Presentation 2011 Annual Results for the year ended 31 December - PowerPoint PPT Presentation

Liberty Holdings Limited Presentation 2011 Annual Results for the year ended 31 December

Financial performance review Casper Troskie

Operating environment GDP vs CPI Equity market performance 15 160 12 120 9 6.1 6 3 80 0 -3 40 Mar Sep Mar Sep Mar Sep Mar Sep 2007 2008 2009 2010 2011 2012F GDP CPI Emerging markets Developed markets ● CPI breached the targeted range of 3-6%, mainly driven by increased food and petrol prices (excluding rising food and petrol prices, CPI remained well within the inflation target at 4.4%) ● Continued emerging market outperformance as Eurozone uncertainties heightened market volatility 3 Source: MSCI Indices (USD), based to 1 Jan 2007 = 100)

Group financial summary – full year Rm (unless stated otherwise) Dec 10 % Dec 11 Adjusted core operating earnings 2 283 15 2 636 Embedded value of long-term insurance new business 410 261 57 Indexed long-term insurance new business 5 152 4 327 19 Long-term insurance customer cash flows 4 230 (287) >100 Net cash (outflows)/inflows including money market (91) 22 179 >100 Retail and institutional net cash inflows excluding money 13 598 1 323 >100 market Money market net cash (outflows)/inflows 20 856 >100 (13 689) LGL CAR cover (times covered) 2.67 8 2.89 BEE normalised headline earnings 2 597 3 2 663 BEE normalised group equity value per share (R) 91.01 10 100.15 BEE normalised RoGEV (%) 13.4 14 15.3 BEE normalised RoE (%) 19.6 21.2 (7) 4

Business unit BEE normalised headline earnings Rm (unless stated otherwise) 2H11 1H11 Dec 10 % Dec 11 Retail SA 664 650 899 46 1 314 Corporate (11) 47 36 103 (65) LibFin Investments 694 275 969 1 174 (17) LibFin Markets 85 70 155 269 (42) STANLIB 224 190 414 361 15 Liberty Properties 52 44 96 96 0 Liberty Africa 5 16 21 10 >100 Liberty Health (55) (10) (43) (51) (65) Frank (29) (18) (44) (7) (47) Centre (146) (84) (228) (1) (230) BEE normalised headline 1 483 1 180 2 663 2 597 3 earnings BEE normalised headline earnings 930.8 907.6 3 per share (cents) 5

Changes in key assumptions ● Risk discount rate decreased 12 bps 10.95% (Dec 10: 11.07%) ● Positive: • Persistency assumptions were adjusted to improved evidenced trends • An improved estimate of the illiquidity premium of annuity and guaranteed investment products ● Negative: • Expense basis was strengthened to provide for a portion of non recurring expenses, business as usual retention capacity and certain shareholder expenses (VIF) • Strengthening of certain annuitant mortality assumptions Net positive IFRS earnings impact of assumption changes R292m 6

Sources of BEE normalised group equity value profit Rm (unless stated otherwise) Dec 11 Dec 10 % Value of long-term insurance new business 410 261 57 Expected return on SA covered business 1 619 1 1 640 Variances/changes in operating assumptions 894 15 >100 Headline earnings of other businesses 380 10 419 Operational equity value earnings 3 363 2 275 48 Non headline loss of other businesses (110) 100 Development costs (72) 15 (61) Investment return on net worth and investment variances 353 678 (48) Changes in economic assumptions - SA covered business 331 (>100) (12) Increase in fair value adjustment on value of other businesses 183 (21) 145 Change in STC allowance 257 (32) >100 Change in allowance for share options/rights (30) (>100) (64) Group equity value earnings 3 981 3 223 24 RoGEV - annualised return (%) 15.3 13.4 14 7

Long-term insurance indexed new business¹ Rm Dec 10 % Dec 11 Retail SA 3 717 18 4 375 Corporate 638 542 18 Liberty Africa 111 68 63 Frank 28 n/a Total 5 152 4 327 19 1. Excludes natural increases n/a – not applicable 8

Value of new business Rm (unless stated otherwise) Dec 10 % Dec 11 Value of new business 261 57 410 Retail SA 361 229 58 Corporate 18 16 13 Liberty Africa 29 16 81 Frank 2 n/a New business margins (%) 1.4 1.2 17 Retail SA 1.6 1.3 23 Corporate 0.4 (25) 0.3 Liberty Africa 5.2 73 9.0 Frank n/a 2.6 n/a – not applicable 9

Assets under management Rbn Dec 10 % Dec 11 Assets under management 442 3 455 STANLIB 341 355 (4) Liberty Africa 39 29 34 LibFin 25 10 >100 Liberty Properties 27 25 8 Externally managed 23 23 - Asset management net cash flows¹ - 22 (>100) STANLIB 16 (>100) (5) Liberty Africa 6 (17) 5 10 1. Excluding intergroup

Liberty Group Limited CAR cover 3.5x 2.89x 3.0x 2.81x 2.67x 2.66x 2.5x 2.03x 2.0x 1.5x 2007 2008 2009 2010 2011 LGL TCAR 3 510 3 020* 2 542* 2 532 2 406 LGL OCAR 4 102* 2 204 2 413 2 688* 2 495* 11 * Applicable CAR

Distributions ● It is the intention of the Board to pay a full year dividend in accordance with the Group’s dividend policy ● A dividend of 77 cents, subject to STC, has been declared to pass available STC credits to shareholders ● A further dividend announcement will be made as soon as possible on or after 1 April 2012 12

Retail SA Insurance – headline earnings Rm Dec 10 % Dec 11 Expected profit and premium escalations 1 915 5 2 016 Variances, modelling and assumption changes 587 (265) >100 New business strain (475) (462) (3) Project, outperformance incentive and non CPP expenses (328) (250) (31) Other (7) 172 (>100) Taxation (486) (253) (92) Earnings before Bancassurance 1 307 857 53 Liberty share of credit life Bancassurance (net of all taxes) 94 2 96 Complex Bancassurance preference dividend including (52) (71) (89) STC Headline earnings 1 314 899 46 13

LibFin Markets Gross cumulative daily P&L 200 10% Cumulative % return year to date 100 5% 0 0% Cumulative P&L (Rm) -100 -5% -200 -10% -300 -15% -400 -20% 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 Jul Aug Cumulative profit and loss (excl hedging) for the period Cumulative profit and loss (incl hedging) for the period Cumulative return on S&P500 Reducing earnings volatility and capital requirements in turbulent markets 14

LibFin Investments Asset class performances in 2011 120 110 100 90 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Local equity Local bonds Local property Foreign Shareholders' Investment Portfolio Gross return (%) Selection of indices 2007 2008 2009 2010 2011 SWIX 18.1 (21.7) 29.9 20.9 4.3 ALBI 4.2 17.0 (1.0) 15.0 8.8 STEFI 9.4 11.7 9.1 6.9 5.7 R/$ exchange 3.5 (26.6) (26.4) 11.6 22.0 Building a solid track record for reliable risk adjusted returns 15

LibFin – headline earnings Rm 2H11 1H11 Dec 10 % Dec 11 LibFin LibFin Investments 694 275 969 1 174 (17) LibFin Markets 85 70 155 269 (42) Total 779 345 1 124 1 443 (22) The SIP delivered a return of 8.1% in line with benchmark 16

LibFin – Shareholders’ Investment Portfolio Rm % Dec 10 % Dec 11 Local equities 15 3 952 23 3 094 Local bonds 4 343 21 4 053 23 Local cash 5 472 27 3 445 20 Local preference shares 1 471 7 1 617 9 Local property 2 423 12 1 654 10 Foreign assets 3 623 18 2 606 15 Total 20 426 100 17 327 100 Assets backing capital 45 9 043 52 9 226 Assets backing life funds 36 4 457 26 7 397 90:10 exposure 19 3 827 22 3 803 17

Corporate – headline earnings Rm Dec 10 % Dec 11 Gross contribution 789 1 794 Underwriting margin 344 357 (4) Fee income 401 371 8 Pension businesses and other income 49 61 (20) Expenses and other items (647) (577) (12) Amortisation of previously acquired business (68) (52) (31) Pre-tax operating profit 79 160 (51) Taxation (51) >100 17 Headline earnings (before fund termination projects) 96 109 (12) Fund termination projects (6) (>100) (60) Headline earnings 36 103 (65) 18

STANLIB – headline earnings Rm Dec 10 % Dec 11 Net fee income 1 072 14 1 223 Base fees 1 162 1 068 9 Performance fees 61 (5) >100 Operating expenses (680) (602) (13) Profit before investment income 543 470 16 Other income and preference dividends 37 27 37 Pre-tax profit 580 497 17 Taxation (137) (21) (166) Headline earnings 360 15 414 Attributable to Liberty 414 361 15 Headline earnings 360 15 414 Preference shares 1 19

Liberty Properties – headline earnings Rm Dec 10 % Dec 11 Gross profit 243 6 257 Property management 150 127 18 Asset and hotel management 43 39 10 Property development 64 77 (17) Investment and other income 5 5 - Operating expenses (153) (129) (19) Pre-tax operating profit 109 119 (8) Taxation (33) 27 (24) Headline earnings 86 (1) 85 Fountainhead (net of taxation) 10 10 11 Total headline earnings 96 96 - 20

Liberty Africa – headline earnings Rm Dec 10 % Dec 11 Headline earnings 28 61 45 Attributable to Liberty 21 10 >100 Insurance operations 27 9 >100 Asset management 35 16 >100 Health 2 1 100 Head office expenses (43) (16) (>100) 21

Liberty Health – headline earnings Rm Dec 10 % Dec 11 Revenue 504 3 517 Operating expenses (589) (520) (13) EBITDA (72) (16) (>100) Amortisation and depreciation (50) (38) (32) Operating loss (122) (54) (>100) Headline earnings attributable to Liberty (65) (43) (51) 22