190405 us roadshow

International Roadshow Presentation: 

International Roadshow Presentation April 2005 www.liberty.co.za

Liberty Life: 

Liberty Life Shareholder structure

Structure: 

Liberty Holdings Limited Liberty Group Limited Structure Standard Bank (54,65%) (50,17%) Life Assurance Asset Management Liberty Personal Benefits Liberty Corporate Benefits Liberty Active (Charter) STANLIB (37,4%) Liberty Ermitage Liberty Properties

Liberty Life: 

Liberty Life People the cornerstone of our business

Liberty Life: 

Liberty Life Overview of business

Mix of business (2004): 

Mix of business (2004) 7% 71% 5% 17% 7% 68% 6% 19% Total new indexed premiums * Total in force indexed premiums * * Indexed refers to recurring premiums plus 10% of single

Overview of premiums (2004): 

Overview of premiums (2004) 85% 15% 76% 24% Total new indexed premiums * Total in force indexed premiums * * Indexed refers to recurring premiums plus 10% of single

New individual API premiumsby channel: 

New individual API premiums by channel

Life insurance operations: 

Source: LOA market share statistics for all life offices Year ended 31 December 2000 Year ended 31 December 2001 Life insurance operations New individual business market share (including Liberty Active) % Single individual Year ended 31 December 2002 Year ended 31 December 2003 Nine months ended 30 September 2004 20 23 24 25 26 15 17 20 25 27 Recurring individual

Individual average new recurring premiums: 

Individual average new recurring premiums Source: LOA market share statistics for all life offices

Market share – corporate benefits: 

Market share – corporate benefits Not comparable due to size of funds targeted Number of schemes: 9 500 Number of members: 287 000 Typically funds with 10 to 300 employees Scale of business to change significantly

Liberty Life: 

Liberty Life Our key financial value drivers

Driving improved performance through higher ROEV’s : 

Driving improved performance through higher ROEV’s ROEV = EV earnings/EV EV earnings drivers new business profits managing the in-force costs mortality/morbidity persistency investment performance Capital management capital management committee Capital Alliance debt

Seven key financial measures: 

Seven key financial measures These items drive ROEV

Life insurance operations: 

Life insurance operations New business premiums Total +15% to R13 440m Individual life +22% to R11 374m Corporate benefits -12% to R2 066m Indexed new business premiums Total +10% to R4 186m Individual life +11% to R3 544m Corporate benefits +3% to R642m Individual life Corporate benefits 2001 Rm 2002 2003 2004 +22% -12% +11% +3%

Life insurance operations: 

Life insurance operations Total in force business premiums Total +13% to R20 544m Individual life +21% to R16 359m Corporate benefits -8% to R4 195m Indexed in force business premiums Total +17% to R11 343m Individual life +17% to R8 571m Corporate benefits +18% to R2 771m Individual life Corporate benefits +21% -8% +17% +18% Rm Rm

New business : 

New business CAGR of 11,3% in total new business (5yrs) Consistent market share gains Upper income segment – growing disposable income Standard Bank’s client base presents further opportunities Changing model for corporate benefits business Liberty Active (Charter) for the future New product development unit

Value of new business and new business margins*: 

Value of new business and new business margins* Margins exceeded our longer term average of 18-22% Individual margins range 20-24% Corporate margins range from 6-10% * Value of new business divided by indexed new business premium

Headline earnings: 

Headline earnings Revenue earnings attributable to shareholders’ funds Operating profit from insurance operations

Headline earnings: 

Headline earnings Operating profit from insurance operations: Reasons for volatility and decrease since 2000 10% shareholders’ participation in investment returns once off items capitalised by valuation basis e.g. expense profits (or losses) stochastic modelling of guarantee reserves AC133 (to be followed by IFRS4 and IAS compliance) Other earnings contributors: STANLIB, Liberty Ermitage, trading portfolio and Liberty Properties Return on other shareholders’ investments equities bonds cash/preference shares offshore

Life insurance operations: 

Net cash inflows from insurance operations Total -19% to R3 640m Individual life +76% to R5 492m Corporate benefits -234% to -R1 852m R5 492m Net cash inflows from individual life business Net cash inflows from corporate benefits business Life insurance operations Rm 2003 2001 2004 2002 -R1 852m

Net cash inflows from insurance operations : 

Net cash inflows from insurance operations Useful when read together with new business growth In-force book is being managed better Customer service drive and STANLIB’s investment performance should improve retention Maturities of property backed products in second half of 2004 of R2bn Total inflows of R22.6bn (2003 R18.3bn) including asset management inflows

Expenses: 

Expenses Business structure to be restructured into front and back office eliminating duplication Capital Alliance assists with focusing on efficiencies Expect once off restructuring costs, but enduring benefit Targeting expense cost per policy increase at 4.25% Headcount for Liberty Life & Stanlib reduced by >400 since 30 June 2003, but… Growing headcount in Liberty Active

Expenses – controlling headcount: 

Expenses – controlling headcount 251 people taken on in October 2003 as part of IEB acquisition IT outsourcing and HR restructuring - reduction of 95 people Group expenses increased 5% Maintenance cost per policy increased +3.5% in Liberty and -4.9% in Liberty Active 3353 Liberty headcount excluding IEB Liberty headcount including IEB Dec 02 Mar 03 Jun 03 Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 3221 3472 3320 3069

Embedded value: 

Embedded value Value of in force business Shareholders’ finds Fair value adjustment BEE impairment Rm

Capital adequacy: 

Capital adequacy Times covered Times covered incl BEE times

Capital management: 

Capital management Capital management committee Long-term shareholder portfolio established Successful Liblife B.V. bond redemption Application to the FSB to issue debt - conditional approval received BEE transaction successfully implemented Offer made for Capital Alliance Dividend policy introduced

Capital management-dividend policy: 

Capital management-dividend policy Objectives: predictable growth less volatility leave room for new business growth strong capital adequacy Yield on EV per share of approximately 4,75% as a base Going forward – aligned to medium term growth of EV taking into account: economic conditions; and CAR cover >1,5 interim dividend at 40% of previous full year

Risks and issues: 

Risks and issues Increasing compliance and regulatory requirements Volatile investment markets Risk averse investors Perception of industry AIDS (not as much an issue for Liberty Life)

Some positives are emerging: 

Some positives are emerging Industry has started recognising its shortcomings Emerging middle class - a reality, but net spenders South African economy - a success story Investors becoming more bullish Good local investment returns Cash being accumulated by investors = opportunity

A simple business model: 

A simple business model Liberty’s business is conceptually simple and generic We develop products We sell products We receive money We invest the money according to product specification We administer according to product specification We pay benefits

Focus areas for next twelve months: 

Focus areas for next twelve months Exciting opportunities Operational restructuring opportunities Capital Alliance new business efficiency Products Capital structuring Liberty Active and, as always ... people ... service … costs

Why Liberty Life?: 

Why Liberty Life? Pure, focussed South African life insurance company Strong parent Strong equity play Low smoothed bonus business Improved returns through better capital management and efficiencies A history of delivery

Why Liberty Life?: 

Why Liberty Life? High dividend yield at current price Future growth opportunities (market segments) Revised top team – good mix of insurance and general management experience Uncomplicated strategy Share price offers value!

Appendix: 

Appendix Insurance industry in South Africa

Competitors: 

Competitors * As at 31 March 2005

Total new business: 

2002 Total new business 2003 2004 I = Individual; G = Group Rm

Indexed new business *: 

2002 2003 2004 Indexed new business * * Indexed new business as per embedded value statement Rm

Net flow of funds from life insurance operations: 

Net flow of funds from life insurance operations 2002 2003 2004 Liberty Sanlam Old Mutual Momentum Discovery (Life) Rm

Embedded value: 

Embedded value NAV and subs VIF LGL SLM OML MOM DSY Rm

JSE Securities Exchange statistics: 

JSE Securities Exchange statistics

JSE Securities Exchange statistics: 

JSE Securities Exchange statistics

Contact details: 

Contact details

International Roadshow Presentation: 

International Roadshow Presentation April 2005 www.liberty.co.za