- 1 - liberty life interim results presentation 11 august 2005

- 1 -

Liberty Life

Interim Results Presentation

11 August 2005

www.liberty.co.za

- 2 -

Agenda

What we said

What we’ve done

Operating climate

Financial and operating results

Focus areas for remainder of the year

Questions

- 3 -

What we said…

• Operational restructuring opportunities

• Capital Alliance (CAHL)

- new business

- efficiency

• Products

• Capital structuring

• Liberty Active

and, as always ... people ... service … costs

- 4 -

What we’ve done …operational restructuring

The past

Insurance operations Other operations

Liberty Group Limited Liberty Active CAHL

Liberty PropertiesLCB Individual Life Individual Life

Liberty ErmitageLPB Bancassurance Group Life

Liberty HealthcareConsultancy Project Khula Distribution

Support Services Support Services Support Services

- 5 -


Shortcomings of the old structure

• Processes evolved differently leading to inefficiency

• Many different products and services

• Slow customer response times

• Duplication of structures leading to additional costs

• Varying and different customer contact points

• Potentially higher operational risk environment

- 6 -


The present

Assetmanagement

Marketingand

distributionOperations

Group support services

- 7 -

What we’ve done …Capital Alliance

2005 2006 2007

… people … service … costs …

Implement acquisition

Implementnew structure

Plan phase I

Integration and methodology – phase I – start with Liberty Active

Plan phase II

Integration phase II

- 8 -

What we’ve done … products and distribution channels

• Continued focus on broker relationships

• Regional head office in Cape Town being established

• Individual life bancassurance model continues to deliver

• Recruitment in agency and franchise progressing well

- 9 -

What we’ve done … products and distribution channels

• Productivity of sales force remains a focus

• Launch of AddLib loyalty program

• Introduction of new risk product options

• Continue advertising campaign - ‘let’s keep working on it’

- 10 -

What we’ve done …capital management

• Approval by FSB to issue bond of up to R2bn

- Took cautious approach post PFA rulings

- Still committed to issuing debt, but at the right time

• Bought CAHL, with statutory CAR cover now at 1,78x (our range 1,5-1,7x)

• Sold significant portion of SAB

• Liquidated trading portfolio

- 11 -

What we’ve done … Liberty Active

Early days

• Sales management 61 with 245 tied agents

• 22 branches have been opened-mainly new areas

• 7 broker networks in the Eastern Cape

• “Active Series” of six products has been launched

• Sales of 12 335 Active Series policies (API R24m)

- 12 -

What we’ve done …Liberty Active

Keeping a watchful eye

• Premium collection is difficult in this market as expected

• Management of persistency is critical

• Steering committee meets monthly ensuring tight management

• Reiterate that we would rather focus on build, not buy strategy

• This ‘investment’ should not be more than R50–R100m

- 13 -

Operating climate

It’s getting even tougher

• PFA rulings have negatively impacted sentiment

• Compliance and regulatory requirements continue

• IFRS

• Low interest rate/low inflation environment

• Investors remain risk averse

• Poor perception of industry (media and consumers)

- 14 -

Operating climate (continued)

PFA rulings have cast the industry in a very poor light

• Liberty’s Lifestyle Retirement Annuity Fund has had 4 rulings against it

• Total rulings to date <R0,3m

• We are taking it very seriously

• The industry is introducing new flexible products

• We need to resolve both the past and the future

• There is still uncertainty

• Working with the industry to resolve the issues

- 15 -

Operating climate (continued)

But…

• South African economy - the success story continues

• Strong local investment returns

• Weakness in the rand has helped, but offshore product demand still poor

• Cash still being accumulated by investors = opportunity

• We welcome the move to greater transparency

- 16 -

Deon De Klerk

- 17 -

Rm June 20051

June 2004

%

Total new business 7 744 6 342 +22

Indexed new business 2 257 1 968 +15

Indexed new business excl contractual increases 1 841 1 576 +17

Value of new business 370 330 +12

New business margin 20% 21% -4

Net cash inflows from insurance operations2 2 669 2 382 +12

Operational features – 2005/2004 with no CAHL comparatives

1 Includes CAHL numbers for 3 months since acquisition with no comparatives in 20042 Excludes STANLIB and Ermitage net cash inflows

- 18 -

Individual life Corporate benefits

Life insurance operations

New business premiums (6 months to June)

• Total +22% to R7 744m

• Individual life +22% to R6 564m

• Corporate benefits +20% to R1 180m

Rm 20042002 20052003

0

1000

2000

3000

4000

5000

6000

7000

8000

+22%

+20%

+21%(ex CAHL)

+16%(ex CAHL)

- 19 -

Individual life Corporate benefits


Indexed new business premiums (6 months to June)

• Total +15% to R2 257m

• Individual life +11% to R1 860m

• Corporate benefits +35% to R397m

20042002 20052003

0

Rm

500

1000

1500

2000 +11%

+35%

+9%(ex CAHL)

+22%(ex CAHL)

- 20 -

Individual life Group benefits CAHL


Embedded value of new business (6 months to June)

• Total +12% to R370m

• Individual life ex CAHL +8% to R344m

• Corporate benefits ex CAHL = R3m

20042002 20052003

0

Rm

100

200

300

400 +12%

+26%

- 21 -

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Individual life Group benefits


New business EV margins

• Total = 20% (June 2004: 21%)

• Individual life ex CAHL = 22% (June 2004: 23%)

• Corporate benefits ex CAHL = 1% (June 2004: 6%)

Jun 20046 months

Jun 20036 months

Dec 200412 months

Dec 200312 months

Jun 20056 months

- 22 -

Individual life Group benefits


Net cash flows from insurance operations (6 months to June)

• Total +12% to R2 669m

• Individual life +21% to R2 828

• Corporate benefits -R159m vs +R51m

20042002 20052003

-1000

Rm

0

1000

2000

3000 R2828m

-R159m

- 23 -Source: LOA market share statistics for all life offices

Year ended 31 December 2000 Year ended 31 December 2001

Year ended 31 December 2002 Year ended 31 December 2003

Three months ended 31 March 2005Year ended 31 December 2004


New business market share

0%

5%

10%

15%

20%

25%

30%

35%

Recurring Individual Single Individual

19.6%

22.8%23.6%

25.3%26.0%

25.3%

15.5%16.5%

20.3%

24.5%

27.2%

32.0%

- 24 -

Other operations

STANLIB: assets under management and funds under administration

RbnJune 2005

Dec 2004

%

Life funds 76 72 +6

Segregated funds 69 66 +5

Unit trusts 52 51 +2

Structured products and other 40 34 +18

Total AUM and FUA 237 223 +6

Money market as % of total 16% 16%

• Net cash inflows of R6,4 billion (R5,8bn in June 2004)• Earnings before tax of R197 million up 65%

- 25 -

Other operations

Ermitage: assets under management

US$mJune 2005

Dec 2004

%

Hedge funds 1 517 1 500 +1

Long-only funds 1 388 1 382 0

Money funds 749 762 -2

Total AUM 3 654 3 644 0

Third party funds as % of total funds 41% 41%

• Net cash inflows of US$120m vs US$379m • Headline earnings of £2,8m +64% (R33m)

- 26 -

Financial results – 2005/2004

Rm June 2005

June 2004

%

BEE normalised headline earnings per share before IFRS (cents)

257,5 167,2 +54

Headline earnings per share (cents) 303,4 157,3 +93

BEE normalised embedded value per share (Rand) 66,50 *63,72 +4

Embedded value per share (Rand) 68,34 *65,07 +5

Statutory capital adequacy requirement(times covered)

1,78 *2,46

Interim dividend per share - new policy (cents) 126

Interim dividend per share - previous (cents) 162

* Refers to adjusted Dec 2004

- 27 -

Headline earnings

Rm1st half2005

1st half 2004

%2nd half

2004%

Operating profit from insurance operations 591 335 +76 594 -1

Operating profit from shareholders’ investments

79 100 -21 172 -54

Income on assets utilised to fund BEE transaction

- 25 -100 26 -100

Headline earnings before IFRS 670 460 +46 792 -15

Net income on BEE prefs accounted for in equity

44 - - 31 41

BEE normalised headline earnings before IFRS

714 460 +55 823 -13

BEE normalised headline earnings per share before IFRS (cents)

257,5 167,2 +54 298,5 -14

- 28 -

Headline earnings (continued)

Rm1st half2005

1st half 2004

%2nd half

2004%

Headline earnings before IFRS 670 460 +46 792 -15

IFRS adjustments -37 -27 +37 30 -

Net realised and unrealised gains on shareholders’ funds1

130 - - - -

Headline earnings 763 433 +76 822 -7

Headline earnings per share (cents) 303,4 157,3 +93 302,3 0

BEE normalised headline earnings per share (cents)

291,0 157,3 +85 309,0 -6

1 Now included in headline earnings with no restatement of the comparative

- 29 -

Operating profit from life insurance operations – major influencing factors

• Inclusion of CAHL for 3 months

• Shareholders’ 10% participation and higher asset base

• Investment guarantee reserve

• Expenses

- Costs per policy

- Non-recurring expenses

- 30 -

Inclusion of CAHL for 3 months

RmJune

2005 June 2004

%

Revenue earnings on assets utilised to fund CAHL acquisition

311 552 -44

CAHL revenue earnings 42 - -

‘CAHL effect’ on revenue earnings 73 55 +33

1 Revenue earnings on R3,1 billion for the period up to implementation date – 26 April 20052 Revenue earnings on R3,1 billion for the six months ended 30 June 2004

- 31 -

Gross investment returns

Year-to-date return 2005 Year-to-date return 2004 Actuarial assumption 2005

Release from guarantee reserves of R91 million after tax mainly due to better than expected investment performance (2004: increase in reserves of R29 million after tax)

0%

5%

10%

15%

20%

25%

30%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0.2%

11.5%

22.7%

9.7%

- 32 -

Expenses

Rm June 2005

June 2004

%

Total Liberty Group expenses 1 281 972 +32

IFRS 2 adjustments – share based payments (20) (5) >100

Business restructuring, integration and other non-recurring costs

(135) (50) >100

Project Khula costs (14) (1) >100

CAHL costs for 3 months with no comparative (176) - -

Normalised group expenses 936 916 +2

- 33 -

Restructuring, integrationand other non-recurring expenses

-Rm

June 2005

June 2004

Retrenchment costs 47 6

Consultants, systems and process costs 37 -

Non-capitalised relocation and renovation costs 34 6

Systems impairments - 20

Various other 17 18

135 50

Policyholders’ non-recurring: R106 million (2004: R39 million)Shareholders’ non-recurring: R29 million (2004: R11 million)

- 34 -

Maintenance costs per policy

June 2005

Dec 2004

%

Individual annual maintenance costs per policy

Liberty Life R 259 R 248 +4

Liberty Active R 153 R 154 -1

CAHL Complex R 220 R 2171 +1

CAHL Simple R 81 R 801 +1

1 For the year ended 31 March 2005

- 35 -

Operating profit from shareholders’ funds

Rm June 2005

June 2004

%

Financial services operations 131 91 +44

Listed investments 25 26 -

Other investments 59 142 -58

Preference dividend in subsidiary (65) (41) +59

Shareholders’ management expenses (67) (51) +31

Shareholders’ tax (24) (47) -49

Investment gains net of CGT 138 - N/a

Operating profit post IFRS adjustments 197 120 +64

- 36 -

Embedded value

Rm June 2005

Restated Dec 2004

%Published

Dec2004

Net worth 8 137 8 200 -1 8 494

Fair value adjustments 21 766 >100 766

Fair Value of share options (144) (191) -25 -

Net value of in-force business 9 219 7 544 +22 7 607

Embedded value 17 233 16 319 +6 16 867

Embedded value per share (Rand) 68,34 65,07 +5 67,25

BEE normalised embedded value per share (Rand) 66,50 63,72 +4 65,69

- 37 -

June 2005

Dec 2004

Statutory capital adequacy requirement (Rm)

3 114 3 013

Times covered 1,78 2,46

Times covered without BEE impairment 2,18 2,88

Capital adequacy cover

- 38 -

Cents per share June 2005

June 2004

Interim - new dividend policy 126

Interim - previous 162

Dividend

• At 2004 year end new dividend policy established• Interim dividend set at 40% of previous year’s full annual dividend

- 39 -

Conclusion

- 40 -

Focus areas for remainder of the year and beyond, much the same

• Capital management continues

• Compliance, IFRS …

• Address PFA issues

• ... people ... service … costs

- 41 -

Focus areas for remainder of the year and beyond, much the same

• Operational restructuring and CAHL integration continues

• Marketing and distribution restructuring

- Products

- Channels

- Project Khula continues

• Group support service restructuring and integration

• … Hug our customers!

- 42 -

Questions

Panel

Myles Ruck Chief Executive

Andrew Lonmon-Davis Statutory Actuary

Deon de Klerk Chief Financial Officer

- 43 -

Appendices

- 44 -

Rm June 20051

June 20041

%

Total new business 7 744 6 444 +20


Net cash inflows from insurance operations2 2 669 2 206 +21

Operational features –2005/2004 with CAHL comparatives

1 Includes CAHL numbers for 3 months, both in 2005 and 20042 Excludes STANLIB and Ermitage net cash inflows

- 45 -

June 2005Rm

June 2005 ROEVBuild up (%)Annualised

Investment return on shareholders funds 328 4.1

Expected return on life business 436 5.4

Investment experience 386 4.8

Other experience -149 -1.8

Changes in economic assumptions 9 0.1

Changes in non-economic assumptions -251 -3.1

Change in company tax rate 118 1.5

Change in modeling -16 -0.2

New business 370 4.6

Allowance for fair value of options 47 0.6

EV Profit 1 278 16.3

Less Abnormal

Change in company tax rate -118 -1.4

Write off of CAHL goodwill 312 3.9

EV Profit 1 472 18.9

Embedded value (EV) reconciliation and ROEV build up

- 46 -

Rm June 2005

June 2004

% Change

Net fee income 350 278 +26

Investment and other income 39 23 +70

Total income 389 301 +29

Operating expenses 192 182 +5

Income before tax 197 119 +66

Normal tax 56 40 +40

STC 11 4 +175

Income after tax 130 75 +73

Preference dividends 30 33 -9

Earnings 100 42 138

Cost to income ratio 55,0% 65,5%

Stanlib Detailed Earnings Analysis

- 47 -

Financial services and subsidiaries

Rm June 2005 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 17 0 230 247 1% 4 0 240 244

Liberty Ermitage Jersey 450 81 300 831 13% 375 69 290 734

Stanlib 401 0 545 946 29% 387 0 345 732

Carrying value of VIF business acquired from IEB

102 0 -102 0* n/a 109 0 -109 0*

Carrying value of VIF business acquired from CAHL

952 0 -952 0* n/a - - - -

1 922 81 21 2 024 18% 875 69 766 1 710

* The value of the IEB & CAHL business is included in the group's estimates of the VIF

- 48 -

New business excluding contractual increases ex CAHL

Recurring Premiums Single Premiums Total Premiums % Change

Rm June2005

June2004

June2005

June2004

June2005

June2004

Individual 1 025 992 5 165 4 096 6 190 5 088 +22

Corporate 137 98 868 764 1 005 862 +17

Total new business 1 162 1 090 6 033 4 860 7 195 5 950 +21

% Change +7 +24


Indexed Individual new business 1 542 1 401 +10

Indexed Individual new business 224 175 +28

- 49 -

New business EV Analysis-ex CAHL

Rm June 2005

June 2004

%Change

Indexed Individual new business 1 542 1 401 +10

Indexed Group new business 224 175 +28


Individual NB EV 344 320 +8

Group NB EV 3 10 -73

Total NB EV 347 330 +5

NB Individual Margin 22.3% 22.8%

NB Group Margin 1.3% 5.9%

Total Margin 19.7% 20.9%

• Indexed new business of CAHL for EV purposes R75m (Recurring R69m, single R64m)• NB embedded value of R23m• CAHL NB embedded value and volumes for 3 months only

- 50 -

Effect of the BEE transaction on headline earnings

1. As a consequence of utilising Liberty Life’s 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 25.8m shares. The transaction was implemented on 8 November 2004

RmJune2005

June2004

%Change

Earnings before before IFRS 670 460 +46

Preference shares accrued 1 44

Headline earnings including preference dividends before IFRS 714 460 +55

Weighted average number of shares in issue (millions) 251.5 275.3

Reinstatement of weighted average number of shares reduced for BEE transaction (millions) 2 25.8

Weighted average number of shares after reinstatement of the transaction shares (millions) 277.3 275.3

BEE normalised headline earnings per share (R) 257.5 167.2 +54

- 51 -

RmJune2005

Dec 2004 4

%Change

EV per EV statement 17 233 16 319 6%

Costs of transaction included in headline earnings net of tax & debited against reserves 1 - 40

Reinstatement of impaired empowerment preference shares 1 251 1 251

Preference dividends accrued 2 - 13

Embedded value before impairment 18 484 17 191 5%

Total number of shares in issue (millions) 252,2 250,8

Reinstatement of number of shares reduced for BEE transaction (millions) 3 25,8 25,8

Total number of shares after reinstatement of the transaction shares (millions) 277,9 276,6

BEE normalised EV per share (R) 66,50 63,72 4%

Effect of the BEE transaction on EV per share

1. Preference dividends for the period to June 2005

2. Preference dividends received in six months to June 2005 of R38 million have been credited directly to equity

3. 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 in issue has been reduced by 25 796 143 shares at 30 June 2005 and 31 December 2004

4. Restated

- 52 -

Claims & policyholder benefits-Liberty ex CAHL

Group

Rm June 2005

June 2004

%Change

Individual 6 053 5 424 +12

Death & disability 956 953 0

Policy maturity claims 1 757 1 899 -7

Policy surrender claims 2 574 1 866 +38

Annuity payments 766 706 +8

Group 2 553 1 917 +33

Death & disability 249 250 0

Scheme terminations 135 124 +8

Scheme member withdrawals 851 731 +16

Annuity payments 20 21 -4

Investment only terminations and withdrawals 1 298 791 +64

Total claims & policyholder benefits 8 606 7 341 +17

• Surrenders appear significantly higher due to the higher level of assets since 30 June 2004• Actual surrender policy count up 2.6%

- 53 -

Claims & policyholder benefits-CAHL only (3 months)

Group

Rm June2005

June2004

%Change

Individual 731 689 +6

Death & disability 117 108 +8

Policy maturity claims 265 230 +15

Policy surrender claims 196 160 +23

Annuity payments 153 191 -20

Group 248 61 +313

Death & disability 228 46 +407

Scheme terminations 4 8 -50

Scheme member withdrawals 16 7 +129

Total claims & policyholder benefits 979 750 +31

- 54 -

New business detailed analysis

New Business Recurring Premiums Single Premiums Total Premiums Total % Change

RmJune 2005

June 2004

June 2005

June 2004

June 2005

June 2004

June 2005

June 2005

Incl CAHL Incl CAHL Incl CAHL Incl CAHL Excl CAHL

Individual 1 337 1 265 5 227 4 096 6 564 5 361 22,4 20,7

Corporate 310 217 870 764 1 180 981 20,3 16,0

Total 1 647 1 482 6 097 4 860 7 744 6 342 22,1 20,0

% Change 11,1 25,5 22,1

% Change Ex CAHL 6,4 24,1 20,0

Indexed new business 2 257 1 968 14,7 10,8

- 55 -

Net cash flows detailed analysis

Net Cash Flows Recurring Premiums Single Premiums Total Premiums Total % Change

RmJune 2005

June 2004

June 2005

June 2004

June 2005

June 2004

June 2005

June 2005

Incl CAHL Incl CAHL Incl CAHL Incl CAHL Excl CAHL

Net Premiums 9 612 7 755 2 642 1 968 12 254 9 723 26,0 17,1

Net claims and benefits 6 784 5 424 2 801 1 917 9 585 7 341 30,6 17,2

Net cash flowsfrom assurance ops

2 828 2 331 -159 51 2 669 2 382 12,0 16,7

% Change 21,3 N/a

% Change Ex CAHL 31,3 N/a

- 56 -

New business by distribution channel-Ex CAHL

Recurring Premiums Single Premiums Total Premiums

RmJune2005

June2004

June2005

June2004

June2005

June2004

Individual 1 308 1 264 5 164 4 096 6 472 5 361

Broker 459 440 2 199 1 623 2 658 2 063

Bancassurance 465 429 1 653 1 254 2 118 1 683

Agency 226 254 902 839 1 128 1 093

Franchise & other 158 141 410 380 568 521

Corporate 270 218 868 764 1 138 981

Broker 139 95 259 186 398 281

Bancassurance 11 5 5 0 16 5

Agency 92 77 129 144 221 221

Franchise & other 28 41 475 434 503 475

Total new business 1 578 1 482 6 032 4 860 7 610 6 342

- 57 -

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Since Dec 2004 CAR cover shown as statutory CAR cover

CAR Cover-historical analysis

Times covered Times covered incl BEE

Jun 2004Dec 2002 Dec 2004Dec 2003Dec 2001 Jun 2005

- 58 -

53% of the group’s EV is represented by value of in force compared to December 2004 where it was 46%

EV-Historical analysis (Rand per share)

0

10

20

30

40

50

60

70

80

NAV per share VIF per share

Jun 2004Jun 2003 Dec 2004Dec 2003Dec 2002 Jun 2005

R68,34R65,07

- 59 -

• CAHL administration staff of 636 included at 30 June 2005

• 61 administration staff at project Khula at 30 June 2005

2800

3000

3200

3400

3600

3800

4000

Liberty headcount analysis

Liberty excluding new initiatives Liberty total

Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05

33203370

3308

3920

3223

- 60 -

Liberty Life

Interim Results Presentation

11 August 2005

www.liberty.co.za

- 1 - liberty life interim results presentation 11 august 2005

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