| |
Liberty's commitment to transformation is not driven by compliance, but by the understanding that businesses need to contribute to the country's socio-economic transformation in a way that will bring meaningful change to the lives of all South African citizens. Transformation and empowerment are fundamental to the future growth and sustainability of the financial services sector and the South African economy.
Transformation is also important to Liberty due to the growing emphasis placed by public and corporate sector clients on having Broad-based Black Economic Empowerment (B-BBEE) compliant service providers. Liberty's own future success and sustainability hinge on its ability to keep track of, anticipate, and actively lead the transformation taking place in the financial services sector.
Externally, Liberty is represented on the Association for Savings and Investments South Africa (ASISA) various Standing Committees, including the ones for Savings, Access to Financial Services, Fundisa, Zimele (Zimele is a stamp of an endorsement for CAT14 compliant products), Corporate Social Investment, Consumer Education, and Empowerment Financing respectively.
14CAT (Charges, access and terms) refers to entry level products conforming to charges, easy access and fair terms
|
| |
Progress against regulatory frameworks |
The national regulatory framework within which Liberty operates is set by the Department of Trade
and Industry (DTI) Codes of Good Practice for Broad-based Black Economic Empowerment. As the
process to align the Financial Sector Charter (FSC) with the DTI Codes is still underway, for 2010
financial institutions were required to report only under the DTI Codes. However, once the sector
code has been gazetted financial institutions will be obliged to report under the revised Financial
Sector Code, and the generic Codes will no longer be applicable.
The primary governance structure for transformation is the Group Transformation Committee
chaired by the Liberty Holdings Limited chairperson, which is responsible for ensuring that the
group meets the requirements of the Financial Sector Charter and the DTI Codes of Good Practice.
In 2010 a Transformation Steering Committee was created with 18 members to drive
transformation through the business. The committee is chaired by the Chief Executive: Group
Strategic Services and includes the Chief Executive: Liberty Holdings and all of the executive
management committee as members. |
| |
Improving our B-BBEE rating |
| • |
Continue the drive to achieve employment equity
objectives, specifically with respect to the
appointment of black talent into senior management roles (see "Embrace diversity" section in
Attract and retain talent chapter for more detail) |
Liberty achieved a Level
Three B-BBEE rating in
2010, a year earlier than
anticipated
|
| • |
Continue to invest in skills development programmes, with specific focus on developing
female and black staff |
| • |
Increase procurement from black owned, and specifically black women owned, suppliers |
|
| |
These efforts paid off and in 2010 Liberty Holdings achieved an overall DTI score of 75.03 points
(verified by Empowerdex), making us a Level Three contributor according to the Codes. This
equates to a 110% recognition level, meaning that for each rand spent by a client on Liberty
Holdings, 110 cents will count towards B-BBEE procurement on that client's B-BBEE scorecard under
the preferential procurement element.
The 2010 DTI score is an improvement on the Level Four DTI accreditation (score of 69.19) that was
achieved by Liberty in 2009. Liberty achieved its Level Three rating a year earlier than anticipated. |
| |
| DTI element |
Total
weighting |
Liberty’s
targets for
2011 |
Liberty’s
audited
score
September
2010 |
Liberty’s
audited
score
September
2009 |
| Ownership |
20 |
16.00 |
15.35 |
14.21 |
| Management |
10 |
5.69 |
4.44 |
4.11 |
| Employment Equity |
15 |
10.2 |
9.32 |
9.68 |
| Skills Development |
15 |
8.85 |
8.85 |
7.17 |
| Preferential Procurement |
20 |
17.07 |
17.07 |
14.02 |
| Enterprise Development |
15 |
15.00 |
15.00 |
15.00 |
| Socio-economic
Development |
5 |
5.00 |
5.00 |
5.00 |
| Total DTI Score |
100 |
77.81 |
75.03** |
69.19 |
| DTI Level |
|
Three |
Three |
Four |
| Ranking in Empowerdex
Top 100 Empowerment
Companies |
|
|
47th |
71st |
|
| |
| In Empowerdex's annual 2010 BEE survey (known as the Top 100 Empowerment Companies),
Liberty was ranked 47th and performed above average (i.e. better than its peers) on the following
elements of the DTI transformation scorecard: ownership, employment equity, and preferential
procurement. Liberty was below average on management control. Liberty was in line with the
industry average on skills development and socio-economic development. |
| |
Continuing our Financial Sector Charter efforts |
Significant progress was made in 2010 in the negotiations to align the FSC to the DTI Codes of
Good Practice. In 2010, The FSC Council's Gazetting Committee reached agreement on the first
draft of the Financial Sector Code which covers only those elements that were agreed to by all the
FSCC constituencies. The Phase 1 draft specifically excluded Access to Financial Services (defined as
consumer education, CAT standard insurance and savings products as well as accessible
distribution), Empowerment Financing, Enterprise Development and some aspects of the
measurement of Black Ownership.
Following planned consultations and revisions in early 2011 (including the formulation of a Phase 2
draft which covers all previously excluded issues), it is anticipated that the sector code will be
finalised by the end of the first half of 2011.
In 2010, Liberty's FSC focus areas were: |
| • |
To move away from a compliance mindset to delivering a sustainable approach to the
provision of access to financial services |
| • |
To align the consumer education program to the business by delivering it at worksites to
potential future clients |
| • |
To secure the approval of a Liberty Fair Charges, Easy Access, Decent Terms (CAT) compliant
life cover product by the statutory actuary |
| • |
To continue to track empowerment financing, with the BEE transactions element of this now
being included under the DTI Codes of Good Practice "enterprise development" category |
| • |
To conduct FSC Access to Financial Services and Empowerment Financing audits |
|
| |
Liberty achieved modest success in embedding consumer education in public sector worksites, and
saw an increase in the number of new public sector clients following consumer education
workshops. The introduction of a CAT compliant life cover product was put on hold as the ELM unit
made a strategic decision to focus on repositioning itself for growth, including improving its sales
and distribution.
In 2010, Liberty achieved 14.5 out 18 points on the "access to financial services" element of the FSC
scorecard as audited by Sizwe and Ntsaluba. |
| |
Looking ahead |
Liberty will work towards its target of 78.29 on the DTI scorecard in 2011. In doing so, Liberty will
continue to focus on improving its performance on the management control, employment equity
and skills development elements of the DTI scorecard. We have not set DTI scorecard targets
beyond 2011 as the gazetting of the Financial Sector Charter as a sector code will mark our
transition to aligning to the FSC codes.
Since 2008, Liberty has been monitoring and auditing its progress on the elements of the Financial
Sector Charter that would likely fall under the Financial Sector Code when it was finally approved;
they are Access to Financial Services, and Empowerment Financing. Our focus in 2011 will therefore
be on ensuring a smooth transition to reporting on transformation under the Financial Sector Code
(assuming it is approved in 2011). |
| |
Promote financial literacy |
As a responsible corporate citizen, Liberty is committed to playing an active role in the
transformation and empowerment of communities in which we operate. By investing in educating
consumers about financial management and promoting financial literacy, we aim to fast-track
development and uplift communities.
Further, consumer education is part of Liberty's strategic approach to accessing the emerging
market segment. It also ensures that we comply with the Financial Services Charter (FSC) Scorecard.
Both of these are key to Liberty's sustainability as they create a pipeline of potential Liberty
customers, and ensure that Liberty operates within the bounds of the existing regulatory
framework.
The FSC defines consumer education as "the process of gaining knowledge and skills to manage
personal resources and to participate in decisions that affect individual well-being and the public good". Based on the Liberty Own Your Life philosophy, Liberty's consumer education initiative aims
to help South Africans with a monthly personal income of up to R11 000 to be financially aware and
responsible. Its money management programme covers basic financial literacy and money
management principles and is a Level 2 National Qualifications Framework (NQF) accredited
programme.
Promoting financial literacy is part of the Liberty's corporate social investment (CSI) mandate, with a
portion of Liberty's annual CSI budget allocated to the Entry Level Market (ELM) Unit specifically for
consumer education.
In 2009 an internal realignment saw the consumer education function move into Liberty's ELM Unit
in order to align the education initiatives with the business. This change has resulted in a shift in
mindset with consumer education now seen as an integral part of business strategy rather than
merely a compliance issue. To this end, Liberty's FSC Access Steering Committee was disbanded in
2010 as the manager of consumer education now reports directly to the ELM executive committee,
and progress is reported quarterly to the board's Transformation Committee.
In addition to the Liberty ELM consumer education programme, the STANLIB Investment Academy
offers NQF Level 3 accredited courses in budgeting, savings and investments at 16 previously
disadvantaged universities and Further Education and Training (FET) colleges. |
| |
Progress during 2010 |
To date, a total of 35 340
people have received
financial literacy training
through Liberty workshops
A further 11 360 students
have attended the STANLIB
Investment Academy
Liberty‟s spend on face-to-face consumer education in 2010
totalled around R2 million, with ELM expenditure at R1.18
million and the STANLIB Investment Academy at R831 000.
This represents more than 0.2% of post-tax profits. In
terms of the FSC scorecard targets for consumer education,
we achieved the 2014 FSC target score of 2 points in 2008
and 2009.
To date, close to 47 000 people have received some kind of
financial training from Liberty and STANLIB. A total of 35
340 people have received financial literacy training through
the ELM Unit?s workshops, and 11 360 students have attended STANLIB's investment workshops
since 2006. 2 480 university and college students attended the STANLIB Investment Academy?s
workshops in 2010, and there was positive feedback from the students.
|
| |
| |
2010 |
2009 |
| Number of people trained by Liberty's consumer education
programmes |
8 896 |
23 000 |
| Number of people trained through the STANLIB Investment
Academy |
2 480 |
2 439 |
| Total |
11 376 |
25 439 |
|
| |
Rolling out regional consumer education programmes |
Liberty has adopted a regional approach to the roll out of consumer education, starting with
KwaZulu-Natal in 2009 and 2010. KZN was selected as a starting point because of its high
population as well as Liberty's historical presence in the region, which allows the alignment of
education with business follow-up to be tested.
Provantage and BizPro are contracted by Liberty to deliver the consumer education outreach
programmes. Training takes place at worksites and within communities and covers: the basics of budgeting; learning to differentiate between needs and wants; debt management; banking,
insurance and saving; and writing a will. Training is provided in English and Zulu, and varies in
length depending on the venue (around three hours in communities, one hour in worksites). The
training is supported by a media strategy (radio and print in vernacular) in the same region.
The targets for 2010 were to train 15 000 people face-to-face in KwaZulu-Natal, 10 000 of these in
worksites and 5 000 in rural communities. A deliberate decision was made to train fewer people in
2010 than in 2009 to better manage the training, and to embed consumer education as part of the
ELM value proposition rather than a separate function.
The major challenges in 2010 included the public sector strike and the canvassing for local
municipal elections, both of which negatively impacted attendance at consumer education sessions.
Employee attendance levels at worksite training were poorer than expected, and Liberty faces the
challenge of promoting the importance and usefulness of financial literacy training.
A ten-week "It's MY LIFE Media Campaign" was conducted between September and December 2010,
with the objective of delivering Liberty's consumer education messages to a broader audience. The
campaign used different platforms such as print, radio and SMS to communicate messages around
self-empowerment and encouraging audiences to take control of their money. |
| |
Looking ahead |
In 2011, Liberty plans to introduce the consumer education course in an additional vernacular
language, and to scale up the consumer education programme within KwaZulu-Natal to reach a
wider audience. Liberty will also focus on making its financial literacy training more relevant, with a
focus on educating consumers on key issues in the insurance industry e.g. the consequences of not
making regular premium payments, and of failing to update beneficiary details on policies.
In the longer term, Liberty's focus will be on finding ways to ensure the sustainability of consumer
education programmes, and empowering communities to own and run the programmes. In
addition, Liberty plans to evaluate the success of its financial literacy training in KwaZulu-Natal, and
use lessons from this experience to inform roll-outs of the training into other provinces. |
| |
Offer accessible products to low-income consumers |
Previously disadvantaged South Africans were largely excluded from enjoying the benefits of
financial services. Reaching this sector with quality financial services is a national imperative, and
one that Liberty embraces in many ways. Not only is it important for social development, but lowincome
consumers represent a growing market opportunity for financial services providers in South
Africa and the wider African continent.
Liberty defines the Emerging Market segment as consumers with a monthly personal income of up
to R11 000 per month. These consumers need simple, easily understandable financial products and
services linked to clearly defined needs (e.g. funeral cover and savings towards education). They
also need access to financial products and services through community channels.
We provide products and services to this segment through
Standard Bank branches and our Liberty Entry Level Market
(ELM) sales and distribution channels. Liberty's ELM unit
employs around 850 people and has 51 dedicated ELM teams
located in all nine provinces in South Africa. In addition, we sell funeral and credit life products to low income communities through Standard Bank branches
and call centres.
Liberty underwrites over
1.3 million funeral policies
The products that Liberty has developed to cater to this segment include simple life cover plans,
funeral plans (member and family) as well as savings products, and group loan protection products.
STANLIB's products in this segment include Chuma and FUNDISA. STANLIB has also maintained a
debit order minimum of R50 on its general equity fund to increase accessibility to lower income
consumers. Sales and distribution channels include Liberty@Work (tied agency), ELM Direct (tied
agency call centre), independent brokers and Standard Bank.
|
| |
| Product name |
Description |
Distribution
Channels |
Total number of
in-force policies/
products |
| Standard Bank
funeral plan |
Funeral cover for the member, spouse,
children and their extended family |
Standard Bank |
1 064 746 |
| Liberty funeral
plans |
Funeral cover for the member, spouse,
children and their extended family (standard
and comprehensive) |
Liberty@Work, broker
and ELM Direct |
243 153 |
| Parents Cover
Plan |
Funeral cover for the parents and parents in
law of the premium payer |
Liberty@Work, broker
and ELM Direct |
585 |
| Life Cover Plan |
Simple non-underwritten life cover |
Liberty@Work,
broker and ELM
Direct |
16 468 |
| Savings Plan |
This is a regular premium life insurance
investment contract that allows the investor
to invest on a monthly basis, with an initial
term of five years |
Liberty@Work, broker
and ELM Direct |
39 155 |
| Chuma |
An investment vehicle for stokvels, burial
societies, taxi federations, and other groups.
With a minimum debit order of R50 per
month, money channelled through Chuma is
invested in the STANLIB Cash Plus Fund and
the STANLIB Dynamic Return Fund. |
Standard Bank,
Liberty agency,
Liberty Franchise and
Direct |
635 |
| FUNDISA |
A STANLIB, ASISA and Department of
Education initiative to help consumers save
for tertiary education. It is a unit trust fund
with a minimum investment amount of R40 a
month. There is an annual government bonus
of 25% of an investor's net contributions (the
government bonus is limited to R600 per
student per year). |
Standard Bank,
Liberty agency,
Liberty Franchise,
Standard Bank
branches and Fundisa
Call Centre |
7 343 |
|
| |
Progress during 2010 |
| Liberty remains committed to emerging markets and in 2010 developed and implemented a
turnaround strategy for the ELM business unit. The broad objective of the strategy is to set the
business on the path to profitability and sustainability into the future. Specific activities that were
undertaken to give effect to this strategy include: |
| • |
Appointing a head of ELM along with a full executive team to manage the business (new
executives included Director of Sales & Distribution, Director of Operations and Director of
Finance and Actuarial). |
| • |
Creating a dedicated product development capability through the appointment of a product
development actuary. A new product was introduced in the last quarter of 2010, the Parents
Cover Funeral Plan which allows policyholders to cover their parents' funerals without
requiring policyholders to be covered. The Life Cover Plan (an existing product) was
enhanced to extend cover from a maximum of R150k to R250k. The Accident Plan was
withdrawn in the last quarter of 2009, and the Extended Family Funeral Plan was withdrawn
in 2010 due to the failure of these products to meet customer needs. |
| • |
Changing the sales and distribution strategy. In 2010, tied agents were encouraged to focus
more on government and larger private sector worksites as these channels have a lower
propensity to fail (challenges associated with smaller private sector worksites include
difficulty in collecting premiums and poor credit worthiness). This change in focus resulted
in public sector worksites accounting for 33% of book by December 2010, compared to 11%
in January 2010. |
| • |
Streamlining broker channels to improve business quality and customer service. In 2008 and
2009 Liberty had distribution arrangements with many independent brokers including a
large number of independent call centres. An investigation was conducted which found that
some of these brokers were engaged in selling products inappropriately, resulting in
inordinately high policy lapses as well as high volumes of customer complaints. Liberty
therefore terminated broker contracts with more than 60 independent call centres during
2010. Although this negatively impacted sales volumes, customer complaints in 2010 were
less than half of 2009 levels, and persistency has improved steadily. Following the closure of
the broker call centres the ELM management team successfully re-intermediated all
contactable policyholder orphans. |
| • |
Liberty introduced a change in commission payment rules for intermediaries to strongly
encourage selling business at levels which are affordable to the customer. This change has
been instrumental in reducing policy lapses since implementation in April 2010. |
| • |
As part of on-going efforts to identify and prevent fraud, Liberty is collaborating with
industry players to implement measures to limit fraudulent claims and identify and break
criminal syndicates. This includes enhancing Liberty's claims intelligence capabilities to
identify and proactively investigate suspicious claims. |
|
| |
The main challenges faced by Liberty's ELM unit in 2010 included high policy lapses brought about
by poor sales practices, difficulties in premium collections, as well as higher than expected
mortality claims.
Comprehensive change has been introduced to deal with these challenges within the business and
positive results have been achieved in both lower policy lapses as well as substantially higher
premium collection rates. Liberty will continue to focus on further improvements to embed these
early successes into 2011 as well as addressing the issue of higher mortality claims.
Fulfilling a promise made in the 2009 Sustainability Report, Liberty simplified its policy
documentation. The broker and Liberty at Work application forms were standardised and simplified
from 42 pages to 11 pages. Revised and simplified policy contract documents are on track for
introduction in 2011.
Liberty set itself the goal of improving its brand awareness amongst emerging market consumers in
2010 by leveraging the consumer education programme to drive the Own Your Life philosophy.
Consumer education sessions were held at selected worksites as well as surrounding communities
during the year.
In 2010, Liberty also sought to drive the access agenda with key industry stakeholders by securing
Liberty Group representation in industry forums, and by driving industry engagement with key
stakeholders including both the Charter Council as well as ASISA. |
| |
Results |
Difficult economic conditions in 2010, together with the streamlining of our broker channels, saw a
decline in the number of new ELM policies and accounts compared to 2009. Funeral policies remain
the single biggest ELM product category in insurance and savings policies.
The value of Fundisa assets under management more than doubled compared to 2009. To date, a
total of 7 343 Fundisa accounts have been opened since launch in November 2007. 635 Chuma
accounts have been opened since its introduction in February 2007. The main challenge in the
distribution of Fundisa and Chuma is limited selling activity by financial advisers due to the low
commission levels (the commission levels are linked to the contribution amounts, which are low for
these two products). |
| |
| Product name |
2010 |
2009 |
| Total number of CAT15 standard products offered
(member only, family and extended family funeral
plans) |
3 |
3 |
| Total number of entry level insurance and savings
policies sold |
120 737 |
227 368 |
| Total value of entry level insurance and savings policies
sold (R million APE) |
302 |
428 |
| Total number of entry level insurance and savings
policies |
309 148 |
328 084 |
| Total number of CAT standard products collective
investment products offered
(Chuma and Fundisa) |
2 |
2 |
| Number of Fundisa accounts opened |
2 429 |
>2 896 |
| Total number of Fundisa accounts |
7 343 |
4 914 |
| Total value of Fundisa assets under management |
R17.4 million |
R7.1 million |
| Number of Chuma accounts opened |
85 |
142 |
| Total number of Chuma accounts |
635 |
550 |
| Total value of Chuma assets under management |
R7.3 million |
R5.05 million |
|
| |
| Liberty has exceeded its 2014 Financial Services Charter (FSC) scorecard target of 1.4 million in
force insurance policies in both 2009 and 2010. Liberty has three CAT standard insurance products
against its 2014 target of four. In addition to this the Liberty Group's two collective investment
products, Fundisa and Chuma, comply with the FSC requirements for Collective Investments Access
bringing the total to five CAT standard products across insurance and collective investments. |
| |
Looking ahead |
| Liberty is in the process of developing a wider emerging market strategy to take the business
beyond 2010. Key steps include: |
| • |
Sizing the broad emerging market opportunity |
| • |
Defining, describing and evaluating sub segments within emerging markets |
| • |
Crafting segment and customer value propositions to serve priority segments |
| • |
Developing appropriate competencies (including sales, distribution and servicing channel
capabilities) for the emerging market |
|
| |
Going forward, the emphasis on rebuilding and focusing our sales and distribution business in line
with sustainable market opportunities will continue. We plan to grow our tied agent presence within
larger commercial and public sector worksites and build partnerships with established brokerages, affinities and employers. We will re-evaluate our ELM branch footprint and strive to ensure that our
branches are accessible to our customer base. We also plan to increase the visibility of our brand in
emerging markets.
To cater to the segment needs our product range will be expanded along with the required training
and accreditation of advisors to sell this broader product range. In addition, the ELM unit will
continue to focus on improving business processes to deliver sustainable value to customers and
bottom line profits for Liberty.
To improve the distribution of Fundisa and Chuma, we are engaging with the FSB on an on-going
basis to obtain an FAIS exemption for Fundisa. This would allow us to broaden our distribution
channels beyond bank branches and financial advisors. Work is also being done to bundle Fundisa
and Chuma with other Group products to deliver more value to our customers and increase uptake. |
| |
Finance empowerment |
Liberty views empowerment financing as an opportunity to support sustainable black companies
and individuals through debt financing and equity investments, thus contributing to the country's
wider economic development. Empowerment financing is also an opportunity for Liberty to diversify
its investment portfolios away from state-owned entities, government and banking institutions.
Empowerment financing at Liberty is managed by LibFin and consists of: |
| • |
Targeted investments: debt financing or other forms of credit extension for transformational
infrastructure, low income housing, agricultural development and black SMEs. |
| • |
BEE transaction financing: these transactions involve black people's acquisition of direct
ownership in new or existing entities other than SMEs. |
|
| |
The Financial Sector Charter (FSC) provides a framework for the financial services industry to
commit itself to developing new and existing BEE accredited companies. Liberty's approach to
empowerment financing is consistent with the Charter, and will also be informed by the Financial
Sector Code once it has been finalised.
Liberty's approach to empowerment financing also speaks to the monetary aspects of the DTI
Codes of Good Practice "enterprise development" element. This dual approach has enabled Liberty
to participate in both enterprise development and empowerment financing through a common
mandate. |