2005 Results Presentation to the Investment Analysts

1
2005 Results Presentation to the Investment
Analysts Society of Southern Africa

• 2 March 2006
• www.liberty.co.za

2
Agenda
What we said What weve done Financial and
operating results Focus areas Questions
3
What we said

• Capital management continues
• Compliance, IFRS
• Address PFA issues
• ... people ... service costs

4
What we said

• Operational restructuring and CAHL integration
  continues
• Marketing and Distribution restructuring
• Products
• Channels
• Project Khula continues
• Group professional services restructuring and
  integration
• Hug our customers!

5
What weve done Capital management

• Bought CAHL utilising some excess capital
• First life company in SA to issue capital
  qualifying bond
• Sold significant portion of SAB - no remaining
  concentration risks
• Sale of Prefsure and Hightree
• Ermitage sale in progress
• New dividend policy implemented
• Capital reduction

6
What weve done PFA issues

• Statement of Intent signed with National Treasury
• What the industry agreed to
• Minimum standards applied to early termination
  values
• Retrospective and prospective
• Treasurys promises
• New commission regulations
• Jurisdictional clarity (PFA, FSOS Ombudsman, LTI
  Ombudsman)
• Recognition of application of Long-Term Insurance
  Act to RA policies
• Resolution of other regulatory matters

7
What weve done PFA issues

• All business with savings as the primary purpose,
  is included
• RAs (with and without life cover)
• Endowments
• Whole of life (where savings is primary purpose)
• Reversionary bonus business
• Policies intended primarily to provide risk
  benefits, are excluded
• Pure risk products (eg Lifestyle Protector)
• Whole life business not included
• A number of outstanding practicalities still to
  be finalised
• Full provision for Statement of Intent (SOI) made
  at 31 December 2005

8
What weve done Operational restructuring

• Overview of new structure given at the interim
  results
• Updated restructuring and integration progress
  given in November 2005
• Marketing and Distribution
• Operations
• Group Professional Services
• Asset Management (Stanlib and Properties)

9
What weve done Operational restructuring

• Choice of IT platform finalised and project
  started
• Life licenses under review
• Recap of numbers
• Restructuring and integration costs of R500m over
  3-4 years
• Anticipated cost reduction of R300m pa by 2008
• Estimated after tax net benefit of approximately
  R1bn
• Restructuring and integration on track

10
What weve done Products

• New risk product (Lifestyle Protector) performing
  well
• Sought more clarity on PFA rulings before
  launching new savings products
• New long term savings product launch planned for
  later this month
• Policyholder value proposition
• Internal culture we should only sell a product
  that we would be happy to sell to our mothers!
• Increased advertising awareness of real benefits
  of RAs

11
What weve done Distribution

• Agency restructured
• Continued focus on broker relationships
• Entry level market
• Khula performance
• CAHL Commercial/Khula agents consolidated
  (Liberty_at_Work)
• Individual life bancassurance model still
  delivering
• Awaiting finalisation of the commission proposal
• SAFSIA Awards

12
Deon de Klerk
13
Operational features 2005/2004

Rm 20051 20042

Total new business 16 673 13 748 21
Indexed new business 4 870 4 336 12
Value of new business pre SOI costs 882 815 8
New business margin pre SOI costs 23 24 -1
Net cash inflows from insurance operations3 5 726 3 186 80

1. Includes CAHL numbers for 9 months since
   acquisition
2. Includes CAHL numbers for 9 months for
   comparability where appropriate
3. Excludes STANLIB and Ermitage net cash inflows

14
Impact of SOI

Rm

Net asset value (406)
Headline earnings (321)
Goodwill impairment (85)
Value of in-force (193)
Embedded value (599)

• Value of new business margins reduced to 20

15
Life insurance operations

• New business premiums
• Total R16 673m (21)
• Individual life R13 721m (18)
• Corporate benefits R2 952m (39)

• Indexed new business premiums
• Total R4 870m (12)
• Individual life R4 004m (10)
• Corporate benefits R866m (26)

16
Life insurance operations

• Embedded value of new business
• Total R882m (8)
• Individual life R845m (3)
• Corporate benefits increased from -R4m to R37m

• New business EV margins
• Total 23 ? 20 after SOI
• Individual life 25 ? 23 after SOI
• Corporate benefits 6 ? 6 unchanged

Before SOI impact
17
New business EV margins PV of premiums basis

Rm After SOI 2005 Before SOI 2005 2004

Value of new business 777 882 815
PV of future expected premiums 26 216 26 902 24 030
Value of new business as a of PV of future expected premiums 3,0 3,3 3,4
As reported
18
Life insurance operations

• Net cash flows from insurance operations
  (excluding Stanlib Ermitage)
• Total R5 726m (80)
• Individual life R4 948m (4)
• Corporate benefits R778m (149)

19
Life insurance operations

• New business market share

Source LOA
20
Other operations

• STANLIB assets under management and funds under
  administration

Rbn 2005 2004

Life funds 90 72 25
Segregated funds 83 66 26
Unit trusts 53 51 4
Structured products and other 50 34 47
Total AUM and FUA 276 223 24
Money market as of total 12 16
Net cash inflows of R13,3bn (R15,3bn in
2004) Earnings before tax of R407m up 46
21
Financial results 2005/2004

Rm 2005 Restated2004

BEE normalised headline earnings per share before IFRS SOI (cents) 665,4 465,3 43
BEE normalised embedded value per share before SOI (Rand) 75,56 63,72 19
Statutory capital adequacy requirement(times covered) 2,0 2,5
22
BEE normalised headline earnings before IFRS and
SOI

Rm 2005 Restated2004

Insurance operations 1 308 827 58
Per financial statements 942 841 12
IFRS adjustments 45 (14) gt100
SOI provisions 321 - n/a
Shareholders funds 451 425 6
Per financial statements 899 409 gt100
IFRS adjustments (448) 16 lt100
BEE funding 88 31 gt100
BEE normalised earnings before IFRS SOI 1 847 1 283 44
Per share (cents) 665,4 465,3 43
23
Operating profit from life insurance operations
major influencing factors

• Inclusion of CAHL for 9 months
• Shareholders 10 participation and higher asset
  base
• Risk profits
• Investment guarantee reserve
• Expenses
• Costs per policy
• Non-recurring expenses

24
Gross investment returns
9,7
25
Expenses

Rm 2005 Restated2004

Total Liberty Group expenses 3 612 3 370 7
IFRS 2 adjustments share based payments (40) (14) gt100
Mutual funds on consolidation (137) (116) 18
Project Khula costs (27) (6) gt100
VIF amortisation (120) (18) gt100
Restructuring, integration and other non-recurring costs (199) (137) 45
Normalised group expenses 3 089 3 079 0
CAHL costs included for 9 months in 2004 and
2005
26
Restructuring, integration and other
non-recurring expenses

Rm Actual Estimated Estimated Estimated Estimated Estimated Estimated Estimated
Rm 2005 2005 2005 2006 2006 2007 2007 Total

Retrenchments and other staff costs 80 50 50 20 20 - - 70
Systems and process costs 32 100 100 150 150 70 70 320
Infrastructure and office relocation costs 70 50 50 20 20 - - 70
Consolidation of Marketing Distribution integration 2 20 20 20 20 - - 40
Total 184 220 220 210 210 70 70 500
Incurred to date (184)
Expenses still to be incurred 316
Other non-recurring expenses of R36m
27
Maintenance costs per policy

2005 2004 Assumption

Individual annual maintenance costs per policy Individual annual maintenance costs per policy Individual annual maintenance costs per policy Individual annual maintenance costs per policy Individual annual maintenance costs per policy
Liberty Life R258 R248 4,0 4,25
Liberty Active R139 R154 -9,7 4,25
CAHL Complex R221 R2171 2,52 4,25
CAHL Simple3 R98 R801 30,02 4,25

1. For the year ended 31 March 2005
2. Annualised
3. Consolidation of 63 000 policies into 1 policy
   during 2005 impacted per policy statistics

28
Embedded value

Rm 2005 Restated2004

Shareholders funds statutory basis 8 198 8 200 0
Fair value adjustments 326 766 -57
Fair value of share options (245) (191) -28
Net value of in-force business 10 874 7 544 44
Embedded value 19 153 16 319 17
Embedded value per share (Rand) 75,96 65,07 17
BEE normalised embedded value per share before SOI (Rand) 75,56 63,72 19
29
Capital adequacy cover

2005 Restated2004

Statutory capital adequacy requirement (Rm) 3 782 3 013
Statutory capital (Rm) 7 734 7 417
Times covered 2,0 2,5
Times covered without BEE impairment 2,4 2,9
30
Capital reduction

• Target CAR cover of 1,7 times
• Excess capital of approximately R1bn
• Capital reduction of R1bn or 360 cents per share
• Subject to shareholder and regulatory approval

31
Dividend

Cents per share 2005 2004

Interim 126 162 -22
Final 224 153 46
Total 350 315 11

Annual 350
Base for future dividend declarations 325
Capital reduction impact 25

• At 2004 year end new dividend policy established
• Dividend growth in line with current estimated
  medium term growth in embedded value(after
  normal dividends)

32
Bruce Hemphill
33
Addressing market concerns

• Insurance skills
• Integration and restructuring
• Good progress made in 2005
• CAHL staff relocated to Liberty
• One team, good mix of CAHL and Liberty
• Continuity
• Group Executive
• Rex Tomlinson/Bruce Hemphill on Exco for 24 months

34
Liberty priorities for the next 12 months

• Customers
• Customer service
• Moral high ground
• Leading product innovators
• Real value to policyholders

35
Liberty priorities for the next 12 months

• Systems and processes
• Single IT platform
• Efficient business model
• Scalable

36
Liberty priorities for the next 12 months

• People
• Our people are the critical ingredient
• Positive energy
• Team environment
• Enjoyable workplace

37
Questions

Panel

Myles Ruck Chief Executive
Bruce Hemphill Chief Executive Designate
Andrew Lonmon-Davis Statutory Actuary
Deon de Klerk Chief Financial Officer
38
Appendices
39
Operating profit from shareholders funds

Rm 2005 Restated 2004

Financial services operations 149 172 -13
Listed investments 62 94 -34
Disposal groups held for sale 77 46 67
Other investments 319 319 0
Shareholders management expenses (163) (128) 27
Shareholders tax (36) (94) -62
Investment gains net of CGT 491 - n/a
Operating profit post IFRS adjustments 899 409 120
40
Embedded value (EV) reconciliation and ROEV build
up

2005 YrRm 2005 ROEVBuild Up ()

Investment return on shareholders funds 1 416 8,9
Expected return on life business 938 5,9
Investment experience 1 292 8,2
Other experience (23) -0,1
Operating assumption changes 60 0,4
Changes in economic assumptions 457 2,9
Value of in-force acquired 167 1,1
Change in modeling (603) -3,8
New business 882 5,6
Exchange rate movements 46 0,3
EV Profit before Abnormal items 4 632 29,4
Less Abnormal
Implementation of minimum values for savings products (599) -3,8
Future non-recurring costs (216) -1,4
Change in company tax rate 118 0,8
Write off of CAHL goodwill (397) -2,5
EV Profit 3 538 22,5
Net of allowance for fair value of options of
-R54m
41
Embedded value (EV) reconciliation 1H05 vs 2H05

2H05Rm 1H05Rm 2005 YrRm

Investment return on shareholders funds 729 687 1 416
Expected return on life business 502 436 938
Investment experience 906 386 1 292
Other experience 126 (149) (23)
Operating assumption changes 311 (251) 60
Changes in economic assumptions 448 9 457
Value of in-force acquired 167 - 167
Change in modeling (587) (16) (603)
New business 512 370 882
Exchange rate movements 46 - 46
EV Profit before Abnormal items 3 160 1 472 4 632
Less Abnormal
Implementation of minimum values for savings products (599) - (599)
Future non-recurring expenses (216) - (216)
Change in company tax rate - 118 118
Write off of CAHL goodwill (85) (312) (397)
EV Profit 2 260 1 278 3 538

• Net of allowance for fair value of options of
  R101m in 2H05 (1H05 R47m)
• Annualised ROEV for 2H05 is 28 (1H05 16)

42
IFRS NAV vs Statutory NAV

Rm 2005 Restated 2004

Shareholders funds published basis 9 434 8 526
CAR requirements of subsidiaries (1 212) (376)
Debt and preference shares 2 200 -
Differences between statutory and published valuation methodologies (1 429) (430)
IFRS adjustments - (32)
Inadmissible assets (1 259) (271)
Shareholders funds statutory basis 7 734 7 417
43
Stanlib detailed earnings analysis

Rm 2005 2004 Change

Net fee income 753 630 20
Investment and other income 67 67 -
Total income 820 697 18
Operating expenses 413 419 -1
Income before tax 407 278 46
Normal tax 142 97 46
Income after tax 265 181 46
Preference dividends 62 65 -5
Earnings 203 116 75
Cost to income ratio 55 64
44
Ermitage - assets under management

USm 2005 2004

Hedge funds 1 789 1 500 19
Long-only funds 1 329 1 382 -4
Money funds 646 762 -15
Total AUM 3 764 3 644 3
Third party funds as of total funds 41 41

• Net cash inflows of US69m
• Headline earnings of 6,67m (R77m) up 138

45
Financial services and subsidiaries

Rm December 2005 December 2005 December 2005 December 2005 December 2004 December 2004 December 2004 December 2004
Fair Value Adjustment Tangible NAV Goodwill net of amortis-ation Fair Value Uplift Total Carrying value in EV excl VIF Change Tangible NAV Goodwill net of amortis-ation Fair Value Uplift Total Carrying value in EV excl VIF

Liberty Group Properties 11 0 300 311 27 4 0 240 244
Liberty Ermitage Jersey 546 81 305 932 14 456 69 290 815
Stanlib 406 0 710 1 116 48 407 0 345 752
Prefsure 400 0 30 430 - - - - -
Carrying value of VIF business acquired from IEB 96 0 (96) 0 n/a 109 0 (109) 0
Carrying value of VIF business acquired from CAHL 923 (923) 0 n/a - - - -
2 382 81 326 2 789 54 976 69 766 1 811
The value of the IEB CAHL business is
included in the group's estimates of the
VIF Restated for IFRS
46
New business excluding contractual increases - ex
CAHL

Recurring Premiums Recurring Premiums Recurring Premiums Single Premiums Single Premiums Single Premiums Total Premiums Total Premiums Total Premiums
Rm 2005 2004 2004 2005 2004 2004 2005 2004 2004 Change

Individual 2 142 2 064 2 064 10 485 8 700 8 700 12 627 10 764 10 764 17
Corporate 288 248 248 2 311 1 582 1 582 2 599 1 830 1 830 42
Total new business 2 430 2 312 2 312 12 796 10 282 10 282 15 226 12 594 12 594 21
Change 5 24 21
Indexed new business 3 710 3 340 3 340 11
Indexed Individual new business 3 191 2 934 2 934 9
Indexed Corporate new business 519 406 406 28
47
Total premiums

Recurring Premiums Recurring Premiums Recurring Premiums Single Premiums Single Premiums Single Premiums Total Premiums Total Premiums Total Premiums
Rm Inc CAHL2005 Inc CAHL2004 Inc CAHL2004 Inc CAHL2005 Inc CAHL2004 Inc CAHL2004 Inc CAHL2005 Inc CAHL2004 Inc CAHL2004 Change

Individual 9 762 8 746 8 746 11 030 8 918 8 918 20 792 17 664 17 664 18
Corporate 4 134 2 941 2 941 2 365 1 759 1 759 6 499 4 700 4 700 39
Total premiums 13 896 11 687 11 687 13 395 10 677 10 677 27 291 22 364 22 364 22
Change 19 25 22
Indexed total business 15 236 12 755 12 755 19
Indexed Individual total business 10 865 9 652 9 652 13
Indexed Corporate total business 4 371 3 103 3 103 41
48
New business EV analysis - ex CAHL

Rm 2005 (After SOI) 2005 (Before SOI) 2004 Change

Indexed Individual new business 3 191 3 191 2 934 9
Indexed Group new business 519 519 406 28
Indexed new business 3 710 3 710 3 340 12
Individual NB EV 701 806 819 -2
Group NB EV 7 7 -4 gt100
Total NB EV 708 813 815 -0,2
NB Individual Margin 22 25 28 -3
NB Group Margin 1 1 -1 2
Total Margin 19 22 24 -2

• Indexed new business of CAHL for EV purposes
  R201m (Recurring R170m, single R31m)
• CAHL NB embedded value of R69m
• CAHL NB embedded value and volumes for 9 months
  only

49
Effect of the BEE transaction on headline earnings

Rm 2005 2004 Change

Earnings before IFRS 1 438 1 252 15
Costs of transaction included in headline earnings net of tax - 18
Preference shares accrued1 88 13
Headline earnings including preference dividends before IFRS 1 526 1 283 19
Weighted average number of shares in issue (millions) 251,8 271,9
Reinstatement of weighted average number of shares reduced for BEE transaction (millions)2 25,8 3,78
Weighted average number of shares after reinstatement of the transaction shares (millions) 277,6 275,7
BEE normalised headline earnings per share (cents) 549,8 465,3 18

1. As a consequence of utilising Liberty Lifes own
   cash flows (in the form of ordinary dividends
   paid) to service the empowerment transaction
   financing structure (in the form of dividends on
   preference shares), the dividends received on the
   empowerment preference shares will be accounted
   for directly in reserves, thereby offsetting the
   dividends so received against the ordinary
   dividends paid by the company
2. Due to the fact that the Black Economic
   Empowerment transaction is effectively accounted
   for as a share buy back (until such time that all
   funding is repaid), the weighted average number
   of shares in issue for 2004 has been reduced by
   25,8million shares. The transaction was
   implemented on 8 November 2004

50
Effect of the BEE transaction on EV per share

Rm 2005 2004 Change

EV per EV statement 19 153 16 319 17
Costs of transaction included in headline earnings net of tax debited against reserves1 - 40
Reinstatement of impaired empowerment preference shares 1 251 1 251
Preference dividends accrued - 13
Embedded value before impairment 20 404 17 623 16
Total number of shares in issue (millions) 252,1 250,8
Reinstatement of number of shares reduced for BEE transaction (millions)1 25,8 25,8
Total number of shares after reinstatement of the transaction shares (millions) 277,9 276,6
BEE normalised EV per share (Rand) 73,41 63,72 15

1. Due to the fact that the Black Economic
   Empowerment transaction is effectively accounted
   for as a share buy back (until such time that all
   funding is repaid), the total number of shares
   has been reduced by 25 796 143 shares at 31
   December 2005 and 31 December 2004

51
Claims policyholder benefits - Liberty ex CAHL

Group Group
Rm 2005 2004 Change

Individual 13 240 10 867 22
Death disability 2 165 1 895 14
Policy maturity claims 3 548 3 427 4
Policy surrender claims 5 873 4 005 47
Annuity payments 1 654 1 540 7
Group 4 921 6 047 -19
Death disability 543 489 11
Scheme terminations 258 276 -7
Scheme member withdrawals 1 884 1 448 30
Annuity payments 269 251 7
Investment only terminations and withdrawals 1 967 3 583 -45
Total claims policyholder benefits 18 161 16 914 7
52
New business detailed analysis - Rm

New Business Recurring Premiums Recurring Premiums Recurring Premiums Single Premiums Single Premiums Single Premiums Total Premiums Total Premiums Total Premiums Total Change Total Change Total Change
2005 2004 2004 2005 2004 2004 2005 2004 2004 2005 2005 2005
Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Ex CAHL Ex CAHL

Individual 2 924 2 759 2 759 10 797 8 870 8 870 13 721 11 629 11 629 18 17 17
Corporate 635 531 531 2 317 1 588 1 588 2 952 2 119 2 119 39 38 38
Total 3 559 3 290 3 290 13 114 10 458 10 458 16 673 13 748 13 748 21 20 20
Change 8 25 21
Change Ex CAHL 13 28 24
Indexed new business 4 870 4 336 4 336

• Includes premium escalations

53
Net cash flows detailed analysis - Rm

Net cash flows Individual business Individual business Corporate business Corporate business Total Premiums Total Premiums Total Premiums Total Change Total Change Total Change
2005 2004 2005 2004 2005 2004 2004 2005 2005 2005
Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Inc CAHL Ex CAHL Ex CAHL

Net Premiums 20 792 17 664 6 499 4 700 27 291 22 364 22 364 22 20 20
Net claims and benefits 15 844 12 892 5 721 6 286 21 565 19 178 19 178 12 7 7
Net cash flows 4 948 4 772 778 (1 586) 5 726 3 186 3 186 80 77 77
Change 11 149 80
Change Ex CAHL 9 125 77
54
New business by distribution channel

Recurring Premiums Recurring Premiums Single Premiums Single Premiums Total Premiums Total Premiums Total Premiums
Rm 2005 2004 2005 2004 2005 2005 2004

Individual 2 924 2 759 10 797 8 870 13 721 13 721 11 629
Broker 1 025 979 4 234 3 365 5 259 5 259 4 344
Bancassurance 927 862 3 545 2 694 4 472 4 472 3 557
Agency 578 556 1 856 1 760 2 434 2 434 2 316
Franchise other 394 362 1 162 1 061 1 556 1 556 1 413
Corporate 635 531 2 317 1 588 2 952 2 952 2 119
Broker 341 255 847 407 1 188 1 188 662
Bancassurance 29 16 12 36 41 41 52
Agency 149 171 254 224 403 403 395
Franchise other 116 89 1 204 921 1 320 1 320 1 010
Total new business 3 559 3 290 13 114 10 458 16 673 16 673 13 748
55
CAR Cover - Historical analysis

• Since December 2004, CAR cover is shown as
  statutory CAR cover

56
EV - Historical analysis

• After the capital reduction (ACR) 60 of the
  groups EV will be represented by the value of
  in-force

57
Headcount analysis

• 61 administration staff at project Khula at 30
  March 2005
• CAHL administration staff of 636 included at 30
  June 2005

IEB
Liberty Incl CAHL
Liberty excl CAHL
58
2005 Results Presentation to the Investment
Analysts Society of Southern Africa

• 2 March 2006
• www.liberty.co.za