02/03/2007 08:00:01 Produced by the JSE SENS Department.
