Highlights Opened a life insurance business in Zambia Liberty Online was implemented in three countries and enhanced business integration in East A new short-term administration system was implemented in Kenya New products launched Retail Funeral, Simple Life, Critical Illness and Personal Accident products Platinum Life product Boresha Maisha Pension Plan in Kenya Re-branded CfC Life as Liberty Life in Kenya New strategic partnerships established to enhance Liberty s distribution in-country Strengthened teams to build leadership and technical competencies is responsible for developing and expanding the group s long- and short-term insurance presence across sub-saharan. currently has a presence in seven countries outside of South, namely Botswana, Kenya, Namibia, Swaziland, Tanzania, Uganda and Zambia, with six life insurance licences and two short-term insurance licences. B30 Online additional information 2014
Overview combines the group s proven capabilities in governance, process design, technical and technological competence, with the capacity to enter international and Pan- n agreements, to facilitate rapid product and channel development. Operating environment in sub-saharan A number of sub-saharan n countries have sustained growth in excess of 5% over the last decade, helping to reduce poverty and increase disposable income. This economic growth, together with retirement reform, micro-insurance legislation and increased urbanization, offers market penetration opportunities in a region that currently has extremely low insurance penetration rates. However, there is increasing competition across the n continent, from local, regional and international insurers, including but not limited to, South n companies and non-traditional competitors such as funeral parlours and mobile network operators. Performance review Performance indicators Rm 2014 Rm 2013 Headline earnings (before head office expenses) (1) 179 154 Long-term insurance operations 95 104 Short-term insurance operations 84 50 Headline earnings Liberty share (before head office expenses) 102 95 Less head office expenses (43) (43) Attributable to Liberty 59 52 Long-term Indexed new business 219 158 Net customer cash flows 437 325 Short-term Net customer cash flows 202 169 Claims loss ratio (%) 41 42 Number of employees 468 436 South 31 30 Other 437 406 (1) The headline earnings result is shown at 100% of the earnings of the various entities that make up. s attributable portion of headline earnings for the year was R59 million against the prior year of R52 million. The growth in earnings was primarily driven by: A growth of 38% in indexed new business sales of R219 million; Good growth in bancassurance business in Swaziland and Uganda, good group risk and group funeral business growth in Kenya and Swaziland, good business growth in Namibia and growing affinity business in Botswana and Swaziland in particular; Good growth in premium income across all of the businesses due to both new business sales and retention initiatives, particularly in Kenya where the books are more mature; and An increase of 35% in the Life net cashflows of R437 million, due to the growing health premium income, a business mix shift to single premium bancassurance sales, and a higher level of single premium investment business written in Namibia. B31 Online additional information 2014
Delivering on commitments 2014 strategic objectives Self-assessment Implement the retail product set and Liberty Online in all countries of representation Expand distribution reach Continue to mature operational processes and enhance management information capability Raise awareness of the Liberty brand Expand presence both in existing countries and in new countries of representation Continue to build leadership and technical competencies ⅔ ½ ⅔ Substantially achieved. ½ Moderate progress. ⅔ Good progress. Growing business in From an insurance perspective, Liberty s business model for growth in sub-saharan primarily focuses on institutional business, and simple, affordable products requiring little or no advice, with a bias to products providing education, funeral and health protection for individuals. These products are designed and marketed for local conditions using a combination of local expertise and networks, supported by specialist skills and group competencies provided out of Johannesburg. In Kenya, Liberty sells more complex traditional individual life and pension products to address both the needs of consumers, and take advantage of the prevailing market opportunities. A significant portion of the existing life and short-term insurance market in sub-saharan is centred on employers acquiring these products on behalf of their employees at a wholesale level, or as part of a group scheme. Employers are seeking end-to-end solutions leading to opportunities to complement Liberty s health products, through the addition of risk, investment and pension product sets. Increasingly, individuals are being accessed through group arrangements, and this will be a key growth strategy going forward. As s product sets are largely standardised, the ability to scale systems, processes and other competencies also represent significant operational efficiency advantages. Distribution into the various insurance markets is primarily through large brokers, bancassurance, affinity partnerships and, in selected markets, an agency force. Liberty s plans to expand into West are ongoing. Retail markets in West offer opportunities for additional risk and investment products. New business in Zambia During 2014, opened a new life insurance business in Zambia. The Zambian insurance market has good growth potential, as Zambia has a population of more than 15 million people, economic growth of 6,9%, and a life insurance penetration of 0,35%. The bancassurance partnership with the Standard Bank Group in Zambia commenced on 1 January 2015, and over the course of 2015 and beyond, the business will expand its distribution reach to include brokers, affinity partners and potentially its own sales agents. Existing relationships with partners in other countries will be leveraged in this regard. Implementing the retail product set and Liberty Online in all countries of representation During 2014, rolled out its retail product set on its front-end online system (Liberty Online) in three countries (Botswana, Namibia and Swaziland), and will implement this product set in Kenya, Uganda and Zambia in 2015. Liberty Online will be used by distribution partners to capture customer and claim details, and will improve data integrity, and mitigate operational risk. The launch of the retail product set will extend the potential number of affinity partners Liberty can transact with, making it more competitive across sub-saharan. Business in a Box has invested significant time in understanding where products and processes can be standardised to create economies of scale across countries, reduce risk, and where tailor making is required, to reflect unique customer, market and regulatory needs. This work is largely complete on the life insurance side. In 2014, a new operating platform that will be used across the continent for short-term insurance, was successfully implemented in Kenya. Work is now ongoing to document processes and controls in order to enable the same standardisation and benefits as for the life insurance business. This single IT platform will also enable to improve financial and risk controls, as well as to contain fixed costs and move towards a more variable cost business model, which will in turn create more value for shareholders. During 2014, enhanced its business reporting integration in East through the implementation of a SAP system solution. B32 Online additional information 2014
The rapid introduction of new technologies, particularly the advancement in mobile technology, creates an opportunity to increase insurance penetration across sub-saharan, by delivering solutions to customers at an affordable price and with easy access. Distribution channels Expanding distribution reach A broad distribution network is necessary to grow sales volumes and achieve sufficient scale within each business. Liberty focuses on five distribution channels: Bancassurance: This includes embedded products, non-advisory transactional products, and group plans sold to small micro-medium enterprises and corporate clients serviced by Standard Bank; Brokers: Tier I brokers typically deal with institutional clients while Tier II brokers deal mainly with retail clients, and institutional clients on a limited basis. Prior to the implementation of Liberty Online, the Tier I brokers were the key source of broker business. However, with this new online capability, there is significant opportunity for Tier II brokers to increase sales volumes and deepen s distribution reach, especially outside of urban areas; Affinity partnerships: The affinity partnership strategy provides customers with access to relevant insurance products in a cost-effective manner by utilising the partners brand and distribution capability. has secured affinity partnerships across the various countries through banks, mobile network operators, mobile payment companies, church groups, unions, medical aids and funeral parlours, all being organisations or associations with strong brands and access to large customer groups; Agents: An agency force exists in Kenya where the focus is on improving the productivity and efficiency of the channel. Plans to build a more variable cost agency model will be implemented in 2015 to enable worksite marketing and affinity partnerships in line with the group strategy; and Group Arrangements: has begun leveraging the relationships that Liberty Health has with multinationals and international employee benefit brokerages. This synergy enables to sell pension and group risk type products to corporate clients across the n continent. Developing the bancassurance channel Liberty s partnership with Standard Bank Group remains a focus area, with bancassurance agreements in place in Botswana, Namibia and Swaziland. Plans are underway to roll out bancassurance agreements in some of the East n countries as legislation changes now allow for this. The Zambian business will further enable Liberty to leverage off the bancassurance arrangement in-country. Embedded products, such as credit life and funeral business, continue to drive this business. In 2014, embedded value of new business for bancassurance amounted to R95 million (2013: R69 million). Product development Product development is a critical part of Liberty s strategy to grow earnings by enhancing and expanding product lines to support growth across all channels. Liberty has the ability to create differentiated products suited to the various channels and market segments. Key to this is the development of in-country Liberty teams who work with the pricing actuaries to develop relevant products. During 2014, a set of retail products were made available to distribution partners including a funeral plan, a simple life plan, a personal accident plan and critical illness plan. A hospital cash plan and an education plan will be rolled out in 2015 to complete the full retail product set. In addition, a Platinum Life product was launched at the end of 2014 which is targeted at the higher income group as it involves limited underwriting. A new pension product was also launched in Kenya. Brand awareness Creating Liberty brand awareness across the n continent remains important. The CfC Life business in Kenya was re-branded to the Liberty brand in 2014. Key risks to achieving strategic priorities and their management monitors and manages its risks through the group s robust enterprise-wide value and risk management governance process. Key risks to achieving strategic priorities include: Managing the high concentration to certain distribution channels and countries, such as the global bancassurance agreement with Standard Bank, and the current earnings concentration to Kenya; Managing unforeseen legislative or regulatory changes that may result in increased compliance costs; Attracting and retaining skilled people, particularly for senior positions, who understand the local markets and the corporate culture; Balancing the group s governance standards and in-country commercial realities; Ensuring effective stakeholder management with local shareholders; Managing shareholder expectations in a tough local and global economic environment; and Managing the increasing competitive environment across sub-saharan. B33 Online additional information 2014
Attract and retain quality employees Building key technical skills and continuing to invest in leadership capabilities is ongoing. significantly strengthened its teams in-country in terms of actuarial, finance, sales and operational skills. Furthermore, all the managing directors key performance indicators were aligned with the entire Insurance business performance as opposed to just their in-country performance. This alignment is aimed at rewarding the correct behavior from a group perspective and has improved the culture of teamwork and communication between countries. Looking ahead Engaging staff across the n continent is important for building leadership capability, providing networking opportunities and achieving alignment with the group s brand and culture initiatives that will ultimately benefit the business as a whole. Liberty Insurance continues to equip its managing directors with the necessary tools and leadership development opportunities to be Liberty s brand ambassadors in-country. continues to embed transformation within its South n operations and transformation targets were met at the end of 2014. In 2015, will focus on the delivery of the following key objectives Continue to implement products relevant to all countries of representation Expand distribution reach through current networks and affinity partners, and explore opportunities through new partners and technologies Roll out Liberty Online to all countries of representation Explore opportunities to expand s presence both in existing and new countries of representation Continue to build leadership and technical competencies and align in-country employees with the Liberty brand and culture philosophy Continue to raise awareness of the Liberty brand Liberty summarised product offering Product name Credit life product range Business loan protection Funeral plans Capital Bond Endowment individual Group risk cover Protection products Short-term insurance Product description A range of products designed to cover the outstanding balances on vehicle loans, home loans, personal loans and credit cards following the death or disability of the policyholder. An insurance policy which pays the outstanding balance on a loan following the death or permanent disability of the policyholder. This product has been successfully aligned to small and medium enterprise loans. A variety of funeral plan options are available, providing cover to the main member or to the main member and their family. A number of ancillary benefits, such as the tombstone benefit, are also available. A single premium investment policy offering the opportunity for ad hoc premiums. A range of endowments for individuals including both an investment and a protection element. A range of group risk benefits including life cover, critical illness cover, lump sum and income disability cover. A comprehensive range of protection products including Funeral, Simple Life, Critical Illness and Personal Accident Plans. A Platinum Life product was recently launched offering higher levels of life cover and other benefits with limited underwriting requirements. Cover provided for fire, theft, motor, engineering, marine, liability, personal accident and workman s compensation related risks. B34 Online additional information 2014