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

FINANCIAL RESULTS FINANCIAL RESULTS Liberty Holdings Limited For the year ended 31 December 2018 Financial results presentation Liberty – an Authorised Financial Services Provider In terms of the FAIS Act (Licence No. 2409).

FINANCIAL RESULTS PRESENTATION Liberty Holdings Limited Financial results presentation for the year ended 31 December 2018 Strategic update David Munro, Chief Executive NOTES 1 Liberty Holdings Limited Financial results for the year ended 31 December 2018

FINANCIAL RESULTS PRESENTATION Good progress made in delivering Liberty’s turnaround strategy Group purpose Improving people’s lives by making their financial freedom possible Transforming Liberty to be the trusted leader in South Africa and chosen markets by delivering superior value Group vision through exceptional client and adviser experiences In executing our Group We measure our progress using strategy our key focus areas are five strategic value drivers Deliver an exceptional client Client & Adviser and financial adviser Client experience Employee Risk and Financial experience + + = and Adviser engagement conduct outcome experience Digitisation via digital platforms SEE impact Standard Bank Integral part of the Standard Group Bank Group SEE = Social, economic and environmental 3 Supporting our clients in their life journeys 4 NOTES 2

FINANCIAL RESULTS PRESENTATION Strategic delivery in 2018 Restore the performance of the SA Retail Improved investment performance in 1 2 business STANLIB South Africa EARNINGS R1 581 million  31% EARNINGS R355 million  41% VALUE OF NEW BUSINESS R271 million  75% FIRST QUARTILE EQUITY AND BALANCED CORE RETAIL FUNDS 1 year return  Enhanced customer and adviser self service capabilities  Appointment of Head of Investments (HOI)  Adviser experience and productivity  Restructured equity and multi-asset capabilities  Product enhancements  Improved risk and performance analytics  Margin management  Strengthening the quality of oversight  Organisational redesign  Simplified uncompetitive product set 5 Strategic delivery in 2018, continued Leverage further opportunities 3 4 Optimise our growth initiatives with the Standard Bank group  Continue to prioritise collaboration for business growth,  Liberty Corporate strategic direction confirmed and leverage joint capabilities for the group  L2D converted to a corporate REIT Bancassurance Collaboration across Africa  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 Assurance Banking 6 NOTES 3 Liberty Holdings Limited Financial results for the year ended 31 December 2018

FINANCIAL RESULTS PRESENTATION Review of the financial results for 2018 Yuresh Maharaj, Group Financial Director Group financial highlights NORMALISED OPERATING EARNINGS THIRD PARTY CASH FLOWS R2 006 million  42% R10 168 million  56% (Dec 2017: R1 412 million) (Dec 2017: R6 503 million) NEW BUSINESS MARGIN EMBEDDED VALUE OF NEW BUSINESS 0.9%  40 bps R371 million  59% (Dec 2017: R233 million) (Dec 2017: 0.5%) CAPITAL COVERAGE RATIO FULL YEAR DISTRIBUTION PER SHARE 691 cents LIBERTY GROUP LIMITED 1.87 times covered Significant progress across key metrics 8 NOTES 4

FINANCIAL RESULTS PRESENTATION Contribution to normalised headline earnings % ∆ Normalised headline earnings Rm Dec 18 Dec 17 + South African Insurance Operations 2 009 1 665 21 Positive experience variances, stringent cost management and SA Retail (previously Individual Arrangements) 1 581 1 208 31 positive basis changes Liberty Corporate 52 81 (36) LibFin Markets 376 376 - + South African Asset Management – STANLIB 355 252 41 Strong third party net cash flows Africa regions¹ 8 7 14 + Operations under ownership review (166) (322) 48 Negotiations underway 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 - Lower market returns LibFin Investments - SIP 250 1 307 (81) Normalised headline earnings 2 256 2 719 (17) 1. Comprises – Liberty Africa Insurance and STANLIB Africa within Southern African region 9 Group value of new business Value of new business contribution (Rm) Value of new business key drivers (Rm) Dec 2018 371 December 2017 233 + Margin initiatives, volumes and expenses 90 27 233 73 + Modelling, assumption and basis changes 48 21 57 Value of new business for the year 371 271 155 Value of new business margin (%) 0.9 2017 2018 SA Retail Liberty Corporate Liberty Africa Insurance • 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 10 NOTES 5 Liberty Holdings Limited Financial results for the year ended 31 December 2018

FINANCIAL RESULTS PRESENTATION Insurance key indicators % ∆ 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 Signs of improvement with better second half performance 11 SA insurance operations embedded value Positive operating experience variances (Rm) Contribution to return on embedded value from positive operating experience variances (%) 582 1.86 477 423 1.35 330 1.22 0.96 2015 2016 2017 2018 2015 2016 2017 2018 • Consistent positive experience variances driven by: › Positive mortality and morbidity variances › Continued emergence of positive credit portfolio variances Consistently managed to better than model 12 NOTES 6

FINANCIAL RESULTS PRESENTATION Normalised group equity value earnings Influenced by Influenced by management action investment market returns 246 507 (108) 371 (369) 2 433 1 488 (1 582) (10) Expected Value of new Experience Headline earnings Development 1 year Investment Change in Group Equity return on VIF business variances of other costs replacement variances, share option Value earnings and assumption business units of shareholder economic allowance changes expenses and fair value adjustments Operational equity value profits increased 18%, driven by management actions 13 STANLIB South Africa Core retail funds - quartile performance 2018 2017 2016 Investment performance Fund name 1 year 3 years 1 year 3 years 1 year 3 years reflecting early signs of improvement 1 3 2 3 4 3 STANLIB Equity Fund  Additional resources 1 3 3 4 4 4 added to the team STANLIB Balanced with significant industry experience, starting Net cash inflows (Rm) Dec 2018 Dec 2017 to bear fruit Retail and Institutional 16 149 4 731  Improved investment oversight and Non-money market 9 155 4 815 governance processes Money market 6 994 (84) Good start to restore investment track record 14 NOTES 7 Liberty Holdings Limited Financial results for the year ended 31 December 2018

FINANCIAL RESULTS PRESENTATION Capital position Rm (unless stated otherwise) Liberty Group Limited S&P Ratings Feb 2019 Regulatory capital Long Term Counter-party Rating zaAAA Available Solvency Capital 32 586 Subordinated Debt Rating zaAA- Solvency Capital Requirement 17 400 Surplus above solvency requirement 15 186 Capital ratio at year end (times covered) 1.87 S&P Ratings • Robust balance sheet • Strong capital and risk management capability Capital position at upper end of target range 15 Measure of progress 1 2 3 4 Value of Robust capital Return on Return new business margin at upper end of range Group Equity Value on equity 0.9% 1.87 times 3.8% 10.1% Dec 2017: 0.5% Dec 2017: * Dec 2017: 1.1% Dec 2017: 12.3% Improved earnings from Stringent cost Improved variances and + + + + Robust balance sheet SA Retail and STANLIB management basis changes South Africa Improving value of new + business Product and margin Strong risk management Stringent cost + + + initiatives capability management Investment variances, - economic basis changes Improved sales volume Low investment market Low investment market + + - - Dividend maintained in second half 2018 returns returns 1% - 1.5% target range 1.5 - 2.0x target range RoGEV >12% 15 - 18% target range 16 * 2017 comparative not applicable due to the new prudential regulatory regime effective 1 July 2018 NOTES 8