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									                                             May 2002
 Update is a newsletter produced by the investor relations department of New Africa Capital financial services group.
 It provides information on the different businesses in the group as well as financial news. Contact Nico Oosthuizen on
 (021) 9406111 or Sue Snow on (021) 940-6119 or send an e-mail to or for further information.

New in force business
The group new business figures for the quarter ended 31 March 2002 are shown below. The basis used is
consistent with that used in the embedded value calculation. Policies are included from the date that they
become in force as opposed to the date on which they are concluded (production figures). There is usually a
delay up to three months between these two dates.

 NEW BUSINESS PREMIUMS #                      3 mths to           12 mths to         average                    %
                                              31.3.2002          31.12.2001           quarter        change 2002
                                                    Rm                  Rm               Rm           (annualised)

 Recurring premiums
   Individual life                                   154                  484              121                    27
       Gross premiums                                180                  582              146                    24
       Lapses at inception                           (26)                 (98)             (25)                  (6)
   Employee benefits                                   16                 155                39                 (59)
                                                     170                  639              160                     6
 Single premiums
   Individual life                                    202              1 033               258                  (22)
   Employee benefits                                  212              1 958               490                  (57)
                                                      414              2 991               748                  (45)
 Annual premium equivalent (APE)                      211                938               235                  (10)
 Lapses as a % of gross premiums                     14%                 17%              17%                     18

 # Provisional new business premiums subject to adjustment at the year-end valuation.

The trends in respect of both individual life recurring premium business and lapses at inception are
improving. Employee benefits recurring premium business is currently below the level attained during 2001,
as are both categories of single premium business. In the case of employee benefits single premium
business, this is partly as a result of a move towards off balance sheet business and partly because of the
erratic nature of such business. The position has since improved and at 30 April 2002 the figure for single
premium income, including off balance sheet inflows, was in line with the corresponding period in 2001.
New business production – individual life
Total new business production was higher than that written during the same period in 2001. The main drivers
of this improvement were Metropolitan Direct and Metropolitan Namibia.

An upsurge in the new business production of Metropolitan Direct, which is campaign driven, boosted total
new business production for the quarter. Metropolitan Direct is dependent on its ability to source new
campaigns to sustain growth.

While other categories have been lagging the 2001 comparatives, it is worth mentioning that there has been
a marked uptrend in ordinary individual life new business production since the end of the quarter. Year-to-
date production after the first three weeks of May is on a par with the equivalent figure for 2001.

It is particularly pleasing to be able to report an improvement in the lapse experience at inception of business
written in the last quarter of 2001 that came into force in the first quarter of 2002 (refer to the table above). It
must also be borne in mind that most of this business was written prior to the roll-out of Predict, the lapse
predictor tool for excluding potentially high lapse rate business prior to inception. The beneficial effects of
Predict will therefore only be seen in subsequent quarters.

The Predict tool is able to determine with a high degree of accuracy those policies with a propensity to lapse
within the first year. Based on the risk of lapse ranking, the following two business interventions are applied:

            New business applications that score within the top 10% of high risk policies are declined.
            For new business applications that fall within the next 15% of high risk cases, commission is
             paid on an “as and when” basis over the first 12 months of the contract.

At one of the pilot sites, it was particularly encouraging to see that the rate of lapses at inception declined
from 55% in February to 12% in May 2002.

Delayed detection of lapses at inception

It should be noted that in some cases there can be a delay of up to five months between the date on which
an insurance policy is concluded and the date on which it eventually lapses. This excludes any potential
delay between a client deciding that he/she wants a policy and the company finally accepting his/her
application as complete.

Assuming that a policy is accepted by an insurance company on 20 January, the date of the first premium
deduction could be as late as 31 March. If this premium is not received, it will be re-submitted for payment in
the following month (April) and possibly the month thereafter as well (May). Only then will the insurance
company be able to determine that the policy should be classified as “lapsed at inception”, a full five months
after the date on which the policy was accepted.

Cost-saving drive
With New Africa Capital having committed to a saving of R 50 million on actual expenses incurred in 2001,
each of the businesses and support services within the group was asked to review its budget for 2002 and
determine ways of effecting the necessary reductions.

The central focus of the cutback exercise was, and continues to be, costs attributable to individual life
operations, especially fixed acquisition costs in respect of new business. Growing businesses were not
requested to take aggressive remedial steps that would in any way detract from their ability to capitalise to
the full on growth opportunities.

Management is confident that the group as a whole will save well in excess of the targeted R50 million in
administration expenses by the end of the 2002 financial year, despite having made adequate provision for
future expansion. These savings will not all be attributable to new business costs.
Short-term interventions for long-term gain will mean that the bulk of the cost savings will only start flowing
through in the second half of the financial year.

Business processes are currently being optimised and, where necessary, further rightsizing measures will be
implemented. Both existing and proposed business projects are also being reviewed and re-evaluated on a
cost versus growth basis.

The group finance director will continue to measure and monitor progress, with the various operating entities
being held fully accountable for delivery in terms of the cost-saving goals which have been fully integrated
into the group’s performance management objectives for 2002.

Metropolitan Health Group
The right-sizing of the health business has been completed without compromising the levels of service
offered to its clients, says Blum Khan, CEO of the Metropolitan Health Group (MHG).

In spite of having lost the administration contract for Topmed and Selfmed, the two Sanlam medical
schemes, which the latter sold last year, the Metropolitan Health Group is operating profitably, showing
improved margins over the same period in 2001.

Now that OpenPlan, the open scheme administered by MHG, is showing favourable financial results, the
group anticipates that it will become an attractive retail product in the future.

In line with MHG’s commitment to exploring alternative business opportunities, its traditional source of
revenue, in terms of fees derived from members under administration, is now being supplemented by
licensing fees derived from franchise agreements and clients who purchase managed care programmes. In
this regard, MHG have signed their first international franchise deal for implementation later this year.

In January MHG rolled out its first franchise agreement with LAMAF, a scheme for local authorities with
40 000 lives under administration. By April this year a second, similar agreement with SAMWUMED
(formerly a municipal workers medical aid) with 45 000 lives, was rolled out.

When the Bankmed administration division was corporatised in January 2000, Bankmed (the medical
scheme) retained ownership of 19.9% of the newly created company in terms of a concession granted by the
Council for Medical Schemes. As part of the original agreement the New Africa Capital group had an option
to acquire this shareholding from Bankmed when the latter’s concession expired.

This concession has now expired and NAC has acquired these shares from Bankmed with effect from 1
January 2002 for approximately R100 million. In terms of the original purchase contract MHG will continue to
be responsible for the administration of the Bankmed scheme for at least another three years, subject to the
attainment of all normal service level criteria.

This acquisition is part of the ongoing integration of MHC and MetHealth, which are already fully merged at
an operational level, and further aligns shareholder interests in MHG.

Metropolitan Asset Managers
The house view, represented by the Global Managed Fund, under-performed its cumulative benchmark for
the quarter ended 31 March 2002 by 3.7%. This under-performance excludes the negative performance that
resulted from derivative exposures implemented for the Guaranteed Fund.

The under-performance reported for 2001 continued for the first quarter of 2002. Stock selection was the
reason for MetAM’s under-performance, with its underweighting in gold mostly to blame. Other major
negative contributions came from life assurance, banks and platinum. All these sectors have, however,
staged a strong recovery since quarter end. Views are taken on a three-year investment horizon where
periods of short-term underperformance are likely.
Macro asset allocation contributed positively, with the house being aggressively underweight in bonds in
favour of equity.

Compounded versus benchmark performance clearly indicates that the under-performance continued, but
that the trend has turned.

Market overview

Global markets
Equity markets failed to sustain the strong performance of the fourth quarter of 2001. Subsequent economic
releases indicated that a US recovery was taking place, but the really bad news of the Enron debacle and
escalating tensions in the Middle East once again brought home the reality that equity prices are still

Interest rates in the US are at a forty-year low and the anticipation of a recovery, as well as increased
government spending, spooked the bond market. Long-term interest rates are on a rising trend and US
corporates are using this last opportunity to raise capital by issuing debt at attractive rates.

The European and Asian equity markets followed the same pattern as the US, with Japanese equities
outperforming other markets for a change thanks to the weaker yen and improved global growth prospects.
Emerging markets performed well due to the higher gearing to interest rates and weak currencies.

Commodity prices started to recover during November 2001 and maintained this trend into 2002 as global
growth sentiment improved.

Local markets
Resource shares continued to dominate the equity market during the quarter. This is not surprising given the
rand hedge qualities of these shares. Once the realisation had set in that gold mining companies stood to
benefit most from the substantially weaker rand and the gold price itself had showed some resilience, gold
shares became very attractive and outperformed the market by a substantial margin. However, non-mining
resources outperformed mining resources. MetAM held a high resource weighting relative to its peers, but
still slightly less than the all share weighting.

Financial stocks once again de-rated on bad news from the micro-lending industry, and banks exposed to
the lower end of the market came under pressure, notwithstanding the good overall earnings prospects for
this sector. The insurance sector, in which MetAM holds an overweight position, did not show the growth
that was achieved in the past. Recent and anticipated interest rate hikes are not beneficial to the financial
and industrials sectors.

Industrial shares moved sideways over the quarter, with IT shares (MetAM slightly overweight) taking
another beating. Consumer stocks remained under pressure from shrinking margins and declining
discretionary spending. Tax relief has not yet had an impact on consumer spending, but increases in the
prices of fuel, transport and food have taken their toll.

The rand’s 5.4% appreciation against the US dollar was not enough to offset tremendous inflationary
pressures, from both imported goods and foreign demand for locally produced goods. Even before the first
official consumer inflation figure was published, it had become clear that the 2002 inflation targets were out
of reach.

The bond market reacted negatively to the deteriorating inflation outlook while the delay and uncertainty in
privatisation issues, together with the huge forward book losses, prompted a sell-off in the bond market.
MetAM’s performance

Fund                                                   Return                           Ranking
3 months to 31/03/2002                                   -1.5                             42/57
12 months to 31/03/2002                                  16.5                             53/57
36 months to 31/03/2002                                  16.2                             26/43
3 months to 31/03/2002                                   -4.3                               5/5
12 months to 31/03/2002                                  -2.5                               5/5
36 months to 31/03/2002                                  7.1                                2/5
3 months to 31/03/2002                          -0.5                                      16/57
12 months to 31/03/2002                         16.2                                      54/57
36 months to 31/03/2002                         11.8                                      43/43
Source: Alexander Forbes Manager Watch, March 2002

Market outlook
The outlook for domestic growth is not good. The weaker rand will bring stimulation in the form of higher
export earnings, import substitution and some pre-emptive spending, but higher inflation and interest rates
will start to bite.

The economy is still not creating jobs, and, although labour productivity is improving, overall productivity is
not. The higher oil price is partly being offset by a higher gold price. Domestic demand will be under pressure
from lack of discretionary spending. Margins of exporters and primary producers are improving, but for
retailers and banks margins are deteriorating.

The next quarter will be critical for South Africa. The resources cycle is mature and domestic growth is
required to arouse investor interest in local financial and industrial shares. Financial stability remains the
priority for 2002 and the rand exchange rate will continue to be the central character in this quest.

The performance of the rand will also continue to determine the performance of resources vs. financial
equities. A stronger rand is needed for financials to outperform in the next quarter or two. Better
performance of financial shares is likely since financials are very cheap on most valuation bases and
stimulus in the form of lower real rates and a faster growing monetary base will benefit banks and other
financial stocks. IT and media shares are also dependent on a global upturn, but are likely to outperform
only once fixed investment improves.

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