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Edited Transcript of LBH.J earnings conference call or presentation 1-Aug-19 8:00am GMT

Q2 2019 Liberty Holdings Ltd Earnings Call

JOHANNESBURG SOUTH Aug 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Liberty Holdings Ltd earnings conference call or presentation Thursday, August 1, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* David Charles Munro

Liberty Holdings Limited - Group CEO & Executive Director

* Yuresh Maharaj

Liberty Holdings Limited - Group Financial Director & Director

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Conference Call Participants

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* Francois Du Toit

Citigroup Inc, Research Division - Director

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Presentation

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David Charles Munro, Liberty Holdings Limited - Group CEO & Executive Director [1]

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We think that these results show continued progress that we've been making towards rebuilding our business as competitive and sustainable. The strong operational results produced in these numbers exceeding up 14%, and that reflects the client franchise that we run. This has been bolstered by the improved investment performance in our Shareholder Investment Portfolio, which together with operating earnings led to an increase of normalized headline earnings of 51%. We're pleased with numbers, and I'll share with you some thoughts about the progress we've made during 2019 during the course of this presentation.

Liberty's strategic direction remains unchanged, and we are deeply in the execution of our strategy. 2018 was a year of us delivering on our commitments and of achieving meaningful progress on the initiatives that we have prioritized. And we feel that this momentum has continued into 2019. I'll be sharing some of that progress with you this morning. We feel that we've put our company on the right path, and that we've taken substantial steps to simplify and strengthen our business to better serve our clients and advisers in a digital way as part of the Standard Bank Group.

We feel that the disciplined execution of our strategy is starting to deliver value. As we noted before and as is evident in our integrated report, we are guiding and measuring the execution of our strategy through the 5 strategic value driver model, and this forms the basis of our reporting to you this morning as well. I will be outlining our progress against the first 3 strategic value drivers. And the fifth one, the fee impact. Yuresh will then share with you the financial results and outcomes for the first half.

Let me start in relation to client and adviser experience, and I'll spend some time detailing several initiatives that demonstrate the progress that we're making here.

First, it's important when we think about our clients and advisers to illustrate the impact that we're having on real people's lives who are our clients. It's important to give you a sense of how we're able to serve our clients during this first half of 2019 as we maintain our promises and deliver against our purpose.

We paid ZAR 3.8 billion in death and disability claims to help family meet their financial responsibilities through our retail business and an additional ZAR 1.2 billion through our corporate business to employees of our institutional clients. Both of these numbers represent a 7% increase and meaningful contribution to families at a time of restitution.

Likewise, our retired clients received ZAR 3.9 billion in annuity payments, which is up 9% in comparison to the first half of last year. These statistics truly demonstrate the profound impact on people's lives and on these families that our business can have. And it is why this is so important that we maintain the momentum to restoring Liberty, its health and its competitiveness.

Let's focus then on the initiatives that we delivered that have enhanced our clients' experience. We listen to our clients and try to understand their needs, and through extensive insights, confirm that people are living longer and healthier lives. This has led to us repositioning Liberty's flagship Lifestyle Protector product, which is now uniquely positioned to provide benefits for evolving life stages. The recently launched Liberty Wellness Bonus enhances our product. And it is a major step forward in the way that Liberty seeks to reward clients for living healthy lifestyles. The launch of the Liberty Wellness Bonus was motivated by 2 key client insights.

The first is that clients want to be rewarded, but they do not want another rewards program. The second key insight is that clients want the freedom to choose their wellness program independent of the provision of other services and in particular, independent of other financial services. They wanted to be given the credit for their healthy lifestyles, where they choose to take that credit and not to have benefit dictated to them.

One of our competitors, Discovery, has sought to prevent us from providing this benefit to our customers. They have lost an action in the High Court, where they allege that we've infringed their trademark -- trademarks and they've alleged unlawful competition. We have responded with our own submission of court papers and affidavits, and we will vigorously defend this matter.

I'd like to highlight to you 2 important principles that underline this matter. Firstly, Liberty sees this action by our competitor as an attempt to limit competition in our markets. Secondly and perhaps more profoundly, we believe that client data belongs to the client.

We believe that this is a question about whose data is it really. We believe it belongs to the client and not to the company and that the client should not be prevented from using their own data to their best advantage.

During the first 6 months, Liberty Corporate has redeveloped their investment and annuity propositions in support of an improved employee benefits offering. And finally, with respect to our client experience, we have simplified connected and enhanced many of our basic customer experiences and services using Agile work methodology and good examples of this are the launch of the MyLiberty website and our new claims [loss] platform, which uses new robotic automation to significantly improve our claims processes.

Focusing now on our advisers, we also listen to their needs. We've helped to focus our advisers and improve their productivity so that they can make sure that they can establish, build and maintain and grow the relationships with their clients. We've done this by providing more competitive products and work towards delivering excellent client service to them, while enabling them with new smart tools.

We've rolled out the atWORK financial needs analysis tool with 1,000 of our top advisory partners, and we did this in a 4-month period ending March. This was made possible through the MuleSoft integration layer. I mention that because this is the first major demonstration of the use of fintech and the cloud to radically improve our ability to deliver the best digital tools fast and efficient.

The feedback from the field has been positive and reflect the sentiment around simplicity and an enhanced customer experience. Significant progress has been made in refocusing our service strategy within the IFA and SBFC channels to drive increased support for these critical partners of ours.

And finally, we hosted an inaugural risk conference, which was designed to showcase the extensive insight that we have related to living longer. Critical to delivering experience and outcomes for our customers is STANLIB, our asset management platform. And I'm pleased to report that they've delivered a fantastic first half of 2019.

Management efforts to improve investment oversight by strengthening the team and by continuing to enhance the governance processes has started to show benefits. And we're pleased to report improved investment performance has continued through the first 6 months, now reflecting 18 months of top or second quartile performance in key funds. The operational environment in STANLIB has also been significantly strengthened over the past year through the diligent work in both the operations and finance areas, both of which have new leaders.

And finally, within STANLIB, we continue with the fund rationalization program, with the closure of 6 more funds so that we can continue to optimize client offerings and cede classes.

Our relationship with the Standard Bank Group remains a critical differentiator of Liberty. The bancassurance relationship continues to provide considerable value to both Liberty and Standard, with growth in the embedded credit part of our business and net customer cash flows, respectively, for the 2 businesses.

During the period, we also collaborated to launch a new enhanced funeral proposition in the embedded business. Our Assurance Banking initiatives are also moving forward with both the wealth and investment and short-term insurance, with the insurance proposition being delivered now to the Liberty customer base.

Moving to our second strategic value driver, our focus on employee experience, initiatives have been ongoing to shift the culture within Liberty. We're seeing the interplay of 3 key forces within our business. Firstly, the adoption of new ways of working and SAFe Agile methodology. Secondly, the adoption of modern digital technologies that are helping to shift our human engagements. And good examples of these are the implementation of Office365 and the SAP Success Factors platform. These are not just work tools, these are tools that are helping our teams come together and work in significantly more collaborative and future team type work styles.

Culture, as you know, can drive these things in a positive way or they can hold them back. And so we are seeking to really influence our culture within the entire Liberty Group through the cascade and implementation of observable, consistent and conscious behaviors by leaders and all of the teams within Liberty.

In respect to our risk and conduct environment, Liberty remains well-capitalized and has managed within its risk target range and well within risk appetite throughout the period. We continually enhance the risk culture across the organization through various grassroots interventions as part of the larger Risk and Control Enhancement Programme.

We continue to invest and enhance the group's cybersecurity profile and resilience based on changes to both the threat landscape and the development of technology.

And finally, in relation to risk and control, our area of focus has been the financial control environment, which has continued to be enhanced across our organization.

Moving then to the impact that we have on society, the environment and the economy, I'd like to note that we've aligned that measure of our 5 strategic value driver model to the United Nations Sustainable Development Goals. You'll see that in our report to society, and we'll provide you with a more detailed update when we provide our results at the end of the year.

However, it is important for Liberty to continue to deal diligently with critical industry issues that impact on our client franchise, and importantly, that impact on our clients. The important matter of unclaimed benefits within the pension fund industry is one of the issues that we continue to focus on, with the primary goal to provide benefits due to beneficiaries. The significant progress made in placing members in the Liberty-sponsored unclaimed benefit funds has continued into 2019, and this resulted in just under ZAR 64 million in claims being paid in June, up into the year to June, representing more than 16,000 beneficiaries and tracing efforts enabling 35,000 claims per month.

In relation to the issue around fund rehabilitation, we are working with the trustees of the 25 funds that were reinstated last year through the High Court process towards being in a position to actually pay benefits to beneficiaries where these are due and to do that as fast as we can. We aim to approach the High Court in respect of the remaining that need to be reinstated before the end of 2019.

We're seeking to learn from the current reinstatement process to expedite the next set of funds in the future. We've been proactive with our engagements to all our stakeholders in this regard, including regulators, and importantly, including social organizations that represent beneficiaries seeking to find what is rightfully theirs.

I'd now like to hand over to Yuresh, who will outline the financial outcomes delivered during the period, and then I will return and present some thoughts to conclude this morning's proceedings. Thank you very much.

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Yuresh Maharaj, Liberty Holdings Limited - Group Financial Director & Director [2]

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Good morning, ladies and gentlemen. Before I present the 2019 results, first reflecting on the global and local operating environment of the last 6 months, this graph provides some context to the results reported for the period.

We have seen ongoing Brexit-related uncertainty, together with global economic markets or equity markets which need to benefit from the easing of the U.S./China trade tensions. We've also seen the accommodative stance adopted by Central Banks and the surge of the U.S. S&P 500 Index in achieving an all-time high.

Locally, we started the year with some pre-election uncertainty, economy contracting in the first quarter of this year, with real GDP down 3.2% quarter-on-quarter. This was followed by the Reserve Bank revising its 2019 full year growth forecast down to 0.6%. However, following the national general elections in May this year and with the newly-appointed Cabinet, the country is in a better position to grow and develop.

Now let's turn to the group financial performance. The group's performance for the first half of 2019 reflects the continued progress achieving our medium-term key financial outcomes, with an annualized return on equity, 17.7%, supported by a 14%

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in earnings, significantly higher earnings from the Shareholder Investment Portfolio.

The annualized return on group equity value increased to 14% from 4.7% at June 2018 and compares favorably with our return on group equity value target of greater than 12%. The group value of new business margin increased by 20 basis points to 0.9%, and the group's capital position continues to remain strong at the upper end of our target range.

I will now detail the drivers underpinning each of these financial outcomes. Normalized operating earnings for the 6 months was just below ZAR 1.1 billion, reflects an improved operational performance, good earnings contribution from the South African insurance and asset management businesses, up 7% and 19%, respectively, on 2018. Shareholder Investment Portfolio delivered earnings of ZAR 922 million, benefiting from strong local equities and bond performance, together with good performance from developed market equities. Portfolio produced a gross return of 5.9% over the period. This resulted in a 51% increase in normalized headline earnings to just over ZAR 2 billion.

Earnings from the SA Retail business, ZAR 782 million, 11% up on 2018. This increase was supported by favorable risk experience variances, offsetting lower persistency variances. Cost managed in line with current sales growth volumes.

Liberty Corporate earnings of ZAR 39 million showed an improvement from the ZAR 25 million loss reported in the second half of 2018. The underwriting results was impacted by poorer group life mortality experience in the period. However, the experience on the disability book continues to improve, following management actions taken, adding selective risk [premium] repricing. Cost continued to be well-managed within this business.

LibFin markets, comprising our assets and liability management capability, credit portfolio, delivered earnings of ZAR 191 million, which was 13% up on the prior year.

The improved earnings from the continuing operations in the Africa region, ZAR 31 million, was primarily as a result of better claims experience from the -- from the short-term insurance businesses in Kenya. And the asset management operations in the Southern Africa regions [formed] in line with 2018.

As regards to asset entities and the ownership review, the loss of ZAR 64 million is reduced compared to the 2018 loss of ZAR 81 million, due mainly the sale of the short-term insurance technology platform to Standard Bank Group in January this year. David will elaborate on the progress we are making with the entities under ownership review later in the presentation. Cost discipline continues to be -- continued in the current business environment, and the central costs have been well-managed across the group.

Now turning to Standard South Africa. Standard South Africa earnings grew by 19% to ZAR 209 million. The result was supported by higher fee income due to good client cash flows and favorable investment market returns in the period.

Operating expenses were well-managed, with focus on the cost-to-income ratio continuing within the business. Standard's third-party cash flows grew by 58% to ZAR 13.3 billion. Standard has continued to maintain its top quartile peer ranking performance for its core retail and balance funds for the last 18 months. The improved investment performance has started to demonstrate market confidence in these franchises, supported by good institutional inflows.

Standard has a reputation of being a large fixed income manager and has also benefited from the current risk-off sentiment, with strong money market inflows during the period.

Moving to the sources of group equity value-added. The higher return on group equity value was supported by improved investment market returns in a marginally lower interest rate environment. Management actions, including overhead cost control, supported a 3% growth in operational equity value profit.

SA Retail's experience variances remained positive in the period. However, persistency and early duration of less than 12 months is reflecting the impact of the economy, as several management actions are underway to improve the retention on these -- on this portfolio's policies.

Liberty Corporate experience variances were negatively impacted by higher umbrella terminations, low salary growth rates and member withdrawals correlated to the challenging economic cycle.

Turning to the key insurance metrics. The group value of new business of ZAR 171 million, grew 20% over 2018, with a margin improvement from 0.7% to 0.9%. SA Retail's value of new business increased by 14% to ZAR 134 million, with the increase supported by positive product enhancements and margin management, combined with an improved business mix.

The value of new business for Liberty Corporate and Liberty Africa Insurance increased to ZAR 22 million and ZAR 15 million, respectively.

Group long-term insurance indexed new business of ZAR 3.9 billion, increased by 2.4%. Guaranteed investment plans and conventional annuity new business has increased significantly compared to 2018, which continues to demonstrate the need for certainty in a volatile economic environment.

Liberty Africa Insurance indexed new business reflects a significant improvement, with good sales of living annuity and personal loan protection products across the region. Focus remains on sales assets and new business volumes in the prevailing tough consumer environment.

As David noted earlier, a number of initiatives were launched in the first half of 2019, which includes various product enhancements within the retail and corporate risk and investment propositions, which we now need to capitalize on for the remainder of the year to increase these lead indicators.

Moving to our capital position. The group's capital position remains robust, with a solvency capital ratio of Liberty Group Limited, the group's main long-term insurance license, at 1.85x at 30 June 2019, and this remains within the upper end of our target range.

The Board has approved the 2019 interim dividend of ZAR 2.76 per ordinary share. This is in accordance with our dividend policy, amounting to 40% of our 2018 full year dividend.

In summary, good progress has been made in moving towards our medium-term financial outcomes over the last 18 months. Our focus remains on driving SA Retail performance, growing the group value of new business, maintaining top quartile investment performance in STANLIB and concluding the outcomes for the operations and ownership review. All of these will ensure that we achieve our financial outcomes on a sustainable basis, facing long-term value creation for all our stakeholders. Thank you. I'll now hand over to David to conclude this morning's presentation.

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David Charles Munro, Liberty Holdings Limited - Group CEO & Executive Director [3]

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Thank you very much, Yuresh. I think it's obvious that the improved financial results and the much better risk and control environment are giving us the opportunity to continue to invest in the future of our business, allowing us to focus on building a really competitive and sustainable business, with the core driver at all times being our focus on client and adviser experience.

I'd like to now just share with you some thoughts about what differentiates Liberty today. Firstly and importantly, we are a focused South African business, not exclusively, I'll come to that in a minute, but the large part -- the largest part of our business is focused on South Africa. South Africa is our home. We understand our clients and customers here, and we will keep listening to and learning from them to enhance our service to the people and advisers of this country. We as Liberty are really highly geared to this country and to South Africa's economic recovery. We're positive about this country, and we remain committed to playing our role in its progress and its future. And so while South Africa is a nice democracy, and this has been evident in the last few months and years, we think it's important to remain positive and have good reasons to do so. Many of our state institutions remain strong. There is a focus on governance being brought to the SOEs and the state sector as a whole. The impact of the transparent processes, such as various commissions of inquiry are building a much more -- a much stronger foundation for this country. A strong political cohesion in a world today that is evidenced by significant political fragmentation in many countries around the world. There's a vibrancy in our private sector and our private sector truly has the capability to mobilize capital to drive growth in this country.

And indeed, we are also a society that is trying to look after all of its people, and indeed, the poorest of the poor. These are good reasons for us to remain positive about our country, and we do believe that it's the individual acts of confidence by the citizens of this country and the corporate sector and the businesses in this country, can today -- can help capitalize to start to shift the fortunes of our country, and we remain committed to playing our role in this regard.

We are working towards ensuring that the foundations of our business are capable of sustaining what are the tough times now, that we will be well positioned to benefit once the economic tailwinds begin to blow.

The second area of differentiation I'd like to focus on are our operations across Africa regions. And so while our focus has been on the rehabilitation of our South African operations because of the scale, we do remain committed to the opportunities where we see long-term growth in countries outside South Africa, where we can partner with the Standard Bank Group and where we can be competitive.

This includes our operations in Kenya, where we already have significant business. And we will also retain our asset management operations in the Southern African regions, where they can link to South Africa through the common monetary area. And so with this backdrop, I do need to give you an update on the progress that we're making in respect of our disposal group. As advised to shareholders in an announcement on SENS last night, we have entered into an agreement to dispose of our STANLIB Ghana operations to the Standard Bank Group for a consideration of GHS 70 million, which is approximately ZAR 185 million. This agreement is obviously subject to various conditions precedent, including regulatory approvals, but we do think it represents evidence of our progress towards executing against the initiatives and goals that we set for ourselves.

We are also in advanced negotiations for the disposal of 3 other asset management operations across Africa regions in 3 different countries. Unfortunately, the negotiations with respect to our initial partner in respect of our health business were terminated within sight of the finishing line. However, understanding that we h ave recommenced the process with other partners and parties that we felt and knew were interested in that business, and we will continue to run that process and try to bring it to a conclusion as soon as we can.

The third area of transformation and differentiation in our business is our focus on client and adviser experience. We fundamentally believe in the role that advice plays in our business, particularly in the management of investment and risk for clients in this complex world.

Our goal is to leverage this capability, advance the power of the adviser and the humanity that they bring to the client and to this business through the power of digital and data interventions. And to achieve this, we've underpinned our transformation plan by a powerful technology plan. We'll be partnering with big tech players that we think can radically shift the customer experience and engagement capabilities of Liberty to rapidly change both advisers and clients' experience of us. These partners include some of the world's biggest companies like Microsoft Azure and the Amazon Web Services business.

The final differentiator, we think, that Liberty has today is that we are part of the Standard Bank Group. There are 4 dimensions to this relationship, which we should call out when we think about the Standard Bank Group. The first is obviously our bancassurance agreement and the work that we do, as I highlighted earlier in the presentation, towards delivering through Standard Bank's distribution channels, product manufactured by Liberty. And obviously, the Assurance Banking initiatives as well. It's the first dimension to our relationship.

The second dimension to our relationship is our ability to partner with Standard Bank Group as they continue to grow their operations across Africa regions. Where we have bancassurance agreements with the Standard Bank Group operations, we will continue to run to build and grow our short- and long-term insurance operations, as I said earlier, particularly in East Africa and Southern Africa.

The third dimension to our relationship is the scale and capabilities that the Standard Bank Group can bring to bear and that they can use to help leverage and support us, particularly in the world of technology and digital and data. The relationships that I spoke about with big tech companies are not just Liberty relationships alone, they form part of the wider Standard Bank Group relationships.

The final element of differentiation and final dimension of this part of Liberty's differentiation is the fact that the Standard Bank Group is a strong core shareholder for Liberty.

So in conclusion on this morning's presentation, I'd like to summarize as follows. We're really pleased with the solid performance that we've delivered in this business in the first half of 2019. We're proud of our 51% increase in normalized headline earnings, and we're proud of generating 14% growth in our operating earnings in a very tough climate. We feel that, that creates a good foundation for us to tackle the second half and build towards a full year result. It is clear from our presentation and our comments this morning that we continue to reorientate our business and to deliver against the needs -- to deliver towards the needs of our clients and advisers.

Importantly, we will continue to look for opportunities to satisfy these needs through innovations, particularly in a disruptive way. Modern digital technology forms a key part of this plan going forward with world-class partners. The final piece that I'd like you to take away from this presentation this morning is that the transformation of our business currently underway will position us to be competitive and sustainable for the growth -- for growth in the future.

I'd like to take this opportunity to thank the entire Liberty community for their hard work and support over the last 6 months. We've built a good foundation in the first 6 months to deliver an excellent year of progress for Liberty in the full year of 2019.

I'd like to thank you all for listening to our presentation this morning, and we'd be very happy to field any questions that you may have. Thank you.

Right. So I think let's see if we have any questions here in the auditorium at the Standard Bank Global Leadership Centre, and then we'll move to participants on the webcast and conference call. All right, [Warrick]? Sure, go ahead.

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Questions and Answers

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Unidentified Analyst, [1]

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Dividend's been flat since 2015, full year dividend. What are your considerations in making the decision as whether to maintain or increase your dividend cover ratio for the full year?

Second question is on cost containment for the group and

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Standard's operating expenses, they fell 5% and new expense base, to what extent all this benefits? Just give us some more color on do the costs

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going forward. And last question on new business volumes, do you have targets, new business volumes? And maybe you can provide some more insight as to what channels are working well, whether there's any change in strategy on growing new business?

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David Charles Munro, Liberty Holdings Limited - Group CEO & Executive Director [2]

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Sure. Thank you very much, [Warrick]. Yuresh, why don't you take the dividend and cost question, and I'll deal with the volumes...

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Yuresh Maharaj, Liberty Holdings Limited - Group Financial Director & Director [3]

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Yes.

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David Charles Munro, Liberty Holdings Limited - Group CEO & Executive Director [4]

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Question, if that's all right?

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Yuresh Maharaj, Liberty Holdings Limited - Group Financial Director & Director [5]

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Okay. Thanks, [Warrick]. As to our interim dividends, 40% of our full year 2018 dividends as per our dividend policy. I think we, in consideration of the dividend, we look at our core underlying earnings and clearly, in the 6 months, we have to look at sort of going forward in terms of the future for the next 6 months. And clearly, the indicators that we show is on an annualized basis. We've seen the benefits of investment markets. And we will take all of this into consideration as we go into the next 6 months in terms of assessing our full year dividend. However, it's still underpinned by our dividend policy, which he has referenced to core -- growing our core dividend earnings and a dividend cover of 2% to 2.5%. So I think there's various considerations, as you rightly pointed out. And we'll do that as we close the next 6 months of the year, which we have to appreciate that is a level of investment performance in these numbers, and we need to understand that that's the status.

As regards to the cost increase. As a group, I think we've made massive strides in terms of cost discipline, both within the Liberty and the Standard franchises. And quite rightly so sort of running below inflation now and on an absolute sort of below prior year level, these are good achievements. I think we spent a large amount of time and focus on central overheads and sort of management cost. I think these are well-sustained and within a fairly good [base]. I think where we do get injection in terms of our top line in terms of new business volumes. There will be, obviously, less to see in terms of our acquisition cost because now, I think I'm very comfortable with where our overhead costs are running at for the group and it's less than (inaudible) levels.

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David Charles Munro, Liberty Holdings Limited - Group CEO & Executive Director [6]

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Thanks, Yuresh. And then in respect to your question in relation to new business volumes, the first one is our targets are as high as possible. But obviously, we have budgets. We have goals in terms of production for various different parts of our business, depending on channel, depending on product type, investments versus risk. So we have a very comprehensive program towards what we're trying to deliver. Clearly, in terms of where are we seeing performance across the different channels, importantly, for us, we're seeing renewed support from the IFA channel. That's been, I think, an important feature for us in the first half of this year.

If you juxtapose that to having to work very closely with our colleagues at Standard Bank Group, and particularly the [QBP] operations of Standard Bank, as they've gone through the restructuring of the branch network, which impacts on the SBFC channel. So we've seen some impact of that through the SBFC volumes and in between that we would put our entire workforce with entrepreneur performing a little bit better than agency. Thanks, [Warrick]. [Johan], have I got that right? I'm getting a thumbs-up from Johan , so thank you. Okay. Any further questions here in Johannesburg? Okay, let's see whether we can go to the webcast and see -- am I pointing at the right thing? Webcast, start with the webcast, are there any questions from the webcast?

Sharon's telling me that there's no questions from the webcast, so then let's go to the conference call, participants on the conference call. Are there any questions? I'm looking, I think, to [Herman] on that. There's one coming.

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Operator [7]

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We have a question from Francois Du Toit from Citi.

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Francois Du Toit, Citigroup Inc, Research Division - Director [8]

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Just quickly on the core earnings. I've seen the core earnings adjustments that you provide us, the sustainability adjustment for Standard's earnings. If you can just explain why you think Standard's sustainable earnings is ZAR 19 million lower than what was reported? Similarly, also there is a ZAR 132 million down in production for the SA Retail business for, I guess, elements you consider to be one-off, there's operating variances, assumption changes and so on. So you, based on that, you believe that there were one-off positive contributions in earnings -- in operating earnings from those 2 operations. So if you can just explain those one-offs and why you believe they're a one-off, please?

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Yuresh Maharaj, Liberty Holdings Limited - Group Financial Director & Director [9]

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Thanks, Francois. Starting with Standard, that ZAR 18 million adjustment, I wouldn't characterize that as once-off adjustment. If you recall, last year, we set the sustainable earnings for Standard at ZAR 380 million per year. And if you sort of slice that into half year, you could see our run rate at ZAR 209 million is essentially higher than that. We've been cautious at this stage. We've just -- we've had a look at Standard's earnings on a sustainable basis 6 months ago. I think we pretty much also have to adjust that in a 6-month performance. So that's something that we look at, at the long-term through the cycle view on valuation. And hence, that's the adjustment relating to Standard.

With regards to the SA Retail business that you referred to, the ZAR 132 million, the one element within that result is the cost recoveries that we did receive on the sale of the Standard Bank -- to Standard Bank, the short-term insurance technology platform. So you're quite right that, that won't be repeatable. And furthermore, in terms of some of the variances, again, we do that on a regular basis. So there's nothing, should I say, once-off in those. However, the Standard Bank recovery of cost is clearly one that is.

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Francois Du Toit, Citigroup Inc, Research Division - Director [10]

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Can you just quantify the recovery of cost component?

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Yuresh Maharaj, Liberty Holdings Limited - Group Financial Director & Director [11]

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It's roughly around ZAR 30 million to ZAR 35 million.

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David Charles Munro, Liberty Holdings Limited - Group CEO & Executive Director [12]

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Great. Thank you very much, Francois. Is there any further questions here at Johannesburg? Anyone else want to ask anything? I don't think so. Any more came on the webcast conference call? Okay. Well, thank you very much, everybody. We look forward to another 6 months of very hard work and disciplined execution of our strategy. And we look forward to seeing you and reporting back for our full year in 2019 in March next year.