Liberty Holdings - 2019 · 2020. 2. 27. · Liberty – an Authorised Financial Service Provider in...

Liberty – an Authorised Financial Service Provider in terms of the FAIS Act (Licence No. 2409).

Liberty Holdings Limited

Financial results presentationfor the year ended 31 December 2019

NOTES

Liberty Holdings LimitedFinancial results presentation for the year ended 31 December 2019

A tribute to our founder Sir Donald Gordon

David Munro, Chief Executive

Liberty Holdings Limited Financial results for the year ended 31 December 2019 1

NOTES

3

I WILL REMEMBER THE HUMANITY IN WHAT WE DO

I WILL HELP PEOPLE LEAVE A LEGACY FOR THEIR FAMILIES

I WILL MAKE LIBERTY NOT JUST OUR NAME,BUT WHAT WE DO

A legacy etched in substantial contributions made to society

Liberty’s purpose: Improving people’s lives by making their financial freedom possible

Liberty’s founding principles, since 1956. Established by Sir Donald Gordon

Progress made in 2019David Munro, Chief Executive

2 Liberty Holdings Limited Financial results for the year ended 31 December 2019

NOTES

5

Challenges• South Africa’s economy continues to face headwinds

• Consistent and increasing net outflows in industrydue to economy

• Rising geopolitical tensions impact other African territories

• Global trends in technology, significantly changing client expectations for service platforms

• Changing competitor landscape rapidly setting the paceof change

South Africa has potential but is facing challenges…

Moments of hope in 2019

6

+ + = +

CLIENT ANDADVISER EXPERIENCE

EMPLOYEEEXPERIENCE

RISK ANDCONDUCT

FINANCIAL OUTCOME

SEEIMPACT

Delivered successful outcomes on key strategic focus areas

Strategic focus areas

Deliver an exceptional client and financial adviser experience

Through digital platforms

Integral part of the Standard Bank Group

Client and Adviser experience

Digitisation

Universal financial services organisation

Guiding and measuring balanced execution of our strategy


NOTES

7

R10.5bn in Retail and Institutional

death and disability claims paid to help families meet their

financial responsibilities

R7.8bn annuity paymentsin support of our retired clients

Fulfilled client promises delivers financial certainty

10%

9%

8

Several enhancements to product offerings

Awarded Best Life and Risk and Employee Benefits category winners by the FIA Intermediary Experience Awards

Simplified processes supported by numerous robotic automation solutions

Digitised and streamlined client processes

Improved stability and resilience of our technology platforms

Client experiences to foster life-long relationships with Liberty


NOTES

9

Advisers empowered for more meaningful human interactions

Focused on adviser productivity with smart enablement and competitive products

Partnered with Big Tech and Cloud based solutions, to radically improve our connection to clients, people and advisers

Delivered INN8 - a wealth management proposition inspired by global investment trends

Completed channel re-structure for IFA and SBFC channels

10

Maintained longer term investment performance

Launched 1invest, a simple, transparent and cost-effective passive investment product

Continued fund rationalisation efforts

Improved stability and resilience of the technology platforms

Continued stringent cost focus

Strengthened businesses

56% Liberty owned, predominantly precinctand retail-focused South African REIT

2019 Financial highlights*

Good trading density growth and low retail vacancies

Strengthened leadership

Successfully refinanced 2019 debt expiry

60.43 cps delivered within guidance

Various sustainability initiatives delivered

* Source: Company results


NOTES

11

A valuable commercial relationship

Direct Life Insurance continues to perform well

New and enhanced offerings through collaboration

Collaborated on 1invest, specialist index tracker fund at STANLIB

Enhanced partner relationship

Standard Bank

12

+ + = +

EMPLOYEEEXPERIENCE

Create an employee experience to build the Liberty community

Operating model successfully embedded and new ways of working initiated

Completed employee experience framework to influence culture shifts

Adopted modern digital technologies;

meaningful collaboration and communication

faster execution and reduced complexity


NOTES

13

+ + = +

RISK ANDCONDUCT

Manage our business in a safe, secure and profitable manner

Robust capital and managed within risk appetite

Completed Risk & Control Enhancement Programme

Successful adoption of cloud solutions to reduce long-term costs of IT for quick deployment of infrastructure

Invested in cyber security and data protection with strong support from Standard Bank received

14

+ + = +

Ensure prosperity and wellbeing of the societies in which we operate

SEE IMPACT

Continue unclaimed benefits and fund rehabilitation

Human touch engagements are part of our business model

Enable financial inclusion through financial literacy

Reducing our impact on the environment and protect valuable resources

Invest in renewable energy and bulk infrastructure projects


NOTES

Financial outcomes for the year ended 31 December 2019Yuresh Maharaj, Group Financial Director

16

Dec 18 Feb 19 Apr 19 Jun 19 Aug 19 Oct 19 Dec 19



South African market data

R14.40

R14.00

7%

10%All Bond IndexRebased to 100

SWIX total returnRebased to 100

Dec 17 Jun 18 Dec 18 Jun 19 Dec 19

Consumer services indexRebased to 100

USD/ZAR1

3

3% 2

4 16%


NOTES

17

Progress on medium-term financial outcomes

+ + = +

FINANCIALOUTCOME

Dec 2019Return on

equity14.0%

Dec 2019Return on

Group Equity Value11.5%

Dec 2019Value of

new business margin1.0%

Dec 2019Robust capital

at upper end of range1.99 times

Dec 2018: 10.1% Dec 2018: 3.8% Dec 2018: 0.9% Dec 2018: 1.87 times

In target range Close to target range Below target range

18* 2018 comparative adjusted for expense reallocation from Liberty holding company to SA Retail and Liberty Corporate

Return on equity and normalised headline earnings

Normalised headline earnings Rm Dec 19 Dec 18* % ∆

South African Insurance Operations 1 986 1 954 2

SA Retail 1 505 1 544 (3)

Liberty Corporate 85 34 >100

LibFin Markets 396 376 5

STANLIB South Africa 460 355 30

Africa regions 54 8 >100

Operations under ownership review (147) (166) 11

Central costs and sundry income (152) (145) (5)

Normalised operating earnings 2 201 2 006 10

Shareholder Investment Portfolio 1 004 250 >100

Normalised headline earnings 3 205 2 256 4215 - 18% target range

+ Improvement in STANLIB SA and Africa regions

+ Continued cost discipline

+ Good investment market returns

Return on equity14.0%

Dec 2018: 10.1%


NOTES

19

STANLIB South Africa

Core retail funds - quartile performance

2019 2018 2017

Fund name 1 year 3 year 1 year 3 year 1 year 3 year

STANLIB Equity

STANLIB Balanced

STANLIB Income

Net client cash flows (Rm) Dec 19 Dec 18 % ∆

Retail and Institutional 15 190 16 149 (6)

Non-money market 15 936 9 155 74

Money market (746) 6 994 (>100)

3

3 4

121

1

1

3 2

3

11

2 2

2

+ Headline earnings R460 million

+ AUM R568 billion

+ Net fee income R1.7 billion

2019Key indicators

+ Cost-to-income ratio improves to

30%

5%

7%

66%

2

2

20

3 340

4 4181 078

Operationalequity value profits

Economic and fair valueadjustments

Groupequity value earnings

* Numbers displayed in brackets reflect a loss

Sources of normalised group equity value earnings

Return on Group Equity Value

11.5%Dec 2018: 3.8%

RoGEV >12%

+ Good investment market returns

+ Positive economic assumptions and VoNB

Dec 18: R1 488m

Influenced by management action

Influenced byinvestment market returns

Rm

Dec 18: (R1 592m)* 100%Dec 18: R3 080m 8%

100%

+ Improved STANLIB SA earnings


NOTES

21* 2018 comparative includes the reclassification of additional voluntary contributions on investment business from recurring to single premium new business

Focus on driving new business continues

Value ofnew business margin

1.0%Dec 2018: 0.9%

1% - 1.5% target range

+ Product enhancements

+ Continued margin management

+ Cost discipline

Insurance operations Dec 19 Dec 18 % ∆

Embedded value of new business (Rm) 407 371 10

SA Retail 290 271 7

Liberty Corporate 68 73 (7)

Liberty Africa Insurance 49 27 81

New business margin (%) 1.0 0.9

SA Retail 0.9 0.8

Liberty Corporate 0.9 0.8

Liberty Africa Insurance 4.0 2.8

Total insurance indexed new business (Rm) 8 125 7 991 2

SA Retail 6 558 6 495 1

Liberty Corporate* 1 124 1 132 (1)

Liberty Africa Insurance 443 364 22

22

Robust capital position

Capitalat upper end of range

1.99 timesDec 2018: 1.87 times

1.5 - 2.0x target range

+ Robust balance sheet

+ Strong risk management capability

+ Full year dividend 712 cps up 3%

Liberty Group Limited - Rm (unless stated otherwise) Dec 19 Dec 18

Regulatory capital

Available solvency capital 33 255 32 586

Solvency Capital Requirement (16 746) (17 400)

Surplus above solvency requirement 16 509 15 186

Capital ratio at year end (times covered) 1.99 1.87


NOTES

23

Focus remains on delivery of medium-term outcomes

15 - 18% target range RoGEV >12% 1% - 1.5% target range 1.5 - 2.0x target range

In target range Close to target range Below target range

Dec 2018: 10.1% Dec 2018: 3.8% Dec 2018: 0.9% Dec 2018: 1.87 times

Dec 2017: 12.3% Dec 2017: 1.1% Dec 2017: 0.5% Dec 2017: n/a

Dec 2019Return on

equity14.0%

Dec 2019Return on

Group Equity Value11.5%

Dec 2019Value of

new business margin1.0%

Dec 2019Robust capital

at upper end of range1.99 times

Invest and position for future valueDavid Munro, Chief Executive


NOTES

25

Persistency, customer loyalty and new business

Increased motivationand commitment

Robustcapital

Operationalleverage

Positiveimpact

+ + = +

CLIENT ANDADVISER EXPERIENCE

EMPLOYEEEXPERIENCE

RISK ANDCONDUCT

FINANCIAL OUTCOME

SEEIMPACT

An evolved business to deliver a compelling investment

Increased productivity

Stakeholder value

Opportunity to invest and grow Economic growth

26

Our view of the future• People are living longer…

…and demand integrated cross category services

In closing

Liberty of the future• Augment the power of human to human

engagement

• Scalable digital engagement platform

• Supported by global technology partners

• Driven by• Data

• Artificial intelligence

• Machine learning

• Other modern digital technologies

Building for the future to retain that human focus, helping people lead better lives


NOTES

Questions




Financial resultsfor the year ended 31 December 2019

NORMALISED OPERATING EARNINGS

R2,2 billion10%

CONTENTS Page

Financial performance indicators 17

Financial review 18

Accounting policies 22

Auditor statement 23

Directors' responsibility 23

Explanation of terms 24

Consolidated statement of financial position 25

Consolidated statement of comprehensive income 26

Summary consolidated statement of changes in equity 27

Summary consolidated statement of cash flows 28

Headline earnings and earnings per share 29

Summary consolidated segment information 30

Group equity value report 34

Long-term insurance new business 40

Long-term insurance net customer cash flows 41

Assets under management 42

Asset management net external customer cash flows 42

Short-term insurance indicators 43

Capital commitments 43

Retirement benefit obligations 44

Related parties 44

Disposal groups classified as held for sale 45

Offsetting, enforceable master netting arrangements or similar agreements

46

Accounting classifications of financial instruments under IFRS 9

47

Change in accounting policies 49

HIGHLIGHTS

NORMALISED RETURN ON IFRS EQUITY

14,0%

NEW BUSINESS MARGIN

1,0%

NORMALISED RETURN ON GROUP EQUITY VALUE

11,5%

NORMALISED GROUP EQUITYVALUE PER SHARE

R147,827%

LIBERTY GROUP LIMITEDSCR COVER

1,99 times

STANLIB SOUTH AFRICA ASSETS UNDER MANAGEMENT

R568 billion7%

upper end of target range

Rm (unless otherwise stated) 2019 2018%

change

Liberty Holdings Limited Earnings Normalised headline earnings(1) 3 205 2 256 42Normalised headline earnings per share (cents)(1) 1 174,2 817,9 44Normalised return on IFRS equity (%)(1) 14,0 10,1 Group equity value Normalised group equity value per share (R)(1) 147,82 138,64 7Normalised return on group equity value (%)(1) 11,5 3,8 Distributions per share (cents) Normal dividend 712 691 3

Interim dividend 276 276 Final dividend 436 415 5

Total assets under management (Rbn) 738 718 3

Long-term insurance operations Indexed new business (excluding contractual increases) (4) 8 125 7 991 2Embedded value of new business 407 371 10New business margin (%) 1,0 0,9 Net customer cash inflows (142) 2 001 (>100)Solvency capital requirement cover of Liberty Group Limited (times covered)(2) 1,99 1,87

Asset management – STANLIB South Africa Assets under management (Rbn) 568 529 7Net cash inflows including money market(3) 15 190 16 149 (6)

Retail and institutional net cash inflows excluding money market(3) 15 936 9 155 74Money market net cash (outflows)/inflows(3) (746) 6 994 (>100)

(1) Normalised: headline earnings, headline earnings per share, return on IFRS equity, group equity value per share and return on group equity value. These measures reflect the economic substance 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) Solvency capital requirement cover is the excess of assets over liabilities required by an insurer to ensure that its assets remain larger than its liabilities with a 99.5% level of certainty

over a one year time horizon, with assets and liabilities valued in accordance with the Insurance Act, 2017.(3) Excludes intergroup life funds.(4) 2018 adjusted for change in classification in Liberty Corporate from recurring to single premiums for additional investment voluntary contributions.

FINANCIAL PERFORMANCE INDICATORSfor the year ended 31 December 2019

Preparation and supervision:

This announcement on Liberty Holdings Limited annual financial results for the year ended 31 December 2019 has been prepared and supervised by M Norris (Executive: Group Finance) CA (SA) and Y Maharaj (Financial Director) CA (SA).


FINANCIAL REVIEWfor the year ended 31 December 2019

Resilience demonstrated in the current economic climate, while continuing to invest for the future

HighlightsImproved delivery to customersDelivering exceptional client and adviser experiences is core to Liberty’s strategy. In continuing to support our clients through their life journeys and fulfilling our promises to them, death and disability payments made by Liberty in 2019 increased by 10% to R10,5 billion and annuity payments increased by 9% to R7,8 billion. We are committed to continue investing in and utilising new digital capabilities to offer our clients and advisers the best service and advice.

Resilience in the current climateThe group’s performance reflects continued progress in moving towards our medium-term financial targets. The 10% increase in normalised operating earnings, together with significantly higher earnings from the Shareholder Investment Portfolio (SIP), resulted in normalised headline earnings per share of 1 174,2 cents, a 44% increase on 2018. This represents a normalised return on equity of 14,0% for the year. The normalised return on group equity value (RoGEV) increased to 11,5% from 3,8% at 31 December 2018. The group value of new business (VoNB) margin improved to 1,0%. STANLIB South Africa net external third-party client cash flows remained strong. The Liberty Group Limited capital position remains at the upper end of the target range.

2019 final dividend increasedThe 2019 final dividend of 436 cents increased by 5% over the 2018 final dividend of 415 cents. This represents a 3% increase in the 2019 full year dividend of 712 cents over the 2018 full year dividend of 691 cents. This dividend is in line with the group’s dividend policy, reflecting the strong capital position and the board’s confidence in the business following the group’s improving operational performance.

Group financial performanceNormalised operating earnings for the year ended 31 December 2019 of R2 201 million increased by 10% on 2018, reflecting a good operational performance in the current economic climate, particularly in STANLIB South Africa and the Africa Regions continuing businesses. The SIP earnings of R1 004 million benefitted from improved investment market returns, particularly in respect of foreign and local equities in 2019. Normalised headline earnings of R3 205 million were 42% up on the previous year. Normalised return on equity was 14,0%, compared to 10,1% in 2018.

Headline earnings for 2019 of R3 254 million, which includes a positive adjustment of R55 million (31 December 2018: R397 million positive adjustment) arising from the accounting mismatch on the consolidation of the Liberty Two Degrees listed REIT, were 23% above 2018 headline earnings of R2 645 million.

Normalised group equity value per share increased by 7% to R147,82 (31 December 2018: R138,64). The RoGEV increased to 11,5% from 3,8% in the prior year. The higher RoGEV was mainly attributable to higher investment market returns during 2019 and a substantially improved performance from STANLIB South Africa.

The group VoNB of R407 million was 10% up from R371 million in the prior year with margin improvement from 0,9% to 1,0%. This outcome was mainly attributable to product enhancements and margin management supported by continued cost discipline, which mitigated the impact of low new business growth.

Group net external third-party client cash inflows increased to R13,3 billion from R10,2 billion in 2018, supported mainly by good STANLIB South Africa net external third-party client cash inflows. Total group assets under management amounted to R738 billion (31 December 2018: R718 billion). Group assets under management reduced by the transfers to other external managers of R25,4 billion in respect of the STANLIB Africa entities which were disposed of during the year and discontinued segregated mandates in STANLIB Kenya and Uganda. These outcomes are consistent with the decision to exit asset management in these regions.

Group long-term insurance indexed new business of R8 125 million was 2% above 2018. Focus remains on sales efforts and new business volumes in the prevailing consumer environment in South Africa.


Earnings by business unit

South African Insurance OperationsThe South African Insurance Operations, comprising SA Retail, Liberty Corporate and LibFin Markets (credit portfolio and asset liability matching portfolio), earnings contribution of R1 986 million was up 2% on the comparative period.

SA RetailEarnings from the group’s South African Retail business amounted to R1 505 million compared to R1 544 million in the prior year. The business experienced lower than anticipated risk profits in the second half of 2019. Lower persistency experience continued throughout the year, reflective of the current South African economic climate. This was partly offset by active and disciplined cost management which reduced new business strain.

FINANCIAL REVIEW (CONTINUED) for the year ended 31 December 2019

Indexed new business sales of R6 558 million were 1% up on 2018. Growth in sales volumes remains management’s highest priority with low new business volumes being experienced in the group’s tied channels, while strong growth was evidenced in the embedded credit and direct channels. Various product enhancements within the investment and risk product suite were launched during 2019. This included the launch of the Liberty Advanced Global Equity Tranches 2 and 3 portfolios on the Evolve Investment Plan, the Wellness Bonus Benefit and enhanced income disability features on the Lifestyle Protector risk proposition.

The SA Retail VoNB increased by 7% to R290 million (31 December 2018: R271 million), and the margin improved to 0,9% (31 December 2018: 0,8%). This result is attributable to the positive impact of product enhancements and margin management. Net client cash inflows of R197 million reflected the impact of increased death, surrender and maturity values paid on investment policies following improved market returns over the year.

Rm (Unaudited) 2019 2018%

change

South African Insurance Operations 1 986 1 954 2

SA Retail(1) 1 505 1 544 (3)Liberty Corporate(1) 85 34 >100LibFin Markets 396 376 5

South African Asset Management STANLIB South Africa 460 355 30

Africa Regions 54 8 >100

Liberty Africa Insurance 29 (19) >100STANLIB Africa 25 27 (7)

Operations under ownership review(2) (147) (166) 11Central costs and sundry income(1) (152) (145) (5)

Normalised operating earnings 2 201 2 006 10Shareholder Investment Portfolio (SIP) 1 004 250 >100

Normalised headline earnings 3 205 2 256 42BEE preference share adjustment (6) (8) 25Reversal of accounting mismatch arising on consolidation of L2D(3) 55 397 (86)

Headline earnings 3 254 2 645 23(1) The 2018 results have been normalised to reflect the change in operating model as reported in the 31 December 2018 disclosures, whereby certain functions and therefore related

costs were transferred from the Liberty holding company to the South African insurance businesses.(2) Disposals of the short-term insurance technology start-up, STANLIB Ghana and STANLIB Botswana were effective on 27 February 2019, 1 December 2019 and 31 December

2019 respectively. Remaining operations under ownership review at 31 December 2019 were asset management operations in Uganda and Kenya, the Health solutions business and short-term insurance businesses in Botswana and Malawi.

(3) Refer to Explanation of terms.

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



The loss of R147 million includes the Liberty Health loss of R126 million. Efforts continue to find a suitable outcome for the health business; however these are taking longer than anticipated.

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.

The performance of the SIP was mainly attributable to good performance of local and developed market equities during 2019, which resulted in the SIP producing a gross return of 8,0% (31 December 2018: 3,7%) and delivering earnings of R1 004 million (31 December 2018: R250 million). The SIP exposure to investment markets remains appropriate in the context of the group’s risk appetite.

Liberty Two Degrees (L2D)The 2019 full year distribution was in line with L2D’s guidance to the market. The balance sheet capacity and continued operational performance of L2D's defensive portfolio are key differentiators in a difficult trading environment. L2D's South African retail strategy has been validated by the good trading performance in the core retail portfolio evidenced by low retail vacancy rates and positive trading density growth.

Further details on the results are available on the L2D website and in the L2D results announcement.

BancassuranceThe bancassurance agreement with Standard Bank Group, which is applicable across the group’s 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 3% on the prior year, reflecting a good increase in credit life sales. We continue leveraging our joint capabilities with Standard Bank to capture appropriate opportunities.

Capital adequacy coverThe Solvency Capital Requirement cover of Liberty Group Limited, the group’s main long-term insurance licence, of 1,99 times at 31 December 2019 is at the upper end of the target range and underpins our ability to fulfil our promises to policyholders and other stakeholders.

All other group subsidiary life licences were adequately capitalised.

Liberty CorporateLiberty Corporate earnings increased to R85 million from R34 million in 2018. This reflects improved disability claims experience and annuitant mortality coupled with tight expense discipline.

Indexed new business of R1 124 million (31 December 2018: R1 132 million) decreased marginally due to lower recurring premiums written during the year. Product enhancements include the refresh of the Liberty Stable Growth investment strategy and the launch of a comprehensive suite of new investment propositions. VoNB of R68 million was broadly in line with 2018.

Net client cash outflows of R1 030 million (31 December 2018: outflows of R449 million) were impacted by client investment outflows increasing through positive market returns over the year and higher umbrella scheme terminations experienced in line with the current South African economic environment.

LibFin Markets – Asset liability management and credit portfolio The asset liability management portfolio produced an increased profit of R114 million (31 December 2018: R74 million) and earnings from the credit portfolio amounting to R282 million (31 December 2018: R302 million). LibFin Markets assets under management amounted to R70 billion (31 December 2018: R65 billion).

South African Asset ManagementSTANLIB South AfricaSTANLIB South Africa earnings were up 30% to R460 million. Fee income was higher in the current period due primarily to strong cash inflows throughout the year and favourable investment market performance. Cost to income ratios have also improved.

Net external third-party client cash inflows amounted to R15,2 billion compared to R16,1 billion in 2018. This result was largely attributable to good institutional inflows to both money market and non-money market funds. Intragroup cash outflows for the year amounted to R5,1 billion.

Total assets under management by STANLIB South Africa amounted to R568 billion (31 December 2018: R529 billion).

Africa Regions Africa Regions comprise Liberty Africa Insurance and the STANLIB asset management continuing operations in the Southern African region.

Earnings of R54 million (31 December 2018: R8 million) was mainly supported by an improved short-term insurance claims experience in Kenya.

Operations under ownership reviewGood progress has been made with the successful completion of the sale of Liberty’s short-term insurance technology platform announced in February 2019 and the sale of the STANLIB Ghana and Botswana businesses effective 1 December 2019 and 31 December 2019 respectively. The sale of the asset management businesses in Kenya and Uganda is progressing according to plan and expected to be completed by 30 June 2020.


Dividends2019 final dividend In line with the group’s dividend policy, the board has approved and declared a gross final dividend of 436 cents per ordinary share. The final dividend will be paid out of income reserves and is payable on Monday, 6 April 2020 to all ordinary shareholders recorded in the books of Liberty Holdings Limited on the record date.

The dividend of 436 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 348,8 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, 31 March 2020

First trading day ex dividend on the JSE Wednesday, 1 April 2020

Record date Friday, 3 April 2020

Payment dateMonday,

6 April 2020

Share certificates may not be dematerialised or rematerialised between Wednesday, 1 April 2020 and Friday, 3 April 2020, 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, 6 April 2020.

ProspectsManagement’s focus remains on improving the client and adviser experience, delivering STANLIB’s investment performance in the top quartile, concluding outcomes for the remaining operations under ownership review and optimising our relationship with the Standard Bank Group.

Although we expect South African economic conditions to remain weak and are not anticipating an improvement in the economic environment, we are confident that our focus is appropriately directed to create sustainable longer-term value for all stakeholders.


David Munro Jacko MareeGroup chief executive Chairman

26 February 2020

Liberty Holdings Limited Incorporated in the Republic of South Africa (Registration number: 1968/002095/06)JSE code: LBHISIN code: ZAE0000127148Preference share code: LBHPISIN code: ZAE000004040Telephone +27 11 408 3911These results are available at www.libertyholdings.co.za

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


The 2019 consolidated annual financial statements of Liberty Holdings Limited have been prepared in accordance with and contain 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 Listings 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 2019.

The accounting policies are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements except for the mandatory adoption of IFRS 16 Leases. The group applied IFRS 16 retrospectively from 1 January 2019, using the modified retrospective approach. Comparatives, as permitted by IFRS 16, are not restated under this approach. There was no impact to opening retained earnings on adoption of IFRS 16. IFRS 16 replaces IAS 17 Leases as well as the related interpretations and sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, being the lessee and the lessor.

ACCOUNTING POLICIES

The standard requires lessees to capitalise all significant lease arrangements on inception of the lease as right-of-use assets with corresponding finance lease liabilities on the statement of financial position. The group has included the right-of-use assets within 'Equipment and right-of-use assets' on the statement of financial position. As at 1 January 2019, a right-of-use asset of R278 million was recognised with a corresponding finance lease liability on the statement of financial position. The net impact to earnings for the year ended 31 December 2019 resulting from the difference between operating lease charges under IAS 17 and the IFRS 16 income statement expenses (deprecation and finance costs) is not significant (less than R50 million).

Operating lease charges will continue to be recognised for short-term leases and leases of low value items (which includes the month-to-month property leases and computer leasing charges where applicable, and other miscellaneous leases). Refer to the 'Adoption of IFRS 16 Leases' note for more detail.

Various amendments issued by the IASB as well as IFRIC 23 Uncertainty over Income Tax Treatments were also adopted for the year commencing 1 January 2019. The impact on the group’s financial results, disclosures or comparative information is not expected to be significant.

New standards not yet effectiveIFRS 17 Insurance Contracts (effective 1 January 2022, following IASB due process) will have significant financial reporting impact for the group. Management is assessing this impact under a focussed project.


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 2019, 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.

DIRECTORS’ 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 2019 audited consolidated Liberty Holdings Limited annual financial statements which are available for inspection at the company’s registered office on request.


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

FCTRForeign Currency Translation Reserve.

FVOCIFair value through other comprehensive income

FVPLFair value through profit or loss

“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 12 months’ premiums on new recurring premium policies and one tenth of single premium sales.

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

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

Solvency capital requirement (SCR)The SCR is the excess of assets over liabilities required by an insurer to ensure that its assets remain larger than its liabilities with a 99.5% level of certainty over a one-year time horizon, with assets and liabilities valued in accordance with the Insurance Act, 2017.

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 substance 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 transactionIFRS 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.

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 shares.

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 shares trade relative to the underlying net asset value.

L2D adjustment in group equity valueIn 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 Portfolio (SIP) to the listed share price.

Summary of impactBelow is a summary of the L2D transaction impact on the ordinary shareholders’ equity:

EXPLANATION OF TERMS

Rm

Group equity value

TotalIFRS net

asset value

SIP equity value

adjustment

Opening adjustment at 1 January 2019 940 522 418IFRS profit or loss 55 55 Group equity value earnings 87 87Transaction between owners and other equity movements (19) (73) 54

Closing adjustment at 31 December 2019 1 063 504 559


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONas at 31 December 2019

Rm (Audited) 2019 2018

Assets Intangible assets 611 572Defined benefit pension fund employer surplus 117 140Properties 36 294 35 961Equipment and right-of-use assets 1 078 1 038Interests in joint ventures 1 316 1 353Interests in associates 16 178 13 834Deferred taxation 317 245Deferred acquisition costs 790 777Long-term policyholder assets – insurance contracts 7 017 6 708Reinsurance assets 2 409 2 119Long-term insurance 1 991 1 699Short-term insurance 418 420Financial investments 351 083 328 365Policy loans receivable 248 340Assets held for trading and for hedging 10 003 10 340Repurchase agreements, scrip and collateral assets 11 573 12 658Prepayments, insurance and other receivables 4 679 4 953Cash and cash equivalents 17 377 16 974Disposal group assets held for sale 584 897Total assets 461 674 437 274Liabilities Long-term policyholder liabilities 324 246 310 994Insurance contracts 206 103 200 744Investment contracts with discretionary participation features 10 252 10 437Financial liabilities under investment contracts 107 891 99 813Reinsurance liabilities 246 283Third party financial liabilities arising on consolidation of mutual funds 56 758 48 186Provisions 140 145Deferred taxation 3 191 2 694Deferred revenue 330 314Short-term insurance liabilities 991 984Financial liabilities 7 792 8 104Lease liabilities 209 Liabilities held for trading and for hedging 7 932 8 457Repurchase agreements, liabilities and collateral deposits payable 12 474 11 747Employee benefits 1 376 1 377Insurance and other payables 13 115 11 971Current taxation 239 347Disposal group liabilities held for sale 246 278Total liabilities 429 285 405 881Equity Ordinary shareholders’ equity 24 068 23 003Share capital 26 26Share premium 5 066 5 104Retained surplus 19 882 18 661Other reserves (906) (788)Non-controlling interests 8 321 8 390Total equity 32 389 31 393Total equity and liabilities 461 674 437 274


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2019


Revenue Insurance premiums 42 182 40 611Reinsurance premiums (2 381) (2 090)Net insurance premiums 39 801 38 521Revenue from contracts with customers 4 076 4 073Investment income 3 199 3 316Interest income on financial assets using the effective interest rate method 1 920 1 516Fair value adjustment to assets held at fair value through profit or loss 35 451 3 078Total income 84 447 50 504Claims and policyholder benefits under insurance contracts (41 730) (39 504)Insurance claims recovered from reinsurers 2 079 1 571Change in long-term policyholder assets and liabilities (4 590) 11 449Liabilities under insurance contracts (5 400) 10 024Policyholder assets related to insurance contracts 309 (776)Investment contracts with discretionary participation features 171 1 607Applicable to reinsurers 330 594Fair value adjustment to long-term policyholder liabilities under investment contracts (9 146) 1 273Fair value adjustment to financial liabilities (1 206) (1 381)Fair value adjustment on third party mutual fund interests (6 327) (2 407)Acquisition costs (4 241) (4 413)General marketing and administration expenses (11 075) (11 184)Finance costs (243) (110)Profit share allocations under bancassurance and other agreements (1 512) (1 284)Remeasurement of disposal groups classified as held for sale (319) (249)Profit on disposal of subsidiary 141 Equity accounted earnings from associate 21 32Equity accounted earnings from joint ventures (2) Profit before taxation 6 297 4 297Taxation(1) (2 662) (1 255)Total earnings 3 635 3 042Other comprehensive income/(loss) 9 369Items that may be reclassified subsequently to profit or loss (18) 269Net change in fair value on cash flow hedges 47 (9)Income and capital gains tax relating to net change in fair value on cash flow hedges (13) 3Net change in debt instruments measured at FVOCI (15) 42Income tax relating to movement in debt instrument measured at FVOCI 4 (12)Foreign currency translation (41) 245Items that may not be reclassified subsequently to profit or loss 27 100Owner-occupied properties – fair value adjustment (8) 19Income and capital gains tax relating to owner-occupied properties fair value adjustment 6 2Change in long-term policyholder insurance liabilities (application of shadow accounting) 16 2Actuarial gains on post-retirement medical aid liability 53 70Income tax relating to post-retirement medical aid liability (14) (20)Net adjustments to defined benefit pension fund(2) (19) (30)Income tax relating to defined benefit pension fund 5 8Fair value adjustments to financial liabilities arising from own credit (16) 68Income tax relating to fair value adjustments to financial liabilities arising from own credit 4 (19)

Total comprehensive income 3 644 3 411Total earnings attributable to: Shareholders' equity 3 078 2 398Non-controlling interests 557 644 3 635 3 042Total comprehensive income attributable to: Shareholders' equity 3 105 2 680Non-controlling interests 539 731 3 644 3 411Basic and fully diluted earnings per share Cents CentsBasic earnings per share 1 153,2 889,1Fully diluted basic earnings per share 1 112,0 863,7(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.


SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2019


Balance of ordinary shareholders’ equity at 1 January 23 003 22 444IFRS 9 transition adjustment (121)Ordinary dividends (1 915) (1 941)Total comprehensive income 3 105 2 680FCTR recycled through profit and loss 6 Cash flow hedge recycled through profit and loss on early settlement 12Share buy-back(1) (278) (247)Black economic empowerment transaction 28 33Share-based payments 127 94Preference dividends (2) (2)Share issue costs in subsidiary (1)Disposal of interest in subsidiary - Liberty Life Swaziland 7 Acquisition of interest in subsidiary - Liberty Holdings Namibia 17 Transactions between owners - Liberty Two Degrees (30) 52Ordinary shareholders’ equity 24 068 23 003Balance of non-controlling interests at 1 January 8 390 7 947Total comprehensive income 539 731Acquisition of additional interest in unincorporated property consortiums (180) Unincorporated property partnerships net distributions (246) (222)Non-controlling interests' share of subsidiary distributions (182) (314)Share-based payments 8 Share issue costs in subsidiary (1)Disposal of interest in subsidiary - Liberty Life Swaziland 8 Acquisition of interest in subsidiary - Liberty Holdings Namibia (25) Transactions between owners - Liberty Two Degrees 9 249Non-controlling interests 8 321 8 390Total equity 32 389 31 393(1) Share buy-backs are purchases of shares from the market to meet employee share-based payment obligations and to hold as treasury shares.


SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2019


Cash flows from operating activities 2 021 (379)Cash utilised by operations (4 642) (9 805)Interest income on financial assets using the effective interest rate method 1 920 1 516Distributions paid (3 349) (3 196)Taxation paid (2 363) (3 092)Net disposal of financial instruments(1) 10 612 13 293Net disposal of other assets 293 215Deposits received on collateral deposits payable 88 1 098Other operating cash flows (538) (408)Cash flows from investing activities (184) (512)Net disposal of investments 23Net purchase of other assets (263) (524)Acquisition of associate (10)Acquisition of equity accounted joint ventures (1) (1)Proceeds on sale of disposal groups classified as held for sale 268 Cash flows from investing activities in disposal groups (188) Cash flows from financing activities (1 396) 2 785Net (repayment)/advance from financial liabilities (837) 1 927Net repayment of lease liabilities (78) Net (repayment of)/proceeds on repurchase agreements liabilities (58) 730Net cash flows from equity transactions with non-controlling interests (145) 377Share issue cost in subsidiary (2)Share buy-backs (278) (247)

Net increase in cash and cash equivalents 441 1 894Cash and cash equivalents at the beginning of the year 16 974 15 169Foreign currency translation (22) 129Disposal groups cash classified as held for sale (16) (218)Cash and cash equivalents at the end of the year 17 377 16 974(1) Included in the net disposal of financial instruments for 2019 was R5 787 million (2018: R5 200 million) related to dividends received and R11 322 million (2018: R11 003 million) related

to interest income in respect of financial instruments measured at fair value.


HEADLINE EARNINGS AND EARNINGS PER SHAREfor the year ended 31 December 2019

Rm (unless otherwise stated)/(Audited) 2019 2018

Reconciliation of total earnings to headline earnings attributable to shareholders Total earnings attributable to shareholders 3 078 2 398Preference share dividend (2) (2)Basic earnings attributable to ordinary shareholders 3 076 2 396Remeasurement of disposal groups classified as held for sale 319 249Profit on disposal of subsidiary (141) Headline earnings attributable to ordinary shareholders 3 254 2 645Net income earned on BEE preference shares 6 8Reversal of the accounting mismatch arising on consolidation of L2D(1) (55) (397)Normalised headline earnings attributable to ordinary shareholders 3 205 2 256Weighted average number of shares in issue (‘000) 266 726 269 496Normalised weighted average number of shares in issue ('000) 272 943 275 842Fully diluted weighted average number of shares in issue (‘000) 276 617 277 407Earnings per share Cents CentsTotal earnings attributable to ordinary shareholders Basic 1 153,2 889,1Headline 1 220,0 981,5Normalised headline 1 174,2 817,9Fully diluted earnings attributable to ordinary shareholders Basic 1 112,0 863,7Headline 1 176,4 953,5(1) Refer to Explanation of terms.


SUMMARY CONSOLIDATED SEGMENT INFORMATIONfor the year ended 31 December 2019

The audited segment results for the year ended 31 December 2019 are as follows:

South African operations Africa regions

Insurance operations

Asset management

Rm (Audited) SA

RetailLiberty

CorporateOther

operations(1) STANLIB

South Africa Liberty Africa

Insurance Liberty Health STANLIB Africa TotalReporting

adjustments(2) IFRS reported

Total income 70 855 17 170 1 673 2 721 3 948 1 054 275 97 696 (13 249) 84 447Profit/(loss) before taxation 4 635 252 734 647 132 (369) (17) 6 014 283 6 297Taxation(3) (2 270) (59) (45) (187) (94) 9 (16) (2 662) (2 662)Total earnings 2 365 193 689 460 38 (360) (33) 3 352 283 3 635Reconciliation of total earnings to headline earnings/(loss) attributable to shareholders

Total earnings/(loss) 2 365 193 689 460 38 (360) (33) 3 352 283 3 635Attributable to non-controlling interests (1) (216) (53) (4) (274) (283) (557)Remeasurement of disposal groups classified as held for sale 30 234 55 319 319Profit on sale of subsidiary (141) (141) (141)Preference share dividend (2) (2) (2)Headline earnings/(loss) 2 365 192 330 460 15 (126) 18 3 254 3 254Net income earned on BEE preference shares 6 6 6Reversal of the accounting mismatch arising on consolidation of L2D (55) (55) (55)Normalised headline earnings/(loss) 2 365 192 281 460 15 (126) 18 3 205 3 205Reconciliation of business operations earnings/(loss) to segment result South African Insurance Operations 1 805 181 1 986 SA Retail 1 505 1 505 Liberty Corporate 85 85 LibFin Markets 300 96 396 South African Asset Management STANLIB South Africa 460 460 Africa regions 15 (126) 18 (93) Liberty Africa Insurance 15 15 Liberty Health (126) (126) STANLIB Africa 18 18 Shareholder Investment Portfolio (SIP) 627 11 366 1 004 Central costs and sundry income (67) (85) (152) Normalised headline earnings/(loss) 2 365 192 281 460 15 (126) 18 3 205 (1) Includes shareholders’ equity, not allocated to the other operating segments, specifically invested to maximise the investment yield within the group’s risk appetite and

regulatory requirements and costs associated with the group’s governance, investor relations, strategy co-ordination and certain corporate social investment and black economic empowerment activities.

(2) 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.

(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 operating segments are supported by LibFin who manages the asset/ liability mismatch risk, originates and manages credit assets backing the guaranteed investment product set arising in the South African insurance operations and manages the performance of shareholder investment exposures in the South African life insurance operations. The impact of these activities is disclosed in the relevant segment grouping.


The audited segment results for the year ended 31 December 2019 are as follows:

South African operations Africa regions

Insurance operations

Asset management

Rm (Audited) SA

RetailLiberty

CorporateOther


South Africa Liberty Africa



Total income 70 855 17 170 1 673 2 721 3 948 1 054 275 97 696 (13 249) 84 447Profit/(loss) before taxation 4 635 252 734 647 132 (369) (17) 6 014 283 6 297Taxation(3) (2 270) (59) (45) (187) (94) 9 (16) (2 662) (2 662)Total earnings 2 365 193 689 460 38 (360) (33) 3 352 283 3 635Reconciliation of total earnings to headline earnings/(loss) attributable to shareholders

Total earnings/(loss) 2 365 193 689 460 38 (360) (33) 3 352 283 3 635Attributable to non-controlling interests (1) (216) (53) (4) (274) (283) (557)Remeasurement of disposal groups classified as held for sale 30 234 55 319 319Profit on sale of subsidiary (141) (141) (141)Preference share dividend (2) (2) (2)Headline earnings/(loss) 2 365 192 330 460 15 (126) 18 3 254 3 254Net income earned on BEE preference shares 6 6 6Reversal of the accounting mismatch arising on consolidation of L2D (55) (55) (55)Normalised headline earnings/(loss) 2 365 192 281 460 15 (126) 18 3 205 3 205Reconciliation of business operations earnings/(loss) to segment result South African Insurance Operations 1 805 181 1 986 SA Retail 1 505 1 505 Liberty Corporate 85 85 LibFin Markets 300 96 396 South African Asset Management STANLIB South Africa 460 460 Africa regions 15 (126) 18 (93) Liberty Africa Insurance 15 15 Liberty Health (126) (126) STANLIB Africa 18 18 Shareholder Investment Portfolio (SIP) 627 11 366 1 004 Central costs and sundry income (67) (85) (152) Normalised headline earnings/(loss) 2 365 192 281 460 15 (126) 18 3 205 (1) Includes shareholders’ equity, not allocated to the other operating segments, specifically invested to maximise the investment yield within the group’s risk appetite and



(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 operating segments are supported by LibFin who manages the asset/ liability mismatch risk, originates and manages credit assets backing the guaranteed investment product set arising in the South African insurance operations and manages the performance of shareholder investment exposures in the South African life insurance operations. The impact of these activities is disclosed in the relevant segment grouping.

SUMMARY CONSOLIDATED SEGMENT INFORMATION (CONTINUED) for the year ended 31 December 2019


The audited segment results for the year ended 31 December 2018 are as follows: South African operations Africa regions

Insurance

operations Asset

management

Rm (Audited) SA

RetailLiberty

CorporateOther


South AfricaLiberty Africa



Total income 43 890 11 544 2 530 2 802 2 329 912 288 64 295 (13 791) 50 504Profit/(loss) before taxation 1 971 199 1 544 493 5 (351) 53 3 914 383 4 297Taxation(3) (803) (44) (209) (138) (67) 47 (41) (1 255) (1 255)Total earnings 1 168 155 1 335 355 (62) (304) 12 2 659 383 3 042Reconciliation of total earnings to headline earnings/(loss) attributable to shareholders

Total earnings/(loss) 1 168 155 1 335 355 (62) (304) 12 2 659 383 3 042Attributable to non-controlling interests (259) 2 (4) (261) (383) (644)Remeasurement of disposal groups classified as held for sale 23 226 249 249Preference share dividend (2) (2) (2)Headline earnings/(loss) 1 168 155 1 074 355 (37) (78) 8 2 645 2 645Net income earned on BEE preference shares 8 8 8Reversal of the accounting mismatch arising on consolidation of L2D (397) (397) (397)Normalised headline earnings/(loss) 1 168 155 685 355 (37) (78) 8 2 256 2 256Reconciliation of business operations earnings/(loss) to segment result South African Insurance Operations 1 860 149 2 009 SA Retail 1 581 1 581 Liberty Corporate 52 52 LibFin Markets 279 97 376 South African Asset Management STANLIB South Africa 355 355 Africa regions (37) (78) 8 (107) Liberty Africa Insurance (37) (37) Liberty Health (78) (78) STANLIB Africa 8 8 Shareholder Investment Portfolio (SIP) (699) 6 943 250 Central costs and sundry income(4) 7 (258) (251) Normalised headline earnings/(loss) 1 168 155 685 355 (37) (78) 8 2 256 (1) Includes shareholders’ equity, not allocated to the other operating segments, specifically invested to maximise the investment yield within the group’s risk appetite and



(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) Includes the short-term insurance technology start-up.



The audited segment results for the year ended 31 December 2018 are as follows: South African operations Africa regions

Insurance

operations Asset

management

Rm (Audited) SA

RetailLiberty

CorporateOther


South AfricaLiberty Africa



Total income 43 890 11 544 2 530 2 802 2 329 912 288 64 295 (13 791) 50 504Profit/(loss) before taxation 1 971 199 1 544 493 5 (351) 53 3 914 383 4 297Taxation(3) (803) (44) (209) (138) (67) 47 (41) (1 255) (1 255)Total earnings 1 168 155 1 335 355 (62) (304) 12 2 659 383 3 042Reconciliation of total earnings to headline earnings/(loss) attributable to shareholders

Total earnings/(loss) 1 168 155 1 335 355 (62) (304) 12 2 659 383 3 042Attributable to non-controlling interests (259) 2 (4) (261) (383) (644)Remeasurement of disposal groups classified as held for sale 23 226 249 249Preference share dividend (2) (2) (2)Headline earnings/(loss) 1 168 155 1 074 355 (37) (78) 8 2 645 2 645Net income earned on BEE preference shares 8 8 8Reversal of the accounting mismatch arising on consolidation of L2D (397) (397) (397)Normalised headline earnings/(loss) 1 168 155 685 355 (37) (78) 8 2 256 2 256Reconciliation of business operations earnings/(loss) to segment result South African Insurance Operations 1 860 149 2 009 SA Retail 1 581 1 581 Liberty Corporate 52 52 LibFin Markets 279 97 376 South African Asset Management STANLIB South Africa 355 355 Africa regions (37) (78) 8 (107) Liberty Africa Insurance (37) (37) Liberty Health (78) (78) STANLIB Africa 8 8 Shareholder Investment Portfolio (SIP) (699) 6 943 250 Central costs and sundry income(4) 7 (258) (251) Normalised headline earnings/(loss) 1 168 155 685 355 (37) (78) 8 2 256 (1) Includes shareholders’ equity, not allocated to the other operating segments, specifically invested to maximise the investment yield within the group’s risk appetite and



(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) Includes the short-term insurance technology start-up.



GROUP EQUITY VALUE REPORTfor the year ended 31 December 2019

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 businessThe 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 Head of Actuarial Function. The full embedded value report is included in the supplementary information section.

2.2 Other businesses STANLIB South Africa Valued using a 10 times (2018: 10 times) multiple of estimated sustainable earnings.

STANLIB Africa Valued using a combination of estimated sales price where available, if the operation is held for sale, or a 10 times (2018: 10 times) multiple of estimated sustainable earnings, adjusted for country risk.

Liberty Health As Liberty Health is under disposal groups held for sale, the IFRS net asset value has been used as it includes a remeasurement to fair value, less cost to sell.

Liberty Africa Insurance Liberty Africa Insurance is a 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 2019 the combined valuations were approximately equal to the cluster’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 (L2D) normalisation adjustmentThis represents the difference between Liberty Group Limited’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 Group Limited 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 adjustmentsThese 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 (2018: 9 times).


3. Normalised group equity value 3.1 Analysis of normalised group equity value

2019Rm (Audited)

SA covered business

Other businesses Total

Liberty Group Limited consolidated 18 690 18 690STANLIB South Africa(1) 913 913STANLIB Africa(1) 114 114Liberty Africa Insurance 920 920Liberty Holdings 2 103 2 103Operations under ownership review(2) 265 265Liberty Two Degrees adjustment to net asset value(3) 1 046 17 1 063Shareholders’ equity reported under IFRS 19 736 4 332 24 068Reverse deferred acquisition cost and deferred revenue liability (321) (321)Reverse value of in-force acquired (2) (2)Frank Financial Services allowance for future expenses (50) (50)BEE preference funding 78 78Liberty Two Degrees adjustment(3) (1 046) (17) (1 063)Allowance for employee share rights (35) (24) (59)Normalised net worth 18 360 4 291 22 651Value of in-force – SA Retail 16 269 16 269Value of in-force – Liberty Corporate 2 885 2 885Cost of required capital (3 155) (3 155)Fair value adjustment – STANLIB South Africa(1) 3 387 3 387Fair value adjustment – STANLIB Africa(1) 212 212Allowance for future shareholder expenses (1 342) (1 342)Normalised equity value 34 359 6 548 40 907

(1) STANLIB valuation (Rm) 2019 2018 Change

STANLIB South Africa 4 300 3 800 500Net asset value 913 852 61Fair value adjustment 3 387 2 948 439STANLIB Africa 300 330 (30)Net asset value(i) 88 130 (42)Fair value adjustment 212 200 12

Total 4 600 4 130 470

(i) The STANLIB Africa net asset value reconciles to the positive R114 million (31 December 2018: positive R84 million) in table 3.1 above less R26 million negative net asset value (31 December 2018: plus R46 million positive net asset value) included in operations under ownership review.

(2) Under IFRS these are disclosed as disposal groups classified as held for sale.(3) This represents the difference between Liberty Group Limited's share of the net asset value of L2D as at the reporting date and the listed price of L2D shares multiplied by

the number of shares in issue to Liberty Group Limited 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.

GROUP EQUITY VALUE REPORT (CONTINUED)for the year ended 31 December 2019


3. Normalised group equity value (continued)3.1 Analysis of normalised group equity value (continued)

2018Rm (Audited)

SA covered business

Other businesses Total

Liberty Group Limited consolidated 18 088 18 088STANLIB South Africa 852 852STANLIB Africa 84 84Liberty Africa Insurance 926 926Liberty Holdings 1 731 1 731Operations under ownership review(1) 382 382Liberty Two Degrees adjustment to net asset value(2) 932 8 940Shareholders' equity reported under IFRS 19 020 3 983 23 003Reverse deferred acquisition cost and deferred revenue liability (328) (328)Reverse value of in-force acquired (7) (7)Frank Financial Services allowance for future expenses (100) (100)Impact of discounting on deferred tax asset (100) (100)BEE preference funding 99 99Liberty Two Degrees adjustment(2) (932) (8) (940)Allowance for employee share rights (46) (36) (82)Normalised net worth 17 706 3 839 21 545Value of in-force – SA Retail 16 054 16 054Value of in-force – Liberty Corporate 2 965 2 965Cost of required capital (3 038) (3 038)Fair value adjustment – STANLIB South Africa 2 948 2 948Fair value adjustment – STANLIB Africa 200 200Allowance for future shareholder expenses (1 990) (1 990)Normalised equity value 33 687 4 997 38 684(1) Under IFRS these are disclosed as disposal groups classified as held for sale.(2) This represents the difference between Liberty Group Limited's share of the net asset value of L2D as at the reporting date and the listed price of L2D shares multiplied by




3. Normalised group equity value (continued)3.2 Normalised group equity value earnings and value per share

2019 2018

Rm (Audited)

SA covered

businessOther

businesses Total

SA covered

businessOther

businesses Total

Normalised equity value at the end of the period 34 359 6 548 40 907 33 687 4 997 38 684Equity value at the end of the period 35 327 6 565 41 892 34 520 5 005 39 525Liberty Two Degrees adjustment(1) (1 046) (17) (1 063) (932) (8) (940)BEE preference shares 78 78 99 99Net share buy-backs 278 278 247 247Funding of restricted share plan 3 (3) 80 (80) Intragroup dividends(2) 2 235 (2 235) 2 252 (2 252) Dividends paid 1 917 1 917 1 943 1 943Normalised equity value at the beginning of the period (33 687) (4 997) (38 684) (34 599) (4 787) (39 386)Equity value at the beginning of the period (34 520) (5 005) (39 525) (34 458) (5 384) (39 842)Beginning of year adjustment for introduction of new prudential regime(3) (139) (139)IFRS 9 transition adjustment 121 121Liberty Two Degrees adjustment(1) 932 8 940 597 597BEE preference shares (99) (99) (123) (123)

Normalised equity value earnings 2 910 1 508 4 418 1 420 68 1 488Normalised return on group equity value (%) 8,6 31,9 11,5 4,1 1,5 3,8Normalised number of shares (’000) 276 733 279 025Number of shares in issue (’000) 266 044 268 418Shares held for the employee restricted share scheme (’000) 4 237 4 353Estimated shares on settlement of performance reward plan 274 Adjustment for BEE shares (’000) 6 178 6 254Normalised group equity value per share (R) 147,82 138,64(1) This represents the difference between Liberty Group Limited's share of the net asset value of L2D as at the reporting date and the listed price of L2D shares multiplied by


(2) Dividends paid by Liberty Group Limited to Liberty Holdings Limited.(3) This adjustment and the consequential impact on the components of the embedded value earnings analysis were explained in section 1 of the 31 December 2018 South

African Covered Business Embedded Value Report.



3. Normalised group equity value 3.3 Sources of normalised group equity value earnings

2019 2018

Rm (Audited)

SA covered

businessOther

businesses Total

SA covered

businessOther

businesses Total

Value of new business written in the period 358 49 407 344 27 371Expected return on value of in-force business 2 373 2 373 2 433 2 433Variances/changes in operating assumptions ( 265) 648 383 135 372 507Operating experience variances (206) (206) 423 423Operating assumption changes (101) (101) 103 103Changes in modelling methodology 42 42 (19) (19)New operating model - expense impact(1) 648 648 (372) 372 Development costs (47) (16) (63) (9) (99) (108)Liberty Holdings shareholder expenses(2) (127) (127) (369) (369)Headline earnings of other businesses/intragroup transfers 367 367 246 246Operational equity value profits 2 419 921 3 340 2 903 177 3 080Economic adjustments 480 251 731 (1 473) 417 (1 056)Return on net worth 576 251 827 2 417 419Investment variances (653) (653) (1 225) (1 225)Change in economic assumptions 557 557 (250) (250)Change in fair value adjustments on value of other businesses(3) 324 324 ( 526) ( 526)Change in allowance for share rights 11 12 23 (10) (10)Group equity value earnings 2 910 1 508 4 418 1 420 68 1 488(1) This is the impact of reserving for expenses that resided in Liberty Holdings Limited that were transferred to Liberty Group Limited with effect 1 January 2019, in line

with the change to the group's operating model which came into effect on the same date.(2) This includes the actual shareholder expenses incurred by Liberty Holdings of R128 million (31 December 2018: R223 million) plus the change in the allowance for future

shareholder expenses over the period.(3) The positive R324 million comprises the change in the fair value adjustment in respect of the STANLIB asset management operations of positive R451 million, release of

allowance for discounting on deferred tax asset of positive R100 million, operations under ownership review net remeasurement of negative R178 million (R319 million remeasurement, less R141 million profit on sale of subsidiary) and Liberty Africa Insurance value of new business offset of R49 million.



3 Normalised group equity value (continued) 3.4 Analysis of value of long-term insurance new business and margins

Rm (unless otherwise stated) (Audited) 2019 2018

South African covered business SA Retail 1 765 1 710Traditional Life 1 550 1 530Direct Channel 102 82Credit Life 113 98Liberty Corporate 158 168Gross value of new business 1 923 1 878Overhead acquisition (including underwriting) costs impact on value of new business (1 365) (1 341)Cost of required capital (200) (193)Net value of South African covered business 358 344Present value of future expected premiums 39 712 42 417Margin (%) 0,9 0,8Liberty Africa Insurance Net value of new business 49 27Present value of future expected premiums 1 207 972Margin (%) 4,1 2,8Total group net value of new business 407 371Total group margin (%) 1,0 0,9



LONG-TERM INSURANCE NEW BUSINESSfor the year ended 31 December 2019

Rm (Unaudited) 2019 2018

Sources of insurance operations total new business by product type Retail 26 715 26 641Single 22 088 22 131Recurring 4 627 4 510Institutional 2 321 2 377Single(1) 1 148 1 233Recurring(1) 1 173 1 144

Total new business 29 036 29 018Single(1) 23 236 23 364Recurring(1) 5 800 5 654

Insurance indexed new business 8 125 7 991Sources of insurance indexed new business SA Retail 6 558 6 495Liberty Corporate(1) 1 124 1 132Liberty Africa Insurance(2) 443 364

(1) 2018 adjusted for change in classification in Liberty Corporate from recurring to single premiums for additional investment voluntary contributions.(2) 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.


LONG-TERM INSURANCE NET CUSTOMER CASH FLOWSfor the year ended 31 December 2019


Net premiums by product type Retail 43 700 43 553Single 21 598 21 836Recurring 22 102 21 717Institutional 12 519 11 522Single 2 188 2 062Recurring 10 331 9 460

Net premium income from insurance contracts and inflows from investment contracts 56 219 55 075

Single 23 786 23 898Recurring 32 433 31 177Net claims and policyholders benefits by product type Retail (43 239) (41 263)Death and disability claims (8 175) (7 277)Policy surrender and maturity claims (28 023) (27 579)Annuity payments (7 041) (6 407)Institutional (13 122) (11 811)Death and disability claims (2 298) (2 285)Scheme terminations and member withdrawals (10 022) (8 726)Annuity payments (802) (800)

Net claims and policyholders benefits (56 361) (53 074)Long-term insurance net customer cash flows(1) Rm (Unaudited) Sources of insurance operations net cash flows: (142) 2 001SA Retail 197 2 065Liberty Corporate (1 030) (449)Liberty Africa Insurance(2) 691 385

(1) This excludes net cash flows attributed to the off balance sheet GateWay LISP of outflows R55million (2018: inflows of R524 million).(2) 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.


ASSETS UNDER MANAGEMENT(1)

as at 31 December 2019

Rbn (Unaudited) 2019 2018

Managed by group business units 709 682STANLIB South Africa 568 529STANLIB Africa(2) 28 51Remaining operations 18 19Operations under ownership review(4) 10 32LibFin Markets 70 65Other internal managers 43 37Externally managed 29 36Total assets under management(3) 738 718 Continuing operations 728 686Operations under ownership review 10 32(1) Includes funds under administration.(2) Liberty owns less than 100% of certain of the entities that make up STANLIB 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 2019 amounts:

Unit trusts listed (Rbn)STANLIB

managedOther

managed Total

STANLIB 40 92 132Gateway 5 5 10

(4) Under IFRS these are disclosed as disposal groups classified as held for sale.

ASSET MANAGEMENT NET EXTERNAL CUSTOMER CASH FLOWS(1)


Rm (Unaudited) 2019 2018

STANLIB South Africa Non-money market 15 936 9 155Retail 8 059 6 146Institutional 7 877 3 009Money market (746) 6994Retail 89 (48)Institutional (835) 7 042

Net South Africa cash inflows 15 190 16 149STANLIB Africa(2) Non-money market (1 128) (7 696)Retail (309) 19Institutional (819) (7 715)Money market (1 219) (868)Net Africa cash outflows (2 347) (8 564)Net cash inflows from asset management 12 843 7 585(1) Cash flows exclude intergroup segregated life funds mandates.(2) The STANLIB Africa cash flows represent the flows up to the date of the sale of the applicable asset management operations or transfer of mandates.


SHORT-TERM INSURANCE INDICATORSfor the year ended 31 December 2019


Net premiums 1 551 1 347Liberty Health – medical risk 927 808Liberty Africa Insurance – motor, property, medical and other 624 539Net claims (971) (943)Liberty Health – medical risk (715) (650)Liberty Africa Insurance – motor, property, medical and other (256) (293)

Net cash inflows from short-term insurance 580 404Unaudited Claims loss ratio (%) Liberty Health 77 80Liberty Africa Insurance 41 54Combined loss ratio (%) Liberty Health 115 117Liberty Africa Insurance 91 108

CAPITAL COMMITMENTSas at 31 December 2019


Equipment and computer software 364 543Investment and owner-occupied properties 1 240 1 497Committed capital(1) 1 040 1 337Total capital commitments 2 644 3 377Under contracts 689 808Authorised by the directors but not contracted 1 955 2 569

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

The above 2019 capital commitments will be financed by available bank facilities, existing cash resources, internally generated funds, R103 million (2018: R49 million) from non-controlling interests in unincorporated property partnerships and R197 million (2018: R433 million) from non controlling interest in respect of properties.


RETIREMENT BENEFIT OBLIGATIONSas at 31 December 2019

AuditedPost-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 2019, the Liberty post-retirement medical aid benefit liability was R459 million (2018: R471 million).

RELATED PARTIESfor the year ended 31 December 2019

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 in the 31 December 2019 financial period:

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

’000Fair value

RmOwnership

%

Standard Bank Group Limited Balance at 1 January 2019 20 618 3 687 1,29Purchases 6 411 1 180 Sales (8 282) (1 472) Fair value adjustments (241) Balance at 31 December 2019 18 747 3 154 1,18

1.2 BancassuranceLiberty has extended the bancassurance business agreements with Standard Bank group 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 2019 amounted to R7 908 million (2018: R8 895 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 2019 is R1 485 million (2018: R1 266 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.

1.3 Purchases and sales of financial instrumentsAs per Liberty’s 2018 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.

1.4 Business operations sold to Standard BankShort-term insurance technology start-up

On 27 February 2019, Liberty Holdings Limited entered into a sale and purchase agreement with the Standard Bank of South Africa to dispose 100% of the technology that supports and enables its short-term insurance business, which operated as a division of Liberty Holdings Limited, including all moveable assets used and intellectual property. The purchase consideration was R145 million, which realised a full recovery of the capitalised asset as at 31 December 2018 of R94 million and a partial past expense recovery of R51 million.

Disposal of STANLIB Ghana Limited

Effective 1 December 2019, Liberty Holdings Limited disposed of 100% of its shares in STANLIB Ghana Limited to Stanbic Holdings Ghana Limited, a wholly owned subsidiary of Standard Bank Group Ltd. The purchase consideration of GHS70 million (seventy million Ghanaian cedi) which amounted to R172 million. The realised profit on sale was R141 million.

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


DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALEas at 31 December 2019

AuditedAs part of the strategy refresh exercise conducted during 2018, various cash-generating units were identified as either sub-scale or no longer applicable to Liberty's revised strategy. Consequently, the board approved a process of disposals and strategic partnership negotiations with the expectation to lead to loss of control of these cash-generating units during 2019.

The disposal of three operations, being the short-term insurance technology start-up, and the asset management operations in Ghana and Botswana were concluded in the period under review.

The cash-generating units remaining as held for sale at 31 December 2019 are asset management operations in Uganda and Kenya, the Health solutions business and short-term insurance operations in Botswana and Malawi.

Based on the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the assets and liabilities have been disclosed as disposal groups and are separately disclosed on the statement of financial position. The disposal groups are measured at the lower of carrying amount and fair value less costs to sell, which has lead to various remeasurements, as set out below:

2019 2018

Rm GrossFair value

adjustment Net GrossFair value

adjustment Net

Total assets classified as held for sale 891 (307) 584 1 146 (249) 897Total liabilities classified as held for sale 246 246 278 278Net assets of disposal groups held for sale 645 (307) 338 868 (249) 619

The potential sales are not discontinued operations as defined under IFRS 5 as they are not disposals of separate major lines of business or geographical areas of operation. Profit or loss from cash-generating units within disposal groups have consequently not been separately identified in the statement of comprehensive income.

Disposals of operations during the year Disposal of the short-term insurance technology start-up

On 27 February 2019, Liberty Holdings Limited entered into a sale and purchase agreement with the Standard Bank of South Africa to dispose of 100% of the technology that supports and enables its short-term insurance business, which is operated as a division of Liberty Holdings Limited, including all movable assets used and intellectual property. The purchase consideration was R145 million, which realised a full recovery of the capitalised asset as at 31 December 2018 of R94 million and a partial past expense recovery of R51 million.


Effective 1 December 2019, Liberty Holdings Limited disposed of 100% of its shares in STANLIB Ghana Limited to Stanbic Holdings Ghana Limited, a wholly owned subsidiary of Standard Bank Group Ltd. The purchase consideration was GHS70 million (seventy million Ghanaian cedi) which amounted to R172 million. The realised profit on sale was R141 million.

Disposal of STANLIB Investment Management Services Proprietary Limited

Effective 31 December 2019, Liberty Holdings Botswana Proprietary Limited, a wholly owned subsidiary of Liberty Holdings Limited, disposed of 100% of its shares in STANLIB Investment Management Services Proprietary Limited. The proceeds on disposal were R2 million, equivalent to the remeasured IFRS net asset value.

These transactions are at arm’s length and are primarily used to support investment portfolios for policyholders and shareholders’ capital.

1.4 Business operations sold to Standard BankShort-term insurance technology start-up

On 27 February 2019, Liberty Holdings Limited entered into a sale and purchase agreement with the Standard Bank of South Africa to dispose 100% of the technology that supports and enables its short-term insurance business, which operated as a division of Liberty Holdings Limited, including all moveable assets used and intellectual property. The purchase consideration was R145 million, which realised a full recovery of the capitalised asset as at 31 December 2018 of R94 million and a partial past expense recovery of R51 million.


Effective 1 December 2019, Liberty Holdings Limited disposed of 100% of its shares in STANLIB Ghana Limited to Stanbic Holdings Ghana Limited, a wholly owned subsidiary of Standard Bank Group Ltd. The purchase consideration of GHS70 million (seventy million Ghanaian cedi) which amounted to R172 million. The realised profit on sale was R141 million.


OFFSETTING, ENFORCEABLE MASTER NETTING ARRANGEMENTS OR SIMILAR AGREEMENTSas at 31 December 2019

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 arrangements (MNA) or similar agreements.

NATURE OF AGREEMENT RELATED RIGHTS

Derivative assets and liabilities International swaps and derivatives agreements 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

2019 Assets Assets held for trading and for hedging 10 003 (1 087) 8 916 (7 645) 1 271Total assets 10 003 (1 087) 8 916 (7 645) 1 271Liabilities Liabilities held for trading and for hedging 7 932 (214) 7 718 (7 645) 73Repurchase agreements liabilities 5 929 5 929 (5 810) 119Collateral deposits payable 6 545 6 545 (6 545) Total liabilities 20 406 (214) 20 192 (20 000) 1922018 Assets Assets held for trading and for hedging 10 340 (1 496) 8 844 (8 008) 836Total assets 10 340 (1 496) 8 844 (8 008) 836Liabilities Liabilities held for trading and for hedging 8 457 (133) 8 324 (8 008) 316Repurchase agreements liabilities 5 771 5 771 (5 680) 91Collateral deposits payable 5 976 5 976 (5 976) Total liabilities 20 204 (133) 20 071 (19 664) 407(1) Financial collateral relates to these instruments that are subject to MNA or similar agreements.


ACCOUNTING CLASSIFICATIONS OF FINANCIAL INSTRUMENTS UNDER IFRS 9as at 31 December 2019

The tables below reflect the classification of the group's financial assets and financial liabilities split into the IFRS 9 measurement categories. The financial assets categories have been determined based on the contractual cash flow characteristics and business model of the entity. Other measurement basis refers to equity accounting under IAS 28, or balances under IFRS 4.

Fair value through profit or loss

Total fair value

Amor-tised cost

Other measure-

ment basis

Total per statement

of financial positionRm (Audited)

Held for trading

and hedging

Desig- nated Default

Fair value through

other comprehensive income

Financial assets Interests in joint ventures 1 262 1 262 54 1 316Interests in associates 16 168 16 168 10 16 178Financial investments 2 223 329 053 19 142 350 418 350 418Loan receivables 665 665 248 913Assets held for hedging and for trading 10 003 10 003 10 003Repurchase agreements, scrip and collateral assets 11 573 11 573 11 573Prepayments, insurance and other receivables 2 284 2 284 817 1 578 4 679Cash and cash equivalents 11 173 11 173 6 204 17 377

Total 10 003 2 223 372 178 19 142 403 546 7 269 1 642 412 457

Financial liabilities Financial liabilities under investment contracts 107 891 107 891 107 891Third-party financial liabilities arising on consolidation of mutual funds 56 758 56 758 56 758Financial liabilities 5 673 5 673 2 119 7 792Liabilities held for trading and for hedging 7 932 7 932 7 932Repurchase agreements liabilities and collateral deposits payable 12 474 12 474 12 474Insurance and other payables 5 753 5 753 856 6 506 13 115Total 7 932 188 549 196 481 2 975 6 506 205 962


Fair value through profit or loss

Total fair value

Amortised cost

Other measurement

basis

Total per statement

of financial positionRm (Audited)

Held for trading

and hedging

Desig- nated Default

Fair value through

other comprehensive income

2018 Financial assets Interests in joint ventures 1 297 1 297 56 1 353Interests in associates 13 824 13 824 10 13 834Financial investments 2 486 308 339 16 803 327 628 327 628Loan receivables 737 737 340 1 077Assets held for hedging and for trading 10 340 10 340 10 340Repurchase agreements, scrip and collateral assets 12 658 12 658 12 658Prepayments, insurance and other receivables 3 037 3 037 664 1 252 4 953Cash and cash equivalents 10 024 10 024 6 950 16 974

Total financial assets 10 340 2 486 349 916 16 803 379 545 7 954 1 318 388 817

Financial liabilities Financial liabilities under investment contracts 99 813 99 813 99 813Third-party financial liabilities arising on consolidation of mutual funds 48 186 48 186 48 186Financial liabilities 6 478 6 478 1 626 8 104Liabilities held for trading and for hedging 8 457 8 457 8 457Repurchase agreements liabilities and collateral deposits payable 11 747 11 747 11 747Insurance and other payables 4 628 4 628 708 6 635 11 971

Total financial liabilities 8 457 170 852 179 309 2 334 6 635 188 278

ACCOUNTING CLASSIFICATIONS OF FINANCIAL INSTRUMENTS UNDER IFRS 9 (CONTINUED)as at 31 December 2019


CHANGE IN ACCOUNTING POLICIESas at 31 December 2019

1. Adoption of IFRS 16 Leases As a lessee

The group has applied IFRS 16 retrospectively from 1 January 2019 (the date of initial application), using the modified retrospective approach. Comparatives are not restated under this approach and therefore the group's previously reported financial results up to 31 December 2018 are presented in accordance with IAS 17 Leases and related interpretations. There was no impact to the group's opening retained earnings on adoption of IFRS 16. The core principle of IFRS 16 is that the lessee should recognise all rights and obligations arising from leasing arrangements on the statement of financial position. The most significant change relates to the accounting treatment for operating leases from the lessees' perspective, in that IFRS 16 eliminates the concept of operating and finance leases and introduces a single lessee accounting model where a right-of-use asset together with a lease liability, is recognised for all leases with a term of more than 12 months.

The group elected not to re-assess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date, the group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the group's incremental borrowing rates as at 1 January 2019. The rates applied to discount the operating lease commitments ranged from 7%-18%, due to the multiple jurisdictions the group operates within, i.e. rates were determined for each different jurisdiction. The total discounted operating lease commitments and anticipated lease extensions for properties as at 1 January 2019 amounted to R278 million.

A right-of-use property asset was recognised on the same date at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of initial application (R278 million).

Deferred tax asset of R78 million and deferred tax liabilities of R78 million were raised on 1 January 2019 in respect of the transition IFRS 16 impacts.

In applying IFRS 16 for the first time, the group used certain other practical expedients permitted by the standard, namely the use of a single discount rate for a portfolio of leases with reasonably similar characteristics, the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases (as long as there was no option to extend), the exclusion of initial direct costs for the measurement of the right of use asset at the date of initial application, and the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. The group is applying the exemption for short-term and low value leases, the costs of which are expensed on a monthly basis.

Depreciation on the right-of-use asset and finance costs on the finance lease liability are recognised in the income statement, rather than the previously recognised operating lease charges (under IAS 17). The net impact to earnings for the year ended 31 December 2019 resulting from the difference between operating lease charges under IAS 17 and the IFRS 16 income statement expenses (deprecation and finance costs) is not significant (less than R50 million). As the impact is immaterial, disclosure on the impact of earnings per share has not been provided.

As a lessor

IFRS 16 did not introduce any significant changes for lessors, and as a result the group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.


NOTES




Supplementary informationfor the year ended 31 December 2019

CONTENTS

Page

Analysis of ordinary shareholders’ equity 53

Analysis of group earnings – core earnings 54

South African covered business embedded value 55

Bancassurance – Benefit to Liberty 62

90:10 Shareholder exposure 62

Long-term policyholder liabilities IFRS reconciliation 63

Long-term insurance – New business by distribution channel 64

South African insurance distribution headcount 65

Shareholder Investment Portfolio 66

Shareholder Investment Portfolio percentage allocation 66

Shareholder Investment Portfolio return 67

LibFin Markets – Credit portfolio 67

Summary of group long-term indexed new business, VONB, VONB margin and long-term insurance cash flows 68

SA Retail – Headline earnings 68

SA Retail – Key performance indicators 68

SA Retail – Indexed new business 69

SA Retail – Maintenance cost per policy 69

SA Retail – Negative rand reserves 69

Liberty Corporate – Headline earnings 70

Liberty Corporate – Key performance indicators 70

Reconciliation of Africa regions and operations under ownership review earnings 70

Liberty Health – Headline earnings 71

Liberty Health Cover Product and Heritage Kenya (Heriflex) – Lives serviced 71

Liberty Africa Insurance – Headline earnings 71

Liberty Africa Insurance – Key performance indicators 72Liberty Africa Insurance – Long-term insurance net cash flows 72STANLIB South Africa – Headline earnings 73STANLIB South Africa – Net cash flows and assets under management by asset category 74STANLIB South Africa – Assets under management breakdown by source and asset type 75STANLIB South Africa – Retail investment performance 76STANLIB South Africa – Institutional investment performance 76STANLIB South Africa – Investment performance 77STANLIB Africa – Assets under management 78STANLIB Africa – Assets under management by asset type 78

Group funds invested Contribution to earnings

Rm 2019 2018 2019 2018

South African Insurance Operations 18 690 18 088 2 990 2 204Fixed assets and working capital/ insurance operating surplus(4) 9 126 8 684 2 179 1 592Present value of in-force business 2 7 (5) (5)Investment portfolios 15 205 15 029 1 155 984Subordinated notes at fair value (5 643) (5 632) (339) (367)South African Asset Management STANLIB South Africa 913 852 460 355Africa regions 1 299 1 298 (93) (107)Liberty Africa Insurance 920 926 29 (19)STANLIB Africa 114 84 25 27Operations under ownership review(1) 265 288 (147) (115)Central costs and sundry income(4) (156) (151)Liberty Holdings Limited 2 103 1 731 Operations under ownership review(1) 94 (51)Liberty Two Degrees consolidation adjustment(2),(3) 1 063 940 55 397Preference share dividend (2) (2)Headline earnings 3 254 2 645Preference share dividend 2 2Profit on disposal of subsidiary 141 Remeasurement of disposal groups classified as held for sale (319) (249)Liberty Holdings shareholders’ equity/total earnings 24 068 23 003 3 078 2 398Normalised Liberty Holdings shareholders’ equity/headline earnings 24 068 23 003 3 254 2 645BEE preference shares 78 99 6 8Liberty Two Degrees normalisation adjustment(2),(3) (504) (522) (55) (397)Normalised shareholders’ equity/headline earnings 23 642 22 580 3 205 2 256

(1) Disposals of the short-term insurance technology start-up, STANLIB Ghana and STANLIB Botswana were effective on 27 February 2019, 1 December 2019 and 31 December 2019 respectively. Remaining operations under ownership review at 31 December 2019 were asset management operations in Uganda and Kenya, the Health solutions business and short-term insurance businesses in Botswana and Malawi.

(2) Reversal of the accounting mismatch arising on consolidation of the policyholders obligation linked to L2D units.(3) Represents the difference between Liberty's share of the net asset value of L2D at the end of the period and the listed price of L2D shares multiplied by the number of shares in issue

to Liberty at the end of the period. Comprises R1 046 million (2018: R932 million) at Liberty Group Limited level plus additional R17 million (2018: R8 million) at a Liberty Holdings group level.

(4) The 2018 results have been normalised to reflect the change in operating model as reported in the 31 December 2018 disclosures, whereby certain functions and therefore related costs were transferred from the Liberty holding company to the South African insurance businesses.

ANALYSIS OF ORDINARY SHAREHOLDERS’ EQUITYfor the year ended 31 December 2019


Rm 2019 2018

South African Insurance Operations 2 558 2 634

SA Retail planned margin release including annual contribution increases 1 874 2 028 SA Retail credit life 208 201 SA Retail VIF amortisation (5) (5) Liberty Corporate(1) 85 34 LibFin Markets 396 376

Expected long-term rate of return on Shareholder Investment Portfolio(2) 1 322 1 389 South African Asset Management STANLIB South Africa 430 380

Africa regions 54 8

Liberty Africa Insurance 29 (19) STANLIB Africa 25 27

Central costs and sundry income (152) (145)

Centre costs and sundry income(1) (158) (153) BEE preference share income 6 8

Core operating earnings 4 212 4 266 SA Retail new business strain(1) (633) (704) SA Retail operating variances, assumption changes and other 61 24

Adjusted core operating earnings 3 640 3 586 Operations under ownership review(3) (147) (166) Variance to long-term rate of return on Shareholder Investment Portfolio ( 318) (1 139) STANLIB South Africa sustainable earnings adjustment 30 (25)

Normalised headline earnings 3 205 2 256


(2) 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.(3) Disposals of the short-term insurance technology start-up, STANLIB Ghana and STANLIB Botswana were effective on 27 February 2019, 1 December 2019 and 31 December

2019 respectively. Remaining operations under ownership review at 31 December 2019 were asset management operations in Uganda and Kenya, the Health solutions business and short-term insurance businesses in Botswana and Malawi.

ANALYSIS OF GROUP EARNINGS – CORE EARNINGSfor the year ended 31 December 2019


1. Description of embedded value of South African covered business

SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE for the year ended 31 December 2019

The current version of Advisory Practice Note (APN) 107 became effective for financial years ending on or after 31 December 2018. 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 published IFRS basis, adjusted for the elimination of the carrying value of covered business acquired, removal of the value of any deferred acquisition cost (DAC) and deferred revenue liability (DRL) and 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 published IFRS valuation basis. Covered business is defined as business regulated by the Prudential Authority as long-term insurance business written in Liberty Group Limited.

The required capital is defined as the level of capital that is restricted from distribution to shareholders, comprising an assessment of the likely long-term regulatory capital requirements and any additional capital considered appropriate by the Board given the risks in the business. Required capital has been set in line with risk appetite, adjusted for differences between the published IFRS and regulatory balance sheet. The cost of required capital is the difference between the amount of required capital and the present value of future releases of this capital, allowing for future net of tax investment returns expected to be earned on this 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 on the published IFRS basis, reduced by the cost of required capital allocated to new business. When assessing the cost of required capital, allowance is made for diversification benefits between new and existing business. New business is defined as covered business arising from the sale of new policies, once-off premium increases in respect of in-force covered risk business, and once-off contributions in respect of in-force covered investment 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 end of period assumptions. Investment yields at the point of sale have been used for new conventional annuities, guaranteed investment plans, and embedded derivatives; for all other business the investment yields at the date of reporting have been used.


SOUTH AFRICAN COVERED BUSINESS EMBEDDED VALUE (CONTINUED)for the year ended 31 December 2019

2. Normalised embedded value

Rm (unless otherwise stated) 2019 2018

Risk discount rate %(1) 11,97 12,22 Net worth 18 360 17 706 Ordinary shareholders’ funds on published basis 19 736 19 020 BEE preference share funding 78 99 Adjustment of ordinary shareholders’ funds from published basis(2) (321) (328) Liberty Two Degrees normalisation(3) (1 046) (932) Adjustment for carrying value of in-force business acquired(4) (2) (7) Allowance for fair value of share rights (35) (46) Frank Financial Services allowance for future expenses (50) (100) Net value of life business in-force 15 999 15 981 Value of life business in-force 19 154 19 019 Cost of required capital (3 155) (3 038)

Normalised embedded value 34 359 33 687

3. Normalised embedded value earnings Embedded value at the end of the period 34 359 33 687 Intragroup dividends(5) 2 235 2 252 Funding of restricted share plan 3 80 Beginning of year IFRS 9 transition adjustment 121 Beginning of year adjustment for introduction of new prudential regime(6) (139) Embedded value at the beginning of the period (33 687) (34 581) Embedded value earnings 2 910 1 420 Return on embedded value (%) 8,6 4,1



4. Analysis of normalised embedded value earnings

2019 2018

RmNet

worth

Value of in-force covered

business

Cost of required

capital

Em-bedded

valueNet

worth


business

Cost of required

capital

Em-bedded

value

Embedded value at the end of the period 18 360 19 154 (3 155) 34 359 17 706 19 019 (3 038) 33 687Intragroup dividends(5) 2 235 2 235 2 252 2 252Funding of restricted share plan 3 3 80 80Beginning of year IFRS 9 transition adjustment 121 121Beginning of year adjustment for introduction of new prudential regime(6) (6 932) 5 300 1 493 (139)Embedded value at the beginning of the period (17 706) (19 019) 3 038 (33 687)(11 134) (25 137) 1 690 (34 581)Embedded value earnings 2 892 135 (117) 2 910 2 093 (818) 145 1 420Components of embedded value earnings Value of new business written in the period (824) 1 382 (200) 358 (868) 1 405 (193) 344Expected return on value of in-force business(7) 2 259 114 2 373 2 312 121 2 433Expected net of tax profit transfer to net worth 3 090 (3 090) 3 160 (3 160) Variances/changes in operating assumptions (30) (203) (32) (265) 290 161 56 507Operating experience variances(8) (119) (55) (32) (206) 253 114 56 423Operating assumption changes(9) 94 (195) (101) 52 51 103Changes in modelling methodology (5) 47 42 (15) (4) (19)Development expenses (47) (47) (9) (9)New operating model - expense impact(10) (332) (40) ( 372)Embedded value earnings from operations 2 189 348 (118) 2 419 2 241 678 (16) 2 903Economic adjustments 692 (213) 1 480 (138) (1 496) 161 (1 473)Return on net worth and other adjustments(11) 576 576 2 2Investment variances(12) (387) (254) (12) (653) (250) (1 149) 174 (1 225)Changes in economic assumptions(13) 503 41 13 557 110 (347) (13) (250)Change in allowance for fair value of share rights(14) 11 11 (10) (10)Normalised embedded value earnings 2 892 135 (117) 2 910 2 093 (818) 145 1 420



5. Notes to embedded value

(1) Certain books of business are valued with reference to the entire yield curve while others are valued with reference to the market yield on medium-term South African government stock as shown below.

Investment return p.a.

% 2019 2018

Government stock 9,17 9,42Equities 12,67 12,92Property 10,17 10,42Cash 7,67 7,92The risk discount rate has been set equal to the risk-free rate plus 80% of the equity risk premium 11,97 12,22Maintenance expense inflation rate 7,42 7,67

(2) The amount represents the removal of the DAC and DRL that is held on the published IFRS basis. This reduction in net worth results in an increase in the value of in-force.

(3) This represents the difference between Liberty Group Limited's share of the net asset value of L2D as at the reporting date and the listed price of L2D shares multiplied by the number of shares in issue to Liberty Group Limited 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.

(4) The carrying value of business acquired by Liberty Group Limited 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 R2 million (31 December 2018: R7 million).

(5) These are dividends paid by Liberty Group Limited to Liberty Holdings Limited.

(6) This adjustment and the consequential impact on the components of the embedded value earnings analysis were explained in section 1 of the 31 December 2018 South African Covered Business Embedded Value Report.

(7) The expected return on the value of in-force covered business is obtained by applying the previous year’s risk discount rate to the value of in-force covered business 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.

(8) 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 31 December 2019 operating experience variance of negative R206 million (31 December 2018: positive R423 million) comprised:



Operating experience variances (Rm) Net worth


business

Cost of required

capitalEmbedded

value

2019 SA Retail (101) 61 (32) (72)Mortality and morbidity 98 26 124Policyholder behaviour (145) 5 (140)Other(i) (54) 30 (32) (56)Liberty Corporate(ii) (128) (116) (244)Credit portfolio variance 110 110Total (119) (55) (32) (206)2018 SA Retail 263 57 56 376Mortality and morbidity 189 61 250Policyholder behaviour (115) 50 (65)Other(i) 189 (54) 56 191Liberty Corporate (140) 57 (83)Credit portfolio variance 130 130Total 253 114 56 423

(i) This item includes tax variances.(ii) The amount of negative R116 million on the value of in-force relates to lower overall book growth, which included higher terminations, in the context of a difficult

economic environment.

(9) The amount of negative R101 million (31 December 2018: positive R103 million) is primarily due to negative policyholder behaviour assumption changes which were partially offset by positive expense assumption changes.

(10) This was the anticipated impact of reserving for expenses that resided in Liberty Holdings Limited that transferred to Liberty Group

Limited with effect 1 January 2019, in line with the change to the group's operating model which came into effect on the same date. (11) Reconciliation of embedded value return on net worth and other adjustments to LibFin Investments earnings:

Rm 2019 2018

Shareholder Investment Portfolio after consolidation of L2D 1 004 250Adjustment to reflect L2D at listed share price (87) (207)Shareholder Investment Portfolio earnings 917 43Remove 90:10 book (178) 27Frank Financial Services 19 (39)BEE preference scheme 7 8Central treasury investments 64 61Other(i) (253) (98)Return on net worth and other adjustments 576 2

(i) This includes continued investment in the modernisation of the group's investment platform to better serve customers of the group and the movement in the fair value adjustments to financial liabilities arising from own credit.

5. Notes to embedded value (continued)



(12) The amount of negative R653 million (31 December 2018: negative R1 225 million) is a result of the investment returns for the period being below assumption.

(13) The amount of positive R557 million (31 December 2018: negative R250 million) relates to changes in economic assumptions as described in note (1).

(14) The amount of positive R11 million (31 December 2018: negative R10 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 share price over the reporting period.

Other bases and assumptions

Taxation has been allowed for at rates and on bases applicable to Section 29A of the Income Tax Act. Full taxation relief on expenses to the extent permitted was assumed. Capital gains taxation has been taken into account in the embedded value. No adjustment has been made for the discounting of tax provisions in the embedded value.

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

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

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.

5. Notes to embedded value (continued)



6. Sensitivity to risk discount rate and other assumptions In order to indicate sensitivity to varying assumptions, the value of the in-force life business less cost of required capital and the value of the new business written for Liberty Group Limited are shown below for various changes in assumptions. The initial reserve and solvency capital requirement has been kept constant. Certain of the sensitivities not only change future experience but also future reserving levels and this has been captured through the change in the value of in-force covered business. In addition, management action has been assumed for demographic sensitivities on risk contracts where appropriate. Each value is shown with only the indicated parameter being changed.

Rm

Value of in-force life

business less cost of

required capital at

31 December 2019

Value of new business

written in 2019

Value of in-force life

business less cost of

required capital at

31 December 2018

Value of new business

written in 2018

Base value 15 999 358 15 981 344Value of in-force/new business 19 154 558 19 019 537Cost of required capital (3 155) (200) (3 038) (193)100 basis point increase in risk discount rate 14 199 230 14 251 216Value of in-force/new business 18 062 473 17 954 450Cost of required capital (3 863) (243) (3 703) (234)100 basis point decrease in interest rate environment 16 496 484 16 385 456Value of in-force/new business 19 609 683 19 391 648Cost of required capital (3 113) (199) (3 006) (192)10% fall in equity and property market values 15 472 15 435 Value of in-force 18 627 18 473 Cost of required capital (3 155) (3 038) 100 basis point increase in equity and property returns 17 002 400 17 004 386Value of in-force/new business 19 709 573 19 624 552Cost of required capital (2 707) (173) (2 620) (166)10% decrease in maintenance expenses 16 942 432 16 889 422Value of in-force/new business 20 097 632 19 927 615Cost of required capital (3 155) (200) (3 038) (193)10% decrease in new business acquisition expenses (other than commissions) 494 478Value of new business 694 671Cost of required capital (200) (193)10% decrease in withdrawal rates 17 634 552 17 624 528Value of in-force/new business 20 789 752 20 662 721Cost of required capital (3 155) (200) (3 038) (193)5% decrease in mortality and morbidity for life assurance business 17 583 495 17 464 468Value of in-force/new business 20 738 695 20 502 661Cost of required capital (3 155) (200) (3 038) (193)5% decrease in mortality for annuity business 15 766 346 15 751 339Value of in-force/new business 18 921 546 18 789 532Cost of required capital (3 155) (200) (3 038) (193)


Liberty share (Rm) 2019 2018

Credit Life IFRS headline earnings 208 201Embedded value of in-force contracts 537 505Other insurance products Embedded value of new business 53 49Embedded value of in-force contracts 808 811STANLIB Net service fees on assets under management sourced from Standard Bank distribution 495 460

BANCASSURANCE – BENEFIT TO LIBERTYas at 31 December 2019

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 expected amount for the period 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 2019 2018

Exposure as at the beginning of the period 3 472 3 920Expected earnings 267 287Variance (89) (314)Total net earnings 178 ( 27)Exposure as at the end of the period 3 172 3 472

90:10 SHAREHOLDER EXPOSUREas at 31 December 2019


LONG-TERM POLICYHOLDER LIABILITIES IFRS RECONCILIATIONas at 31 December 2019

Rm 2019 2018

Policyholder liabilities at beginning of the period net of reinsurance 302 870 314 616Policyholder liabilities 310 994 322 918Reinsurance liabilities 283 663Policyholder assets (6 708) (7 484)Reinsurance assets (1 699) (1 481)Transfers to policyholder liabilities 12 678 (12 157)Net premium income from insurance contracts and inflows from investment contracts 56 219 55 075Net insurance premiums 38 250 37 174Fund inflows from investment contracts 17 969 17 901Investment returns 30 883 1 485Net claims and policyholder benefits (56 361) (53 073)Net insurance claims (38 680) (36 990)Fund outflows from investment contracts (17 681) (16 083)Acquisition costs (3 667) (3 831)Management expenses, finance costs and profit share allocations (10 061) (9 916)Taxation (2 372) ( 876)Operating profit from insurance operations (1 963) (1 021)Foreign currency translation reserve (64) 411Policyholder liabilities at end of period net of reinsurance 315 484 302 870Policyholder liabilities 324 246 310 994Reinsurance liabilities 246 283Policyholder assets (7 017) (6 708)Reinsurance assets (1 991) (1 699)


Recurring premiums Single premiums Total premiums Indexed premiums

Rm 2019 2018 2019 2018 2019 2018 2019 2018

Retail 6 042 5 899 22 088 22 131 28 130 28 030 8 252 8 112Broker 1 073 1 149 6 498 5 552 7 571 6 701 1 723 1 704Bancassurance 3 040 2 787 4 869 6 126 7 909 8 913 3 527 3 399Tied channels(2) 1 659 1 717 10 372 10 179 12 031 11 896 2 697 2 736Other 270 246 349 274 619 520 305 273Institutional(3) 1 173 1 144 1 148 1 233 2 321 2 377 1 288 1 268Broker 705 740 381 515 1 086 1 255 744 792Bancassurance 19 17 19 17 19 17Tied channels(2) 416 376 603 650 1 019 1 026 476 441Other 33 11 164 68 197 79 49 18

Total new business 7 215 7 043 23 236 23 364 30 451 30 407 9 540 9 380Split between: South Africa(1) SA Retail 5 795 5 687 21 775 21 962 27 570 27 649 7 973 7 884Broker 1 068 1 143 6 362 5 483 7 430 6 626 1 704 1 691Bancassurance 2 948 2 722 4 859 6 111 7 807 8 833 3 434 3 333Tied channels(2) 1 527 1 585 10 372 10 177 11 899 11 762 2 565 2 604Other 252 237 182 191 434 428 270 256Liberty Corporate(3) 1 011 1 010 1 126 1 218 2 137 2 228 1 124 1 132Broker 641 675 359 500 1 000 1 175 678 725Bancassurance 19 17 19 17 19 17Tied channels(2) 348 318 603 650 951 968 408 383Other 3 164 68 167 68 19 7

Total new business 6 806 6 697 22 901 23 180 29 707 29 877 9 097 9 016Liberty Africa Insurance Retail 247 212 313 169 560 381 279 228Broker 5 6 136 69 141 75 19 13Bancassurance 92 65 10 15 102 80 93 66Tied channels(2) 132 132 2 132 134 132 132Other 18 9 167 83 185 92 35 17Institutional 162 134 22 15 184 149 164 136Broker 64 65 22 15 86 80 66 67Tied channels(2) 68 58 68 58 68 58Other 30 11 30 11 30 11

Total new business 409 346 335 184 744 530 443 364

(1) Includes premium escalations for SA Retail; excludes STANLIB Multi-manager.(2) Tied channels include Agency, Liberty entrepreneurs and Liberty@work.(3) 2018 adjusted for change in classification in Liberty Corporate from recurring to single premiums for additional investment voluntary contributions.

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

for the year ended 31 December 2019


SOUTH AFRICAN INSURANCE DISTRIBUTION HEADCOUNTas at 31 December 2019

0

300

600

900

1200

1500

SOUTH AFRICAN INSURANCE DISTRIBUTION HEADCOUNT

Agency(1) Liberty entrepreneurs(1) Liberty@work(1) Standard BankFinancial Consultants

Broker Consultants

929

1 160

760

490

98

(1)Tied agents December 2015 December 2016 December 2017 December 2018 December 2019


2019 2018

Local Foreign Total Local Foreign Total Exposure category Rm Rm Rm % Rm Rm Rm %

Equities 4 437 3 587 8 024 29 4 403 3 736 8 139 30Bonds 8 657 584 9 241 34 8 051 734 8 785 32Cash 4 671 20 4 691 17 4 602 213 4 815 18Property 2 736 2 736 10 2 533 2 533 9Other 1 794 1 019 2 813 10 1 762 1 158 2 920 11Total 22 295 5 210 27 505 100 21 351 5 841 27 192 100Assets backing capital 15 205 55 15 029 55Assets backing policyholder liabilities 9 128 33 8 691 3290:10 exposure 3 172 12 3 472 13Reconciliation to IFRS shareholders' equity Shareholder Investment Portfolio 27 505 27 192 Less: 90:10 exposure (3 172) (3 472) Less: Subordinated notes (5 643) (5 632) South African insurance operations group funds 18 690 18 088 Liberty Group Limited group's

IFRS shareholders' equity 19 736 19 020 Insurance group funds 18 690 18 088 Liberty Two Degrees(1) 1 046 932

(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.

SHAREHOLDER INVESTMENT PORTFOLIOas at 31 December 2019

2019 2018

Exposure category %

Assets backing

capital

Assets backing

policyholder liabilities

90:10 exposure Total

Assets backing

capital

Assets backing

policyholder liabilities

90:10 exposure Total

Local assets Equities 11 5 16 10 6 16Bonds, cash and property 23 33 2 58 31 22 3 56Other 7 7 7 7Foreign assets Equities 10 3 13 3 9 2 14Bonds, cash and property 1 2 3 1 2 3Other 3 3 4 4Total 55 33 12 100 55 32 13 100

SHAREHOLDER INVESTMENT PORTFOLIO PERCENTAGE ALLOCATION as at 31 December 2019


Rm 2019 2018

Realised gross result 2 188 1 027Taxation (619) (194)Subordinated notes at fair value (503) (525)Expenses (including asset management fees) (62) (58)Net profit 1 004 250Gross return (%) 8,0 3,7

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.

SHAREHOLDER INVESTMENT PORTFOLIO RETURNas at 31 December 2019

Rm (unless otherwise stated) 2019 2018

Net earnings from credit portfolio 282 302Total LibFin assets (Rbn) 70 65Credit portfolio assets (Rbn) 52 45Banks, treasuries and shorter dated assets (Rbn) 18 20

LIBFIN MARKETS – CREDIT PORTFOLIOas at 31 December 2019


Rm 2019 2018

Expected profit and premium escalations 2 029 2 111Variances, modelling and assumption changes 12 116New business strain(1) (633) (704)Project and non-cost per policy expenses (6) (172)Direct financial services (9) (31)Other 50 109Earnings before bancassurance 1 443 1 429Liberty share of credit life bancassurance (net of all taxes) 208 201Complex bancassurance preference dividend (146) (86)Headline earnings 1 505 1 544


Rm (unless stated otherwise) 2019 2018

Net customer cash flows 142 2 589Insurance products 197 2 065LISP (55) 524Gross sales (excluding LISP) 26 155 26 260Indexed new business (excluding LISP) 6 558 6 495Value of new business 290 271Retail margin excluding STANLIB (%) 1,0 0,9Retail new business margin including STANLIB (%) 0,9 0,8

SA RETAIL – HEADLINE EARNINGSfor the year ended 31 December 2019

SA RETAIL – KEY PERFORMANCE INDICATORS as at 31 December 2019

SUMMARY OF GROUP LONG-TERM INDEXED NEW BUSINESS, VONB, VONB MARGIN AND LONG-TERM INSURANCE CASH FLOWSfor the year ended 31 December 2019

2019 2018 2019 2018 2019 2018 2019 2018

Indexed new

business

Indexed new

business VONB VONBVONB

marginVONB

margin

Net customer

cash flows

Net customer

cash flowsBusiness unit Rm Rm Rm Rm % % Rm Rm

SA Retail 6 558 6 495 290 271 0,9 0,8 197 2 065Liberty Corporate(1) 1 124 1 132 68 73 0,9 0,8 (1 030) (449)Liberty Africa Insurance 443 364 49 27 4,1 2,8 691 385Total 8 125 7 991 407 371 1,0 0,9 (142) 2 001

(1) 2018 adjusted for change in classification in Liberty Corporate from recurring to single premiums for additional investment voluntary contributions.


Rm 2019 2018

SA Retail Insurance (excluding emerging consumer market) 5 853 5 860Emerging consumer market 272 252Total SA Retail Insurance 6 125 6 112Direct Financial Services 96 84STANLIB ‘on balance sheet’ sales 337 299Total ‘on balance sheet’ sales 6 558 6 495STANLIB ‘off-balance sheet’ sales 3 368 3 169GateWay LISP ‘off-balance sheet’ sales 232 258Total SA Retail distribution 10 158 9 922

SA RETAIL – INDEXED NEW BUSINESSas at 31 December 2019

R 2019 2018

Valuation basis Complex(1) 744 715Simplex 372 358Annuities 372 358

(1) The recalculated 31 December 2018 maintenance cost per policy (previously R671 for complex) is after allowing for the impact of moving expenses from Liberty Holdings Limited to Liberty Group Limited as a result of a change to the operating model as reported in the 31 December 2018 disclosures.

Rm 2019 2018

Published IFRS basis 14 860 14 903

(1) Gross of taxation.

By their nature, "negative rand reserves" include offsets between policies with positive and negative reserves. The policies included here are on products where the aggregate rand reserves are negative across the product type (e.g. risk, universal life and certain investment products). This therefore excludes those that in aggregate have positive rand reserves such as annuities, with-profit products and guaranteed investment plans. Additionally the embedded derivative liabilities are also excluded from the above.

SA RETAIL – MAINTENANCE COST PER POLICYas at 31 December 2019

SA RETAIL – NEGATIVE RAND RESERVES(1)




Gross sales 2 137 2 228Indexed new business(1) 1 124 1 132Value of new business 68 73New business margin (%) 0,9 0,8Net customer cash flows (1 030) (449)

(1) 2018 adjusted for change in classification in Liberty Corporate from recurring to single premiums for additional investment voluntary contributions.

2019 2018

Rm

Africa regions -

remaining operations

Operations under

ownership review(1) Total

Africa regions -

remaining operations

Operations under

ownership review(1) Total

Liberty Africa Insurance 29 (14) 15 (19) (18) (37)Liberty Health (126) (126) (78) (78)STANLIB Africa 25 (7) 18 27 (19) 8Total Africa regions 54 (147) (93) 8 (115) (107)Short-term insurance (51) Total operations under ownership review (147) (166)

(1) Under IFRS these are disclosed as disposal groups classified as held for sale.

LIBERTY CORPORATE – KEY PERFORMANCE INDICATORSfor the year ended 31 December 2019

RECONCILIATION OF AFRICA REGIONS AND OPERATIONS UNDER OWNERSHIP REVIEW EARNINGSfor the year ended 31 December 2019

Rm 2019 2018

Gross contribution 1 120 1 036Underwriting margin 462 455Fee income 570 559Pension businesses and other income 88 22Expenses and other items(1) (1 000) (981)Profit before taxation 120 55Taxation (35) (21)Headline earnings 85 34


LIBERTY CORPORATE – HEADLINE EARNINGSfor the year ended 31 December 2019


Rm 2019 2018

Loss before depreciation and amortisation (129) (116)Amortisation and depreciation (6) (7)Loss before taxation (135) (123)Taxation 9 45Headline loss (126) (78)

LIBERTY HEALTH – HEADLINE EARNINGS for the year ended 31 December 2019

Thousands 2019 2018 2017 2016

Region Eastern Africa 63 56 57 55Western Africa 31 30 36 35Southern Africa 37 32 29 31Total 131 118 122 121

Liberty-owned licenses 76 69 79 81Third-party licenses 55 49 43 40

LIBERTY HEALTH COVER PRODUCT AND HERITAGE KENYA (HERIFLEX) – LIVES SERVICEDas at 31 December 2019

Rm 2019 2018

Insurance entities earnings(1) Long-term insurance 68 60Short-term insurance 80 (7)Headline earnings (before head office expenses) 148 53Non-controlling shareholders share of headline earnings (65) (24)Liberty share of headline earnings 83 29Head office costs (68) (66)Net headline earnings attributable to Liberty 15 (37)

(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 – HEADLINE EARNINGSfor the year ended 31 December 2019


Rm 2019 2018

Net premiums by product type Retail 692 584Single 97 91Recurring 595 493Institutional 913 704Single 369 203Recurring(1) 544 501

Net premium income from insurance contracts and inflows from investment contracts(1) 1 605 1 288Net claims and policyholders benefits by product type Retail (428) (359)Death, critical illness and disability claims (115) (58)Policy surrender and maturity claims (299) (289)Annuity payments (14) (12)Institutional (486) (544)Death, critical illness and disability claims (39) (118)Scheme terminations and member withdrawals(1) (447) (426)

Net claims and policyholders benefits(1) (914) (903)Net cash flow split as follows: 691 385Retail 264 225Institutional 427 160

(1) Recurring premiums and scheme terminations and member withdrawals have been reduced to normalise for a large internal switch of funds in 2019.

LIBERTY AFRICA INSURANCE – LONG-TERM INSURANCE NET CASH FLOWSfor the year ended 31 December 2019


Embedded value of new business written in period 49 27New business margin (%) 4,1 2,8Long term: Gross sales 744 530Indexed new business 443 364Net customer cash flows 691 385Short term: Net customer cash flows 368 246Claims loss ratio (%) 41 54

LIBERTY AFRICA INSURANCE – KEY PERFORMANCE INDICATORSfor the year ended 31 December 2019



Net fee income 1 747 1 672Base fees 1 722 1 651Performance fees 25 21Total operating expenses (1 259) (1 295)Operating expenses (1 157) (1 237)Non-recurring projects and expenses (102) (58)

Profit before investment income 488 377Other income 160 116Profit before taxation 648 493Taxation (188) (138)Total headline earnings 460 355Average margin (bps) 31 34Average assets under management (Rbn) 563 558

STANLIB SOUTH AFRICA – HEADLINE EARNINGSfor the year ended 31 December 2019


Net cash flows Assets under management

Rm 2019 2018 2019 2018

Retail 8 148 6 098 241 307 221 297Fixed interest 11 497 5 722 66 354 55 056Equity 51 (562) 10 296 9 881Property (1 742) (1 146) 7 988 9 661Money market 89 (48) 24 842 24 754Absolute return (309) 2 710 8 096 8 220Balanced (1 613) 242 22 859 22 919International 140 (808) 13 102 10 565LISP 459 360 85 734 77 829Structured (424) (372) 2 036 2 412Institutional 7 042 10 051 130 764 119 450Fixed interest 3 915 5 577 32 400 26 489Equity 2 054 (624) 12 582 9 837Property (1 893) 1 151 5 548 8 340Money market (835) 7 042 64 404 64 309Absolute return 2 231 (647) 3 417 869Balanced 715 (2 267) 8 643 7 273International 855 (181) 3 044 1 701Other 726 632Liberty – Delta LISP 2 551 (397) 46 387 39 425Liberty – intragroup(1) (7 606) (16 567) 149 389 148 392Total 10 135 (815) 567 847 528 564

(1) The 31 December 2018 Liberty intergroup value for property includes an adjustment to transfer out the Liberty property portfolio assets of R20 361 million to L2D internal asset manager.

STANLIB SOUTH AFRICA – NET CASH FLOWS AND ASSETS UNDER MANAGEMENT BY ASSET CATEGORYas at 31 December 2019


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STANLIB SOUTH AFRICA – ASSETS UNDER MANAGEMENT BREAKDOWN BY SOURCE AND ASSET TYPEas at 31 December 2019


Rolling period

One year Three-year Five-yearCore retail funds – quartile performance Fund name 2019 2018 2019 2018 2019 2018

STANLIB Equity 2 1 2 3 2 3STANLIB SA Equity 4 3 4 4 4 4 STANLIB Balanced 2 1 2 3 3 4STANLIB Balanced Cautious 1 3 3 4 3 3STANLIB Absolute Plus 4 1 1 1 1 1 STANLIB Bond 1 3 1 1 1 2STANLIB Income 2 1 1 1 1 1STANLIB Money Market 2 2 2 2 2 2STANLIB Flexible Income 1 4 4 4 4 4STANLIB Aggressive Income(1) 3 1 2 STANLIB Property Income 2 4 4 3 3 3

(1) The STANLIB Aggressive Income Fund was rationalised during 2019 and hence no current year information is provided.

Rolling period

One year Three-year Five-yearSurvey funds (Alexander Forbes Surveys – quartile performance) 2019 2018 2019 2018 2019 2018

Stanlib Core Bond 2 3 2 1 2 2Money Market 4 4 3 3 3 4STANLIB Property Income Fund 2 4 4 4 4 4 Large Manager – Global 1 1 3 4 4 4Full Global Mandate 2 1 3 4 4 4Domestic Only Mandate 4 4 4 4 4 4 Stanlib Core Equity 4 4 4 4 4 4STANLIB Multi Factor Equity(1) 1 3 3 3 3 3 STANLIB Absolute Plus Fund 3 1 2 3 2 1

(1) Previously called the STANLIB Enhanced Index Fund.

STANLIB SOUTH AFRICA – RETAIL INVESTMENT PERFORMANCEfor the year ended 31 December 2019

STANLIB SOUTH AFRICA – INSTITUTIONAL INVESTMENT PERFORMANCEfor the year ended 31 December 2019


■ December 2016 ■ December 2017 ■ December 2018 ■ December 2019

5 years3 years1 year

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

0

20

40

60

80

100

8080

6060

5050

■ December 2016 ■ December 2017 ■ December 2018 ■ December 2019

0

20

40

60

80

5656

2222 2222

5 years3 years1 year

% OF INSTITUTIONAL FUNDS IN 1ST AND 2ND QUARTILE

STANLIB SOUTH AFRICA – INVESTMENT PERFORMANCEas at 31 December 2019


Assets under management (Rm) 2019 2018

Opening market value 51 204 52 531Net cash inflows (2 043) (7 735)External (2 347) (8 564)Liberty – intragroup 304 829STANLIB Kenya discontinued mandates(1) (11 181) STANLIB Africa disposals of entities(1) (14 236) Capital appreciation 4 652 6 408Closing market value 28 396 51 204Segregated funds 14 458 31 232Unit trusts 4 741 7 264Money market 9 197 12 708Total assets under management 28 396 51 204

(1) Operations under ownership review include STANLIB Kenya and STANLIB Uganda. STANLIB Botswana and STANLIB Ghana were disposed of during the period under review.

Assets under management (Rm) 2019 2018

Remaining operations(1) 18 835 19 136Fixed interest 3 954 4 756Equity 3 613 4 429Money market 8 107 8 596Other 3 161 1 355Operations under ownership review(2) 9 561 32 068Fixed interest 1 498 15 181Equity 5 573 4 963Property 1 400 2 810Money market 1 090 4 112Other 5 002

Total assets under management 28 396 51 204Combined Fixed interest 5 452 19 937Equity 9 186 9 392Property 1 400 2 810Money market 9 197 12 708Other 3 161 6 357 28 396 51 204

(1) Remaining operations include STANLIB Namibia, STANLIB Namibia Unit Trust Management Company, STANLIB Swaziland and STANLIB Lesotho.(2) Operations under ownership review include STANLIB Kenya and STANLIB Uganda. STANLIB Botswana and STANLIB Ghana were disposed of during the period under review. Under

IFRS these are disclosed as disposal groups classified as held for sale.

STANLIB AFRICA – ASSETS UNDER MANAGEMENTas at 31 December 2019

STANLIB AFRICA – ASSETS UNDER MANAGEMENT BY ASSET TYPEas at 31 December 2019


Fair value hierarchy1. Asset hierarchy

The table below analyses the fair value measurement of applicable assets by level.

2019Rm (Audited) Level 1 Level 2 Level 3 Total

Equity instruments 109 127 28 3 956 113 111Listed equities on the JSE or foreign exchanges 103 378 103 378Unlisted equities 28 2 694 2 722Scrip assets – listed equities on the JSE 5 749 5 749Interests in joint ventures 1 262 1 262Debt instruments 80 096 68 430 189 148 715Listed preference shares on the JSE or foreign exchanges 3 547 3 547Unlisted preference shares 104 189 293Listed term deposits on BESA, JSE or foreign exchanges 70 725 17 960 88 685Unlisted term deposits 50 366 50 366Repurchase agreements and collateral assets 5 824 5 824Mutual funds(1) 11 083 102 045 1 224 114 352Property 125 910 1 035Equity instruments 3 542 15 371 657 19 570Interest-bearing instruments 60 22 332 22 392Mixed asset classes 7 356 63 432 567 71 355Investment policies 2 342 901 3 243Derivative assets held for trading and for hedging 7 739 7 739Equity instruments 976 976Currency exchange instruments 262 262Interest rate instruments 6 501 6 501Policy loans receivable 665 665Properties 36 294 36 294Collateral deposits receivable 2 264 2 264Prepayments and other receivables held at fair value throught profit or loss 2 284 2 284Cash and cash equivalents held at fair value through profit or loss 11 173 11 173Total assets subject to fair value hierarchy analysis 200 306 194 021 45 513 439 840Other assets not subject to fair value hierarchy analysis: Intangible assets 611Defined benefit pension fund employer surplus 117Equipment 1 078Interest in joint venture – equity accounted 54Interest in associates – equity accounted 10Deferred taxation 317Deferred acquisition costs 790Long-term policyholder assets – insurance contracts 7 017Reinsurance assets 2 409Policy loans receivable 248Prepayments other receivables held at amortised cost 817Insurance contract receivables 1 578Cash and cash equivalents held at amortised cost 6 204Disposal groups classified as held for sale 584Total assets as per statement of financial position 461 674

(1) Mutual funds are categorised into property, equity or interest-bearing instruments based on a minimum of 80% of the underlying asset composition of the fund by value being of a like category. In the event of “no one category meeting this threshold” it is classified as mixed assets class.

FAIR VALUE MEASUREMENT DISCLOSURESfor the year ended 31 December 2019


FAIR VALUE MEASUREMENT DISCLOSURES (CONTINUED)for the years ended 31 December 2019

The table below analyses the fair value measurement of applicable assets by level.


Equity instruments 106 606 1 3 248 109 855Listed equities on the JSE or foreign exchanges 99 978 99 978Unlisted equities 1 1 951 1 952Scrip assets – listed equities on the JSE 6 628 6 628Interests in joint ventures 1 297 1 297Debt instruments 85 890 51 351 186 137 427Listed preference shares on the JSE or foreign exchanges 3 138 3 138Unlisted preference shares 110 186 296Listed term deposits on BESA, JSE or foreign exchanges 77 377 8 374 85 751Unlisted term deposits 42 212 42 212Repurchase agreements and collateral assets 5 375 655 6 030Mutual funds(1) 6 127 91 003 1 533 98 663Property 12 938 950Equity instruments 1 449 13 824 760 16 033Interest-bearing instruments 107 17 231 17 338Mixed asset classes 4 559 59 010 773 64 342Investment policies 8 219 1 243 9 462Derivative assets held for trading and for hedging 6 235 6 235Equity instruments 793 793Currency exchange instruments 1 039 1 039Interest rate instruments 4 403 4 403Policy loans receivable 737 737Properties 35 961 35 961Collateral deposits receivable 4 105 4 105Prepayments and other receivables held at fair value through profit or loss 3 037 3 037Cash and cash equivalents held at fair value through profit or loss 10 024 10 024Total assets subject to fair value hierarchy analysis 198 623 170 938 45 945 415 506Other assets not subject to fair value hierarchy analysis: Intangible assets 572Defined benefit pension fund employer surplus 140Equipment 1 038Interest in joint venture – equity accounted 56Interest in associates – equity accounted 10Deferred taxation 245Deferred acquisition costs 777Long-term policyholder assets – insurance contracts 6 708Reinsurance assets 2 119Policy loans receivable(3) 340Prepayments other receivables held at amortised cost 664Insurance contract receivables 1 252Cash and cash equivalents held at amortised cost 6 950Disposal groups classified as held for sale 897Total assets as per statement of financial position 437 274

(1) Mutual funds are categorised into property, equity or interest-bearing instruments based on a minimum of 80% of the underlying asset composition of the fund by value being of a like category. In the event of “no one category meeting this threshold” it is classified as mixed assets class.

1. Asset hierarchy (continued)



2. Liability hierarchyThe table below analyses the fair value measurement of applicable liabilities by level.


Policyholder long-term investment contract liabilities 107 891 107 891Third-party financial liabilities arising on consolidation of mutual funds 55 218 1 540 56 758Financial liabilities 5 673 5 673Repurchase agreements liabilities 5 929 5 929Liabilities held for trading and for hedging 7 932 7 932Insurance and other payables held at fair value through profit or loss 5 753 5 753Collateral deposits payable 6 545 6 545Total liabilities subject to fair value hierarchy analysis 189 188 7 293 196 4812018Rm (Audited) Policyholder long-term investment contract liabilities 99 813 99 813Third-party financial liabilities arising on consolidation of mutual funds 46 628 1 558 48 186Financial liabilities 6 478 6 478Repurchase agreements liabilities 5 771 5 771Liabilities held for trading and for hedging 8 457 8 457Insurance and other payables held at fair value through profit or loss 4 628 4 628Collateral deposits payable 5 976 5 976Total liabilities subject to fair value hierarchy analysis 173 123 6 186 179 309



3. Fair value disclosure of financial assets and liabilities that are measured at amortised costThe fair value of financial assets and liabilities which are measured at amortised cost is categorised into the following fair value hierarchies:

2019Rm (Audited)

Amortised cost Fair value Level 1 Level 2 Level 3

Financial assets measured at amortised cost Policy loans receivable – net carrying value 248 230 230Financial liabilities measured at amortised cost Loan facilities 2 119 2 084 2 084

2018Rm (Audited) Financial assets measured at amortised cost Policy loans receivable – net carrying value 340 316 316Financial liabilities measured at amortised cost Loan facilities(1) 1 626 1 626 1 626

(1) The financial liability for 2018 was drawn down on 1 November 2018, therefore the amortised cost and fair value is materially the same.

The fair value of prepayments and other receivables, cash and cash equivalents and other payables that are all held at amortised cost approximate their carrying value and are not included in the above hierarchy table as their settlement terms are short-term and therefore from a materiality perspective fair values are not required to be modelled.




4. Reconciliation of level 3 assets and liabilities The table below analyses the movement of level 3 assets for the period.


Balance at the beginning of the year - excluding prepayments and other receivables 42 908 39 751IFRS 9 reclassification from amortised cost to fair value through profit or loss of policy loans receivable 831Balance restated after IFRS 9 adjustment 42 908 40 582Fair value adjustment recognised in profit or loss as part of investment gains(1) (259) 823Fair value adjustment recognised in other comprehensive income(1) (8) 19Foreign currency translation 41Additions 1 283 1 456Disposals (707) (276)Movements on third-party share of financial instruments in mutual funds 12 263Balance at the end of the year - excluding prepayments and other receivables 43 229 42 908Financial instruments – prepayments and other receivables(2) 2 284 3 037Balance at the end of the year 45 513 45 945Properties 36 294 35 961Financial instruments – equity and mutual funds 5 180 4 781Financial instruments – debt 189 186Financial instruments – policy loans receivable 665 737Financial instruments – prepayments and other receivables 2 284 3 037Financial instruments – investment policies 901 1 243

(1) Included in the fair value adjustments is a R341 million unrealised loss (2018: R713 million unrealised gain).(2) No movement analysis is provided for prepayments and other receivables that are included as level 3 assets in the fair value hierarchy. These amounts are typically short term

trade debtors and arise in the ordinary course of business. It is impracticable to separate additions and disposals.

The liabilities categorised as level 3 relate to the mutual fund third party portion. The movement in the year is prepared below.

Rm 2019 2018

Balance at the beginning of the year 1 558 1 229Unrealised fair value adjustments and net movements on consolidated mutual funds (18) 329Balance at the end of the year 1 540 1 558

No movement analysis is provided for other payables that are included as level 3 liabilities in the fair value hierarchy. These amounts are typically short term trade creditors and arise in the ordinary course of business. It is impracticable to separate additions and disposals.




5 Sensitivity analysis of level 3 assets 5.1 Investment and owner-occupied property

Investment and owner-occupied properties fair values were derived by determining sustainable net rental income, to which an appropriate exit capitalisation rate is applied. Exit capitalisation rates are adjusted for occupancy levels, age of the building, location and expected future benefit of recent alterations.

The exit capitalisation rates applied at 31 December 2019 range between 6,5% to 10% (2018: between 6,3% to 9,5%). This compares to the ten year government yield of 9,17% (2018: 9,42%). The non observable adjustments included in the valuation can therefore be referenced to the variance to the ten year government rate. Discount rates in 2019 were between 12,25% to 15,25%.

Both the investment and the owner-occupied properties are largely linked to policyholder benefits and consortium non-controlling interests which limits the impact to group ordinary shareholder comprehensive income or equity for any changes in the fair value measurement.

The tables below indicates the sensitivity of the aggregate market values for a 1% change in the exit capitalisation rate.

Change in exit capitalisation

rate

2019Rm (Audited) Total

1%increase

1%decrease

Properties below 6,8% capitalisation rate 16 151 14 593 18 168Properties between 6,8 – 8,5% capitalisation rate 16 559 15 067 18 271Properties between 8,5 – 10,0% capitalisation rate 3 584 3 325 3 908Total 36 294 32 985 40 3472018Rm (Audited) Properties below 6,8% capitalisation rate 31 033 26 933 36 015Properties between 6,8 – 8,5% capitalisation rate 1 867 1 660 2 133Properties between 8,5 – 9,5% capitalisation rate 3 061 2 757 3 441Total 35 961 31 350 41 589

The table below indicates the sensitivity of the aggregate market values for a 1% change in the discount rate.

Change in discount rate

2019Rm (Audited) Total

1%increase

1%decrease

Total properties 36 294 34 862 37 4902018 Rm (Audited) Total

1%increase

1%decrease

Total properties 35 961 34 558 37 170




5.2 Financial instrument assets

Audited

2019Audited

2018

Rm

Discount rate

% Rm

Discount rate

%

Equities and mutual funds Unlisted equities 2 694 10–14 1 951 10–14Interests in joint venture 1 262 14 1 297 14Mutual funds 1 224 10–19 1 533 10–19Investment policies 901 11 1 243 11Debt Unlisted preference shares 189 12 186 12Policy loans receivable 665 12 737 12

Approximately 98% (2018: 97%) of these assets are allocated to policyholder investment-linked portfolios and therefore changes in estimates would be offset by equal changes in liability values.

Audited

2019Audited

2018

Change in discount rate Change in discount rate

Net shareholder

exposure Rm

1% increase

Rm

1% decrease

Rm

Net shareholder

exposure Rm

1% increase

Rm

1% decrease

Rm

After tax net impact to profit or loss and shareholder equity 1 344 (82) 95 1 191 (83) 97

5. Sensitivity analysis of level 3 assets (continued)




6 Group’s valuation processThe group’s appointed asset managers have qualified valuators that perform the valuations of financial assets and appointed independent valuators to determine fair values of properties required for financial reporting purposes, including level 3 fair values. These valuations are reviewed and approved every reporting period by the group balance sheet management committee. The committee is chaired by the group’s financial director.

The fair values of level 3 instruments are determined using valuation techniques that incorporate certain assumptions that are not supported by prices from observable current market transactions in the same instruments and are not based on available observable market data. Such assumptions include the assumed risk adjusted discount rate applied to estimate future cash flows and the liquidity and credit spreads applied to debt instruments. Changes in these assumptions could affect the reported fair value of the financial instruments.

6.1 Valuation techniques used in determining the fair value of assets and liabilities classified within level 2

INSTRUMENT VALUATION BASIS/TECHNIQUES MAIN ASSUMPTIONS

Unlisted preference shares Discounted cash flow model (DCF) Bond and interbank swap interest rate curves Agreement interest rate curves Issuer credit ratings Liquidity spreads

Unlisted term deposits, illiquid listed term deposits and senior secured term facility

DCF Bond and interbank swap interest rate curves Issuer credit ratings Liquidity spreads

Mutual funds Quoted put (exit) price provided by the fund manager

Price – not applicableNotice period – bond interest rate curves

Investment policies Quoted put/surrender price provided by the issuer, adjusting for any applicable notice periods (DCF)

Face value Premium burdenLife expectancy Nond and interbank swap interest rate curves

Derivative assets and liabilities Option pricing models Volatility and correlation factors DCF Bond and interbank swap interest rate curves Forward equity and currency rates

Policyholder investment contracts liabilities– unit-linked policies

Current unit price of underlying unitised financial asset that is linked to the liability, multiplied by the number of units held

Not applicable

– fixed term annuities DCF Bond and interbank swap interest rate curves Own credit/liquidity

Subordinated notes DCF and listed bond prices 3-month JIBAR (floating rate notes) Bond Spread (Own credit/liquidity)

Yield curves, with implied credit spreads Different cash flows of various bonds, with fixed and floating rates

Commercial paper DCF Discount curveCredit spread

Cash equivalents - short term deposits Market to market Yield curves

Bonds and interbank swap interest curve

Cash on hand Face value Not applicable

Third-party financial liabilities arising on the consolidation of mutual funds

Quoted put (exit) price provided by the fund manager

Not applicable




6. Group’s valuation process (continued)

6.2 Valuation techniques used in determining the fair value of assets and liabilities classified within level 3

INSTRUMENT VALUATION BASIS/TECHNIQUES MAIN ASSUMPTIONS

Investment and owner-occupied properties

DCF Exit capitalisation and discount rates Price per square meter

Long-term net operating income margin Vacancies

Market rental trends (market rental growth ranges: 4,0% to 5,5%)

Economic outlook Location Hotel income trends/inflation based Hotel occupancy (range between 60% – 75%) Sale price (if held for sale) Not applicable

Unlisted equities and debt, including associates and joint ventures – measured at fair value

DCF/earnings multiple Cost of capital Bond and interbank swap interest rate curves Consumer price index

Gross domestic product

If a property investment entity, then assumptions applied are as above under investment and owner-occupied property

Net asset value Not applicable Recent arm’s length transactions Not applicable

Unlisted preference shares DCF Bond and interbank swap interest rate curves Agreement interest rate curves Issuer credit ratings Liquidity spreads

Unlisted term deposits and illiquid listed term deposits

DCF Bond and interbank swap interest rate curves Issuer credit ratings Liquidity spreads

Mutual funds Quoted put (exit) price provided by the fund manager, adjusted for liquidity

Price – not applicableNotice periods and estimated repayment –

bond interest rate curves Liquidity spreads

Investment policies Probabilistic valuation methodology Face value DCF Premium burden Life expectancy Bond and interbank swap interest rate curves

Policy loans receivable DCF Prime interest rate Term

Prepayments and other receivables DCF Age analysis

Applicable risk-free rateApplicable credit marginExpected cash flows

Other payables DCF Age analysis

Applicable credit margin including Liberty's own credit risk

Third-party financial liabilities arising on the consolidation of mutual funds

Quoted put (exit) price provided by the fund manager

Not applicable


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

Executive: Group FinanceMichael NorrisTel: +27 (11) 408 [email protected]

Investor RelationsSharon SteynTel: +27 (11) 408 [email protected] [email protected]

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

Website: www.libertyholdings.co.zaCustomer Call Centre Tel: 0860 456 789

Head Office and Registered Address Liberty, 1 Ameshoff Street Braamfontein, Johannesburg 2001Postal address: PO Box 10499, Johannesburg 2000 Tel: +27 (11) 408 3911Registration number: 1968/002095/06

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

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

CONTACT DETAILS


www.libertyholdings.co.za

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