liberty life and capital alliance integration update myles ruck, rex tomlinson, ian kirk, deon de...
TRANSCRIPT
Liberty Life and Capital Alliance integration update
Myles Ruck, Rex Tomlinson, Ian Kirk, Deon de Klerk
23 November 2005
Agenda
Introduction and overall update
Marketing and Distribution (MaD)
Operations and IT
Summary and conclusions
Group Support Services
Financial impact
Introduction and overall updateFrom here …
LC B
LPB
Consultancy
Support services
Liberty G roup Lim ited
Individual Life
Bancassurance
Project Khula
Support services
Liberty Active
Individual Life
Group Life
Distribution Partners
Support services
CAH L
Insurance operations
Liberty Properties
Liberty Erm itage
Liberty Healthcare
Other operations
LC B
LPB
Consultancy
Support services
Liberty G roup Lim ited
Individual Life
Bancassurance
Project Khula
Support services
Liberty Active
Individual Life
Group Life
Distribution Partners
Support services
CAH L
Insurance operations
Liberty Properties
Liberty Erm itage
Liberty Healthcare
Other operations
Introduction and overall updateTo here …
Stanlib
Properties
Ermitage
Distribution
Products
Marketing
Strategic investments
Support services
Communications
Corporate benefits
Individual life
CAL group risk
PrefSure
Asset Management
Marketing and Distribution
Operations
Other
Group Support Services
Introduction and overall updateWhat we’re trying to do
Shortcomings of the old structure
• Processes evolved differently leading to inefficiency
• Many different products and services
• Slow customer response times
• Duplication of structures leading to additional costs
• Varying and different customer contact points
• Potentially higher operational risk environment
Introduction and overall updateWhat we’re trying to do
Benefits of the new structure
• Improved efficiency
• Lower unit costs
• Fewer customer service contact points
• Improved product-to-market time
• Lower operational risk
• Improved staff morale post restructure
• Enhanced embedded value
Introduction and overall updateOur objectives
• Leading SA life assurer with a strong market share in individual life and group
business
• Offer a comprehensive and complementary range of “value for money” long
term insurance products and services
• Further enhance Liberty Life’s sales and distribution capability
• Be the leading service provider in our industry
Introduction and overall updateOur objectives (continued)
• Develop an effective and efficient administration capability supporting the
- Organic growth strategy in SA, and
- Closed book integration strategy locally and internationally
• Create a customer centric business through the implementation of standard
platforms
• New business acquisition cost and policy maintenance costs that are the
lowest comparable in our industry
• A definite culture that embraces the best of Liberty Life and CAL
Introduction and overall updateOur objectives (continued)
• Attract, retain and develop our people to be the envy of other players in our
market
• Leading retail brand in SA for risk and investment products
• Preserve and enhance CAL’s ability to continue pursuing its acquisition
growth strategy
• Respected by our peers, customers and market commentators
• Through centres of excellence and shared services, ensure Group Support
Services deliver cost effective and appropriate support to the business
Introduction and overall updateOur top priorities
• Customer service
• Our people - performance management, attracting and retaining the right people, employment equity balance and developing our leadership team
• Implementing a single IT platform
• Keeping our business simple and easy to implement
• Attaining the moral high ground
Introduction and overall updateOur top priorities (continued)
• Wake the place up - get positive energy flowing
• Leading product innovators - easy for policyholders to understand, straight forward to administer, not full of exceptions
• Work better together as a team – one share price, no silos
• Provide better value to our policyholders – reduced costs, improved service and efficiency, more appropriate products
Introduction and overall updateRestructure plan
• Phase One
- Short to medium term projects to deliver quick wins (to end 2006)
» Rationalise and consolidate the product offerings
» Remove duplication of roles and structures
» Improve process effectiveness, efficiency and management control
» Increase and standardise functionality of the new business and servicing “front-end” environment
» Initial systems conversion projects which reduce costs
Introduction and overall updateRestructure plan (continued)
• Phase Two
- Medium to long term projects to deliver strategic objectives (to end 2008)
» Conversion of all Individual and Group Business to a common platform
Introduction and overall updateProgress made so far
• Overall restructuring into MaD, Operations and GSS completed
• Many high level people issues resolved, but more to follow
• Office relocations completed
• Initial projects within each division commenced
• Encouraging progress so far in most areas
• Budgets and plans completed in line with the new structure
Agenda
Introduction and overall update
Marketing and Distribution (MaD)
Operations and IT
Summary and conclusions
Group Support Services
2006 Budget
MaDRestructure objectives
• One face of Liberty Life to market
• Eliminate waste and duplication
• Simplicity and speed
• Distribution which leverages current intermediary model, but looks to new channels
• Streamline product development and launch process
• Market channel focus
MaDThe Historical Silo Model
Group Product Development
Group Brand Marketing
Consultancy
(Assisted)
LCB
LPB
LIBERTY ACTIVE
CAL
CALL CENTRE
HEALTHCARE
(Assisted)
Product
Development
Marketing
Distribution
MaDConceptual Framework
Risk
Investment
Group
Distributio
nMarketSegments
Pro
du
ct I
nn
ova
tio
nan
d T
ech
no
log
y
IFA
Tied
Direct and Partners
Corporate
Wealth
Complex
ELM
Embedded
MaDDistribution
Distribution channels
Business development consultants
Market segments
Corporate Wealth Complex Emerging Mass
Brand
Communication
MaD Distribution: Operational Drivers
• Restructure group distribution model to improve both it’s strategic positioning and effectiveness, whilst structurally shrinking our cost base
• Leveraging our current intermediary model, while establishing and growing new channels
MaDMarketing and Communication
Distribution channels
Business development consultants
Market segments
Corporate Wealth Complex Emerging Mass
Brand
Communication
Marketing and Communication: Operational Drivers
• Build the Liberty Life brand through a consistent experience of the brand at all touch points, that clearly sets us apart from our competitors
• Through a greater understanding of our markets and why people buy, drive a market channel focus
MaDProduct Innovation
Operations
Marketing Segments
Technology
Support Services
R &
D, P
artn
ers
Ris
k
Inve
stm
ents
Gro
up S
chem
es
Product Innovation: Operational Drivers
• Ensure that our products, while addressing specific market opportunities, are trusted and transparent in the generation of value for both Liberty Life, and the policyholder
Agenda
Introduction and overall update
Marketing and Distribution (MaD)
Operations and IT
Summary and conclusions
Group Support Services
2006 Budget
Restructuring progress (1 of 3)
Operations
• Enhanced the following
- Management information
– Simplification of reporting and revised monitoring (end to end)
– Changing escalation procedures to ensure rapid action
- Customer service levels
- Reduction in management expenditure (set benchmarks for renewal cost)
- Start of improvement in productivity levels
- Development of metrics to benchmark operational effectiveness
Restructuring progress (2 of 3)
Operations
• Currently developing high performance work teams
- Focus on performance management
• Simplification of processes, back to basics and installing discipline
• Detailed plans developed for projects to improve processes and operational effectiveness
- Several projects already in progress to improve processes and management control
• Teambuilding exercises for management and staff, alignment, culture
Restructuring progress (3 of 3)
Operations
• Using “buddy system” whereby team members will be multi-skilled on all products and services
- Complemented by formal training
- Call centre cross-skilling programme completed
• Analysis of major processes has been completed and changes will be made to improve their effectiveness and efficiency
• Customer service levels will be improved to adhere to requirements and be the “best service provider” in the South African insurance industry
• Communication
- Newsletters developed to maintain communication to all management and staff
• The major integration and restructuring to date has been in Individual Life Ops
Operations projects started (1 of 2)
• Conversion of all Individual Life and Group business to Compass
- Phased conversion of all policies from other systems
– Liberty Life (LPB & LCB), Liberty Active, CAL (IL & Group Risk)– Peripheral systems included– Expected completion 2008
• Front end scanning, imaging and workflow combined with improved management control systems
- Three phases
– Phase 1 – end 2005– Phases 2 and 3 – 2006
- To capture ALL requests from clients using various media types (telephone, fax, e-mail, document, electronic) into a central repository for processing using workflow and to enable improved management control and increased productivity
• Improve the effectiveness and efficiency of all major business processes
- Use best of Liberty, Liberty Active and CAL
Operations projects started (2 of 2)
• Reengineering of the Call Centre processes and technology
- Development of the most effective and efficient processes
– Q2 2006- Standardisation of technology, migrating from current systems used by Liberty Life and
CAL
– Q3/4 2006
• Enhance the functionality and user friendliness of the single front-end environment
- Increase functionality of Blueprint Online
- Retire Blueprint Mobile
- Once completed will provide “breathing space” for back-end conversion to Compass
• Standardised values calculations for communication and publication to policyholders and intermediaries
- Requirements and specifications developed
- Development in progress
• Policyholder communication
- Requirements and specifications being developed
IT Update
Current issues
• Multiple business systems, entry points, versions of data and business rules, technologies, platforms and associated skill sets
Future architectural principles
• Any where, any time, any place browser based (thin client)
• Single roles based front-end
• Single product engine and processing layer for all classes of business
• Standard platforms, interfaces and tools
Strategic platform
• Adopt Compass as the strategic platform for all individual life and group business
Future IT Architecture
Commissions (Policy Level)
Compass(All classes of Business)
Sales Reward System (Intermediary Level)
Processing Layer and Underwriting
Cashiering Payments Tax Reassurance
“Blueprint Online”Workflow, Enquiries, Quotes, New Business and Servicing
Contact Centre / IVR www.Liberty.co.za
SAP (HR, Finance, BWH, Procurement and Properties)
Top priorities and actions for 2006
1. Operations Support
• Implement Compass as the single platform for all product lines and the conversion to Compass of all current Individual Life and Group Risk business
• Implementation of the “POT” processes and procedures to support IL Operations Phase 1 re-engineering
2. Marketing and Distribution (MaD) Support
• Support launch of new products and cater for PFA and compliance requirements
• Further enhancements to Sales Reward System (SRS) to support planned changes to intermediary remuneration
3. Cost management
• To ensure Liberty has the lowest possible business acquisition and policy maintenance costs in our industry
• To ensure the benefits contained in project business cases are driven through to realisation
- Conversion to Compass and migration off the mainframe are the two major projects which will derive significant benefit
Main IT Integration Projects
Phase I - Short to medium term Possible schedule
• Scan/image, workflow and MCS for Ops (Phase 1) End 2005
• CAL and LA Annuities conversion to Liberty Annuities March 2006
• LCB legacy conversion to Compass (Group business) March 2006
• Product rationalisation for MaD March 2006
• Scan/image, workflow and MCS for Ops (Phase 2) Mid 2006
• LA to CAL Individual Q2 2006
• Call centre consolidated platform Q3/4 2006
Phase II - Longer term Possible schedule
• Scan/image, workflow and MCS for Ops (Phase 3) End 2006
• LPB Annuities to Compass End 2006
• CAL Group Risk conversion to Compass (Group business) March 2007
- From March 2006 schemes converted on renewal date
• Liberty Individual business (LPB) to Compass End 2007
• CAL Individual business to Compass Mid/End 2008
• Retire mainframe environment End 2009
Agenda
Introduction and overall update
Marketing and Distribution (MaD)
Operations and IT
Summary and conclusions
Group Support Services
2006 Budget
Group Support ServicesProgress
• Restructure into single Group Support Services completed, including
- Financial
- Actuarial
- Risk and Compliance
- Human Resources
- Legal
• Removal of duplication caused by the integration of all four companies support services – in progress
• Office moves completed to Liberty Life Centre
• Working with MaD and Ops to ensure financial control is maintained
• Finance and Actuarial process re-engineering underway
Agenda
Introduction and overall update
Marketing and Distribution (MaD)
Operations and IT
Summary and conclusions
Group Support Services
Financial implications
Financial implications of the restructuring and integration
Cost of control Total
Capital Alliance purchase consideration 3 048
Less shareholders’ assets acquired (Nav) -1 791
Less value of in-force acquired (Vif) -945
Goodwill (Cost of control) 312
Note: Goodwill was impaired at 30 June 2005. This cost has therefore already been taken in the embedded value per share.
Financial implicationsCosts (continued)
Integration costs 2005 2006 2007 Total
Retrenchments and other staff costs 50 20 - 70
Systems and processes 100 150 70 320
Infrastructure and office relocations 50 20 - 70
Consolidation of marketing and distribution
20 20 - 40
Total estimated costs (before tax) 220 210 70 500
Note: We would have spent +-R350m (or potentially more) on a restructuring of the business regardless of the CAL acquisition
Financial implicationsSavings
Potential to reduce annual cost base going forward - Rm 2007/ 2008
Individual life maintenance costs 120
Corporate benefits maintenance costs 30
Acquisition costs 150
Total (before tax) 300
Note: This delivers an estimated after tax capitalised benefit of +-R1bn
Financial implicationsSummary
Value enhancement - Rm
Capitalised benefit of reducing annual cost base by R300m 1 000
Less restructuring and integration costs net of tax -324
Net embedded value enhancement 676
Potential net embedded value per share enhancement R2,00 to R2,50
Notes: The net embedded value enhancement is more than twice the value of the control premium paid.
The value of Capital Alliance new business is not taken into account in the calculation.
No attempt has been made to place values on efficiency, customer servicing ability, the ability to bring product to market faster and a lower operational risk environment.
Agenda
Introduction and overall update
Marketing and Distribution (MaD)
Operations and IT
Summary and conclusions
Group Support Services
2006 Budget
Summary and Conclusions
• The operating environment remains challenging
• The group’s restructuring and integration is on track
• A net value enhancement of between R2,00 and R2,50 per share is expected once the process has been completed
- Excludes any value of new business from CAHL
- Excludes benefits not quantified such as efficiency, customer servicing ability, etc.