Schedule LiveUpdate from SEPM failes with 1813 error

Schedule LiveUpdates from my SEPM server fail with the following error:

"EVENT - SERVER SELECTION FAILED EVENT - LiveUpdate failed to connect to server liveupdate.symantecliveupdate.com at path  via a HTTP connection. The server connection attempt failed with a return code of 1813, Proxy or host authorization is incorrect"

When I execute LUall.exe manually it is successful. We are using a web proxy server and the credentials specified are correct.

Environment Details:

SEPM Host is Server 2008 R2 Enterprise

SEP Version 12.1.671.4971

Full log file attached.