Transcript No Slide Title

Liberty Group Limited
Interim Results Presentation
6 August 2003
www.liberty.co.za
Liberty. Lighting your way to financial prosperity.
A challenging six months at Liberty

Some changes in senior management

Restructure of business operations

Accounting and regulatory issues

Market update issued in May

Growth in market share and positive cash flow
A challenging six months at Liberty
(continued)

STANLIB’s first birthday

Largest BEE asset management deal

New life product developed

Acquisition by Corporate Benefits of IEB

Reduced offshore emphasis
Some changes in senior management



New Chief Executive Officer
Deon de Klerk (6 years’ service) replaces
Mark Bloom
Andrew Lonmon-Davis (16 years’ service)
becomes Chief Actuary

Mike Jackson moves on

146 years’ service on Exco
Restructure of business operations

Executive Committees integrated
•
•
Insurance Operations Committee and
Investment Operations Committee
= Group Executive Committee
Executive Management Committee
= Executive Communications Forum
Restructure of business operations
(continued)

Subsidiary board meetings streamlined

Healthcare incorporated into Personal Benefits

STANLIB restructure – phase 2
Duplication removed
Accounting and regulatory issues

AC133 implementation

Ongoing process to align PGN104 with AC133

No material impact on headline earnings yet

No international accounting standards for
insurers as yet

Tighter control by regulators – FAIS and FICA

CISCA paves way for restructuring
Not a simple process
Transformation



Financial Services Charter – work in progress
Employment equity – high priority receiving
continuous focus
STANLIB BEE deal the beginning of the road
A huge challenge
New CEO’s thoughts on the business





Sound business
Good products and distribution
Healthy margins
Strong capital position
Positive cash flows
but



Volatile earnings
Service issues
Cost base
Financial results
Features - 2003/2002





Indexed new business
• Individual
• Corporate
Value of new business
New business margin
Headline earnings per share
Dividend maintained
+
+
+
+
6%
2%
30%
6%
18%
46%
162 cents
Features - 2003/2002



Net cash inflow from insurance
operations: R1,7 bn
Embedded value per share :
R53,42
Capital adequacy cover
+
6%
3%
2,6 x
Continued gains in market share
Headline earnings
30 June
2003
Rm
30 June
2002
Rm
Change
%
Life fund operating surplus
253
563
(55 )
Revenue earnings –
shareowners’ funds
148
127
17
Preference dividend
(45 )
(28 )
61
Headline earnings
356
662
(46 )
130,0
242,5
(46 )
Headline EPS (cents)
Life fund operating surplus



Significant reduction due to 10% shareowners’
participation in negative returns
Further reduction in fees due to lower levels of
assets under management
1H02 included significant expense profits due to
cost containment not repeated in 1H03
Investment returns
(Weighted average of equity, managed
and foreign assets portfolios)
15
Year-to-date return 2002
Expected return 2003
Year-to-date return 2003
10
5
0
Oct
-5
-10
-15
Year-to-date June 2002 : - 0,4%
Year-to-date June 2003 : - 3,6%
Markets continued to decline in 2003
New generation products earn management fees
instead of 10% capital bonuses
Expenses
30 June
2003
30 June
2002
Total insurance expenses (Rm)
663
587
Net inflow of policies (number)
16 560
20 417
Renewal cost per policy
increased/(decreased) by
+7,6%
0,0%
Acquisition cost per policy
increased/(decreased) by
+9,3%
+2,1%
Change
%
13
(19 )
Significant non-recurring expenses incurred in 1H03
Cost saving targets set throughout the Group
Revenue earnings –
shareowners’ funds
30 June
2003
30 June
2002
Change
%
(26)
Financial services activities
72
97
Listed investments
25
25
-
Other income
90
60
50
(39 )
(55 )
(29)
148
127
Tax
17
Embedded value
30 June
2003
Rm
31 Dec
2002
Rm
Change
Shareowners’ funds
8 266
8 588
(4)
Value of life business
in-force
5 646
5 700
(1)
711
838
(15)
14 623
15 126
(3)
53,42
55,28
(3)
Financial services subsidiaries
fair value adjustment
Total
Embedded value per share
(Rand)
%
Financial services subsidiaries
fair value adjustment



STANLIB impaired : R54 million
Liberty Ermitage multiple revised down to 12 x
and stronger Rand : R70 million
Liberty Properties multiple maintained at 10 x
Shareowners’ funds

Impairments:
•
Hightree goodwill : R62 million
•
Unlisted investments : R39 million
Capital adequacy cover
4
3,8
3,5
3,4
3,0
2,6
2
0
1H01
2H01
1H02
2H02
Capital adequacy cover on new
statutory basis: 2,6 x
1H03
Dividend
Interim
Final
2003
Cents per
share
2002
Cents per
share
162
162
116
278
Positive cash flows
Confident about our future
Operations
New business – percentage increase
Individual
business
%
Recurring
Single
Total
Index
•
•
•
•
10
(20 )
(14 )
2
Corporate
business
%
22
51
45
30
Total
%
12
(9)
(5)
6
Continuing market share gains
Focus on productivity of sales force
Investment performance competitive over longer periods
Strong property backed sales
Market share individual business
(including Charter)
%
30,0
23,6
25,0
20,0
24,8
22,7
22,6
20,2
19,6
15,4
15,0
16,6
10,0
5,0
0,0
Recurring individual
Year ended 31 December 2000
Year ended 31 December 2002
Single individual
Year ended 31 December 2001
Quarter ended 31 March 2003
Source: LOA market share
statistics for all life offices
Value of new business
Value of new business (Rm)
New business margin (%)
30 June
2003
30 June
2002
Change
%
262
248
6
18,4
17,6
1
All margins slightly up vs June 2002
Net cash inflows from insurance
operations
Total premiums and inflows
under investment contracts
30 June
2003
Rm
30 June
2002
Rm
Change
8 004
7 552
6
( 5 915)
6
1 637
6
Claims, policy-owner benefits and
payments under investment
contracts
( 6 274)
Net cash inflows
1 730
%
Rm
2 000
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-
Total net cash inflow from insurance
operations
1 730
1 637
1 057
1 024
479
1H99
1H00
1H01
1H02
1H03
Charter new business
Recurring premiums
Single premiums
Total
Index
30 June
2003
Rm
30 June
2002
Rm
Change
221
548
769
276
235
626
861
298
(6 )
(12 )
(11 )
(7 )
• Charter’s share of SBFC 23% (38%)
• Liberty’s share of SBFC 59% (45%)
• Simple products + 23%
%
Launch of Lifestyle Protector product

New generation risk protection product

Cover for multiple lives

Number of unique benefits
•


Settles the disability/impairment debate
Further leverages our Blueprint software
Retained the very successful Universal Lifestyle
product
STANLIB
Liberty Ermitage
STANLIB





Weak and volatile investment markets adversely
impacted results
Headline earnings of R47,1 million down 26%
Normalised headline earnings of R65,1 million
up 6%
Disappointing short-term investment
performance
Longer term investment performance (3 years)
remains satisfactory - upper quartile
STANLIB


Most portfolios positioned for expected
re-rating of equities relative to bonds
Merger and systems integration activities
continue (R25,7 million spent this half year)

Merger costs cease end 2003

Cost saving initiative in progress

Empowerment transaction announced in June
STANLIB




Asset Management net inflows for the six
months of R4 billion
Wealth Management net inflows for the six
months of R4 billion
Asset Management assets under management
of R131,8 billion up 3%
Wealth Management funds under administration
of R55,1 billion up 6%
STANLIB
Asset Management - assets
30 June
2003
Rm
Life funds
Segregated funds
Unit trusts
Total
53
48
30
131
107
414
259
780
31 December
2002
Rm
52
48
27
128
633
334
464
431
Increase
%
1
10
3
Liberty Ermitage
Assets under management
Hedge funds
Long only funds
Money funds
Total
30 June
2003
US$m
31 December
2002
US$m
1 059
889
646
2 594
807
792
667
2 266
57% external third party funds
Increase
%
31
12
(3 )
15
Conclusion
Focus areas for next six months

Improve service levels

Emphasis on cost reduction

Focus on domestic operations

Renewed emphasis on people

Explore other market segments and Africa

Address capital situation
Building and changing on
a solid platform
Panel

Myles Ruck
Chief Executive

Deon de Klerk
Chief Financial Officer

Andrew Lonmon-Davis
Chief Actuary