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Liberty Group Limited International Presentation October 200 2

Liberty Group Limited International Presentation October 200 2. Contents. Market positioning What makes Liberty different? Standard Bank relationship Bancassurance Capital management Corporate governance Black Economic Empowerment HIV/AIDS Sources of future growth

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Liberty Group Limited International Presentation October 200 2

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  1. Liberty Group Limited International Presentation October 2002

  2. Contents • Market positioning • What makes Liberty different? • Standard Bank relationship • Bancassurance • Capital management • Corporate governance • Black Economic Empowerment • HIV/AIDS • Sources of future growth • Additional information

  3. Market positioning Corp/Commercial Liberty Corporate Benefits HNW Liberty Personal Benefits SBFC/IFAs/Agency/Franchise • STANLIB • Asset Management • Unit Trusts Mass affluent Middle Liberty Corporate Benefits Charter Life Bancassurance Mass market

  4. What makes Liberty different? • Multiple distribution channels • Agency, franchise, broker, Standard Bank Financial Consultants (SBFC), Charter Life, call centres • Bancassurance – successful model • Quality of business • average case size 260% of industry average • profitability • focused on HNW and mass affluent market • Quality of sales force – education and training • Product innovation • Blueprint technology (sales and servicing)

  5. What makes Liberty different? • Current superior relative investment performance • STANLIB • Liberty Ermitage • Focused business units • Preferred employer status • Top team incentivisation • Capital strength • High ROE – greater than 20% • Insurance cash flow

  6. Corp/Commercial 15 000 businesses Small/Medium 250 000 businesses Affluent 35 000 customers R33 000 p.m. Middle 1m customers R3 300 p.m. Mass market 3m customers Standard Bank – the ideal bancassurance partner 35% of South Africa’s banking Strongest financial services brand Penetration by Liberty/Charter ± 20%

  7. Standard Bank relationship • Developments during the year • Improved and extended bancassurance agreement - to 2012 • Bancassurance distribution now managed by Liberty – sales up 18% • Creation of STANLIB by merging asset management, mutual fund and linked product operations • Liberty achieving increased share of growing market • No anticipated change to shareholding structure

  8. Advantages • Creates scale and economies – • assets under management R135 billion • largest mutual fund in South Africa • Leverages off all distribution channels • Pools intellectual capital • Creates ability to design products using banking and insurance licenses Major benefits without the risks of a full bank on insurer merger

  9. Dedicated investment marketing for: • STANLIB Asset Management – in-house active management • Simeka – empowerment quants asset manager • STANLIB – multi-manager • Liberty Ermitage – international hedge fund and long equities • Third party funds Full asset management offering availablethrough STANLIB

  10. Capital management • Current level 3.4 x statutory requirement • Ongoing review of capital management • Expected regulatory increase in local CAR requirement - approximately 20% Dividend cover: • Dividend cover reduced from 2.0 x to 1.5 x • Dividend per share increased by 27% • Policy dependent on level of capital Well positioned in volatile markets

  11. 16 14.4 14 12 10.6 10 8.9 7.3 8 6.2 5.6 6 3.8 3.5 3.4 4 2 0 Jun98 Jun99 Jun00 Jun01 Jun02 Dec98 Dec99 Dec00 Dec01 CAR cover multiple(Capital and reserves divided by statutory CAR)

  12. Total net cash inflow from insurance operations Rm

  13. Value extracted for shareholders Shareholders’ interests distributed: 1999 • Liberty International PLC • Standard Bank April 2001 • Capital reduction R10.50 per share August 2002 • Dividend cover reduced from 2.0 to 1.5 Total assets and capital distributed R17.0 billion

  14. Corporate governance • Committed to King II Code • High ratings for corporate governance • South Africa follows International Accounting Standards • Appropriate number of independent non-executive directors • Strong audit and remuneration committees • Share options - 3.5% of shares outstanding Embedded value calculations audited by PwC

  15. Black Economic Empowerment • Engaging government on Financial Services Charter – co-operative not confrontational • Government recognises need for sound business principles • Empowerment partnerships • Asset management – Simeka • Corporate Benefits - being developed • Employment equity targets achievable • Affirmative procurement in place

  16. HIV/AIDSLiberty’s positioning • Most new business investment only • High value policies in upper income market – reduced exposure • HIV screening on policies greater than R100 000 sum assured • Ongoing repricing in Corporate Benefits markets • Rates reviewable • Minimal effect on mortality experienced • Industry initiative to cover lower end of market (mortgage cover) Risks well managed

  17. Sources of future growth • Bancassurance • Development consultants – accessing the black consumer market • Growth in tied sales force and productivity • Corporate benefits (group/pension business) • Product development • Growth in market share – currently growing share by 1% to 3% per annum South Africa has minimum social security underpin

  18. Growing bancassurance production Rm 1 661 Bancassurance business up 81% at 30 June 2002

  19. Building distribution Tied Intermediaries 1 935 1887 1 663 1 310 1 135 Focus on productivity

  20. Growth in black adult consumer market(Financial services products purchased) People 000s Based on a sample of 29.5 million black adults with personal income of R5 000+ (Liberty’s target market) Source AMPS 1998 and 2002

  21. The Liberty story • Strongest diversified distribution • New business growth 16% per annum for past five years • Successful bancassurance model • Well capitalised – high ROE • Strong governance • Proven track record of achieving objectives • Historic dividend yield 7% - trading atclose to embedded value

  22. Additional information

  23. Group structure Subsidiaries - Charter Life (100%) - Liberty Group Properties (100%) - Liberty Healthcare (100%) - Electric Liberty (100%) - Liberty Ermitage (100%) • Joint Ventures • - Astute Financial Services Exchange (33%) • Simeka Financial Services (18%) • Medscheme

  24. Indexed new business New business margin Bancassurance new business Headline earnings per share Net cash inflow from insurance operations: R1.6 billion Embedded value per share: R56.68 Dividend cover amended: reduced from 2.0 x to 1.5 x Dividend per share of 162 cents +22% 18% +81% -5% +60% +5% +27% Financial highlightssix months to 30 June 2002 Significant gain in market share

  25. 563 171 (44 (28 662 242.5 162 594 120 (20 694 255.7 128 (5 42 41 (5 (5 27 ) ) ) ) ) ) Headline earnings –continuing operations Life fund operating surplus Revenue earnings – shareholders’ funds STC on ordinary dividends Preference dividend Headline earnings Headline EPS (cents) Dividend per share (cents) 30 June 2002 Rm 30 June 2001 Rm Change %

  26. Life fund earnings • Reduced by 5.1% from R594 million to R563 million • Geared to investment returns earned for policyholders’ portfolios 30 June 2002 % 30 June 2001 % Portfolio weighted average Mainly due to:Offshore portfolio (0.4 (16.2 ) ) 10.2 0.8 • Significant reduction in this component of life fund earnings • Offset by benefits from expense management Local equity and bond portfolios outperformed benchmarks

  27. Embedded value 30 June 2002 Rm 30 June 2001 Rm Change % Shareholders’ funds Value of life businessin-force Financial services subsidiaries fair value adjustment Total Embedded value per share (Rand) 9 136 5 507 835 15 478 56.68 8 346 5 112 1 309 14 767 54.21 9 8 (36 5 5 )

  28. Key issues for second half 2002 • Profitability will be influenced by investment market performance • Higher Secondary Tax on Companies on higher dividend – R42 million (total for 2002 - R82 million, 2001 - R32 million) • Merger costs – STANLIB – R44 million

  29. Market share 1st Quarter 2002 % Full years 2001 2000 % % New recurring individual Brokers Agents Individual single premiums Brokers Agents 18.56 19.10 17.93 17.01 16.43 17.87 17.86 16.96 18.94 14.76 13.25 14.95 15.72 14.11 17.68 11.49 9.46 17.00

  30. Average recurring premiums 1st Quarter 2002 Full year 2001 Change % Liberty average premiums Industry average Liberty % average 6 626 2 465 269 6 086 2 519 242 8.9 (2.1 )

  31. STANLIB Asset ManagementAssets under management at 31.12.01 SCMBAM Rbn Libam Rbn STANLIB Rbn * ** Life fund Segregated funds Unit trusts Africa Multi-manager 4.7 20.6 17.9 2.0 2.2 47.0 29.0 7.8 – 1.0 51.7 49.6 25.7 2.0 3.2 47.4 84.8 132.2 * Charter Life funds ** Includes money market funds of R10 billion

  32. International strategy • Grow Liberty Ermitage distribution • Follow Stanbank into emerging markets • Build distribution in Europe

  33. Liberty Ermitage • Assets under management increased from US$2152 million to US$2258 million at 30 June • Investment marketing sales force now in place • Strong support from Standard Bank and STANLIB • Alternative asset management strategy • Focusing primarily on wholesale market

  34. Liberty Ermitage • Hedge funds standing up well to turmoil in world markets as at 30 June: • Alpha –0.03% in US dollars • Asset Selection +0.94% in US dollars Three out of four equity funds achieved Micropal 4-Star ratings placing them in the top 30% of their categories in the world over three years

  35. Scorecard Goals set for 2002 • Launch and grow STANLIB • Develop SBFC and bancassurance sales • Reposition Charter Life in mass and niche markets • Focus on profitability of Liberty Corporate Benefits 4 4 8 4½

  36. Scorecard Goals set for 2002 • Leverage CRM initiative for new business and retention • Grow Liberty Ermitage sales • Focus on productivity of agency and franchise 4 4 4 By half year 5½ out of 7 achieved

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