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CLIENTELE LIMITED - Condensed Group Results For The Six Months Ended 31 December 2014

Release Date: 16/02/2015 17:00
Code(s): CLI     PDF:  
Wrap Text
Condensed  Group Results For The Six Months Ended 31 December 2014

Clientèle Limited
(Registration number 2007/023806/06)
Share code: CLI ISIN: ZAE000117438

Condensed Group results for the six months ended 31 December 2014

Highlights

Value of New Business increased by 23% to R400,5 million

Annualised Recurring Return on Embedded Value of 33%

Recurring Embedded Value Earnings increased by 50% to R603,7 million

Annualised return on average shareholders' interest of 62%

Net insurance premiums increased by 17% to R742,1 million

Diluted headline earnings per share increased by 1% to 54,99 cents

Comments

Introduction

The Board is pleased to announce that the Clientèle Group ("the Group") has achieved good operating results for the period, despite the ongoing tough economic environment. Investment returns,
although being in line with the market, are lower than the comparative period. The strong production achieved during the 2014 financial year has continued during this period whilst the quality of
new business written has been maintained. This is the result of the Group's continued focus on ingraining sustainability practices and principles and maintaining strict controls.

This has translated into a material increase in the Value of New Business ("VNB") of 23% to a record level of R400,5 million (2013: R325,2 million), and a 50% increase in Recurring Embedded
Value Earnings to R603,7 million (2013: R403,5 million). New Business profit margins have also improved to 29,7% (2013: 27,2%) as a result of continued cost control, strong production of good
quality new business and an increase in average premiums.

Profit before tax increased by 3% to R251,5 million (2013: R244,3 million) over the comparative period, however after reversing the once-off discretionary margin release of R49,9 million in the
prior period, profit before tax increases by 29%.

Headline earnings for the Group increased by 1% to R181,3 million (2013: R179,4 million). This is a commendable achievement considering the fact that headline earnings for the prior period were
positively impacted by the once-off release of the discretionary margin of R35,9 million (after tax).

This performance resulted in the Group achieving an annualised return on average shareholders' interests of 62%.

Operating Results

Group Statement of Comprehensive Income

Diluted headline earnings per share for the period increased by 1% to 54,99 cents (2013: 54,62 cents), despite the once-off release of the discretionary margin in the prior period.

Net insurance premium revenue increased by 17% to R742,1 million (2013: R636,9 million), on the back of the ongoing increase in the production of good quality business and improved withdrawal
experience.

Despite the increase in marketing and other acquisition costs incurred to support the material VNB growth, the increase in operating expenses has been restricted to 8% in contrast to the 17%
increase in net insurance premiums mentioned above.

The Group follows a conservative accounting practice of eliminating negative reserves (a discretionary margin). As acquisition costs are expensed upfront, this defers the recovery of these costs
and the profits over the policy life. The present value of this discretionary margin amounts to R2,43 billion (2013: R2,05 billion).

Group Embedded Value

The sustained momentum in the production of good quality business has driven the 23% increase in the VNB to the record level of R400,5 million (2013: R325,2 million). The Recurring Embedded
Value Earnings of R603,7 million translates into an annualised Recurring Return on Embedded Value ("ROEV") of 33% (2013: 24%) and the profit margin on New Business has increased to 29,7%
(2013: 27,2%). The Group Embedded Value ("EV") has increased by 17% to R4,26 billion (2013: R3,64 billion). Withdrawal experience on new business as well as existing business was better
than assumption and an improvement on the prior period resulting in a withdrawal profit of R34,6 million (2013: R3,8 million).

The Risk Discount Rate ("RDR"), has been set at 11,2% (2013: 10,7%). The calculation is comprehensively explained in the Group EV results section of the results and a sensitivity analysis is also
provided.

Segment Results

Clientèle Life - Long-term insurance

Clientèle Life's Long-term insurance segment remains the major contributor to Group performance. It accounts for 86% (2013: 86%) or R343,6 million (2013: R280,9 million) of the Group's R400,5
million of VNB and recorded Recurring EV Earnings of R511,4 million (2013: R328,1 million) for the period. The segment generated R153,9 million (2013: R157,0 million) net profit for the period, a
decrease of 2%, nevertheless a pleasing result given the once-off positive after tax impact of R35,9 million in the comparative period resulting from the release of the discretionary margin.

Clientèle Life - Investment contracts

The Investment Contracts operating segment reported a R4,5 million net profit for the period (2013: R3,3 million). This should be viewed in conjunction with the R18,4 million (2013: R24,4 million)
of deferred profits included in the Statement of Financial Position.

Clientèle General Insurance (Clientèle Legal) - Short-term insurance

Clientèle Legal accounts for R55,0 million (2013: R43,5 million) of the Group's VNB for the period, and recorded Recurring EV Earnings of R95,2 million (2013: R66,8 million). The segment generated
a 17% increase in net profit for the period to R21,2 million (2013: R18,1 million).

Prospects

The Board's focus for the future will remain on building on the positive momentum that has been achieved in the production of good quality business and on customer service. In addition, the
Board is committed to providing products that are relevant and meet the individual policyholders' needs and delivering these to the market conveniently and efficiently as well as creating and
nurturing mutually beneficial partnerships with all its stakeholders that add value on a sustainable basis.

By order of the Board

G Q Routledge    B W Reekie
Chairman         Managing Director

Johannesburg
16 February 2015


UNAUDITED
Condensed Group Statement of Comprehensive Income

                                                                                                                      Six months                           Audited
                                                                                                                         ended                    %     Year ended
                                                                                                                      31 December            Change        30 June
(R'000's)                                                                                                        2014            2013                         2014

Revenue
Insurance premium revenue                                                                                     798 302         684 364                    1 406 175
Reinsurance premiums                                                                                          (56 192)        (47 432)                    (100 005)

Net insurance premiums                                                                                        742 110         636 932            17      1 306 170
Other income                                                                                                   88 952          88 277                      171 194
Interest income                                                                                                16 123          30 586                       53 169
Fair value adjustment to financial
assets at fair value through profit or loss                                                                    74 654         127 119                      181 556

Net income                                                                                                    921 839         882 914                    1 712 089
Net insurance benefits and claims                                                                            (145 896)       (156 326)                    (311 102)
Decrease in policyholder liabilities under insurance contracts after discretionary margin release              16 789          34 092                       42 727

Decrease/(increase) in policyholder liabilities under insurance contracts before discretionary
margin release                                                                                                 16 789         (15 774)                      (7 139)
Once-off release of discretionary margin                                                                                       49 866                       49 866

Decrease in reinsurance assets                                                                                    (74)            (38)                         (95)
Fair value adjustment to financial liabilities at fair value through profit or loss - investment contracts    (42 492)        (35 636)                     (49 184)
Interest expense                                                                                               (2 546)         (7 466)                     (12 393)
Impairment of advances                                                                                         (5 889)        (18 060)                     (31 719)
Operating expenses                                                                                           (490 187)       (455 183)            8       (927 937)

Profit before tax                                                                                             251 544         244 297             3        422 386
Tax                                                                                                           (69 318)        (64 325)            8       (115 870)

Net profit for the period                                                                                     182 226         179 972             1        306 516

Attributable to:
Non-controlling interest
- ordinary shareholders                                                                                           790             437                       (1 295)
Equity holders of the Group
- ordinary shareholders                                                                                       181 436         179 535             1        307 811

Net profit for the period                                                                                     182 226         179 972             1        306 516

Other comprehensive income:
Gains on property revaluation                                                                                                                               20 296
Income tax relating to gains on property revaluation                                                                                                        (5 014)

Other comprehensive income for the period - net of tax                                                              -               -                       15 282

Total comprehensive income for the period                                                                     182 226         179 972             1        321 798

Total comprehensive income attributable to:
Non-controlling interest
- ordinary shareholders                                                                                           790             437                       (1 295)
Equity holders of the Group
- ordinary shareholders                                                                                       181 436         179 535             1        323 093


Condensed Group Statement of Financial Position

                                                                                                                      Six months                           Audited
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

Assets
Intangible assets                                                                                              24 601          22 232                       23 461
Property and equipment                                                                                         23 041          25 302                       23 389
Owner-occupied properties                                                                                     249 843         188 848                      224 009
Deferred tax                                                                                                   23 829          25 463                       25 744
Inventories                                                                                                     1 380           1 364                        1 860
Reinsurance assets                                                                                              3 168           3 299                        3 242
Financial assets held at fair value through profit or loss                                                  1 942 009       2 101 419                    2 043 394
Loans and receivables including insurance receivables                                                          87 879         161 653                      113 348
Current tax                                                                                                       689           1 046                        6 317
Cash and cash equivalents                                                                                     124 588         165 536                      183 246

Total assets                                                                                                2 481 027       2 696 162                    2 648 010

Total equity and reserves                                                                                     549 995         471 028                      618 846

Liabilities
Policyholder liabilities under insurance contracts                                                            687 135         712 559                      703 924
Financial liabilities - investment contracts                                                                  975 554       1 191 522                    1 046 721

- at fair value through profit or loss                                                                        963 359       1 145 832                      998 337
- at amortised cost                                                                                            12 195          45 690                       48 384

Financial liabilities - loans at amortised cost                                                                28 380          80 018                       10 000
Employee benefits                                                                                              75 776          52 970                       98 423
Deferred tax                                                                                                   29 909          31 334                       33 727
Accruals and payables including insurance payables                                                            133 929         138 351                      134 909
Current tax                                                                                                       349          18 380                        1 460

Total liabilities                                                                                           1 931 032       2 225 134                    2 029 164

Total equity and liabilities                                                                                2 481 027       2 696 162                    2 648 010


Tax

                                                                                                                      Six months                           Audited
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

Current and deferred tax                                                                                      (64 154)        (64 145)                    (114 734)
Capital gains tax                                                                                              (5 164)           (180)                        (714)
Underprovision in prior periods                                                                                                                               (422)

Tax                                                                                                           (69 318)        (64 325)                    (115 870)

The Individual Policyholder Fund has an estimated tax loss of R2,5 billion (2013: R2,1 billion).


Reconciliation of Net Profit to Headline Earnings

                                                                                                                      Six months                           Audited
                                                                                                                         ended                    %     Year ended
                                                                                                                      31 December            Change        30 June
(R'000's)                                                                                                        2014            2013                         2014

Net profit for the period attributable to equity holders of the Group                                         181 436         179 535             1        307 811
Less: Profit on disposal of property and equipment                                                               (133)            (93)                        (202)

Headline earnings for the period                                                                              181 303         179 442             1        307 609


Ratios per Share

                                                                                                                      Six months                           Audited
                                                                                                                         ended                    %     Year ended
                                                                                                                      31 December            Change        30 June
(Cents)                                                                                                          2014            2013                         2014

Headline earnings per share                                                                                     55,02           54,67             1          93,58
Diluted headline earnings per share                                                                             54,99           54,62             1          93,53

Earnings per share                                                                                              55,07           54,70             1          93,64
Diluted earnings per share                                                                                      55,03           54,65             1          93,59

Net asset value per share                                                                                      166,79          143,50            16         187,97
Diluted net asset value per share                                                                              166,83          143,39            16         188,16

Dividends per share - paid                                                                                      78,00           74,00             5          74,00
Dividends per share - declared                                                                                                                               78,00

Ordinary shares in issue ('000)                                                                               329 761         328 771                      329 218
Weighted average ordinary
shares ('000)                                                                                                 329 494         328 241                      328 722

Diluted average ordinary shares ('000)                                                                        329 682         328 505                      328 901


Condensed Group Statement of Cash Flows

                                                                                                                      Six months                           Audited
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

Cash flows from operating activities                                                                          (49 201)            (87)                      49 245

Profit from operations adjusted for non-cash items                                                            268 178         199 928                      418 720
Working capital changes                                                                                       (53 844)        (51 644)                     (95 884)
Separately disclosable items1                                                                                 (25 811)        (23 589)                     (49 005)
Decrease in financial liabilities2                                                                           (115 907)       (173 115)                    (334 158)
Net disposal of investments3                                                                                  176 039         313 680                      426 142
Interest received                                                                                              18 500          14 978                       30 145
Dividends received                                                                                              7 311           8 611                       18 860
Dividends paid                                                                                               (256 963)       (243 029)                    (243 030)
Tax paid                                                                                                      (66 704)        (45 907)                    (122 545)

Cash flows from investing activities4                                                                         (37 837)        (14 388)                     (46 010)
Cash flows from financing activities5                                                                          28 380

Net (decrease)/increase in cash and cash equivalents                                                          (58 658)        (14 475)                       3 235
Cash and cash equivalents at beginning of the period                                                          183 246         180 011                      180 011

Cash and cash equivalents at end of the period                                                                124 588         165 536                      183 246

1. Interest and dividends.
2. Financial liabilities - investment contracts.
3. Investments in respect of insurance operations and investment contracts.
4. Mainly relates to the acquisition of intangible assets, property and equipment.
5. External funding for new office building development.

Notes to the Results

The results have not been reviewed or audited by the Group's auditors, PricewaterhouseCoopers Incorporated. The change in policyholder liabilities has been based on best estimates after
providing for compulsory and discretionary margins and has been actuarially reviewed by the Group's internal Statutory Actuary.

The Condensed Group Results were prepared under the supervision of Mr I B Hume (CA(SA), ACMA), the Group Financial Director.

Changes to the Board

Mr M P Matlwa was appointed as a Non-Executive Director on 1 July 2014 and resigned on 5 January 2015, to assume a full time senior position at the South African Revenue Services.


Segment Assets and Liabilities

                                                                                                                      Six months                           Audited
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

Assets
Long-term insurance                                                                                         1 382 040       1 307 089                    1 454 656
Investment contracts                                                                                          976 008       1 191 898                    1 047 977
Short-term insurance                                                                                          135 980         123 082                      150 153

Other*                                                                                                         57 197         160 492                       86 105
Inter segment                                                                                                 (70 198)        (86 399)                     (90 881)

Total Group Assets                                                                                          2 481 027       2 696 162                    2 648 010

Liabilities
Long-term insurance                                                                                           914 709         915 110                      933 007
Investment contracts                                                                                          975 554       1 191 522                    1 046 721
Short-term insurance                                                                                           38 254          31 674                       36 085
Other*                                                                                                         72 713         173 227                      104 232
Inter segment                                                                                                 (70 198)        (86 399)                     (90 881)

Total Group Liabilities                                                                                     1 931 032       2 225 134                    2 029 164

* The decrease in other segment assets and liabilities relates to the decrease in advances of Clientèle Loans Direct


Accounting Policies

Statement of compliance

The condensed consolidated interim Financial Statements are prepared in accordance with the JSE Listing Requirements for interim reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require interim reports to be prepared in accordance with the framework concepts, the measurement and recognition requirements of International
Financial Reporting Standards ("IFRS"), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and must also, as a minimum, contain the information required
by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the condensed consolidated interim Financial Statements are in terms of IFRS and are consistent with those applied in the previous
consolidated annual Financial Statements.

The preparation of the condensed consolidated interim Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates and judgments. The reported
amounts in respect of the Group's insurance contracts, employee benefits and unquoted financial instruments are affected by accounting policies and judgments.

There was no major impact due to changes in previous assumptions and estimates used in deriving the amounts referred to above.

Capital Commitments

The Group's wholly owned subsidiaries, Clientèle Properties East and Clientèle Properties North, are in the process of developing a new office building and parking structure within the Clientèle
Office Park. The capitalised costs of this are estimated to be R213,0 million, of which R56,0 million has been capitalised since inception. It is the Group's intention that the building will be
occupied by the Group in December 2015.

Financial Assets held at Fair Value through profit or loss - Fair Value Hierarchy Disclosure

The following table presents the Group's financial assets and liabilities that are measured at fair value through profit or loss at 31 December 2014.

(R'000's)                                                                                                     Level 1       Level 2       Level 3           Total

Assets
Listed equity securities                                                                                      576 135                                     576 135
Unlisted equity securities                                                                                                    3 850                         3 850
Promissory notes and fixed deposits                                                                                         495 202       401 042         896 244
Funds on deposit                                                                                                            396 857                       396 857
Fixed interest securities                                                                                                    68 923                        68 923

Total Assets                                                                                                  576 135       964 832       401 042       1 942 009

Liabilities

Financial liabilities at fair value through profit or loss                                                                  829 486       133 873         963 359

Total Liabilities                                                                                                           829 486       133 873         963 359

Shareholders' and policyholders' linked exposure to African Bank Limited ("ABL") through investments in zero coupon fixed deposits of R267,2 million and R133,9 million respectively as at 31
December 2014 have been reclassified to level 3 (from level 2) on the fair value hierarchy as values are estimated indirectly using valuation techniques or models for which one or more of the
significant inputs are assumptions (based on unobservable market inputs).

The Group establishes fair value by using a valuation technique if the market for a financial instrument is not quoted in an active market. Valuation techniques include using transactions
between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing
models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices
obtained in actual market transactions, the Group uses that technique. Fair value is estimated on the basis of the results of a valuation technique that makes maximum use of market inputs,
and relies as little as possible on entity-specific inputs.

The value of the unlisted equity securities represents shares in share block companies which are valued with reference to a written valuation by management of the administration company for
the shareblock company, which is based on recent market related prices between willing buyers and sellers.

Related Party Transactions

Transactions between Clientèle Limited and its subsidiaries have been eliminated on consolidation. There were no major related party transactions during the period.

Segment Information

The Group's results are analysed across South Africa ("SA") - geographical segment.

The Group's main operating segments are Long-term insurance, Investment contracts, Short-term insurance and Other (which is predominantly Clientèle Loans). The vast majority of policies
written are in respect of individuals.


Segment Statements of Comprehensive Income

                                                                                                                                                                   Inter segment
                                                                                                                Long-term     Investment    Short-term                (revenue)/
(R'000's)                                                                                                       insurance      contracts     insurance      Other        expense          Group

31 December 2014
Insurance premium revenue                                                                                         682 192                      116 110                                  798 302
Reinsurance premiums                                                                                              (55 957)                        (235)                                 (56 192)

Net insurance premiums                                                                                            626 235                      115 875                                  742 110
Other income                                                                                                       80 331          7 854           216      3 190         (2 639)        88 952
Interest income                                                                                                     7 913                          399     11 664         (3 853)        16 123
Fair value adjustment to financial assets at fair value through profit or loss                                     24 342         45 502         4 810                                   74 654

Segment revenue                                                                                                   738 821         53 356       121 300     14 854         (6 492)       921 839
Segment expenses and claims                                                                                      (525 127)       (47 039)      (92 528)   (12 093)         6 492       (670 295)

Net insurance benefits and claims                                                                                (133 676)                     (13 060)                      840       (145 896)
Decrease in policyholder liabilities under insurance contracts                                                     16 470                          319                                   16 789
Decrease in reinsurance assets                                                                                        (74)                                                                  (74)
Fair value adjustment to financial liabilities at fair value through profit or loss                                              (42 492)                                               (42 492)
Interest expense                                                                                                                  (2 247)                  (4 152)         3 853         (2 546)
Impairment of advances                                                                                                                                     (5 889)                       (5 889)
Operating expenses                                                                                               (407 847)        (2 300)      (79 787)    (2 052)         1 799       (490 187)

Profit before tax                                                                                                 213 694          6 317        28 772      2 761              -        251 544
Tax                                                                                                               (59 782)        (1 769)       (7 616)      (151)                      (69 318)

Net profit for the period                                                                                         153 912          4 548        21 156      2 610              -        182 226

Attributable to:
Non-controlling interest - ordinary shareholders                                                                                                              790                           790
Equity holders of the Group - ordinary shareholders                                                               153 912          4 548        21 156      1 820              -        181 436

31 December 2013
Insurance premium revenue                                                                                         590 427                       93 937                                  684 364
Reinsurance premiums                                                                                              (47 217)                        (215)                                 (47 432)

Net insurance premiums                                                                                            543 210                       93 722                                  636 932
Other income                                                                                                       77 276          6 875            48      6 685         (2 607)        88 277
Interest income                                                                                                     6 623                          420     27 410         (3 867)        30 586
Fair value adjustment to financial assets at fair value through profit or loss                                     81 001         38 495         7 623                                  127 119

Segment revenue                                                                                                   708 110         45 370       101 813     34 095         (6 474)       882 914
Segment expenses and claims                                                                                      (494 806)       (40 842)      (77 631)   (31 812)         6 474       (638 617)

Net insurance benefits and claims                                                                                (145 082)                     (11 244)                                (156 326)
Decrease in policyholder liabilities under insurance contracts after discretionary margin release                  33 893                          199                                   34 092

(Increase)/decrease in policyholder liabilities under insurance contracts before discretionary margin release     (15 973)                         199                                  (15 774)
Once-off release of discretionary margin                                                                           49 866                                                                49 866

Decrease in reinsurance assets                                                                                        (38)                                                                  (38)
Fair value adjustment to financial liabilities at fair value through profit or loss                                              (35 636)                                               (35 636)
Interest expense                                                                                                                  (2 586)                  (8 747)         3 867         (7 466)
Impairment of advances                                                                                                                                    (18 060)                      (18 060)
Operating expenses                                                                                               (383 579)        (2 620)      (66 586)    (5 005)         2 607       (455 183)

Profit before tax                                                                                                 213 304          4 528        24 182      2 283              -        244 297
Tax                                                                                                               (56 338)        (1 268)       (6 080)      (639)                      (64 325)

Net profit for the period                                                                                         156 966          3 260        18 102      1 644              -        179 972

Attributable to:
Non-controlling interest - ordinary shareholders                                                                                                              437                           437
Equity holders of the Group - ordinary shareholders                                                               156 966          3 260        18 102      1 207              -        179 535


Condensed Group Statement of Changes in Equity

                                                                                                                                    SAR and
                                                                                               Common                          Bonus Rights                                    Non-
                                                                         Share      Share     control       Sub-    Retained        Schemes           NDR:       Sub-   controlling
(R'000's)                                                              capital    premium     deficit      total    earnings        Reserve*   Revaluation      total      interest       Total

Balance as at 1 July 2013                                                6 560    268 982    (220 273)    55 269     417 700         15 066         45 940    533 975        (4 555)    529 420
Ordinary dividends                                                                                                  (243 069)                                (243 069)                 (243 069)
Total comprehensive income                                                                                           179 535                                  179 535           437     179 972

- Net profit for the period                                                                                          179 535                                  179 535           437     179 972

Shares issued                                                               15     10 060                 10 075                                               10 075                    10 075
SAR and Bonus Rights Schemes allocated                                                                                                4 705                     4 705                     4 705
Transfer from Shares issued                                                                                          (8 789)         (1 286)                  (10 075)                  (10 075)

Balance as at 31 December 2013                                           6 575    279 042    (220 273)    65 344    345 377          18 485         45 940    475 146        (4 118)    471 028

Balance as at 1 January 2014                                             6 575    279 042    (220 273)    65 344    345 377          18 485         45 940    475 146        (4 118)    471 028
Total comprehensive income                                                                                          128 276                         15 282    143 558        (1 732)    141 826

- Net profit/(loss) for the period                                                                                  128 276                                   128 276        (1 732)    126 544
- Other comprehensive income                                                                                                                        15 282     15 282                    15 282

Shares issued                                                                9      6 576                  6 585                                                6 585                     6 585
SAR and Bonus Rights Schemes allocated                                                                                                5 992                     5 992                     5 992
Transfer from shares issued                                                                                          (5 289)         (1 296)                   (6 585)                   (6 585)

Balance as at 30 June 2014                                               6 584    285 618    (220 273)    71 929    468 364          23 181         61 222    624 696        (5 850)    618 846

Balance as at 1 July 2014                                                6 584    285 618    (220 273)    71 929    468 364          23 181         61 222    624 696        (5 850)    618 846
Ordinary dividends                                                                                                 (257 031)                                 (257 031)                 (257 031)
Total comprehensive income                                                                                          181 436                                   181 436           790     182 226

- Net profit for the period                                                                                         181 436                                   181 436           790     182 226

Shares issued                                                               11      9 458                  9 469                                                9 469                     9 469
SAR and Bonus Rights Schemes allocated                                                                                                5 954                     5 954                     5 954
Transfer from Shares issued                                                                                          (7 973)         (1 496)                   (9 469)                   (9 469)

Balance as at 31 December 2014                                           6 595    295 076    (220 273)    81 398    384 796          27 639         61 222    555 055        (5 060)    549 995

* SAR Scheme - the Clientèle Limited Share Appreciation Rights Scheme
* Bonus Rights Scheme - the Clientèle Limited Bonus Rights Scheme


GROUP EMBEDDED VALUE RESULTS

Group Embedded Value

The Embedded Value ("EV") represents an estimate of the value of the Group, exclusive of goodwill attributable to future new business. The EV comprises:
- the Free Surplus; plus,
- the Required Capital identified to support the in-force business; plus,
- the Present Value of In-force ("PVIF") business; less,
- the Cost of Required Capital ("CoC").

The PVIF business is the present value of future after tax profits arising from covered business in force as at 31 December 2014.

All material business written by the Group has been covered by EV Methodology as outlined in Advisory Practice Notice, APN 107 of the Actuarial Society of South Africa, including:
- all long-term insurance business regulated in terms of the Long-term Insurance Act, 1998;
- Legal insurance business where EV Methodology has been used to determine future shareholder entitlements;
- annuity income arising from non-insurance contracts where EV Methodology has been used to determine future shareholder entitlements; and
- Loans and Mobile business where EV Methodology has been used to determine future shareholder entitlements.

The EV calculation have been reviewed by the Group's internal Statutory Actuary. The EV can be summarised as follows:

                                                                                                                      Six months
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June 
(R'000's)                                                                                                        2014            2013                         2014   

Free surplus                                                                                                  186 822         191 861                      287 353
Required capital                                                                                              334 438         282 090                      312 387

Adjusted Net Worth ("ANW") of covered business                                                                521 260         473 950                      599 740

CoC                                                                                                           (67 257)        (51 211)                     (58 308)
PVIF                                                                                                        3 802 279       3 216 414                    3 397 262

EV of covered business                                                                                      4 256 281       3 639 153                    3 938 694

The ANW of covered business is defined as the excess value of all assets attributed to the covered business, but not required to back the liabilities of covered business. Free Surplus is the
ANW less the Required Capital attributed to covered business.

Reconciliation of Total Equity to ANW
                                                                                                                      Six months
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

Total equity and reserves per the Statement of Financial Position                                             549 995         471 028                      618 846
Adjusted for Deferred Profits and impact of compulsory margins on investment business                          10 313          14 667                       12 793
Adjusted for minority interests                                                                                 5 060           4 118                        5 850
Adjusting subsidiaries to Net Asset Value                                                                      20 148          15 129                       20 148
SAR and Bonus Rights Schemes adjustment                                                                       (64 257)        (30 991)                     (57 897)

ANW                                                                                                           521 260         473 950                      599 740

The CoC is the opportunity cost of having to hold the Required Capital of R334,4 million as at 31 December 2014 (30 June 2014: R312,4 million). The Required Capital has been set at the
greater of the Statutory Termination Capital Adequacy Requirement and 1,25 times the Statutory Ordinary Capital Adequacy Requirement for the Life company plus the Required Statutory
Capital for the Short-term company.

The SAR and Bonus Rights Schemes adjustment recognises the future dilution in EV, on a mark to market basis, as a result of the SAR and Bonus Rights Schemes.

Clientèle Life's Statutory Capital Adequacy Requirement cover ratio at 31 December 2014 was 1,66 times (30 June 2014: 2,03 times) on the statutory valuation basis.

Clientèle General Insurance's Statutory Capital Adequacy Requirement cover ratio at 31 December 2014 was 1,19 times (30 June 2014: 1,57 times) on the statutory valuation basis.

Value of New Business ("VNB")
                                                                                                                      Six months
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

Total VNB                                                                                                     400 454         325 218                      638 154
Present Value of New Business premiums                                                                      1 350 435       1 194 892                    2 319 368
New Business profit margin                                                                                      29,7%           27,2%                        27,5%

The VNB (excluding allowance for the Goodwill and Medium Term incentive schemes which is shown as a separate component of EV Earnings) represents the present value of projected after
tax profits at the point of sale on new covered business commencing during the period ended 31 December 2014 less the CoC pertaining to this business.

The New Business profit margin is the VNB expressed as a percentage of the present value of future premiums (and other annuity fee income) pertaining to the same business.

Long-term Economic Assumptions
                                                                                                                      Six months
                                                                                                                         ended                          Year ended
                                                                                                                      31 December                          30 June
(%)                                                                                                              2014            2013                         2014
Risk discount rate                                                                                               11,2            10,7                         11,1
Non-unit investment return                                                                                        7,7             7,2                          7,6
Unit investment return                                                                                            9,0             7,2                          9,0
Expense inflation                                                                                                 6,2             5,7                          6,1
Corporate tax                                                                                                    28,0            28,0                         28,0

The risk discount rate ("RDR") has been determined using a top-down weighted average cost of capital approach, with the equity return calculated using the Capital Asset Pricing Model
("CAPM") theory. In terms of current actuarial guidance, the RDR has been set as the risk free rate plus a beta multiplied by the assumed equity risk premium. It has been assumed that the
equity risk premium (i.e. the long-term expected difference between equity returns and the risk free rate) is 3,5%. The beta pertaining to the Clientèle share price is relatively low, which is
partially a consequence of the relatively small free-float of shares. After careful consideration, the Board has decided to continue to use a more conservative beta of 1, as opposed to its actual
beta of 0,0815, in the calculation of the RDR. The Board draws the reader's attention to the RDR sensitivity analysis in the table below, which allows for sensitivity comparisons using various
alternative RDRs.

The resulting RDR utilised for the South African business as at 31 December 2014 was 11,2% p.a. (30 June 2014: 11,1% p.a.).

RDR Sensitivities

(R'000's)                                                                                                         EV              VNB
RDR 9.2%                                                                                                      4 979 304         500 052
RDR 10.2%                                                                                                     4 592 868         455 112
RDR 10.7% (RDR as at December 2013)                                                                           4 595 613         430 954
RDR 11.1% (RDR as at June 2014)                                                                               4 289 939         405 920
RDR 11.2% (RDR as at December 2014)                                                                           4 256 281         400 454
RDR 12.2%                                                                                                     3 980 139         362 226
RDR 13.2%                                                                                                     3 744 599         330 254

Demographic and other changes

A withdrawal and unpaid premium profit was experienced during the period. The results allow for worse withdrawal experience in the second half of the financial year, as per historic experience.

EV per Share
                                                                                                                    Six months ended                    Year ended
                                                                                                                      31 December                          30 June
(Cents)                                                                                                          2014            2013                         2014
EV per share                                                                                                 1 290,72        1 106,90                     1 196,38
Diluted EV per share                                                                                         1 289,98        1 106,01                     1 195,73


Segment Information

The EV can be split between segments as follows:

(R'000's)                                                                                                           ANW           PVIF          CoC           EV

31 December 2014
SA - Long-term insurance                                                                                        437 210      3 202 133      (45 750)   3 593 593
SA - Short-term insurance                                                                                        94 505        594 863      (21 507)     667 861
SA - Investment contracts                                                                                             -          2 799            -        2 799
Other                                                                                                           (10 456)         2 484            -       (7 972)

Total                                                                                                           521 260      3 802 279      (67 257)   4 256 281

31 December 2013
SA - Long-term insurance                                                                                        391 288      2 723 115      (36 086)   3 078 317
SA - Short-term insurance                                                                                        91 408        479 133      (15 125)     555 415
SA - Investment contracts                                                                                             -          3 618            -        3 618
Other                                                                                                            (8 746)        10 549            -        1 803

Total                                                                                                           473 950      3 216 414      (51 211)   3 639 153

30 June 2014
SA - Long-term insurance                                                                                        500 170      2 868 411      (41 066)   3 327 515
SA - Short-term insurance                                                                                       111 976        518 714      (17 242)     613 448
SA - Investment contracts                                                                                             -          3 051            -        3 051
Other                                                                                                           (12 406)         7 086            -       (5 320)

Total                                                                                                           599 740      3 397 262      (58 308)   3 938 694

The VNB can be split between segments as follows:

                                                                                                                    Six months ended                    Year ended
                                                                                                                      31 December                          30 June
(R'000's)                                                                                                        2014            2013                         2014

SA - Long-term insurance                                                                                      343 611         280 904                      550 551
SA - Short-term insurance                                                                                      55 038          43 511                       85 507
SA - Investment contracts                                                                                         792             383                          745
Other                                                                                                           1 014             420                        1 351

Total                                                                                                         400 454         325 218                      638 154

Embedded Value Earnings Analysis

EV earnings (per APN 107) comprises the change in EV for the period after adjusting for capital movements and dividends paid as they pertain to the Group.

                                                                                               Six months ended 31 December 2014                          Six months ended         Year ended
                                                                                                                                                               31 December            30 June
(R'000's)                                                                             ANW                PVIF                  CoC           Total                    2013               2014
A: EV at the end of the period                                                    521 260           3 802 279              (67 257)      4 256 281               3 639 153          3 938 694
EV at the beginning of the period                                                 599 740           3 397 262              (58 308)      3 938 694               3 546 640          3 546 640
Ordinary dividends                                                               (257 031)                  -                    -        (257 031)               (243 069)          (243 069)

B: Adjusted EV at the beginning of the period                                     342 709           3 397 262              (58 308)      3 681 663               3 303 572          3 303 572

EV earnings (A - B)                                                               178 550             405 017               (8 949)        574 618                 335 582            635 122

Impact of once-off economic assumption changes                                       (135)             26 150                3 096          29 111                  61 326            139 436
Impact of other once-off items                                                          -                   -                    -               -                   6 607             30 718

Recurring EV earnings                                                             178 416             431 166               (5 854)        603 729                 403 514            805 276
Recurring Return on EV                                                                                                                       32,8%                   24,4%              24,4%

Return on EV                                                                                                                                 31,2%                   20,3%              19,2%

Components of EV earnings

VNB                                                                              (159 500)            563 435               (3 480)        400 454                 325 218            638 154
Expected return on covered business                                                     -             194 251                3 906         198 158                 161 554            344 233
Expected profit transfer                                                          329 038            (329 038)                   -               -                       -                  -
Withdrawal and unpaid premium experience variance                                   1 029              37 978               (4 408)         34 599                   3 811            (16 975)
Claims and reinsurance experience variance                                             56                   -                    -              56                    (289)            (2 259)
Sundry experience variance                                                          4 975                (277)                  (0)          4 698                     528              5 212
Changes in modelling/basis and non-economic assumptions                            11 681              (8 691)              (1 872)          1 118                 (78 267)          (144 313)
Expected return on ANW                                                             14 280                   -                    -          14 280                  12 338             29 385
SAR and Bonus Rights Schemes dilution                                              (4 865)                  -                    -          (4 865)                 (4 304)           (25 078)
Goodwill and Medium-term incentive schemes                                        (22 571)            (26 492)                   -         (49 063)                (37 307)           (63 827)

EV operating return                                                               174 123             431 166               (5 854)        599 436                 383 281            764 532

Investment return variances on ANW                                                  4 293                   -                    -           4 293                  20 233             40 744

Recurring EV earnings                                                             178 416             431 166               (5 854)        603 729                 403 514            805 276

Effect of economic assumption changes                                                 135             (26 150)              (3 096)        (29 111)                (61 326)          (139 436)
Impact of other once-off items                                                          -                   -                    -               -                  (6 607)           (30 718)

EV earnings                                                                       178 550             405 017               (8 949)        574 618                 335 582            635 122


Registered office: Clientèle Office Park, Cnr Rivonia and Alon Roads, Morningside, PO Box 1316, Rivonia 2128, South Africa

Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001, South Africa
PO Box 61051, Marshalltown 2107, South Africa

Directors: G Q Routledge BA LLB (Chairman); G J Soll CA(SA) (Vice Chairman);
B W Reekie BSc(Hons), FASSA* (Managing Director); A D T Enthoven BA, PhD (Political Science);
B Frodsham BCom*; P R Gwangwa BProc LLB, LLM; I B Hume CA(SA), ACMA*;
B A Stott CA(SA); R D Williams, BSc(Hons), FASSA

Company secretary: W van Zyl CA(SA) *Executive Director

website: www.clientele.co.za e-mail: info@clientele.co.za

Sponsor: PricewaterhouseCoopers Corporate Finance Proprietary Limited
Date: 16/02/2015 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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