Liberty Holdings Limited. Financial results presentation

Transcription

1 Liberty Holdings Limited Financial results presentation For the year ended 31 December 2017

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3 Liberty Holdings Limited Financial results 1 FINANCIAL RESULTS PRESENTATION Liberty Holdings Limited Financial results presentation 2017 For the year ended 31 December Taking stock Liberty Holdings Limited David Munro, Chief Executive Notes

4 2 Liberty Holdings Limited Financial results FINANCIAL RESULTS PRESENTATION LIBERTY S PURPOSE Improving people s lives by making their financial freedom possible Liberty has a broad range of products that deliver for a large and loyal customer base > Too many new efforts layered in complexity and distracted from core capabilities > Customer experience and service to financial advisers needs attention > Some products have become uncompetitive and difficult for advisers to deliver customer value > Poor investment performance from asset management operations Operating in a challenging macro environment with increased competitor activity Challenges led to pressure on margins and the ability to generate value from new business 3 Addressing the immediate priorities in the next two years 1 Value of new business margin 1% - 1.5% range 2 Growth in embedded value that exceeds 12% 3 RoE 15% - 18% range 4 Maintain robust capital within our target range times This can be achieved by; Increasing sales volumes Reduction in acquisition and maintenance costs Managing to better than assumptions and models Efficient management of capital A journey that will take time and hard work prioritising the right actions 4 Notes

5 Liberty Holdings Limited Financial results 3 Devising the path forward for Liberty FINANCIAL RESULTS PRESENTATION Horizon 1 Here and now Manage the present Horizon 2 The following years through to 2020 Horizon 3 Beyond Immediate priorities for the leadership team horizon 1 Simplification program Improve customer service, reduce complexity and simplify processes for our clients and financial advisers Reduce costs and improve efficiencies and effectiveness through intelligent automation Modernise and improve reporting systems and processes Enhance the risk and control environment Improve investment performance in asset management operations Initiatives to improve short- to medium-term performance reflect early signs of progress 6 Notes

6 4 Liberty Holdings Limited Financial results FINANCIAL RESULTS PRESENTATION Immediate priorities for the leadership team horizon 1 continued Restore financial performance Sales force effectiveness Margins Product and portfolio rationalisation Expense management Working with Liberty Two Degrees management to assess alternatives to the existing structure Terminated the intended acquisition in Nigeria Optimise outcomes from Liberty Africa Insurance, Liberty Health and the Short-term insurance joint venture with Standard Bank Group 7 Looking at our time frame to 2020 horizon 2 Evolve our strategy Understand and anticipate the changing market and evolving customer needs Leverage unique data sets and invest in technology to shape customer engagement Identify opportunities to grow Maximise our relationship with Standard Bank Group, leverage capacity and resources to increase access to customers Digitisation, improve the way we support clients and advisers and prioritise existing initiatives Modernise Liberty through culture, people and brand 8 Notes

7 Liberty Holdings Limited Financial results 5 FINANCIAL RESULTS PRESENTATION Financial results review Liberty Holdings Limited Yuresh Maharaj, Financial Director Group financial highlights Rm (unless stated otherwise) Dec 17 Dec 16 % Δ Normalised headline earnings Long-term insurance net customer cash flows Long-term insurance indexed new business Total assets under management (Rbn) Shareholder Investment Portfolio (SIP) gross of tax return (%) Liberty Group Limited capital adequacy cover (times covered) Dividend per share (cents) Improved normalised headline earnings, higher investment returns and strong capital position 10 Notes

8 6 Liberty Holdings Limited Financial results FINANCIAL RESULTS PRESENTATION SA insurance operations Operating experience variances and basis changes remain positive (Rm) SA covered business net worth (Rm) Dec 17 Dec 16 Expected transfer to net worth Operating experience variances and basis changes Development expenses (55) (45) Change in allowance for fair value share rights (3) 28 Actual net of tax transfer to net worth Performance in line with expectation (%) H Continued positive risk, persistency and credit variances partially offset by: Basis changes to better reflect the expectation of future cash flows given policy terms, conditions and regulatory landscape SA covered business embedded value maintained R34 billion, generating a return of 8.2% 5 year track record since 2013 of consistently managing insurance operations to model 11 Capital position at 31 December 2017 Rm (unless stated otherwise) Liberty Holdings Limited Liberty Group Limited IFRS IFRS shareholder equity BEE preference shares Liberty Two Degrees normalisation (340) - Normalised shareholder equity Regulatory capital Shareholder assets Regulatory capital requirement Surplus above regulatory requirement Risk appetite capital coverage ratio Capital buffer in excess of risk appetite Capital ratio at period end (times covered) Capital levels remain strong post the sovereign credit ratings downgrade 12 Notes

9 Liberty Holdings Limited Financial results 7 Business unit earnings Business unit contribution to normalised earnings (Rm) FINANCIAL RESULTS PRESENTATION (204) (236) FY16 (%): 8 (89) 18 (45) >(100) (13) (19) 66 8 Individual Group LibFin STANLIB STANLIB Central 2017 normalised SIP 2017 normalised Arrangements Arrangements Markets SA Rest of Africa operating earnings headline earnings Individual Arrangements earnings largely driven by positive risk variances Group Arrangements had increased IPP claims experience and once-off Nigeria acquisition termination costs STANLIB SA impacted by margin pressure from less favourable sales mix and increased costs Remediation program in STANLIB Rest of Africa continued, with risk of further operational losses significantly reduced 13 Insurance operations Key performance indicators (Rm unless stated otherwise) 2H17 1H % Δ Value of new business (52) New business margin (%) Indexed new business Individual Arrangements (1) Group Arrangements Net customer cash flows (665) Individual Arrangements Group Arrangements 227 (1 439) (1 212) (268) >(100) STANLIB Multi-manager* (561) Improved persistency in Individual Arrangements risk business, retention initiatives having positive impact on withdrawals and maturities Increased new recurring premium sales offset by umbrella scheme outflows in Liberty Corporate * Arrangement terminated in 2016, no flows are recorded for 2017 and going forward 14 Notes

10 8 Liberty Holdings Limited Financial results FINANCIAL RESULTS PRESENTATION Asset management operations South African operations Improved non-money market inflows: Fixed income, property, absolute return funds and LISP Ongoing initiatives to address investment performance and financial control Rest of Africa operations Strengthened control environment in East Africa Curtailment of cash mandate business Other territories performed to expectation AUM and cash flows Dec 17 Dec 16 % Δ Assets under management (Rbn) STANLIB SA STANLIB Rest of Africa Net customer cash flows (Rm) (26) STANLIB SA STANLIB Rest of Africa (480) >(100) Remediation of operations remains an immediate priority for the new leadership at STANLIB 15 Financial performance focus areas remain Value of new business and margins are priorities for the insurance operations: Focus on meaningful cost efficiencies with prudent expense management Continue to innovate on new higher margin products Product enhancements to improve margin risk, critical illness, investment builder Retention initiatives Committed to deliver on short-term performance targets 16 Notes

11 Liberty Holdings Limited Financial results 9 FINANCIAL RESULTS PRESENTATION In closing Liberty Holdings Limited David Munro, Group Chief Executive We have diagnosed the challenges and put plans in place to restore Liberty Financial advisers and distribution partners are critical to success Renewed sense of optimism in the organisation Focused on delivering exceptional client and adviser experience Critical capabilities have been replaced Strategy workstreams are driving high levels of engagement Emerging confidence and sentiment in South Africa again Early signs of progress are emerging 18 Notes

12 10 Liberty Holdings Limited Financial results FINANCIAL RESULTS PRESENTATION Liberty has all the ingredients for success 1 We have been trusted partners to our clients and advisers for over 60 years More than 2.5 million in-force policies Paid R8.7bn in death and disability claims We administer over retirement schemes, and individual and institutional investment customers Largest provider of long-term insurance solutions to the SA retail affluent market 4 An integral part of Standard Bank Group with a meaningful bancassurance arrangement 5 Staffed by more than people who are passionately committed to the organisation 2 A diversified multichannel distribution capability More than tied financial advisers 6 A strong capital base, a unique ability to manage risk, and disciplined cost management 3 We have a track record of pioneering financial solutions in South Africa First Retirement Annuity offering Insurer to build shopping malls JSE-listed Life assurer Insurer to introduce Nurses on the Road To introduce Umbrella Funds Liberty Group Limited CAR cover 2.92 times the statutory requirement LibFin facilitates differentiating features in product offerings Source: 2017 Integrated Annual Report 19 Questions Notes

13 Liberty Holdings Limited Financial results 11 NOTES FINANCIAL RESULTS PRESENTATION

14 12 Liberty Holdings Limited Financial results FINANCIAL RESULTS PRESENTATION NOTES

15 FINANCIAL RESULTS Liberty Holdings Limited Financial results For the year ended 31 December2017

16 FINANCIAL RESULTS HIGHLIGHTS CONTENTS Page NORMALISED HEADLINE EARNINGS R2,7 billion Financial performance indicators 15 Financial review 16 Accounting policies 20 Auditor statement 20 Directors responsibility 21 LIBERTY GROUP LIMITED CAR COVER 2,92 times Explanation of terms 21 Consolidated statement of financial position 23 Consolidated statement of comprehensive income 24 Summary consolidated statement of changes in equity 25 Summary consolidated statement of cash flows 26 Headline earnings and earnings per share 27 LONG-TERM INSURANCE INDEXED NEW BUSINESS R8 billion Summary consolidated segment information 28 Group equity value report 32 Long-term insurance new business 38 Long-term insurance net cash flows 39 Assets under management 40 Asset management net cash flows 40 Short-term insurance indicators 41 GROUP ASSETS UNDER MANAGEMENT R720 billion Capital commitments 41 Retirement benefit obligations 42 Related parties 42 Offsetting, enforceable master netting arrangements or similar agreements 43

17 Liberty Holdings Limited Financial results 15 FINANCIAL PERFORMANCE INDICATORS FINANCIAL RESULTS Rm (unless otherwise stated) % change Liberty Holdings Limited Earnings Basic earnings per share (cents) 1 152,6 811,7 42 Fully diluted basic earnings per share (cents) 1 120,7 788,9 42 Normalised headline earnings (1) Normalised headline earnings per share (cents) (1) 982,1 904,5 9 Normalised return on IFRS equity (%) (1) 12,3 11,4 Group equity value Normalised group equity value per share (R) (1) 140,31 145,86 (4) Normalised return on group equity value (%) (1) 1,1 5,1 Distributions per share (cents) Normal dividend Interim dividend Final dividend Total assets under management (Rbn) Long-term insurance operations Indexed new business (excluding contractual increases) Embedded value of new business (52) New business margin (%) 0,5 1,1 Net customer cash inflows Capital adequacy cover of Liberty Group Limited (times covered) 2,92 2,95 Asset management Assets under management (Rbn) Net cash inflows including money market (2) (26) Retail and institutional net cash inflows excluding money market (2) (18) Money market net cash inflows (2) (54) (1) Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity value. These measures reflect the economic reality of the consolidation of the listed REIT Liberty Two Degrees (L2D) and the Black Economic Empowerment (BEE) transaction, as opposed to the required IFRS accounting treatment. (2) Excludes intergroup life funds. Preparation and supervision: This announcement on Liberty Holdings Limited annual financial results has been prepared by M Natsas CA(SA) and D Wichmann CA(SA) and supervised by Y Maharaj (Financial Director) CA(SA).

18 16 Liberty Holdings Limited Financial results FINANCIAL RESULTS FINANCIAL REVIEW Normalised headline earnings increased by 8% supported by improving SA retail insurance earnings and higher returns from investment markets. The group s capital position remains strong. Decisive actions are being taken to improve profitability and place Liberty on a sound strategic footing. The group remained resilient during the year, as evidenced by the stronger capital position of the group s main long-term insurance licence, Liberty Group Limited, with a capital adequacy ratio at 2,92 times the regulatory minimum compared to 2,82 at 30 June This remains at the upper end of our target range at 31 December 2017 despite the impact of downgrades of the South African sovereign credit rating during the year. The group s SA covered insurance business continued to deliver positive operating variances and be managed to better than model supporting the core assumptions underlying the insurance book. The SA covered business embedded value was preserved, maintaining embedded value earnings of R2,8 billion compared to the prior year and generating a return of 8,2%. The value of new business (VoNB) and new business margin however ended the year below expectation. Actions are being taken to restore the new business margin. The economic environment favoured flows into guaranteed products, which manifested in a weaker mix of business from a margin perspective. The improvement in VoNB in the second half of 2017, despite lower volumes, shows signs that the focused initiatives commenced in the second quarter 2017 are starting to deliver the desired outcome. Group equity value per share was lower at R140,31 (31 December 2016: R145,86). The lower group equity value per share was attributable to weaker earnings from the group s non-covered businesses particularly within the STANLIB businesses and the resultant capitalisation impact of reduced earnings. Group net customer cash inflows, including the Gateway LISP, were positive at R6,5 billion despite the poor economic backdrop. Long-term insurance net customer cash inflows of R1,6 billion reflected an improvement on the prior year inflows of R1,1 billion, supported by lower policy withdrawals and maturities in Individual Arrangements. Long-term insurance indexed new business sales grew marginally to R8 billion. Competitive retail market pricing and the tough economic environment continued to place significant pressure on retail sales volumes, partially offset by growth in Liberty Corporate recurring premiums during the year. Total group assets under management increased to R720 billion (31 December 2016: R676 billion). Normalised headline earnings for the year ended 31 December 2017 of R2 719 million were 8% up on 2016, supported by a higher contribution of R1 307 million (31 December 2016: R787 million) from the shareholder investment portfolio (SIP). Normalised operating earnings however were 19% down on the prior year. The improved earnings contribution from Individual Arrangements was offset by the lower underwriting result from Liberty Corporate. STANLIB SA s earnings continued to be impacted by margin pressure due to a less favourable sales mix and operational write-offs. STANLIB Rest of Africa earnings were impacted by operational losses. Normalised return on equity was 12,3% (31 December 2016: 11,4%). Headline earnings for 2017 amounted to R3 252 million, up 47% compared to R2 207 million in Liberty s headline earnings include the positive earnings impact of R543 million arising from the accounting mismatch on the consolidation of the Liberty Two Degrees listed REIT.

19 Liberty Holdings Limited Financial results 17 FINANCIAL REVIEW (CONTINUED) FINANCIAL RESULTS Earnings by business unit Rm (Unaudited) % change Insurance Individual Arrangements Group Arrangements (89) Liberty Corporate (58) Liberty Africa Insurance Liberty Health (54) (45) (20) Nigeria (3) and project support costs (56) (38) (47) Balance sheet management LibFin Markets credit portfolio LibFin Markets asset/liability management portfolio >100 Asset management (1) STANLIB South Africa (45) STANLIB Rest of Africa (204) (97) (>100) Central overheads and sundry income (236) (208) (13) Normalised operating earnings (19) LibFin Investments SIP Normalised headline earnings BEE preference share adjustment (10) (16) 38 Reversal of accounting mismatch arising on consolidation of L2D (2) 543 (304) >100 Headline earnings (1) Asset management customer facing unit includes the asset management capabilities under STANLIB South Africa and STANLIB Rest of Africa business units, which are managed separately, with each business having its own accountable executive. (2) Refer Explanation of terms on page 21. (3) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU. Commentary on the earnings by business unit follows below. Additional information is contained in the summary consolidated segment information. Individual Arrangements Headline earnings from the group s South African retail operations of R1 208 million were 8% up on the prior year. Positive risk variances in the year were partly offset by modelling and assumption changes to better reflect the expectation of future cash flows given policy terms and conditions. New business strain arising from the geared effects of increased costs relative to new business volumes with a weaker business mix continued to place pressure on earnings. This, together with the impact of the new tax risk fund and basis changes resulted in the value of new business reducing to R155 million in the current year (31 December 2016: R426 million), while the new business margin declined to 0,5% from 1,2% in the prior year. The improvement in the value of new business from R62 million for the six months to 30 June 2017 to R155 million for the year to 31 December 2017 indicates that initiatives implemented in 2017 to improve the value of new business are starting to have the desired effect. Indexed new business of R6 570 million was 1% down on Competitive retail market pricing and the tough economic environment continued to place significant pressure on sales volumes. The economic environment favoured flows into guaranteed products, as evidenced by strong demand for the Guaranteed Investment Product and the Bold Living Annuity throughout the year. Net customer cash inflows of R2,8 billion were 46% up on prior year inflows of R1,9 billion, driven by lower policy withdrawals and maturities. This also reflects a significant improvement over the R0,8 billion inflows reported at 30 June 2017 and confirms that the ongoing initiatives to improve retention are delivering the required results. Despite the tough environment, the business continued to deliver positive operating variances and has been managed to better than model consistently for the last five years.

20 18 Liberty Holdings Limited Financial results FINANCIAL RESULTS FINANCIAL REVIEW (CONTINUED) Group Arrangements Liberty Corporate Earnings of R81 million were impacted by a considerably lower underwriting result due to a high level of risk claims experienced, particularly an increase in income protection plan (IPP) claims in the second half of Indexed new business was 39% higher than the prior year at R1 171 million, with recurring premium new business up 42% due to good risk and umbrella enhancement sales. Single premium new business was up 6%. This resulted in the value of new business increasing to R57 million. Net cash outflows amounted to R1,5 billion reflecting a small number of high asset value scheme terminations and higher risk and IPP claims linked to the challenging economic environment and associated job losses, partially offset by increased recurring premium inflows. Liberty Africa and Liberty Health Insurance Liberty Africa Insurance earnings of R45 million were 10% up on the prior year despite negative exchange rate movements. Indexed new business in the long-term insurance businesses of R277 million was 33% down on the prior year due to exchange rate movements and a large once off deal in The value of new business was lower at R21 million at a margin of 3,9%. The short-term insurance businesses have experienced considerable pricing pressure. The recessionary environment in Nigeria significantly impacted Liberty Health s short-term profitability. Management remains focused on growing the operations to scale. Asset management STANLIB South Africa STANLIB South Africa earnings were R252 million for the year (31 December 2016: R459 million). Earnings were impacted by margin pressure due to a less favourable sales mix, costs associated with the termination of the institutional administration outsourcing programme, the launch of new franchises and operational write-offs. Total assets under management by STANLIB South Africa increased by R21 billion to R556 billion at 31 December Net customer cash inflows (excluding intergroup) grew to R4,7 billion from inflows of R2,8 billion in the prior year. This result was mainly attributable to strong non-money market inflows. Intergroup cash outflows for the year amounted to R15,9 billion. STANLIB Rest of Africa STANLIB Rest of Africa incurred a loss of R204 million for the year (31 December 2016: loss of R97 million). The business continued to be affected mainly by operational losses identified during the remedial programme in East Africa. Efforts to strengthen the operational and control environments have progressed well and risks of further operational losses are significantly reduced. Operations in the other African territories tracked broadly to expectation. Total assets under management by STANLIB Rest of Africa increased by R1,7 billion to R52,5 billion at 31 December Liberty Two Degrees (L2D) L2D s results were released on 19 February The operational performance of the property portfolio remained strong notwithstanding a difficult consumer environment. Together with L2D management, we are assessing alternatives to deal with the limitations of the existing structure. Bancassurance The bancassurance agreement with Standard Bank, which is applicable across the group s asset management and insurance operations, continues to make a positive contribution to new business volumes and earnings. The total indexed new business premiums sold under the agreement increased by 7% to R3,3 billion for the year. Good progress is being made with the implementation of the 10 point bancassurance plan and we continue leveraging our relationship with Standard Bank to capture appropriate opportunities. Balance sheet management LibFin Markets Asset liability management and credit portfolio Earnings from the credit portfolio increased by 10% to R330 million as a result of growth in the credit portfolio notwithstanding the impact of the sovereign ratings downgrades. The asset liability management profit amounted to R46 million due to favourable market positioning (31 December 2016: R18 million). LibFin assets under management were higher at R62 billion (31 December 2016: R58 billion). LibFin Investments Shareholder Investment Portfolio (SIP) The SIP includes the assets backing capital in the insurance operations as well as the group s investment market exposure to the 90:10 book of business. The current risk profile of the SIP is similar to a conservative balanced portfolio and is managed with a long-term through the cycle investment horizon. Market returns experienced in 2017 were higher and the portfolio accordingly delivered a gross return of 8,5% (31 December 2016: 5,7%) which was marginally below the portfolio benchmark. The extent of the SIP exposure to investment markets remains appropriate in the context of the group s risk appetite. Earnings of R1 307 million were well above 2016 earnings of R787 million despite the significant rand appreciation in December 2017 which reduced the returns on offshore assets.

21 Liberty Holdings Limited Financial results 19 FINANCIAL REVIEW (CONTINUED) FINANCIAL RESULTS Capital adequacy cover The capital adequacy cover of Liberty Group Limited remained strong at 2,92 times the statutory requirement (31 December 2016: 2,95 times). The group remains well capitalised at the upper end of its target range in respect of the current capital regime and in respect of capital requirements under the impending Solvency Assessment and Management regime. All other group subsidiary life licences were adequately capitalised. Dividends 2017 final dividend In line with the group s dividend policy, the board has approved and declared a gross final dividend of 415 cents per ordinary share. The final dividend will be paid out of income reserves and is payable on Monday, 9 April 2018 to all ordinary shareholders recorded in the books of Liberty Holdings Limited on the record date. The dividend of 415 cents per ordinary share will be subject to a local dividend tax rate of 20% which will result in a net final dividend, to those shareholders who are not exempt from paying dividend tax, of 332 cents per ordinary share. Liberty Holdings Limited s income tax number is 9050/191/71/8. The number of ordinary shares in issue in the company s share capital at the date of declaration is Share certificates may not be dematerialised or rematerialised between Wednesday, 4 April 2018 and Friday, 6 April 2018, both days inclusive. Where applicable, in terms of instructions received by the company from certificated shareholders, the payment of the dividend will be made electronically to shareholders bank accounts on payment date. In the absence of specific mandates, cheques will be posted to shareholders. Shareholders who have dematerialised their shares will have their accounts with their CSDP or broker credited on Monday, 9 April Prospects Liberty s business is built on our deep relationships with our customers and advisers which is core to creating value for all stakeholders. We are taking decisive actions to improve profitability and place our business on a sound strategic footing. In 2018, management will focus on restoring the financial performance of the SA Retail insurance business, improving the investment performance of STANLIB, simplifying the group s overall operations and expanding our relationship with the Standard Bank Group. We are confident that the group will emerge from this period of change with significantly greater potential to serve the needs of all stakeholders. The important dates pertaining to the dividend are as follows: Last date to trade cum dividend on the JSE Tuesday, 3 April 2018 First trading day ex dividend on the JSE Wednesday, 4 April 2018 Record date Friday, 6 April 2018 Payment date Monday, 9 April 2018 David Munro Chief Executive 1 March 2018 Jacko Maree Chairman Transfer Secretaries Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) Rosebank Towers, 15 Biermann Avenue, Rosebank Johannesburg 2196 Tel: +27 (11) Sponsor Liberty Holdings Limited Incorporated in the Republic of South Africa (Registration number: 1968/002095/06) JSE code: LBH ISIN code: ZAE Preference share code: LBHP ISIN code: ZAE Telephone These results are available at

22 20 Liberty Holdings Limited Financial results FINANCIAL RESULTS ACCOUNTING POLICIES The 2017 consolidated annual financial statements of Liberty Holdings Limited have been prepared in accordance with and contains information required by: International Financial Reporting Standards (IFRS) including IAS 34 Interim Financial Reporting (with the exception of disclosures required under IAS 34 16A (j) relating to fair value measurement, which are not required by the JSE Listing Requirements); the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee; Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council; the Listings Requirements of the JSE Limited; and the South African Companies Act No. 71 of The consolidated annual financial statements have been prepared in compliance with IFRS and interpretations for year ends commencing on or after 1 January The accounting policies are consistent with those applied in the prior year except for the mandatory adoption of minor amendments or early adoption of amendments to IFRS. These amendments have not resulted in any material impacts to the group s 2017 reported results or comparative periods. Amendments to IFRS 2 Share-based Payments and IAS 40 Investment Properties, effective 1 January 2018, have been early adopted as at 1 January These amendments have not resulted in any impact to the group s 2017 reported results, comparative periods or disclosures. AUDITOR STATEMENT PricewaterhouseCoopers Inc. (PwC) have audited the consolidated annual financial statements of Liberty Holdings Limited from which the summary consolidated financial results have been extracted. These summary consolidated financial results comprise the consolidated statement of financial position at 31 December 2017, the consolidated statement of comprehensive income, summary consolidated changes in equity and summary consolidated cash flows for the year then ended and selected explanatory notes. These statements and related notes are marked as audited. This announcement itself is not audited. The financial results contained in this announcement have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated annual financial statements, from which the summary consolidated financial results were extracted, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the prior year s consolidated annual financial statements except for the changes outlined in the Accounting policies above. This announcement does not include the information required pursuant to paragraph 16A (j) of IAS 34. The full IAS 34 compliant summary consolidated financial results announcement and a copy of the auditors report is available on request or on the company s website and at the company s registered office. The auditors have expressed an unmodified audit opinion on the consolidated annual financial statements. PwC have also issued an unmodified assurance opinion on Liberty Holdings Limited s group equity value report, which has also been marked as audited in this financial results announcement. Shareholders are advised that in order to obtain a full understanding of the nature of the auditors engagement, they should obtain a copy of the auditors reports together with the accompanying financial information which is available upon request from Liberty Holdings Limited s registered office.

23 Liberty Holdings Limited Financial results 21 DIRECTORS RESPONSIBILITY FINANCIAL RESULTS The summary consolidated annual financial statements included in this announcement are the full responsibility of the directors. The directors confirm that the financial information has been correctly extracted from the underlying 2017 audited consolidated Liberty Holdings Limited annual financial statements which are available for inspection at the company s registered office on request. EXPLANATION OF TERMS Capital adequacy requirement (CAR) The capital adequacy requirement is the minimum amount by which the Financial Services Board requires an insurer s assets to exceed its liabilities. The assets, liabilities and CAR must be calculated using a method which meets the Financial Services Board s requirements. Capital adequacy cover refers to the amount of capital the insurer has as a multiple of the minimum requirement. Development costs Represents project costs incurred on developing or enhancing future revenue opportunities. FCTR Foreign Currency Translation Reserve. Liberty or group Represents the collective of Liberty Holdings Limited and its subsidiaries. Long-term insurance operations Indexed new business This is a measure of new business which is calculated as the sum of twelve months premiums on new recurring premium policies and one tenth of single premium sales. Long-term insurance operations Value of new business and margin The present value, at point of sale, of the projected stream of after tax profits for new business issued, net of the cost of required capital. The present value is calculated using a risk adjusted discount rate. Margin is calculated using the value of new business divided by the present value of future modelled premiums. Short-term insurance operations Claims loss ratio This is a measure of underwriting risk and is measured as a ratio of claims incurred divided by the net premiums earned. Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity value These measures reflect the economic reality of the Black Economic Empowerment (BEE) transaction and the consolidation of the listed REIT Liberty Two Degrees (L2D) as opposed to the required IFRS accounting treatment. BEE transaction IFRS reflects the BEE transaction as a share buy-back. Dividends received on the group s preference shares (which are recognised as an asset for this purpose) are included in income. Shares in issue relating to the transaction are reinstated.

24 22 Liberty Holdings Limited Financial results FINANCIAL RESULTS EXPLANATION OF TERMS (CONTINUED) Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity value (CONTINUED) Reversal of accounting mismatch arising on IFRS profit or loss consolidation of L2D An accounting mismatch arises on consolidation of L2D in the group annual financial statements, resulting from the different measurement bases applied to L2D s assets and Liberty Group Limited s (100% subsidiary of Liberty Holdings Limited) policyholder liabilities. Specifically: on a consolidated look through basis the investment property assets of L2D are included in the group annual financial statements at fair value; whereas the corresponding linked obligations to Liberty Group Limited s policyholders are required under IFRS to continue to be measured in the group annual financial statements at the listed price of the L2D units. The result of this is an accounting mismatch that represents any difference in the profit and loss movement in the price at which L2D s listed units trade relative to the underlying net asset value. L2D adjustment in group equity value In addition to the reversal of the accounting mismatch in IFRS profit or loss described above, the group equity value adjusts the exposures in the shareholder investment portfolios (SIP) to the listed unit price. Summary of impact Below is a summary of the L2D transaction impact on the ordinary shareholders interest: Rm Group equity value Total IFRS net asset value SIP equity value adjustment Opening adjustment at 1 January 2017 (330) (193) (137) IFRS profit or loss Group equity value earnings Transaction between owners (10) (10) Closing adjustment at 31 December

25 Liberty Holdings Limited Financial results 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2017 FINANCIAL RESULTS Rm (Audited) Assets Intangible assets Defined benefit pension fund employer surplus Properties Equipment Interests in joint ventures Interests in associates Deferred taxation Deferred acquisition costs Long-term policyholder assets insurance contracts Reinsurance assets Long-term insurance Short-term insurance Financial investments Loans and receivables Assets held for trading and for hedging Repurchase agreements, scrip and collateral assets Prepayments, insurance and other receivables Cash and cash equivalents Total assets Liabilities Long-term policyholder liabilities Insurance contracts Investment contracts with discretionary participation features Financial liabilities under investment contracts Reinsurance liabilities Third-party financial liabilities arising on consolidation of mutual funds Provisions Deferred taxation Deferred revenue Deemed disposal taxation liability Short-term insurance liabilities Financial liabilities Liabilities held for trading and for hedging Repurchase agreements liabilities and collateral deposits payable Employee benefits Insurance and other payables Current taxation Total liabilities Equity Ordinary shareholders equity Share capital Share premium Retained surplus Other reserves ( 905) ( 636) Non-controlling interests Total equity Total equity and liabilities

26 24 Liberty Holdings Limited Financial results FINANCIAL RESULTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Rm (Audited) Insurance premiums Reinsurance premiums (1 950) (1 922) Net insurance premiums Fee income and reinsurance commission Investment income Hotel operations sales Investment gains/(losses) (1 823) Total revenue Claims and policyholder benefits under insurance contracts (38 819) (39 664) Insurance claims recovered from reinsurers Change in long-term policyholder assets and liabilities (6 829) 598 Liabilities under insurance contracts (6 504) Policyholder assets related to insurance contracts 170 (265) Investment contracts with discretionary participation features (521) (404) Applicable to reinsurers Fair value adjustment to long-term policyholder liabilities under investment contracts (9 116) (3 891) Fair value adjustment to financial liabilities (27) Fair value adjustment on third party mutual fund interests (4 619) 619 Acquisition costs (4 935) (4 723) General marketing and administration expenses (11 345) (10 733) Finance costs (1 344) (1 415) Profit share allocations under bancassurance and other agreements (972) (1 029) Equity accounted earnings from joint venture Profit before taxation Taxation (1) (2 864) (1 325) Total earnings Other comprehensive income (233) (148) Items that may be reclassified subsequently to profit or loss (95) (101) Net change in fair value on cash flow hedges Income and capital gains tax relating to net change in fair value on cash flow hedges (21) (56) Foreign currency translation (149) (263) Items that may not be reclassified subsequently to profit or loss (138) (47) Owner-occupied properties fair value adjustment (67) (1) Income and capital gains tax relating to owner-occupied properties fair value adjustment (14) Change in long-term policyholder insurance liabilities (application of shadow accounting) (32) 1 Actuarial gains on post-retirement medical aid liability Income tax relating to post-retirement medical aid liability (13) (8) Net adjustments to defined benefit pension fund (2) (41) (96) Income tax relating to defined benefit pension fund (16) 27 Total comprehensive income Total earnings attributable to: Shareholders Non-controlling interests Total comprehensive income attributable to: Shareholders Non-controlling interests Basic and fully diluted earnings per share Cents Cents Basic earnings per share 1 152,6 811,7 Fully diluted basic earnings per share 1 120,7 788,9 (1) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation. (2) Net adjustments to defined benefit pension fund include actuarial gains or losses, return on plan assets, reduced by the interest on the net defined benefit asset and the effect of the application of the asset ceiling.

27 Liberty Holdings Limited Financial results 25 SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FINANCIAL RESULTS Rm (Audited) Balance of ordinary shareholders equity at 1 January Ordinary dividends (1 942) (2 022) Total comprehensive income Share buy-back (1) (350) (477) Black economic empowerment transaction Share-based payments Transaction costs of issuing units in Liberty Two Degrees (78) Preference dividends (2) (2) Transactions between owners 9 (40) Transactions between owners Liberty Two Degrees (10) 101 Ordinary shareholders equity Balance of non-controlling interests at 1 January Total comprehensive income Acquisition of Liberty Two Degrees Transactions between owners Liberty Two Degrees 351 (101) Acquisition of unincorporated property partnership Acquisition of subsidiaries 33 Unincorporated property partnerships net distributions (238) (219) Non-controlling interests share of subsidiary distributions (133) (21) Non-controlling interests share of shares issued in subsidiary 2 3 Transaction costs of issuing units in Liberty Two Degrees (38) Transactions between owners 9 (29) Non-controlling interests Total equity (1) Share buy-backs are purchases from the market to meet employee share-based payment obligations.

28 26 Liberty Holdings Limited Financial results FINANCIAL RESULTS SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS Rm (Audited) Cash flows from operating activities Cash utilised by operations (7 082) (9 157) Interest and dividends received Distributions paid (3 075) (2 717) Taxation paid (1 946) (2 260) Other operating cash flows (1 617) (1 665) Cash flows from investing activities (3 581) (6 607) Net purchase of investments (2 906) (4 937) Net purchase of other assets (375) (288) Repayment of collateral deposits payable (258) (1 236) Acquisition of subsidiaries (146) Acquisition of equity accounted joint ventures (42) Cash flows from financing activities (1 280) (18) Net advance of financial liabilities Net repayment of repurchase agreements liabilities (2 393) (3 175) Net cash flows from equity transactions with non-controlling interests Transaction costs of issuing units in Liberty Two Degrees (116) Share buy-back (350) (477) Net increase/(decrease) in cash and cash equivalents 260 (4 182) Cash and cash equivalents at the beginning of the year Cash and cash equivalents acquired through business acquisitions 61 Foreign currency translation (85) (190) Cash and cash equivalents at the end of the year

29 Liberty Holdings Limited Financial results 27 HEADLINE EARNINGS AND EARNINGS PER SHARE FINANCIAL RESULTS Rm (unless otherwise stated) (Audited) Reconciliation of total earnings to headline earnings attributable to shareholders Total earnings attributable to shareholders Preference share dividend (2) (2) Basic earnings attributable to ordinary shareholders Impairment of intangible assets 164 Tax on headline earnings adjustable item (28) Headline earnings attributable to ordinary shareholders Net income earned on BEE preference shares Reversal of the accounting mismatch arising on consolidation of L2D (1) (543) 304 Normalised headline earnings attributable to ordinary shareholders Weighted average number of shares in issue ( 000) Normalised weighted average number of shares in issue ( 000) Fully diluted weighted average number of shares in issue ( 000) Earnings per share Cents Cents Total earnings attributable to ordinary shareholders Basic 1 152,6 811,7 Headline 1 202,9 811,7 Normalised headline 982,1 904,5 Fully diluted earnings attributable to ordinary shareholders Basic 1 120,7 788,9 Headline 1 169,7 788,9 (1) Refer Explanation of terms on page 21.

30 28 Liberty Holdings Limited Financial results FINANCIAL RESULTS SUMMARY CONSOLIDATED SEGMENT INFORMATION The audited segment results are as follows: Group Arrangements Rm (Audited) Individual Arrange ments Liberty Corporate Liberty Africa Insurance Liberty Health Total revenue Profit before taxation (134) Taxation (3) (1 819) (62) (74) 28 Total earnings (106) Reconciliation of total earnings to headline earnings attributable to shareholders Total earnings (106) Attributable to non-controlling interests (1) (58) Preference share dividend Impairment of intangible assets Headline earnings (11) (54) Net income earned on BEE preference shares Reversal of the accounting mismatch arising on consolidation of L2D Normalised headline earnings (11) (54) Reconciliation of business unit earnings to segment result Individual Arrangements Group Arrangements 81 (11) (54) Liberty Corporate 81 Liberty Africa Insurance 45 Liberty Health (54) Nigeria (2) and project support costs (56) LibFin (Markets and Investments) (138) 151 LibFin Markets credit portfolio LibFin Markets asset/liability matching 35 1 LibFin Investments SIP (365) 12 Asset management STANLIB South Africa STANLIB Rest of Africa Central overheads and sundry income 80 Normalised headline earnings (11) (54) (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term insurance into defined IFRS investment and insurance products, the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of intergroup transactions. (2) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU. (3) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation. The customer facing units are supported by shared service functions (Group Enablement) and LibFin (incorporating LibFin Markets and LibFin Investments), which are strategic competency units. The impact of LibFin Markets is disclosed in the relevant customer grouping.

31 Liberty Holdings Limited Financial results 29 SUMMARY CONSOLIDATED SEGMENT INFORMATION (CONTINUED) FINANCIAL RESULTS Asset management Other Total Reporting adjustments (1) IFRS reported (12 174) (212) (725) (2 864) (2 864) (3) (179) (241) (345) (586) (2) (2) (2) (543) (543) (543) (54) (56) (204) (204) (316) (236)

32 30 Liberty Holdings Limited Financial results FINANCIAL RESULTS SUMMARY CONSOLIDATED SEGMENT INFORMATION (CONTINUED) The audited segment results for the year ended 31 December 2016 are as follows: Group Arrangements Restated (4) Rm (Audited) Individual Arrangements Liberty Corporate Liberty Africa Insurance Liberty Health Total revenue Profit before taxation (74) Taxation (3) (950) (112) (79) 29 Total earnings (45) Reconciliation of total earnings to headline earnings attributable to shareholders Total earnings (45) Attributable to non-controlling interests (62) Preference share dividend Headline earnings (45) Net income earned on BEE preference shares Reversal of the accounting mismatch arising on consolidation of L2D Normalised headline earnings (45) Reconciliation of business unit earnings to segment result Individual Arrangements Group Arrangements (45) Liberty Corporate 191 Liberty Africa Insurance 41 Liberty Health (45) Nigeria (2) and project support costs (38) LibFin (Markets and Investments) LibFin Markets credit portfolio LibFin Markets asset/liability matching 15 3 LibFin Investments SIP (206) (3) Asset management STANLIB South Africa STANLIB Rest of Africa Central overheads and sundry income (57) (30) Normalised headline earnings (45) (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term insurance into defined IFRS investment and insurance products, the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of intergroup transactions. (2) Costs associated with the possible acquisition of a long-term licence in Nigeria and project management costs of the Group Arrangements CFU. (3) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation. (4) The segment results for the year ended 31 December 2016 have been restated to provide more information on the three distinct segments within Group Arrangements, in order to better align to the information reported to the chief operating decision maker.

33 Liberty Holdings Limited Financial results 31 SUMMARY CONSOLIDATED SEGMENT INFORMATION (CONTINUED) FINANCIAL RESULTS Asset management Other Total Reporting adjustments (1) IFRS reported (16 370) (148) (65) (1 325) (1 325) (7) (31) (100) (317) (417) (2) (2) (2) (45) (38) (97) (97) (121) (208)

34 32 Liberty Holdings Limited Financial results FINANCIAL RESULTS GROUP EQUITY VALUE REPORT 1 Introduction Liberty presents a group equity value report to reflect the combined value of the various components of Liberty s businesses. Section 2 below describes the valuation bases used for each reported component. It should be noted that the group equity value is presented to provide additional information to shareholders to assess performance of the group. The total equity value is not intended to be a fair value calculation of the group but should provide indicative information of the inherent value of the component parts. 2 Component parts of the group equity value and valuation techniques used Group equity value has been calculated as the sum of the following component parts: 2.1 South African (SA) covered business: The wholly owned subsidiary, Liberty Group Limited, comprises the South African long-term insurance entities and related asset holding entities. The embedded value methodology in terms of Advisory Practice Note 107 issued by the Actuarial Society of South Africa continues to be used to derive the value of this business cluster described as South African covered business. The embedded value report of the South African covered business has been reviewed by the group s statutory actuary. The full embedded value report is included in the supplementary information section. 2.2 Other businesses: STANLIB South Africa STANLIB Rest of Africa Liberty Health Liberty Africa Insurance Liberty Holdings Valued using a 10 times (2016: 10 times) multiple of estimated sustainable earnings. Valued using a 10 times (2016: 10 times) multiple of estimated sustainable earnings. As Liberty Health has yet to establish a history to support a sustainable earnings calculation, an adjusted IFRS net asset value is applied. Liberty Africa Insurance is an emerging cluster of both long and short-term insurance businesses located in various African countries outside of South Africa. A combination of valuation techniques including embedded value, discounted cash flow and earnings multiples have been applied to value these businesses. The combined value of this cluster is not material relative to the other components of group equity value and therefore a detailed analysis of this valuation has not been presented. At 31 December 2017 and 31 December 2016 the combined valuations approximated the group s IFRS net asset value. Therefore the IFRS net asset value was used. The net market value of assets and liabilities held by the Liberty Holdings Limited company excluding investments in any subsidiaries which are valued separately. 2.3 Liberty Two Degrees normalisation adjustment: This represents the difference between Liberty s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the shareholder investment portfolio. 2.4 Other adjustments: These comprise the fair value of share rights allocated to staff not employed by the South African covered businesses, adjusting certain deferred tax assets to current values and allowance for certain shareholder recurring expenses incurred in Liberty Holdings Limited capitalised at a multiple of 9 times (2016: 9 times).

35 Liberty Holdings Limited Financial results 33 GROUP EQUITY VALUE REPORT (CONTINUED) FINANCIAL RESULTS 3 Normalised group equity value 3.1 Analysis of normalised group equity value 31 December 2017 Rm (Audited) SA covered business Other businesses Total Liberty Group Limited STANLIB South Africa (2) STANLIB Rest of Africa (2) Liberty Health (including Total Health Trust) Liberty Africa Insurance Liberty Holdings Liberty Two Degrees adjustment to net asset value Shareholders equity reported under IFRS Difference between statutory and published valuation methods (7 253) (7 253) Negative rand reserves (6 806) (6 806) Deferred acquisition costs (730) (730) Deferred revenue liability Subordinated notes (including accrued interest) CAR of subsidiaries (10) (10) Reverse value of in-force acquired (12) (12) Inadmissible assets (1 018) (1 018) Statutory excess assets over liabilities (3) Reverse CAR of subsidiaries Reverse subordinated notes (including accrued interest) (5 581) (5 581) Reverse inadmissible assets Frank Financial Services allowance for future expenses (100) (100) Impact of discounting on deferred tax asset (100) (100) BEE preference funding Liberty Two Degrees normalisation adjustment (1) (597) (597) Allowance for employee share rights (36) (36) (72) Normalised net worth Value of in-force Individual Arrangements Value of in-force Group Arrangements: Liberty Corporate Cost of required capital (1 690) (1 690) Fair value adjustment STANLIB South Africa (2) Fair value adjustment STANLIB Rest of Africa (2) Allowance for future shareholder expenses (2 217) (2 217) Normalised equity value (1) This represents the difference between Liberty s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the shareholder investment portfolio. (2) STANLIB valuation: Rm STANLIB South Africa STANLIB Rest of Africa 150 Total (3) The adjustments between the IFRS and statutory net asset values for the Liberty Africa subsidiaries have not been included. This is because the group equity value for these entities is set to their IFRS net asset value and so these adjustments do not affect group equity value.

36 34 Liberty Holdings Limited Financial results FINANCIAL RESULTS GROUP EQUITY VALUE REPORT (CONTINUED) 3 Normalised group equity value (continued) 3.1 Analysis of normalised group equity value (continued) 31 December 2016 Rm (Audited) SA covered business Other businesses Total Liberty Group Limited STANLIB South Africa (2) STANLIB Rest of Africa (2) Liberty Health (including Total Health Trust) Liberty Africa Insurance Liberty Holdings Liberty Two Degrees adjustment to net asset value (330) (330) Shareholders equity reported under IFRS Difference between statutory and published valuation methods (6 786) (58) (6 844) Negative rand reserves (6 344) (6 344) Deferred acquisition costs (698) (698) Deferred revenue liability Other (58) (58) Subordinated notes (including accrued interest) CAR of subsidiaries (10) (10) Reverse value of in-force acquired (17) (17) Inadmissible assets (807) (85) (892) Statutory excess assets over liabilities Reverse difference between statutory and published valuation methods Reverse CAR of subsidiaries Reverse subordinated notes (including accrued interest) (4 601) (4 601) Reverse inadmissible assets Frank Financial Services allowance for future expenses (100) (100) Impact of discounting on deferred tax asset (100) (100) BEE preference funding Liberty Two Degrees normalisation adjustment (1) Allowance for employee share rights (33) (27) (60) Normalised net worth Value of in-force Individual Arrangements Value of in-force Group Arrangements: Liberty Corporate Cost of required capital (1 641) (1 641) Fair value adjustment STANLIB South Africa (2) Fair value adjustment STANLIB Rest of Africa (2) Allowance for future shareholder expenses (1 892) (1 892) Normalised equity value (1) This represents the difference between Liberty s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the shareholder investment portfolio. (2) STANLIB valuation: Rm STANLIB South Africa STANLIB Rest of Africa 360 Total 6 150

37 Liberty Holdings Limited Financial results 35 GROUP EQUITY VALUE REPORT (CONTINUED) FINANCIAL RESULTS 3 Normalised group equity value (continued) 3.2 Normalised group equity value earnings and value per share Rm (Audited) SA covered business Other businesses Total SA covered business Other businesses Total Normalised equity value at the end of the year Equity value at the end of the year Liberty Two Degrees adjustment (1) (597) (597) BEE preference shares Net share buy-backs Funding of restricted share plan 92 (92) 92 (92) Intragroup dividends (2 600) (3 500) Dividends paid Normalised equity value at the beginning of the year (34 470) (6 751) (41 221) (35 268) (6 367) (41 635) Equity value at the beginning of the year (34 322) (6 421) (40 743) (34 946) (6 367) (41 313) Liberty Two Degrees adjustment (1) (330) (330) BEE preference shares (148) (148) (322) (322) Normalised equity value earnings (2 362) (707) Normalised return on group equity value (%) 8,2 (36,4) 1,1 7,9 (11,8) 5,1 Normalised number of shares Number of shares in issue ( 000) Shares held for the employee restricted share scheme ( 000) Adjustment for BEE shares ( 000) Normalised group equity value per share (R) 140,31 145,86 (1) This represents the difference between Liberty s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the shareholder investment portfolio.

38 36 Liberty Holdings Limited Financial results FINANCIAL RESULTS GROUP EQUITY VALUE REPORT (CONTINUED) 3 Normalised group equity value (continued) 3.3 Sources of normalised group equity value earnings Rm (Audited) SA covered business Other businesses Total SA covered business Other businesses Total Value of new business written in the year Expected return on value of in-force business Variances/changes in operating assumptions Operating experience variances Property portfolio liquidity fee/stanlib REIT Fund Managers (1) (167) Operating assumption changes (295) (295) Changes in modelling methodology (251) (251) Development costs (55) (166) (221) (45) (62) (107) Liberty Holdings shareholder expenses (3) (584) (584) (228) (228) Headline earnings of other businesses/ intragroup transfer Operational equity value profits (629) Economic adjustments (432) (139) (571) (683) (67) (750) Return on net worth (2) (14) (139) (153) 153 (67) 86 Investment variances (2) (594) (594) (963) (963) Change in economic assumptions Change in fair value adjustments on value of other businesses (1 585) (1 585) (825) (825) Change in allowance for share rights (3) (9) (12) Group equity value earnings (2 362) (707) (1) Following the listing of Liberty Two Degrees in December 2016, STANLIB REIT Fund Managers (RF) Proprietary Limited (the Manager), a 100% held subsidiary of Liberty Holdings Limited (LHL), was appointed as the Manager of L2D. The property portfolio liquidity fee which was previously earned in Liberty Group Limited will be used to fund the asset management fee paid to STANLIB REIT Fund Managers. STANLIB REIT Fund Managers has been valued using a 10 times multiple of the estimated sustainable earnings. (2) The investment return on net worth includes an amount of negative R7 million (2016: negative R16 million) in respect of the change in the fair value of cash-flow hedges supporting LGL subordinated notes. Similarly, the investment variances include an amount of R61 million (2016: R178 million) in respect of the change in the fair value of cash-flow hedges supporting LibFin Credit. (3) This includes the actual shareholder expenses incurred by Liberty Holdings of R259 million (2016: R122 million) plus the change in the allowance for future shareholder expenses over the period.

39 Liberty Holdings Limited Financial results 37 GROUP EQUITY VALUE REPORT (CONTINUED) FINANCIAL RESULTS 3 Normalised group equity value (continued) 3.4 Analysis of value of long-term insurance new business and margins Rm (unless otherwise stated) (Audited) South African covered business: Individual Arrangements Traditional Life Direct Channel Credit Life LibFin Credit uplift to Individual Arrangements Group Arrangements: Liberty Corporate Traditional Business LibFin Credit uplift to Group Arrangements: Liberty Corporate Gross value of new business Overhead acquisition (including underwriting) costs impact on value of new business (1 305) (1 243) Cost of required capital (90) (86) Net value of South African covered new business Present value of future expected premiums Margin (%) 0,5 1,1 Group Arrangements: Liberty Africa Insurance Net value of new business Present value of future expected premiums Margin (%) 3,9 5,6 Total group net value of new business Total group margin (%) 0,5 1,1

40 38 Liberty Holdings Limited Financial results FINANCIAL RESULTS LONG-TERM INSURANCE NEW BUSINESS Rm (Unaudited) Sources of insurance operations total new business by product type Retail Single Recurring Institutional Single Recurring Total new business Single Recurring Insurance indexed new business Sources of insurance indexed new business: Individual Arrangements Group Arrangements: Liberty Corporate Liberty Africa Insurance (1) (1) Liberty owns less than 100% of certain entities that make up Liberty Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership. The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under long-term insurance new business by distribution channel arises mainly from different treatment for extensions of matured policies, reinvestment of fund withdrawals, conversions of standalone funds to umbrella funds and fund member movements within Liberty administered funds.

41 Liberty Holdings Limited Financial results 39 LONG-TERM INSURANCE NET CASH FLOWS FINANCIAL RESULTS Rm (Audited) Net premiums by product type Retail Single Recurring Institutional Single Recurring Net premium income from insurance contracts and inflows from investment contracts Single Recurring Net claims and policyholders benefits by product type Retail (40 436) (40 924) Death and disability claims (6 567) (6 570) Policy surrender and maturity claims (27 984) (28 870) Annuity payments (5 885) (5 484) Institutional (12 070) (12 996) Death and disability claims (2 118) (1 912) Scheme terminations and member withdrawals (9 139) (10 280) Annuity payments (813) (804) Net claims and policyholders benefits (52 506) (53 920) Long-term insurance net customer cash flows (2) Rm (Unaudited) Sources of insurance operations net cash flows: Individual Arrangements Group Arrangements: (1 212) (268) Liberty Corporate (1 536) (751) Liberty Africa Insurance (1) Asset Management: STANLIB Multi-manager (3) (561) (1) Liberty owns less than 100% of certain of the entities that make up Liberty Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership. (2) This excludes net cash inflows attributed to the off balance sheet GateWay LISP of R350 million (2016: R557 million). (3) The arrangement whereby funds were placed with external asset managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows in 2017 and going forward.

42 40 Liberty Holdings Limited Financial results FINANCIAL RESULTS ASSETS UNDER MANAGEMENT (1) as at 31 December 2017 Rbn (Unaudited) Managed by group business units STANLIB South Africa STANLIB Rest of Africa (2) LibFin Markets Other internal managers 13 9 Externally managed Total assets under management (3) (1) Includes funds under administration. (2) Liberty owns less than 100% of certain of the entities that make up STANLIB Rest of Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership. (3) Included in total assets under management are the following LISP December 2017 amounts: Unit trusts listed (Rbn) STANLIB managed Other managed Total STANLIB Gateway ASSET MANAGEMENT NET CASH FLOWS (1) Rm (Unaudited) STANLIB South Africa Non-money market Retail (2 327) Institutional (3 434) Money market (84) Retail (1 400) Institutional Net South Africa cash inflows STANLIB Rest of Africa Non-money market (1 156) Retail 738 (422) Institutional (1 894) Money market 676 (761) Net Rest of Africa cash (outflows)/inflows (480) Net cash inflows from asset management (1) Cash flows exclude intergroup segregated life fund mandates.

43 Liberty Holdings Limited Financial results 41 SHORT-TERM INSURANCE INDICATORS FINANCIAL RESULTS Rm (Audited) Net premiums Liberty Health medical risk Liberty Africa Insurance motor, property, medical and other Net claims (886) (994) Liberty Health medical risk (637) (743) Liberty Africa Insurance motor, property, medical and other (249) (251) Net cash inflows from short-term insurance Unaudited Claims loss ratio (%) Liberty Health Liberty Africa Insurance Combined loss ratio (%) Liberty Health Liberty Africa Insurance CAPITAL COMMITMENTS as at 31 December 2017 Rm (Audited) Equipment Investment and owner-occupied properties Committed capital (1) Total capital commitments Under contracts Authorised by the directors but not contracted (1) Liberty has committed capital to certain infrastructure and development funds. The committed funds are only drawn down when required. The above 2017 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds and R452 million (2016: R360 million) from non controlling interests in respect of investment properties. Throughout the group there are various short term leases (less than one year) for office and computer equipment. The obligations outstanding at 31 December are not material.

44 42 Liberty Holdings Limited Financial results FINANCIAL RESULTS RETIREMENT BENEFIT OBLIGATIONS as at 31 December 2017 Audited Post-retirement medical benefit The group operates an unfunded post-retirement medical aid benefit for permanent employees who joined the group prior to 1 February 1999 and agency staff who joined prior to 1 March As at 31 December 2017, the Liberty post-retirement medical aid benefit liability was R495 million (2016: R493 million). Defined benefit retirement fund The group operates a defined benefit pension scheme on behalf of employees. The fund is closed to new membership and is well funded. RELATED PARTIES Audited Standard Bank Group Limited and any subsidiary (excluding Liberty) is referred to as Standard Bank in the context of this section. The following selected significant related party transactions have occurred or have been contracted in the 31 December 2017 financial year: 1. Summary of related party transactions with Standard Bank 1.1 Summary of movement in investment in ordinary shares held by the group in the group s holding company is as follows: Number Fair value Ownership 000 Rm % Standard Bank Group Limited Balance at 1 January ,60 Purchases Sales (5 888) (1 020) Fair value adjustments 615 Balance at 31 December , Bancassurance The bancassurance business agreements with the Standard Bank group caters for the manufacture, sale and promotion of insurance, investment and health products through the Standard Bank s African distribution capability. New business premium income in respect of this business in 2017 amounted to R9 129 million (2016: R7 973 million). In terms of the agreements, Liberty s group subsidiaries pay profit shares to various Standard Bank operations. The amounts to be paid are in most cases dependent on source and type of business and are paid along geographical lines. The total combined net profit share amounts accrued as payable to the Standard Bank group for the year to 31 December 2017 is R948 million (2016: R1 005 million). The bancassurance business agreements are evergreen agreements with a 24-month notice period for termination as at the date of the approval of these financial statements, neither party had given notice. A binder agreement was entered into with Standard Bank effective from 31 December The binder agreement is associated with the administration of policies sold under the bancassurance business agreement, and shall remain in force for an indefinite period with a 90-day notice period for termination. Fees accrued for the year to 31 December 2017 is R206 million (2016: R150 million). 1.3 Purchases and sales of financial instruments As per Liberty s 2017 group annual financial statements, in the normal course of conducting business, Liberty deposits cash with Standard Bank, purchases and sells financial instruments issued by Standard Bank and enters into sale and repurchase agreements and derivative transactions with Standard Bank. These transactions are at arm s length and are primarily used to support investment portfolios for policyholders and shareholders capital. There are no other significant changes to related party transactions as reported in Liberty s 2017 annual financial statements.

45 Liberty Holdings Limited Financial results 43 OFFSETTING, ENFORCEABLE MASTER NETTING ARRANGEMENTS OR SIMILAR AGREEMENTS as at 31 December 2017 FINANCIAL RESULTS The group does not have any financial assets or financial liabilities that are currently subject to offsetting in accordance with IAS 32 Financial Instruments: Presentation. The table below sets out the nature of agreements and the types of rights relating to items which do not qualify for offset but that are subject to a master netting arrangement (MNA) or similar agreement. Derivative assets and liabilities Repurchase agreements Collateral deposits payable NATURE OF AGREEMENT International swaps and derivatives associations Global master repurchase agreements Global master securities lending arrangements RELATED RIGHTS The agreement allows for offset in the event of default Rm (Audited) Total Not subject to MNA or similar agreements Subject to MNA or similar agreements Financial collateral (1) Net 2017 Assets Assets held for trading and for hedging (1 356) (6 016) 499 Total assets (1 356) (6 016) 499 Liabilities Liabilities held for trading and for hedging (56) (6 016) 239 Repurchase agreements liabilities (4 671) Collateral deposits payable (4 426) Total liabilities (56) (15 113) Assets Assets held for trading and for hedging (595) (6 532) Total assets (595) (6 532) Liabilities Liabilities held for trading and for hedging (49) (6 532) 217 Repurchase agreements liabilities (7 064) Collateral deposits payable (4 684) Total liabilities (49) (18 280) 217 (1) Financial collateral relates to these instruments that are subject to MNA or similar agreements.

46 44 Liberty Holdings Limited Financial results FINANCIAL RESULTS NOTES

47 Liberty Holdings Limited Supplementary information For the year ended 31 December2017

48 46 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION CONTENTS Page Analysis of ordinary shareholders equity 47 Analysis of group earnings core earnings 48 South African covered business embedded value 49 Bancassurance Benefit to Liberty 56 90:10 Shareholder exposure 56 Long-term policyholder liabilities IFRS reconciliation 57 South African insurance distribution headcount 57 Long-term insurance New business by distribution channel 58 Total long-term insurance premiums 59 LibFin Shareholder Investment Portfolio 59 LibFin Shareholder Investment Portfolio percentage allocation 60 LibFin Shareholder Investment Portfolio return 60 LibFin Markets Credit Portfolio 60 Individual Arrangements Headline earnings 61 Individual Arrangements Key performance indicators 61 Individual Arrangements Indexed new business 61 Individual Arrangements Maintenance cost per policy 62 Individual Arrangements Negative rand reserves 62 Liberty Corporate Headline earnings 62 Liberty Corporate Key performance indicators 63 Liberty Health Headline earnings 63 Liberty Health Cover Product Lives serviced 63 Liberty Africa Insurance Headline earnings 64 Liberty Africa Insurance Key performance indicators 64 Liberty Africa Insurance Long-term insurance net cash flows 65 Our presence in Africa 65 STANLIB South Africa Headline earnings 66 STANLIB South Africa Net cash flows and assets under management by asset category 66 STANLIB South Africa Assets under management breakdown by source and asset type 67 STANLIB South Africa Retail investment performance 68 STANLIB South Africa Institutional investment performance 68 STANLIB South Africa Investment performance 69 STANLIB Rest of Africa Assets under management 69 STANLIB Rest of Africa Assets under management by geographical location 70

49 Liberty Holdings Limited Financial results 47 ANALYSIS OF ORDINARY SHAREHOLDERS EQUITY Group funds invested Contribution to earnings SUPPLEMENTARY INFORMATION Rm South African insurance Insurance operating surplus Present value of in-force business (5) (13) Investment portfolios Fixed assets and working capital (1) Subordinated notes (excluding accrued interest) (5 500) (4 500) (311) (231) Other insurance (65) (42) Liberty Africa Insurance Nigeria (4) and project support costs (56) (38) Liberty Health (54) (45) Asset management STANLIB South Africa STANLIB Rest of Africa (204) (97) Central overheads and sundry income (244) (222) Liberty Holdings Limited Liberty Two Degrees adjustment to net asset value (2) 597 (330) Mismatch earnings on L2D policyholder assets 543 (304) Preference share dividend (2) (2) Headline earnings Preference share dividend 2 2 Impairment of intangible assets (136) Liberty Holdings shareholders equity/total earnings Normalised: Liberty Holdings shareholders equity/headline earnings BEE preference shares Liberty Two Degrees normalisation adjustment (3) (340) 193 (543) 304 Normalised shareholders equity/headline earnings (1) With effect from 1 July 2005 Liberty Group Limited established a working capital funding loan between insurance operations and shareholder assets, subsequently supported by the subordinated notes issue. Inter-divisional interest is charged at 8,77% nacm. (2) Represents the difference between Libertys share of the net asset value of L2D at the end of the period and the listed price of L2D units multiplied by the number of units in issue to Liberty at the end of the period. (3) Reversal of the accounting mismatch arising on consolidation of the policyholders obligation linked to L2D units and the policyholders allocation of the group funds investment. (4) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU.

50 48 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION ANALYSIS OF GROUP EARNINGS CORE EARNINGS Rm Individual Arrangements planned margin release including annual contribution increases Individual Arrangements credit life Individual Arrangements VIF amortisation (5) (12) LibFin Markets Expected long-term rate of return on Shareholder Investment Portfolio (1) Other businesses headline earnings Group Arrangements Liberty Corporate Liberty Africa Insurance Liberty Health (54) (45) Nigeria (2) and project support costs (56) (38) Asset management STANLIB South Africa STANLIB Rest of Africa 15 (97) Central overheads and sundry income (236) (208) Centre overheads and sundry income (246) (224) BEE preference share income Core operating earnings Individual Arrangements new business strain (675) (611) Individual Arrangements operating variances, assumption changes and other (250) (223) Adjusted core operating earnings Variance to long-term rate of return on Shareholder Investment Portfolio (157) (698) STANLIB South Africa sustainable earnings adjustment (193) STANLIB Rest of Africa sustainable earnings adjustment (219) Normalised headline earnings (1) The expected long term rate of return on the SIP portfolio is based on the long term view to avoid volatility in the core operating earnings.. (2) Costs associated with the termination of a long-term licence acquisition in Nigeria and project managements costs of the Group Arrangements CFU.

51 Liberty Holdings Limited Financial results 49 SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE SUPPLEMENTARY INFORMATION 1 Description of embedded value of South African covered business The prudential regulatory regime governing South African insurance companies is expected to change imminently, which may affect the basis on which embedded value is calculated. Liberty will continue to report embedded value on the same basis as before until the best practice for embedded value reporting emerges. The current version of Advisory Practice Note (APN) 107 came into force for all financial years ending on or after 31 December APN 107 governs the way in which embedded values of life assurance companies are reported. The embedded value consists of: The net worth; plus The value of in-force covered business; less The cost of required capital. The net worth represents the excess of assets over liabilities on the statutory valuation method, adjusted for the elimination of the carrying value of covered business acquired and for the fair value of share rights granted to Liberty Group Limited employees. The value of in-force covered business is the discounted value of the projected stream of after-tax shareholder profits arising from existing in-force covered business. These shareholder profits arise from the release of margins under the statutory basis of valuing liabilities, which differs from the release of profits on the published accounting basis. Covered business is defined as business regulated by the FSB as long-term insurance business written in Liberty Group Limited. For reversionary and smoothed bonus business, the value of in-force covered business has been calculated assuming that bonuses are changed over time so that the full amount of the bonus stabilisation reserves is distributed to policyholders over the lifetime of the in-force policies. The required capital is defined as the level of capital that is restricted for distribution to shareholders. This comprises the statutory CAR calculated in accordance with Standard of Actuarial Practice (SAP) 104 plus any additional capital considered appropriate by the board given the risks in the business. Required capital has been calculated at 1,5 x CAR, consistent with risk appetite. The cost of required capital is the present value, at the risk discount rate, of the projected release of the required capital allowing for investment returns on the assets supporting the projected required capital. The value of new business written is the present value at the point of sale of the projected stream of after-tax profits from that business, reduced by the cost of required capital. New business is defined as covered business arising from the sale of new policies and once-off premium increases in respect of in-force covered business during the reporting period. Risk policies with an inception date prior to the reporting date where no premium has been received are included in the embedded value and value of new business. The contractual terms of these policies state that Liberty Group Limited is on risk from the inception date, even though a premium may not have been received. This definition is consistent with that used in the financial statements. The value of new business has been calculated on the closing assumptions. Investment yields at the point of sale have been used for new fixed annuities, guaranteed investment plans, and embedded derivatives; for all other business the investment yields at the date of reporting have been used. No adjustment has been made for the discounting of tax provisions in the embedded value.

52 50 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED) 2 Normalised embedded value Rm (unless otherwise stated) Risk discount rate % (1) 11,79 11,92 Net worth Ordinary shareholders funds on published basis BEE preference share funding Adjustment of ordinary shareholders funds from published basis (2) (7 253) (6 786) Adjustment for carrying value of in-force business acquired (3) (12) (17) Allowance for fair value of share rights (36) (33) Frank Financial Services allowance for future expenses (100) (100) Net value of life business in-force Value of life business in-force Cost of required capital (1 690) (1 641) Normalised embedded value Normalised embedded value earnings Embedded value at the end of the year Funding of restricted share plan Intragroup dividends Less embedded value at the beginning of the year (34 470) (35 268) Embedded value earnings Return on embedded value (%) 8,2 7,9

53 Liberty Holdings Limited Financial results 51 SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED) 4 Analysis of normalised embedded value earnings SUPPLEMENTARY INFORMATION Rm Net worth Value of in-force covered business Cost of required capital Embedded value Net worth Value of in-force covered business Cost of required capital Embedded value Embedded value at the end of the year (1 690) (1 641) Plus dividends paid Plus funding of restricted share plan Embedded value at the beginning of the year (11 717) (24 394) (34 470) (12 761) (24 025) (35 268) Embedded value earnings (49) (123) Components of embedded value earnings Value of new business written in the year (1 790) (90) 212 (1 661) (86) 454 Expected return on value of in-force business (4) Expected net of tax profit transfer to net worth (4 112) (4 217) Variances/changes in operating assumptions 110 (8) (155) (66) 43 Operating experience variances (5) Operating assumption changes (6) (45) (160) (39) (96) (295) Changes in modelling methodology (7) (70) (188) 7 (251) (22) Property portfolio liquidity fee variance (4) (163) (167) Development expenses (55) (55) (45) (45) Intragroup transfers Embedded value earnings from operations (45) (116) Economic adjustments (311) (117) (4) (432) (255) (421) (7) (683) Return on net worth (8) (14) (14) Investment variances (9) (393) (201) (594) (164) (799) (963) Changes in economic assumptions (10) (4) 176 (244) 378 (7) 127 Change in allowance for fair value of share rights (11) (3) (3) Normalised embedded value earnings (49) (123) 2 794

54 52 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED) Notes to embedded value (1) Future investment returns on major asset classes and other economic assumptions have been set with reference to the market yield on medium-term South African government stock. Investment return p.a. % Government stock 8,99 9,12 Equities 12,49 12,62 Property 9,99 10,12 Cash 7,49 7,62 The risk discount rate has been set equal to the risk free rate plus 80% of the equity risk premium 11,79 11,92 Maintenance expense inflation rate 7,24 7,37 (2) Adjustment of ordinary shareholders funds from the published basis The amounts represent the change in the amount of shareholder funds as a result of moving from a published valuation basis to the net worth on the embedded value basis. 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. (3) Adjustment for carrying value of in-force business acquired The carrying value of business acquired by Liberty has been deducted from shareholders funds in order to avoid double counting. For embedded value purposes, the value in respect of this acquired business is included in the value of life business in-force. The net adjustment was R12 million (2016: R17 million). (4) The expected return on the value of life business is obtained by applying the previous year s risk discount rate to the value of life business in force at the beginning of the period and the current year s risk discount rate from the point of sale to the valuation date in respect of the value of new business.

55 Liberty Holdings Limited Financial results 53 SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED) Notes to embedded value (continued) SUPPLEMENTARY INFORMATION (5) Operating experience variances consist of the combined effect on net worth and value of in-force of operating experience being different to that anticipated at the prior year end. The net operating experience variance of R330 million (2016: R477 million) comprised: Rm Net worth Value of in-force covered business Cost of required capital Embedded value 2017 Individual Arrangements Mortality and morbidity Policyholder behaviour (8) Other (i) (130) (31) (161) Group Arrangements: Liberty Corporate (70) (35) (105) Credit portfolio variance Total Individual Arrangements 202 (10) 192 Mortality and morbidity Policyholder behaviour 52 (35) 17 Other, including tax variances 83 (59) 24 Group Arrangements: Liberty Corporate Credit portfolio variance Other Total (i) The amount of R130 million is primarily related to strengthening in respect of regulatory and other simplification projects.

56 54 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED) Notes to embedded value (continued) (6) The amount of R30 million (2016: negative R295 million) is due to a number of offsetting assumption changes. (7) The amount of negative R251 million (2016: R28 million) is due to a number of data refinements and modelling changes including refinements to the modelling of reinsurance. (8) Reconciliation of embedded value return on net worth to LibFin Investments earnings: Rm LibFin Investments after consolidation of L2D Adjustment to reflect L2D at listed unit price (394) 95 LibFin Investments earnings Adjustments for differences between the statutory and published basis (604) (527) 90:10 book (194) (5) Frank Financial Services (50) (28) Bancassurance obligations relating to Liberty Africa Insurance and STANLIB (54) (39) BEE preference scheme 7 21 Central treasury investments Software asset impairment (71) Other (76) (170) Return on net worth (14) 153 The return on net worth includes an amount of negative R7 million (2016: negative R16 million) in respect of the change in the fair value of cash-flow hedges supporting LGL subordinated notes. (9) The amount of negative R393 million (2016: negative R164 million) arises from the mismatch created by hedging market risk on the IFRS basis and the negative investment variance on the 90:10 book. The investment variances include an amount of R61 million (2016: R178 million) in respect of the change in the fair value of cash-flow hedges supporting LibFin Credit. (10) The amount of R176 million (2016: R127 million) relates to changes in economic assumptions as described in note (1). (11) The amount of negative R3 million (2016: R28 million) in respect of the change in the fair value of share rights arises from the change in the number of share rights for staff employed by Liberty Group Limited and the change in the market value of Liberty Holdings Limited shares over the reporting period. Other bases, bonus rates and assumptions 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. Assumptions reflect best estimates of future experience consistent with the valuation basis excluding any compulsory or discretionary margins. However, in contrast to the assumptions in the valuation basis, the embedded value makes allowance for non-compulsory automatic premium and benefit increases. The assets backing the required capital are consistent with the long-term strategic mix of shareholder funds approved by the Liberty Holdings board.

57 Liberty Holdings Limited Financial results 55 SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED) 5 Sensitivity to risk discount rate and other assumptions In order to indicate sensitivity to varying assumptions, the value of the in-force life business less cost of required capital and the value of the new business written for Liberty Group Limited are shown below for various changes in assumptions. The reserving basis has been kept constant and only future experience assumptions have been varied. Each value is shown with only the indicated parameter being changed. SUPPLEMENTARY INFORMATION Audited Rm Value of in-force life business less cost of required capital at 31 December Value of new business written in Value of in-force life business less cost of required capital at 31 December Value of new business written in Base value Value of in-force/new business Cost of required capital (1 690) (90) (1 641) (86) 100 basis point increase in risk discount rate Value of in-force/new business Cost of required capital (2 071) (108) (2 002) (106) 100 basis point decrease in interest rate environment Value of in-force/new business Cost of required capital (1 689) (92) (1 659) (84) 10% fall in equity and property market values Value of in-force Cost of required capital (1 690) (1 641) 100 basis point increase in equity and property returns Value of in-force/new business Cost of required capital (1 431) (76) (1 395) (72) 10% decrease in maintenance expenses Value of in-force/new business Cost of required capital (1 690) (90) (1 641) (86) 10% decrease in new business acquisition expenses (other than commissions) Value of new business (1) Cost of required capital (90) (86) 10% decrease in withdrawal rates Value of in-force/new business Cost of required capital (1 690) (90) (1 641) (86) 5% decrease in mortality and morbidity for life assurance business Value of in-force/new business (2) Cost of required capital (1 690) (90) (1 641) (86) 5% decrease in mortality for annuity business Value of in-force/new business Cost of required capital (1 690) (90) (1 641) (86) (1) The effect of decreasing acquisition expenses on the value of new business includes the effect on the deferred tax asset impairment, which decreases materially when acquisition expenses decrease. The effect of acquisition expenses on the value of new business is shown in the analysis of value of long-term insurance business and margins in the group equity value report. (2) A correction was made to the 2016 value of in-force morbidity sensitivity.

58 56 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION BANCASSURANCE BENEFIT TO LIBERTY as at 31 December 2017 Liberty share (Rm) Credit Life IFRS headline earnings Embedded value of in-force contracts Other insurance products Embedded value of new business Embedded value of in-force contracts STANLIB Net service fees on assets under management sourced from Standard Bank distribution :10 SHAREHOLDER EXPOSURE as at 31 December 2017 The 90:10 exposure refers to the shareholders exposure to certain policyholder portfolios on which a fee arrangement exists whereby the investment return on the portfolios is shared between the policyholders and shareholders in a 90:10 ratio. As a result of the market risk that arises for shareholders on this exposure it is managed as part of the Shareholders Investment Portfolio (SIP) and consequently the earnings form part of the SIP returns and are included in the LibFin Investments revenue account. Because of its nature as a management fee the present value of these 90:10 fees are included in the Value of In Force of the business and the annual expected amount forms part of the expected transfer to Net Worth in the AoEV. There is therefore an inconsistency between the IFRS revenue account (shown as LibFin Investments revenue) and the AoEV (shown as expected Life Fund Operating earnings). Rm Exposure as at the beginning of the year Expected earnings Variance (109) (359) Total net earnings Exposure as at the end of the period

59 Liberty Holdings Limited Financial results 57 LONG-TERM POLICYHOLDER LIABILITIES IFRS RECONCILIATION as at 31 December 2017 Rm Policyholder liabilities at beginning of the year net of reinsurance Policyholder liabilities Reinsurance liabilities Policyholder assets (7 314) (7 579) Reinsurance assets (1 352) (1 317) Transfers to policyholder liabilities Net premium income from insurance contracts and inflows from investment contracts Net insurance premiums Fund inflows from investment contracts Investment returns Net claims and policyholder benefits (52 506) (53 920) Net insurance claims (36 133) (37 220) Fund outflows from investment contracts (16 373) (16 700) Acquisition costs (4 326) (4 136) Management expenses, finance costs and profit share allocations (9 441) (9 238) Taxation (1 906) (1 058) Operating profit from insurance operations (1 296) (1 589) Foreign currency translation reserve (270) (351) Policyholder liabilities at end of year net of reinsurance Policyholder liabilities Reinsurance liabilities Policyholder assets (7 484) (7 314) Reinsurance assets (1 481) (1 352) SUPPLEMENTARY INFORMATION SOUTH AFRICAN INSURANCE DISTRIBUTION HEADCOUNT as at 31 December Agency (1) Liberty entrepreneurs (1) Liberty@work (1) Standard Bank Financial Consultants Broker Consultants (1) Tied agents December 2013 December 2014 December 2015 December 2016 December 2017

60 58 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION LONG-TERM INSURANCE NEW BUSINESS BY DISTRIBUTION CHANNEL (1) Recurring premiums Single premiums Total premiums Indexed premiums Rm Retail Broker Bancassurance Tied channels (2) Other Institutional Broker Bancassurance Tied channels (2) Other Total new business Split between: South Africa (1) Individual Arrangements Broker Bancassurance Tied channels (2) Other Liberty Corporate Broker Bancassurance Tied channels (2) Other Total new business Liberty Africa Insurance Retail Broker Bancassurance Tied channels (2) Other Institutional Broker Bancassurance Tied channels (2) Other Total new business (1) Includes premium escalations for Individual Arrangements; excludes STANLIB Multi-manager. (2) Tied channels include Agency, Liberty entrepreneurs and Liberty@work.

61 Liberty Holdings Limited Financial results 59 TOTAL LONG-TERM INSURANCE PREMIUMS Recurring premiums Single premiums Total premiums SUPPLEMENTARY INFORMATION Rm Individual Arrangements Liberty Corporate Liberty Africa Insurance STANLIB Multi-manager Total premiums Indexed premiums Individual Arrangements Liberty Corporate Liberty Africa Insurance STANLIB Multi-manager (1) 28 (1) The arrangement whereby funds were placed with external asset managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows in 2017 and going forward. The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under long-term insurance new business by distribution channel arises mainly from different treatment for extensions of matured policies, reinvestment of fund withdrawals, conversions of standalone funds to umbrella funds and fund member movements within Liberty administered funds. LIBFIN SHAREHOLDER INVESTMENT PORTFOLIO as at 31 December 2017 Exposure category Rm Local Foreign Total % Local Foreign Total (1) % Equities Bonds Cash Property Other Total Assets backing capital Assets backing policyholder liabilities :10 exposure Reconciliation to IFRS shareholders equity Shareholder Investment Portfolio Less: 90:10 exposure (3 920) (4 142) Less: Subordinated notes (5 500) (4 500) SA insurance IFRS shareholder s equity

62 60 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION LIBFIN SHAREHOLDER INVESTMENT PORTFOLIO PERCENTAGE ALLOCATION as at 31 December 2017 Exposure category % Assets backing capital Assets backing policyholder liabilities :10 exposure Total Assets backing capital Assets backing policyholder liabilities 90:10 exposure Total Local assets Equities Bonds, cash and property Other Foreign assets Equities Bonds, cash and property Other Total LIBFIN SHAREHOLDER INVESTMENT PORTFOLIO RETURN as at 31 December 2017 Rm Realised gross result Taxation (512) (349) Bond cost (432) (321) Expenses (including asset management fees) (77) (82) Net profit Gross return (%) 8,5 5,7 Taxation note: The taxation treatment of income derived from assets backing capital is the normal taxation rules applicable to life investment portfolios. The taxation applicable to income derived from assets backing life funds and the 90:10 exposure is determined by the tax rates pertaining to each life tax fund to which the assets are allocated (I-E tax). In addition there is transfer tax at 28% on the net surplus, after the applicable I-E tax. LIBFIN MARKETS CREDIT PORTFOLIO as at 31 December 2017 Rm (unless otherwise stated) % change Net earnings from Credit portfolio Total LibFin assets (Rbn) Credit portfolio assets (Rbn) Banks, treasuries and shorter dated assets (Rbn) 20 20

63 Liberty Holdings Limited Financial results 61 INDIVIDUAL ARRANGEMENTS HEADLINE EARNINGS Rm SUPPLEMENTARY INFORMATION Expected profit and premium escalations Variances, modelling and assumption changes (144) (341) New business strain (675) (611) Project, outperformance incentive and non cost per policy expenses (286) (106) Direct Financial Services (8) (109) Other Release of tax provisions 16 Earnings before bancassurance Liberty share of credit life bancassurance (net of all taxes) Complex bancassurance preference dividend (62) (105) Headline earnings INDIVIDUAL ARRANGEMENTS KEY PERFORMANCE INDICATORS as at 31 December 2017 Rm (unless otherwise stated) Net customer cash flows Insurance products LISP Gross sales (excluding LISP) Indexed new business (excluding LISP) Value of new business Retail margin excluding STANLIB (%) 0,5 1,4 Retail new business margin including STANLIB (%) (1) 0,5 1,2 (1) The arrangement whereby funds were placed with external managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows in 2017 resulting in the same margin being reported. INDIVIDUAL ARRANGEMENTS INDEXED NEW BUSINESS as at 31 December 2017 Rm Individual Arrangements Insurance (excluding emerging consumer market) Emerging consumer market Total Individual Arrangements Insurance Direct Financial Services STANLIB on balance sheet sales Total on balance sheet sales STANLIB off balance sheet sales GateWay LISP off balance sheet sales Total Individual Arrangements distribution

64 62 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION INDIVIDUAL ARRANGEMENTS MAINTENANCE COST PER POLICY as at 31 December 2017 R Valuation basis Complex Simplex Annuities INDIVIDUAL ARRANGEMENTS NEGATIVE RAND RESERVES (1) as at 31 December 2017 Rm Published IFRS basis Statutory basis (1) Gross of taxation By their nature negative rand reserves includes offsets between policies with positive and negative reserves. The Directive 145 adjustment is applied only to policies with negative reserves. LIBERTY CORPORATE HEADLINE EARNINGS Rm Gross contribution Underwriting margin Fee income Longevity improvement factor assumption change (50) Provision movements and sundry ad hoc items (36) 59 Pension businesses and other income Expenses and other items (960) (877) Profit before tax Taxation (31) (74) Headline earnings

65 Liberty Holdings Limited Financial results 63 LIBERTY CORPORATE KEY PERFORMANCE INDICATORS Rm (unless otherwise stated) SUPPLEMENTARY INFORMATION Gross sales Indexed new business Value of new business New business margin (%) 0,6 0,4 Net customer cash outflows (1 536) (751) LIBERTY HEALTH HEADLINE EARNINGS Rm Earnings before depreciation and amortisation (78) (16) Amortisation and depreciation (11) (33) Loss before taxation (89) (49) Taxation 35 4 Headline loss (54) (45) LIBERTY HEALTH COVER PRODUCT LIVES SERVICED as at 31 December 2017 Thousands Region Eastern Africa Western Africa Southern Africa Total Liberty owned licences Third party licences

66 64 Liberty Holdings Limited Financial results SUPPLEMENTARY INFORMATION LIBERTY AFRICA INSURANCE HEADLINE EARNINGS Rm Insurance entities earnings (1) Long-term insurance Short-term insurance Headline earnings (before head office expenses) Non controlling shareholders share of headline earnings (61) (66) Liberty share of headline earnings Liberty owned businesses >3 years Liberty owned businesses <3 years (3) (4) Head office costs (52) (74) Net headline earnings attributable to Liberty (1) The headline earnings result is shown at 100% of the earnings of certain of the entities that make up Liberty Africa Insurance. LIBERTY AFRICA INSURANCE KEY PERFORMANCE INDICATORS Rm (unless otherwise stated) Value of new business New business margin (%) 3,9 5,6 Long term: Gross sales Indexed new business Net customer cash flows Short term: Net customer cash flows Claims loss ratio (%) 48 44

67 Liberty Holdings Limited Financial results 65 LIBERTY AFRICA INSURANCE LONG-TERM INSURANCE NET CASH FLOWS Rm SUPPLEMENTARY INFORMATION Net premiums by product type Retail Single Recurring Institutional Single Recurring Net premium income from insurance contracts and inflows from investment contracts Net claims and policyholders benefits by product type Retail (307) (293) Death, critical illness and disability claims (61) (77) Policy surrender and maturity claims (242) (212) Annuity payments (4) (4) Institutional (528) (833) Death, critical illness and disability claims (110) (81) Scheme terminations and member withdrawals (418) (752) Net claims and policyholders benefits (835) (1 126) Net cash flow split as follows: Retail Institutional OUR PRESENCE IN AFRICA KEY 1 Senegal 2 Burkina Faso 3 Ivory Coast 4 Ghana 5 Niger 6 Nigeria 7 Chad 8 Cameroon 9 Equatorial Guinea 10 Gabon 1 1 Congo 1 2 Uganda 1 3 Kenya 14 Tanzania 1 5 Zambia 16 Malawi 17 Mozambique 18 Madagascar 1 9 Mauritius 2 0 Zimbabwe 2 1 Botswana 22 Namibia 2 3 Swaziland 24 Lesotho 2 5 South Africa Life insurance Asset management Short-term insurance Property Health 19