Liberty Life UBS Financials Conference

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Liberty Life UBS Financials ConferenceThe
Turning Points For Our BusinessMyles RuckCEO

• October 2005

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Agenda
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Libertys turning points

• A brief history
• 1974 Liberty acquired SA operations of Sun Life
• 1978 Liblife Controlling Corporation formed with
  Standard Bank (SBK)
• 1983 Joint control of Premier Group, which
  acquires 35 of SAB
• 1987 Liberty increases stake in SBK to over 30
• 1987 Prudential Assurance becomes wholly owned
  subsidiary
• 1991 Investment in SBK increases to 39
• 1993 Libsil established to hold Liberty
  strategic assets

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Libertys turning points-historical structure
Liblife
Standard
Liberty
Controlling
Bank
50
50
21.8
Investors
Corporation
Investment
Limited
(Pty)
Corporation
Limited
Limited
54.9
Liberty Holdings
Limited
53.9
45.4
Guardian
Liberty Life
National
Association of
Insurance
Company
6.1
Africa Limited
Limited
54.8
94.0
100
100
82.5
100
100
100
(4)
Millennium
Liberty
Charter
Financial
Liblife
Liberty
Life
Guardbank
Liblife
First
Consultants
Life
International
Asset
Insurance
International
Properties
Management
Strategic
and
BV
Company
Management
Trust
Investment
Netherlands
(Pty)
Corporation
Investments
Limited
Limited
Services
Limited
Limited
Ltd
Limited
(Pty) Ltd
41.6
39.1
28.1
31.8
41.5
Beverage
Liberty
Standard
and
International
Consumer
The Premier
Bank
Holdings
Group
Industry
Investment
PLC
Limited
Holdings
Corporation
(UK)
Limited
Limited
100
71.8
100.0
28.5
Liberty
Capital
The South
Capital
International
Shopping
African
Counties
Financial
Effective interest
Centres PLC
(UK)
Breweries
Services PLC
(UK)
Limited
(UK)
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Libertys turning points-historical EV
At 31 December 1998
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Libertys turning points

• Changing the investment trust
• 1999 unbundling of FIT
• 1999 Distribution of direct holding in Liberty
  International
• 1999 Unbundling of Libsil to LGL level
• 1999 sale of Guardian National
• 1999 Change of control to Standard Bank
• 1999 Appointment of Roy Andersen (Donald Gordon
  retires)
• 2000 Dispose of Liberty International

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Libertys turning points-improving structure
Stanbic
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Liberty Holdings (Libhold)
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Liberty Life
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SAB plc
100 Liberty Asset Management 100 Liberty
Healthcare 100 Liberty Properties 100 Charter
Life 94 Millennium Financial
Consultants 100 Oracle Employee benefits 100
Guardbank Management Corporation
As at April 2001
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Libertys turning points-EV more focused
EV is as reported
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Libertys turning points

• Relationship with Standard Bank
• The change in control in 1999 had a positive
  impact on relationship
• Liberty structure had changed radically
• Formal bancassurance agreement entered into in
  1999 and revised in 2002
• Stanlib formed in 2002
• New CEO from Standard Bank in June 2003
• Other initiatives
• IT outsourcing JV
• Management development programs
• BEE

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Bancassurance

• Bancassurance has performed well (Rm)

Total new bancassurance premiums
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Stanlib-Created in 2002

• Strong performance

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Libertys turning points

• Stopped the offshore expansion
• 2003- decision taken to focus on local business
• International distribution -Hightree
• Merchant Investors Assurance
• Ermitage sale initiated in 2005
• We may however follow SBK into African retail
  territories
• We may still enter the closed book market in time

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Libertys turning points

• Significant senior management changes made
• The only way to change attitude and culture is to
  start from the top
• Working hard to eliminate the entitlement
  factor
• Ongoing transformation at Liberty
• Fresh ideas need fresh management

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Liberty previous management structure

• Executive management committee

RoyAndersen
HyltonAppelbaum
MarkBloom
AndrewLonmon-Davis
IanMaron
MikeJackson
Deonde Klerk
LeanneDewey
ThembaGamedze
JimMcLean
RonMitchell
DavidNohr
MikeGarbutt
LeeIzikowitz
CraigLawrence
DanPienaar
MartinSmale
AlanWoolfson
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Liberty management structure changes

• Executive management committee

RoyAndersen
HyltonAppelbaum
MarkBloom
AndrewLonmon-Davis
IanMaron
MikeJackson
Deonde Klerk
LeanneDewey
ThembaGamedze
JimMcLean
RonMitchell
DavidNohr
MikeGarbutt
LeeIzikowitz
CraigLawrence
DanPienaar
MartinSmale
AlanWoolfson
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Liberty-current management structure

• Group Executive Committee, a number of new faces

Rex Tomlinson
Ian Kirk
Myles Ruck
Deonde Klerk
Audrey Mothupi
Hennie Nortje
Martijn Appelo
AndrewLonmon-Davis
LeeIzikowitz
Bobby Malabie
Bruce Hemphill
AlanWoolfson
IanMaron
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Libertys turning points

• Remained committed to face-to-face distribution
• We have consistently looked to grow our
  distribution
• Avoided the cutbacks that some of our competitors
  embarked on
• Were first to introduce the franchise agency
  concept
• Bancassurance has been a critical success factor
• Entering the emerging market in a cautious way
• Continue to monitor the efficiency not just the
  absolute level of sales staff

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Libertys turning points

• New business market share

Source LOA market share statistics for all life
offices
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Libertys turning points

• BEE deals finalised
• Initial BEE deal done at Stanlib level
• 25,2 sale to Safika Consortium
• A successful LBO
• November 2004 Liberty finalised BEE deal
• Shanduka and Safika 3.7
• Black staff 3.7
• Community Trust 1.9

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Libertys turning points

• Capital management received significant attention
• Introduced capital management committee in Nov
  2003
• Cleaned up the balance sheet
• Shed equity concentration risks and liquidated
  trading portfolio
• New dividend policy established
• First life assurance company in SA to issue debt
• Utilised excess capital to buy CAHL

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Libertys turning points

• Capital Alliance (CAHL) acquisition
• A marriage of strong distribution and operational
  focus
• Libertys new management team up for the
  challenge
• Significantly scales up our operations (1.8m to
  3.0m policies)
• Facilitated planned organisational restructure at
  Liberty (at some cost)
• CAHL has experience to significantly lower
  operational risk
• Improvement of processes to improve efficiency

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Liberty operational structure

• The past

Insurance operations
Other operations
Liberty Group Limited
Liberty Active
CAHL
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Liberty operational structure

• The present

Assetmanagement
Marketingand distribution
Operations
Group support services
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CAHL time line
Implement acquisition
Implementnew structure
Plan phase I
Integration and methodology phase I start
with Liberty Active
Plan phase II
Integration phase II
2005
2006
2007
people service costs
More detail will be presented on the CAHL
integration end Nov 2005
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Agenda
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Industry turning points

• Regulatory environment increasingly difficult
• FAIS
• FICA
• PPR
• Audit on pension funds
• Foreign exchange changes
• Surplus Apportionment Act
• PFA rulings

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PFA Rulings

• 3 Major issues have been ruled on by PFA
• Illustrative maturity values
• Inflationary increases on guaranteed annuities
• Early termination or reduced premiums on
  retirement annuities
• lets deal with the facts and the implications

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Rulings we consider illogical
Rulings we consider illogical

• Issue 1-Illustrative maturity values (IMV)
• This has never been a guarantee, although some
  clients may have seen it as such
• In the Sanlam case, the illustrative real return
  was less than actual achieved, yet still ruled
  against Sanlam (De Beer case)
• IMV showing 15 plus returns was appropriate for
  a 15 inflationary environment
• New policyholder quotations showing reduction in
  yield (RIY)
• Expect a decision on De Beer case by end October
  2005

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Rulings we consider illogical
Rulings we consider illogical

• Issue 2-Guaranteed annuities (GA)
• At the time of purchasing an annuity, client
  decides on options
• Fixed, living, escalating, joint life,
  guaranteed, or other
• We price an annuity based on the clients choice
• We cant give something for nothing
• Pensions Fund Act requires inflationary increases
• Favourable senior counsel opinion obtained and
  provided to FSB

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Rulings that may have some merit

• Issue 3-Retirement annuities (RA)
• The problem has been with early termination (paid
  up and lapse), reduction in premiums and early
  retirement
• The industry needs to accept that the product has
  not been flexible enough for clients
• It is this that causes clients to feel fleeced
• There is no doubt that both the client and the
  life company make more money in the long term if
  the client keeps paying
• Upfront costs are the problem, both commission
  and life company acquisition costs

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Agenda
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Libertys future turning points

• A change in attitude and the way we do business
• A focused single platform will enhance customer
  service, reduce costs and improve value
  proposition for client
• Totally re-vamped investment product
• Lower margin, higher volume ?

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Libertys future turning points

• A change in attitude and the way we do business
• Resolution of PFA issues
• Financial Sector Charter implementation
• Solution to access by lower income markets an
  industry imperative

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Agenda