Liberty Holdings Limited 2017€¦ · 10 Liberty Holdings Limited Financial results for the six...

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Liberty Holdings Limited Financial results for the six months ended 30 June 2017 1

Slides-Aug2017 August 3, 2017 5:46 PM

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Financial resultspresentation

Liberty Holdings Limited

for the six months ended 30 June2017

2

Results agenda

Financial performance review for the six months ended 30 June 2017

Casper Troskie

Financial Director

Conclusion

David Munro

Chief Executive

Conclusion David Munro

Chief Executive

Financial performance review Casper Troskie

for the six months ended 30 June 2017 Financial Director

2 Liberty Holdings Limited Financial results for the six months ended 30 June 2017

August 3, 2017 5:46 PM Slides-Aug2017

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Low equity market returns, recessionary environment

Source: I-Net Bridge and Bloomberg

•  GDP growth data confirms that the South African economy has now officially fallen into recession

•  Deterioration in business and consumer confidence aggravated by the sovereign downgrade and ongoing political uncertainty

•  Weak GDP growth outlook and lower inflation prompts MPC to cut rates

•  Favourable inflows to SA and a smaller current account deficit helped offset negatives from the ratings downgrade and political environment

JSE SWIX Jan 2015

7,00

7,50

8,00

8,50

9,00

9,50

10,00

10,50

11,00

11,50

12,00

ZAR/USD 10 year SA bond (RHS)

Jan 2015 Jan 2017 Jan 2016

Volatile local equity market returns take direction from global market events

SA bonds yields attract offshore investors – ratings pressure and political risk have not countered demand

Jun 2017 Jun 2017

13.07

8.78

Liberty Holdings LimitedCasper Troskie, Financial Director

Financial performance review

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Group financial highlights

Improved sales and cash inflows, underpinned by a strong capital position

Rm (unless stated otherwise) Jun 17 Jun 16

Normalised headline earnings 1 267 1 821

Group Equity Value 40 190 41 994

Normalised Group Equity Value per share (R) 143.16 148.44

Group net customer cash flows 5 744 461

Long-term insurance indexed new business 3 930 3 569

Insurance gross sales 14 092 12 762

LGL CAR cover (times covered) 2.82 2.95

Normalised headline earnings improvement from second half of 2016

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•  Operating variances and assumptions reflect: ›  Strong positive risk variances

›  Negative impacts of modelling changes to better reflect the expectation of future cash flows in respect of advisor benefits

›  Negative tax assumption change required to reflect revisions to the dividend withholding tax rate

•  Value of new business down due to sales mix and cost pressures

Operating variances and assumption changes remained positive

257

86

1H16 1H17

Value of new business (Rm)

213

21

1H16 1H17

Total operating experience variances (Rm)



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SA covered business net worth – delivery on assumption

Continued positive delivery on actuarial assumptions

Net worth (Rm) 1H2017 1H2016

Expected transfer to net worth 2 138 2 154

Operating experience variances, assumption and modelling changes 49 127

Development expenses (30) -

Change in allowance for fair value of share rights - 11

Actual net of tax transfer to net worth 2 157 2 292

Performance in line with expectation (%) 101 106

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Capital position at 30 June 2017

Capital levels remain strong post the sovereign credit ratings downgrade

Rm Liberty

Holdings Limited Liberty

Group Limited

IFRS

IFRS shareholder equity 21 778 18 369

BEE preference shares 142 142

Liberty Two Degrees normalisation (158) -

Normalised shareholder equity 21 762 18 511

Regulatory capital

Shareholder assets 18 118 14 849

Regulatory capital requirement 5 899 5 262

Surplus above regulatory requirement 12 219 9 587

Risk appetite capital coverage ratio 1.50 1.50

Capital buffer in excess of risk appetite 9 270 6 956

Capital ratio at period end 3.07 2.82

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Interim dividend declared in line with policy

* Excludes 130cps special dividend

•  Sufficient cash generation to support dividend

•  Capital ratios remain strong and at upper end of target ranges

•  Attractive dividend yield

276

528* 581

634 691 691

2012 2013 2014 2015 2016 2017 Interim Final

Total distributions - cents per share

10

597

814

1 267

61

168 115

453

(118) (9)

Business unit earnings lower

•  Individual Arrangements earnings impacted by: ›  Higher new business strain ›  Negative impacts of modelling changes

•  STANLIB SA earnings were impacted by margin pressure from lower market returns and product mix

•  Exposures in STANLIB Rest of Africa have been addressed

Business unit contribution to normalised operating earnings (Rm)

1H16: (17%) (10%) 29% (54%) >(100%) 89% (26%) (37%) (30%)

Individual Arrangements

Group Arrangement

LibFin STANLIB SA

STANLIB Rest of Africa

Central 2017 normalised operating earnings

SIP 2017 normalised headline earnings



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Group Equity Value

•  Reduction mainly due to: ›  Final dividend paid in April 2017 and share buy backs exceeding equity value earnings

›  SA covered business operating experience variances net positive

›  Reduced earnings from the asset management business resulted in negative fair value adjustment

Rm Jun 17 Dec 16

Normalised Equity Value at the end of the period 40 190 41 221

BEE preference shares 142 148

Liberty Two Degrees normalisation (158) 330

Equity Value at the end of the period 40 206 40 743

Net share buy-backs 335 477

Dividends paid 1 168 2 024

Normalised Equity Value at the beginning of the period (41 221) (41 635)

Normalised Equity Value earnings 472 2 087

Normalised Group Equity Value per share (R) 143.16 145.86

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Long-term insurance metrics remain a key focus area for improvement

Value of new business (Rm)

Individual Arrangements 62 242 (74) Group Arrangements 24 15 60 Total 86 257 (67)

Indexed new business (Rm) Jun 17 Jun 16 % Δ

Individual Arrangements 3 205 3 094 4 Group Arrangements 725 475 53

Liberty Corporate 558 324 72 Liberty Africa Insurance 167 151 11

Total 3 930 3 569 10

New business margin (%)

Individual Arrangements 0.4 1.6 (75) Liberty Corporate 0.3 (0.1) >100 Liberty Africa Insurance 4.3 7.0 (39) Total 0.4 1.4 (71)

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Rbn Jun 17 Dec 16 % Δ

Assets under management 688 676 2

STANLIB 593 586 1

LibFin 58 58 -

Other internal, external managers & GateWay LISP 37 32 16

* Excludes Gateway LISP R122m for 1H2017 (1H2016: R129m)

Substantial improvement in group net customer cash inflows

Rm Jun 17 Jun 16 % Δ

STANLIB net customer cash flows 6 090 453 >100

Retail and institutional 5 358 3 169 69

Money market 732 (2 716) >100

Long-term insurance net customer cash flows (665) (353) (88)

Individual Arrangements* 774 597 30

Group Arrangements (1 439) (955) (51)

STANLIB multi-manager - 5 -

Total 5 425 100 >100

14

96

100

104

108

112

Jan Feb Mar Apr May Jun Jul Local equity Local bonds Foreign Shareholder Investment Portfolio

Gross return (%) Selection of indices 2013 2014 2015 2016 1H2017

SWIX 20.7 15.4 3.6 4.1 0.9 ALBI 0.6 10.2 (3.9) 15.5 3.9 STEFI 5.2 5.9 6.5 7.4 3.7 R/$ exchange 23.8 10.3 33.7 (11.2) (4.8) SIP gross return 14.6 10.3 9.6 5.7 3.4 SIP earnings (Rm) 1 878 1 382 1 356 787 453

Shareholder Investment Portfolio returns impacted by equity / forex movements Asset class performance in 1H2017



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LibFin Markets – ALM

Cautious ALM positioning amid uncertain developed market monetary policy and political climate

1H2017 1H2017 1H2017

Modest equity returns within a narrow range

Emerging market rates rally as search for yield continues

Softer long-term implied volatility in line with lower realised volatility

SWIX40 10 year swap 3 year SWIX40 implied volatility

16

LibFin Markets – Credit

•  Portfolio diversification continues

•  Greater allocation to asset backed finance, project finance and property sectors

Increased diversification continues to improve the risk adjusted return

Jun 17 Jun 16 % Δ

Earnings from the Credit portfolio (Rm) 138 139 (1)

Total Credit portfolio assets 58 53 9

Credit portfolio assets (Rbn) 39 31 26

Banks, treasuries and shorter dated assets (Rbn) 19 22 (14)

Banks and Sovereign Diversified

corporates

SOE Industrials

Real Estate

LibFin assets 1H2017

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•  Value of new business and margins are priorities for the insurance operations: ›  Expense management

›  Launch of new higher margin products (Agile 2.0)

›  Margin improvements through product enhancements – risk, critical illness, investment builder

›  Insurance sales mix

•  Financial and investment performance for STANLIB

•  Conditions precedent for the Nigeria transaction not met to date

Financial performance – key focus areas

Focused on delivering an improved short- to medium-term performance

Liberty Holdings LimitedDavid Munro, Chief Executive

Conclusion



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•  Challenging operating environment

•  Disappointing decline in profitability and lower value of new business

•  Individual Arrangements and STANLIB need attention

•  Operational write-offs are not acceptable

•  Liberty Corporate, Liberty Africa Insurance and Liberty Health delivered a satisfactory result

•  Shareholder Investment Portfolio performance in line with its benchmark

•  Strong capital position and positive cash flows

Observations

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Our purpose

We make a difference in people’s lives by making their financial freedom possible

We make a difference in people’s lives by making their financial freedom possible

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Liberty Holdings Limited 2017€¦ · 10 Liberty Holdings Limited Financial results for the six...

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