liberty holdings limited 2016...liberty holdings limited online additional information 2016 2...

IndividualArrangements April 6, 2017 10:07 AM

Business unit reviews

Liberty Holdings Limited

For the year ended 31 December

2016

Liberty Holdings Limited Online additional information 2016 2


Our organisational structure

To optimise our ability to achieve Liberty's 2020 strategic goals, an operating model was implemented to maximise our focus on our chosen customer segments, and more effectively leverage group shared capabilities.

CUSTOMER FACING UNITS

Individual ArrangementsProvides risk and health

insurance, and investment solutions to individual

mass-affluent and affluent consumers, mainly

in South Africa.

Group ArrangementsProvides insurance

and investment solutions to corporate customers

and retirement funds across sub-Saharan Africa.

Asset ManagementProvides asset management

capabilities to manage investment assets on the African continent.

STANDARD BANK BANCASSURANCE PARTNERSHIP

Supported and enabled by:

STRATEGIC COMPETENCY UNITS

LibFinManages market and credit risk

inherent in the South African insurance operations, originates

credit portfolios and oversees investment management of the group's financial capital.

Group DistributionProvides a groupwide advisory

service and distribution capability for the customer

facing units’ product offerings through multiple channels.

Investment PlatformA single investment platform

to service investment products sold by the group

is under development.

GROUP ENABLEMENT

Group Enablement delivers common services, processes and technologies by creating efficiencies through economies of scale. Group Enablement also builds future capabilities in technology and insurance

through dedicated centres of excellence.

GROUP GOVERNANCE AND EXECUTIONThe group's mandatory governance functions, group finance, stakeholder reporting

and strategic support and oversight.



Individual ArrangementsIndividual Arrangements customer facing unit (CFU) is responsible for the development, marketing, distribution, servicing and administration of retail insurance and retailinvestment products, in support of financial advice provided to South African customers.

It is structured to optimise the ability to achieve Liberty’s 2020 strategic goals and to maximise focus on chosen customer segments and more effectively leverage the group’s shared capabilities.

2016HIGHLIGHTS Financial performance is reflective of a tough economic environment

Achieved headline

earnings of R1,1 billion

3% increase in indexed new

business

Net cash inflows of

R2,5 billion

Value of new business of

R426 million at a margin of 1,2%

Continued to develop innovative product solutions and offerings:

Launched the Bold Living Annuity product which is the only living annuity that allows a customer to invest in any combination of South Africa’s top funds and change them whenever they like with a return guarantee that rises as the clients’ returns do.

Launched a new offshore endowment proposition which offers access to a range of index trackers and investment portfolios.

Launched a new Guaranteed Investment Plan using a credit-linked structure. This allowed Individual Arrangements to become significantly more competitive in the market.

Launched dHub, which is a rapid delivery digital unit to create exceptional customer and adviser experiences.

Launched the new Liberty website, which has enabled an engaging online experience for customers.

Continued the development of FullView, which is a customer and advisor reporting tool.

Launched LibertyTwo Degrees (L2D) portfolio, offering customers a listed property alternative to the current unlisted property portfolio.

These new offerings contributed to a much stronger new business performance in the second half of the year compared to that of the first half.


Individual Arrangements (continued)


OverviewA challenging South African operating environment prevailed during 2016, with limited economic growth, socio political uncertainty and increased inflation. These challenges continued to increase pressure on consumer disposable income, which in turn impacted on Individual Arrangement’s financial and operational results. Results were also negatively impacted by year end basis changes, together with worse than expected new business strain. Positive variances, albeit at lower levels, were still achieved.

Despite the tough operating environment, the new Customer Value Proposition (CVP) and related operating model has been implemented. The business continued to leverage its current strengths and competitive advantage (i.e. adviser-led solutions using multiple channels, innovative product development, leveraging group capabilities and CFU-specific capabilities). During 2016, the business made strong progress in building new strategic capabilities that will allow the business to deliver on its CVP and long-term strategy. This included building a rapid delivery digital unit (dHub), which was also launched and scaled up in a short period, and initiating the build of a new customer analytics capability.

The business continued to invest in its distribution force, and at the end of 2016, there were 1 087 experienced tied advisers, up 1% on the prior year. This is largely due to its holistic, market-leading Financial Adviser Value Proposition (FAVP). The business continues to invest and develop initiatives to enhance and entrench its FAVP.

Individual Arrangements also continued to focus on extracting expense savings, renewing IT infrastructure and improving the alignment to ensure that the business can deliver on the group’s strategy 2020 initiatives.

Recognising that employees are an important part of sustainable business growth, Individual Arrangements continues to invest in the development and empowerment of its employees, and achieved its 2016 talent attraction, employment equity and retention goals.

Individual Arrangements will continue the development of new skills and capabilities to allow it to maintain its market relevance in an increasingly digital and data-enabled world.

While the transformation to a customer centric business takes place, product innovation, simplification, retention, investing in the distribution force and other key operational initiatives will be ongoing areas of focus to ensure that future financial targets are met.

Delivering on commitments

2016 STRATEGIC OBJECTIVES SELF-ASSESSMENT

Create a new innovation function with a mandate to swiftly translate key customer insights into new customer value propositions �

Create a new ‘Simplify’ function with a mandate to actively focus on managing the Legacy book �

Continue to identify operational efficiencies ⅔

Further expand the distribution capability ⅔

Further align customer experience and branding ½

Continue to invest in the growth and empowerment of staff ⅔

� Substantially achieved ⅔ Good progress ½ Moderate progress

Other highlights• Liberty maintained its number one ranking

in the Swiss Re Volume Survey for risk business for the 13th consecutive year

• Surpassed R29 billion of funds invested in Evolve and Gateway

• Embedded a new target operating model aligned to the Individual Arrangements 2020 strategy

• Significant progress was made in preparing for the migration of the Capital Alliance

investment (Legacy) business




Deliver sustainable financial resultsPerformance review

Performance indicatorsRm 2016 2015

Expected profit and premium escalations 2 020 2 080 Variances, modelling and assumption changes (341) 237 New business strain (611) (392)Project, outperformance incentive and non-cost per policy expenses (106) (112)Direct Financial Services (109) (49)Other 195 71 Release of tax provisions 16 10

Earnings before bancassurance 1 064 1 845 Liberty share of credit life bancassurance (net of all taxes)(1) 160 147 Complex Bancassurance preference dividend (105) (123)

Headline earnings 1 119 1 869

Indexed new business 6 639 6 421

Recurring 4 356 4 288 Single 2 283 2 133

Net cash flows 2 505 7 790

Net cash flows – Insurance 1 948 6 288 Net cash flows – GateWay LISP 557 1 502

Total claims paid 40 631 33 731 Embedded value of new business 426 654 Embedded value of new business margins (%) 1,2 2,0 Assets under management – GateWay LISP 6 612 4 666 Maintenance cost per complex policy (R) 596 559 Total policies in-force (’000) 2 596 2 645 Number of employees (salaried) 2 020 1 993 (1) In terms of the existing agreement with Standard Bank, Liberty’s share of risk profits on simple credit life products sold by Standard Bank’s distribution channels is 10%.

Headline earnings of R1,1 billion was 40% lower than 2015. This was largely due to the year end basis changes (which strengthened the balance sheet to align with expected future customer experience), together with worse than expected new business strain (due to expense growth exceeding sales volume growth). Positive experience variances, albeit at lower levels, were again achieved across risk, persistency and expense categories.

Indexed new business premiums for the year amounted to R6,6 billion, an increase of 3% on the 2015 comparative. This was largely driven by a moderate increase in recurring premium sales, especially in the credit life business, as well as an above inflation increase in single premium investment business.

The value of new business declined to R426 million at a margin of 1,2%. The decline in margin and lower value of new business was the consequence of new business volume growth ending below the

2016 expense growth, year end basis changes, a change in product mix towards lower margin products, together with the regulated introduction of the new 5th tax fund effective from 1 January 2016. The resultant repricing of risk products was implemented in March 2016.

Net insurance cash flows of R1,9 billion were lower than the R6,3 billion achieved in 2015, primarily due to higher maturity and surrender claims, reflective of a tougher economic and consumer environment

GateWay (Liberty’s LISP), attracted R0,6 billion in net inflows. Between Gateway and the innovative Evolve product, Liberty has cumulatively attracted over R29 billion in funds since 2012.

Total policies in-force decreased by 1,9% during the year as a result of both lower new business case count and high policy terminations.




Place customers at the heart of our business decisionsCustomer management practicesIn 2016, a strong focus was placed on driving excellent customer service experience and deepening customer insights within Liberty by:

• Re-designing the website with embedded analytics, which provides better insights about customers. These analytics are being used to drive improved usage in 2017.

• Continuing the channel migration strategy to self-service channels, which showed that an increasing number of customers continue to use this channel compared to the contact centre.

• Deploying a groupwide “Voice of the Customer” management tool, which captures customer feedback across various touch points, using various feedback channels.

• Demonstrating commitment to improved complaints management by articulating the complaints strategy.

• Enhancing the complaints customer relations management capability with groupwide standards and Treating Customers Fairly (TCF) categorisations aligned to the Financial Services Board (FSB) requirements.

• Implementing measures to enhance handling of Ombudsman complaints and improve stakeholder relationships.

Customer service experience surveysAt a transactional level there are three key measures of success in customer service: the customer satisfaction index, the net promoter score and the query fully resolved measure. All three measures have shown improvement in 2016 compared to 2015, demonstrating effectiveness of service improvement interventions implemented throughout the year.

Call centre measuresWhile the number of calls declined by 12% year-on-year, as a result of the improved self-service offering, the quality of our service increased from 31% to 82% against our own internal benchmark during the period under review, demonstrating Liberty’s commitment to excellent customer service. The call centre also achieved an abandonment rate of 4% for 2016 compared to 24%

in 2015, further demonstrating that most customers who contact the call centre receive helpful service.

Customer ComplaintsThe number of complaints received by Liberty increased from 1 909 in 2015 to 2 645 in 2016. Of these, 64% of the complaints were logged directly with Liberty, 25% through regulatory bodies and 11% through social media. The increase in complaints highlights deliberate efforts to make complaints channels more accessible to customers. There is a central entry point for all complaints received from the Ombudsman that are logged, tracked and actioned until a resolution has been achieved.

Treating Customers Fairly (TCF) outcomesComplaints relating to customers’ service and advice made up most of complaints received, followed by complaints relating to insurance risk claims and product performance complaints. Liberty is focused on addressing these issues and best practices are continually researched and implemented throughout the organisation. Although the business improved its complaint handling and dispute resolution processes, the number of cases that were referred to the Ombudsman have increased to 511 (2015: 355). In 2016, the Ombudsman overturn rate increased slightly compared to 2015. The overturn rate is the percentage of complaints referred to the Ombudsman for which the Ombudsman ruled in favour of the customer. The increasing overturn rate is receiving management attention through improved systems, training and feedback to financial advisers. There is also dedicated attention from senior managers on this issue with ongoing face-to-face interaction with the Ombudsman.

CVP – product development, enhancements and digital capabilityIndividual Arrangements launched two new innovative products in 2016, the Bold Living Annuity product and an Offshore Endowment product. The Bold Living Annuity is the only living annuity that allows investment into any combination of South Africa’s top funds and change them at any time with a return guarantee that increases as the returns do. An Offshore Endowment, which offers access to a range of index trackers and investment portfolios managed by STANLIB, was relaunched. All new products are designed with reference to the TCF framework and the group product development policy. A summarised list of the product offerings appears on page 9 of this report.



IndividualArrangements April 11, 2017 12:30 PM

Investment product developments and enhancements

Liberty Bold: Launch of new product

A living annuity with a unique increasing return guarantee, underwritten by Liberty. The Bold Living Annuity has a wide choice of investment options with very competitive charges. The product offers a unique return guarantee which gives investors peace of mind to choose investment options with higher expected returns.

Offshore Investment Plan: Enhancement

The existing Offshore Investment Plan was enhanced during 2016; changes were made to the fees and the portfolio availability was increased to include low cost tracker funds.

Enhance social relationshipsIndividual Arrangements rolled out various initiatives throughout 2016 aimed at creating demand for Liberty’s products and strengthening its brand in the market. These initiatives were informed by customer insights per market segment. Key marketing initiatives included the promotion of Income Protection, Term Cover with PayOut, Agile Retirement Annuity, Evolve Investment Plan and the launch of Bold Living Annuity. Liberty was awarded the largest writer of new value of risk business by Swiss Re and this accolade was used to inspire market confidence and reinforce Liberty’s market leadership in the risk category through an advertising campaign.

To drive brand affinity and to create engagement opportunities with existing and prospective customers, various initiatives were sponsored. These include: RetireWell masterclass to provide tips on retirement planning; IgerBook launch (images of Johannesburg captured by Instagrammers) to connect with milllennials, and the Gauteng North Golf Union tournaments to connect with customers through their passion points.

Furthermore, 2015 claim statistics were used to educate customers about the potential risks they faced, based on the types of claims paid. Insights from claim statistics were used to develop educational tools that were targeted at each market segment to assist in understanding the importance of insurance.

External communications focused on thought leadership through the provision of financial advice, linked to customer needs and broader industry and macro-economic commentary.

Expand sales capacitySales and distribution achieved new indexed premium sales 3,4% above the prior year, in a tough economic climate with high levels of competitor activity. The current year was characterised by a much stronger new business performance in the second half of the year compared to that of the first half.

The growth in new business was particularly supported by strong performances in both Standard Bank and Independent Financial Advisers channels. This was achieved despite the clear intention of other large bank brokerages driving vertical integration of their businesses.

Single premium investment growth was particularly pleasing, growing by 15% in the second half of the year. This growth was

buoyed by the take up of both guaranteed products as well as the launch of new generation products.

Management continued to focus on retention and development of experienced financial advisers to improve productivity and ensure a sustainable tied sales force. This was achieved by ongoing investment in Liberty’s talent acquisition and learning capabilities. The recruitment, development (personal and professional) and recognition of financial advisers, together with the alignment of remuneration to strategic goals, remains a key focus point going forward, to ensure that the advice provided to Liberty’s customers is of the highest quality. At the end of 2016, there were 1 087 experienced tied advisers, up 1% on the prior year. This is largely due to Liberty’s holistic, market-leading FAVP. The business continues to investigate and develop initiatives to enhance its FAVP, with one such initiative being the paperless programme that has improved both the financial adviser and customer experience. Enhanced focus on the growth and capture of support in the alternate broker space is delivering positive results.

Engagement with the FSB on its proposed Retail Distribution Review (RDR) regulations continued and the first phase of the RDR recommendations is expected to be implemented in 2017. The impact of this phase on the sales and distribution operations is envisaged to be limited in 2017 and work is underway to ensure compliance with the changes. Communication with the FSB on RDR is ongoing and structures are in place to manage feedback and compliance. The implications of RDR have been factored into the strategic planning process.

BancassuranceIndividual Arrangements and Standard Bank continued to strengthen business relationships through the bancassurance joint venture. In 2016, additional resources were deployed within the Liberty bancassurance team to ensure that the full value of the Standard Bank relationship is leveraged. Year-on-year premium income growth in the two largest bancassurance channels (the embedded and high advice channel) has resulted in an increased dividend payment made to Standard Bank. Liberty’s share of the embedded value of in-force bancassurance contracts increased from R1,461 million in 2015 to R1,574 million in 2016. Liberty continues to reap significant sales, cost and technology benefits from its relationship with Standard Bank.




Improved cost and operational effectivenessFollowing the migration of the Liberty Active book in the prior year, significant progress was made during 2016 to prepare for the migration of the Capital Alliance investment business, which is planned to take place during 2017. This will reduce the complexity involved in managing the active and closed books and greatly improve efficiency levels. The target products are existing products on the Compass platform which will allow for approximately 70% of existing functionality to be automatically inherited.

Liberty’s new website, launched in 2016, has enabled an engaging online experience for customers. On average, the website received 60 000 hits from users monthly since the launch. A groupwide multi-year digital programme was established in 2016, with the key focus of addressing the self-service experience for Liberty customers, starting with investment products. Once completed, the programme will enable customers to view, engage, change and update their policies and investments with Liberty across the group.

Several other digital initiatives were delivered in the period to enhance the advisor and customer experience.

The risk assessment criteria for HIV positive customers at application stage was updated, resulting in a new rating standard, effective 1 January 2016. The changes allow for a more streamlined underwriting process, enabling a better customer and intermediary experience.

Competitive differentiationLiberty’s brand, sales management model, multi-channel distribution capability and track record of product innovation are key differentiators, while also leveraging off the group’s unique market risk management capability. During 2016, good progress was made in building additional capabilities, to enhance the business’ existing competencies and assist in achieving its long-term strategy. This also enables Individual Arrangements to navigate through a changing regulatory environment, challenging economic conditions, changing customer needs and increasing competitor activity.

Attract, develop and retain quality employeesThe new Individual Arrangements operating model and structure was implemented early in 2016. The people focus was on driving key performance objectives of the business to deliver on the 2016 financial targets, as well as the relevant strategic initiatives to achieve strategy 2020 objectives. A key component of this process was implementing a tactical culture activation plan aimed at energising employees and uplifting the morale following the target operating model change process. The culture activation process included the deployment of a survey aimed at establishing factors that will enable employees to deliver excellent customer service.

Individual Arrangements met its employment equity targets at the senior and middle management levels, retained over 95% of its key

talent and implemented various team effectiveness and learning and development programmes

to enhance functional, managerial, leadership and team capabilities.

Looking aheadIn 2017, Individual Arrangements will focus on

the delivery of the following key objectives:• Continuing to focus on retention and new product innovation;

• Further embedding digital and analytical processes within the business;

• Continuing to actively focus on managing the Legacy book;

• Continuing to identify operational efficiencies;

• Further expanding and investing in our distribution capability;

• Further aligning customer experience and branding; and

• Continuing to invest in the growth and empowerment of staff.




Summarised product offering

PRODUCTS PRODUCT NAME PRODUCT DESCRIPTION

Risk products

Lifestyle Protector range

Provides life protection, loss of income protection, lifestyle protection risk and term cover. The product offers cover to meet customers’ changing needs through life.

Emerging consumer market product range

Life cover plan – Provides life cover and disability benefits.Accident plan – Life insurance contract that provides cover for death and permanent disability due to an accident.Funeral plans – Standard, comprehensive and parents’ funeral plans.

Direct offerings

Life cover Provides life cover up to a maximum of R10 million through an automated underwriting process.

Salary protection Provides for salary protection against disability and serious illness.

Disability cover Provides lump sum cover for disability up to a maximum of R5 million through an automated underwriting process for own or suited occupation.

Serious illness cover

Provides lump sum cover through an automated underwriting process for four major conditions/illnesses.

Hospital cash back Provides cover in the event of hospitalisation relating to illness or injury for three consecutive nights or more.

Funeral plan Provides life cover to family members to cover funeral related expenses.

Investment and savings

products

Education builder A regular contribution pure investment plan with the focus on saving for the cost of an investor’s child’s education. This plan is aimed at all market segments.

Investment builder A recurring contribution investment plan with loyalty bonuses. This plan is aimed at all market segments.

Gateway investment plan

A unit trust investment platform for single and recurring contribution investments. This is not a life insurance wrapped investment.

Evolve Hybrid investment plan

A single or recurring single contribution plan aimed at the mature and affluent market segments that offers the choice of endowment or unit trust portfolios within a unique ‘pay on delivery’ charging structure.

Offshore investment plan

Lump sum investment plan which allows direct offshore investment in a range of global funds, from Liberty offshore trackers to STANLIB offshore portfolios, managed by experienced offshore asset management partners.

Flexible investment plan

Lump sum investment providing flexibility by grouping a number of underlying policies in a bundle. The bundle provides for more flexible access to the investment.

Investment plan Lump sum endowment with a minimum term of five years aimed at the high-income investor.




PRODUCTS PRODUCT NAME PRODUCT DESCRIPTION

Retirement planning

Evolve Hybrid retirement annuity plan

A single or recurring single contribution plan aimed at the mature and affluent market segments that offers a choice of portfolios within a unique ‘pay on delivery’ charging structure to provide a retirement income and capital at selected retirement age.

Agile The Agile retirement range provides a guaranteed income at retirement and the ability to invest in multiple portfolios according to the client’s retirement strategy.

Retirement annuity builder

A regular contribution retirement annuity, with the option to invest additional premiums at any time, allowing a member to provide retirement income and capital upon retirement at the selected retirement age. The product is aimed at all segments.

Retirement annuity plan

Single premium retirement annuity allowing an investor to provide for their retirement, or supplement existing retirement savings.

Pension/provident preserver

Members of existing pension/provident funds can transfer their existing accumulated benefits on termination of service into this product. This enables them to preserve their valuable retirement benefits, allowing continued growth without incurring any tax liability.

Retirement planning

– post retirement

income

Flexible annuity A living annuity aimed at all market segments, with an optional Income Enhancer Benefit which provides some longevity protection.

Life annuity A traditional post-retirement income product (for a single or joint life) that provides an income for life that can be guaranteed for a certain number of payments.

Bold Living annuity A living annuity with a unique increasing return guarantee, underwritten by Liberty.

Summarised product offering (continued)


LibFin April 6, 2017 10:30 AM

Liberty Financial Solutions (LibFin)LibFin is a centre of excellence for the management of market, credit and liquidity risk, in addition to managing the performance of the shareholder investment exposures in the life insurance business.

2016HIGHLIGHTS

Credit Portfolio net profit after tax

of R300 million was up 15% from

the prior year due to effective

utilisation of long-term funding

Asset Liability Management

(ALM) Portfolio was managed within

guidance despite continued elevated

global political uncertainty and market volatility

during 2016

The Shareholder Investment Portfolio

(SIP) remains on strategy and within risk appetite, albeit in a year with weak local equity returns coupled with

the rand strengthening significantly against the

US dollar

OverviewPlace customers at the heart of our business decisionsLibFin seeks to use its unique combination of capital markets, asset management and actuarial skill sets to provide differentiated capabilities to the group’s customer facing units, and to support them in offering innovative and competitive solutions to their customers.

LibFin provided support to Individual Arrangements in the development of the flagship Liberty Evolve product, enabling key

differentiating components that contributed to it being the most successful new product in the company’s history, with cumulative sales of R23 billion since its launch in October 2012.

Following a successful launch of the Liberty Agile product in 2015, LibFin contributed to the development of the innovative Liberty Bold product in 2016, as well as enhancing a number of other existing customer propositions.



Support the group’s customer focused units in delivering appropriate investment products and services for their underlying customer bases �

Construct asset portfolios to match the long-term insurance business’ liabilities, while seeking optimal returns within the group’s risk framework �

Optimise the SIP’s after-tax returns over the longer term and within the group’s risk appetite �

Deploy the long-term funding raised by the long-term insurance business into a portfolio of diversified credit assets to generate attractive risk adjusted returns �

� Substantially achieved


Liberty Financial Solutions (LibFin) (continued)


Deliver sustainable financial results SIPLibFin oversees the management of over R27 billion of shareholder exposures as part of the SIP and is tasked with delivering superior risk-adjusted investment returns over the long-term, through appropriate portfolio construction and fund allocation to underlying specialist asset managers.

Performance since inception and over five years remains in line with expectation and was achieved within the group’s risk appetite. Returns were lower than the prior year mainly due to general market returns being lower including the impact of a stronger rand on foreign assets. LibFin remains satisfied with this performance in the context of a long-term investment strategy.

Performance reviewPerformance indicatorsRm 2016 2015

Headline earnings (Liberty share) 1 105 1 616

LibFin Investments (SIP) 787 1 356LibFin Markets 318 260

Credit Portfolio 300 260ALM 18 –

SIP exposure category under management 27 147 27 385(1)

Local 21 940 22 108Foreign 5 207 5 277

LibFin Markets assets under management (Rbn) 58 50Number of employees (salaried) 86 77(1) December 2015 restated from R26 035 million to R27 385 million to consolidate all shareholders’ assets and exposures, including those held for short-term liquidity management.

Credit PortfolioLibFin seeks to extract value from the portfolio of assets backing guaranteed investment products by investing in a well-diversified portfolio of government, state-owned enterprise, corporate and asset-backed debt instruments. The objective is to generate attractive returns on a risk-adjusted basis. At 31 December 2016, assets under management in this portfolio totaled R58 billion consisting of a combination of illiquid credit assets, listed bonds and bank deposits, which was up 16% on the prior year.

The South African macro-economic environment recorded low growth (less than 1%) over the financial period. Corporate and fixed investment activities followed suit across a number of different sectors with the financial, infrastructure and commercial property sectors being notable exceptions.

LibFin continued its strategy of diversified lending practices across a number of credit asset classes. These included additional lending to the infrastructure and commercial property sectors and select South African corporate opportunities. Equally, the lending practices to African opportunities outside of South Africa continued on a very selective basis.

ALM PortfolioLibFin manages the asset and liability mismatches within the life insurance business. These are represented in the ALM portfolio and arise due to the following exposures:

• Annuities and guaranteed investment plans;

• Guaranteed index trackers;

• Embedded derivatives (including investment guarantees); and

• Negative rand reserves implicit in the policyholder liability valuations.

The ALM team’s strategy is to invest in assets that closely match these liability exposures and ensure that the returns from these assets meet or exceed the obligations of the underlying liabilities.

The management of most asset liability mismatches has largely reached a mature state at Liberty and capital usage and earnings volatility continue to be maintained within the group’s risk appetite parameters.




ALM Portfolio (continued)

Volatility in global markets continued in 2016 with political risks taking center stage over central banks. A muted reaction by the US Federal Reserve, together with accommodative global monetary policy and a decline in global inflation expectations resulted in strong emerging market bond returns, including South Africa.

Despite the elevated uncertainty and volatility in markets, the ALM books delivered a strong performance during the year.

%

Dec2016

Nov2016

Sept2016

Oct2016

Jun2016

Jul2016

Aug2016

Mar2016

Apr2016

May2016

Feb2016

Jan2016

Dec2015

R186 10y Swap

Interest rates bond and swap

7,0

7,5

8,0

8,5

9,0

9,5

10,0

SWIX40

Dec2016

Sep2016

Jun2016

Mar2016

Dec2015

9 000

9 500

10 000

10 500

11 000

11 500

SWIX40 Implied volatility

Dec2016

Sep2016

Jun2016

Mar2016

Dec2015

20,5

21,0

21,5

22,0

22,5

%




Attract, develop and retain quality employeesLibFin’s unique combination of capital markets, asset management and actuarial skills are a key differentiator and as such, LibFin seeks to continually attract, develop and retain these scarce skills by being an employer of choice. In 2016, LibFin focused on enhancing its employee value proposition by investing in training and development and increasing its talent pipeline.

Provide responsible financial servicesLiberty upholds the Code for Responsible Investing in South Africa (CRISA) and this forms the overarching framework for responsible investment across the group. CRISA and other regulatory requirements (e.g. Regulation 28 compliance) are integrated into Liberty’s asset manager mandates where appropriate. Liberty conducts regular and ongoing due diligence of these managers

to ensure that they remain capable of delivering and reporting on compliance with Liberty’s mandate requirements.

The portfolio of Renewable Energy Independent Power Producer Procurement programme financed by LibFin was R3,4 billion at 31 December 2016 (2015: R3,5 billion). The portfolio is split across wind (57%) and solar (43%) assets across various regions of South Africa.

LibFin continues to advise on a portfolio of investments that enables Liberty to remain compliant with the empowerment financing requirements of the Financial Sector Charter and the Code of Good Practice published by the Department of Trade and Industry. In addition, LibFin seeks investments that contribute towards the advancement of black economic empowerment goals while meeting its own investment requirements.

Looking aheadIn 2017, LibFin will focus on the following

strategic objectives, which are unchanged from the previous period and aligned to the 2020 group vision:

• Supporting the group’s customer facing units in delivering appropriate investment products and services for their underlying customer bases;

• Constructing asset portfolios to match the long-term insurance business’ liabilities, while seeking optimal returns within the group’s risk framework;

• Optimising the SIP’s after-tax returns over the longer term and within the group’s risk appetite; and

• Deploying the long-term funding raised by the long-term insurance business into a portfolio of diversified credit

assets to generate attractive risk adjusted returns.


GroupArrange April 5, 2017 9:41 AM

Group ArrangementsGroup Arrangements provides insurance and investment solutions to aggregations of individuals including corporates, affinity groupings and retirement funds across sub-Saharan Africa

2016HIGHLIGHTS

Geographic expansion:• Lesotho life business

successfully launched

• Three short-term insurance businesses acquired in 2016 (Uganda, Malawi and Botswana)

• Regulatory approvals obtained for a Nigeria long-term insurance transaction. Certain conditions remain outstanding

Brand building:• Launched

inaugural Liberty Employee Benefits symposium with over 500 attendees in South Africa that positioned Liberty as a thought leader in the employee benefits industry

Product and systems development:• Alternative investment, Health

Cover, Business Owners Life Insurance and Living Annuity products were developed and launched in various key countries by the Liberty Africa Insurance team

• Significant progress on the multi-year project to deliver a suite of cost effective and flexible investment umbrella products

• SAP collections and disbursement programme successfully implemented in Liberty Corporate

Channel diversification:• Bancassurance transactional channel

implemented and delivering sales in Botswana, Namibia and Swaziland

• Worksite channel implemented across six of the seven life insurance businesses in Africa and delivering promising results

• Increased ownership of Mentenova to 60%

Sales:• Grew Africa Health Cover lives to over 121 000

reflecting net growth of 16 % per annum over the last three years across sub-Saharan Africa

• Liberty Africa long-term indexed new business over R400 million, a 31% compound growth rate since 2012.

• Recurring premium sales up 14% in Liberty Corporate supported by strong umbrella new business


Group Arrangements (continued)



2016 STRATEGIC OBJECTIVES SELF-ASSESSMENTContinue to explore opportunities to expand the group’s presence both in existing and new countries of representation ⅔

Continue to implement products relevant to all countries of representation ⅔

Enhance the Corporate Umbrella solution with a focus on customer experience ⅔

Expand distribution reach through current networks and affinity partners, and exploring opportunities through new partners and technologies ⅔

Further improve operational efficiency and IT capabilities to improve customer service through digital interfaces ½

Deliver default annuitisation and preservation solutions in line with Retirement Reform initiatives ⅔

Accelerate Liberty Health Cover growth in the rest of Africa �

Strengthen THT’s position and grow the Nigeria presence ⅔

Remain competitive in providing liability solutions for retirement benefit obligations of retirement funds and employers ½

Leverage Liberty group-wide opportunities through bancassurance relationships, corporate customer solutions with LibFin and STANLIB and processing efficiencies with Group Enablement ¼

Embed people development and talent management to support business growth �

Optimise synergy opportunities within Group Arrangements and with the rest of the Liberty group ½

� Substantially achieved ⅔ Good progress ½ Moderate progress ¼ Limited progress

Awards• Liberty Life Kenya was runner up for prestigious life insurer award

and second runner up in the socially responsible corporate awards category (7th Annual Think Business Awards)

• Liberty Viewpoint won bronze at the Assegai awards

• Liberty Corporate was awarded the 2016 Imbasa Yegolide Award for the Member Education Fund Challenge

• Liberty Corporate was awarded the Gold Standard Certificate for excellence in stakeholder project (Employee Financial Freedom Campaign)

by the Institute of Retirement Funds

• Liberty Corporate was awarded the PMR Diamond Arrow for national survey on pension fund administrators, consultants, product and insurers 2016

• Liberty Health ranked number one health provider in Zimbabwe

• THT was awarded top Health Management Organisation in Nigeria




OverviewGroup Arrangements consists of three business units, namely Liberty Africa Insurance, Liberty Corporate and Liberty Health. This grouping of business units allows Liberty to optimise its focus on chosen customer segments, while effectively leveraging shared capabilities. The target market customer segments include multinationals, large corporates, small medium enterprises and affinities. Customer value propositions have been developed for each of these customer segments which remain the foundation of fulfilling Group Arrangements vision of being the trusted leader to institutional customers in insurance and investment in sub-Saharan Africa. The three business units main objectives are as follows:

Liberty Africa Insurance: Developing and expanding the group’s long- and short-term insurance presence across sub-Saharan

Africa outside South Africa. Liberty Africa Insurance currently has a presence in nine countries outside of South Africa, namely Botswana, Kenya, Lesotho, Namibia, Swaziland, Tanzania, Uganda, Malawi and Zambia, with seven life insurance licences and five short-term insurance licences.

Liberty Corporate: Providing financial security and wealth creation solutions for institutional customers, groups of employees and pensioners in South Africa including investment, annuity, group risk and retirement umbrella administration products and specialised structuring solutions and consulting services.

Liberty Health: Providing health solutions which include administration, insurance and technology. Liberty Health has representation in 22 countries across the African continent.

Deliver sustainable financial resultsPerformance review

Rm 2016 2015

Headline earnings 187 225

Liberty Corporate (South Africa) 191 219 Liberty Africa Insurance 41 25 Liberty Health (45) (19)

Long-term insurance indexed new business 1 253 1 094

Liberty Corporate (South Africa) 842 790 Liberty Africa Insurance 411 304

Long-term insurance value of new business 57 75

Liberty Corporate (South Africa) 28 30 Liberty Africa Insurance 29 45

Long-term insurance margin (%)Liberty Corporate (South Africa) 0,4 0,5Liberty Africa Insurance 5,6 6,6

Long-term insurance customer cash flows (268) (496)

Liberty Corporate (South Africa) (751) (891)Liberty Africa Insurance 483 395

Short-term insurance claims loss ratio (%)Liberty Africa Insurance 44,0 46,1 Liberty Health 80,8 71,2

Number of employees (salaried) 1 720 1 854




Overview (continued)

Total Group Arrangements headline earnings were R187 million compared to R225 million in 2015. Liberty Corporate’s earnings were impacted by considerably higher risk claims (particularly disability) and a once off R36 million charge related to the strengthening of longevity improvement assumptions. Africa Insurance earnings were up 64% on the prior year largely due to a good performance from the short-term insurance businesses. The overall results are however still lower than anticipated due to the ongoing tough investment markets in Kenya, Namibia and Botswana. Liberty Health’s attributable loss of R45 million was up on the prior year’s loss of R19 million, largely due to the anticipated negative impact of the curtailment of the Liberty Medical Scheme contract of approximately R25 million and higher claims experienced in Nigeria, which is experiencing recessionary economic conditions.

Indexed new business and recurring new business in Liberty Corporate were up 6,6% and 14,3% respectively on the prior year, mainly due to strong growth in umbrella and strategic venture (funeral and credit life) sales. Liberty Corporate’s value of new business was disappointing due to the lack of large annuity proposals and difficulty in attracting large corporate funds. Africa Insurance benefited from a receipt of R583 million, a once-off deal, in Liberty Life Swaziland, however lower bancassurance sales were evident across the continent as a result of challenging economic conditions leading to lower bank lending.

Liberty Corporate’s long-term insurance cash flows were negative R751 million (2015: negative R891 million). The negative cash flow reflects the low volume of single premium new business written, terminations and umbrella member withdrawals resulting from increased unemployment. Africa Insurance’s improved cash inflows of R483 million (2015: R395 million) were largely due to the R583 million inflow from the large one-off deal in Liberty Life Swaziland.

Claims loss ratios in Africa Insurance were below those in 2015 and indicate a good channel risk selection and claim controls. Liberty Health’s increase in claim ratios was mainly due to the challenging economic conditions in most territories that the Liberty Health cover is provided, with Nigeria’s recession posing a particular challenge in the short term.

Despite the economic challenges, the Liberty Health Cover business has seen its membership grow to 121 000 lives as at 31 December (2015: 105 000). Growth of 16% per annum in the number of Liberty Health Cover product lives has been achieved over the last three years. This brand and product offering has been externally commended as the best multinational health solution across sub-Saharan Africa.

Place customers at the heart of our business decisionsProduct offerings and developmentProduct development is a critical part of Liberty’s strategy to grow earnings by enhancing and expanding product lines to support growth across all channels. Liberty has the ability to create differentiated products suited to the various channels and customer segments. Key to this is the development of central multinational solutions as well as in-country Liberty teams who work with the pricing actuaries to develop relevant products that meet customer needs specific to that territory.

Liberty Corporate’s investment brand and capabilities were further strengthened, supporting the strategy of diversifying sales and earnings to investment business. The addition of the four tracker portfolios introduced in the prior period completes the tracker range and reinforces Liberty Corporate as the provider of the lowest cost tracker portfolios in the retirement market. These portfolios are tracking their stated indices however the global trackers have struggled in absolute terms as the rand strengthened in 2016. The listed property and index-linked bond trackers are performing in line with their asset class returns and the new asset class index trackers have formed a large portion of the partner model portfolios (Mentenova particularly uses them).

Several partner broker and asset manager unit trusts/model portfolios have been added to the umbrella range, which assisted distribution in 2016 and improved member service.

Liberty Corporate remains positioned as one of the top-three bulk annuity providers. Systems development of a group living annuity product went live in 2016. This is the first project phase for a new product development initiative that will allow Liberty to offer a competitive and broader range of standard and bespoke annuity solutions to standalone and umbrella retirement funds. The first group living annuity payment occurred in 2016, which allows Liberty Corporate to administer a traditional living annuity on a group basis. It also has the ability to combine a living annuity payment with a life annuity payment for a single pensioner, thereby combining two different product sets.

The development process for a further group annuity product began in 2016 and has been positioned at Liberty’s Innovation Hub for approval. This new group annuity product will allow Liberty to offer the full spectrum of annuity solutions in response to the default regulation principles and customer requirements. The external customer focussed research will commence in early 2017.




Place customers at the heart of our business decisions (continued)

Product offerings and development (continued)

A special sub-committee has been established with Corporate Selection Umbrella Fund trustees to pre-empt Liberty’s proposed solutions regarding proposed/imminent default annuity and default preservation regulation.

Following a customised Post-Retirement Medical Aid plan asset solution implemented in the prior period, a large state-owned entity was successfully on-boarded during 2015, with an additional voluntary tranche paid to Liberty during 2016. Members are receiving their monthly annuity payments and the solution is meeting the commitments made.

During 2016, Alternative investment, Health Cover, Business Owners Life Insurance and Living Annuity products were developed and launched in various key countries by the Liberty Africa Insurance team.

Capacity building to expand Group Arrangements geographic footprint and capabilitiesAcquisitions to provide access to owned licences occurred in several countries during 2016, including Botswana, Malawi and Uganda (short-term insurance).

The consulting business (Liberty Viewpoint) in Liberty Corporate is progressing on its strategy to be a market leading practice. During 2016, Liberty increased its stake in MenteNova Asset Consultants to 60%. This business is positioned to offer a broader range of professional consulting services to clients across the different market segments.

Distribution channelsImproving the diversification of sales volumes through multiple channels to support the newly defined and targeted customer segments and value propositions, remains a key focus for Group Arrangements. A broad distribution network is necessary to grow sales volumes and affinity partners for Africa Insurance, to provide scale and reach for a comparatively low capital investment. Africa Insurance focuses on five distribution channels, namely bancassurance, brokers, affinity partners, agents and franchises.

Liberty Corporate’s capability and capacity in focused distribution teams has been strengthened, particularly in the investment, liability driven solutions and bancassurance channels.

The Liberty Health business continues to improve upon its ability to service multinational clients through its Liberty Health Cover product range.

Improving customer service levels and efficiencyContinually improving customer service and efficiencies remains a key focus in the small to medium enterprises and large corporate

and multinational segments. Liberty Corporate’s operating model in administration has been embedded with emphasis on customer service, staff skills and process efficiency. Improved customer service is demonstrated by a significant improvement in the Net Promoter Score, consistent delivery ahead of service level agreements and a marked reduction of 24% in customer complaints. Umbrella client retention has improved by 21% from 2015. Liberty Corporate’s simplified IT architecture projects are gaining momentum and benefit realisation is likely in the short-term.

Liberty Africa Insurance’s retail product set on its front-end online system (Liberty Online) is used by distribution partners to capture customer and claim details, improve data integrity and mitigate operational risk. The retail product set extends the potential number of affinity partners Liberty can transact with, making it more competitive across sub-Saharan Africa.

Key components of Liberty Africa Insurance’s short-term ‘Business in a Box’ project, which enables a standard business operating model for short-term insurance across Africa, is ready for implementation in Uganda, Botswana and Malawi. This project will create economies of scale across countries and reduce risk where customisation is required.

The key opportunity for Group Arrangements is to leverage the synergies across the specific business units thereby optimising the skill and knowledge of territory, products and customer segments.

Enhance social relationshipsCreating Liberty brand awareness across the African continent remains important and focus is on supporting the Liberty monolithic brand strategy, as a foundation to creating further brand value for the group. Brand building initiatives during 2016 included brand and product advertising, thought leadership engagements, sponsorships and corporate social investment. It is likely that the THT (Nigeria) and Heritage (Kenya) brands will be transitioned to the Liberty brand during 2017/2018.

Key risks to achieving strategic priorities and management mitigationThe forecast for business growth in all our Africa territories remains tentative due to the declining economic outlook. Political uncertainty and lower country debt credit ratings are impacting South Africa, contributing to a low growth scenario. During 2016, Nigeria’s GDP contracted by more than 2% over two consecutive quarters, effectively placing the country into a recession. Kenya is preparing for national elections in August 2017 and investment markets are currently more volatile. This volatility has been aggravated by the interest rate being capped by Kenyan regulators on both deposits and lending which has negatively impacted the outlook of the financial sector.




Key risks to achieving strategic priorities and management mitigation (continued)

Over the medium-term Nigeria and Kenya face several challenges of which corruption remains the biggest hindrance. This is coupled with the recent Independent Electoral and Boundaries Commission campaigning in Kenya and the long-awaited partial decoupling of the naira from the US dollar in Nigeria. In addition, security challenges and instability in the banking sectors also remain a medium-term threat. With the recent developments in the banking sector, the central banks of Kenya and Nigeria have intervened to improve short-term stability and tighten supervision of banks.

Management is on track with complying and adapting to the new risk-based capital framework for insurers in Kenya. The draft regulations are likely to have negative capital and possible earnings impacts. Management, along with industry associations, are actively lobbying for regulation changes where likely impacts are believed to be unfair.

The performance of the deposit administration business investment portfolio in Kenya over the past few years, combined with aggressive competitor activity, has undermined the ability of the business to support competitive bonus declaration rates. A comprehensive review of the business strategy for this product was undertaken in 2016, and various improvements were identified and will be addressed by management going forward. In addition, a unit-linked pension product with individual investment choice (Boresha Maisha) was launched to offer a unique proposition in the Kenyan market. Client communication has also increased. Other country-specifics, such as, interest rate capping, impairments of bank corporate bonds and the poor performance of the STANLIB managed Kenyan REIT all negatively impacted the business.

The inherent risk of internal fraud remains high, given the current economic climate, and management continues to closely monitor this risk. Increased policyholder risk claims across the Group Arrangements business are concerning and a detailed analysis to investigate reasons for this increase is underway, one of which is the current depressed economic conditions.

The Liberty Medical Scheme was successfully transferred to Bonitas and Liberty has completed the restructure and downsizing of the health business in South Africa. The business has been repositioned

to expand across Africa. Liberty Health remains a very important component of Liberty’s strategy and customer value proposition and this development is creating an opportunity to realign the health business operating model.

Exposure to a number of foreign currencies in both the Liberty Health and Africa Insurance business creates risk of conversion on translating of earnings performance to rands.

The recent legal challenge to the liquidation/deregistration process by the regulator of several retirement funds has not been successful. However greater regulatory scrutiny to compliance matters is evident and will in the short term slow down the funds efforts to wind up various dormant retirement funds.

Attract, develop and retain quality employeesThe concept of a Group Arrangements customer facing unit was embedded within the three business units and the group in 2016. Following the curtailment of the Liberty Medical Scheme contract, Liberty Health embarked on a restructure which resulted in 221 employees being retrenched through a formal Section 189A procedure. This restructure necessitated a change management programme and extensive employee engagement to transition the remaining employees to the new operating model.

The roll out of the Group Arrangements strategy map and purposeful goal, Liberty as One and the Liberty Citizenship Awareness Campaign further enabled employees to identify with the role of each business unit in the delivery of the Group Arrangements strategy. These initiatives will be further enhanced in 2017.

Focus remains on managing and retaining talent within Group Arrangements through defined individualised development plans. Identifying and investing in talent to build future leadership capability has been instrumental to building strong teams.

South African employment equity targets were met for 2016. Vacancies have been significantly reduced with 93% of all appointments in South Africa being employment equity candidates, most of whom are female.




Looking aheadIn 2017, Group Arrangements will focus on

the delivery of the following key objectives:• Completing the Nigerian long-term licence acquisition

and transitioning the 2016 licences acquired to Liberty’s business model;

• Continuing to implement products relevant to all countries of representation;

• Continuing to deliver the multi-year enhancement of the Corporate Umbrella Solution with the focus on improving the customer experience;

• Expanding distribution reach through current networks and affinity partners, and exploring opportunities through new partners and technologies;

• Further improving operational efficiency and IT capabilities to improve customer service through digital interfaces;

• Completing the delivery of default annuitisation and preservation solutions in line with Retirement Reform initiatives;

• Continuing to grow Liberty Health Cover in the rest of Africa;

• Delivering the core Health IT processing platform supporting the Liberty Health Cover product;

• Remaining competitive in providing Liability Solutions for retirement benefit obligations of retirement funds and employers;

• Leveraging Liberty group-wide opportunities through bancassurance relationships, corporate customer solutions with LibFin and STANLIB and processing efficiencies with Group Enablement;

• Embedding people development and talent management to support business growth;

• Partnering with Group Enablement to implement a framework for capturing, storing and managing customer data in alignment with the group; and

• Advancing the Liberty Viewpoint strategy through partnership/capability build with remuneration and health specialists.




Summarised product offering (Liberty Africa Insurance)

PRODUCT NAME PRODUCT DESCRIPTION

Credit Life Product Range

A range of products designed to cover the outstanding balances on vehicle loans, home loans, personal loans and credit cards following the death or disability of the policyholder.

Business Loan Protection

An insurance policy which pays the outstanding balance on a loan following the death or total permanent disability of the policyholder. This product has been successfully aligned to small and medium enterprise loans.

Funeral PlansA variety of funeral plan options are available, providing cover to the main member and their family. A number of ancillary benefits, such as the tombstone benefit, are also available.

Hospital Cash Back Benefit

The product pays an amount for each day the policyholder (and for family members if selected) stays in hospital for more than three days.

SME Life and Short-term Product and Income Protector Products

The SME products provide life, impairment and critical illness cover and short-term cover for small and medium enterprise owners. The income protector product provides temporary income replacement in the event of death, disability or retrenchment of the account holder.

Education ProtectorThe product provides a benefit to pay for a child’s education in the event of a parent’s death or impairment. The product also pays a payback benefit in the event no claim is made.

Capital Bond A single premium investment policy offering the opportunity for ad hoc premiums.

Group Risk CoverA range of group risk benefits including life cover, critical illness cover, lump sum and income disability cover are offered to employers to cover their employees.

Protection ProductsA comprehensive range of protection products including Funeral, Simple Life, Critical Illness and Personal Accident Plans. A Platinum Life product was recently launched offering higher levels of life cover and other benefits with limited underwriting requirements.

Short-term InsuranceCover provided for fire, theft, motor, engineering, marine liability, personal accident and workman's compensation related risks.

Liberty Corporate summarised product offering


RetirementRetirement fund solutions for employers with a comprehensive range of risk benefits and investment portfolios, predominantly provided through an umbrella retirement fund arrangement.

InvestmentAn on-balance sheet investment product offering with a specialised range of portfolios for retirement funds and medical schemes. The range includes risk-managed, balanced and passive investment solutions.

Liability Driven Solutions

A specialised range of solutions to meet defined benefit obligations for institutional clients, which include liability driven investment, guaranteed cash flow matched, bulk annuity and customised post-retirement medical aid solutions.

Group RiskGroup risk offering for retirement funds, employers, affinity groups and credit providers, including all standard risk product types such as group life, funeral cover, critical illness, and both lump sum and income disability.

ConsultingEmbedded consulting services to institutional clients and their appointed financial intermediaries covering actuarial, benefit, investment and corporate consulting. Professional stand-alone consulting services provided through Liberty Viewpoint, a separately registered Financial Services Provider.




Liberty Health summarised product offering (continued)


Liberty Health CoverA health insurance product developed for employees of multinational organisations, local corporate entities, and small to medium enterprises operating in sub-Saharan Africa. The product offers a range of health insurance benefit options from local to global cover.

Medical Gap Cover

A supplementary health insurance policy for South African medical scheme members. This short-term insurance primarily covers the policyholder and their dependents for the shortfalls that may occur when a specialist in hospital charges more than the policyholder’s medical scheme tariff rate. In conjunction with ZestLife, the policy is administered by V-innovation, a subsidiary of Liberty Health.

Premium Waiver

A supplementary health insurance policy for South African medical scheme members. This long-term insurance product pays a benefit equal to the policyholder’s medical scheme contributions in the event of the policyholder’s death or permanent disability, thus ensuring continued medical scheme benefits for affected individuals. The policy is administered by V-innovation, a Liberty Health subsidiary.


AssetMan April 6, 2017 10:29 AM

Asset ManagementSTANLIB provides wealth and investment management solutions for individual and institutional investors. These include Liberty policyholders, a variety of third-party investors such as provincial governments, municipalities, state-owned enterprises, retirement funds and medical schemes, as well as more than 500 000 individual investors.

2016HIGHLIGHTS

Listed the Liberty Two

Degrees REIT(1) on the

Johannesburg Stock Exchange

(JSE)

Expanded STANLIB’s

capabilities by launching

Multi-Manager’s Alternative Assets

Fund of Funds solution and a new

multi-managed Standard Bank

co-branded fund range

Launched STANLIB’s new brand strategy and campaign in the market

with the aim of demonstrating

its multi-specialist capabilities

Established the

STANLIB Equity

Franchise

(1) A REIT is a regulated investment vehicle that enables investors to pool money together to invest in real estate which they typically could not acquire on their own.

Successfully outsourced the STANLIB Retail administration business

Investment team with over 1 200 years collective investment experience

Total assets under management increased to R586 billion

Named Best Africa Investment Management Team by Corporate Finance International (CFI.co)


Asset Management (continued)


OverviewSTANLIB has distinct competitive advantages that have been strengthened over time, including:

• Multi-channel distribution with both banking and life insurance retail distribution channels.

• A diverse product range with a wide range of active, passive and alternative products.

• A competitive cost to income ratio.

• Being a multi-specialist investment business that leverages the strength of diversity and the power of focus.

• Having an established African presence with operations or representative offices in eight countries outside South Africa, being: Botswana, Ghana, Kenya, Lesotho, Namibia, Swaziland, Tanzania and Uganda.

• Dedicating its focus to ensure that customers are at the centre of service excellence.

STANLIB’s investment process and philosophy remain unchanged while its investment team continues to focus on achieving investment excellence. The longer-term investment performance across its core capabilities continue to deliver to customer expectations.



Deliver investment performance to build STANLIB‘s brand ½

Optimise STANLIB‘s product range to meet investor needs ½

Expand STANLIB‘s distribution capabilities to further its reach ⅔

Continue to invest in people in order to attract and retain skilled employees �


Deliver sustainable financial resultsPerformance reviewPerformance indicatorsRm 2016 2015

Headline earnings 362 629

South Africa 459 567 Rest of Africa (97) 62

Net cash flows (excluding inter-group) 5 764 8 454 Total South Africa (excluding inter-group) 2 801 5 694

Retail (2 327) 8 511 Institutional 3 091 (2 145)Money market 2 037 (672)Rest of Africa (excluding inter-group) 2 963 2 760

Assets under management and administration (Rbn) 586 579

South Africa 535 529 Rest of Africa 51 50

Operating cost to income ratio (%) 64,4 56,2Service fee margin (%) 0,34 0,33Number of employees (salaried) 619 699

South Africa 526 610 Rest of Africa 93 89

STANLIB’s headline earnings of R362 million were 42% lower than the prior year. Continued low market returns and positive but lower external net cash inflows, higher once off costs

relating to the implementation of the outsourcing of its retail and institutional administration business and costs relating to provisioning for tax and client exposures contributed to this result.




During the course of 2016, our Kenyan activities were mainly impacted by significant market changes such as restrictions around the offering of the Cash Management Services Product, the capping of interest rates for the banking sector and a number of second tier banks having been placed in receivership. Costs incurred in identifying, resolving and providing for potential exposures and write offs further impacted the results of the business in Kenya. Operations in the other African territories tracked expectation.

Net customer cash inflows (excluding intergroup) amounted to R5,8 billion compared to R8,5 billion in the prior year. This result was mainly driven by lower South African non-money market flows and was partly offset by improved non-money market inflows from the African businesses. The asset management cash inflows improved considerably from the net cash inflows of R453 million reported at 30 June 2016.

Place customers at the heart of our business decisionsDelivering investment excellence to customersSTANLIB’s multi-specialist investment model appoints focused teams in highly specialised and distinct investment specialist

areas. The ten capabilities are supported by strategic shared services which provide administrative services and support. This model offers a centralised platform providing the capabilities access to the best in class processes and technology, allowing them to focus on delivering investment excellence to customers. This model also allows STANLIB to successfully incubate new capabilities to meet customer needs.

Investment performanceShort-term performance has shown a marked improvement for the single-manager active franchises with 60% of STANLIB’s core retail funds performing in the top two quartiles, compared to 40% in 2015. Over a three-year period, 47% of our core funds outperformed the median. This is a significant improvement since the 2015 level of 13%.

In the institutional market 25% (2015: 25%) of STANLIB’s funds performed in the top two quartiles over 12 months and 42% (2015: 38%) of funds outperformed their one-year benchmarks.

Performance in the three-year period improved slightly with 17% (2015: 8%) of funds ahead

of their peer median.

Awards Recognition received in 2016

Corporate Finance International (CFI.co) Awards: STANLIB was named winner of the

CFI.co 2016 Best Africa Investment Management Team Award.

Raging Bull Awards: Top Outright Performers for best Offshore USA Equity General Fund and

best Offshore Global Fixed Interest Bond Fund; and

Top Risk-Adjusted Performers for best Offshore USA Equity General Fund on a risk-adjusted basis and best Offshore Global Fixed Interest Bond Fund on a risk-adjusted basis.

Global Finance magazine: STANLIB named the Best Asset Manager based in Frontier Markets.

Green Building Council South Africa: Sandton City’s Atrium on 5th (part of the Liberty property portfolio) was awarded a 4 Star Green Star SA certification

Sandton City (part of the Liberty property portfolio) won the following awards:• Spectrum Award from the South African Council of Shopping Centres’ which recognises exceptional

shopping centre marketing, innovation and creative achievements, with economic success.

• Gold Footprint Award for its ‘empty shop initiative’ which allows visitors to donate clothes, toys, accessories and books.

• Two Gold Footprint Awards for its advertising of the EcoMobility Festival, and the ‘Christmas Share the Joy’ campaign.

Eastgate Shopping Centre (part of Liberty property portfolio) won a South African Institute of Steel Construction’s (SAISC) Steel Award for balancing high-tech construction methods with ground-breaking aesthetics

STANLIB Kenya won Best Fund in Absolute Returns at the Think Business Investment Awards




Provide responsible financial servicesLiberty’s approach to responsible investing is based on incorporating environmental, social and governance issues into investment decisions. External frameworks and principles provide guidance to the group. Liberty, as an insurance company, and STANLIB, as an asset manager, are both signatories to the Code for Responsible Investing in South Africa (CRISA) and this serves as the overarching framework for responsible investment across the group. CRISA’s annual reporting requirements form the basis for accountability.

Continuing to embed new investment capabilitiesSTANLIB continues to seek earnings diversification by geography, customer segment and investment capability, through its direct property, infrastructure and private equity capabilities. Investor appetite for STANLIB’s new capabilities is encouraging.

Multi-Manager: STANLIB Multi-Manager maintained its position as the largest CIS multi-manager in South Africa, with over R150 billion assets under stewardship. During the third quarter of 2016, STANLIB Multi-Manager achieved a South African market first by launching a multi-managed Alternative Assets Fund of Funds.

This fund, with group committed seed capital of R5 billion, will offer customers access to alternative assets including infrastructure and unlisted property from a range of asset managers across regions including South Africa, the rest of Africa and globally. During the fourth quarter, the STANLIB Multi-Manager team also launched a new range of co-branded multi-managed Standard Bank retail funds, which is expected to transform the existing Standard Bank Wealth investment proposition.

STANLIB Africa Direct Property Development Fund: This fund was established with group committed seed capital of USD50 million. The fund offers investors exposure to commercial and retail property investment opportunities in selected countries, including Kenya, Uganda, Ghana and Nigeria, with a target internal rate of return in excess of 20% in USD. Three of the fund’s projects are well advanced and will be breaking ground in 2017.

STANLIB Infrastructure Private Equity Fund 1: This fund, established in 2013 with R500 million in group committed seed capital, was fully subscribed at R1,2 billion upon its final close in 2014. The fund is focused on investment in early-stage infrastructure project developments in Africa. Current investments represent approximately 60% of total fund commitments and a pipeline of new opportunities exist for the balance of commitments. These investments include several projects located in South Africa under the Renewable Energy Independent Power Producers Programme (REIPPP) and an independent power development project located in Southern Africa.

STANLIB Infrastructure Yield Fund: This fund was established in late 2016 with commitments of R1,4 billion. This fund will focus on acquiring a portfolio of long-term positions in operational infrastructure assets that will provide a blend of cash yield and capital growth over the long term. Initial investments include a portfolio of investments in three South African toll roads.

Fahari Income Real Estate Investment Trust (I-REIT) in Kenya: Following its debut listing on the Nairobi Securities Exchange in 2015, the I-REIT completed the acquisition of three properties, namely a shopping centre with 16,116m2 gross leasable area, and two office buildings with gross leasable areas of 2,566m2 and 710m2 respectively. This resulted in a 67% deployment of the Initial Public Offering proceeds in investment property, with the balance being held in high yielding cash investments. The management team is focused on initiatives to maintain confidence in the I-REIT’s unique investment offering and ability to yield value to unitholders going forward. These initiatives include building a pipeline of quality investment assets and ensuring that the existing assets meet targeted investment returns.

Private Equity: STANLIB’s partnership with the founders of Agri-Vie Investment Fund made good progress as it achieved its first close of the Agrie Vie Fund II at the planned USD100 million early in 2017. This Mauritian private equity fund focuses on the food and agricultural business sector across Africa and allows both parties the opportunity to expand their alternative investment offerings.

Liberty property portfolioAsset management and property developmentThe Liberty property portfolio is one of the prime unlisted property income funds in Africa and it represents one of the only investment options through which an individual can gain access to some of Southern Africa’s most iconic shopping centres, through a Liberty life-wrapped investment product. The philosophy is to invest in prime property with a long-term view and to continually maintain properties to attract top tenants at a premium. During 2016, Liberty’s property portfolio delivered an annual gross return of 13,44% to policyholders in challenging market conditions, which exceeded the benchmark of CPI plus 5%, over a five-year rolling period.

In December 2016, Liberty listed part of this property portfolio (Liberty Two Degrees) which offers institutional investors an opportunity to participate in a property portfolio anchored by these unique, prime assets that command a high scarcity value through co-ownership with Liberty policyholders.

Property development and JHI Retail The strategic property management partnership between Liberty and JHI (a joint venture owned 49% by Liberty and 51% by JHI) which commenced operation on 1 May 2015 continued to perform well. During 2016, JHI Retail delivered a net profit of R44,3 million, which exceeded expectations. As at December 2016, the development company as well as the property manager are being managed by STANLIB REIT Fund Managers.




Liberty property portfolio (continued)

Utility consumptionLiberty continues to invest in technical and equipment upgrades to improve energy and water efficiency and sustainability across its portfolio. In 2016, the electricity and water consumption showed

a 5,2% and 10,3% decrease respectively, mainly due to energy and water saving initiatives being implemented. In addition, the leased buildings electricity consumption reduced due to STANLIB Melrose Arch moving from leased to owned buildings during 2016. Further information on Liberty’s electricity and water consumption are provided in the 2016 sustainability report.

Portfolio consumption 2016 2015 2014

Electricity owned and leased buildings1(kWh) 242 518 347 255 826 094 259 197 017Water owned buildings2 (kl) 1 022 529 1 139 920 1 183 512

(1) Total electricity includes Liberty’s consumption in both owned (including tenants) and leased buildings. (2) Liberty does not currently record water consumption at its leased branches because of the availability of data. The tenants’ consumption at Liberty’s owned buildings is included in

the water consumption figures.

AfricaSTANLIB remains committed to growing its footprint on the African continent and to being the preferred asset manager for flows destined for Africa. In East Africa, STANLIB Kenya strengthened its management team to ensure that it is well positioned to succeed in a challenging operating environment. In West Africa, STANLIB Ghana revised its retail portfolios to ensure that these continue to remain suitable for the target market. In Southern Africa, STANLIB Swaziland made inroads into offering large institutional clients access to alternative assets in the form of direct property.

Enhance social relationshipsSTANLIB continued to build a premium, global asset management brand to ensure trust, credibility and consistency through a consumer-centric approach. During 2016, STANLIB developed a new brand advertising campaign and corporate identity. These initiatives continue to assist in ensuring STANLIB’s vision and intent to become a leading asset management brand. An integrated media approach was finalised towards the end of 2016 to drive the brand positioning in the market place and will continue into 2017.

Strengthening distribution channels across the group and in the third-party arenaSTANLIB continues to widen its distribution channels across sub-Saharan Africa. During 2016, the integration of the distribution teams into a single STANLIB distribution function was finalised and aligned to the client value proposition of quality (investment excellence), relationships (distribution) and functionality (breadth of capabilities). The global distribution team being established in Europe continues to leverage the group and other partners whilst the establishment of an office and distribution licence is being completed. The primary focus is on creating awareness, in the European and Middle Eastern markets, of STANLIB’s Pan-African and alternatives capabilities. STANLIB continues to build relationships and leverage commercial agreements and drivers within the group’s distribution channels, in order to maintain and grow support and flows. Increasing third-party flows remains a key focus area for STANLIB. The customised solutions team continues to expand in order to grow third-party flows, with the aim of having further STANLIB investment capabilities on key gatekeepers’ buy lists, both for retail and institutional customers.

Risk managementSTANLIB continues to monitor and implement initiatives to mitigate its top risks. Management continues to report progress on the mitigation of these risks to the various governance structures. Further details on the group’s robust enterprise-wide risk management approach are provided in the 2016 integrated report.

Attract, develop and retain quality employeesSTANLIB recognises that the asset management industry is highly competitive, especially when it comes to attracting the best talent. The success of the business is therefore highly dependent on having exceptional talent and strong teams and that its people translate STANLIB’s brand promise into a brand experience. The implementation of its shared values proposition, “The STANLIB Way”, is being further enhanced and progressed by building a culture that can unlock the power of individuals and teams.

During 2016, an improvement was noted in general staff turnover of 13,3% (2015: 16,4%) and investment professional turnover of 7,0% (2015: 14,5%). STANLIB also achieved its employment equity targets through significant strategic recruitment and promotion of key black talent.

Ensuring responsible investmentSTANLIB, as a custodian of customer interests, is active in the pursuit of good governance and responsible investment practices. The principles of responsible investing as represented by environmental, social and governance (ESG) issues are core to STANLIB’s research process. STANLIB believes that the incorporation of ESG principles allows for a better assessment of risk, which ultimately impacts cash flows and therefore valuations. By using its shareholdings and significant influence, it is able to encourage companies to be better corporate citizens. As part of this responsibility, STANLIB is a signatory to the United Nations Principles for Responsible Investment initiative and endorses the Code for Responsible Investing in South Africa.




Summarised product offering


Unit Trusts

A range of collective schemes, ranging from fixed interest, equity and money market funds. STANLIB funds range includes passively-managed funds and funds which are are actively managed by our single managers and multi-managers. Investment into these funds can be made either directly, through the linked investment vehicle or retirement plans.

Tax-Free Savings Account (TFSA)

STANLIB offers tax-free savings accounts to both direct investors and via Linked-Investment Service Providers (LISP). The products are managed in accordance with the legislation on Tax-Free Savings Accounts.

Linked-Investment Service Provider (LISP)

The main wrappers available under LISP are: Classic Investment Plan, Classic Retirement Annuity, Classic Preservation Pension and Provident Plans. A range of unit trust funds, model share portfolios, ETFs and structured products is available under the various LISP wrappers.

Exchange-Traded Funds (ETFs) STANLIB manages ETFs listed on the JSE covering the traditional asset classes (bonds, property and equity).

Segregated Mandates

In addition to unit trusts, STANLIB offers a wide range of institutional investment solutions (including multi-asset, equity, direct and listed property, fixed interest, absolute return, Pan-African and alternatives solutions), through pooled vehicles. STANLIB's team of investment professionals can tailor segregated bespoke investment solutions to customers’ needs.

Alternative Investments

In addition to the passive solutions sold through unit trust funds and ETFs, STANLIB also manages a number of alternative investments which include private equity, infrastructure investments and direct property investments for institutional investors.

Looking aheadIn 2017, STANLIB will focus on the delivery

of the following key objectives:• Delivering investment performance to build STANLIB’s brand by ensuring

that investment capabilities are well resourced;

• Optimising STANLIB’s product range to meet investor needs;

• Creating execution capacity to support a multi-specialist cross jurisdictional business;

• Optimising service for retail customers post the outsource migration;

• Completing the institutional outsourcing programme;

• Enhancing and expanding STANLIB’s distribution capabilities to further its reach; and

• Continuing to invest in people in order to attract and retain

skilled employees.


Bancassurance April 5, 2017 9:25 AM

Bancassurance

Strategic rationale for the business agreement with Standard Bank

Partnering with Standard Bank is a source of competitive advantage for Liberty, primarily from the perspective of expanding market share and the revenue base in South Africa, and facilitating entry into new markets in the rest of Africa.

2016HIGHLIGHTS

The Liberty bancassurance business was

centralised and a

ring-fenced team of senior

resources were deployed

to drive the Standard Bank

opportunity. Significant

alignment was achieved with

the bank’s executive team and strategic

initiatives have been prioritised.

A team of Liberty corporate specialist

sales staff was successfully seconded

to Standard Bank. They are based in

the business banking suites and work in

partnership with the relationship managers of the bank. They sell

corporate wealth product solutions to

the bank’s client base.

A change in the distribution strategy of the credit life and

funeral products, by focusing on

the more affluent bank customer segments, has resulted in an

increase in gross premium income

in both these lines of business.

Enhanced distribution

focus on selling complex risk

products through the

advisory force of the bank has yielded

a case count and premium income lift for

the second consecutive year.

The transactional channel, selling simple life products through

in and outbound contact centres, has improved the quality

of new business, which resulted in a positive

actuarial basis change in the business.

A 14% increase in the joint venture

earnings in the rest of Africa insurance

operations was achieved, despite

tough market conditions in the

various territories.

GoalStandard, a suite of risk differentiated

co-named unit trust

products, was launched by

STANLIB and Standard Bank.


Bancassurance (continued)


Overview of bancassurance arrangementsThe country-specific bancassurance joint venture arrangements between Liberty and Standard Bank are based on a master agreement which establishes the overall framework for bancassurance between the two parties. The country-specific operational agreements detail how bancassurance will be implemented in each country.

The bancassurance joint venture arrangements cover asset management, investment, short-term insurance and health products. Country-specific operational agreements are in place in South Africa, Namibia, Swaziland, Botswana and Zambia. Agreements for Lesotho and Kenya are being finalised to enable full rollout in 2017.

Key benefits of the arrangements to Liberty are:

• Utilisation of the extensive Standard Bank branch network as an additional distribution channel, which provides access to local markets where Liberty does not have distribution reach;

• Diversification of revenue streams from the traditional distribution channels;

• Access to Standard Bank retail and corporate customers that would otherwise not be accessible to Liberty;

• Expansion beyond the borders of South Africa by utilising the established infrastructure of Standard Bank’s market presence in sub-Saharan Africa;

• Ability to attract and retain scarce talent, by providing extended career opportunities; and

• Ability to leverage cost, technology, regulatory relationships and operational synergies as well as best practices.



Launch the co-named unit trust suite to support the bank’s goal-based sales approach in the advisory business �

Build capacity in the transactional business to better support the advisory and embedded business with campaigns ⅔

Optimise the advisory channel of the bank through closer co-operation and experience sharing with the management teams responsible for Liberty’s tied channels ⅔

Ensure close co-operation between the organisations for the preparation and execution of all regulatory changes ½

Partner with Standard Bank in all sub-Saharan African countries in which they have a presence ⅔


Deliver sustainable financial resultsBancassurance benefits to Liberty

Liberty’s shareRm 2016 2015

Credit lifeIFRS headline earnings 160 147Embedded value of in-force contracts 461 413Other insurance productsEmbedded value of new business 53 69Embedded value of in-force contracts 1 113 1 048STANLIBNet service fees on assets under management sourced from Standard Bank distribution 406 351




Economic benefitsThe importance of the bancassurance relationship is underpinned by the substantial contribution made by these arrangements to Liberty’s long-term insurance new business volumes and STANLIB’s cash flows.

The profit share agreed on by the parties is directly dependent on the nature of the business sold, the distribution channel and the relative administrative functions performed by each party. These are summarised in the table below.

NATURE OF BUSINESS PROFIT SHARE/ECONOMIC BENEFIT

SOUTH AFRICA EMBEDDED BUSINESS

Comprises the selling of an insurance product on an “embedded in product” and/or “embedded in process” basis, where the sale is integrally linked to the sale of the Standard Bank product and integrated in the bank’s systems and processes.

Liberty’s profit share on embedded business, commensurate with functions performed, contribution to administration and risk borne, amounts to 10%.

ADVISORY BUSINESS

Relates to the selling of insurance, investment and health products by a personal adviser where the product is not integrally linked to a bank product. A Standard Bank appointed adviser provides advice through a comprehensive financial needs analysis.

Advisory business is administered by Liberty and distributed by Standard Bank Financial Consultants (SBFC). Liberty’s profit share amounts to 50%.

TRANSACTIONAL BUSINESS

Relates to the sale of a wealth product on a single sale basis through a Standard Bank point of customer engagement, where the sale is not integrally linked to the sale of a bank product, giving limited advice which could typically take the form of a single needs analysis and providing product information, but not specifically dependent on a comprehensive financial needs analysis.

The administration and infrastructure for this business is generally provided by Liberty but the Standard Bank branch infrastructure and personnel are used to access customers. Liberty's profit shares range between 50% and 65% depending on the nature of the business. The method of sharing is based on an adjusted statutory earnings basis, with a deduction for the cost of capital.

SPECIFIED SUB-SAHARAN AFRICAN TERRITORIES

Products are sold through Standard Bank branches and Liberty utilises the Standard Bank distribution network in sub-Saharan Africa. Liberty therefore does not have to incur significant infrastructural costs to meet its expansion objectives. Pricing of the products is determined by Liberty.

Economic sharing formulas are aligned to the respective acquisition models and include all business lines (life, health, short-term and investment) with Liberty’s profit share ranging between 40% and 75% depending on the respective responsibilities.

STANLIB STANLIB gains significant advantage by having access to the branch network and customer base of Standard Bank, one of the largest banks in sub-Saharan Africa. A substantial share of the cash flows and assets under management generated by STANLIB originates from Standard Bank.

STANLIB earns asset management and other fees on funds sourced through the Standard Bank channel. Profit shares ranging between 60% and 75% will accrue to STANLIB on new business levels in excess of agreed hurdle rates.

New business premium income in respect of bancassurance business and profit shares paid to Standard Bank in terms of the bancassurance arrangements are included in the related party disclosures, refer to note 42 of the group annual financial statements. Bancassurance related risks are monitored and managed through the group’s enterprise risk management governance process.




Performance overviewSouth AfricaIn the embedded business, Standard Bank’s distribution focus remains committed to the less indebted middle and upper market customer segments. Premium income results have improved for the second year running, with the change having a positive effect on persistency and average premium sizes. The embedded business remains healthy with more than 1,1 million active funeral plans and more than 1,5 million credit life premium paying customers.

In the transactional channel, the change in business rules in 2015 to allow for stricter affordability criteria, has resulted in a positive basis change in the business. Persistency and premium collection results remain better than the original assumptions of the business. The business ended with 47 300 (2015: 42 000) in-force policies at the end of 2016, 13% up on the prior year. Premium income also increased to R143 million, up 34% on the 2015 result.

In the advisory business, the indexed premiums were 4% above the prior year (2015: 3% below), with risk business increasing year-on-year by 17% (2015: 14%) in premium income and 5% (2015: 5%) in case count. Single premium business improved significantly during the second half of the year driven by various planned collaborative initiatives between Liberty and SBFC. Due to the slow start in 2016, this line of business ended short of the indexed premium budget, but 4% ahead of the 2015 result (2015: down 16%) in index terms over the 12 months.

The employee benefit channel selling to the bank’s corporate customers performed well, almost doubling premium income in 2016 and securing 77 new schemes during the year (2015: 52). These results were achieved across both the business banking and the corporate and investment banking channels. Due to the diversification into larger client segments, average premium income per scheme increased from R254 000 to R443 000 during 2016.

Liberty continues to monitor regulatory changes throughout the business. At the end of 2016, the FSB published several industry regulatory papers. Liberty, in collaboration with Standard Bank, will conduct an impact assessment of these proposed changes on the bancassurance business.

Rest of AfricaTotal joint venture earnings from the rest of Africa insurance subsidiaries for the full year amounted to R68 million, representing a 14% increase over 2015.

New business for the year amounted to R54 million, a 24% decrease (2015: R71 million). This result was mainly due to the impact of challenging economic conditions in Liberty’s countries of operation.

StrategyA dedicated staff member has been recruited to focus on product development and customer value proposition. This individual will assume full responsibility for the product development outputs of the Liberty product teams and will work closely with counterparts in the bank to ensure alignment between the two organisations.

The data analytics teams of the bank and Liberty made significant progress, delivering on a number of data projects. An understanding of the overlap between Liberty and the bank’s client base has been achieved and the bank’s team has delivered a customer value proposition assessment matrix at customer segment level. This progress highlights channel preferences, opportunity sizing and future key initiatives.

A joint analysis conducted on the bank’s advisory business resulted in several key deliverables being scoped into work streams and divided into immediate, medium-term and long-term deliverables. A bi-monthly execution forum between Liberty and Standard Bank has been constituted to govern progress, manage obstacles and action decisions. The short-term focus is on leads management, manpower, the maturing investment book and the STANLIB retention strategy. An advisor support model has been established in the transaction business and is now fully operational. In addition, a senior advisory specialist has been seconded from Liberty to the advisory business of the bank to assist with the implementation of best advisory practice initiatives.

A short-term insurance steering committee has been established to oversee the operations of a proposed centre of excellence, which will be a joint venture between Standard Bank and Liberty. A joint IT team from Liberty and Standard Bank has reviewed the proposed IT architecture and agreed a combined view for execution. The legal teams of both parties are preparing a legal framework for the proposed short-term insurance joint venture.

The secondment of corporate benefits sales staff from Liberty to Standard Bank has been effected. All staff are fully operational from a systems and logistics perspective. Collaboration with corporate and investment banking channels has begun and three main areas of opportunity within Liberty Corporate were identified, namely group scheme business, liability driven solutions and Liberty Viewpoint Consultancy.




Expansion into AfricaEmbedded credit life products were introduced in Zambia and Kenya in 2016. Transactional products such as the small and medium enterprise product (SME Life), are in the process of being introduced in Kenya, Botswana and Zambia. The income protect product (aimed at those with savings accounts) is also being rolled out to various African countries. Credit life products are in the process of being introduced in Lesotho. Bancassurance regulations in Uganda are at the final stages of discussion between the regulator, insurance and banking stakeholders, with regulatory implementation expected in 2017. Short-term licenses have been granted in Botswana and Malawi with Namibia awaiting in-country regulatory approval. Negotiations of the Kenya bancassurance agreements are at an advanced stage and are expected to be finalised early in 2017.

New bancassurance initiativesIt is Liberty’s strategic intent to be the bancassurance product provider for Standard Bank in all the sub-Saharan African territories in which the bank operates. The Zambia Life business was licenced in 2014 and Standard Bank’s Life product bancassurance business moved to Liberty from 1 January 2015. The Lesotho Life business received its licence in December 2015 and began operating in 2016. Bancassurance negotiations with Standard Lesotho Bank are at an advanced stage. With the acquisition of short-term insurance licenses in Malawi and Botswana, negotiations will commence with Standard Bank in each of these countries to underwrite short-term insurance products distributed by the bank. The Nigeria licence is pending the acquisition

of a business however, work has commenced on credit life, annuity and group life products.

Following the establishment of a bancassurance risk product forum during 2016, a similar forum for the management of all bancassurance investment products has been established. The forum will report to the bancassurance management committee and its mandate will cover all the Liberty Group investment propositions across all retail and wholesale segments of the bank. The forum will include product representatives from both Liberty and STANLIB, representing both the South African and offshore propositions.

Standard Bank launched phase one of their GoalStandard co-named unit trust portfolios in KwaZulu-Natal in 2016. These products are compliant with proposed regulatory changes and form the core of the bank’s goal-based investment philosophy. The launch was well received with more than R100 million in new assets secured by the end of 2016. A national launch was held in January 2017 and the Liberty broker division and STANLIB are providing distribution support into the regions.

The transactional risk products have been made available as part of the advisory planner offering. The business model relies on client referrals from the bank’s financial advisers to the transactional business for fulfilment. The lead-to-sale ratio of 14% and the quote-

to-sale ratio of 56% are encouraging and considerably better than that experienced in the more

traditional outbound channels. Although the project is in its infancy,

it is proving successful.

Looking aheadIn 2017, bancassurance will focus on

the delivery of the following key objectives:• Establishing a closer working relationship between the embedded

and transactional businesses;

• Launching a critical illness product in the embedded business;

• Establishing a bancassurance health product strategy;

• Further maturing the partnership model between the transactional and advisory business;

• Further maturing the secondment model between Liberty employee benefits and business banking; and

• Establishing a bancassurance presence in Nigeria.

liberty holdings limited 2016...liberty holdings limited online additional information 2016 2...

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