Presentation Transcript
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