Liberty Group LimitedInternational Presentation

October 2002

ContentsContents

• 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

• 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

Corp/Commercial

HNW

Mass affluent

Middle

Mass market

STANLIB•Asset Management•Unit Trusts

Liberty Corporate Benefits

Liberty Personal BenefitsSBFC/IFAs/Agency/Franchise

Liberty Corporate BenefitsCharter LifeBancassurance

Market positioningMarket positioning

What makes Liberty different?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)

• 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)

What makes Liberty different?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

• 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

Standard Bank – the ideal bancassurance partnerStandard Bank – the ideal bancassurance partner

35% of South Africa’s bankingStrongest financial services brand

Penetration by Liberty/Charter ± 20%

35% of South Africa’s bankingStrongest financial services brand

Penetration by Liberty/Charter ± 20%

Affluent35 000 customers

Middle1m customers

Mass market3m customers

Corp/Commercial15 000 businesses

Small/Medium250 000 businesses

R3 300 p.m.

R33 000 p.m.

Standard Bank relationshipStandard 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

• 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

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

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

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

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

Capital managementCapital 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

• 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

CAR cover multiple(Capital and reserves divided

by statutory CAR)

CAR cover multiple(Capital and reserves divided

by statutory CAR)

14.4

10.6

6.25.6

3.8 3.43.5

7.38.9

0

2

4

6

8

10

12

14

16

Jun 98

Dec 98

Jun 99

Dec 99

Jun 00

Dec 00

Jun 01

Dec 01

Jun 02

Total net cash inflow from insurance operations

Total net cash inflow from insurance operations

Rm

-1 000

0

1 000

2 000

3 000

4 000

1998 1999 2000 2001 2002

June December Linear (June)

Value extracted for shareholdersValue 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

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

Corporate governanceCorporate 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

• 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

Black Economic EmpowermentBlack 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

• 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

HIV/AIDSLiberty’s positioning

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)

• 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

Sources of future growthSources 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

• 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

Growing bancassurance productionGrowing bancassurance production

680757

1 155

1 556

1 244

0

300

600

900

1 200

1 500

1 800

1997 1998 1999 2000 2001 Jun-02

Rm

Bancassurance business up 81% at 30 June 2002

1 661

715 642 669 738 814

420 668994

1197 1073

0

300

600

900

1200

1500

1800

2100

1998 1999 2000 2001 End Aug2002

Agency Franchise

1 135 1 310

1 6631 935

Building distributionBuilding distributionTiedIntermediaries

1887

Focus on productivity

Growth in black adult consumer market

(Financial services products purchased)

Growth in black adult consumer market

(Financial services products purchased)

0

50

100

150

200

250

Whole life Endow RA Funeral Medicalinsurance

Short term

Other

19982002

People000s

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

The Liberty storyThe 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 at

close to embedded value

• 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 at

close to embedded value

Additional information

Group structureGroup structure

Financial Services Operations STANLI B L im ited (50% )

Liberty Group L im ited

Liberty H oldings L im ited (54 .7% )

Standard Bank G roup L im ited (54.7% )

Financial Services Operations STANLI B L im ited (50% )

Liberty Group L im ited

Liberty H oldings L im ited (54 .7% )

Standard Bank G roup L im ited (54.7% )

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

Financial highlightssix months to 30 June 2002

Financial highlightssix months to 30 June 2002

• 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

• 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%

+22%18%

+81%-5%

+60%+5%

+27%

Significant gain in market share

Headline earnings –continuing operations

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)

Life fund operating surplus

Revenue earnings – shareholders’ funds

STC on ordinary dividends

Preference dividend

Headline earnings

Headline EPS (cents)

Dividend per share (cents)

563

171

(44

(28

662

242.5

162

563

171

(44

(28

662

242.5

162

)

)

)

)

594

120

(20

694

255.7

128

594

120

(20

694

255.7

128

)

)

(5

42

41

(5

(5

27

(5

42

41

(5

(5

27

)

)

)

)

)

)

30 June2002Rm

30 June2002Rm

30 June2001Rm

30 June2001Rm

Change

%

Change

%

Life fund earningsLife fund earnings

Reduced by 5.1% from R594 million to R563 million Geared to investment returns earned for policyholders’

portfolios

Reduced by 5.1% from R594 million to R563 million Geared to investment returns earned for policyholders’

portfolios

Significant reduction in this component of life fund earnings

Offset by benefits from expense management

Significant reduction in this component of life fund earnings

Offset by benefits from expense management

Portfolio weighted average

Mainly due to:Offshore portfolio

Portfolio weighted average

Mainly due to:Offshore portfolio

(0.4

(16.2

(0.4

(16.2

)

)

)

)

10.2

0.8

10.2

0.8

30 June2002

%

30 June2002

%

30 June 2001

%

30 June 2001

%

Local equity and bond portfolios outperformed benchmarks

Embedded valueEmbedded value

Shareholders’ funds

Value of life businessin-force

Financial services subsidiaries fair value adjustment

Total

Embedded value per share (Rand)

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

9 136

5 507

835

15 478

56.68

8 346

5 112

1 309

14 767

54.21

8 346

5 112

1 309

14 767

54.21

9

8

(36

5

5

9

8

(36

5

5

)

)

30 June2002Rm

30 June2002Rm

30 June2001Rm

30 June2001Rm

Change

%

Change

%

Key issues for second half 2002Key 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

• 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

Market shareMarket share

New recurring individualBrokersAgents

Individual single premiumsBrokersAgents

New recurring individualBrokersAgents

Individual single premiumsBrokersAgents

17.8616.9618.94

14.7613.2514.95

17.8616.9618.94

14.7613.2514.95

18.5619.1017.93

17.0116.4317.87

18.5619.1017.93

17.0116.4317.87

Full yearsFull years1st Quarter

2002%

1st Quarter

2002% 15.72

14.1117.68

11.499.46

17.00

15.7214.1117.68

11.499.46

17.00

2001% %

2000

Average recurring premiumsAverage recurring premiums

Liberty average premiums

Industry average

Liberty % average

Liberty average premiums

Industry average

Liberty % average

6 086

2 519

242

6 086

2 519

242

6 626

2 465

269

6 626

2 465

269

Full year2001

Full year2001

1st Quarter

2002

1st Quarter

2002

8.9

(2.1

8.9

(2.1

Change%

Change%

)

)

STANLIB Asset ManagementAssets under management at 31.12.01

STANLIB Asset ManagementAssets under management at 31.12.01

SCMBAMRbn

SCMBAMRbn

LibamRbn

LibamRbn

STANLIBRbn

STANLIBRbn

Life fundSegregated fundsUnit trustsAfricaMulti-manager

Life fundSegregated fundsUnit trustsAfricaMulti-manager

* Charter Life funds** Includes money market funds of R10 billion

* Charter Life funds** Includes money market funds of R10 billion

4.720.617.9

2.02.2

4.720.617.9

2.02.2

*

**

*

**

47.029.0

7.8–

1.0

47.029.0

7.8–

1.0

51.749.625.7

2.03.2

51.749.625.7

2.03.2

47.447.4 84.884.8 132.2132.2

International strategyInternational strategy

• Grow Liberty Ermitage distribution• Follow Stanbank into emerging markets• Build distribution in Europe

• Grow Liberty Ermitage distribution• Follow Stanbank into emerging markets• Build distribution in Europe

Liberty ErmitageLiberty Ermitage

• Assets under management increased from US$2 152 million to US$2 258 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

• Assets under management increased from US$2 152 million to US$2 258 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

Liberty ErmitageLiberty 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

• 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 Micropal4-Star ratings placing them in the top 30% of their

categories in the world over three years

ScorecardScorecard

Goals set for 20021. Launch and grow STANLIB2. Develop SBFC and

bancassurance sales3. Reposition Charter Life in

mass and niche markets4. Focus on profitability of

Liberty Corporate Benefits

Goals set for 20021. Launch and grow STANLIB2. Develop SBFC and

bancassurance sales3. Reposition Charter Life in

mass and niche markets4. Focus on profitability of

Liberty Corporate Benefits

½½

ScorecardScorecard

Goals set for 2002

5. Leverage CRM initiative for new business and retention

6. Grow Liberty Ermitage sales

7. Focus on productivity of agency and franchise

Goals set for 2002

5. Leverage CRM initiative for new business and retention

6. Grow Liberty Ermitage sales

7. Focus on productivity of agency and franchise

By half year 5½ out of 7 achieved