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Interim Results Presentation Liberty Holdings by alicejenny

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									       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          +     6%
     • Individual                 +     2%
     • Corporate                  +    30%
   Value of new business         +     6%
   New business margin                18%
   Headline earnings per share   -    46%
   Dividend maintained           162 cents
                        Features - 2003/2002

   Net cash inflow from insurance
    operations: R1,7 bn              +    6%
   Embedded value per share :
    R53,42                           -     3%
   Capital adequacy cover           2,6 x




       Continued gains in market share
                               Headline earnings

                              30 June   30 June   Change
                               2003      2002
                                Rm        Rm        %
Life fund operating surplus    253       563       (55 )
Revenue earnings –
 shareowners’ funds            148       127        17
Preference dividend             (45 )     (28 )     61
Headline earnings              356       662       (46 )
Headline EPS (cents)          130,0     242,5      (46 )
                    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)
      Year-to-date return 2002        Year-to-date return 2003
15    Expected 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   30 June   Change
                                   2003      2002       %

Total insurance expenses (Rm)       663       587       13
Net inflow of policies (number)   16 560    20 417     (19 )

  Renewal cost per policy
  increased/(decreased) by        +7,6%      0,0%

  Acquisition cost per policy
  increased/(decreased) by        +9,3%     +2,1%

Significant non-recurring expenses incurred in 1H03
   Cost saving targets set throughout the Group
                                Revenue earnings –
                                shareowners’ funds

                                 30 June   30 June   Change
                                  2003      2002       %

Financial services activities      72         97      (26)
Listed investments                 25         25        -
Other income                       90         60      50
Tax                               (39 )      (55 )    (29)
                                  148       127       17
                                      Embedded value
                                  30 June   31 Dec   Change
                                   2003      2002
                                    Rm        Rm       %
Shareowners’ funds                 8 266     8 588     (4)
Value of life business
 in-force                          5 646     5 700     (1)
Financial services subsidiaries
  fair value adjustment             711       838     (15)

Total                             14 623    15 126     (3)
Embedded value per share
 (Rand)                            53,42     55,28     (3)
                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    1H03

    Capital adequacy cover on new
         statutory basis: 2,6 x
                            Dividend
                 2003        2002
               Cents per   Cents per
                 share       share


Interim          162         162

Final                        116

                             278



    Positive cash flows
 Confident about our future
Operations
              New business – percentage increase
                          Individual   Corporate     Total
                           business    business
                              %           %           %

     Recurring                10          22          12
     Single                  (20 )        51          (9)
     Total                   (14 )        45          (5)
     Index                     2          30           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   24,8
25,0
               22,7                                             22,6
        19,6                                          20,2
20,0
                                               16,6
                                        15,4
15,0


10,0


 5,0


 0,0
        Recurring individual              Single individual
       Year ended 31 December 2000   Year ended 31 December 2001
       Year ended 31 December 2002   Quarter ended 31 March 2003
                                                Source: LOA market share
                                                statistics for all life offices
                             Value of new business

                                30 June   30 June   Change
                                 2003      2002       %

Value of new business (Rm)       262       248        6
New business margin (%)         18,4       17,6       1




     All margins slightly up vs June 2002
               Net cash inflows from insurance
                                    operations
                                   30 June   30 June    Change
                                    2003      2002
                                     Rm        Rm         %

Total premiums and inflows
  under investment contracts       8 004      7 552       6
Claims, policy-owner benefits and
  payments under investment
  contracts                       ( 6 274)   ( 5 915)     6
Net cash inflows                   1 730      1 637       6
        Total net cash inflow from insurance
                                  operations
  Rm
2 000                                  1 730
1 800                          1 637
1 600
1 400
               1 057
1 200                  1 024
1 000
  800    479
  600
  400
  200
    -
        1H99   1H00    1H01    1H02    1H03
                          Charter new business

                            30 June   30 June   Change
                             2003      2002
                              Rm        Rm        %

Recurring premiums           221       235       (6 )
Single premiums              548       626      (12 )
Total                        769       861      (11 )
Index                        276       298       (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    31 December   Increase
                     2003          2002
                      Rm            Rm         %


Life funds          53   107    52   633        1
Segregated funds    48   414    48   334        -
Unit trusts         30   259    27   464       10
Total              131   780   128   431        3
                             Liberty Ermitage
                     Assets under management

                   30 June   31 December   Increase
                    2003         2002
                    US$m        US$m         %


Hedge funds         1 059        807         31
Long only funds       889        792         12
Money funds           646        667         (3 )
Total               2 594      2 266         15




        57% external third party funds
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

								
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