Liberty Holdings Limited

Transcription

1 Supplementary 2015 information For the year ended 31 December

2 CONTENTS GROUP Analysis of ordinary shareholders' funds 53 Analysis of group earnings core earnings 54 Summary of BEE transaction status 55 Reconciliation of business unit earnings to segment result 56 South African covered business embedded value 57 Bancassurance Benefit to Liberty 65 INSURANCE 90:10 Shareholder exposure 65 Long-term policyholder liabilities IFRS reconciliation 66 South African insurance distribution headcount 66 Total long-term insurance premiums 67 Long-term insurance New business by distribution channel 68 LibFin Shareholder Investment Portfolio exposure 69 LibFin Shareholder Investment Portfolio percentage allocation 69 LibFin Shareholder Investment Portfolio return 70 INDIVIDUAL ARRANGEMENTS Individual Arrangements Headline earnings 70 Individual Arrangements Key performance indicators 71 Individual Arrangements Indexed new business 71 Individual Arrangements Maintenance cost per policy 72 Individual Arrangements Negative rand reserves 72 GROUP ARRANGEMENTS Liberty Corporate Headline earnings 73 Liberty Corporate Key performance measures 73 Liberty Health Headline earnings 74 Liberty Health Lives serviced 74 Liberty Africa Insurance Headline earnings 75 Liberty Africa Insurance Key performance indicators 75 ASSET MANAGEMENT STANLIB South Africa Headline earnings 76 STANLIB South Africa Net cash flows and AUM by asset category 76 STANLIB South Africa AUM breakdown by source and asset type 77 STANLIB South Africa Retail investment performance 78 STANLIB South Africa Institutional investment performance 78 STANLIB South Africa Investment performance 79 STANLIB Other Africa AUM 79 STANLIB Other Africa AUM by geographical location 80

3 Financial results 3 Analysis of ordinary shareholders' funds Group funds invested Contribution to earnings South African insurance Insurance operating surplus Present value of in-force business (44) (76) Investment portfolios Fixed assets and working capital (1) Subordinated notes (excluding accrued interest) (3 500) (3 500) (209) (180) Other insurance Liberty Africa Insurance Liberty Health (19) (30) Asset Management STANLIB South Africa (2) STANLIB Other Africa Central overheads and sundry income (235) (235) Centre expenses and sundry income (278) (276) Liberty Properties (2) Preference share dividend (2) (2) Headline earnings Preference share dividend 2 2 Impairment of intangible assets (93) Liberty Holdings shareholders funds/total earnings BEE normalised: Liberty Holdings shareholders funds/headline earnings BEE preference shares BEE normalised shareholders funds/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) Liberty has entered into a strategic partnership with the retail division of JHI combining the collective property management service capabilities under a new joint venture entity, JHI Retail (Pty) Ltd. The transaction was effective 1 May 2015 with Liberty s interest in JHI Retail being 49%. Earnings from the 49% interest in JHI Retail are included in STANLIB South Africa's earnings. The results of operations to 30 April 2015 and the ongoing portfolio liquidity charge total of R43 million were reflected in central overheads and sundry income.

4 4 Financial results Analysis of group earnings core earnings Individual Arrangements planned margin release including annual contribution increases Individual Arrangements credit life Individual Arrangements VIF amortisation (44) (76) LibFin Markets Expected long-term rate of return on Shareholder Investment Portfolio (1) Other businesses headline earnings and shareholder net expenses Group Arrangements Liberty Corporate Liberty Africa Insurance Liberty Health (19) (30) Asset Management STANLIB South Africa (2) STANLIB Other Africa Central overheads and sundry income (282) (184) Centre overheads and sundry income (351) (278) Liberty Properties (2) BEE preference share income Core operating earnings Individual Arrangements new business strain (392) (402) Individual Arrangements operating variances, assumption changes and other Sundry income strategic investment return 71 Adjusted core operating earnings Variance to long-term rate of return on Shareholder Investment Portfolio (23) 205 BEE 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) Liberty has entered into a strategic partnership with the retail division of JHI combining the collective property management service capabilities under a new joint venture entity, JHI Retail (Pty) Ltd. The transaction was effective 1 May 2015 with Liberty s interest in JHI Retail being 49%. Earnings from the 49% interest in JHI Retail are included in STANLIB South Africa's earnings. The results of operations to 30 April 2015 and the ongoing portfolio liquidity charge total of R43 million were reflected in central overheads and sundry income.

5 Financial results 5 Summary of BEE transaction status as at 31 December 2015 Safika Holdings Proprietary Limited Shanduka Group Proprietary Limited The Black Managers Trust The Liberty Community Trust Total Number of shares Balance at date of trading restrictions lifted Shares traded or transferred to participant on settlement of proportional debt ( ) ( ) ( ) Balance at 31 December Preference share debt () Balance at date of trading restrictions lifted Shares traded or transferred to participant on settlement of proportional debt (191) (20) (274) (485) Balance at 31 December Liberty s 100% held subsidiary, Liberty Group Limited, entered into a series of transactions during 2004 whereby an investment in aggregate of R1 251 million was made in cumulative redeemable preference shares. The proceeds of this transaction were used by the BEE entities to purchase Liberty Group Limited shares. On 1 December 2008, in terms of a Companies Act section 311 transaction to remove Liberty Holdings Limited control structure, each BEE entity accepted an exchange of ordinary shares for Liberty Group Limited shares on a one for one basis. The cumulative redeemable preference shares attract dividends at 67% (with effect from 1 March 2008) of Standard Bank s prime lending rate. The preference dividends are payable on each date the company (which has issued the preference shares) receives an ordinary dividend from. The preference shares do not meet the definition of a financial asset in terms of International Financial Reporting Standards and therefore the investment value of the preference shares has reduced group equity and is stated in the analysis of group equity as a negative empowerment reserve. Receipt of preference share redemptions and dividends are credited directly to reserves. With effect from 1 January 2015 the trading restrictions on the underlying Liberty Holdings Shares securing the cumulative redeemable preference shares were lifted. If however, part or all these shares are traded, any related outstanding preference share liability would need to be settled from the proceeds.

6 6 Financial results Reconciliation of business unit earnings to segment result Business unit () Individual Arrangements Group Arrangements Asset Management Other Total Allocated recurring shareholder expenses (1) Adjusted total (1) 2015 Individual Arrangements (119) Group Arrangements (26) 199 Liberty Corporate (26) 193 Liberty Africa Insurance Liberty Health (19) (19) (19) LibFin (Markets and Investments) LibFin Markets credit portfolio LibFin Markets asset/liability matching (4) 4 LibFin Investments SIP (109) (5) Asset Management STANLIB South Africa STANLIB Other Africa Central overheads and sundry income (191) (26) 6 (211) 145 (66) BEE normalised headline earnings Preference share dividend Impairment of intangible assets (51) (21) (21) (93) (93) Net income earned on BEE preference shares (26) (26) (26) Total earnings attributable to equity holders Individual Arrangements Group Arrangements Liberty Corporate Liberty Africa Insurance Liberty Health (30) (30) LibFin (Markets and Investments) LibFin Markets credit portfolio LibFin Markets asset/liability matching LibFin Investments Asset management STANLIB South Africa STANLIB Other Africa Central overheads and sundry income (19) 41 (206) (184) BEE normalised headline earnings Preference share dividend 2 2 Net income earned on BEE preference shares (53) (53) Total earnings attributable to equity holders (1) With reference to note 2.1 to the group equity value report, the allocation of recurring shareholder expenses is provided to indicate what the business unit earnings would be for 2015, on this basis.

7 Financial results 7 South African covered business embedded value 1 Description of embedded value of South African covered business The current version of Actuarial Practice Note (APN) 107 came into effect 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 options/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 longterm insurance business written in Liberty Group Limited and its subsidiaries. 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 Capital Adequacy Requirement (CAR) calculated in accordance with Standard 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 difference between the amount of required capital and 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 group annual financial statements. The value of new business has been calculated on the closing non-economic 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. Change in measurement bases These changes have been adopted with effect from 1 January 2015 and amounted to an increase in the embedded value of SA covered business by R2 191 million. The change in measurement basis of LibFin Credit and certain shareholder recurring costs is explained in section 2 of the group equity value report.

8 8 Financial results South African covered business embedded value (continued) 2 BEE normalised embedded value Risk discount rate % (a) 12,77 10,84 Net worth Ordinary shareholders funds on published basis BEE preference share funding Adjustment of ordinary shareholders funds from published basis (b) (6 633) (5 874) Adjustment for carrying value of in-force business acquired (c) (30) (74) Allowance for fair value of share rights (61) (136) Frank Financial Services allowance for future expenses (100) (100) Net value of life business in-force Value of life business in-force (d) Cost of required capital (1 518) (1 456) BEE normalised embedded value BEE normalised embedded value earnings Embedded value at the end of the year Less change in measurement basis: LibFin Credit (876) Less change in measurement basis: recurring shareholder expenses (1 315) Funding of restricted share plan Intergroup dividends Less embedded value at the beginning of the year (31 371) (27 959) Embedded value earnings Return on embedded value (%) 12,2 17,3

9 Financial results 9 4 Analysis of BEE normalised embedded value earnings Net worth Value of in-force covered business Cost of required Embedded capital value Net worth Value of in-force covered business Cost of required Embedded capital value Embedded value at the end of the year (1 518) (1 456) Plus dividends paid Plus funding of restricted share plan Less change in measurement basis: LibFin Credit 170 (1 046) (876) Less change in measurement basis: recurring shareholder expenses 251 (1 566) (1 315) Embedded value at the beginning of the year (11 838) (20 989) (31 371) (9 858) (19 667) (27 959) Embedded value earnings (62) Components of embedded value earnings Value of new business written in the year (1 521) (95) 684 (1 498) (101) 914 Expected return on value of in-force business (e) Expected net of tax profit transfer to net worth (3 825) (3 266) Operating experience variances (h) Credit portfolio variance Development expenses (52) (52) Property portfolio liquidity fee (d) Operating assumption changes (i) 40 (151) (111) (19) (43) (62) One period replacement of shareholder expenses (122) (122) Transfer of shareholder expense reserve Changes in modelling methodology (j) (19) (56) (54) Embedded value earnings from operations (74) Economic adjustments 951 (948) Investment return on net worth (k) Investment variances (l) 67 (30) 37 (93) 14 (79) Changes in economic assumptions (m) 28 (918) 12 (878) (6) Change in allowance for fair value of share rights (n) BEE normalised embedded value earnings (62) Note: 2014 comparative figures are in many cases not directly comparable to 2015 actuals, due to the change in measurement bases for LibFin Credit and certain recurring shareholder expenses. Refer to section 2 of the group equity value report.

10 10 Financial results South African covered business embedded value (continued) Notes to embedded value a) 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 9,97 8,04 Equities 13,47 11,54 Property 10,97 9,04 Cash 8,47 6,54 The risk discount rate has been set equal to the risk free rate plus 80% of the equity risk premium 12,77 10,84 Maintenance expense inflation rate 6,97 5,06 b) Adjustment of ordinary shareholders funds from the published basis The amount represents the change in the amount of shareholder funds as a result of moving from a published valuation basis to the statutory valuation 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. c) 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 Capital Alliance Holdings Limited (CAHL) (30) (73) Business previously acquired by CAHL (1) (30) (74) d) Following the property management transaction with JHI, the ongoing liquidity fee component charge to the property portfolio is valued at R168 million within the value of in-force covered business. This was previously earned by a fellow subsidiary of Liberty Holdings Limited, namely Liberty Properties (Pty) Limited. Going forward, the fee will be earned in Liberty Group Limited. e) 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 year 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. f) 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. g) Other bases, bonus rates and assumptions Parameters reflect best estimates of future experience, consistent with the valuation bases used by the statutory actuaries, 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.

11 Financial results 11 Notes to embedded value (continued) h) Operating experience variances (including incentive outperformance) 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 31 December 2015 operating experience variance of R421 million (2014: R709 million) comprised: Value of Net worth in-force covered business Cost of required capital Embedded value Operating experience variances 2015 Individual Arrangements (24) Mortality and morbidity Policyholder behaviour (41) Other, including tax variances (43) (41) (84) Group Arrangements Short-term incentives outperformance (60) (60) Cash settled incentives linked to share price (4) (4) Other, mainly release of tax over-provisions Total Individual Arrangements Mortality and morbidity Policyholder behaviour Other, including tax variances 177 (33) 144 Group Arrangements 152 (36) 116 Short-term incentives outperformance (103) (103) Cash settled incentives linked to share price (22) (22) Other (non Individual Arrangements) Total

12 12 Financial results South African covered business embedded value (continued) Notes to embedded value (continued) i) The amount of negative R111 million (2014: negative R62 million) arises mainly due to the strengthening of the basis for policyholder behaviour on investment products. j) The amount of R103 million (2014: negative R54 million) comprises a number of minor modelling and data refinements. k) Reconciliation of embedded value investment return on net worth to LibFin Investments earnings: LibFin Investments Adjustments for differences between the statutory and published bases (327) (124) 90:10 book (275) (328) Frank Financial Services, including deferred tax asset impairment (119) (47) Bancassurance obligations relating to Liberty Africa and STANLIB (21) (32) Software asset impairment (reversal in 2014) (44) 53 Frank Financial Services allowance for future expenses (100) BEE preference share scheme Central treasury investments 121 Other, including positive tax variances Investment return on net worth l) Includes effect of negative R133 million (2014: negative R93 million) in respect of the change in fair value of cash flow hedges supporting the LibFin Credit business. m) The amount of negative R878 million (2014: positive R58 million) relates to changes in economic assumptions as described in note a. n) The amount of R75 million (2014: R100 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 the share price over the reporting year. o) The assets backing the required capital are consistent with the long-term strategic mix of shareholder funds approved by the Liberty Holdings Limited board.

13 Financial results 13 5 Comparative showing 2015 on previous basis The change in the measurement basis of LibFin Credit and certain shareholder recurring costs, explained in section 2 of the group equity value report, affects the analysis of BEE normalised embedded value earnings. In order to facilitate the analysis of the 2015 embedded value, as well as comparison with prior periods, the 2015 analysis of BEE normalised embedded value earnings has been produced on the previous basis and reported below. 31 December 2015 as reported 31 December 2015 on previous basis Embedded value Embedded value (1) Analysis of BEE normalised embedded value earnings Embedded value at the end of the year Plus dividends paid Plus funding of restricted share plan Less change in measurement basis: LibFin Credit (876) Less change in measurement basis: recurring shareholder expenses (1 315) Embedded value at the beginning of the year (31 371) (31 371) Embedded value earnings Components of embedded value earnings Value of new business written in the year Expected return on value of life business Expected net of tax profit transfer to net worth Operating experience variances Credit portfolio variance Development expenses (47) Property portfolio liquidity fee Operating assumption changes (111) (65) One period replacement of shareholder expenses (123) Changes in modelling methodology Embedded value earnings from operations Investment return on net worth Investment variances 37 (44) Changes in economic assumptions (878) (797) Change in allowance for fair value of share rights BEE normalised embedded value earnings (1) The previous basis of embedded value is not audited. Note: The expected net of tax profit transfer to net worth changes from R3 825 million in the reported analysis to R3 454 million on the previous basis.

14 14 Financial results South African covered business embedded value (continued) 6 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. Value of in-force life business less cost of required capital at 31 December 2015 Value of new business written in 2015 Value of in-force life business less cost of required capital at 31 December 2014 Value of new business written in 2014 Base value Value of in-force/new business Cost of required capital (1 518) (95) (1 456) (101) 100 basis point increase in risk discount rate Value of in-force/new business Cost of required capital (1 861) (116) (1 828) (128) 100 basis point decrease in interest rate environment Value of in-force/new business Cost of required capital (1 520) (96) (1 460) (102) 10% fall in equity and property market values Value of in-force Cost of required capital (1 518) (1 456) 100 basis point increase in equity and property returns Value of in-force/new business Cost of required capital (1 273) (80) (1 189) (83) 10% decrease in maintenance expenses Value of in-force/new business Cost of required capital (1 518) (95) (1 456) (101) 10% decrease in new business acquisition expenses (other than commissions) Value of new business Cost of required capital (95) (101) 10% decrease in withdrawal rates Value of in-force/new business Cost of required capital (1 518) (95) (1 456) (101) 5% improvement in mortality and morbidity for assurances Value of in-force/new business Cost of required capital (1 518) (95) (1 456) (101) 5% improvement in mortality for annuities Value of in-force/new business Cost of required capital (1 518) (95) (1 456) (101)

15 Financial results 15 Bancassurance Benefit to Liberty Liberty share () 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 2015 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) Exposure as at the beginning of the year Expected earnings Variance (34) 22 Total net earnings

16 16 Financial results Long-term policyholder liabilities IFRS reconciliation as at 31 December Policyholder liabilities at beginning of the year net of reinsurance Transfers to policyholder liabilities Net premium income from insurance contracts Net inflows from investment contracts Net premium income from insurance contracts and inflows from investment contracts Investment returns Claims, policyholder benefits and payments (47 269) (44 546) Acquisition costs (4 208) (4 169) Management expenses, finance costs and profit share allocations (8 583) (7 011) Taxation (1 779) (1 825) Operating profit from insurance operations (2 271) (2 496) Foreign currency translation reserve Policyholder liabilities at end of year net of reinsurance Reinsurance assets Policyholders liabilities at end of year as published South African insurance distribution headcount five year history Tied agents. Agency 1 Liberty entrepreneurs 1 Liberty@work 1 Standard Bank Financial Consultants Broker Consultants December 2011 December 2012 December 2013 December 2014 December 2015

17 Financial results 17 Total long-term insurance premiums Recurring premiums Single premiums Total premiums Individual Arrangements Liberty Corporate Liberty Africa Insurance STANLIB Multi-manager Total premiums % change Individual Arrangements % change Liberty Corporate 7 (47) (19) % change Liberty Africa Insurance % change STANLIB Multi-manager (50) (50) Indexed premiums Individual Arrangements Liberty Corporate Liberty Africa Insurance STANLIB Multi-manager The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under longterm 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.

18 18 Financial results Long-term insurance New business by distribution channel (1) Recurring premiums Single premiums Total premiums Indexed premiums 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 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.

19 Financial results 19 LibFin Shareholder Investment Portfolio exposure as at 31 December Local Foreign Total Local Foreign Total Exposure category % % Equities Bonds Cash Preference shares Property Other Total Assets backing capital Assets backing life funds :10 exposure LibFin Shareholder Investment Portfolio percentage allocation as at 31 December % Assets backing capital Assets backing life funds 90:10 exposure Total Assets backing capital Assets backing life funds 90:10 exposure Total Local assets Equities Bonds, cash and property Preference shares Other Foreign assets Equities Bonds, cash and property Other Total

20 20 Financial results LibFin Shareholder Investment Portfolio return as at 31 December Realised gross result Taxation (565) (581) Bond cost (290) (248) Expenses (including asset management fees) (76) (77) Net profit Gross return (%) 9,6 10,3 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. Individual Arrangements Headline earnings Expected profit and premium escalations Variances, modelling and assumption changes New business strain (392) (402) Project, outperformance incentive and non cost per policy expenses (112) (179) Direct Financial Services (49) (47) Other 114 (158) Tax variances and release of tax provisions (33) 158 Earnings before bancassurance Liberty share of credit life bancassurance (net of all taxes) Complex bancassurance preference dividend (123) (88) Headline earnings

21 Financial results 21 Individual Arrangements Key performance indicators (unless stated otherwise) Net customer cash flows Insurance products LISP Gross sales (excluding LISP) Indexed new business (excluding LISP) Value of new business Retail margin excluding STANLIB (%) 2,3 2,5 Retail new business margin including STANLIB (%) 2,0 2,3 Individual Arrangements Indexed new business Indexed premium () 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

22 22 Financial results Individual Arrangements Maintenance cost per policy as at 31 December 2015 Post revision Pre revision R 2015 (1) 2015 (1) 2014 Valuation basis Complex Simplex Annuities (1) The maintenance cost per policy has been revised at 31 December 2015 to allow for the inclusion of further shareholder and non-recurring expenses. Individual Arrangements Negative rand reserves (1) as at 31 December 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.

23 Financial results 23 Liberty Corporate Headline earnings Gross contribution Underwriting margin Fee income Pension businesses and other income 16 (69) Expenses and other items (802) (789) Profit before tax Taxation (86) (66) Headline earnings Liberty Corporate Key performance measures (unless stated otherwise) Gross sales Indexed new business Value of new business New business margin (%) 0,5 1,1 Net customer cash flows (891) 3 438

24 24 Financial results Liberty Health Headline earnings Earnings before depreciation and amortisation 27 Amortisation and depreciation (35) (50) Loss before taxation (8) (50) Taxation (14) 7 Headline loss (22) (43) Headline loss attributable to Liberty (19) (30) Liberty Health Lives serviced Thousands Risk lives Liberty Health Cover Risk lives THT (1) Administration lives South Africa Other Africa (including THT) IT Lives South Africa Other Africa (including THT) (1) Total Health Trust (THT) offers capitation medical insurance with limited risk.

25 Financial results 25 Liberty Africa Insurance Headline earnings Headline earnings (before head office expenses) (1) Long-term insurance operations Short-term insurance operations Headline earnings Liberty share (before head office expenses) Less head office expenses (63) (43) 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 (unless stated otherwise) Embedded value of new business written in year New business margin (%) 6,6 6,5 Long term: Indexed new business Net customer cash flows Short term: Net customer cash flows Claims loss ratio (%) 46 41

26 26 Financial results STANLIB South Africa Headline earnings (unless stated otherwise) Net fee income Base fees Performance fees Operating expenses (1 042) (972) Profit before investment income Other income Profit before taxation Taxation (161) (201) Total headline earnings Average margin (bps) Average assets under management (Rbn) STANLIB South Africa Net cash flows and AUM by asset category as at 31 December 2015 Net cash flows AUM Retail Fixed interest 498 (2 770) Equity (310) (656) Property 740 (1 196) Money Market (1 413) (3 359) Other Institutional (1 404) (7 102) Fixed interest (1 222) Equity 411 (591) Property (780) (2 280) Money Market 741 (7 994) Other (554) (979) Liberty intergroup (9 256) (14 158) Total (3 562) (19 300)

27 Financial results 27 STANLIB South Africa AUM breakdown by source and asset type as at 31 December 2015 Money market (incl cash) Fixed interest Equity Property Other Absolute return Balanced International Structured Retail life LISP Total 31 December 2015 Retail Collective Investments Linked Investment and Structured Products Money market Multi-manager Collective Investments Institutional Segregated funds Money market Liberty intergroup STANLIB total December 2014 Retail Collective Investments Linked Investment and Structured Products Money market Multi-manager Collective Investments Institutional Segregated funds Money market Liberty intergroup STANLIB total

28 28 Financial results STANLIB South Africa Retail investment performance Rolling period 1 Year 3 Year 5 Year Core retail funds quartile performance Fund name STANLIB SA Equity STANLIB Equity STANLIB Growth STANLIB Value STANLIB Balanced STANLIB Balanced Cautious STANLIB Inflation Plus 5% STANLIB Inflation Plus 3% STANLIB Absolute Plus STANLIB Bond STANLIB Income STANLIB Money Market STANLIB Flexible Income STANLIB Aggressive Income STANLIB Property Income STANLIB South Africa Institutional investment performance Rolling period Survey funds (Alexander Forbes Surveys quartile performance) 1 Year 3 Year 5 Year Large Manager Global Full Global Mandate Domestic Only Mandate STANLIB Core Equity STANLIB Growth Equity STANLIB Research (1) STANLIB Value STANLIB Enhanced Index Absolute Return Domestic Absolute Return STANLIB Core Bond Money Market STANLIB Institutional Property (1) Discontinued in survey.

29 13% 8% 42% 47% Financial results 29 STANLIB South Africa Investment performance as at 31 December 2015, four year history % of Core Retail Products in 1st and 2nd quartile % Year 3 Year 5 Year % of Institutional Funds in 1st and 2nd quartile % 0 1 Year 3 Year 5 year STANLIB Other Africa AUM as at 31 December 2015 Assets under management () Opening market value Net cash inflows/(outflows) (2 090) Capital appreciation Closing market value Segregated funds Unit trusts Money market Total AUM

30 30 Financial results STANLIB Other Africa AUM by geographical location as at 31 December 2015 Assets under management () Southern region (1) Fixed interest Equity Property Money Market Other Eastern region (2) Fixed interest Equity Property Money Market Western region (3) Fixed interest Money Market Other Total AUM Combined Fixed interest Equity Property Money Market Other (1) Southern region includes Botswana, Swaziland, Lesotho and Namibia. (2) Eastern region includes Kenya, Tanzania and Uganda. (3) Western region is Ghana

31 AB_4-W Financial results 31 Appendix: Fair value measurement disclosures Financial instruments measurement analysis as at 31 December 2015 Audited Measurement basis Fair value hierarchy Designation per Financial Position Statement Amortised Equity cost (1) accounted Financial soundness value (2) Fair value Total Provided below Not provided (3) Assets Pledged assets Derivative assets Interests in associates measured at fair value Interest in joint ventures Financial instruments Prepayments, insurance and other receivables Cash and cash equivalents Properties (investment and owneroccupied) Total financial instrument and property assets Fair value of amortised cost assets Liabilities Investment contracts with discretionary participation features Financial liabilities under investment contracts Financial liabilities Third party financial liabilities arising on consolidation of mutual funds Derivative liabilities Repurchase agreements liabilities and collateral received Insurance and other payables Total financial instrument liabilities Fair value of amortised cost liabilities (1) Amortised cost The R1 210 million financial instrument asset relates to policyholder loans. The fair value has been determined by utilising a discounted cash flow model utilising discount rates ranging between 11,8% and 13,5%. The financial liabilities comprise subordinated bonds of R3 574 million and redeemable preference shares of R5 million. The fair value of these liabilities is R3 295 million and R5 million respectively. The fair value of the subordinated bonds is determined by discounting the cash flows using the government bond curve and a credit spread. The credit spread ranges from 2,66% to 3,05%. (2) Financial soundness value The financial soundness valuation methodology is described in SAP 104 issued by the Actuarial Society of South Africa. With regards to investment contracts with discretionary participation features, the group cannot reliably measure the fair value of the investment contracts with discretionary participation features (DPF). The DPF is a contractual right that gives investors in these contracts the rights to receive supplementary discretionary returns through participation in the surplus arising from the assets held in the investment DPF fund. These supplementary returns are subject to the discretion of the group. Given the discretionary nature of these investments returns and the absence of an exchange market in these contracts, there is no generally recognised methodology available to determine fair value. These instruments are issued by the group and the intention is to hold the instruments to full contract term. (3) Fair value hierarchy not provided The fair value of prepayments, insurance and other receivables, collateral deposits, cash and cash equivalents, equity accounted joint ventures, insurance and other payables and repurchase agreement liabilities and collateral received approximate their carrying value and are not included in the hierarchy table. In most cases their settlement terms are short-term and therefore, from a materiality perspective, fair values are not required to be modelled.

32 AB_4-W Financial results 32 Appendix: Fair value measurement disclosures (continued) Financial instruments measurement analysis (continued) as at 31 December 2014 Audited Measurement basis Fair value hierarchy Designation per Financial Position Statement Amortised cost (1) Financial soundness value (2) Fair value Total Provided below Not provided (3) Assets Pledged assets Derivative assets Interests in associates measured at fair value Financial instruments Prepayments, insurance and other receivables Cash and cash equivalents Properties (investment and owner-occupied) Total financial instrument and property assets Fair value of amortised cost assets Liabilities Investment contracts with discretionary participation features Financial liabilities under investment contracts Financial liabilities Third party financial liabilities arising on consolidation of mutual funds Derivative liabilities Repurchase agreements liabilities and collateral received Insurance and other payables Total financial instrument liabilities Fair value of amortised cost liabilities (1) Amortised cost The R1 327 million financial instrument asset relates to policyholder loans. The fair value has been determined by utilising a discounted cash flow model utilising discount rates ranging between 11,3% and 18,0%. The financial liabilities comprise subordinated bonds of R3 570 million and redeemable preference shares of R5 million. The fair value of these liabilities is R3 501 million and R5 million respectively, using discount rates ranging between 8,3% and 9,8%. (2) Financial soundness value The financial soundness valuation methodology is described in SAP 104 issued by the Actuarial Society of South Africa. With regards to investment contracts with discretionary participation features, the group cannot reliably measure the fair value of the investment contracts with discretionary participation features (DPF). The DPF is a contractual right that gives investors in these contracts the rights to receive supplementary discretionary returns through participation in the surplus arising from the assets held in the investment DPF fund. These supplementary returns are subject to the discretion of the group. Given the discretionary nature of these investments returns and the absence of an exchange market in these contracts, there is no generally recognised methodology available to determine fair value. These instruments are issued by the group and the intention is to hold the instruments to full contract term. (3) Fair value hierarchy not provided The fair value of prepayments, insurance and other receivables, collateral deposits, cash and cash equivalents and insurance and other payables, and repurchase agreements and collateral received approximate their carrying value and are not included in the hierarchy table as their settlement terms are short-term and therefore, from a materiality perspective, fair values are not required to be modelled. Fair value hierarchy of instruments measured at fair value The table below analyses the fair value measurement of applicable assets by level: Level 1 Values are determined using readily and regularly available quoted prices in an active market for identical assets or liabilities. These prices would primarily originate from the Johannesburg Stock Exchange, the Bond Exchange of South Africa or an international stock or bond exchange. Level 2 Values are determined using valuation techniques or models, based on assumptions supported by observable market prices or rates either directly (that is, as prices) or indirectly (that is, derived from prices) prevailing at the financial position date. The valuation techniques or models are periodically reviewed and the outputs validated. Level 3 Values are estimated indirectly using valuation techniques or models for which one or more of the significant inputs are reasonable assumptions (that is unobservable inputs), based on market conditions.