Liberty Holdings Limited. Analyst day

Transcription

1 Liberty Holdings Limited Analyst day 2014

2 2 Agenda 27 November :15 Thabo Dloti, Group CE 13:00 Casper Troskie, Capital and cash 13:30 Deon Swart, Liberty Corporate 13:50 Seelan Gobalsamy, Asset Management 14:10 Steven Braudo, Retail SA 14:30 Tea / coffee break 14:45 Mukesh Mittal, Bancassurance 15:00 Stuart Wenman, Rest of Africa 15:20 Steven Braudo, closing comments

3 Thabo Dloti Group Chief Executive

4 Operational update to end-october 2014

5 5 Ten months to October 2014 In summary Operating performance supported by good insurance results Results continue to reflect the benefits of product innovation and related positive momentum in insurance new business sales with relatively stable customer behaviour Corporate business new initiatives provide significant growth in premium income and cash flows Asset management operations reflect a positive net result of retail and institutional non-money market inflows, in difficult operating conditions Liberty Africa long-term insurance contribution to the group improves steadily combined with good cash flows Returns on the shareholder investment portfolio for the period remain slightly below benchmark for 2014, but significantly ahead of the three years cumulative benchmark

6 The core of our strategy has not changed - We have become more focused

7 7 The core of our strategy A focused strategy with growth opportunities that exist in the markets we operate in 1 Focus on core businesses Align our business Reduce complexity and increase agility Enable leverage of capabilities 2 Create a differentiated customer value proposition Build on strong capabilities Holistic look at customer needs 3 Group wide leverage of differentiated competencies Function as a group Enable mobility to new opportunities SBG partner

8 8 We are focusing on what we are good at, how we leverage this expertise to grow and deliver returns 6. Deliver value to shareholders 1. Trusted leader in insurance and investment 2. Market growth Success is defined 4. Differentiated model focused on market segments Consumer segments changing

9 9 To do this, we identified specific opportunities to pursue Business models Markets Growth opportunities Individual arrangements Group arrangements Asset management SBG relationship Group SA and Nigeria SSA Africa SSA Grow market share in a more defined mass-affluent market that is growing Ability to capture a broader market through corporate and group arrangements Maximise on opportunities created by reforms Capture growth momentum created by reforms in Africa and provide expertise in the growing alternatives market Provide investable assets for international funds Leverage distribution footprint across all product pillars and regions drive bancassurance Leverage insurance balance sheet and asset management competency in new regulatory environment Create additional shareholder value through delivery and strategy execution

10 10 Changing consumer segments provide opportunities for our Retail / Individual proposition For Liberty the mass-affluent market is defined: South Africa Rest of Africa (Nigeria & Kenya) Multi-channel arrangements to access customers Intermediaries Direct (call centre, internet) Standard Bank A comprehensive range of solutions, presented as a single customer experience Investment & Risk Health & Short-term Improved governance, systems and process efficiency Build meaningful relationships with customers that present long-term relationship potential with multiple financial needs

11 11 Regulation will provide additional opportunities for our Group Arrangements proposition in all our markets Create an attractive value proposition to the group who makes the buying decision Simple packaged solutions Solutions that are competitively priced but deliver good value Groups and individuals have easy and flexible access to solutions, service and their data, across Africa Partner with the customer to deliver financial solutions to their employees To partner and deliver financial solutions in a relevant, simple and accessible way through defined solutions that are competitively priced

12 12 Asset management on the continent needs to have capacity to develop assets to attract funds and have the expertise to deliver returns Third party Retail and Institutional in SA and SSA and offshore HNW and specialist buyers Retail Pension funds & parastatals International asset allocators Wholesale retailers Institutional Investment expertise Solution and portfolio construction capability Wealth preservation International Asset and liability matching Develop investable African assets to attract international flows Global distribution and pan-african presence Leverageable investment skills across the continent

13 13 The partnership with SBG gives Liberty the opportunity to grow on the continent through collaboration, access to customers and bank infrastructure Mature contract with defined terms across all business and product lines Significant opportunities are still to be unlocked in the corporate client space Cross-selling represents additional opportunities Preferred partner on the continent Focus on Business and Corporate clients in Africa Cost synergies Significant cost savings from deal and transactional values, leveraging of synergistic initiatives and cross provisioning of technology services African expansion enabled by less capital intensive business strategies Leverage group resources and technology to gain further advantage Liberty and Standard Bank Standard Bank without Liberty

14 Conclusion

15 15 Execution of our strategy will result in a diversified financial services business delivering shareholder value Grow Individual business with established strengths Invest in Corporate by building capabilities using new solutions Excellerate Asset management strategy Leading provider in SA Retail affluent market Leading Corporate SA provider through acquisitions Seamless transfer of core capabilities to where opportunities are High penetration in Nigeria and Kenya Corporate provider to SBG client base through group schemes Preferred Asset Manager for asset flows SBG preferred partner in all geographies Generate sustainable and progressive operating earnings growth and cash generation supporting dividends and capital

16 16 We want to continue improving on our recent track record Headline earnings Rm Group VoNB Rm % 43% AUM Rbn Insurance indexed new business Rm % 16% CAGR

17 Thank You

18 Casper Troskie Group Finance Director Liberty Holdings Limited Analyst day 2014

19 19 How do we manage the business today recap Annual Group financial targets are set, based on: IFRS operating earnings Return on group equity value adjusted for short term fluctuations in investment returns SIP return vs. a medium-term benchmark Business unit targets are directly linked to the achievement of group targets Longer term targets are based on an average return on group equity value All targets are referenced to the group cost of equity currently est. at L + 4% IFRS operating earnings target referenced to minimum ROE target of 19% Financial targets are supplemented by specific Key Performance Indicator s (KPI s) Management within risk appetite a gate to the incentive scheme Financial return targets are clear

20 20 Risk appetite framework definitions and concepts - recap Risk appetite gap Risk target gap (the buffer) Risk capacity Risk appetite Risk target Risk profile Risk profile is the amount of risk taken by the organisation which management aims to optimise Risk capacity is an externally imposed limit on the maximum amount of risk the organisation may take Risk appetite is set by the Board based on their utility not to breach risk capacity Risk target is set by management based on their utility not to breach appetite Concept Risk capacity Risk appetite Risk target Risk profile Definition The maximum amount of risk the organisation is able to support in pursuit of its business objectives The maximum amount of risk the organisation is prepared to accept in pursuit of its business objectives The optimal amount of risk the organisation aims to take in pursuit of its business objectives A measure of the amount of risk to which the organisation is exposed at a specific point in time All return targets in Liberty are set within the overall risk appetite as a constraint

21 21 How do we set, manage and monitor risk appetite - recap Regulatory Capital Comprehensive earnings Current coverage of the sum of the regulatory capital requirements within the Group should not fall below 1.50 In a 1-in-10 year event, annual comprehensive earnings, normalised for the BEE transaction, should not fall by more risk appetite Economic capital Embedded Value Available financial resources should be sufficient to cover the internal economic capital coverage requirement calculated at a 99.5% confidence level In a 1-in-10 year event, embedded value, normalised for the BEE transaction, should not fall by more than the set risk appetite limit We set and monitor risk based on four dimensions two are capital based

22 22 Return metrics and risk appetite re-calibration We have recently completed a risk appetite survey which was used to update our risk appetite and risk target calibrations We have much greater clarity on SAM requirements and approved revised risk appetite limits for our capital ratios under SAM these have however not changed substantially We are refining our performance metrics with greater emphasis on capital efficiency and cash generation Greater clarity on capital requirements in respect of SAM

23 23 Capital position Liberty Holdings Rm IFRS June 2014 June 2013 IFRS shareholder funds BEE preference shares BEE normalised shareholders funds Regulatory capital Shareholder assets Regulatory capital requirement (5 267) (5 090) Surplus above minimum requirement Target minimum capital coverage ratio Capital buffer Capital ratio at period end Regulatory capital increased by R3.2bn in the last year assisted by R1bn debt

24 24 Capital position Liberty Group Limited Rm IFRS June 2014 June 2013 IFRS shareholder funds BEE preference shares BEE normalised shareholders funds Regulatory capital Shareholder assets Regulatory capital requirement (4 802) (4 724) Surplus above minimum requirement Target minimum capital coverage ratio Capital buffer Capital ratio at period end Regulatory capital increased by R2.8bn in the last year assisted by R1bn debt

25 25 Capital ratios We are targeting higher capital ratios in support of our corporate business Part of the growth in reported capital requirements was not driven by normal business growth Capital ratios have been influenced by: Credit capital attributed to large reinsurance contracts Existence of some longer term assets warehoused by shareholder on behalf of policyholders Growth in our credit business Substantial work has been done on both the modelling of existing CAR ratios and in respect of SAM requirements which should improve reported capital ratios going forward We are comfortable with our progress on capital ratios in respect of the current regime and future capital requirements under SAM

26 26 Future developments The delivery of our group strategy is expected to deliver a more capital efficient business over time: Asset management / fee based businesses Increased focus on short term insurance, group risk and umbrella funds (investment and group risk) particularly in Africa but also exploring opportunities locally Substantial work has been undertaken to understand capital and cash flow requirements of significant products in our retail business and we will be driving capital efficiency and cash flow generation in this business The impact of the Retail Distribution Review will have a significant positive impact on the capital and internal cash flows of insurers (significantly reducing funding of upfront commissions and acquisition costs) The Liberty BEE scheme matures on 1 January 2015 we are expecting a capital (both IFRS and statutory) uplift of approximately R600m from the repayment of BEE funding

27 27 Cash flows and capital: Risk vs. Evolve

28 28 Delivering on our promises on net worth (assumptions) NET WORTH 1H Expected net of tax transfer to net worth Operating experience variances, assumption and modelling changes (133) (661) Development expenses (21) (53) (78) (61) - - Incentives (35) (154) (181) (131) - - Change in fair value of options /rights (125) 3 (28) (43) Actual net of tax transfer to net worth Performance in line with expectation 114% 100% 87% 92% 93% 62% A significant improvement over time in respect of delivering on net worth expectations

29 29 Cash flow and dividends Change in net worth (201) Asset management Health/DFS 12 (11) (91) (77) (36) Cash earnings before working capital movements Working capital movements / non-cash flow items (62) (692) 376 (28) 953 Cash generated before payouts Dividend paid (1 937) (1 396) (1 353) (1 301) (1 301) Net cash generated / (utilised) before share buy backs (143) IFRS earnings Dividend as a % of earnings 48% 37% 49% 50% >100% Cash generation has been more than sufficient to fund the dividend and growth

30 Questions Liberty Holdings Limited Analyst day 2014

31 Deon Swart Liberty Corporate Liberty Holdings Limited Analyst day 2014

32 2014 Business overview Liberty Holdings Limited Analyst day 2014

33 33 Business overview We have made good progress against our 2014 objectives: Stable Growth assets over R7bn, performing ahead of peers Umbrella fund has been recognised as the largest in the SA market Long-term Insurance Business to Business category winner - Sunday Times Top Brand Awards Improved penetration into large corporate market single premium sales Launched the Employee Protect product in collaboration with Standard Bank Continued sustainable growth in financial results, cash flows and sales Customer focused culture Consistent delivery ahead of Service Level Agreements Net Promoter Score 60% improvement year-on-year Significant reduction in complaints

34 34 Product innovation New guaranteed cash flow matching solution implemented first large institutional client Launched Liberty Secure investment product Passive investment range, including balanced fund, for umbrella Risk product enhancements, including PHI scales for tax changes With profit and default annuity products in development

35 35 Challenges and operating environment Volume of regulatory changes and interpretation of existing legislation Macro economic environment Slowing growth impacting the employment and available resources for companies Evolving competitor landscape with potential new entrants following retirement reform

36 The Liberty Corporate journey Liberty Holdings Limited Analyst day 2014

37 37 Strategic delivery Growth in pre-tax profit Improving VIF & VNB Sustainable base for growth Market leading administration Implement optimal IT architecture Optimise intermediary service efficiency Sustainable Earnings Stabilise and Optimise the Operating Environment Placing our customers first Engaging our people Embedding our culture transformation Managing our talent People and Customer Focus Grow and Expand the Business New investment products Alternative sales channels Large corporate market New Liber8 umbrella

38 38 Strategic delivery cont. Sustainable Earnings Sustainable growth in financial results and sales Net client cash flows are positive at a 10 year high VNB and margin increase - large single premium deals and improved Group Risk performance Effective cost management People and customer focus Improvements in our delivery to customers post the completion of several major projects Complaints down 36% year on year Leveraging the foundation through people and leadership development Increased involvement in various CSI initiatives

39 39 Strategic delivery cont. Stabilise and Optimise the Operating Environment Optimised the administration business through process improvements and increasing staff skills Group Risk system conversion first company to move risk business to Compass Notable improvements in service levels Improving relationship with Regulators Plans to build digital client interaction and automated admin capability Grow and Expand the Business Innovation in the Liability Driven Solutions (LDS) product range resulted in high single premium sales Good growth in recurring premium sales year-on-year Enhanced the operating environment to manage bespoke solutions Diversified the distribution channels

40 40 Success is defined by long-term sustainability and growth Long-term Insurance Rm Significant improvement in cash flows Stable Growth Fund continues to grow New investment and LDS range (452) (1 880) Net cash flows Indexed new business Jun 12 Jun 13 Jun 14 Remain focused on positioning the business in the corporate market for growth

41 Focus areas Liberty Holdings Limited Analyst day 2014

42 42 Strategic focus Focus on holistic client proposition, leveraging existing solutions Ability to capture a broader market through corporate and group arrangements Key markets in sub-saharan Africa Maximise on opportunities created by reforms Partner with the customer to deliver financial solutions to their employees/members To partner and deliver financial solutions in a relevant, simple and accessible way through defined solutions that are competitively priced

43 43 Success measures Grow in scale on the continent Grow AUM through retirement reform, preservation, annuitisation Leverage existing operations through improved efficiencies

44 Conclusion Liberty Holdings Limited Analyst day 2014

45 45 Conclusion Solid foundation delivering improved customer service and business growth Accelerated growth and market share in the large corporate market driven by flexible product offerings Diversification of distribution channels and enhanced Bancassurance relationships On track to deliver, in spite of challenging economic conditions Consistent and strong leadership team to drive future business success We continue to put the customer at the centre of everything we do

46 Questions Liberty Holdings Limited Analyst day 2014

47 STANLIB Seelan Gobalsamy

48 Our Vision To be the leading asset manager in South Africa and the other emerging markets that we serve To fulfill our vision we will: Consistently deliver on our investment promise to our clients Be recognised as a top tier asset management business by the large institutional asset consultants and the top 200 independent financial advisors Be the uncontested centre of excellence in asset management within the Group

49 STANLIB WESTERN AFRICA EASTERN AFRICA South Sudan First Asset Manager to manage money in South Sudan Nigeria Standard Bank made strategic acquisition of IBTC Chartered Bank Ghana STANLIB s recent Acquisition Uganda STANLIB was the first asset manager to set up shop in 2002 Kenya Running the largest Unit Trust in Kenya Namibia Launched the first Property Unit Trust in Namibia in 2007 Botswana Currently has the biggest unit trust platform in the country and running the biggest Money Market Fund in Botswana South Africa Largest Management Company in Africa SOUTHERN AFRICA Tanzania StSTANLIB license application Swaziland The biggest manager with local presence Lesotho STANLIB launched the first unit trust in Lesotho as part of the Lesotho Government s privatization initiative Current physical presence Markets serviced from other jurisdictions Leveraged presence

50 Multi-Specialist Franchise Model Henk Viljoen Herman van Velze Robin Eagar Keillen Ndlovu Fixed Interest Franchise Balanced and Core Equity Franchise Balanced and Value Franchise Listed Property Franchise Amelia Beattie Eben Maré Marius Oberholzer Andrew Vintcent Patrick Mamathuba Direct Property Franchise Absolute Return Franchise Unconstrained Equity Franchise Beta Quants Franchise John Mackie Henry Munzara Joao Frasco Greg Babaya Pan-Africa Franchise Research Franchise STANLIB Multi-Manager Franchise Infrastructure Franchise

51 Delivery on 2014 focus areas Create a Global distribution framework Infrastructure fund closed at over R1.2bn Develop a Solutions capability Engagement driven brand strategy Grow Third Party Business Expand Product Offering launch of Fahari REIT in Kenya - go to market, Q Continuing discussions Private Equity party Ghana deal concluded, on-boarding plans progressing Nigeria efforts continue Geographical Expansion Leverage Group Capabilities Geographical expansion Safeguard captive life business Increasing returns

52 Business review Challenges Pressure on net cash flows particularly from retail Most of the pressure has been on money market flows Historically strong(er) fixed interest capabilities faced headwinds with the change in interest rate cycle and post ABIL Investment performance has recovered the last 6 months. 3 & 5 year performance remains extremely competitive On going economic pressures meant a tougher business environment

53 Business review Opportunities Our investment process and philosophy remain consistent, while our investment teams continue to be committed and focused on the client promise Franchises remain stable Infrastructure fund s second closing at R0.6bn, bringing total committed funds to more than R1.2bn Our Africa expansion story has achieved significant milestones; acquisition in Ghana completed, incorporation of STANLIB Tanzania and STANLIB South Sudan

54 Focus areas STANLIB AFRICA

55 Focused strategy - to become the preferred destination for asset flows destined for Africa Vision for Africa Build dominance in markets we choose to operate in Leverage operating model across the continent Expand gradually into new developing countries Diversify investor and investment base for STANLIB Key risks Pension reforms that do not materialise or are slow to implement (all regions) Southern Africa - Further slow down in economic growth and money market flows (competition from banks) East Africa - Further margin compression in institutional West Africa - drive to develop the breadth and depth of capital markets and reform in the pension fund sector is slow

56 Why Africa? Sub-Saharan Africa is poised for the fastest economic growth globally, powered by; Low base Favourable demographics Resource extraction Expanding consumer markets Infrastructure development Deepening capital markets Improved macroeconomic policy and stability Forecast growth for 2015 at 5.5% Source: Knight Frank Africa Report 2013 & Business Monitor Online May

57 Established skills to capture opportunities STANLIB Direct Property Investment (SDPI) Africa Property Development Fund Capital raising gained traction two due diligences in process at the moment for $100m Very good quality portfolio of assets assembled Ring-fencing of team in process Kenya REIT (Fahari) Launch in Q1 2015, following regulatory and tax approvals delaying launch Good deals have been done to create seed portfolio - seed capital of $5m Trustee & Registrar appointments completed Liberty Property Portfolio Expected to deliver good returns in 2014 and continue to outperform its 5 year rolling benchmark Property management partnering with the retail management division of JHI Properties (Pty) Ltd STANLIB will be expanded to include the property development arm to create additional capacity 57

58 Risk level Asset value Infrastructure funds: strategy and sectors The Infrastructure franchise has a multi fund strategy driven by the investment life cycle Target project life cycle PE Funds (Fund 1 operational) Yield Fund (in development) Airports Air & ground services Commercial & parking Roads Toll roads Toll bridges Project Life Rail Concession operators Rolling stock Greenfield Construction Ramp Up Growth Mature Ports Port operations Container terminals Infrastructure equity risk premium Telecommunications Voice (mobile & fixed line) Data networks Water Waste water treatment Desalination Renewables Wind Solar Oil and Gas Pipelines Associated infrastructure Power Generation IPP s Distribution Logistics Storage Terminals 58

59 Infrastructure Private Equity Fund 1 The STANLIB Infrastructure Private Equity Fund 1 established May 2013, with second close in August 2014 and final close in November 2014 A mandate to make long-term equity and equity-related investments in infrastructure projects in sub-saharan Africa, principally in South Africa Total fund commitments c. R1.190 million from institutional investors R600 million has been committed to 5 investments to date with conditional commitments of an additional R120 million The fund has a robust pipeline and expects to invest up to 30% of its total commitments outside of South Africa Current investments are all projects located in South Africa under the Renewable Energy Independent Power Producers Programme: 37% 17% 4% 31% 11% Wind Farm Solar PV Round 1 Solar PV Round 2 Solar PV Round 2 Solar PV Round 1

60 Conclusion

61 Conclusion Pressure on net cash flows particularly from retail and in money market 3 & 5 year performance remains reasonable, but 1 year performance below expectations with a recovery in the last 6 months On going economic pressures meant a tougher business environment Current market cycle unfavourable for Bond and Listed Property sectors Infrastructure fund s total committed funds are R1.2bn Our Africa expansion story has achieved significant milestones Development of new investment capability will be a unique differentiator in delivering the Africa expansion story

62 Questions

63 Retail SA Steven Braudo

64 Retail Exco and Business statistics

65 65 Retail SA Executive Committee Steven Braudo Liberty Deputy CE BEconSc, CFA, BSc(Hons), FASSA, AMP (Harvard) Joined Liberty in 2008, to head up Individual life from MD of Investment Solutions multi manager Member of Liberty Holdings Exco and Board member 22 yrs financial services experience Michael Gondo MD Emerging Consumer Market (ECM) Joined Liberty in 2012 as ECM: Head of Finance Prior to joining Liberty, Michael worked for Old Mutual where he held various roles, including Emerging Markets Finance Lead: Mass Market Business Development. 16 years financial services experience Leon Deist IT & Operations BSc(Eng), MSc robotics and control systems Joined Liberty in 2009, to head Strategy Execution. Previously served as Enablement director at Virgin Money since 2005 and was the Outsource Exec for Arivia since yrs operational experience MD Product and Marketing BSc(Hons), FASSA Amanda Sebolai Customer Management Frank Schutte Frank spent the early years of his actuarial career in prod dev and corp valuations until he was appointed Liberty Active Stat Act. He later spearheaded the retention programme 22 yrs financial services experience BSc(Hons.)(Comp Science), MBA(e-Business), Certified Usability Analyst Joined Liberty in August 2013 Prior to Liberty developed Vodacom s Customer Ecosystem as the Executive Head of Online; Developed Customer Engagement strategies for all Standard Bank channels; Launched Flysaa.com (SAA) in 21 different countries 17 years Channel Management and Customer Experience Johan Minnie Sales & Distribution BCom (Hons), BProc, CFP Joined Liberty 15 years ago, as legal advisor After 2yrs he was transferred to field as Regional legal advisor. Following a number of promotions in 2006 he was appointed Strategist for distribution 22 yrs financial services experience

66 66 Retail SA Executive Committee John Maxwell Group Executive - DFS CA (SA) Extensive background in financial services companies in leadership positions including (Virgin Money, BOE, Peoples Bank and NBS) Joined Liberty in 2008 as MD of Individual Life 22 yrs financial services experience Andrew Lonmon-Davis Chief Financial Officer BSc (Hons), FASSA Joined Prudential out of varsity which later merged with Liberty. Served as Chief and Statutory Actuary also deputy CEOof Libfin Appointed Retail SA CFO in yrs financial services experience Nazir Goolam Hoosen Risk and Compliance BCom(Fin Acc), Forensic Auditing (Hons) Joined Liberty in 2003 as senior internal auditor, later manger. Responsible for Governance, Risk Management and Internal Controls. In 2011 appointed DD of Risk and Compliance Retail SA 17 yrs financial services experience David Lloyd MD Liberty Investments BSc (Hons) Originally recruited by Liberty in 2011 as Head of Products. Prior to joining Liberty, worked at Intersolve Ltd, an actuarial consultancy; a board member of American Express UK financial services company as its Appointed Actuary and Head of Products; and also worked as an investment banker at NatWest Markets (all in the UK). 27 years in financial services Selomane Maitisa Divisional Director: Marketing MBA; Diploma in Higher Education (UDE) Prior to joining Liberty in 2012, Selomane was running her own company, DIPARE Consultancy. Before that, Selomane was the Group Managing Director of Draftfcb South Africa Selomane sits on the boards of Voith Turbo South Africa, Phatsima Property Investments and Neema Africa Trust 27 years marketing and comms experience Giles Heeger Chief Executive: Libfin CA (SA), MSc, BBusSci Joined Liberty in 2007 as CE Libfin Worked for Standard Bank London, Ernst & Young JHB, and served as director at Standard Bank, CIB 16 yrs financial services experience 258 years combined total experience; 113 years combined Liberty experience

67 67 Retail SA: vital statistics June 2014 Customers 2,6m policies in-force (ECM: 0,5m) Approximately new policies (ECM: ) sold in the first half of 2014 Frank life licence consolidation in progress Contribution Biggest contributor to earnings 68% of Group normalised operating earnings New business margin 2.2% (excluding STANLIB) Value of new business (incl. STANLIB) R314m (1H13:R279m) People permanent employees, excl. tied agents Largest areas are Retail IT & Operations Sales and Distribution Critical skills areas Retail Actuarial Solutions; Product Development

68 2014 Business overview

69 69 Our strategic themes Product excellence Sales and distribution leadership Operational efficiency Brand trust Combined to ensure that we manage the business to model

70 70 We continue to operate in a challenging environment Increased regulatory oversight continues SAM, TCF, PoPI & RDR Tough economic conditions Relatively low interest rates; however, extremely volatile Higher food, fuel and rates with weaker Rand Pressure on consumer disposable income Changing consumer needs Increased competition Product flexibility means we are well positioned to help the consumer

71 71 Multi-channel distribution to support a multi-product suite Risk Broker 22% of new business supporting agents Investments OYLR Corporate Multiproduct Multichannel distribution Tied 30% of new business tied agents 11% increase in head-count since Dec-2013 Bancassurance 42% of new business Products sold through +600 bank branches in SA Health Direct 6% of new business ±290 call-centre agents

72 72 Direct Financial Services (DFS) Four direct brands Frank life licence in process of being rationalised Retention and collections have improved Business is performing to better than budget Leveraging the traditional business capabilities

73 73 Product innovation remains a key driver of sales Liberty Investments - working closely with LibFin to create unique products, by managing insurance risk on the balance sheet 2013 Gateway Lisp FullView investment reporting technology Evolve Hybrid (unique combination of onbalance sheet and off-balance sheet) 2014 Evolve switch product FullView enhancements and rollout Significant marketing effort behind Liberty investments: above-the-line adverts, Investment road-shows to intermediaries and customers At June 2014 Evolve and Gateway passed R10bn in AUM since their launches in October 2012 and July 2013 respectively

74 74 Liberty Investments Highlights - 10 months 2014 compared to end-october 2013 : Indexed new business (incl. LISP): R5.3 billion (up 9%) Single premium new business (incl. LISP): R18.9 billion (up 29%) Retail LISP new single premiums: R2.1 billion Approx. 42% of the money invested in Retail LISP has gone to Stanlib unit trusts investors have invested with Liberty financial advisers chose Liberty Investments for their clients Key statistics Assets under management exceed R160 billion More than investors have investments with Liberty

75 75 Life & Protection maintain quality and market share Risk revealer (u/w for accidental risk) New fixed increasing premium pattern New quotes package (tablet accessible) ECM Educator benefit HIV+ product Claims explorer interactive customer claims tool ECM extended funeral cover DFS funeral cover Items in bold indicate market first innovation

76 76 Life & Protection Highlights - 10 months 2014 compared to end-october 2013 : 2014 focussed on striking a balance between improving service delivery, building capacity and supporting sales During January to October advisors sold risk policies an increase of 5% from 2013 Each advisor on average sold 9 policies Brokers and Tied Franchise accounted for 79% of the new business (including SBFC) Ongoing good retention Key statistics 59% of the business is written in rating category 1 (i.e. to the affluent market) 57% of our new customers are male 62% of our customers elected age-rated premiums Life and Protection unit aims to maintain market leadership through product innovation and consistent service delivery

77 77 Operational excellence Focus on enhancing underwriting capabilities; started underwriting academy Continued efforts to improve client experience and service delivery via brandbuilding and driving a customer-centric culture, consequently: Net promoter score has increased from 31% in February 2014 to 40% in September 2014 Liberty recently won the Ask Afrika Orange Index Award for Service Excellence in the Longterm Insurance category Implemented a number of process efficiencies in ECM : Mobile application that enables FAs to calculate premiums Affordability checks for Government stop order business Predictive dialer system implemented in ECM Direct Within DFS, real-time scoring system implemented and has resulted in improved quality of new sales as well as customer retention Frank life licence rationalisation commenced (to be finalised 2015)

78 78 Market share at 30 June 2014 Recurring premium new business 14.3 Single premium new business Category 1 Jun-12 Jun-13 Jun-14 Category 1 Jun-12 Jun-13 Jun-14 Indexed premium new business 22.9 Movements in Liberty s market share compared to the first half of 2013: Reclassification by ASISA of large insurers now combined with small-medium insurers Marginal increase in recurring premium and single premium new business Category 1 Jun-12 Jun-13 Jun-14 Continued increase on an indexed basis Liberty has retained its position as the leading writer of new risk business in 2013 by 1 sum insured and new business annual premium Sources: SA new business market share (ASISA): January to June 2014; Swiss Re Individual Volumes Survey (August 2014)

79 79 Own your Life Rewards (OYLR) programme At 31 October 2014: principal members and total of lives registered on the programme Customers have saved R150 million since inception of the programme Second generation enhancements went live 1 October 2014; new offering provides: Introduction of a lower cost R49 p.m. Customers earn and spend Lifestyle Rands at 200 brand partners Option to buy-up a travel package and a fitness package giving customers flexibility to choose their benefits Liberty customers get additional signature benefits Early indications are that the new programme is even more popular than the original

80 Regulatory changes top of mind

81 81 FSB discussion paper on RDR RDR discussion paper issued for comment Total of 55 RDR proposals made Various points of clarity required; request for comment by 2 March 2015 Initial review and discussions with ASISA early December Phased implementation approach with structural changes in industry and regulation not expected before mid-2016, with 12-month implementation period suggested Our approach Team established across organisation to study and provide comment We will engage FSB via ASISA and directly Concerns and opportunities still in the process of being identified Many of our 2020 plans have been designed with RDR principles in mind

82 Focus areas

83 83 Focus areas Delivering the 2014 strategic priorities Consolidating initial thoughts with regards to the FSB RDR discussion paper within pre-identified streams Successful conclusion of Challenge 2014 Set 2015 strategic priorities to ensure that we are geared for delivery across: New products Sales and distribution Existing book management Operational excellence; and Brand trust

84 Conclusion

85 85 Conclusion Focus has been on managing to model Maintaining healthy margins with quality business Attracting cashflows Customer centricity is at the heart of the business

86 Questions Liberty Holdings Limited Analyst day 2014

87 Bancassurance Mukesh Mittal

88 Terms of the SBG partnership

89 89 The arrangement The bancassurance relationship is 15 years old The current agreement (signed in 2011) is evergreen with a 24 month notice period Liberty enjoys exclusive access to the SBG client base Liberty is allowed to engage in distribution agreements with other banks Insurance, health, short-term and investments business are included in the agreement. The SA agreement serves as a guide for all geographies outside South Africa The deal economics are dependant on each value chain

90 90 A detailed value chain has been designed for every acquisition model/channel, defining the roles of the respective parties Bancassurance Value Chain Manufacturing Distribution Fulfilment Customer management Distribution Manufacturing Fulfillment (Sales & Service) Customer Management Business Category Brandin g Marketin g Client Databas e and Access Custom er Value Prop Transactional / Infrastructur e Lead Generation Databas e campaig n leads Sales Process Sales Tools Channel Sales Support Technic al Product Design Tech Product (incl Compliance) Manufacturi ng Statutor y Reportin g Actuaria l / Asset Management & Asset Consulting Policy App Form Completion Front End Capture System Policy Loading (User) Policy Admin System (back end system) Actual Fulfill / Policy Issued Policy Maintenance Benefits Forensic / Claims Management Handling Premiu m Collectio n Premiu m Collectio n: Managin g Debtor's Book Custom er Relation -ship Management Client Retentio n Embedded S S S S S S S S S L L L L S S S S S S S S S S S S Transactional S S S S S S S L/S L L L L L S/L L S/L L L/S L L L/S S L L L Advisory L L S S S S S L L L L L L S L S L L L L L S L S/L S/L Specialist L L S L S S L L L L L L L L L L L L L L L S L L L/S

91 91 Terms of the Bancassurance agreement The current profit share methodology: South Africa Africa Liberty SB Liberty SB Embedded Transactional direct Transactional in-branch consultant and advisory consultant Advisory planner Life STANLIB For Africa, only the profit share splits for the embedded acquisition model differ, the rest mirror that of SA Specialist 75 25

92 92 Benefits of the partnership a strategic focus for Liberty Mature contract with defined terms across all business and product lines Significant opportunities are still to be unlocked in the corporate client space Cross selling represents additional opportunities Preferred partner on the continent Focus on Business and Corporate clients in Africa Cost synergies Significant cost savings from deal and transactional values, leveraging of synergistic initiatives and cross provisioning of technology services African expansion enabled by less capital intense business strategies Liberty and Standard Bank Standard Bank without Liberty Leverage group resources and technology to gain further advantage

93 2014 Business overview

94 94 Business overview Geographic Expansion Successfully launched Lifeway Insurance Zambia Approval obtained to enter Botswana Short Term Insurance and Lesotho Life Established a working relationship with the Stanbic China desk in Kenya to source business from Chinese companies in Africa Embedded channel gross written premiums up, despite significant slowdown in banking consumer credit advances Advisory channel positive growth in single premium investment business, corporate new business and VoNB Transactional channel policies sold > STANLIB successful expansion into Corporate Banking with growth in new business and improved margins as bank clients move away from money market

95 95 Challenges faced during 2014 Embedded Channel (Funeral and Credit Life) Price capping of the unsecured lending credit life product impacted premium income Slow down in credit extension to low and middle income market segments has negatively impacted credit life value and volume Rest of Africa Lower number of institutional leads received from the bank and conversion rates below par Delays in the launch of a transaction channel and SME product Value of new business lower than prior year due to high costs without associated pickup in sales STANLIB Change in interest rate cycle impacted net inflows in income and property funds which is a large part of the bank client base

96 Focus areas

97 97 Focus areas Geographic Expansion Complete due diligence investigations in: - Namibia - Tanzania - Uganda - Malawi Implement the transactional channel and Liberty Online in African territories Optimise operational structure and alignment with SBG Foster close working relationship with SBG on regulatory developments Consumer Credit Insurance Review Retail Distribution Review POPI TCF

98 Conclusion

99 99 Conclusion Joint management structure working well Liberty now represented on the SBG Wealth Exco Financial performance of the arrangement is delivering in line with expectation The transactional channel (est. in 2012) is starting to contribute meaningfully to VoNB Liberty is continuously seeking to better align with SBG in terms of: Customer strategy Africa expansion plans Organisational design / business integration Technology and digital strategy A strategic objective is to protect Liberty s status as the preferred Bancassurance partner and be more relevant to SBG The long term retention of the partnership is an organisational imperative across Liberty

100 Questions Liberty Holdings Limited Analyst day 2014

101 Stuart Wenman Liberty Africa Insurance

102 102 The realities of African markets. Characteristics of our markets: Very low insurance penetration due to accessibility and affordability Existing market is largely an institutional market Short term insurance dominated lack of trust Pension administration dominated by a few, but scale and skills are a challenge Pricing / competition is cut throat Market will grow with foreign investment Informal & government employment Lack of awareness / trust in the industry Lack of social security Sense of community China is a key investor Africa is still seen as unfamiliar for foreign players and corporates How is the landscape changing: Emerging growth opportunity in SME & individual markets Urbanisation Breakdown of community Growing middle class Technology Smart phones = internet access Mobile money Regulation Reforms & Compulsory schemes Risk based capital Bancassurance Increased competition local, international & non traditional Foreign investment & aid These realities create an opportunity

103 Africa Insurance Business Model

104 104 Key principles embedded in the Liberty Africa Insurance Model Simplicity 80% standardisation, 20% localisation to create scale across geographies Minimise fixed cost infrastructure and partner in order to create an affordable entry price point Enable experimentation to create access Run the business locally

105 105 Our Insurance Business Model Channel Standard Bank Brokers Affinity Partners Own Sales Force Institutional Business Group Risk Tier I Brokers Direct Bulk Retail business (admin done by partner; premium collection may be done by partner) Embedded & Transactional Tier II Brokers e.g. MNO s Churches, Banks Agents/ Franchises Retail Admin and premium collection done by Liberty Kenya Common Front End Premium Collection capability Common Admin Platform Liberty Branded Products Partner Branded Products (Ingredient brand)

106 106 Competitive differentiators for Liberty Africa Insurance Standard Bank Pan African presence Business in a box Team approach to leverage opportunities & learnings Client Brand Scalability Multi-national & Distribution Services e.g. IT, Payroll HR Consistency of experience Simplify Africa across geography Low cost regional clients & partners Health / Blue Relationships Full product set Operational risk management Africa wide incentive IBTC as a major shareholder Rapid expansion Diversity of views and experiences

107 2014 Business overview

108 108 Business overview Product Boresha Maisha Pension product in Kenya Individual Life product suite: Simple Life, Platinum Life, Critical Illness and Disability / Impairment range of products Liberty Blue o o o o Bancassurance Continued execution of strategy to move underwriting to Liberty insurance licenses Growth in lives with strong renewal rate Credit Loss Ratio (CLR) at target New SME and Individual products Transactional channel being launched in Southern Africa China strategy being implemented in Kenya Other channels New global broker partnerships New affinity partners e.g. KWFT, SwaziPost, BOMAID Franchise model developed to enable affinities and worksite marketing

109 109 Business overview cont. CFC Life successfully rebranded to Liberty Life Kenya Capabilities - Liberty Online live - New short term system implemented - Debit order / stop order / mobile money capabilities and sms communication implemented - E-claiming (Zimbabwe) and SMART (Kenya) implemented for Health West Africa expansion Other expansion initiatives New life company operational in Zambia S52 process for two new companies Number of due diligences currently underway People Significant investment in skills and expertise of people to enable growth

110 110 Opportunities with challenges Small business challenges Claims experience volatile Concentration risk Skills Competitor pricing Understanding the operating environment Expansion initiatives Time to execute Price of deals

111 Focus areas

112 112 Focus areas Product Bulk retail Hospital Cash Plan and Education Plan Investigating Annuities and Pension Fund Admin Channel expansion Transactional and institutional Bancassurance Affinity partnerships Worksite marketing Business synergies in Kenya / East Africa Geographic expansion

113 Conclusion

114 114 Conclusion Exciting growth opportunities remain Standard Bank is a key competitive differentiator Business strategy is a less capital intense one Targeting presence to 16 countries life and short term But don t underestimate: The local mind set required The learnings you will make Liberty and Standard Bank Standard Bank without Liberty

115 Questions Liberty Holdings Limited Analyst day 2014

116 116 Thank You