liberty life ubs financials conference “the turning points for our business” myles ruck ceo...

Liberty Life

UBS Financials Conference“The Turning Points For Our Business”

Myles RuckCEO

October 2005

- 2 -

Agenda

Liberty Turning Points

Industry Turning Points

The Future

Questions

- 3 -

Liberty’s 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

- 4 -

Liberty’s turning points-historical structure

6.1%

Liberty Life

Association of

Africa Limited

Liberty

InvestorsLimited

LiblifeControlling

Corporation

(Pty)

Limited

Guardian

National

Insurance

Company

Limited

Liberty Holdings

Limited

StandardBank

Investment

Corporation

Limited

Standard

Bank

Investment

Corporation

Limited

Beverage

andConsumer

Industry

Holdings

Limited

The Premier

Group

Limited

50 % 50% 21.8%

54.9%

53.9%45.4%

Liberty

Life

Properties

(Pty)

Ltd

Liblife

International

BV

Netherlands

Guardbank

Management

Corporation

Limited

Charter

LifeInsurance

Company

Limited

Liblife

Strategic

Investments

Limited

Liberty

Asset

Management

Limited

First

International

Trust

Limited

54.8% 100%(4)

100% 82.5% 100% 100% 94.0%

Millennium

Financial

Consultants

and

Investment

Services

(Pty)Ltd

41.6%*39.1%* 28.1%*31.8%41.5%

Liberty

International

Holdings

PLC

(UK)

The South

African

Breweries

Limited

Liberty

International

Financial

Services PLC

Capital &

Counties

Capital

Shopping

Centres PLC

100% 71.8% 100.0% 28.5%*

100%

* Effective interest(UK)

(UK)

(UK)

- 5 -

Liberty’s turning points-historical EV

Premier1%

Other NAV16%

VIF18% SBK

22%

Guardian National

2%

SAB/Bevcon12%

Liberty International

29%

At 31 December 1998

- 6 -


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

- 7 -

Liberty’s turning points-improving structure

StanbicStanbic

Liberty Holdings (“Libhold”)Liberty Holdings (“Libhold”)

Liberty LifeLiberty Life

SAB plcSAB plc

55%

56%

8%

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

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

- 8 -

Liberty’s turning points-EV more focused

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec 1998 Dec 1999 Dec 2000 Dec 2001 Dec 2002 Dec 2003 Dec 2004 June 2005

NAV VIF

EV is as reported

- 9 -


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

- 10 -

Bancassurance

Bancassurance has performed well (Rm)

33 46 72 99316

589 680 757

1,155

1,5551,671

3,164

2,639

3,608

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Total new bancassurance premiums

- 11 -

Stanlib-Created in 2002

Strong performance

116.1 112.2

284.7

197.0

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

2002 2003 2004 1H 2005

Rm

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Pre tax profit Cost to income ratio

- 12 -


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

- 13 -


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

- 14 -

Liberty previous management structure

Executive management committee

RoyAndersen

HyltonAppelbaum

MarkBloom

Deonde Klerk

LeanneDewey

ThembaGamedze

MikeGarbutt

LeeIzikowitz

CraigLawrence

AndrewLonmon-Davis

IanMaron

MikeJackson

JimMcLean

RonMitchell

DavidNohr

DanPienaar

MartinSmale

AlanWoolfson

- 15 -

Liberty management structure changes

Executive management committee

RoyAndersen

HyltonAppelbaum

MarkBloom

Deonde Klerk

LeanneDewey

ThembaGamedze

MikeGarbutt

LeeIzikowitz

CraigLawrence

AndrewLonmon-Davis

IanMaron

MikeJackson

JimMcLean

RonMitchell

DavidNohr

DanPienaar

MartinSmale

AlanWoolfson

- 16 -

Liberty-current management structure

Myles Ruck

Ian Kirk

Deonde Klerk

AudreyMothupi

LeeIzikowitz

Bobby Malabie

AndrewLonmon-Davis

IanMaron

RexTomlinson

HennieNortje

MartijnAppelo

Bruce Hemphill

AlanWoolfson

Group Executive Committee, a number of new faces

- 17 -


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

- 18 -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%

- 19 -


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%

- 20 -


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

- 21 -


Capital Alliance (CAHL) acquisition

•A marriage of strong distribution and operational focus

•Liberty’s 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

- 22 -

Liberty operational structure

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

- 23 -

Liberty operational structure

The present

Assetmanagement

Marketingand

distributionOperations

Group support services

- 24 -

CAHL time line

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

More detail will be presented on the CAHL integration end Nov 2005

- 25 -

Agenda



The Future

Questions

- 26 -

Industry turning points

Regulatory environment increasingly difficult

•FAIS

•FICA

•PPR

•Audit on pension funds

•Foreign exchange changes

•Surplus Apportionment Act

•PFA rulings

- 27 -

PFA Rulings

3 Major issues have been ruled on by PFA

1. Illustrative maturity values

2. Inflationary increases on guaranteed annuities

3. Early termination or reduced premiums on retirement annuities

…lets deal with the facts and the implications

- 28 -

Rulings we consider illogicalIssue 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

Rulings we consider illogical

- 29 -

Rulings we consider illogicalIssue 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 client’s choice

• We can’t give something for nothing

• Pensions Fund Act requires inflationary increases

• Favourable senior counsel opinion obtained and provided to FSB

Rulings we consider illogical

- 30 -

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

Rulings that may have some merit

- 31 -

Agenda



The Future

Questions

- 32 -

Liberty’s 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 ?

- 33 -

Liberty’s 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

- 34 -

Agenda



The Future

Questions

liberty life ubs financials conference “the turning points for our business” myles ruck ceo...

Documents

liberty properties

liberty healthcare

agenda liberty

turning points

relationship liberty

liberty life properties

liberty strategic assets

international trust