Liberty Group Limited

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Liberty Group Limited Interim Results
Presentation 6 August 2003 www.liberty.co.za
Liberty. Lighting your way to financial
prosperity.
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A challenging six months at Liberty

• Some changes in senior management
• Restructure of business operations
• Accounting and regulatory issues
• Market update issued in May
• Growth in market share and positive cash flow

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A challenging six months at Liberty (continued)

• STANLIBs first birthday
• Largest BEE asset management deal
• New life product developed
• Acquisition by Corporate Benefits of IEB
• Reduced offshore emphasis

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Some changes in senior management

• New Chief Executive Officer
• Deon de Klerk (6 years service) replaces Mark
  Bloom
• Andrew Lonmon-Davis (16 years service) becomes
  Chief Actuary
• Mike Jackson moves on
• 146 years service on Exco

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Restructure of business operations

• Executive Committees integrated
• Insurance Operations Committee and Investment
  Operations Committee Group Executive Committee
• Executive Management Committee Executive
  Communications Forum

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Restructure of business operations(continued)

• Subsidiary board meetings streamlined
• Healthcare incorporated into Personal Benefits
• STANLIB restructure phase 2

Duplication removed
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Accounting and regulatory issues

• AC133 implementation
• Ongoing process to align PGN104 with AC133
• No material impact on headline earnings yet
• No international accounting standards for
  insurers as yet
• Tighter control by regulators FAIS and FICA
• CISCA paves way for restructuring

Not a simple process
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Transformation

• Financial Services Charter work in progress
• Employment equity high priority receiving
  continuous focus
• STANLIB BEE deal the beginning of the road

A huge challenge
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New CEOs thoughts on the business

• Sound business
• Good products and distribution
• Healthy margins
• Strong capital position
• Positive cash flows
• but
• Volatile earnings
• Service issues
• Cost base

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Financial results
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Features - 2003/2002

• Indexed new business
• Individual
• Corporate
• Value of new business
• New business margin
• Headline earnings per share
• Dividend maintained

- 162

• 6
• 2
• 30
• 6
• 18
• 46
• cents

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Features - 2003/2002
6 3

• Net cash inflow from insurance operations R1,7
  bn
• Embedded value per share R53,42
• Capital adequacy cover

• -
• 2,6 x

Continued gains in market share
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Headline earnings
30 June 2003 Rm
30 June 2002 Rm
Change

• Life fund operating surplus
• Revenue earnings shareowners funds
• Preference dividend
• Headline earnings
• Headline EPS (cents)

(46
)
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Life fund operating surplus

• Significant reduction due to 10 shareowners
  participation in negative returns
• Further reduction in fees due to lower levels of
  assets under management
• 1H02 included significant expense profits due to
  cost containment not repeated in 1H03

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Investment returns(Weighted average of equity,
managedand foreign assets portfolios)
Jul
Apr
Jan
Jun
Feb
Aug
Sep
Oct
Dec
Mar
Nov
May
Year-to-date June 2002 - 0,4 Year-to-date June
2003 - 3,6
Markets continued to decline in 2003 New
generation products earn management feesinstead
of 10 capital bonuses
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Expenses
30 June 2003
30 June 2002
Change
Total insurance expenses (Rm) Net inflow of
policies (number)
663 16 560
587 20 417
13 (19
)
Renewal cost per policy increased/(decreased)
by Acquisition cost per policy increased/(decrease
d) by
0,0 2,1
7,6 9,3
Significant non-recurring expenses incurred in
1H03 Cost saving targets set throughout the Group
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Revenue earnings shareowners funds
30 June 2003
30 June 2002
Change
)
)
) )
Financial services activities Listed
investments Other income Tax
72 25 90 (39 148
97 25 60 (55 127
(26 - 50 (29 17
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Embedded value
30 June 2003 Rm
31 Dec 2002 Rm
Change
Shareowners funds Value of life
businessin-force Financial services subsidiaries
fair value adjustment Total Embedded value per
share (Rand)
8 266 5 646 711 14 623 53,42
8 588 5 700 838 15 126 55,28
(4) (1) (15) (3) (3)

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Financial services subsidiariesfair value
adjustment

• STANLIB impaired R54 million
• Liberty Ermitage multiple revised down to 12 x
  and stronger Rand R70 million
• Liberty Properties multiple maintained at 10 x

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Shareowners funds

• Impairments
• Hightree goodwill R62 million
• Unlisted investments R39 million

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Capital adequacy cover
CAR multiple
Capital adequacy cover on new statutory basis
2,6 x
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Dividend
2003Cents per share
2002Cents per share
Interim Final
162
162 116 278
Positive cash flows Confident about our future
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Operations
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New business percentage increase
Individual business
Corporate business
Total

• Recurring
• Single
• Total
• Index

10 (20 (14 2
22 51 45 30
12 (9 (5 6
) )
) )

• Continuing market share gains
• Focus on productivity of sales force
• Investment performance competitive over longer
  periods
• Strong property backed sales

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Market share individual business (including
Charter)

Source LOA market sharestatistics for all life
offices
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Value of new business
30 June 2003
30 June 2002
Change
Value of new business (Rm) New business margin ()
262 18,4
248 17,6
6 1
All margins slightly up vs June 2002
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Net cash inflows from insuranceoperations
30 June 2003 Rm
30 June 2002 Rm
Change

Total premiums and inflows under investment
contracts Claims, policy-owner benefits and
payments under investment contracts Net cash
inflows
8 004 6 274) 1 730
7 552 5 915) 1 637
6 6 6
(
(
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Total net cash inflow from insurance operations
Rm
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Charter new business

30 June 2003 Rm
30 June 2002 Rm
Change
) ) ) )
Recurring premiums Single premiums Total Index
(6 (12 (11 (7
221 548 769 276
235 626 861 298

• Charters share of SBFC 23 (38)
• Libertys share of SBFC 59 (45)
• Simple products 23

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Launch of Lifestyle Protector product

• New generation risk protection product
• Cover for multiple lives
• Number of unique benefits
• Settles the disability/impairment debate
• Further leverages our Blueprint software
• Retained the very successful Universal Lifestyle
  product

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STANLIB Liberty Ermitage
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STANLIB

• Weak and volatile investment markets adversely
  impacted results
• Headline earnings of R47,1 million down 26
• Normalised headline earnings of R65,1 million up
  6
• Disappointing short-term investment performance
• Longer term investment performance (3 years)
  remains satisfactory - upper quartile

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STANLIB

• Most portfolios positioned for expected
  re-rating of equities relative to bonds
• Merger and systems integration activities
  continue (R25,7 million spent this half year)
• Merger costs cease end 2003
• Cost saving initiative in progress
• Empowerment transaction announced in June

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STANLIB

• Asset Management net inflows for the six months
  of R4 billion
• Wealth Management net inflows for the six months
  of R4 billion
• Asset Management assets under management of
  R131,8 billion up 3
• Wealth Management funds under administration of
  R55,1 billion up 6

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STANLIBAsset Management - assets
30 June 2003 Rm
31 December 2002 Rm
Increase

• Life funds
• Segregated funds
• Unit trusts
• Total

53 107 48 414 30 259 131 780
52 633 48 334 27 464 128 431
1 - 10 3
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Liberty ErmitageAssets under management
30 June 2003 USm
31 December 2002 USm
Increase
807 792 667 2 266
31 12 (3 15
)

• Hedge funds
• Long only funds
• Money funds
• Total

1 059 889 646 2 594
57 external third party funds
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Conclusion
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Focus areas for next six months

• Improve service levels
• Emphasis on cost reduction
• Focus on domestic operations
• Renewed emphasis on people
• Explore other market segments and Africa
• Address capital situation

Building and changing on a solid platform
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Panel

• Myles Ruck Chief Executive
• Deon de Klerk Chief Financial Officer
• Andrew Lonmon-Davis Chief Actuary

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