For the year ended 31 December 2018 Financial results presentation - - PDF document

FINANCIAL RESULTS FINANCIAL RESULTS

Liberty – an Authorised Financial Services Provider In terms of the FAIS Act (Licence No. 2409).

Liberty Holdings Limited

For the year ended 31 December 2018

Financial results presentation

Liberty Holdings Limited Financial results for the year ended 31 December 2018

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FINANCIAL RESULTS PRESENTATION

Strategic update

David Munro, Chief Executive

Liberty Holdings Limited

Financial results presentation for the year ended 31 December 2018

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FINANCIAL RESULTS PRESENTATION

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Supporting our clients in their life journeys

3

Good progress made in delivering Liberty’s turnaround strategy

Improving people’s lives by making their financial freedom possible

SEE = Social, economic and environmental We measure our progress using five strategic value drivers

Transforming Liberty to be the trusted leader in South Africa and chosen markets by delivering superior value through exceptional client and adviser experiences

Group purpose Group vision

Client and Adviser experience Employee engagement Risk and conduct Financial

• utcome

+ + =

SEE impact In executing our Group strategy our key focus areas are Client & Adviser experience

Deliver an exceptional client and financial adviser experience

Digitisation

via digital platforms

Standard Bank Group

Integral part of the Standard Bank Group

Liberty Holdings Limited Financial results for the year ended 31 December 2018

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FINANCIAL RESULTS PRESENTATION

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Strategic delivery in 2018, continued

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Optimise our growth initiatives

Liberty Corporate strategic direction confirmed L2D converted to a corporate REIT Negotiations underway to sell majority stake in Liberty Health Sold Short-term Insurance technology platform to SBSA Actively pursuing disposal options or strategic partnerships for STANLIB operations in East and West Africa Liberty Africa Insurance undergoing a strategic review

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Leverage further opportunities with the Standard Bank group

Continue to prioritise collaboration for business growth, and leverage joint capabilities for the group Bancassurance Assurance Banking Collaboration across Africa

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Strategic delivery in 2018

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Restore the performance of the SA Retail business

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Improved investment performance in STANLIB South Africa

Enhanced customer and adviser self service capabilities Adviser experience and productivity Product enhancements Margin management Organisational redesign Appointment of Head of Investments (HOI) Restructured equity and multi-asset capabilities Improved risk and performance analytics Strengthening the quality of oversight Simplified uncompetitive product set EARNINGS R1 581 million 31% VALUE OF NEW BUSINESS R271 million 75% EARNINGS R355 million 41% EQUITY AND BALANCED CORE RETAIL FUNDS

FIRST QUARTILE 1 year return

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FINANCIAL RESULTS PRESENTATION

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Group financial highlights

Significant progress across key metrics

NORMALISED OPERATING EARNINGS

R2 006 million 42%

(Dec 2017: R1 412 million)

EMBEDDED VALUE OF NEW BUSINESS

R371 million 59%

(Dec 2017: R233 million)

NEW BUSINESS MARGIN

0.9% 40 bps

(Dec 2017: 0.5%)

THIRD PARTY CASH FLOWS

R10 168 million 56%

(Dec 2017: R6 503 million)

CAPITAL COVERAGE RATIO

LIBERTY GROUP LIMITED

1.87 times covered

FULL YEAR DISTRIBUTION PER SHARE

691 cents

Review of the financial results for 2018

Yuresh Maharaj, Group Financial Director

Liberty Holdings Limited Financial results for the year ended 31 December 2018

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FINANCIAL RESULTS PRESENTATION

10 155 271 57 73 21 27

2017 2018 SA Retail Liberty Corporate Liberty Africa Insurance

Group value of new business

• Group value of new business improvement of 59% driven by:

› Product enhancement and margin initiatives › Disciplined cost management › Improved single premium sales in Liberty Corporate and Liberty Africa Insurance Value of new business key drivers (Rm) Dec 2018 December 2017 233 Margin initiatives, volumes and expenses 90 Modelling, assumption and basis changes 48 Value of new business for the year 371 Value of new business margin (%) 0.9 Value of new business contribution (Rm)

+ +

371 233 9

Contribution to normalised headline earnings

• 1. Comprises – Liberty Africa Insurance and STANLIB Africa within Southern African region

Normalised headline earnings Rm Dec 18 Dec 17 % ∆ South African Insurance Operations 2 009 1 665 21 SA Retail (previously Individual Arrangements) 1 581 1 208 31 Liberty Corporate 52 81 (36) LibFin Markets 376 376

• South African Asset Management – STANLIB

355 252 41 Africa regions¹ 8 7 14 Operations under ownership review (166) (322) 48 Liberty Africa Insurance (18) 4 (>100) STANLIB Africa (19) (226) 92 Liberty Health (78) (54) (44) Short-term insurance (51) (46) (11) Central costs and sundry income (200) (190) (5) Normalised operating earnings 2 006 1 412 42 LibFin Investments - SIP 250 1 307 (81) Normalised headline earnings 2 256 2 719 (17)

+

Positive experience variances, stringent cost management and positive basis changes

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Strong third party net cash flows

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Negotiations underway

• Lower market returns

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FINANCIAL RESULTS PRESENTATION

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582 477 330 423 2015 2016 2017 2018

Consistently managed to better than model

SA insurance operations embedded value

• Consistent positive experience variances driven by:

› Positive mortality and morbidity variances › Continued emergence of positive credit portfolio variances Positive operating experience variances (Rm)

1.86 1.35 0.96 1.22 2015 2016 2017 2018

Contribution to return on embedded value from positive

• perating experience variances (%)

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Insurance key indicators

Signs of improvement with better second half performance

Insurance indexed new business (Rm) 2H18 1H18 Dec 18 Dec 17 % ∆ South African Insurance operations 4 060 3 627 7 687 7 741 (0.7) SA Retail (previously Individual Arrangements) 3 384 3 111 6 495 6 570 (1.1) Liberty Corporate 676 516 1 192 1 171 1.8 Liberty Africa Insurance 218 146 364 277 31.4 Total insurance indexed new business 4 278 3 773 8 051 8 018 0.4 Insurance net customer cash flows (Rm) 2H18 1H18 Dec 18 Dec 17 % ∆ South African Insurance operations 1 555 61 1 616 1 310 23.3 SA Retail (previously Individual Arrangements) 1 315 750 2 065 2 846 (27.4) Liberty Corporate 240 (689) (449) (1 536) 70.8 Liberty Africa Insurance 184 201 385 324 18.8 Total insurance net customer cash flows 1 739 262 2 001 1 634 22.5

Liberty Holdings Limited Financial results for the year ended 31 December 2018

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FINANCIAL RESULTS PRESENTATION

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STANLIB South Africa

Investment performance reflecting early signs of improvement Additional resources added to the team with significant industry experience, starting to bear fruit Improved investment

• versight and

governance processes

Good start to restore investment track record

Net cash inflows (Rm) Dec 2018 Dec 2017 Retail and Institutional 16 149 4 731 Non-money market 9 155 4 815 Money market 6 994 (84) Core retail funds - quartile performance 2018 2017 2016 Fund name 1 year 3 years 1 year 3 years 1 year 3 years STANLIB Equity Fund STANLIB Balanced

1 2 4 1 3 3 3 3 3 4 4 4

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Normalised group equity value earnings

Operational equity value profits increased 18%, driven by management actions

Expected return on VIF Value of new business Experience variances and assumption changes Headline earnings

• f other

business units Development costs 1 year replacement

• f shareholder

expenses Investment variances, economic and fair value adjustments Change in share option allowance Group Equity Value earnings Influenced by investment market returns Influenced by management action

2 433 1 488 371 507 246 (108) (369) (1 582) (10)

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FINANCIAL RESULTS PRESENTATION

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* 2017 comparative not applicable due to the new prudential regulatory regime effective 1 July 2018

Measure of progress

Value of new business margin 0.9%

Dec 2017: 0.5%

Robust capital at upper end of range 1.87 times

Dec 2017: *

Return on Group Equity Value 3.8%

Dec 2017: 1.1%

Return

• n equity

10.1%

Dec 2017: 12.3%

1 2 3 4

1% - 1.5% target range 1.5 - 2.0x target range RoGEV >12% 15 - 18% target range

+

Stringent cost management

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Product and margin initiatives

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Improved sales volume in second half 2018

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Robust balance sheet

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Improved variances and basis changes

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Improved earnings from SA Retail and STANLIB South Africa

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Strong risk management capability

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Dividend maintained

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Stringent cost management

• Low investment market

returns

+

Improving value of new business

• Investment variances,

economic basis changes

• Low investment market

returns

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Capital position at upper end of target range

Capital position

S&P Ratings

• Robust balance sheet
• Strong capital and risk management capability

Rm (unless stated otherwise) Liberty Group Limited Regulatory capital Available Solvency Capital 32 586 Solvency Capital Requirement 17 400 Surplus above solvency requirement 15 186 Capital ratio at year end (times covered) 1.87 S&P Ratings Feb 2019 Long Term Counter-party Rating zaAAA Subordinated Debt Rating zaAA-

Liberty Holdings Limited Financial results for the year ended 31 December 2018

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FINANCIAL RESULTS PRESENTATION

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In conclusion

• Strategy and priorities are clear:

› Exceptional client and adviser experiences › Advanced digital capabilities › Simplification › Motivated workforce

• Business focus remains:

› SA Retail › STANLIB South Africa › Growth initiatives › Standard Bank Group

Conclusion

David Munro, Chief Executive

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FINANCIAL RESULTS PRESENTATION

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Questions