One-on-One Investor Conference

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Merrill Lynch
One-on-One Investor Conference
March 2002
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Who we are

• NAC is the listed holding company of the
  Metropolitan group, previously listed as Metlife
• Metlife has a history of more than 100 years in
  operation
• 1986 Metlife lists on JSE (South Africa)
• 1993 Metlife in the first real black empowerment
  transaction in South Africa with NAIL
• 1995 Metropolitan Health is launched
• 1995 Metropolitan Employee Benefits is launched
• 1996 Metropolitan Namibia is launched
• 1996 Metropolitan Botswana is launched
• 1998 Metropolitan acquires the CU Life group of
  companies
• 1999 Metropolitan acquires the healthcare
  administration businesses of Bankmed
• 2001 New Africa Capital financial services group
  is listed and unbundled from NAIL

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Legal structure
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Business concept

• World-class Africa-based business
• providing aspirational individuals
• with customised financial services
• that protect and grow their assets

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Market segmentation FSMs(financial
sophistication measures)
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Market position

• Aim to dominate the low income sector (FSM 2,3,4)
  
• Aim to be significant player (no 2) in the middle
  income market (FSM 4 5)
• Distribute niche commodity products in the
  middle/upper income sector (FSM 6 7)

Note FSMs 2 - 5 represent over 80 of the
economically active people in Southern Africa
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The Metropolitan brand

• Third strongest insurance brand in SA in terms of
  awareness nationally
• Financial sophistication measures market
  segmentation
• Identified current financial behaviour, financial
  aspirations, channel and service requirements at
  each FSM level
• Alignment of products, distribution channels and
  service models to FSMs

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(No Transcript)
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Market share

• 9 of the SA individual life recurring premium
  market
• 3 of the SA individual life single premium
  market
• 3 of the SA employee benefits market - with
  significant potential for growth
• 15 of the SA medical scheme market
• 15 of the Namibian life insurance market
• 25 of the Botswana life insurance market

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Strategic projects

• Re-modelling of life business
• Established a new broker distribution channel -
  MARS
• Established an empowerment barometer
• Capital management

continued ...
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Re-modelling of life business
Strategic projects continued ...

• 16 offices closed, 130 positions redundant
• Call centres in Cape Town and Johannesburg
  expanded
• Joint ventures with Post Office and retail
  outlets
• Direct sales staff reduced from 2 800 to 1 300
• Distribution channels aligned to FSM market
  segments
• Single client data base established for over 3
  million clients, linked to call centre
• Geared up for new market regulations PPR and FAIS
• New business focus on Gauteng province

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New broker distribution channel - MARS
Strategic projects continued ...

• Metropolitan Advisory and Retail Services
• Strategic plan determined July 2001
• Operational infrastructure established August
  2001
• 118 broker consultants appointed
• Products selected from group training given
• Established 1500 broker contracts
• Target break-even within 12 months

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Empowerment barometer
Strategic projects continued ...

• Comprehensive measure of empowerment
• Wide consultation and support
• User-friendly computer based analysis
• Pillars of measurement
• ownership
• employment equity
• skills development
• procurement
• social involvement

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Capital management
Strategic projects continued ...
30 June 2001

• Total assets R31bn
• Total liabilities R25bn
• Total surplus R6bn
• New structure allows for easier and more
  transparent capital management and disclosure
• Actual capital available for expansion R2bn
  (held mainly in large listed equities)
• R280m already used for a share buy-back
• CAR cover of 3.8 times

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Main drivers of headline earnings

• 6 mths to 15 mths to
• June 2001 Dec 2000
• Metropolitan Life 45 42
• Metropolitan Employee Benefits 19 14
• Metropolitan Health Group 11 2
• Metropolitan Asset Managers 3 2
• Metropolitan Odyssey 3 1
• Commercial Union Life 7 9
• Shareholders funds 18 28

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Strengths

• Strong brand and business in core markets
• Established asset management team
• Market segmentation and distribution
• Profitably managing smoothed bonus business
• Strong corporate governance
• Leaders in AIDS research risk management
• Diversified sources of income
• Strong positive revenue inflow

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Smoothed bonus business

• High demand for this product set
• Tight asset / liability management
• Asset portfolios backing reserves are
• clearly ring-fenced and allocated
• balanced and diversified
• not containing any group strategic investments
• No shareholder subsidisation of bonus rates
• Clearly documented internal governance

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Threats

• Persal
• HIV/AIDS
• Cost management
• Pressure on disposable income in low to middle
  income market

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Persal update

• Persal is governments employee payroll deduction
  system
• Metropolitan has approximately 400 000 Persal
  customers with
• 605 000 policies
• Persal traditionally provided 40 of new business
• From October 2000 to end June 2001 no new
  business was allowed to be submitted to Persal
• From July 2001, new Persal insurance deductions
  limited to 15 of an employees basic salary
• 140 000 clients were over new limits - of these
  clients about 40 of portfolios have been
  rationalised to date

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HIV/AIDS

• Metropolitan/Doyle-model widely used to forecast
  impact of HIV/AIDS on business and in the
  workplace
• Metropolitan Employee Benefits consults to
  companies with regard to impact on structuring of
  EB benefits
• Mortality experience is worsening due to AIDS,
  but claims experience is in line with our
  pricing/forecasts
• Rate of new HIV infections in South Africa has
  probably peaked, but prevalence is still
  increasing
• Estimated 20 of all economically active people
  in SA are HIV infected - large regional variations

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Expense management initiatives

• Balanced approach - focus on costs and growth
• Target is to match actual costs to available cost
  loadings within 12 months
• Targeted actions to achieve required reduction in
  cost levels
• Continue re-modelling and alignment of retail
  businesses
• Significant focus on improving persistency
• Manage product portfolio and margins

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Opportunities

• Middle income market is THE growth market
• Tax cuts in new budget year
• Target growth in the Gauteng market
• Expand further into Africa
• Continue to grow EB, health and asset management
  businesses based on our successful track record
  and empowerment credentials

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Targets

• Target share price at a premium to embedded value
  by
• Increasing individual life new business profit
  margins to 15 on a monthly basis by end of 2002
• Increasing market share of recurring premium
  business from 9 to 12 by end 2003
• Growing embedded value per share
• Continuing share buy-back to enhance shareholder
  value
• Generating ROEV that exceeds cost of capital
• Increasing contact with institutional
  shareholders, both local and international

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Additional information
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How do we operate
Distribution channels Product houses
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Distribution channels and target markets

• FSMs
• Metropolitan Life Direct Writers - middle and
  lower
• income markets 3 4
• Metropolitan Life
• General Intermediary Channel - middle income
  market 3 4
• MARS - middle and upper income
• markets 5,6 7
• Metropolitan Group Schemes - lower income
  market 2,3,4 5
• Metropolitan Direct - middle income market
  4
• Metropolitan Employee Benefits - corporate
  business in
• private, government and
• semi-government institutions n/a
• Metropolitan Namibia - all markets in region
• Metropolitan Botswana - all markets in region

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Volume of shares traded
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People
NAC scoreboard
Creating a NAC empowerment index

• Empowerment

• Establish balanced scorecard-based reward systems
• share incentive schemes
• profit sharing

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Business process objectives
NAC scoreboard
Strategic initiatives
Align products, distribution and marketing with
target users

• Improve market research and segmentation
• Improve service levels and quality

Applied FSM research to segment the market
Client service remodelling
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Customer objectives
NAC scoreboard
Proactively engage government

• Increase market share in middle income Gauteng
  market
• Increase share of government business
• Increase business from alternative channels
• Increase assets under management

Project Goldrush
Establish a CRM strategy
Establish a PRM strategy
Brand and communications strategy
Establish broker channel e-business function
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Financial objectives
NAC scoreboard

• Grow shareholder value
• shareholders operational profit
• embedded value growth
• Achieve target returns on capital employed
• Produce top quartile investment returns
• Achieve continuous improvement in expense
  productivity

Balanced scorecard measurement
Capital management strategy
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Financial highlights
As at 30 June 2001

• Growth in embedded value
• Continued increase in assets under management
• Growth in total premium income
• Positive net cash flows
• Sustained growth in EB Health

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Funds received from clients
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Management diversity
31 December 2001
The designated group includes blacks,
coloureds, Indians, white females and the disabled
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Shareholder profile
Net of 28 million treasury shares acquired for
R234 million