UBS Financials Conference

The quest for positive “jaws” – balancing growth and efficiency

20 October 2006

www.liberty.co.za

Key performance indicators for Liberty

Retrospective drivers of revenues and costs

Opportunities for top line growth

Enhancing operational delivery and customer service

Driving capital management efficiency

Conclusion

Questions

Agenda

3

Key performance indicators

• Return on embedded value (ROEV)

• New business margins

• New business volumes

• Management expenses

• Headline earnings per share

• Net cash flows

• CAR cover

Opening the jaws drives growth in EV

Retrospective drivers of revenues (1970’s – early 1990’s)

• High interest rates, high inflation

• Lower penetration of life products growth

• Consumerism all but non existent

• Tax advantages for life wrapped products

• Limited competition from non-assurance companies

• Strong, well remunerated sales forces

• Strong collaborative relationship with policymakers

Clearly times have changed. Has the industry been slow to adapt?

As good as it gets

Retrospective drivers of revenues – Liberty

XCost focus

• Increasing complexity of operational environment

• Duplication of resources from siloed business units

Cost and inefficiencies are tolerated in high inflationary and growth environments

Drives costs

Source: 1970, 1980, 1990 data – SARB Quarterly Bulletin; (2000 data – LOA).

• Strong sales growth in an inflationary environment

10.3%

14.6%

9.3%

5.2%

16.2%

27.6%

20.5%

4.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1970s 1980s 1990s 2000s

Average inflation Average premium growth

Growth in life assurance premiums vs inflation

Strong sales and cost growth

The jaws of the crocodile

Historical ShapeC

um

ula

tive

pe

rce

nta

ge

ch

an

ge

Time

Premiums

Costs

Pre 2005

Weaker life sales, flat cost growth

The jaws of the crocodile

Cu

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tag

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Time

Current Shape2006

Premiums

Costs

Historical shape

The jaws of the crocodile

Future Shape

2007 onwards

Sales

Costs

Cu

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tag

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Original historical shape

Time

Improved sales, … slower than the past; rigorous focus on costs

The jaws of the crocodile

Time

Premiums

Costs

Historical shape (pre 2005)

Time

Current shape (2006)

Cu

mu

lativ

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erc

en

tag

e c

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e

Cu

mu

lativ

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Historical shape

Premiums

Costs

Time

Future shape (2007 onwards)

Historical shape

Cu

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tag

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Sales

Costs

Strong sales and cost growth Weaker life sales, flat cost growth

Improved sales, … slower than past; rigorous focus on costs

The jaws will open

Top jaw dropping … preserving our basis for growth

Development of SA savings industrytotal business (incl. money market)

Source: Citigroup

(a) incl retail and institutional assets

Source: SARB, Deutsche Bank

Unit trust savings have outgrown life insurance premiums over the past three years

Off-balance sheet sales for the life industry have significantly outstripped on-balance sheet sales since

2003

22%

Rbn

0

100

200

300

400

44%63%

87% 79% 74% 75%

101%

165%

96 97 98 99 00 01 02 03 04 05

187%

Unit trust deposits

Life insurance premiums

UT vs Life (%)

Development of SA life companynew savings business (ex money market) (a)

45

2003 2004 2005

Life on-balance sheet

Asset management off-balance sheet

Total

Rbn

0

40

80

120

160

48

93

46

75

120

55

94

149

Strengthening the top jaw

Defensive: prevents significant value leakage resulting from fundamental shift in Liberty’s market

Growth: provides product and distribution opportunities

Focus on building an equity franchise

Proposed acquisition of 100% of STANLIB is the most appropriate response

Sustainable asset acquisition costs

Maintaining sustainable operating margins is a key profitability requirement. A significant component of this relates to evolving the

distribution and sales structures into models which provide for long term sustainable asset acquisition costs

• Costs of distribution and sales to be more closely linked to the general sales environment

• Facilitate migrations from expensive to cheaper channels

• Differentiated service models – not “one size fits all”

• Customer and intermediary touch points through technology solutions

• Distribution and sales process

Opportunities for top line growth – sustainable asset acquisition cost

Opportunities for top line growth – Bancassurance

• Driven at strategic level

• Leverage current model more broadly

• Representation in branch structure

• Review of consultant profile and remuneration

• Technology enabled sales processes

• Senior staff seconded to Bank for simple product

Standard Bank customer base still represents substantial opportunity

Penetration 700 selling to

8 million

Opportunities for top line growth –

• Optimal product portfolio to widest IFA footprint

• Optimise overlap issues in IFA

• “Single selling message irrespective of wrapper”

• Alleviate product and channel competition in SBFC and Tied force

• Integrated wealth offering at bank branch level

• Combined and integrated direct model

• Integration of corporate benefit sales with Stanlib institutional sales

• Combined approach to Africa

Opportunities for top line growth Alternative models

Opportunities exist to broaden our distribution reach where we:

• Do not wish to build distribution

• Are unable to penetrate market segments

• Wish to convert a component of fixed cost to variable cost

• Require flexibility on human resource and remuneration practices

Operational challengesA snapshot

Poor productivity in processing

#MedianLiberty

Org

an

isat

ion

s

Commissions

Sales Reward System (Intermediary Level)

PINBALLProcessing Layer, Underwriting and Reassurance

Blueprint Online

Enquiries, Quotes, New Business and Servicing

Blueprint Mobile

Enquiries, FNA, Quotes, New Business and Servicing

Conventional Life Lifestyle Annuities CompassClient(PDB)

Cashiering Payments Tax

Call Centre / IVRwww.Liberty.co.za

IWSCHOQS

JNBLegOW

SRS/Other

Comms

LibertyActive

Caliber

ILANGAEnquiriesComms

Hyphen

Complex operating environment

• From 13 main systems to 4

• Currently +50 interfaces to Compass

• Detailed project plans for conversions in place

• Significant opportunity to improve productivity

• Individual ahead of corporate

• People, process and technology

Enhancing operational delivery and customer service

PAST / TODAY

• Reaction to consumerism led to increased operating costs and service burden

• Meeting policyholder service led to deferral of key improvements in intermediary service

• Improved ease of doing business will enhance sales productivity

• Largely an undifferentiated service model

• Complicated legacy environment

Enhancing operational delivery and customer service

TODAY / FUTURE

• Re-balance spend to provide differentiated service to intermediary

• Intermediary service spend should increase sales productivity partner of choice

• Cost savings delivered from service rationalisation

• Increased productivity through process and system rationalisation

• Ensure scalability and decreased time to market

Enhancing operational delivery and customer service

Increase productivity and prioritise service spend better

Get it right the first time

Better service at lower costs

Increase productivity and prioritise service spend better

Get it right the first time

Better service at lower costs

Detailed project plans, management structures and executive responsibility in place to ensure we deliver on our savings promise

Doing what’s right for the customer

Driving capital management efficiency

• Post Stanlib transaction we estimate excess capital at circa R1bn vs interim of R1.4bn

• Commenced risk based modelling to analyse right amount of capital for business

• T-CAR is quite onerous

• Further opportunity to gear the balance sheet

If we don’t need it we will return it to shareholders in the most effective way

The quest for positive jaws

Significant value add for shareholders

Drivers:

• Growth in sales:

– New

– In force

• Stringent cost control

• Improving capital management