liberty holdings limited 2017 · presentation notes ... (sip) – gross of tax return (%) 8.5 5.7...

Financial resultspresentation

Liberty Holdings Limited

For the year ended 31 December 2017

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

Slides-Dec2017 March 1, 2018 8:38 PM

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Financial resultspresentation


For the year ended 31 December2017

Liberty Holdings LimitedDavid Munro, Chief Executive

Taking stock

2 Liberty Holdings Limited Financial results for the year ended 31 December 2017

March 1, 2018 8:38 PM Slides-Dec2017

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Challenges led to pressure on margins and the ability to generate value from new business

LIBERTY’S PURPOSE

Improving people’s lives by making their financial freedom possible

Liberty has a broad range of products that deliver for a large and loyal customer base

Operating in a challenging macro environment with increased competitor activity

Too many new efforts layered in complexity and distracted from core capabilities >

Some products have become uncompetitive and difficult for advisers to deliver customer value >

Customer experience and service to financial advisers needs attention >

Poor investment performance from asset management operations >

4

A journey that will take time and hard work – prioritising the right actions

Addressing the immediate priorities in the next two years

This can be achieved by;

•  Increasing sales volumes

•  Reduction in acquisition and maintenance costs

•  Managing to better than assumptions and models

•  Efficient management of capital

Value of new business margin 1% - 1.5% range 1 Growth in embedded value

that exceeds 12% 2

RoE 15% - 18% range 3 Maintain robust capital within our target range 2.5 - 3.0 times 4



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Devising the path forward for Liberty

Horizon 1 Here and now

Manage the present

Horizon 2 The following years

through to 2020

Horizon 3 Beyond 2020

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•  Simplification program ›  Improve customer service, reduce complexity and simplify processes for our clients and financial advisers

›  Reduce costs and improve efficiencies and effectiveness through intelligent automation

•  Modernise and improve reporting systems and processes

•  Enhance the risk and control environment

•  Improve investment performance in asset management operations

Immediate priorities for the leadership team – horizon 1

Initiatives to improve short- to medium-term performance reflect early signs of progress



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•  Restore financial performance ›  Sales force effectiveness

›  Margins

›  Product and portfolio rationalisation

›  Expense management

•  Working with Liberty Two Degrees management to assess alternatives to the existing structure

•  Terminated the intended acquisition in Nigeria

•  Optimise outcomes from Liberty Africa Insurance, Liberty Health and the Short-term insurance joint venture with Standard Bank Group

Immediate priorities for the leadership team – horizon 1 continued

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•  Evolve our strategy ›  Understand and anticipate the changing market and evolving customer needs

›  Leverage unique data sets and invest in technology to shape customer engagement

•  Identify opportunities to grow ›  Maximise our relationship with Standard Bank Group, leverage capacity and resources to increase

access to customers

›  Digitisation, improve the way we support clients and advisers and prioritise existing initiatives

›  Modernise Liberty through culture, people and brand

Looking at our time frame to 2020 – horizon 2



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Financial results review Liberty Holdings Limited Yuresh Maharaj, Financial Director

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Group financial highlights

Improved normalised headline earnings, higher investment returns and strong capital position

Rm (unless stated otherwise) Dec 17 Dec 16 % Δ

Normalised headline earnings 2 719 2 527 8

Long-term insurance net customer cash flows 1 634 1 119 46

Long-term insurance indexed new business 8 018 7 892 2

Total assets under management (Rbn) 720 676 7

Shareholder Investment Portfolio (SIP) – gross of tax return (%) 8.5 5.7

Liberty Group Limited capital adequacy cover (times covered) 2.92 2.95

Dividend per share (cents) 691 691



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5 year track record since 2013 of consistently managing insurance operations to model

SA insurance operations

•  Continued positive risk, persistency and credit variances partially offset by:

›  Basis changes to better reflect the expectation of future cash flows given policy terms, conditions and regulatory landscape

•  SA covered business embedded value maintained R34 billion, generating a return of 8.2%

109

21

43

2017 1H17 2016

Operating experience variances and basis changes remain positive (Rm)

SA covered business net worth (Rm) Dec 17 Dec 16

Expected transfer to net worth 4 112 4 217

Operating experience variances and basis changes 110 264

Development expenses (55) (45) Change in allowance for fair value share rights (3) 28

Actual net of tax transfer to net worth 4 164 4 464

Performance in line with expectation (%) 101 106

12

Capital position at 31 December 2017

Capital levels remain strong post the sovereign credit ratings downgrade

Rm (unless stated otherwise) Liberty

Holdings Limited Liberty

Group Limited

IFRS

IFRS shareholder equity 22 444 18 412

BEE preference shares 123 123

Liberty Two Degrees normalisation (340) -

Normalised shareholder equity 22 227 18 535

Regulatory capital

Shareholder assets 19 144 15 700

Regulatory capital requirement 6 022 5 378

Surplus above regulatory requirement 13 122 10 322

Risk appetite capital coverage ratio 1.50 1.50

Capital buffer in excess of risk appetite 10 111 7 633

Capital ratio at period end (times covered) 3.18 2.92



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13

1 208 1 412

2 719

16

376 252

1 307

(204) (236)

Business unit earnings

•  Individual Arrangements earnings largely driven by positive risk variances

•  Group Arrangements had increased IPP claims experience and once-off Nigeria acquisition termination costs

•  STANLIB SA impacted by margin pressure from less favourable sales mix and increased costs

•  Remediation program in STANLIB Rest of Africa continued, with risk of further operational losses significantly reduced

Business unit contribution to normalised earnings (Rm)

FY16 (%): 8 (89) 18 (45) >(100) (13) (19) 66 8 Individual

Arrangements Group

Arrangements LibFin

Markets STANLIB

SA STANLIB

Rest of Africa Central 2017 normalised

operating earnings SIP 2017 normalised

headline earnings

14

•  Improved persistency in Individual Arrangements risk business, retention initiatives having positive impact on withdrawals and maturities

•  Increased new recurring premium sales offset by umbrella scheme outflows in Liberty Corporate

Insurance operations

Key performance indicators (Rm unless stated otherwise) 2H17 1H17 2017 2016 % Δ

Value of new business 147 86 233 483 (52)

New business margin (%) 0.5 0.4 0.5 1.1

Indexed new business 4 088 3 930 8 018 7 892 2

Individual Arrangements 3 365 3 205 6 570 6 639 (1)

Group Arrangements 723 725 1 448 1 253 16

Net customer cash flows 2 299 (665) 1 634 1 119 46

Individual Arrangements 2 072 774 2 846 1 948 46

Group Arrangements 227 (1 439) (1 212) (268) >(100)

STANLIB Multi-manager* (561)

* Arrangement terminated in 2016, no flows are recorded for 2017 and going forward



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•  Value of new business and margins are priorities for the insurance operations: ›  Focus on meaningful cost efficiencies with prudent expense management

›  Continue to innovate on new higher margin products

›  Product enhancements to improve margin – risk, critical illness, investment builder

›  Retention initiatives

Financial performance – focus areas remain

Committed to deliver on short-term performance targets

15

South African operations •  Improved non-money market inflows:

›  Fixed income, property, absolute return funds and LISP

•  Ongoing initiatives to address investment performance and financial control

Rest of Africa operations •  Strengthened control environment in East Africa

•  Curtailment of cash mandate business

•  Other territories performed to expectation

Asset management operations

Remediation of operations remains an immediate priority for the new leadership at STANLIB

AUM and cash flows Dec 17 Dec 16 % Δ

Assets under management (Rbn) 609 586 4

STANLIB SA 556 535 4

STANLIB Rest of Africa 53 51 4

Net customer cash flows (Rm) 4 251 5 764 (26)

STANLIB SA 4 731 2 801 69

STANLIB Rest of Africa (480) 2 963 >(100)



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In closing Liberty Holdings Limited David Munro, Group Chief Executive

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We have diagnosed the challenges and put plans in place to restore Liberty

Early signs of progress are emerging

•  Financial advisers and distribution partners are critical to success

•  Renewed sense of optimism in the organisation

•  Focused on delivering exceptional client and adviser experience

•  Critical capabilities have been replaced

•  Strategy workstreams are driving high levels of engagement

•  Emerging confidence and sentiment in South Africa again



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Liberty has all the ingredients for success

Source: 2017 Integrated Annual Report

1 We have been trusted partners to our clients and advisers for over 60 years

2 A diversified multichannel distribution capability

3 We have a track record of pioneering financial solutions in South Africa

4 An integral part of Standard Bank Group with a meaningful bancassurance arrangement

5 Staffed by more than 6 000 people who are passionately committed to the organisation

6 A strong capital base, a unique ability to manage risk, and disciplined cost management

More than 2.5 million in-force policies Paid R8.7bn in

death and disability claims

We administer over 10 000 retirement schemes,

and 500 000 individual and institutional investment customers

More than 3 500 tied financial advisers

Retirement Annuity offering

Insurer to build

shopping malls

JSE-listed Life assurer

Insurer to introduce Nurses

on the Road

To introduce Umbrella

Funds Firs

t

Liberty Group Limited CAR cover 2.92 times

the statutory requirement

LibFin facilitates

differentiating features in

product offerings

Largest provider of long-term insurance solutions to the SA retail affluent market

Questions



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SENS-Dec2017 March 1, 2018 6:20 PM

FINAN

CIAL RESULTS

Financial results


Fo r t h e ye a r e n d e d 31 D e ce m b e r 2017

March 1, 2018 6:20 PM SENS-Dec2017

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CIAL RESULTS HIGHLIGHTS

NORMALISED HEADLINE EARNINGS

R2,7 billion

LIBERTY GROUP LIMITED CAR COVER

2,92 times

LONG-TERM INSURANCE INDEXED NEW BUSINESS

R8 billion

GROUP ASSETS UNDER MANAGEMENT

R720 billion

CONTENTS Page

Financial performance indicators 15

Financial review 16

Accounting policies 20

Auditor statement 20

Directors’ responsibility 21

Explanation of terms 21

Consolidated statement of financial position 23

Consolidated statement of comprehensive income 24

Summary consolidated statement of changes in equity 25

Summary consolidated statement of cash flows 26

Headline earnings and earnings per share 27

Summary consolidated segment information 28

Group equity value report 32

Long-term insurance new business 38

Long-term insurance net cash flows 39

Assets under management 40

Asset management net cash flows 40

Short-term insurance indicators 41

Capital commitments 41

Retirement benefit obligations 42

Related parties 42

Offsetting, enforceable master netting arrangements or similar agreements 43



FINAN

CIAL RESULTSFINANCIAL PERFORMANCE INDICATORS

for the year ended 31 December 2017

Rm (unless otherwise stated) 2017 2016%

change

Liberty Holdings LimitedEarningsBasic earnings per share (cents) 1 152,6 811,7 42Fully diluted basic earnings per share (cents) 1 120,7 788,9 42Normalised headline earnings(1) 2 719 2 527 8Normalised headline earnings per share (cents) (1) 982,1 904,5 9Normalised return on IFRS equity (%) (1) 12,3 11,4 Group equity valueNormalised group equity value per share (R) (1) 140,31 145,86 (4)Normalised return on group equity value (%) (1) 1,1 5,1 Distributions per share (cents) Normal dividend 691 691

Interim dividend 276 276 Final dividend 415 415

Total assets under management (Rbn) 720 676 7

Long-term insurance operationsIndexed new business (excluding contractual increases) 8 018 7 892 2Embedded value of new business 233 483 (52)New business margin (%) 0,5 1,1 Net customer cash inflows 1 634 1 119 46Capital adequacy cover of Liberty Group Limited (times covered) 2,92 2,95

Asset management Assets under management (Rbn) 609 586 4Net cash inflows including money market(2) 4 251 5 764 (26)

Retail and institutional net cash inflows excluding money market(2) 3 659 4 488 (18)Money market net cash inflows(2) 592 1 276 (54)

(1) Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity value. These measures reflect the economic reality of the consolidation of the listed REIT Liberty Two Degrees (L2D) and the Black Economic Empowerment (BEE) transaction,

as opposed to the required IFRS accounting treatment.(2) Excludes intergroup life funds.

Preparation and supervision: This announcement on Liberty Holdings Limited annual financial results for the year ended 31 December 2017 has been prepared by M Natsas CA(SA) and D Wichmann CA(SA) and supervised by Y Maharaj (Financial Director) CA(SA).



FINAN

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Normalised headline earnings increased by 8% supported by improving SA retail insurance earnings and higher returns from investment markets. The group’s capital position remains strong. Decisive actions are being taken to improve profitability and place Liberty on a sound strategic footing.

The group remained resilient during the year, as evidenced by the stronger capital position of the group’s main long-term insurance licence, Liberty Group Limited, with a capital adequacy ratio at 2,92 times the regulatory minimum compared to 2,82 at 30 June 2017. This remains at the upper end of our target range at 31 December 2017 despite the impact of downgrades of the South African sovereign credit rating during the year.

The group’s SA covered insurance business continued to deliver positive operating variances and be managed to better than model supporting the core assumptions underlying the insurance book. The SA covered business embedded value was preserved, maintaining embedded value earnings of R2,8 billion compared to the prior year and generating a return of 8,2%. The value of new business (VoNB) and new business

margin however ended the year below expectation. Actions are being taken to restore the new business margin. The economic environment favoured flows into guaranteed products, which manifested in a weaker mix of business from a margin perspective. The improvement in VoNB in the second half of 2017, despite lower volumes, shows signs that the focused initiatives commenced in the second quarter 2017 are starting to deliver the desired outcome.

Group equity value per share was lower at R140,31 (31 December 2016: R145,86). The lower group equity value per share was attributable to weaker earnings from the group’s non-covered businesses particularly within the STANLIB businesses and the resultant capitalisation impact of reduced earnings.

Group net customer cash inflows, including the Gateway LISP, were positive at R6,5 billion despite the poor economic backdrop. Long-term insurance net customer cash inflows of R1,6 billion reflected an improvement on the prior year inflows of R1,1 billion, supported by lower policy withdrawals and maturities in Individual Arrangements.

Long-term insurance indexed new business sales grew marginally to R8 billion. Competitive retail market pricing and the tough economic environment continued to place significant pressure on retail sales volumes, partially offset by growth in Liberty Corporate recurring premiums during the year.

Total group assets under management increased to R720 billion (31 December 2016: R676 billion).

Normalised headline earnings for the year ended 31 December 2017 of R2 719 million were 8% up on 2016, supported by a higher contribution of R1 307 million (31 December 2016: R787 million) from the shareholder investment portfolio (SIP). Normalised operating earnings however were 19% down on the prior year. The improved earnings contribution from Individual Arrangements was offset by the lower underwriting result from Liberty Corporate. STANLIB SA’s earnings continued to be impacted by margin pressure due to a less favourable sales mix and operational write-offs. STANLIB Rest of Africa earnings were impacted by operational losses. Normalised return on equity was 12,3% (31 December 2016: 11,4%).

Headline earnings for 2017 amounted to R3 252 million, up 47% compared to R2 207 million in 2016. Liberty’s headline earnings include the positive earnings impact of R543 million arising from the accounting mismatch on the consolidation of the Liberty Two Degrees listed REIT.



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Earnings by business unit

Rm (Unaudited) 2017 2016%

change

Insurance Individual Arrangements 1 208 1 119 8 Group Arrangements 16 149 (89)

Liberty Corporate 81 191 (58)Liberty Africa Insurance 45 41 10 Liberty Health (54) (45) (20)Nigeria(3) and project support costs (56) (38) (47)

Balance sheet management 376 318 18

LibFin Markets – credit portfolio 330 300 10 LibFin Markets – asset/liability management portfolio 46 18 >100

Asset management(1)

STANLIB South Africa 252 459 (45)STANLIB Rest of Africa (204) (97) (>100)

Central overheads and sundry income (236) (208) (13)

Normalised operating earnings 1 412 1 740 (19)LibFin Investments – SIP 1 307 787 66

Normalised headline earnings 2 719 2 527 8 BEE preference share adjustment (10) (16) 38 Reversal of accounting mismatch arising on consolidation of L2D(2) 543 (304) >100

Headline earnings 3 252 2 207 47 (1) Asset management customer facing unit includes the asset management capabilities under STANLIB South Africa and STANLIB Rest of Africa business units, which are managed

separately, with each business having its own accountable executive.(2) Refer Explanation of terms on page 21.(3) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU.

Commentary on the earnings by business unit follows below. Additional information is contained in the summary consolidated segment information.

Individual ArrangementsHeadline earnings from the group’s South African retail operations of R1 208 million were 8% up on the prior year. Positive risk variances in the year were partly offset by modelling and assumption changes to better reflect the expectation of future cash flows given policy terms and conditions.

New business strain arising from the geared effects of increased costs relative to new business volumes with a weaker business mix continued to place pressure on earnings. This, together with the impact of the new tax risk fund and basis changes resulted in the value of new business reducing to R155 million in the current year (31 December 2016: R426 million), while the new business margin declined to 0,5% from 1,2% in the prior year. The improvement in the value of new business from R62 million for the six months to 30 June 2017 to R155 million for the year to 31 December 2017 indicates that initiatives implemented in 2017 to improve the value of new business are starting to have the desired effect.

Indexed new business of R6 570 million was 1% down on 2016. Competitive retail market pricing and the tough economic environment continued to place significant pressure on sales volumes. The economic environment favoured flows into guaranteed products, as evidenced by strong demand for the Guaranteed Investment Product and the Bold Living Annuity throughout the year.

Net customer cash inflows of R2,8 billion were 46% up on prior year inflows of R1,9 billion, driven by lower policy withdrawals and maturities. This also reflects a significant improvement over the R0,8 billion inflows reported at 30 June 2017 and confirms that the ongoing initiatives to improve retention are delivering the required results.

Despite the tough environment, the business continued to deliver positive operating variances and has been managed to “better than model” consistently for the last five years.



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Group ArrangementsLiberty CorporateEarnings of R81 million were impacted by a considerably lower underwriting result due to a high level of risk claims experienced, particularly an increase in income protection plan (IPP) claims in the second half of 2017. Indexed new business was 39% higher than the prior year at R1 171 million, with recurring premium new business up 42% due to good risk and umbrella enhancement sales. Single premium new business was up 6%. This resulted in the value of new business increasing to R57 million. Net cash outflows amounted to R1,5 billion reflecting a small number of high asset value scheme terminations and higher risk and IPP claims linked to the challenging economic environment and associated job losses, partially offset by increased recurring premium inflows.

Liberty Africa and Liberty Health InsuranceLiberty Africa Insurance earnings of R45 million were 10% up on the prior year despite negative exchange rate movements. Indexed new business in the long-term insurance businesses of R277 million was 33% down on the prior year due to exchange rate movements and a large once off deal in 2016. The value of new business was lower at R21 million at a margin of 3,9%. The short-term insurance businesses have experienced considerable pricing pressure.

The recessionary environment in Nigeria significantly impacted Liberty Health’s short-term profitability. Management remains focused on growing the operations to scale.

Asset managementSTANLIB South AfricaSTANLIB South Africa earnings were R252 million for the year (31 December 2016: R459 million). Earnings were impacted by margin pressure due to a less favourable sales mix, costs associated with the termination of the institutional administration outsourcing programme, the launch of new franchises and operational write-offs.

Total assets under management by STANLIB South Africa increased by R21 billion to R556 billion at 31 December 2017.

Net customer cash inflows (excluding intergroup) grew to R4,7 billion from inflows of R2,8 billion in the prior year. This result was mainly attributable to strong non-money market inflows. Intergroup cash outflows for the year amounted to R15,9 billion.

STANLIB Rest of AfricaSTANLIB Rest of Africa incurred a loss of R204 million for the year (31 December 2016: loss of R97 million). The business continued to be affected mainly by operational losses identified during the remedial programme in East Africa. Efforts to strengthen the operational and control environments have progressed well and risks of further operational losses are significantly reduced. Operations in the other African territories tracked broadly to expectation.

Total assets under management by STANLIB Rest of Africa increased by R1,7 billion to R52,5 billion at 31 December 2017.

Liberty Two Degrees (L2D)L2D’s results for the year ended 31 December 2017 were released on 19 February 2018. The operational performance of the property portfolio remained strong notwithstanding a difficult consumer environment. Together with L2D management, we are assessing alternatives to deal with the limitations of the existing structure.

BancassuranceThe bancassurance agreement with Standard Bank, which is applicable across the group’s asset management and insurance operations, continues to make a positive contribution to new business volumes and earnings. The total indexed new business premiums sold under the agreement increased by 7% to R3,3 billion for the year. Good progress is being made with the implementation of the 10 point bancassurance plan and we continue leveraging our relationship with Standard Bank to capture appropriate opportunities.

Balance sheet managementLibFin Markets – Asset liability management and credit portfolio Earnings from the credit portfolio increased by 10% to R330 million as a result of growth in the credit portfolio notwithstanding the impact of the sovereign ratings downgrades.

The asset liability management profit amounted to R46 million due to favourable market positioning (31 December 2016: R18 million).

LibFin assets under management were higher at R62 billion (31 December 2016: R58 billion).

LibFin Investments – Shareholder Investment Portfolio (SIP) The SIP includes the assets backing capital in the insurance operations as well as the group’s investment market exposure to the 90:10 book of business. The current risk profile of the SIP is similar to a conservative balanced portfolio and is managed with a long-term through the cycle investment horizon.

Market returns experienced in 2017 were higher and the portfolio accordingly delivered a gross return of 8,5% (31 December 2016: 5,7%) which was marginally below the portfolio benchmark. The extent of the SIP exposure to investment markets remains appropriate in the context of the group’s risk appetite. Earnings of R1 307 million were well above 2016 earnings of R787 million despite the significant rand appreciation in December 2017 which reduced the returns on offshore assets.



FINAN

CIAL RESULTSFINANCIAL REVIEW (CONTINUED)


Capital adequacy coverThe capital adequacy cover of Liberty Group Limited remained strong at 2,92 times the statutory requirement (31 December 2016: 2,95 times). The group remains well capitalised at the upper end of its target range in respect of the current capital regime and in respect of capital requirements under the impending Solvency Assessment and Management regime.

All other group subsidiary life licences were adequately capitalised.

Dividends2017 final dividend In line with the group’s dividend policy, the board has approved and declared a gross final dividend of 415 cents per ordinary share. The final dividend will be paid out of income reserves and is payable on Monday, 9 April 2018 to all ordinary shareholders recorded in the books of Liberty Holdings Limited on the record date.

The dividend of 415 cents per ordinary share will be subject to a local dividend tax rate of 20% which will result in a net final dividend, to those shareholders who are not exempt from paying dividend tax, of 332 cents per ordinary share. Liberty Holdings Limited’s income tax number is 9050/191/71/8. The number of ordinary shares in issue in the company’s share capital at the date of declaration is 286 202 373.

The important dates pertaining to the dividend are as follows:

Last date to trade cum dividend on the JSE Tuesday, 3 April 2018

First trading day ex dividend on the JSE Wednesday, 4 April 2018

Record date Friday, 6 April 2018

Payment date Monday, 9 April 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 4 April 2018 and Friday, 6 April 2018, both days inclusive. Where applicable, in terms of instructions received by the company from certificated shareholders, the payment of the dividend will be made electronically to shareholders’ bank accounts on payment date.

In the absence of specific mandates, cheques will be posted to shareholders. Shareholders who have dematerialised their shares will have their accounts with their CSDP or broker credited on Monday, 9 April 2018.

ProspectsLiberty’s business is built on our deep relationships with our customers and advisers which is core to creating value for all stakeholders. We are taking decisive actions to improve profitability and place our business on a sound strategic footing. In 2018, management will focus on restoring the financial performance of the SA Retail insurance business, improving the investment performance of STANLIB, simplifying the group’s overall operations and expanding our relationship with the Standard Bank Group.

We are confident that the group will emerge from this period of change with significantly greater potential to serve the needs of all stakeholders.

David Munro Jacko MareeChief Executive Chairman

1 March 2018

Transfer SecretariesComputershare Investor Services Proprietary Limited(Registration number 2004/003647/07)Rosebank Towers, 15 Biermann Avenue, RosebankJohannesburg 2196Tel: +27 (11) 370 5000

Liberty Holdings Limited Incorporated in the Republic of South Africa (Registration number: 1968/002095/06)JSE code: LBHISIN code: ZAE000012714Preference share code: LBHPISIN code: ZAE000004040Telephone +27 11 408 3911

These results are available at www.libertyholdings.co.za

www.libertyholdings.co.za

Sponsor



FINAN

CIAL RESULTS ACCOUNTING POLICIES

The 2017 consolidated annual financial statements of Liberty Holdings Limited have been prepared in accordance with and contains information required by:

• International Financial Reporting Standards (IFRS) including IAS 34 Interim Financial Reporting (with the exception of disclosures required under IAS 34 16A (j) relating to fair value measurement, which are not required by the JSE Listing Requirements);

• the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee;

• Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council;

• the Listings Requirements of the JSE Limited; and

• the South African Companies Act No. 71 of 2008.

The consolidated annual financial statements have been prepared in compliance with IFRS and interpretations for year ends commencing on or after 1 January 2017.

The accounting policies are consistent with those applied in the prior year except for the mandatory adoption of minor amendments or early adoption of amendments to IFRS. These amendments have not resulted in any material impacts to the group’s 2017 reported results or comparative periods.

Amendments to IFRS 2 Share-based Payments and IAS 40 Investment Properties, effective 1 January 2018, have been early adopted as at 1 January 2017. These amendments have not resulted in any impact to the group’s 2017 reported results, comparative periods or disclosures.

AUDITOR STATEMENT

PricewaterhouseCoopers Inc. (PwC) have audited the consolidated annual financial statements of Liberty Holdings Limited from which the summary consolidated financial results have been extracted. These summary consolidated financial results comprise the consolidated statement of financial position at 31 December 2017, the consolidated statement of comprehensive income, summary consolidated changes in equity and summary consolidated cash flows for the year then ended and selected explanatory notes. These statements and related notes are marked as ‘audited’. This announcement itself is not audited.

The financial results contained in this announcement have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the consolidated annual financial statements, from which the summary consolidated financial results were extracted, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the prior year’s consolidated annual financial statements except for the changes outlined in the Accounting policies above. This announcement does not include the information required pursuant to paragraph 16A (j) of IAS 34. The full IAS 34 compliant summary consolidated financial results announcement and a copy of the auditors’ report is available on request or on the company’s website and at the company’s registered office.

The auditors have expressed an unmodified audit opinion on the consolidated annual financial statements. PwC have also issued an unmodified assurance opinion on Liberty Holdings Limited’s group equity value report, which has also been marked as ‘audited’ in this financial results announcement.

Shareholders are advised that in order to obtain a full understanding of the nature of the auditors’ engagement, they should obtain a copy of the auditors’ reports together with the accompanying financial information which is available upon request from Liberty Holdings Limited’s registered office.



FINAN

CIAL RESULTSDIRECTORS’ RESPONSIBILITY

The summary consolidated annual financial statements included in this announcement are the full responsibility of the directors. The directors confirm that the financial information has been correctly extracted from the underlying 2017 audited consolidated

Liberty Holdings Limited annual financial statements which are available for inspection at the company’s registered office on request.

EXPLANATION OF TERMS

Capital adequacy requirement (CAR)

The capital adequacy requirement is the minimum amount by which the Financial Services Board requires an insurer’s assets to exceed its liabilities. The assets, liabilities and CAR must be calculated using a method which meets the Financial Services Board’s requirements. Capital adequacy cover refers to the amount of capital the insurer has as a multiple of the minimum requirement.

Development costsRepresents project costs incurred on developing or enhancing future revenue opportunities.

FCTRForeign Currency Translation Reserve.

“Liberty” or “group”Represents the collective of Liberty Holdings Limited and its subsidiaries.

Long-term insurance operations – Indexed new businessThis is a measure of new business which is calculated as the sum of twelve months’ premiums on new recurring premium policies and one tenth of single premium sales.

Long-term insurance operations – Value of new business and marginThe present value, at point of sale, of the projected stream of after tax profits for new business issued, net of the cost of required capital. The present value is calculated using a risk adjusted discount rate. Margin is calculated using the value of new business divided by the present value of future modelled premiums.

Short-term insurance operations – Claims loss ratioThis is a measure of underwriting risk and is measured as a ratio of claims incurred divided by the net premiums earned.

Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity valueThese measures reflect the economic reality of the Black Economic Empowerment (BEE) transaction and the consolidation of the listed REIT Liberty Two Degrees (L2D) as opposed to the required IFRS accounting treatment.

BEE transaction

IFRS reflects the BEE transaction as a share buy-back. Dividends received on the group’s preference shares (which are recognised as an asset for this purpose) are included in income. Shares in issue relating to the transaction are reinstated.



FINAN

CIAL RESULTS EXPLANATION OF TERMS (CONTINUED)

Normalised: headline earnings, headline earnings per share, return on equity, group equity value per share and return on group equity value (CONTINUED)

Reversal of accounting mismatch arising on IFRS profit or loss consolidation of L2DAn accounting mismatch arises on consolidation of L2D in the group annual financial statements, resulting from the different measurement bases applied to L2D’s assets and Liberty Group Limited’s (100% subsidiary of Liberty Holdings Limited) policyholder liabilities. Specifically:

• on a consolidated look through basis the investment property assets of L2D are included in the group annual financial statements at fair value; whereas

• the corresponding linked obligations to Liberty Group Limited’s policyholders are required under IFRS to continue to be measured in the group annual financial statements at the listed price of the L2D units.

The result of this is an accounting mismatch that represents any difference in the profit and loss movement in the price at which L2D’s listed units trade relative to the underlying net asset value.

L2D adjustment in group equity value

In addition to the reversal of the accounting mismatch in IFRS profit or loss described above, the group equity value adjusts the exposures in the shareholder investment portfolios (SIP) to the listed unit price.

Summary of impact

Below is a summary of the L2D transaction impact on the ordinary shareholders interest:

Rm

Group equityvalueTotal

IFRSnet asset

value

SIP equity value

adjustment

Opening adjustment at 1 January 2017 (330) (193) (137)IFRS profit or loss 543 543 Group equity value earnings 394 394Transaction between owners (10) (10)

Closing adjustment at 31 December 2017 597 340 257



FINAN

CIAL RESULTSCONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2017

Rm (Audited) 2017 2016

AssetsIntangible assets 231 390 Defined benefit pension fund employer surplus 171 215 Properties 34 768 33 828 Equipment 1 128 1 105 Interests in joint ventures 1 244 1 229 Interests in associates 15 197 12 995 Deferred taxation 336 358 Deferred acquisition costs 737 713 Long-term policyholder assets – insurance contracts 7 484 7 314 Reinsurance assets 1 774 1 674 Long-term insurance 1 481 1 352 Short-term insurance 293 322 Financial investments 338 534 316 441 Loans and receivables 1 222 1 242 Assets held for trading and for hedging 7 871 8 609 Repurchase agreements, scrip and collateral assets 11 900 15 483 Prepayments, insurance and other receivables 6 361 5 300 Cash and cash equivalents 15 169 14 994 Total assets 444 127 421 890

LiabilitiesLong-term policyholder liabilities 322 918 307 230 Insurance contracts 210 554 204 155 Investment contracts with discretionary participation features 11 845 11 462 Financial liabilities under investment contracts 100 519 91 613 Reinsurance liabilities 663 555 Third-party financial liabilities arising on consolidation of mutual funds 49 713 44 046 Provisions 76 191 Deferred taxation 3 386 2 586 Deferred revenue 291 268 Deemed disposal taxation liability 436 873 Short-term insurance liabilities 780 925 Financial liabilities 5 581 4 601 Liabilities held for trading and for hedging 6 311 6 798 Repurchase agreements liabilities and collateral deposits payable 9 097 11 748 Employee benefits 1 446 1 369 Insurance and other payables 11 995 11 213 Current taxation 1 043 481 Total liabilities 413 736 392 884

EquityOrdinary shareholders’ equity 22 444 21 676 Share capital 26 26 Share premium 5 157 5 296 Retained surplus 18 166 16 990 Other reserves ( 905) ( 636)Non-controlling interests 7 947 7 330 Total equity 30 391 29 006 Total equity and liabilities 444 127 421 890



FINAN

CIAL RESULTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2017


Insurance premiums 39 970 41 288 Reinsurance premiums (1 950) (1 922)Net insurance premiums 38 020 39 366 Fee income and reinsurance commission 3 683 3 731 Investment income 21 652 20 885 Hotel operations sales 532 585 Investment gains/(losses) 18 835 (1 823)Total revenue 82 722 62 744 Claims and policyholder benefits under insurance contracts (38 819) (39 664)Insurance claims recovered from reinsurers 1 800 1 450 Change in long-term policyholder assets and liabilities (6 829) 598 Liabilities under insurance contracts (6 504) 1 164 Policyholder assets related to insurance contracts 170 (265)Investment contracts with discretionary participation features (521) (404)Applicable to reinsurers 26 103 Fair value adjustment to long-term policyholder liabilities under investment contracts (9 116) (3 891)Fair value adjustment to financial liabilities (27)Fair value adjustment on third party mutual fund interests (4 619) 619 Acquisition costs (4 935) (4 723)General marketing and administration expenses (11 345) (10 733)Finance costs (1 344) (1 415)Profit share allocations under bancassurance and other agreements (972) (1 029)Equity accounted earnings from joint venture 25 22 Profit before taxation 6 568 3 951 Taxation(1) (2 864) (1 325)Total earnings 3 704 2 626 Other comprehensive income (233) (148)Items that may be reclassified subsequently to profit or loss (95) (101)Net change in fair value on cash flow hedges 75 218 Income and capital gains tax relating to net change in fair value on cash flow hedges (21) (56)Foreign currency translation (149) (263)Items that may not be reclassified subsequently to profit or loss (138) (47)Owner-occupied properties – fair value adjustment (67) (1)Income and capital gains tax relating to owner-occupied properties fair value adjustment (14)Change in long-term policyholder insurance liabilities (application of shadow accounting) (32) 1 Actuarial gains on post-retirement medical aid liability 45 30 Income tax relating to post-retirement medical aid liability (13) (8)Net adjustments to defined benefit pension fund(2) (41) (96)Income tax relating to defined benefit pension fund (16) 27

Total comprehensive income 3 471 2 478 Total earnings attributable to:Shareholders 3 118 2 209 Non-controlling interests 586 417

3 704 2 626 Total comprehensive income attributable to:Shareholders 2 932 2 128 Non-controlling interests 539 350

3 471 2 478 Basic and fully diluted earnings per share Cents Cents Basic earnings per share 1 152,6 811,7 Fully diluted basic earnings per share 1 120,7 788,9 (1) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation.(2) Net adjustments to defined benefit pension fund include actuarial gains or losses, return on plan assets, reduced by the interest on the net defined benefit asset and the effect of

the application of the asset ceiling.



FINAN

CIAL RESULTS

SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2017


Balance of ordinary shareholders’ equity at 1 January 21 676 21 739 Ordinary dividends (1 942) (2 022)Total comprehensive income 2 932 2 128 Share buy-back(1) (350) (477)Black economic empowerment transaction 32 195 Share-based payments 99 132 Transaction costs of issuing units in Liberty Two Degrees (78)Preference dividends (2) (2)Transactions between owners 9 (40)Transactions between owners – Liberty Two Degrees (10) 101

Ordinary shareholders’ equity 22 444 21 676

Balance of non-controlling interests at 1 January 7 330 4 254 Total comprehensive income 539 350 Acquisition of Liberty Two Degrees 3 000 Transactions between owners – Liberty Two Degrees 351 (101)Acquisition of unincorporated property partnership 87 98 Acquisition of subsidiaries 33 Unincorporated property partnerships net distributions (238) (219)Non-controlling interests’ share of subsidiary distributions (133) (21)Non-controlling interests’ share of shares issued in subsidiary 2 3 Transaction costs of issuing units in Liberty Two Degrees (38)Transactions between owners 9 (29)

Non-controlling interests 7 947 7 330

Total equity 30 391 29 006 (1) Share buy-backs are purchases from the market to meet employee share-based payment obligations.



FINAN

CIAL RESULTS SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS



Cash flows from operating activities 5 121 2 443

Cash utilised by operations (7 082) (9 157)Interest and dividends received 18 841 18 242 Distributions paid (3 075) (2 717)Taxation paid (1 946) (2 260)Other operating cash flows (1 617) (1 665)

Cash flows from investing activities (3 581) (6 607)

Net purchase of investments (2 906) (4 937)Net purchase of other assets (375) (288)Repayment of collateral deposits payable (258) (1 236)Acquisition of subsidiaries (146)Acquisition of equity accounted joint ventures (42)

Cash flows from financing activities (1 280) (18)

Net advance of financial liabilities 980 687 Net repayment of repurchase agreements liabilities (2 393) (3 175)Net cash flows from equity transactions with non-controlling interests 483 3 063 Transaction costs of issuing units in Liberty Two Degrees (116)Share buy-back (350) (477)

Net increase/(decrease) in cash and cash equivalents 260 (4 182)Cash and cash equivalents at the beginning of the year 14 994 19 305 Cash and cash equivalents acquired through business acquisitions 61 Foreign currency translation (85) (190)

Cash and cash equivalents at the end of the year 15 169 14 994



FINAN

CIAL RESULTSHEADLINE EARNINGS AND EARNINGS PER SHARE


Rm (unless otherwise stated) (Audited) 2017 2016

Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings attributable to shareholders 3 118 2 209 Preference share dividend (2) (2)

Basic earnings attributable to ordinary shareholders 3 116 2 207 Impairment of intangible assets 164 Tax on headline earnings adjustable item (28)

Headline earnings attributable to ordinary shareholders 3 252 2 207 Net income earned on BEE preference shares 10 16 Reversal of the accounting mismatch arising on consolidation of L2D(1) (543) 304

Normalised headline earnings attributable to ordinary shareholders 2 719 2 527

Weighted average number of shares in issue (‘000) 270 348 271 883 Normalised weighted average number of shares in issue (‘000) 276 847 279 373 Fully diluted weighted average number of shares in issue (‘000) 278 030 279 760

Earnings per share Cents Cents

Total earnings attributable to ordinary shareholdersBasic 1 152,6 811,7 Headline 1 202,9 811,7 Normalised headline 982,1 904,5

Fully diluted earnings attributable to ordinary shareholdersBasic 1 120,7 788,9 Headline 1 169,7 788,9 (1) Refer Explanation of terms on page 21.



FINAN

CIAL RESULTS SUMMARY CONSOLIDATED SEGMENT INFORMATION


The audited segment results for the year ended 31 December 2017 are as follows:

Group Arrangements

Rm (Audited)

IndividualArrange

mentsLiberty

Corporate

Liberty Africa

InsuranceLiberty Health

Assetmanagement Other Total

Reportingadjustments(1)

IFRSreported

Total revenue 68 161 15 676 2 420 929 3 085 4 625 94 896 (12 174) 82 722

Profit before taxation 2 957 223 121 (134) 263 2 793 6 223 345 6 568 Taxation(3) (1 819) (62) (74) 28 (212) (725) (2 864) (2 864)

Total earnings 1 138 161 47 (106) 51 2 068 3 359 345 3 704

Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings 1 138 161 47 (106) 51 2 068 3 359 345 3 704 Attributable to non-controlling interests (1) (58) (3) (179) (241) (345) (586)Preference share dividend (2) (2) (2)Impairment of intangible assets 13 71 52 136 136

Headline earnings 1 150 232 (11) (54) 48 1 887 3 252 3 252 Net income earned on BEE preference shares 10 10 10 Reversal of the accounting mismatch arising on consolidation of L2D (543) (543) (543)

Normalised headline earnings 1 150 232 (11) (54) 48 1 354 2 719 2 719

Reconciliation of business unit earnings to segment resultIndividual Arrangements 1 208 1 208 Group Arrangements 81 (11) (54) 16

Liberty Corporate 81 81 Liberty Africa Insurance 45 45 Liberty Health (54) (54)Nigeria(2) and project support costs (56) (56)

LibFin (Markets and Investments) (138) 151 1 670 1 683

LibFin Markets – credit portfolio 192 138 330 LibFin Markets – asset/liability matching 35 1 10 46 LibFin Investments – SIP (365) 12 1 660 1 307

Asset managementSTANLIB South Africa 252 252 STANLIB Rest of Africa (204) (204)

Central overheads and sundry income 80 (316) (236)

Normalised headline earnings 1 150 232 (11) (54) 48 1 354 2 719 (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term

insurance into defined IFRS ‘investment’ and ‘insurance’ products, the application of shadow accounting for the change in long-term policyholder insurance liabilities and the elimination of intergroup transactions.

(2) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU.(3) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation.

The customer facing units are supported by shared service functions (Group Enablement) and LibFin (incorporating LibFin Markets and LibFin Investments), which are strategic competency units. The impact of LibFin Markets is disclosed in the relevant customer grouping.



FINAN

CIAL RESULTS


Group Arrangements

Rm (Audited)

IndividualArrange

mentsLiberty

Corporate

Liberty Africa




IFRSreported

Total revenue 68 161 15 676 2 420 929 3 085 4 625 94 896 (12 174) 82 722

Profit before taxation 2 957 223 121 (134) 263 2 793 6 223 345 6 568 Taxation(3) (1 819) (62) (74) 28 (212) (725) (2 864) (2 864)

Total earnings 1 138 161 47 (106) 51 2 068 3 359 345 3 704

Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings 1 138 161 47 (106) 51 2 068 3 359 345 3 704 Attributable to non-controlling interests (1) (58) (3) (179) (241) (345) (586)Preference share dividend (2) (2) (2)Impairment of intangible assets 13 71 52 136 136

Headline earnings 1 150 232 (11) (54) 48 1 887 3 252 3 252 Net income earned on BEE preference shares 10 10 10 Reversal of the accounting mismatch arising on consolidation of L2D (543) (543) (543)

Normalised headline earnings 1 150 232 (11) (54) 48 1 354 2 719 2 719

Reconciliation of business unit earnings to segment resultIndividual Arrangements 1 208 1 208 Group Arrangements 81 (11) (54) 16


LibFin (Markets and Investments) (138) 151 1 670 1 683

LibFin Markets – credit portfolio 192 138 330 LibFin Markets – asset/liability matching 35 1 10 46 LibFin Investments – SIP (365) 12 1 660 1 307

Asset managementSTANLIB South Africa 252 252 STANLIB Rest of Africa (204) (204)

Central overheads and sundry income 80 (316) (236)

Normalised headline earnings 1 150 232 (11) (54) 48 1 354 2 719 (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term


SUMMARY CONSOLIDATED SEGMENT INFORMATION (CONTINUED)




FINAN

CIAL RESULTS




Group Arrangements

Restated(4)

Rm (Audited)

IndividualArrange-

mentsLiberty

Corporate

Liberty Africa




IFRSreported

Total revenue 56 583 13 963 2 811 1 276 3 384 1 097 79 114 (16 370) 62 744

Profit before taxation 2 018 376 144 (74) 517 653 3 634 317 3 951 Taxation(3) (950) (112) (79) 29 (148) (65) (1 325) (1 325)

Total earnings 1 068 264 65 (45) 369 588 2 309 317 2 626

Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings 1 068 264 65 (45) 369 588 2 309 317 2 626 Attributable to non-controlling interests (62) (7) (31) (100) (317) (417)Preference share dividend (2) (2) (2)

Headline earnings 1 068 264 3 (45) 362 555 2 207 2 207 Net income earned on BEE preference shares 16 16 16 Reversal of the accounting mismatch arising on consolidation of L2D 304 304 304

Normalised headline earnings 1 068 264 3 (45) 362 875 2 527 2 527

Reconciliation of business unit earnings to segment resultIndividual Arrangements 1 119 1 119 Group Arrangements 191 3 (45) 149


LibFin (Markets and Investments) 6 103 996 1 105

LibFin Markets – credit portfolio 197 103 300 LibFin Markets – asset/liability matching 15 3 18 LibFin Investments – SIP (206) (3) 996 787

Asset management STANLIB South Africa 459 459 STANLIB Rest of Africa (97) (97)

Central overheads and sundry income (57) (30) (121) (208)

Normalised headline earnings 1 068 264 3 (45) 362 875 2 527 (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term


(2) Costs associated with the possible acquisition of a long-term licence in Nigeria and project management costs of the Group Arrangements CFU.(3) IFRS requires both policyholder and shareholder taxation to be reported in the taxation line. This therefore distorts the effective tax charge relative to profit before taxation.(4) The segment results for the year ended 31 December 2016 have been restated to provide more information on the three distinct segments within Group Arrangements, in order to

better align to the information reported to the chief operating decision maker.



FINAN

CIAL RESULTS


Group Arrangements

Restated(4)

Rm (Audited)

IndividualArrange-

mentsLiberty

Corporate

Liberty Africa




IFRSreported

Total revenue 56 583 13 963 2 811 1 276 3 384 1 097 79 114 (16 370) 62 744

Profit before taxation 2 018 376 144 (74) 517 653 3 634 317 3 951 Taxation(3) (950) (112) (79) 29 (148) (65) (1 325) (1 325)

Total earnings 1 068 264 65 (45) 369 588 2 309 317 2 626

Reconciliation of total earnings to headline earnings attributable to shareholdersTotal earnings 1 068 264 65 (45) 369 588 2 309 317 2 626 Attributable to non-controlling interests (62) (7) (31) (100) (317) (417)Preference share dividend (2) (2) (2)

Headline earnings 1 068 264 3 (45) 362 555 2 207 2 207 Net income earned on BEE preference shares 16 16 16 Reversal of the accounting mismatch arising on consolidation of L2D 304 304 304

Normalised headline earnings 1 068 264 3 (45) 362 875 2 527 2 527

Reconciliation of business unit earnings to segment resultIndividual Arrangements 1 119 1 119 Group Arrangements 191 3 (45) 149


LibFin (Markets and Investments) 6 103 996 1 105

LibFin Markets – credit portfolio 197 103 300 LibFin Markets – asset/liability matching 15 3 18 LibFin Investments – SIP (206) (3) 996 787

Asset management STANLIB South Africa 459 459 STANLIB Rest of Africa (97) (97)

Central overheads and sundry income (57) (30) (121) (208)

Normalised headline earnings 1 068 264 3 (45) 362 875 2 527 (1) Reporting adjustments include the consolidation of unincorporated property partnerships, the consolidation of third party mutual fund liabilities, the classification of long-term






FINAN

CIAL RESULTS GROUP EQUITY VALUE REPORT


1 IntroductionLiberty presents a “group equity value” report to reflect the combined value of the various components of Liberty’s businesses.

Section 2 below describes the valuation bases used for each reported component. It should be noted that the group equity value is presented to provide additional information to shareholders to assess performance of the group. The total equity value is not intended to be a fair value calculation of the group but should provide indicative information of the inherent value of the component parts.

2 Component parts of the group equity value and valuation techniques usedGroup equity value has been calculated as the sum of the following component parts:

2.1 South African (SA) covered business:The wholly owned subsidiary, Liberty Group Limited, comprises the South African long-term insurance entities and related asset holding entities. The embedded value methodology in terms of Advisory Practice Note 107 issued by the Actuarial Society of South Africa continues to be used to derive the value of this business cluster described as “South African covered business”. The embedded value report of the South African covered business has been reviewed by the group’s statutory actuary. The full embedded value report is included in the supplementary information section.

2.2 Other businesses:

STANLIB South Africa

Valued using a 10 times (2016: 10 times) multiple of estimated sustainable earnings.

STANLIB Rest of Africa

Valued using a 10 times (2016: 10 times) multiple of estimated sustainable earnings.

Liberty Health As Liberty Health has yet to establish a history to support a sustainable earnings calculation, an adjusted IFRS net asset value is applied.

Liberty Africa Insurance

Liberty Africa Insurance is an emerging cluster of both long and short-term insurance businesses located in various African countries outside of South Africa. A combination of valuation techniques including embedded value, discounted cash flow and earnings multiples have been applied to value these businesses. The combined value of this cluster is not material relative to the other components of group equity value and therefore a detailed analysis of this valuation has not been presented. At 31 December 2017 and 31 December 2016 the combined valuations approximated the group’s IFRS net asset value. Therefore the IFRS net asset value was used.

Liberty Holdings The net market value of assets and liabilities held by the Liberty Holdings Limited company excluding investments in any subsidiaries which are valued separately.

2.3 Liberty Two Degrees normalisation adjustment:This represents the difference between Liberty’s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the shareholder investment portfolio.

2.4 Other adjustments: These comprise the fair value of share rights allocated to staff not employed by the South African covered businesses, adjusting certain deferred tax assets to current values and allowance for certain shareholder recurring expenses incurred in Liberty Holdings Limited capitalised at a multiple of 9 times (2016: 9 times).



FINAN

CIAL RESULTSGROUP EQUITY VALUE REPORT (CONTINUED)


3 Normalised group equity value

3.1 Analysis of normalised group equity value

31 December 2017Rm (Audited)

SA covered business

Other businesses Total

Liberty Group Limited 18 412 18 412 STANLIB South Africa(2) 795 795 STANLIB Rest of Africa(2) 100 100 Liberty Health (including Total Health Trust) 299 299 Liberty Africa Insurance 813 813 Liberty Holdings 1 428 1 428 Liberty Two Degrees adjustment to net asset value 597 597

Shareholders’ equity reported under IFRS 18 412 4 032 22 444 Difference between statutory and published valuation methods (7 253) (7 253)

Negative rand reserves (6 806) (6 806)Deferred acquisition costs (730) (730)Deferred revenue liability 283 283

Subordinated notes (including accrued interest) 5 581 5 581 CAR of subsidiaries (10) (10)Reverse value of in-force acquired (12) (12)Inadmissible assets (1 018) (1 018)

Statutory excess assets over liabilities(3) 15 700 4 032 19 732 Reverse CAR of subsidiaries 10 10 Reverse subordinated notes (including accrued interest) (5 581) (5 581)Reverse inadmissible assets 1 018 1 018 Frank Financial Services allowance for future expenses (100) (100)Impact of discounting on deferred tax asset (100) (100)BEE preference funding 123 123 Liberty Two Degrees normalisation adjustment(1) (597) (597)Allowance for employee share rights (36) (36) (72)

Normalised net worth 11 134 3 299 14 433 Value of in-force – Individual Arrangements 22 088 22 088 Value of in-force – Group Arrangements: Liberty Corporate 3 049 3 049 Cost of required capital (1 690) (1 690)Fair value adjustment – STANLIB South Africa(2) 3 655 3 655 Fair value adjustment – STANLIB Rest of Africa(2) 50 50 Allowance for future shareholder expenses (2 217) (2 217)

Normalised equity value 34 581 4 787 39 368 (1) This represents the difference between Liberty’s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in

issue to Liberty at the reporting date. Adjusting the valuation from net asset value to share price is required to ensure consistency between policyholder liabilities and their backing assets, and to provide a market consistent valuation of the L2D shares held within the shareholder investment portfolio.

(2) STANLIB valuation: RmSTANLIB South Africa 4 450STANLIB Rest of Africa 150 Total 4 600

(3) The adjustments between the IFRS and statutory net asset values for the Liberty Africa subsidiaries have not been included. This is because the group equity value for these entities is set to their IFRS net asset value and so these adjustments do not affect group equity value.



FINAN

CIAL RESULTS GROUP EQUITY VALUE REPORT (CONTINUED)


3 Normalised group equity value (continued)

3.1 Analysis of normalised group equity value (continued)

31 December 2016Rm (Audited)

SA covered business


Liberty Group Limited 18 505 18 505 STANLIB South Africa(2) 777 777 STANLIB Rest of Africa(2) 104 104 Liberty Health (including Total Health Trust) 404 404 Liberty Africa Insurance 808 808 Liberty Holdings 1 408 1 408 Liberty Two Degrees adjustment to net asset value (330) (330)

Shareholders’ equity reported under IFRS 18 505 3 171 21 676 Difference between statutory and published valuation methods (6 786) (58) (6 844)

Negative rand reserves (6 344) (6 344)Deferred acquisition costs (698) (698)Deferred revenue liability 256 256 Other (58) (58)

Subordinated notes (including accrued interest) 4 601 4 601 CAR of subsidiaries (10) (10)Reverse value of in-force acquired (17) (17)Inadmissible assets (807) (85) (892)

Statutory excess assets over liabilities 15 486 3 028 18 514 Reverse difference between statutory and published valuation methods 58 58 Reverse CAR of subsidiaries 10 10 Reverse subordinated notes (including accrued interest) (4 601) (4 601)Reverse inadmissible assets 807 85 892 Frank Financial Services allowance for future expenses (100) (100)Impact of discounting on deferred tax asset (100) (100)BEE preference funding 148 148 Liberty Two Degrees normalisation adjustment(1) 330 330 Allowance for employee share rights (33) (27) (60)

Normalised net worth 11 717 3 374 15 091 Value of in-force – Individual Arrangements 21 635 21 635 Value of in-force – Group Arrangements: Liberty Corporate 2 759 2 759 Cost of required capital (1 641) (1 641)Fair value adjustment – STANLIB South Africa(2) 5 013 5 013 Fair value adjustment – STANLIB Rest of Africa(2) 256 256 Allowance for future shareholder expenses (1 892) (1 892)

Normalised equity value 34 470 6 751 41 221 (1) This represents the difference between Liberty’s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in


(2) STANLIB valuation: Rm

STANLIB South Africa 5 790STANLIB Rest of Africa 360

Total 6 150



FINAN




3.2 Normalised group equity value earnings and value per share

2017 2016

Rm (Audited)

SA covered business


SA covered business


Normalised equity value at the end of the year 34 581 4 787 39 368 34 470 6 751 41 221

Equity value at the end of the year 34 458 5 384 39 842 34 322 6 421 40 743 Liberty Two Degrees adjustment(1) (597) (597) 330 330 BEE preference shares 123 123 148 148

Net share buy-backs 350 350 477 477 Funding of restricted share plan 92 (92) 92 (92)Intragroup dividends 2 600 (2 600) 3 500 (3 500)Dividends paid 1 944 1 944 2 024 2 024 Normalised equity value at the beginning of the year (34 470) (6 751) (41 221) (35 268) (6 367) (41 635)

Equity value at the beginning of the year (34 322) (6 421) (40 743) (34 946) (6 367) (41 313)Liberty Two Degrees adjustment(1) (330) (330) BEE preference shares (148) (148) (322) (322)

Normalised equity value earnings 2 803 (2 362) 441 2 794 (707) 2 087 Normalised return on group equity value (%) 8,2 (36,4) 1,1 7,9 (11,8) 5,1Normalised number of shares 280 573 282 615

Number of shares in issue (‘000) 270 120 272 247 Shares held for the employee restricted share scheme (‘000) 4 014 3 794 Adjustment for BEE shares (‘000) 6 439 6 574

Normalised group equity value per share (R) 140,31 145,86 (1) This represents the difference between Liberty’s share of the net asset value of L2D as at the reporting date and the listed price of L2D units multiplied by the number of units in




FINAN

CIAL RESULTS GROUP EQUITY VALUE REPORT (CONTINUED)



3.3 Sources of normalised group equity value earnings

2017 2016

Rm (Audited)

SA covered business


SA covered business


Value of new business written in the year 212 21 233 454 29 483 Expected return on value of in-force business 2 926 2 926 2 997 2 997 Variances/changes in operating assumptions 109 109 43 240 283

Operating experience variances 330 330 477 477 Property portfolio liquidity fee/STANLIB REIT Fund Managers(1) (167) 240 73 Operating assumption changes 30 30 (295) (295)Changes in modelling methodology (251) (251) 28 28

Development costs (55) (166) (221) (45) (62) (107)Liberty Holdings shareholder expenses(3) (584) (584) (228) (228)Headline earnings of other businesses/intragroup transfer 46 100 146 185 185

Operational equity value profits 3 238 (629) 2 609 3 449 164 3 613 Economic adjustments (432) (139) (571) (683) (67) (750)

Return on net worth(2) (14) (139) (153) 153 (67) 86 Investment variances(2) (594) (594) (963) (963)Change in economic assumptions 176 176 127 127

Change in fair value adjustments on value of other businesses (1 585) (1 585) (825) (825)Change in allowance for share rights (3) (9) (12) 28 21 49

Group equity value earnings 2 803 (2 362) 441 2 794 (707) 2 087 (1) Following the listing of Liberty Two Degrees in December 2016, STANLIB REIT Fund Managers (RF) Proprietary Limited (the Manager), a 100% held subsidiary of Liberty Holdings

Limited (LHL), was appointed as the Manager of L2D. The property portfolio liquidity fee which was previously earned in Liberty Group Limited will be used to fund the asset management fee paid to STANLIB REIT Fund Managers. STANLIB REIT Fund Managers has been valued using a 10 times multiple of the estimated sustainable earnings.

(2) The investment return on net worth includes an amount of negative R7 million (2016: negative R16 million) in respect of the change in the fair value of cash-flow hedges supporting LGL subordinated notes. Similarly, the investment variances include an amount of R61 million (2016: R178 million) in respect of the change in the fair value of cash-flow hedges supporting LibFin Credit.

(3) This includes the actual shareholder expenses incurred by Liberty Holdings of R259 million (2016: R122 million) plus the change in the allowance for future shareholder expenses over the period.



FINAN




3.4 Analysis of value of long-term insurance new business and margins

Rm (unless otherwise stated) (Audited) 2017 2016

South African covered business:Individual Arrangements 1 445 1 652

Traditional Life 1 159 1 306 Direct Channel 67 96 Credit Life 83 86 LibFin Credit uplift to Individual Arrangements 136 164

Group Arrangements: Liberty Corporate 162 131

Traditional Business 137 113 LibFin Credit uplift to Group Arrangements: Liberty Corporate 25 18

Gross value of new business 1 607 1 783 Overhead acquisition (including underwriting) costs impact on value of new business (1 305) (1 243)Cost of required capital (90) (86)

Net value of South African covered new business 212 454Present value of future expected premiums 42 782 42 370Margin (%) 0,5 1,1

Group Arrangements: Liberty Africa InsuranceNet value of new business 21 29Present value of future expected premiums 528 519Margin (%) 3,9 5,6

Total group net value of new business 233 483Total group margin (%) 0,5 1,1



FINAN

CIAL RESULTS LONG-TERM INSURANCE NEW BUSINESS


Rm (Unaudited) 2017 2016

Sources of insurance operations total new business by product typeRetail 27 132 27 435

Single 22 660 22 916 Recurring 4 472 4 519

Institutional 2 034 2 296

Single 838 1 350 Recurring 1 196 946

Total new business 29 166 29 731


Insurance indexed new business 8 018 7 892 Sources of insurance indexed new business:

Individual Arrangements 6 570 6 639 Group Arrangements: 1 448 1 253

Liberty Corporate 1 171 842 Liberty Africa Insurance(1) 277 411

(1) Liberty owns less than 100% of certain entities that make up Liberty Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership.

The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under long-term insurance new business by distribution channel arises mainly from different treatment for extensions of matured policies, reinvestment of fund withdrawals, conversions of standalone funds to umbrella funds and fund member movements within Liberty administered funds.



FINAN

CIAL RESULTSLONG-TERM INSURANCE NET CASH FLOWS



Net premiums by product typeRetail 43 467 43 150


Institutional 10 673 11 889


Net premium income from insurance contracts and inflows from investment contracts 54 140 55 039


Net claims and policyholders benefits by product typeRetail (40 436) (40 924)

Death and disability claims (6 567) (6 570)Policy surrender and maturity claims (27 984) (28 870)Annuity payments (5 885) (5 484)

Institutional (12 070) (12 996)

Death and disability claims (2 118) (1 912)Scheme terminations and member withdrawals (9 139) (10 280)Annuity payments (813) (804)

Net claims and policyholders benefits (52 506) (53 920)

Long-term insurance net customer cash flows(2) 1 634 1 119

Rm (Unaudited)Sources of insurance operations net cash flows:Individual Arrangements 2 846 1 948 Group Arrangements: (1 212) (268)

Liberty Corporate (1 536) (751)Liberty Africa Insurance(1) 324 483

Asset Management:STANLIB Multi-manager(3) (561)

(1) Liberty owns less than 100% of certain of the entities that make up Liberty Africa. The information is recorded at 100% and is not adjusted for proportional legal ownership.(2) This excludes net cash inflows attributed to the off balance sheet GateWay LISP of R350 million (2016: R557 million).(3) The arrangement whereby funds were placed with external asset managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows in 2017 and

going forward.



FINAN

CIAL RESULTS ASSETS UNDER MANAGEMENT(1)


Rbn (Unaudited) 2017 2016

Managed by group business units 684 653

STANLIB South Africa 556 535STANLIB Rest of Africa(2) 53 51LibFin Markets 62 58Other internal managers 13 9

Externally managed 36 23

Total assets under management(3) 720 676(1) Includes funds under administration. (2) Liberty owns less than 100% of certain of the entities that make up STANLIB Rest of Africa. The information is recorded at 100% and is not adjusted for proportional legal

ownership.(3) Included in total assets under management are the following LISP December 2017 amounts:

Unit trusts listed (Rbn)

STANLIBmanaged

Othermanaged Total

STANLIB 42 80 122 Gateway 3 5 8

ASSET MANAGEMENT NET CASH FLOWS(1)


Rm (Unaudited) 2017 2016

STANLIB South AfricaNon-money market 4 815 764

Retail 8 249 (2 327)Institutional (3 434) 3 091

Money market (84) 2 037

Retail (1 400) 1 007 Institutional 1 316 1 030

Net South Africa cash inflows 4 731 2 801

STANLIB Rest of AfricaNon-money market (1 156) 3 724

Retail 738 (422)Institutional (1 894) 4 146

Money market 676 (761)

Net Rest of Africa cash (outflows)/inflows (480) 2 963

Net cash inflows from asset management 4 251 5 764(1) Cash flows exclude intergroup segregated life fund mandates.



FINAN

CIAL RESULTSSHORT-TERM INSURANCE INDICATORS



Net premiums 1 297 1 484

Liberty Health – medical risk 777 919 Liberty Africa Insurance – motor, property, medical and other 520 565

Net claims (886) (994)

Liberty Health – medical risk (637) (743)Liberty Africa Insurance – motor, property, medical and other (249) (251)

Net cash inflows from short-term insurance 411 490

UnauditedClaims loss ratio (%)Liberty Health 82 81Liberty Africa Insurance 48 44

Combined loss ratio (%)Liberty Health 102 104 Liberty Africa Insurance 99 94

CAPITAL COMMITMENTSas at 31 December 2017


Equipment 741 823 Investment and owner-occupied properties 1 432 1 485 Committed capital(1) 1 071 636

Total capital commitments 3 244 2 944

Under contracts 430 657 Authorised by the directors but not contracted 2 814 2 287

(1) Liberty has committed capital to certain infrastructure and development funds. The committed funds are only drawn down when required.

The above 2017 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds and R452 million (2016: R360 million) from non controlling interests in respect of investment properties.

Throughout the group there are various short term leases (less than one year) for office and computer equipment. The obligations outstanding at 31 December are not material.



FINAN

CIAL RESULTS RETIREMENT BENEFIT OBLIGATIONS


Audited

Post-retirement medical benefitThe group operates an unfunded post-retirement medical aid benefit for permanent employees who joined the group prior to 1 February 1999 and agency staff who joined prior to 1 March 2005.

As at 31 December 2017, the Liberty post-retirement medical aid benefit liability was R495 million (2016: R493 million).

Defined benefit retirement fund The group operates a defined benefit pension scheme on behalf of employees. The fund is closed to new membership and is well funded.

RELATED PARTIESfor the year ended 31 December 2017

AuditedStandard Bank Group Limited and any subsidiary (excluding Liberty) is referred to as Standard Bank in the context of this section.

The following selected significant related party transactions have occurred or have been contracted in the 31 December 2017 financial year:

1. Summary of related party transactions with Standard Bank1.1 Summary of movement in investment in ordinary shares held by the group in the group’s holding company is

as follows:Number Fair value Ownership

’000 Rm %

Standard Bank Group LimitedBalance at 1 January 2017 9 572 1 454 0,60 Purchases 12 496 2 117 Sales (5 888) (1 020)Fair value adjustments 615

Balance at 31 December 2017 16 180 3 166 1,02

1.2 Bancassurance The bancassurance business agreements with the Standard Bank group caters for the manufacture, sale and promotion of insurance, investment and health products through the Standard Bank’s African distribution capability. New business premium income in respect of this business in 2017 amounted to R9 129 million (2016: R7 973 million). In terms of the agreements, Liberty’s group subsidiaries pay profit shares to various Standard Bank operations. The amounts to be paid are in most cases dependent on source and type of business and are paid along geographical lines. The total combined net profit share amounts accrued as payable to the Standard Bank group for the year to 31 December 2017 is R948 million (2016: R1 005 million).

The bancassurance business agreements are evergreen agreements with a 24-month notice period for termination – as at the date of the approval of these financial statements, neither party had given notice.

A binder agreement was entered into with Standard Bank effective from 31 December 2012. The binder agreement is associated with the administration of policies sold under the bancassurance business agreement, and shall remain in force for an indefinite period with a 90-day notice period for termination. Fees accrued for the year to 31 December 2017 is R206 million (2016: R150 million).

1.3 Purchases and sales of financial instrumentsAs per Liberty’s 2017 group annual financial statements, in the normal course of conducting business, Liberty deposits cash with Standard Bank, purchases and sells financial instruments issued by Standard Bank and enters into sale and repurchase agreements and derivative transactions with Standard Bank. These transactions are at arm’s length and are primarily used to support investment portfolios for policyholders and shareholders’ capital.

There are no other significant changes to related party transactions as reported in Liberty’s 2017 annual financial statements.



FINAN

CIAL RESULTS

OFFSETTING, ENFORCEABLE MASTER NETTING ARRANGEMENTS OR SIMILAR AGREEMENTSas at 31 December 2017

The group does not have any financial assets or financial liabilities that are currently subject to offsetting in accordance with IAS 32 Financial Instruments: Presentation. The table below sets out the nature of agreements and the types of rights relating to items which do not qualify for offset but that are subject to a master netting arrangement (MNA) or similar agreement.

NATURE OF AGREEMENT RELATED RIGHTSDerivative assets and liabilities International swaps and derivatives associations

The agreement allows for offset in the event of default

Repurchase agreements Global master repurchase agreements

Collateral deposits payable Global master securities lending arrangements

Rm (Audited) Total

Not subject to MNA

or similar agreements

Subject to MNA

or similar agreements

Financial collateral(1) Net

2017 AssetsAssets held for trading and for hedging 7 871 (1 356) 6 515 (6 016) 499

Total assets 7 871 (1 356) 6 515 (6 016) 499

LiabilitiesLiabilities held for trading and for hedging 6 311 (56) 6 255 (6 016) 239 Repurchase agreements liabilities 4 671 4 671 (4 671)Collateral deposits payable 4 426 4 426 (4 426)

Total liabilities 15 408 (56) 15 352 (15 113) 239

2016AssetsAssets held for trading and for hedging 8 609 (595) 8 014 (6 532) 1 482

Total assets 8 609 (595) 8 014 (6 532) 1 482

LiabilitiesLiabilities held for trading and for hedging 6 798 (49) 6 749 (6 532) 217 Repurchase agreements liabilities 7 064 7 064 (7 064)Collateral deposits payable 4 684 4 684 (4 684)

Total liabilities 18 546 (49) 18 497 (18 280) 217 (1) Financial collateral relates to these instruments that are subject to MNA or similar agreements.



FINAN

CIAL RESULTS

NOTES

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SuppInfo-Dec2017 2 March 1, 2018 6:54 PM

Supplementaryinformation


Fo r t h e ye a r e n d e d 31 D e ce m b e r 2017


March 1, 2018 6:54 PM SuppInfo-Dec2017 2

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CONTENTS Page

Analysis of ordinary shareholders’ equity 47

Analysis of group earnings – core earnings 48

South African covered business embedded value 49

Bancassurance – Benefit to Liberty 56

90:10 Shareholder exposure 56

Long-term policyholder liabilities IFRS reconciliation 57

South African insurance distribution headcount 57

Long-term insurance – New business by distribution channel 58

Total long-term insurance premiums 59

LibFin – Shareholder Investment Portfolio 59

LibFin – Shareholder Investment Portfolio percentage allocation 60

LibFin – Shareholder Investment Portfolio return 60

LibFin – Markets Credit Portfolio 60

Individual Arrangements – Headline earnings 61

Individual Arrangements – Key performance indicators 61

Individual Arrangements – Indexed new business 61

Individual Arrangements – Maintenance cost per policy 62

Individual Arrangements – Negative rand reserves 62

Liberty Corporate – Headline earnings 62

Liberty Corporate – Key performance indicators 63

Liberty Health – Headline earnings 63

Liberty Health Cover Product – Lives serviced 63

Liberty Africa Insurance – Headline earnings 64

Liberty Africa Insurance – Key performance indicators 64

Liberty Africa Insurance – Long-term insurance net cash flows 65

Our presence in Africa 65

STANLIB South Africa – Headline earnings 66

STANLIB South Africa – Net cash flows and assets under management by asset category 66

STANLIB South Africa – Assets under management breakdown by source and asset type 67

STANLIB South Africa – Retail investment performance 68

STANLIB South Africa – Institutional investment performance 68

STANLIB South Africa – Investment performance 69

STANLIB Rest of Africa – Assets under management 69

STANLIB Rest of Africa – Assets under management by geographical location 70



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ANALYSIS OF ORDINARY SHAREHOLDERS’ EQUITYfor the year ended 31 December 2017

Group funds invested Contribution to earnings

Rm 2017 2016 2017 2016

South African insurance 18 412 18 505 2 972 2 415

Insurance operating surplus 1 618 1 663 Present value of in-force business 12 17 (5) (13)Investment portfolios 17 235 14 686 1 480 703 Fixed assets and working capital(1) 6 665 8 302 190 293 Subordinated notes (excluding accrued interest) (5 500) (4 500) (311) (231)

Other insurance 1 112 1 212 (65) (42)

Liberty Africa Insurance 813 808 45 41 Nigeria(4) and project support costs (56) (38)Liberty Health 299 404 (54) (45)

Asset managementSTANLIB South Africa 795 777 252 459 STANLIB Rest of Africa 100 104 (204) (97)

Central overheads and sundry income (244) (222)Liberty Holdings Limited 1 428 1 408 Liberty Two Degrees adjustment to net asset value(2) 597 (330) Mismatch earnings on L2D policyholder assets 543 (304)Preference share dividend (2) (2)

Headline earnings 3 252 2 207 Preference share dividend 2 2 Impairment of intangible assets (136)

Liberty Holdings shareholders’ equity/total earnings 22 444 21 676 3 118 2 209

Normalised:Liberty Holdings shareholders’ equity/headline earnings 22 444 21 676 3 252 2 207 BEE preference shares 123 148 10 16 Liberty Two Degrees normalisation adjustment(3) (340) 193 (543) 304

Normalised shareholders’ equity/headline earnings 22 227 22 017 2 719 2 527 (1) With effect from 1 July 2005 Liberty Group Limited established a working capital funding loan between insurance operations and shareholder assets, subsequently supported by

the subordinated notes issue. Inter-divisional interest is charged at 8,77% nacm.(2) Represents the difference between Libertys’ share of the net asset value of L2D at the end of the period and the listed price of L2D units multiplied by the number of units in issue

to Liberty at the end of the period.(3) Reversal of the accounting mismatch arising on consolidation of the policyholders obligation linked to L2D units and the policyholders allocation of the group funds investment.(4) Costs associated with the termination of a long-term licence acquisition in Nigeria and project management costs of the Group Arrangements CFU.



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Rm 2017 2016

Individual Arrangements planned margin release including annual contribution increases 1 971 1 805 Individual Arrangements credit life 167 160 Individual Arrangements VIF amortisation (5) (12)LibFin Markets 376 318 Expected long-term rate of return on Shareholder Investment Portfolio(1) 1 464 1 485 Other businesses headline earnings 240 303

Group Arrangements 16 149


Asset managementSTANLIB South Africa 445 459 STANLIB Rest of Africa 15 (97)

Central overheads and sundry income (236) (208)

Centre overheads and sundry income (246) (224)BEE preference share income 10 16

Core operating earnings 4 213 4 059 Individual Arrangements new business strain (675) (611)Individual Arrangements operating variances, assumption changes and other (250) (223)

Adjusted core operating earnings 3 288 3 225 Variance to long-term rate of return on Shareholder Investment Portfolio (157) (698)STANLIB South Africa sustainable earnings adjustment (193)STANLIB Rest of Africa sustainable earnings adjustment (219)

Normalised headline earnings 2 719 2 527 (1) The expected long term rate of return on the SIP portfolio is based on the long term view to avoid volatility in the core operating earnings..(2) Costs associated with the termination of a long-term licence acquisition in Nigeria and project managements costs of the Group Arrangements CFU.

ANALYSIS OF GROUP EARNINGS – CORE EARNINGSfor the year ended 31 December 2017



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1 Description of embedded value of South African covered businessThe prudential regulatory regime governing South African insurance companies is expected to change imminently, which may affect the basis on which embedded value is calculated. Liberty will continue to report embedded value on the same basis as before until the best practice for embedded value reporting emerges.

The current version of Advisory Practice Note (APN) 107 came into force for all financial years ending on or after 31 December 2012. APN 107 governs the way in which embedded values of life assurance companies are reported.

The embedded value consists of:

• The net worth; plus

• The value of in-force covered business; less

• The cost of required capital.

The net worth represents the excess of assets over liabilities on the statutory valuation method, adjusted for the elimination of the carrying value of covered business acquired and for the fair value of share rights granted to Liberty Group Limited employees.

The value of in-force covered business is the discounted value of the projected stream of after-tax shareholder profits arising from existing in-force covered business. These shareholder profits arise from the release of margins under the statutory basis of valuing liabilities, which differs from the release of profits on the published accounting basis. Covered business is defined as business regulated by the FSB as long-term insurance business written in Liberty Group Limited.

For reversionary and smoothed bonus business, the value of in-force covered business has been calculated assuming that bonuses are changed over time so that the full amount of the

bonus stabilisation reserves is distributed to policyholders over the lifetime of the in-force policies.

The required capital is defined as the level of capital that is restricted for distribution to shareholders. This comprises the statutory CAR calculated in accordance with Standard of Actuarial Practice (SAP) 104 plus any additional capital considered appropriate by the board given the risks in the business. Required capital has been calculated at 1,5 x CAR, consistent with risk appetite. The cost of required capital is the present value, at the risk discount rate, of the projected release of the required capital allowing for investment returns on the assets supporting the projected required capital.

The value of new business written is the present value at the point of sale of the projected stream of after-tax profits from that business, reduced by the cost of required capital. New business is defined as covered business arising from the sale of new policies and once-off premium increases in respect of in-force covered business during the reporting period. Risk policies with an inception date prior to the reporting date where no premium has been received are included in the embedded value and value of new business. The contractual terms of these policies state that Liberty Group Limited is on risk from the inception date, even though a premium may not have been received. This definition is consistent with that used in the financial statements.

The value of new business has been calculated on the closing assumptions. Investment yields at the point of sale have been used for new fixed annuities, guaranteed investment plans, and embedded derivatives; for all other business the investment yields at the date of reporting have been used.

No adjustment has been made for the discounting of tax provisions in the embedded value.

SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUEfor the year ended 31 December 2017



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2 Normalised embedded valueRm (unless otherwise stated) 2017 2016

Risk discount rate %(1) 11,79 11,92Net worth 11 134 11 717

Ordinary shareholders’ funds on published basis 18 412 18 505 BEE preference share funding 123 148 Adjustment of ordinary shareholders’ funds from published basis(2) (7 253) (6 786)Adjustment for carrying value of in-force business acquired(3) (12) (17)Allowance for fair value of share rights (36) (33)Frank Financial Services allowance for future expenses (100) (100)

Net value of life business in-force 23 447 22 753

Value of life business in-force 25 137 24 394 Cost of required capital (1 690) (1 641)

Normalised embedded value 34 581 34 470

3 Normalised embedded value earningsEmbedded value at the end of the year 34 581 34 470 Funding of restricted share plan 92 92 Intragroup dividends 2 600 3 500 Less embedded value at the beginning of the year (34 470) (35 268)

Embedded value earnings 2 803 2 794

Return on embedded value (%) 8,2 7,9

SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED)




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4 Analysis of normalised embedded value earnings2017 2016

RmNet

worth

Value of in-force covered

business

Cost of required

capital

Em-bedded

valueNet

worth

Value of in-force covered

business

Cost of required

capital

Em-bedded

value

Embedded value at the end of the year 11 134 25 137 (1 690) 34 581 11 717 24 394 (1 641) 34 470 Plus dividends paid 2 600 2 600 3 500 3 500 Plus funding of restricted share plan 92 92 92 92 Embedded value at the beginning of the year (11 717) (24 394) 1 641 (34 470) (12 761) (24 025) 1 518 (35 268)

Embedded value earnings 2 109 743 (49) 2 803 2 548 369 (123) 2 794

Components of embedded value earningsValue of new business written in the year (1 790) 2 092 (90) 212 (1 661) 2 201 (86) 454 Expected return on value of in-force business(4) 2 888 38 2 926 2 961 36 2 997 Expected net of tax profit transfer to net worth 4 112 (4 112) 4 217 (4 217)Variances/changes in operating assumptions 110 (8) 7 109 264 (155) (66) 43

Operating experience variances(5) 225 105 330 450 15 12 477 Operating assumption changes(6) (45) 75 30 (160) (39) (96) (295)Changes in modelling methodology(7) (70) (188) 7 (251) (22) 32 18 28 Property portfolio liquidity fee variance (4) (163) (167)

Development expenses (55) (55) (45) (45)Intragroup transfers 46 46

Embedded value earnings from operations 2 423 860 (45) 3 238 2 775 790 (116) 3 449 Economic adjustments (311) (117) (4) (432) (255) (421) (7) (683)

Return on net worth(8) (14) (14) 153 153 Investment variances(9) (393) (201) (594) (164) (799) (963)Changes in economic assumptions(10) 96 84 (4) 176 (244) 378 (7) 127

Change in allowance for fair value of share rights(11) (3) (3) 28 28

Normalised embedded value earnings 2 109 743 (49) 2 803 2 548 369 (123) 2 794





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Notes to embedded value

(1) Future investment returns on major asset classes and other economic assumptions have been set with reference to the market yield on medium-term South African government stock.

Investment return p.a.

% 2017 2016

Government stock 8,99 9,12Equities 12,49 12,62Property 9,99 10,12Cash 7,49 7,62

The risk discount rate has been set equal to the risk free rate plus 80% of the equity risk premium 11,79 11,92

Maintenance expense inflation rate 7,24 7,37

(2) Adjustment of ordinary shareholders’ funds from the published basis

The amounts represent the change in the amount of shareholder funds as a result of moving from a published valuation basis to the net worth on the embedded value basis. This is largely due to the elimination of certain negative rand reserves on the statutory valuation basis. The reduction in net worth results in a corresponding increase in the value of in-force.

(3) Adjustment for carrying value of in-force business acquired

The carrying value of business acquired by Liberty has been deducted from shareholders’ funds in order to avoid double counting. For embedded value purposes, the value in respect of this acquired business is included in the value of life business in-force. The net adjustment was R12 million (2016: R17 million).

(4) The expected return on the value of life business is obtained by applying the previous year’s risk discount rate to the value of life business in force at the beginning of the period and the current year’s risk discount rate from the point of sale to the valuation date in respect of the value of new business.





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Notes to embedded value (continued)

(5) Operating experience variances consist of the combined effect on net worth and value of in-force of operating experience being different to that anticipated at the prior year end.

The net operating experience variance of R330 million (2016: R477 million) comprised:

Rm Net worth

Value of in-force

covered business

Cost of required

capitalEmbedded

value

2017Individual Arrangements 117 140 257

Mortality and morbidity 255 78 333 Policyholder behaviour (8) 93 85 Other(i) (130) (31) (161)

Group Arrangements: Liberty Corporate (70) (35) (105)Credit portfolio variance 178 178

Total 225 105 330

2016Individual Arrangements 202 (10) 192

Mortality and morbidity 67 84 151 Policyholder behaviour 52 (35) 17 Other, including tax variances 83 (59) 24

Group Arrangements: Liberty Corporate 98 25 123 Credit portfolio variance 150 150 Other 12 12

Total 450 15 12 477 (i) The amount of R130 million is primarily related to strengthening in respect of regulatory and other simplification projects.





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Notes to embedded value (continued)

(6) The amount of R30 million (2016: negative R295 million) is due to a number of offsetting assumption changes.

(7) The amount of negative R251 million (2016: R28 million) is due to a number of data refinements and modelling changes including refinements to the modelling of reinsurance.

(8) Reconciliation of embedded value return on net worth to LibFin Investments earnings:

Rm 2017 2016

LibFin Investments after consolidation of L2D 1 307 787 Adjustment to reflect L2D at listed unit price (394) 95

LibFin Investments earnings 913 882 Adjustments for differences between the statutory and published basis (604) (527)90:10 book (194) (5)Frank Financial Services (50) (28)Bancassurance obligations relating to Liberty Africa Insurance and STANLIB (54) (39)BEE preference scheme 7 21 Central treasury investments 115 19 Software asset impairment (71)Other (76) (170)

Return on net worth (14) 153

The return on net worth includes an amount of negative R7 million (2016: negative R16 million) in respect of the change in the fair value of cash-flow hedges supporting LGL subordinated notes.

(9) The amount of negative R393 million (2016: negative R164 million) arises from the mismatch created by hedging market risk on the IFRS basis and the negative investment variance on the 90:10 book. The investment variances include an amount of R61 million (2016: R178 million) in respect of the change in the fair value of cash-flow hedges supporting LibFin Credit.

(10) The amount of R176 million (2016: R127 million) relates to changes in economic assumptions as described in note (1).

(11) The amount of negative R3 million (2016: R28 million) in respect of the change in the fair value of share rights arises from the change in the number of share rights for staff employed by Liberty Group Limited and the change in the market value of Liberty Holdings Limited shares over the reporting period.

Other bases, bonus rates and assumptionsTaxation has been allowed for at rates and on bases applicable to Section 29A of the Income Tax Act. Full taxation relief on expenses to the extent permitted was assumed. Capital gains taxation has been taken into account in the embedded value.

Assumptions reflect best estimates of future experience consistent with the valuation basis excluding any compulsory or discretionary margins. However, in contrast to the assumptions in the valuation basis, the embedded value makes allowance for non-compulsory automatic premium and benefit increases.

The assets backing the required capital are consistent with the long-term strategic mix of shareholder funds approved by the Liberty Holdings board.





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5 Sensitivity to risk discount rate and other assumptions In order to indicate sensitivity to varying assumptions, the value of the in-force life business less cost of required capital and the value of the new business written for Liberty Group Limited are shown below for various changes in assumptions. The reserving basis has been kept constant and only future experience assumptions have been varied. Each value is shown with only the indicated parameter being changed.

2017 2016

AuditedRm

Value of in-force life

business less cost of

required capital at

31 December

Value of new business

written in

Value of in-force life

business less cost of

required capital at

31 December

Value of new business

written in

Base value 23 447 212 22 753 454 Value of in-force/new business 25 137 302 24 394 540 Cost of required capital (1 690) (90) (1 641) (86)

100 basis point increase in risk discount rate 21 758 61 21 125 330 Value of in-force/new business 23 829 169 23 127 436 Cost of required capital (2 071) (108) (2 002) (106)

100 basis point decrease in interest rate environment 23 891 329 23 051 545 Value of in-force/new business 25 580 421 24 710 629 Cost of required capital (1 689) (92) (1 659) (84)

10% fall in equity and property market values 22 901 22 188 Value of in-force 24 591 23 829 Cost of required capital (1 690) (1 641)

100 basis point increase in equity and property returns 24 364 249 23 639 493 Value of in-force/new business 25 795 325 25 034 565 Cost of required capital (1 431) (76) (1 395) (72)

10% decrease in maintenance expenses 24 331 293 23 610 536 Value of in-force/new business 26 021 383 25 251 622 Cost of required capital (1 690) (90) (1 641) (86)

10% decrease in new business acquisition expenses (other than commissions) 375 595 Value of new business(1) 465 681 Cost of required capital (90) (86)

10% decrease in withdrawal rates 24 843 405 24 061 661 Value of in-force/new business 26 533 495 25 702 747 Cost of required capital (1 690) (90) (1 641) (86)

5% decrease in mortality and morbidity for life assurance business 25 028 373 24 179 600 Value of in-force/new business(2) 26 718 463 25 820 686 Cost of required capital (1 690) (90) (1 641) (86)

5% decrease in mortality for annuity business 23 219 209 22 482 450 Value of in-force/new business 24 909 299 24 123 536 Cost of required capital (1 690) (90) (1 641) (86)

(1) The effect of decreasing acquisition expenses on the value of new business includes the effect on the deferred tax asset impairment, which decreases materially when acquisition expenses decrease. The effect of acquisition expenses on the value of new business is shown in the analysis of value of long-term insurance business and margins in the group equity value report.

(2) A correction was made to the 2016 value of in-force morbidity sensitivity.





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Liberty share (Rm) 2017 2016

Credit LifeIFRS headline earnings 167 160 Embedded value of in-force contracts 506 461 Other insurance productsEmbedded value of new business 32 53 Embedded value of in-force contracts 1 198 1 113 STANLIBNet service fees on assets under management sourced from Standard Bank distribution 422 406

90:10 SHAREHOLDER EXPOSUREas at 31 December 2017

The “90:10 exposure” refers to the shareholders exposure to certain policyholder portfolios on which a fee arrangement exists whereby the investment return on the portfolios is shared between the policyholders and shareholders in a 90:10 ratio.

As a result of the market risk that arises for shareholders on this exposure it is managed as part of the Shareholders Investment Portfolio (SIP) and consequently the earnings form part of the SIP returns and are included in the LibFin Investments revenue account.

Because of its nature as a management fee the present value of these 90:10 fees are included in the Value of In Force of the business and the annual expected amount forms part of the expected transfer to Net Worth in the AoEV. There is therefore an inconsistency between the IFRS revenue account (shown as LibFin Investments revenue) and the AoEV (shown as expected Life Fund Operating earnings).

Rm 2017 2016

Exposure as at the beginning of the year 4 142 4 622

Expected earnings 303 364 Variance (109) (359)

Total net earnings 194 5

Exposure as at the end of the period 3 920 4 142

BANCASSURANCE – BENEFIT TO LIBERTYas at 31 December 2017



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Rm 2017 2016

Policyholder liabilities at beginning of the year net of reinsurance 299 119 296 915

Policyholder liabilities 307 230 305 194 Reinsurance liabilities 555 617 Policyholder assets (7 314) (7 579)Reinsurance assets (1 352) (1 317)

Transfers to policyholder liabilities 15 767 2 555


Net insurance premiums 36 723 37 882 Fund inflows from investment contracts 17 417 17 157

Investment returns 31 102 17 457 Net claims and policyholder benefits (52 506) (53 920)

Net insurance claims (36 133) (37 220)Fund outflows from investment contracts (16 373) (16 700)

Acquisition costs (4 326) (4 136)Management expenses, finance costs and profit share allocations (9 441) (9 238)Taxation (1 906) (1 058)Operating profit from insurance operations (1 296) (1 589)

Foreign currency translation reserve (270) (351)

Policyholder liabilities at end of year net of reinsurance 314 616 299 119

Policyholder liabilities 322 918 307 230 Reinsurance liabilities 663 555 Policyholder assets (7 484) (7 314)Reinsurance assets (1 481) (1 352)

SOUTH AFRICAN INSURANCE DISTRIBUTION HEADCOUNTas at 31 December 2017

LONG-TERM POLICYHOLDER LIABILITIES IFRS RECONCILIATIONas at 31 December 2017

(1)Tied agents December 2013 December 2014 December 2015 December 2016 December 2017

0

300

600

900

1 200

1 500

982

1 351

761

518

152

BrokerConsultants

Standard BankFinancial Consultants

Liberty@work(1)Liberty entrepreneurs(1)Agency(1)



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Recurring premiums Single premiums Total premiums Indexed premiums

Rm 2017 2016 2017 2016 2017 2016 2017 2016

Retail 5 817 5 772 22 660 22 916 28 477 28 688 8 084 8 064

Broker 1 236 1 332 5 527 7 006 6 763 8 338 1 789 2 033 Bancassurance 2 601 2 483 6 519 5 451 9 120 7 934 3 253 3 028 Tied channels(2) 1 732 1 726 10 359 10 170 12 091 11 896 2 768 2 743 Other 248 231 255 289 503 520 274 260

Institutional 1 196 946 838 1 350 2 034 2 296 1 280 1 081

Broker 691 525 398 754 1 089 1 279 731 600 Bancassurance 22 41 22 41 22 41 Tied channels(2) 462 349 419 461 881 810 504 395 Other 21 31 21 135 42 166 23 45

Total new business 7 013 6 718 23 498 24 266 30 511 30 984 9 364 9 145

Split between:South Africa(1)

Individual Arrangements 5 657 5 609 22 583 22 830 28 240 28 439 7 916 7 892

Broker 1 234 1 330 5 527 7 006 6 761 8 336 1 787 2 031 Bancassurance 2 547 2 419 6 494 5 430 9 041 7 849 3 196 2 962 Tied channels(2) 1 652 1 642 10 359 10 170 12 011 11 812 2 688 2 659 Other 224 218 203 224 427 442 245 240

Liberty Corporate 1 089 765 816 771 1 905 1 536 1 171 842

Broker 648 457 376 175 1 024 632 686 474 Bancassurance 22 38 22 38 22 38 Tied channels(2) 419 270 419 461 838 731 461 316 Other 21 135 21 135 2 14

Total new business 6 746 6 374 23 399 23 601 30 145 29 975 9 087 8 734

Liberty Africa InsuranceRetail 160 163 77 86 237 249 168 172

Broker 2 2 2 2 2 2 Bancassurance 54 64 25 21 79 85 57 66 Tied channels(2) 80 84 80 84 80 84 Other 24 13 52 65 76 78 29 20

Institutional 107 181 22 579 129 760 109 239

Broker 43 68 22 579 65 647 45 126 Bancassurance 3 3 3 Tied channels(2) 43 79 43 79 43 79 Other 21 31 21 31 21 31

Total new business 267 344 99 665 366 1 009 277 411 (1) Includes premium escalations for Individual Arrangements; excludes STANLIB Multi-manager.(2) Tied channels include Agency, Liberty entrepreneurs and Liberty@work.

LONG-TERM INSURANCE – NEW BUSINESS BY DISTRIBUTION CHANNEL(1)




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Recurring premiums Single premiums Total premiums

Rm 2017 2016 2017 2016 2017 2016

Individual Arrangements 20 824 20 142 22 151 22 437 42 975 42 579 Liberty Corporate 8 784 8 281 1 222 2 294 10 006 10 575 Liberty Africa Insurance 925 924 234 685 1 159 1 609 STANLIB Multi-manager 276 276

Total premiums 30 533 29 347 23 607 25 692 54 140 55 039

Indexed premiums 32 893 31 916

Individual Arrangements 23 039 22 386 Liberty Corporate 8 906 8 510 Liberty Africa Insurance 948 992 STANLIB Multi-manager(1) 28

(1) The arrangement whereby funds were placed with external asset managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows in 2017 and going forward.

The difference between the single premiums reported under total long-term insurance premiums and single premiums reported under long-term insurance new business by distribution channel arises mainly from different treatment for extensions of matured policies, reinvestment of fund withdrawals, conversions of standalone funds to umbrella funds and fund member movements within Liberty administered funds.

LIBFIN – SHAREHOLDER INVESTMENT PORTFOLIOas at 31 December 2017

Exposure category 2017 2016

Rm Local Foreign Total % Local Foreign Total(1) %

Equities 4 431 4 787 9 218 33 3 971 3 891 7 862 29 Bonds 7 197 304 7 501 27 6 016 289 6 305 23 Cash 5 385 49 5 434 20 6 779 457 7 236 27 Property 3 093 3 093 11 3 561 3 561 13 Other 1 649 937 2 586 9 1 613 570 2 183 8

Total 21 755 6 077 27 832 100 21 940 5 207 27 147 100

Assets backing capital 17 235 62 14 686 54 Assets backing policyholder liabilities 6 677 24 8 319 31 90:10 exposure 3 920 14 4 142 15

Reconciliation to IFRS shareholders’ equityShareholder Investment Portfolio 27 832 27 147

Less: 90:10 exposure (3 920) (4 142)Less: Subordinated notes (5 500) (4 500)

SA insurance IFRS shareholder’s equity 18 412 18 505

.

TOTAL LONG-TERM INSURANCE PREMIUMSfor the year ended 31 December 2017



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Exposure category 2017 2016

%

Assets backing

capital

Assets backing

policyholderliabilities

90:10 exposure Total

Assets backing

capital

Assets backing

policyholderliabilities

90:10 exposure Total

Local assetsEquities 9 1 6 16 8 1 6 15Bonds, cash and property 41 12 3 56 36 20 4 60Other 4 1 1 6 6 6Foreign assets Equities 4 10 3 17 1 9 4 14Bonds, cash and property 1 1 2 1 1 1 3Other 3 3 2 2

Total 62 24 14 100 54 31 15 100

LIBFIN – SHAREHOLDER INVESTMENT PORTFOLIO RETURNas at 31 December 2017

Rm 2017 2016

Realised gross result 2 328 1 539 Taxation (512) (349)Bond cost (432) (321)Expenses (including asset management fees) (77) (82)

Net profit 1 307 787

Gross return (%) 8,5 5,7

Taxation note:

The taxation treatment of income derived from assets backing capital is the normal taxation rules applicable to life investment portfolios. The taxation applicable to income derived from assets backing life funds and the 90:10 exposure is determined by the tax rates pertaining to each life tax fund to which the assets are allocated (I-E tax). In addition there is transfer tax at 28% on the net surplus, after the applicable I-E tax.

LIBFIN – MARKETS CREDIT PORTFOLIOas at 31 December 2017

Rm (unless otherwise stated) 2017 2016%

change

Net earnings from Credit portfolio 330 300 10Total LibFin assets (Rbn) 62 58 7

Credit portfolio assets (Rbn) 42 38 11Banks, treasuries and shorter dated assets (Rbn) 20 20

LIBFIN – SHAREHOLDER INVESTMENT PORTFOLIO PERCENTAGE ALLOCATIONas at 31 December 2017



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ATION

Rm 2017 2016

Expected profit and premium escalations 2 040 2 020 Variances, modelling and assumption changes (144) (341)New business strain (675) (611)Project, outperformance incentive and non cost per policy expenses (286) (106)Direct Financial Services (8) (109)Other 176 195Release of tax provisions 16

Earnings before bancassurance 1 103 1 064 Liberty share of credit life bancassurance (net of all taxes) 167 160Complex bancassurance preference dividend (62) (105)

Headline earnings 1 208 1 119

INDIVIDUAL ARRANGEMENTS – KEY PERFORMANCE INDICATORSas at 31 December 2017

Rm (unless otherwise stated) 2017 2016

Net customer cash flows 3 196 2 505

Insurance products 2 846 1 948 LISP 350 557

Gross sales (excluding LISP) 26 895 27 186 Indexed new business (excluding LISP) 6 570 6 639 Value of new business 155 426 Retail margin excluding STANLIB (%) 0,5 1,4Retail new business margin including STANLIB (%)(1) 0,5 1,2(1) The arrangement whereby funds were placed with external managers via STANLIB Multi-manager was terminated in 2016 and accordingly there are no flows in 2017 resulting in

the same margin being reported.

INDIVIDUAL ARRANGEMENTS – INDEXED NEW BUSINESSas at 31 December 2017

Rm 2017 2016

Individual Arrangements Insurance (excluding emerging consumer market) 5 844 5 785 Emerging consumer market 264 272

Total Individual Arrangements Insurance 6 108 6 057 Direct Financial Services 79 102 STANLIB ‘on balance sheet’ sales 383 480

Total ‘on balance sheet’ sales 6 570 6 639 STANLIB ‘off balance sheet’ sales 2 398 2 063 GateWay LISP ‘off balance sheet’ sales 220 215

Total Individual Arrangements distribution 9 188 8 917

INDIVIDUAL ARRANGEMENTS – HEADLINE EARNINGSfor the year ended 31 December 2017



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ATION

R 2017 2016

Valuation basisComplex 636 596Simplex 318 298Annuities 318 298

INDIVIDUAL ARRANGEMENTS – NEGATIVE RAND RESERVES(1)


Rm 2017 2016

Published IFRS basis 16 767 16 632 Statutory basis 7 379 7 824 (1) Gross of taxation

By their nature “negative rand reserves” includes offsets between policies with positive and negative reserves. The Directive 145 adjustment is applied only to policies with negative reserves.

LIBERTY CORPORATE – HEADLINE EARNINGS for the year ended 31 December 2017

Rm 2017 2016

Gross contribution 1 072 1 142

Underwriting margin 417 488 Fee income 589 548 Longevity improvement factor assumption change (50)Provision movements and sundry ad hoc items (36) 59Pension businesses and other income 102 97

Expenses and other items (960) (877)

Profit before tax 112 265 Taxation (31) (74)

Headline earnings 81 191

INDIVIDUAL ARRANGEMENTS – MAINTENANCE COST PER POLICYas at 31 December 2017



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ATION


Gross sales 1 905 1 536 Indexed new business 1 171 842 Value of new business 57 28 New business margin (%) 0,6 0,4Net customer cash outflows (1 536) (751)

LIBERTY HEALTH – HEADLINE EARNINGSfor the year ended 31 December 2017

Rm 2017 2016

Earnings before depreciation and amortisation (78) (16)Amortisation and depreciation (11) (33)

Loss before taxation (89) (49)Taxation 35 4

Headline loss (54) (45)

LIBERTY HEALTH COVER PRODUCT – LIVES SERVICEDas at 31 December 2017

Thousands 2017 2016 2015 2014

RegionEastern Africa 57 55 48 37 Western Africa 36 35 36 34 Southern Africa 29 31 21 19

Total 122 121 105 90

Liberty owned licences 79 81 67 57Third party licences 43 40 38 33

LIBERTY CORPORATE – KEY PERFORMANCE INDICATORS for the year ended 31 December 2017



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ATION

Rm 2017 2016

Insurance entities earnings(1)

Long-term insurance 100 107 Short-term insurance 58 74

Headline earnings (before head office expenses) 158 181 Non controlling shareholders share of headline earnings (61) (66)

Liberty share of headline earnings 97 115

Liberty owned businesses >3 years 101 119 Liberty owned businesses <3 years (3) (4)

Head office costs (52) (74)

Net headline earnings attributable to Liberty 45 41 (1) The headline earnings result is shown at 100% of the earnings of certain of the entities that make up Liberty Africa Insurance.

LIBERTY AFRICA INSURANCE – KEY PERFORMANCE INDICATORSfor the year ended 31 December 2017


Value of new business 21 29New business margin (%) 3,9 5,6Long term:Gross sales 366 1 009 Indexed new business 277 411 Net customer cash flows 324 483 Short term:Net customer cash flows 271 314 Claims loss ratio (%) 48 44

LIBERTY AFRICA INSURANCE – HEADLINE EARNINGSfor the year ended 31 December 2017



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ATION

Rm 2017 2016

Net premiums by product typeRetail 492 571

Single 40 85 Recurring 452 486

Institutional 667 1 038

Single 194 600 Recurring 473 438


Net claims and policyholders benefits by product typeRetail (307) (293)

Death, critical illness and disability claims (61) (77)Policy surrender and maturity claims (242) (212)Annuity payments (4) (4)

Institutional (528) (833)

Death, critical illness and disability claims (110) (81)Scheme terminations and member withdrawals (418) (752)

Net claims and policyholders benefits (835) (1 126)

Net cash flow split as follows: 324 483

Retail 185 278 Institutional 139 205

OUR PRESENCE IN AFRICA

LIBERTY AFRICA INSURANCE – LONG-TERM INSURANCE NET CASH FLOWSfor the year ended 31 December 2017

21

43 6

5 7

8910 11

12 13

14

15 171620

2122

25 2423

18 19

KEYLife insuranceAsset managementShort-term insurancePropertyHealth

14 Tanzania 15 Zambia 16 Malawi 17 Mozambique 18 Madagascar 19 Mauritius 20 Zimbabwe 21 Botswana 22 Namibia 23 Swaziland 24 Lesotho 25 South Africa

1 Senegal 2 Burkina Faso 3 Ivory Coast 4 Ghana 5 Niger 6 Nigeria 7 Chad 8 Cameroon 9 Equatorial Guinea 10 Gabon 11 Congo 12 Uganda 13 Kenya



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ATION


Net fee income 1 704 1 679 Base fees 1 676 1 651 Performance fees 28 28 Total operating expenses (1 390) (1 127)Operating expenses (1 262) (1 062)Non-recurring projects and expenses (128) (65)

Profit before investment income 314 552 Other income 57 91 Profit before taxation 371 643 Taxation (119) (184)Total headline earnings 252 459 Average margin (bps) 32 34 Average assets under management (Rbn) 546 525

STANLIB SOUTH AFRICA – NET CASH FLOWS AND ASSETS UNDER MANAGEMENT BY ASSET CATEGORYas at 31 December 2017

Net cash inflows/(outflows) Assets under management

Rm 2017 2016 2017 2016

Retail 6 849 (1 320) 228 202 210 016

Fixed interest 7 846 913 48 940 40 988 Equity (752) (1 072) 13 504 13 044 Property 325 (211) 14 954 13 403 Money Market (1 400) 1 007 24 794 26 188 Absolute Return 2 572 (551) 6 008 3 249 Balanced (3 818) (280) 24 819 27 675 International (855) (946) 11 308 11 231 Retail Life 20 (91) 211 183 LISP 3 280 2 116 80 093 70 603 Structured (369) (2 205) 3 571 3 452

Institutional (2 118) 4 121 103 831 100 107

Fixed interest (5) 1 531 19 905 20 134 Equity 1 021 1 653 6 743 4 462 Property (641) 2 440 8 539 8 053 Money Market 1 316 1 030 56 217 51 807 Absolute Return (687) (402) 514 1 070 Balanced (2 481) (1 855) 9 494 11 797 International (641) (280) 1 711 2 138 Other 4 708 646

Liberty – Delta LISP 483 (800) 41 877 37 167 Liberty – intergroup (16 346) (9 207) 181 753 187 696

Total (11 132) (7 206) 555 663 534 986

STANLIB SOUTH AFRICA – HEADLINE EARNINGSfor the year ended 31 December 2017



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FORM

ATION

STANLIB SOUTH AFRICA – ASSETS UNDER MANAGEMENT BREAKDOWN BY SOURCE AND ASSET TYPEas at 31 December 2017

Rm

Mon

ey m

arke

t (in

cl

cash

)Fi

xed

inte

rest

Equi

tyPr

oper

tyO

ther

Abs

olut

ere

turn

Bala

nced

Inte

r-na

tiona

lSt

ruc-

ture

dRe

tail

life

LISP

Tota

l

2017

Reta

ilCo

llect

ive

Inve

stm

ents

46

561

11

010

11

102

5 1

64

19

010

11

308

104

155

Link

ed In

vest

men

t and

St

ruct

ured

Pro

duct

s 3

571

8

0 09

3 8

3 66

4 M

oney

mar

ket

24

794

24

794

Mul

ti-m

anag

er

Colle

ctiv

e In

vest

men

ts 2

379

2

494

3

852

8

44

5 8

09

211

1

5 58

9 In

stitu

tiona

lSe

greg

ated

fund

s 1

9 90

5 6

743

8

539

7

08

514

9

494

1

711

4

7 61

4 M

oney

mar

ket

56

217

56

217

Libe

rty

– Del

ta L

ISP

41

877

41

877

Libe

rty

– int

ergr

oup

5 1

98

32

877

53

169

24

032

645

6

859

2

8 44

1 2

9 02

6 1

506

1

81 7

53

STAN

LIB

tota

l 8

6 20

9 1

01 7

22

73

416

47

525

1 3

53

13

381

62

754

42

045

5 0

77

211

1

21 9

70

555

663

2016

Re

tail

Colle

ctiv

e In

vest

men

ts 3

8 74

2 1

0 56

4 9

671

2

373

2

3 58

1 1

1 23

1 9

6 16

2 Li

nked

Inve

stm

ent a

nd

Stru

ctur

ed P

rodu

cts

3 4

52

70

603

74

055

Mon

ey m

arke

t 2

6 18

8 2

6 18

8 M

ulti-

man

ager

Co

llect

ive

Inve

stm

ents

2 2

46

2 4

80

3 7

32

876

4

094

1

83

13

611

Inst

itutio

nal

Segr

egat

ed fu

nds

786

2

0 13

4 4

462

8

053

6

46

1 0

70

11

664

2 1

38

48

953

Mon

ey m

arke

t 5

1 02

1 1

33

51

154

Libe

rty

– Del

ta L

ISP

37

167

37

167

Libe

rty

– int

ergr

oup

9 1

03

31

547

59

757

25

833

637

7

648

2

1 36

1 3

0 42

9 1

381

1

87 6

96

STAN

LIB

tota

l 8

7 09

8 9

2 66

9 7

7 26

3 4

7 28

9 1

283

1

1 96

7 6

0 83

3 4

3 79

8 4

833

1

83

107

770

5

34 9

86



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ATION

Rolling period

1 Year 3 Year 5 Year

Core retail funds – quartile performance Fund name 2017 2016 2017 2016 2017 2016

STANLIB Bond 1 1 1 2 2 2 STANLIB Income 2 2 1 2 2 2 STANLIB Money Market 2 2 2 3 2 3 STANLIB Flexible Income 1 1 2 2 3 2 STANLIB Aggressive Income 2 1 1 1 3 2

STANLIB Property Income 2 1 2 2 2 3

STANLIB Balanced 3 4 4 4 3 3 STANLIB Balanced Cautious 4 3 3 3 3 3 STANLIB Inflation Plus 5% 4 4 4 4 4 4 STANLIB Inflation Plus 3% 2 1 1 1 3 3 STANLIB Absolute Plus 1 1 1 1 2 2

STANLIB SA Equity 3 3 4 4 4 3 STANLIB Equity 2 4 3 3 2 2 STANLIB Growth 3 3 4 4 4 4 STANLIB Value 4 2 4 4 4 4

STANLIB SOUTH AFRICA – INSTITUTIONAL INVESTMENT PERFORMANCE for the year ended 31 December 2017

Rolling period

1 Year 3 Year 5 Year

Survey funds (Alexander Forbes Surveys – quartile performance) 2017 2016 2017 2016 2017 2016

Stanlib Core Bond 2 1 1 2 2 2 Money Market 2 3 4 4 4 4 Stanlib Institutional Property 3 1 3 2 3 3

Large Manager – Global 4 4 4 4 4 4 Full Global Mandate 4 4 4 4 4 4 Domestic Only Mandate 4 4 4 4 4 4

Stanlib Core Equity 4 4 4 4 4 4 Stanlib Growth Equity 3 3 4 4 4 4 Stanlib Value 4 2 4 4 4 4 Stanlib Enhanced Index 1 4 4 4 4 4

STANLIB Inflation Plus 3% 2 4 2 3 1 2 STANLIB Inflation Plus 5% 4 4 4 4 4 4 Absolute Return 4 3 2 Domestic Absolute Return 4 4 4

STANLIB SOUTH AFRICA – RETAIL INVESTMENT PERFORMANCEfor the year ended 31 December 2017



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ATION

STANLIB REST OF AFRICA – ASSETS UNDER MANAGEMENTas at 31 December 2017

Rm 2017 2016

Opening market value 50 787 50 317 Net cash (outflows)/inflows (756) 2 891

External (480) 2 963Liberty – intergroup (276) (72)

Capital appreciation/(depreciation) 2 500 (2 421)

Closing market value 52 531 50 787

Segregated funds 31 683 32 220 Unit trusts 7 364 6 395 Money Market 13 484 12 172

Total assets under management 52 531 50 787

STANLIB SOUTH AFRICA – INVESTMENT PERFORMANCEas at 31 December 2017

0

10

20

30

40

50

60

70

60

53

40

■ 2014 ■ 2015 ■ 2016 ■ 2017

% OF CORE RETAIL PRODUCTS IN 1ST AND 2ND QUARTILE

5 Year3 Year1 Year

0

10

20

30

40

50

60

70

33

17 17

■ 2014 ■ 2015 ■ 2016 ■ 2017

% OF INSTITUTIONAL FUNDS IN 1ST AND 2ND QUARTILE

5 Year3 Year1 Year



SUPPLEM

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FORM

ATION

Rm 2017 2016

Southern region(1) 30 729 27 287

Fixed interest 6 395 5 904 Equity 11 096 10 634 Money Market 11 587 9 906 Other 1 651 843

Eastern region(2) 17 408 19 975

Fixed interest 9 939 11 595 Equity 3 812 3 308 Property 1 864 3 003 Money Market 1 793 2 069

Western region(3) 4 394 3 525

Fixed interest 1 018 997 Money Market 104 197 Other 3 272 2 331

Total assets under management 52 531 50 787

CombinedFixed interest 17 352 18 496 Equity 14 908 13 942 Property 1 864 3 003 Money Market 13 484 12 172 Other 4 923 3 174

52 531 50 787 (1) Southern region includes Botswana, Swaziland, Lesotho and Namibia. (2) Eastern region includes Kenya and Uganda.(3) Western region is Ghana.

STANLIB REST OF AFRICA – ASSETS UNDER MANAGEMENT BY GEOGRAPHICAL LOCATIONas at 31 December 2017



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NOTES

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Financial DirectorYuresh MaharajTel: +27 (11) 408 [email protected]

Head Office and Registered AddressLiberty Life Centre, 1 Ameshoff StreetBraamfontein, Johannesburg 2001Postal address: PO Box 10499, Johannesburg 2000Tel: +27 (11) 408 3911Registration number: 1968/002095/06

Investor RelationsSharon SteynTel: +27 (11) 408 [email protected]@liberty.co.za

AuditorsPricewaterhouseCoopers Inc.4 Lisbon Lane, Waterfall City,Jukskei View 2090Tel: +27 (11) 797 4000

Company SecretaryJill ParrattTel: +27 (11) 408 [email protected]

Transfer SecretariesComputershare Investor Services Proprietary Limited(Registration number 2004/003647/07)Rosebank Towers, 15 Biermann Avenue, RosebankJohannesburg 2196Tel: +27 (11) 370 5000

Website: www.libertyholdings.co.zaCustomer Call CentreTel: 0860 456 789

Contact details

www.libertyholdings.co.za

liberty holdings limited 2017 · presentation notes ... (sip) – gross of tax return (%) 8.5 5.7...

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