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Summary of Unaudited Interim Results and Cash Dividend Declaration for the Six Months Ended 31 December 2014
Discovery Limited
(Incorporated in the Republic of South Africa) (Registration number: 1999/007789/06)
Company tax reference number: 9652/003/71/7
JSE share code: DSY ISIN: ZAE000022331
JSE share code: DSBP ISIN: ZAE000158564
155 West Street, Sandton 2146 PO Box 786722, Sandton 2146
Tel: (011) 529 2888 Fax: (011) 539 8003
Summary of unaudited interim results and cash dividend declaration
for the six months ended 31 December 2014
Highlights
Normalised profit from operations
R2 824 million
up 19%
Normalised headline earnings
R1 981 million
up 20%
Embedded value
R45.5 billion
up 14%
Commentary
Overview: Model and Discovery Group performance
The period under review to 31 December 2014 saw continued investment in the Discovery business model. This model uses behavioural incentives to engage
members to make better health and lifestyle choices, and integrates this engagement into their insurance. This shared value approach leads to lower price points,
the attraction of healthier lives, behaviour change, lower lapse rates, and better selective lapsation - thereby creating value for members, the insurer, and broader
society.
Over the period, the model delivered continued growth in the established businesses, and strong new business growth (+100%) in the new businesses. This
manifested in total new business growth of 17% for the period to R6 663 million; growth in headline earnings of 106% (distorted by the accounting treatment of the
acquisition of Prudential's remaining stake in the UK joint venture); an uplift in normalised headline earnings of 20% to R1 981 million; an embedded value increase
of 14% to R45.5 billion; and return on capital exceeding the internal benchmark rate of risk free plus 10%.
The period was also one of significant corporate activity, including the acquisition of Prudential's remaining 25% shareholding in the UK joint venture for £155 million,
and the successful restructuring of the UK business. In addition, the period saw Discovery formally establish Discovery Partner Markets; expanding the Discovery
business model with some of the world's leading insurers in their markets.
Expansion and strategic overview
Discovery's expansion strategy is based on two philosophies: (1) a growth engine, comprising businesses at different stages of maturity, powered by start-ups, and
organic growth in established businesses; and (2) choosing the right archetype for entry, being either Primary Markets, where Discovery owns, and operates the
insurer; or Partner Markets, where Discovery partners with leading global insurers in their markets. During the period, the model continued to be deployed
successfully across the Group.
In the UK Primary Market, the business has been rebranded as "Vitality" to reflect the integral nature of this asset to the overall insurance proposition, with the
operating entities being VitalityHealth and VitalityLife respectively.
With full ownership, Discovery intends to accelerate towards its ambition of building the leading protection business in the UK through:
- Rolling out a highly-visible and distinctive brand campaign, under the unified Vitality banner.
- Pursuing a multi-product distribution strategy through the franchise channel.
- Significantly enhancing presence in the direct-to-consumer space through investment in the brand.
- Enhancing the wellness platform, for example, through a new category of real-time benefits, and the inclusion of British Airways, iTunes and Starbucks in the
partner network.
- Further enhancing its market-leading products through the introduction of innovations such as virtual primary care delivery, and the acceleration of life cover for
degenerative diseases of later life.
In the South African Primary Market, deployment over the period focused on building a better insurance system for Discovery members through:
- Product innovation across all of its businesses. This included new product lines, further integration between businesses, and enhancements to current product
suites.
- Strengthened and expanded distribution, most notably through growth in the tied agency force and significant traction in the direct-to-consumer channels.
- Advancing the member experience, supported by innovative technologies.
In Discovery's Partner Markets, the strategy has been to partner with leading global insurers in markets that are characterised by large life insurance industries; a
high prevalence of non-communicable diseases; a strong intermediary presence; and product commoditisation.
These markets are most receptive to the Discovery model, and can be accessed on a capital-light basis, which harnesses the existing brand, and distribution assets
of the partner. Partners franchise this model, acquiring the licence to use its assets in exchange for a share of the economic value created.
Building on the existing partnerships in Asia through AIA, Discovery is partnering with Generali in mainland Europe to launch Vitality-integrated products in Germany,
France, and Austria. In addition, Discovery will soon announce a partnership with a large US life insurer. Discovery Partner Markets is now in a position to serve
eight out of the 10 largest protection markets globally.
Business-specific performance
Discovery Health
Discovery Health has built a sophisticated healthcare system that creates shared value for all its stakeholders. It achieves this by providing better healthcare
services at a lower cost; and by improving the health of members of the schemes under its management.
The success of the shared value health insurance model was evidenced by the strong performance of both open, and restricted scheme clients over the period.
Discovery Health Medical Scheme (DHMS) accelerated its market-leading position to 53% of the open schemes market (2.6 million lives); and Discovery Health
proved highly competitive in the restricted schemes space (just under 300 000 lives under management).
In terms of financial performance, Discovery Health exceeded expectation during the period: normalised operating profit increased by 11% to R954 million, and new
business increased by 7% to R2 806 million, off a significant base, powered by an increasing contribution from the newly-formed direct-to-consumer channel (40% of
individual new business with favourable demographics).
DHMS saw similar excellent performance. Lapses remained comparatively low at 4.6%, and the Scheme ended the calendar year 2014 with a solvency of 25.8%,
with R11.6 billion in reserves.
Discovery Health continued to invest in its model by giving low-income employees access to basic healthcare through the newly-launched Discovery PrimaryCare
product. In addition, it launched initiatives aimed at improving the quality of care, including virtual consultations, and online booking of consultations; a new Discovery
HomeCare nursing service; and Personal Health Programmes which assist GPs to provide improved care to patients with chronic illnesses. Discovery Health is also
making it easier for members to be active through VitalityFit, Team Vitality, and Scheme funding of fitness devices.
Discovery Health maintains its commitment to building a sustainable, and equitable national healthcare system through supporting roll-out of the National Health
Insurance system, and optimising interactions between the public, and private healthcare systems. In addition, Discovery Health continues to play its part in building
a private healthcare system that is accessible, affordable, and of high quality; and is supportive of the Competition Commission's Inquiry into Private Healthcare.
Discovery Health is of the view that the Inquiry will contribute to the development of a more efficient healthcare system for all stakeholders; and looks forward to
engaging in the Inquiry process, and the Panel's report in late 2015.
Discovery Life
Discovery Life's integrated model is the most sophisticated manifestation of the Group's behavioural life insurance model. It creates better initial selection, ongoing
behaviour change, and positive selective lapsation.
Due to the strength of this model, the period under review saw normalised operating profit growth of 17% to R1 464 million; new business uplift of 9% to R1 151
million; claims experience well below expected; and R1 billion of cash generated from existing business, before financing activities, and investment into new
business activities. The embedded value was marginally impacted by a change in the risk-discount rate in combination with increased engagement in high-value
member segments.
Discovery Invest
Discovery Invest's performance was ahead of expectation, with normalised operating profit of R191 million, up 29%; and assets under management increasing to
R45.6 billion, up 27% from the prior period. This sustained growth was largely driven by increased take-up of integrated products, market momentum, and increased
adviser support. The value of new business margins increased due to a shift toward Discovery Invest managed funds, and integrated products.
Discovery Insure
Discovery Insure saw phenomenal growth over the period: new business grew 57% to R403 million; in force premium income grew 82% to R1 403 million; cars
covered grew to 100 000; and the profit signature turned in a positive direction.
Furthermore, the adjacent application of the behavioural insurance model yielded positive actuarial results, with loss ratios trending downwards, and significant
improvement in both loss ratios, and lapse rates by duration. In addition, the period was notable for the emergence of increased business efficiencies, indicative of
Discovery Insure progressing towards scale.
During the period, Discovery Insure's strategic focus was on raising brand awareness, harnessing advanced mobile tracking technology, and transforming the
member claims experience.
DiscoveryCard
DiscoveryCard continued to exhibit exceptional economic dynamics, and quality of client base, as evidenced by spend rates, which grew 12.6% year-on-year, and
bad debt experience, which is among the lowest in the industry. The DiscoveryCard client base now exceeds 250 000 cardholders, and was independently rated as
offering the best credit card benefits in the market. These were further enhanced during the period with the inclusion of new cash-back partners, and incentive
structures where cardholders can earn enhanced miles in a select range of retail stores as they improve their health.
Ping An Health
The opportunity within the Chinese private health insurance sector remains robust, given a significant proportion of out-of-pocket medical spend; a rapidly-expanding
middle class; the increased use of technology to provide access to private healthcare; and government policy that strongly supports the development of commercial
health insurance. Against this backdrop, Ping An Group is developing a health ecosystem characterised by best-in-class health insurance, and the use of technology
to enhance the provision of healthcare services.
Within this ecosystem, Ping An Health is well positioned in both the high-end Group market, and the Individual mid-market segments. Over the period, it built on its
leading position in the high-end market. Individual sales witnessed explosive growth, with a current run rate of over 800 cases sold per day, following an agreement
to issue the product on the Ping An Life licence, thereby making optimal use of the Ping An Life distribution capability. In addition, the loss ratio, and lapse rates
were carefully maintained within tolerance levels.
AIA Vitality
The initial market roll-outs in Singapore, and Australia are well underway, and market receptivity to the integrated products has been excellent - of the current
products with integrated options available, 52% of all sales are Vitality integrated in Singapore, and 33% in Australia. AIA Vitality continued to win awards, with AIA
Australia the recipient of two recent accolades: "Most innovative risk product" for AIA Vitality, by the Association of Financial Advisers, and the "Gold Quill Merit
Award" for AIA Australia's internal launch of Vitality, from the International Association of Business Communicators.
The Vitality Group
The United States is characterised by the biggest spending on healthcare globally, and is the largest wellness and protection market in the world. Discovery
introduced its business model to the US through The Vitality Group, which now covers over 700 000 members in 50 states.
Over the period, the model's capability was endorsed in this highly competitive market, with excellent health participation rates, and member engagement. In
addition, seven Vitality corporate clients were recognised in the 2014 Healthiest 100 Workplaces in America programme.
During the period, the HumanaVitality partnership ended. While the partnership was fruitful for Discovery, it caused brand, and product confusion among distribution
channels, and conflicted with The Vitality Group's agenda for expansion in the US. Humana will continue to use the Vitality asset for a period of two years. Discovery
Partner Markets is now set to partner with a large national life insurer, leveraging off the existing infrastructure provided by The Vitality Group.
The United Kingdom
The UK business is a fundamental beachhead for Discovery's strategy of internationalising its composite Health, and Life insurance model, given the UK's lifestyle
disease burden, ageing population, sizeable protection market, and commoditised offerings. Against this backdrop, the performance of the UK business was strong:
operating profit grew 20% to R432 million; and new business grew 7% to R915 million, driven by VitalityLife which had excellent sales in the last quarter.
VitalityLife
Discovery's UK protection business produced a strong second quarter, with normalised operating profit for the year-to-date, up 18% to R269 million, and new
business up 20% to R502 million. The period also saw the continued adoption of the Vitality-integrated model, with the Vitality Optimiser product comprising 46% of
new business. VitalityLife continued to grow its distribution footprint, and is now on all the major network panels, having recently been added to the prestigious St
James's Place panel.
VitalityHealth
In the period under review, VitalityHealth made a major breakthrough by introducing primary care benefits into the market through its proprietary virtual GP service;
and a new proposition for the Corporate market, which leverages the workplace to drive behaviour change. VitalityHealth made a normalised operating profit of R163
million, up 24% from the prior period, driven by a sophisticated approach to claims management, and price optimisation which saw the loss ratio improve to its
lowest level. New business was down by 4% to R413 million, reflecting the pursuit of quality in a highly competitive, and aggressive new business acquisition
market. Focus on the more profitable business segments brought a substantial uplift in better quality direct business - total direct sales contributed 35% of total
sales, and are up 11% year-on-year.
Rights Issue
The work done over the period has manifested in attractive growth opportunities for the Group. The Board has resolved to raise capital to pursue distinct
opportunities for additional growth:
- In the context of the UK, the rationale behind the acquisition of Prudential's remaining 25% shareholding in the UK joint venture was to pursue strong, profitable
growth and further opportunities. In particular, VitalityLife presents a strong case for further investment, given the success of the Vitality-integrated life insurance
product, the scale and reach of the distribution and wellness network, and attractive returns on new business. Historically, new business was funded through the
Prudential structure. Going forward, to maintain the rate of growth, additional capital is required.
- In the South African Primary Market, Discovery is pursuing adjacent opportunities, which will require capital to fully pursue.
The capital of R4 billion to R5 billion will be raised by way of an underwritten renounceable rights issue, the terms of which will be finalised by 10 March 2015. The
rights issue will be priced at R90.00 per rights issue share, and the capital raising will not exceed R5 billion.
Adrian Gore, Barry Swartzberg, Rand Merchant Insurance Holdings Limited, and other Discovery directors, collectively holding c.37% of Discovery shares, have
irrevocably committed to follow their rights pursuant to the rights issue. The balance of the rights issue is underwritten by Rand Merchant Insurance Holdings
Limited.
Shareholders are referred to the rights issue declaration announcement, released on SENS on 24 February 2015, for further information on the proposed rights
issue.
On behalf of the Board
MI HILKOWITZ A GORE
Chairperson Group Chief Executive
Sandton
23 February 2015
Statement of financial position
at 31 December 2014
Group Group
December June
2014 2014
R million Unaudited Audited
Assets
Assets arising from insurance contracts 19 737 17 999
Property and equipment 715 666
Intangible assets including deferred acquisition costs 2 344 2 344
Goodwill 2 231 2 239
Investment in associates 494 551
Financial assets
- Equity securities 22 569 19 830
- Equity linked notes 2 405 1 672
- Debt securities 10 556 10 318
- Inflation linked securities 219 483
- Money market securities 7 728 8 028
- Derivatives 652 588
- Loans and receivables including insurance receivables 2 768 3 110
Deferred income tax 374 406
Current income tax asset 46 46
Reinsurance contracts 286 266
Cash and cash equivalents 4 658 3 650
Total assets 77 782 72 196
Equity
Capital and reserves
Ordinary share capital and share premium 2 583 2 582
Perpetual preference share capital 779 779
Other reserves 1 653 1 501
Retained earnings 15 584 12 549
20 599 17 411
Non-controlling interest - -
Total equity 20 599 17 411
Liabilities
Liabilities arising from insurance contracts 28 323 25 797
Liabilities arising from reinsurance contracts 3 659 2 247
Financial liabilities
- Puttable non-controlling interests - 4 494
- Negative reserve funding 5 112 4 684
- Borrowings at amortised cost 1 956 572
- Investment contracts at fair value through profit or loss 9 069 8 264
- Derivatives 9 10
- Trade and other payables 3 676 3 752
Deferred income tax 4 801 4 647
Deferred revenue 164 157
Employee benefits 160 154
Current income tax liability 254 7
Total liabilities 57 183 54 785
Total equity and liabilities 77 782 72 196
Income statement
for the six months ended 31 December 2014
Group Group Group
Six months Six months Year
ended ended ended
December December June
2014 2013 % 2014
R million Unaudited Unaudited change Audited
Insurance premium revenue 13 529 11 001 23 090
Reinsurance premiums (1 368) (1 017) (2 182)
Net insurance premium revenue 12 161 9 984 20 908
Fee income from administration business 3 082 2 647 5 863
Vitality income 1 459 1 167 2 492
Receipt arising from reinsurance contracts 1 250 - -
Investment income 212 192 414
- investment income earned on shareholder investments and cash 74 86 152
- investment income earned on assets backing policyholder liabilities 138 106 262
Net realised (losses)/gains on available-for-sale financial assets (8) 43 231
Net fair value gains on financial assets at fair value through profit or loss 1 023 2 359 4 278
Net income 19 179 16 392 34 186
Claims and policyholders' benefits (7 415) (5 350) (11 718)
Insurance claims recovered from reinsurers 1 132 857 1 809
Net claims and policyholders' benefits (6 283) (4 493) (9 909)
Acquisition costs (2 472) (2 007) (4 296)
Marketing and administration expenses (5 883) (4 769) (10 146)
Amortisation of intangibles from business combinations (113) (91) (187)
Recovery of expenses from reinsurers 214 153 360
Transfer from assets/liabilities under insurance contracts (1 770) (2 320) (3 726)
- change in assets arising from insurance contracts 1 772 959 2 816
- change in assets arising from reinsurance contracts 23 (29) 20
- change in liabilities arising from insurance contracts (2 153) (3 220) (5 815)
- change in liabilities arising from reinsurance contracts (1 412) (30) (747)
Fair value adjustment to liabilities under investment contracts (276) (486) (1 224)
Profit from operations 2 596 2 379 5 058
Puttable non-controlling interest fair value adjustment 1 661 105 (201)
Finance costs (106) (108) (220)
- finance costs raised on puttable non-controlling interest financial liability (64) (75) (157)
- other finance costs (42) (33) (63)
Foreign exchange gains 18 1 18
Realised gains from the sale of associate 7 - -
Share of net profits/(losses) from equity accounted investments 48 (16) (14)
Profit before tax 4 224 2 361 79 4 641
Income tax expense (694) (614) (13) (1 327)
Profit for the period 3 530 1 747 102 3 314
Profit attributable to:
- ordinary shareholders 3 495 1 713 104 3 246
- preference shareholders 35 34 68
- non-controlling interest - - -
3 530 1 747 102 3 314
Earnings per share for profit attributable to ordinary shareholders of the company during
the period (cents):
- basic 608,7 307,7 98 574,2
- diluted 600,4 301,1 99 559,8
Statement of comprehensive income
for the six months ended 31 December 2014
Group Group Group
Six months Six months Year
ended ended ended
December December June
2014 2013 % 2014
R million Unaudited Unaudited change Audited
Profit for the period 3 530 1 747 3 314
Items that are or may be reclassified subsequently to profit or loss:
Change in available-for-sale financial assets 13 96 (3)
- unrealised gains 4 160 272
- capital gains tax on unrealised gains 2 (29) (87)
- realised losses/(gains) transferred to profit or loss 8 (43) (231)
- capital gains tax on realised losses/(gains) (1) 8 43
Currency translation differences 57 227 256
- unrealised gains 58 253 285
- deferred tax on unrealised gains (1) (26) (29)
Cash flow hedges 47 (78) (32)
- unrealised gains/(losses) 79 (14) 51
- tax on unrealised gains/losses (12) 2 (9)
- current tax on unrealised gains - - 4
- gains recycled to profit or loss (24) (78) (87)
- tax on recycled gains 4 12 9
Share of other comprehensive income from equity accounted investments 35 26 27
- change in available-for-sale financial assets 4 (6) (*)
- currency translation differences 31 32 27
Other comprehensive income for the period, net of tax 152 271 248
Total comprehensive income for the period 3 682 2 018 82 3 562
Attributable to:
- ordinary shareholders 3 647 1 984 84 3 494
- preference shareholders 35 34 68
- non-controlling interest - - -
Total comprehensive income for the period 3 682 2 018 82 3 562
* Amount is less than R500 000
Headline earnings
for the six months ended 31 December 2014
Group Group Group
Six months Six months Year
ended ended ended
December December June
2014 2013 % 2014
R million Unaudited Unaudited change Audited
Normalised headline earnings per share (cents):
- undiluted 345,0 296,2 16 611,3
- diluted 340,3 289,9 17 595,9
Headline earnings per share (cents):
- undiluted 602,6 301,4 100 542,0
- diluted 594,4 294,9 102 528,4
The reconciliation between earnings and headline earnings is shown below:
Net profit attributable to ordinary shareholders 3 495 1 713 3 246
Adjusted for:
- realised losses/(gains) on available-for-sale financial assets net of CGT 7 (35) (188)
- realised gain from sale of associate including deferred tax reversal (42) - -
- impairment of property and equipment - - 3
Headline earnings 3 460 1 678 106 3 061
- amortisation of intangibles from business combinations net of deferred tax 89 42 116
- finance costs raised on puttable non-controlling interest financial liability 64 75 157
- fair value adjustment to puttable non-controlling interest financial liability (1 661) (105) 201
- non-controlling interest allocation if no put options (42) (40) (81)
- once-off costs relating to business acquisitions 73 - -
- accrual of dividends payable to preference shareholders (2) * -
Normalised headline earnings 1 981 1 650 20 3 454
Weighted number of shares in issue (000's) 574 157 556 944 565 471
Diluted weighted number of shares (000's) 582 060 569 101 580 047
* Amount is less than R500 000
Statement of changes in equity
for the six months ended 31 December 2014
Attributable to equity holders of the Company Attributable to equity holders of the Company
Share capital Preference Share-based Non-
and share share payment Revaluation Translation Hedging Retained controlling
R million premium capital reserve reserve(1) reserve reserve earnings Total interest Total
Period ended 31 December 2014
At beginning of the period 2 582 779 319 250 829 103 12 549 17 411 - 17 411
Total comprehensive income for the period - 35 - 17 88 47 3 495 3 682 - 3 682
Profit for the period - 35 - - - - 3 495 3 530 - 3 530
Other comprehensive income - - - 17 88 47 - 152 - 152
Transactions with owners 1 (35) - - - - (460) (494) - (494)
Increase in treasury shares 1 - - - - - - 1 - 1
Dividends paid to preference shareholders - (35) - - - - - (35) - (35)
Dividends paid to ordinary shareholders - - - - - - (460) (460) - (460)
At end of the period 2 583 779 319 267 917 150 15 584 20 599 - 20 599
Period ended 31 December 2013
At beginning of the period 1 470 779 319 267 917 150 10 204 14 106 2 14 108
Total comprehensive income for the period - 34 - 90 259 (78) 1 713 2 018 - 2 018
Profit for the period - 34 - - - - 1 713 1 747 - 1 747
Other comprehensive income - - - 90 259 (78) - 271 - 271
Transactions with owners 1 021 (34) - - - - (379) 608 (2) 606
Share buy-back(2) * - - - - - - * - *
Share issue 1 030 - - - - - - 1 030 - 1 030
Share issue costs (1) - - - - - - (1) - (1)
Increase in treasury shares (9) - - - - - - (9) - (9)
Proceeds from treasury shares 1 - - - - - - 1 - 1
Non-controlling interest share issues - - - - - - - - 1 1
Non-controlling interest share buy-backs - - - - - - - - (3) (3)
Dividends paid to preference shareholders - (34) - - - - - (34) - (34)
Dividends paid to ordinary shareholders - - - - - - (379) (379) - (379)
At end of the period 2 491 779 319 357 1 176 72 11 538 16 732 - 16 732
(1) This reserve relates to the revaluation of available-for-sale financial assets
(2) Amount is R12 441
Statement of cash flows
for the six months ended 31 December 2014
Group Group Group
Six months Six months Year
ended ended ended
December December June
2014 2013 2014
R million Unaudited Unaudited Audited
Cash flow from operating activities 3 057 1 251 2 813
Cash generated by operations 3 296 3 352 6 424
Receipt arising from reinsurance contracts 1 250 - -
Net purchase of investments held to back policyholder liabilities (2 581) (2 742) (6 036)
Working capital changes 877 389 1 988
2 842 999 2 376
Dividends received 112 133 362
Interest received 411 446 802
Interest paid (41) (34) (63)
Taxation paid (267) (293) (664)
Cash flow from investing activities (71) (859) (1 102)
Disposal/(purchase) of financial assets 121 (366) (228)
Purchase of equipment (126) (104) (208)
Purchase of intangible assets (208) (257) (512)
Increase in investment in associate (58) (132) (133)
Disposal of investment in associate 200 - -
Purchase of businesses - - (21)
Cash flow from financing activities (1 853) 297 (176)
Dividends paid to ordinary shareholders (460) (380) (810)
Dividends paid to preference shareholders (35) (34) (68)
Increase in borrowings 1 500 - -
Non-controlling interest share buy-backs - (3) (3)
Proceeds from issuance of ordinary shares - 1 030 1 032
Proceeds from issuance of preference shares - 45 45
Repayment of borrowings (14) (8) (18)
Settlement of puttable non-controlling interest liability (2 844) (352) (352)
Share buy-back - * *
Share issue costs - (1) (2)
Net increase in cash and cash equivalents 1 133 689 1 535
Cash and cash equivalents at beginning of period 3 520 1 887 1 887
Exchange gains on cash and cash equivalents 5 48 98
Cash and cash equivalents at end of period 4 658 2 624 3 520
Reconciliation to statement of financial position
Cash and cash equivalents 4 658 2 624 3 650
Bank overdraft included in borrowings at amortised cost - - (130)
Cash and cash equivalents at end of period 4 658 2 624 3 520
* Amount is R12 441
Additional information
at 31 December 2014
Financial assets - investments
Group Group
December June
2014 2014
R million Unaudited Audited
Available-for-sale financial assets: 7 482 7 578
- Equity securities 982 887
- Equity linked notes 40 30
- Debt securities 945 1 836
- Inflation linked securities - 71
- Money market securities 5 515 4 754
Financial assets at fair value through profit or loss: 35 995 32 753
- Equity securities 21 587 18 943
- Equity linked notes 2 365 1 642
- Debt securities 9 611 8 482
- Inflation linked securities 219 412
- Money market securities 2 213 3 274
43 477 40 331
Available-for-sale financial assets are shareholder investments. Unrealised gains and losses arising from changes in the fair value of these assets are recognised in
the statement of other comprehensive income. When the assets are sold the accumulated fair value adjustments are included in profit or loss as net realised gains/
losses on available-for-sale financial assets. Interest income and dividends received from these assets are recognised as investment income in profit or loss.
Financial assets designated as financial assets at fair value through profit or loss are those that are held in internal funds to match insurance and investment
contract liabilities that are linked to the changes in the fair value of these assets. Discovery recognises interest income, dividends received, realised and unrealised
gains and losses from these assets in profit or loss in 'Net fair value gains on financial assets at fair value through profit or loss'.
Exchange rates used in the preparation of these results
USD GBP
31 December 2014
- Average 11,04 17,82
- Closing 11,57 18,03
30 June 2014
- Average 10,43 17,06
- Closing 10,63 18,17
31 December 2013
- Average 10,16 16,20
- Closing 10,50 17,37
Fair value hierarchy of financial instruments
The Group's financial instruments measured at fair value have been disclosed using a fair value hierarchy. The hierarchy has three levels that reflect the significance
of the inputs used in measuring fair value. These are as follows:
Level 1 includes financial instruments that are measured using unadjusted, quoted prices in an active market for identical financial instruments. Quoted prices are
readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly
occurring market transactions on an arm's length basis.
Level 2 includes financial instruments that are valued using techniques based significantly on observable market data. Instruments in this category are valued using:
(a) quoted prices for similar instruments or identical instruments in markets which are not considered to be active or
(b) valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.
Level 3 includes financial instruments that are valued using valuation techniques that incorporate information other than observable market data and where at least
one input (which could have a significant effect on instruments' valuation) cannot be based on observable market data.
31 December 2014
R million (unaudited) Level 1 Level 2 Level 3 Total
Financial assets
Financial instruments at fair value through profit or loss:
- Equity securities 21 587 - - 21 587
- Equity linked notes - 2 365 - 2 365
- Debt securities 7 209 2 299 103 9 611
- Inflation linked securities 219 - - 219
- Money market securities 1 349 861 3 2 213
Available-for-sale financial instruments:
- Equity securities 982 - - 982
- Equity linked notes - 40 - 40
- Debt securities 832 17 96 945
- Money market securities 5 503 12 - 5 515
Derivative financial instruments at fair value:
- Hedges - 651 - 651
- Non-hedges - 1 - 1
37 681 6 246 202 44 129
Financial liabilities
Negative reserve funding - 5 112 - 5 112
Borrowings at amortised cost - 1 956 - 1 956
Derivative financial instruments at fair value:
- Hedges - 5 - 5
- Non-hedges - 4 - 4
- 7 077 - 7 077
Investments in unit trusts have been assessed as level 1, as the fair value derives from observable market data and are traded in an active market.
Shareholders' and policyholders' exposure to African Bank Investments Limited (ABIL), through indirect investments in unit trusts, have been reclassified to level 3
(from level 1) on the fair value hierarchy. The total exposure at 31 December 2014 is R202 million. Values are estimated by asset managers using valuation
techniques or models incorporating information based on unobservable market inputs. A 10% haircut has been applied to these investments.
30 June 2014
R million (audited) Level 1 Level 2 Level 3 Total
Financial assets
Financial instruments at fair value through profit or loss:
- Equity securities 18 937 6 - 18 943
- Equity linked notes - 1 642 - 1 642
- Debt securities 7 551 931 - 8 482
- Inflation linked securities 412 - - 412
- Money market securities 2 291 983 - 3 274
Available-for-sale financial instruments:
- Equity securities 887 - - 887
- Equity linked notes - 30 - 30
- Debt securities 1 834 2 - 1 836
- Inflation linked securities 71 - - 71
- Money market securities 4 748 6 - 4 754
Derivative financial instruments at fair value:
- Hedges - 585 - 585
- Non-hedges - 3 - 3
36 731 4 188 - 40 919
Financial liabilities
Puttable non-controlling interests - - 4 494 4 494
Negative reserve funding - 4 684 - 4 684
Borrowings at amortised cost - 572 - 572
Derivative financial instruments at fair value:
- Hedges - 3 - 3
- Non-hedges - 7 - 7
- 5 266 4 494 9 760
Segmental information
for the six months ended 31 December 2014
IFRS reporting adjustments
New Normalised
SA SA SA SA UK UK business All other Segment UK profit IFRS
R million Health Life Invest Vitality Health Life development segments total Life(1) DUT(2) adjustments(3) total
Income statement
Insurance premium revenue 8 4 700 3 932 - 3 434 1 213 498 - 13 785 (256) - - 13 529
Reinsurance premiums (1) (665) - - (607) (256) (95) - (1 624) 256 - - (1 368)
Net insurance premium revenue 7 4 035 3 932 - 2 827 957 403 - 12 161 - - - 12 161
Fee income from administration business 2 321 109 461 - 44 - 147 - 3 082 - - - 3 082
Vitality income - - - 1 003 156 - 300 - 1 459 - - - 1 459
Receipt arising from reinsurance contracts - 1 250 - - - - - - 1 250 - - - 1 250
Investment income on assets backing policyholder liabilities - 102 - - 26 - 10 - 138 - - (138) -
Finance charge on negative reserve funding - - - - - (153) - - (153) 153 - - -
Inter-segment funding# - (234) 234 - - - - - - - - - -
Net fair value gains on financial assets at fair value through profit or loss - 287 490 - - - - - 777 - 246 - 1 023
Net income 2 328 5 549 5 117 1 003 3 053 804 860 - 18 714 153 246 (138) 18 975
Claims and policyholders' benefits * (2 552) (2 298) - (2 146) (192) (325) - (7 513) 98 - - (7 415)
Insurance claims recovered from reinsurers * 540 - - 532 98 60 - 1 230 (98) - - 1 132
Net claims and policyholders' benefits - (2 012) (2 298) - (1 614) (94) (265) - (6 283) - - - (6 283)
Acquisition costs (1) (855) (332) (30) (275) (758) (68) - (2 319) (153) - - (2 472)
Marketing and administration expenses
- depreciation and amortisation (100) (14) - - (39) - (25) (1) (179) - - - (179)
- other expenses (1 273) (721) (190) (945) (1 069) (529) (783) (61) (5 571) (60) - (73) (5 704)
Recovery of expenses from reinsurers - - - - 151 - 63 - 214 - - - 214
Transfer from assets/liabilities under insurance contracts
- change in assets arising from insurance contracts - 923 - - - (98) - - 825 947 - - 1 772
- change in assets arising from reinsurance contracts - (18) - - 39 2 - - 23 - - - 23
- change in liabilities arising from insurance contracts - 26 (2 078) - (83) (5) (13) - (2 153) - - - (2 153)
- change in liabilities arising from reinsurance contracts - (1 412) - - - 947 - - (465) (947) - - (1 412)
Fair value adjustment to liabilities under investment contracts - (2) (28) - - - - - (30) - (246) - (276)
Share of net profits from equity accounted investments - - - - - - 48 - 48 - - - 48
Normalised profit/(loss) from operations 954 1 464 191 28 163 269 (183) (62) 2 824 (60) - (211) 2 553
Investment income earned on shareholder investments and cash 21 20 10 3 3 - 7 10 74 - - 138 212
Net realised gains on available-for-sale financial assets * (8) - - - - - - (8) - - - (8)
Once-off costs relating to business acquisitions - - - - (46) - - (27) (73) - - 73 -
Amortisation of intangibles from business combinations - - - - - - - (113) (113) - - - (113)
Puttable non-controlling interest fair value adjustment - - - - - - - 1 661 1 661 - - - 1 661
Finance costs (15) - - - (1) - - (90) (106) - - - (106)
Foreign exchange gains - - 2 - 2 - 14 - 18 - - - 18
Realised gain from sale of associate - - - - - - - 7 7 - - - 7
Profit before tax 960 1 476 203 31 121 269 (162) 1 386 4 284 (60) - - 4 224
Income tax expense (272) (416) (56) (5) (14) (60) 13 56 (754) 60 - - (694)
Profit for the period 688 1 060 147 26 107 209 (149) 1 442 3 530 - - - 3 530
* Amount is less than R500 000
# The inter-segment funding of R234 million reflects a notional allocation of interest earned on the negative reserve backing policyholders' funds of guaranteed investment products and hence is transferred to Discovery Invest.
The segment information is presented on the same basis as reported to the Chief Executive Officers of the reportable segments.
The segment total is then adjusted for accounting reclassifications and entries required to produce IFRS compliant results. These adjustments include the following:
1 The VitalityLife results are reclassified to account for the contractual arrangement as a reinsurance contract under IFRS 4.
2 The Discovery Unit Trusts (DUT) are consolidated into Discovery's results for IFRS purposes. In the Segment information the DUT column includes the effects of consolidating the unit trusts into Discovery's results, effectively being the
income and expenses relating to units held by third parties.
3 Investment income on assets backing policyholder liabilities is included as part of the normalised profit from operations in the segmental disclosure, but is included together with shareholder investment income for IFRS purposes.
Segmental information
for the six months ended 31 December 2013
IFRS reporting adjustments
New Normalised
SA SA SA SA UK UK business All other Segment UK profit IFRS
R million Health Life Invest Vitality Health Life development segments total Life(1) DUT(2) adjustments(3) total
Income statement
Insurance premium revenue 8 4 118 2 969 - 2 929 848 251 - 11 123 (122) - - 11 001
Reinsurance premiums (1) (613) - - (372) (122) (31) - (1 139) 122 - - (1 017)
Net insurance premium revenue 7 3 505 2 969 - 2 557 726 220 - 9 984 - - - 9 984
Fee income from administration business 2 136 86 363 - 43 - 9 - 2 637 - - 10 2 647
Guarantee received from HumanaVitality - - - - - - 10 - 10 - - (10) -
Vitality income - - - 910 91 - 166 - 1 167 - - - 1 167
Investment income on assets backing policyholder liabilities - 84 - - 22 - - - 106 - - (106) -
Finance charge on negative reserve funding - - - - - (74) - - (74) 74 - - -
Inter-segment funding# - (215) 215 - - - - - - - - - -
Net fair value gains on financial assets at fair value through profit or loss - 547 1 515 - - - - - 2 062 - 297 - 2 359
Net income 2 143 4 007 5 062 910 2 713 652 405 - 15 892 74 297 (106) 16 157
Claims and policyholders' benefits (1) (1 949) (1 108) - (2 029) (226) (183) - (5 496) 146 - - (5 350)
Insurance claims recovered from reinsurers (1) 450 - - 374 146 34 - 1 003 (146) - - 857
Net claims and policyholders' benefits (2) (1 499) (1 108) - (1 655) (80) (149) - (4 493) - - - (4 493)
Acquisition costs - (774) (249) (34) (241) (595) (40) - (1 933) (74) - - (2 007)
Marketing and administration expenses
- depreciation and amortisation (87) (15) - - - - (18) (1) (121) - - - (121)
- other expenses (1 194) (667) (160) (871) (846) (423) (428) (17) (4 606) (42) - - (4 648)
Recovery of expenses from reinsurers - - - - 127 - 26 - 153 - - - 153
Transfer from assets/liabilities under insurance contracts
- change in assets arising from insurance contracts - 284 - - - 644 - - 928 31 - - 959
- change in assets arising from reinsurance contracts - (4) - - (26) 1 - - (29) - - - (29)
- change in liabilities arising from insurance contracts - (53) (3 211) - 59 (2) (13) - (3 220) - - - (3 220)
- change in liabilities arising from reinsurance contracts - (30) - - - 31 - - 1 (31) - - (30)
Fair value adjustment to liabilities under investment contracts - (3) (186) - - - - - (189) - (297) - (486)
Share of net losses from equity accounted investments - - - - - - (16) - (16) - - - (16)
Normalised profit/(loss) from operations 860 1 246 148 5 131 228 (233) (18) 2 367 (42) - (106) 2 219
Investment income earned on shareholder investments and cash 18 29 8 4 2 - 10 15 86 - - 106 192
Net realised gains on available-for-sale financial assets - 41 2 - - - - - 43 - - - 43
Amortisation of intangibles from business combinations - - - - - - - (91) (91) - - - (91)
Puttable non-controlling interest fair value adjustment - - - - - - - 105 105 - - - 105
Finance costs (12) - - - (1) (1) - (95) (109) 1 - - (108)
Foreign exchange gains/(losses) - - 4 - (35) - 1 31 1 - - - 1
Profit before tax 866 1 316 162 9 97 227 (222) (53) 2 402 (41) - - 2 361
Income tax expense (245) (350) (45) (2) (18) (41) 11 35 (655) 41 - - (614)
Profit for the period 621 966 117 7 79 186 (211) (18) 1 747 - - - 1 747
# The inter-segment funding of R215 million reflects a notional allocation of interest earned on the negative reserve backing policyholders' funds of guaranteed investment products and hence is transferred to Discovery Invest.
The segment information is presented on the same basis as reported to the Chief Executive Officers of the reportable segments.
The segment total is then adjusted for accounting reclassifications and entries required to produce IFRS compliant results. These adjustments include the following:
(1) The VitalityLife results are reclassified to account for the contractual arrangement as a reinsurance contract under IFRS 4.
(2) The Discovery Unit Trusts (DUT) are consolidated into Discovery's results for IFRS purposes. In the Segment information the DUT column includes the effects of consolidating the unit trusts into Discovery's results, effectively being the
income and expenses relating to units held by third parties.
(3) Investment income on assets backing policyholder liabilities is included as part of the normalised profit from operations in the segmental disclosure, but is included together with shareholder investment income for IFRS purposes.
Review of Group results
for the six months ended 31 December 2014
New business annualised premium income
New business annualised premium income increased 17% for the six months ended 31 December 2014 when compared to the same period in the prior year.
December December %
R million 2014 2013 change
Discovery Health 2 806 2 623 7
Discovery Life 1 151 1 056 9
Discovery Invest 797 652 22
Discovery Insure 403 257 57
Discovery Vitality 104 90 16
VitalityHealth(1) 413 432 (4)
VitalityLife 502 420 20
The Vitality Group 61 50 22
Ping An Health 426 138 209
New business API of Group 6 663 5 718 17
(1) The comparative for VitalityHealth has been reduced by R130 million to exclude the new joiners as this has not been included in
the 2014 number. New joiners are additional members to existing employer groups.
(2) Due to the sale of the HumanaVitality associate in November 2014, R35 million new business API in respect of this associate has
been excluded from the comparative number.
New business API is calculated at 12 times the monthly premium for new recurring premium policies and 10% of the value of new single premium policies. It also
includes both automatic premium increases and servicing increases on existing policies. For The Vitality Group and Ping An Health, new business API is calculated
based on the date of policy inception.
Gross inflows under management
Gross inflows under management measures the total funds collected by Discovery and is an accurate measure of the growth of Discovery. Gross inflows under
management increased 18% for the six months ended 31 December 2014 when compared to the same period in the prior year.
December December %
R million 2014 2013 change
Discovery Health 24 589 22 011 12
Discovery Life 4 809 4 204 14
Discovery Invest 6 770 4 953 37
Discovery Insure 506 253 100
Discovery Vitality 1 003 910 10
VitalityHealth 3 634 3 063 19
VitalityLife 1 213 848 43
The Vitality Group 300 176 70
Other new business development 139 7 1886
Gross inflows under management 42 963 36 425 18
Less: collected on behalf of third parties (24 637) (21 488) 15
Discovery Health (22 260) (19 867) 12
Discovery Invest (2 377) (1 621) 47
Gross income of Group per the segmental information 18 326 14 937 23
Gross income is made up as follows:
- Insurance premium revenue 13 785 11 123 24
- Fee income from administration business 3 082 2 637 17
- Vitality income 1 459 1 167 25
- Guarantee received from HumanaVitality - 10
Gross income of Group per the segmental information 18 326 14 937 23
Normalised profit from operations
The following table shows the main components of the normalised profit from operations for the six months ended 31 December 2014:
December December %
R million 2014 2013 change
Discovery Health 954 860 11
Discovery Life 1 464 1 246 17
Discovery Invest 191 148 29
Discovery Vitality 28 5 460
VitalityHealth 163 131 24
VitalityLife 269 228 18
Normalised profit from established businesses 3 069 2 618 17
Development and other segments (245) (251) (2)
Normalised profit from operations 2 824 2 367 19
Significant transactions affecting the current results
Discovery acquired Prudential's remaining 25% shareholding in the UK joint venture
In November 2014, Prudential Assurance Company (Prudential) agreed to sell its remaining 25% shareholding in Prudential Health Holdings Limited (PHHL) to
Discovery Limited for GBP 155 million (R2 790 million). The note entitled 'Put options in subsidiaries' gives a detailed description of the impact of this transaction.
This acquisition was primarily funded as follows:
- Bridging debt was raised by Discovery Limited for R1.5 billion. This is included in borrowings at amortised cost in the Statement of Financial Position.
- Discovery Life Limited entered into a financial reinsurance treaty resulting in a cash inflow of R1 250 million. This treaty effectively reinsures approximately 8% of
the negative reserve at 31 December 2014. The inflow has been disclosed as a receipt arising from reinsurance contracts and transfer to liabilities arising from
reinsurance contracts in profit or loss.
Following the purchase of the remaining 25% in PHHL, the products being offered in the UK-market have been rebranded. PruHealth and PruProtect have been
rebranded as VitalityHealth and VitalityLife respectively. These rebranding costs, as well as other once-off costs relating to the acquisition totalled R73 million in the
six month period to 31 December 2014 and have been excluded from normalised headline earnings.
HumanaVitality partnership ended
In November 2014, the HumanaVitality partnership ended. This resulted in the following transactions:
- Humana paid The Vitality Group (TVG) USD 10 million for its initial investment and a further USD 9 million of accrued profits (totaling R200 million) to purchase
TVG's 25% shareholding in HumanaVitality. This resulted in a profit from the sale of the associate of R7 million being recognised in profit or loss. A deferred tax
liability raised upon recognition of the associate of R35 million has also been released to income tax in the Income Statement. Both these values have been
excluded from headline earnings and normalised headline earnings.
- TVG Inc. paid Humana USD 5 million (R54 million) to purchase Humana's 25% shareholding in TVG LLC. The note entitled 'Put options in subsidiaries' gives a
detailed description of the impact of this transaction.
Put options in subsidiaries
During the 2011 financial year, put options were granted to the non-controlling interests of two of Discovery's subsidiaries, entitling the non-controlling interests to
sell their interests in the subsidiaries to Discovery at contracted dates at fair value. In accordance with IAS 32, Discovery recognised the fair value of the non-
controlling interest, being the present value of the estimated purchase price, as a financial liability in the Statement of Financial Position (Puttable non-controlling
interests).
In November 2014, both these put options lapsed, with the purchase by Discovery of the following:
- Prudential's remaining 25% shareholding in PHHL for GBP 155 million (R2 790 million).
- Humana's 25% shareholding in TVG LLC for USD 5 million (R54 million).
The excess between the carrying amount of the puttable non-controlling interest financial liability and the consideration paid, has been recognised in profit or loss as
a puttable non-controlling interest fair value adjustment. This profit has been included in headline earnings but reversed when calculating normalised headline
earnings.
The aggregate effects of these transactions are as follows:
R million Total
Value of puttable non-controlling interests at 1 July 2014 4 494
Finance costs recognised in profit or loss 64
Subsidiary purchases (2 844)
Fair value adjustments recognised in profit or loss (1 661)
Net exchange differences arising during the year allocated to the translation reserve (53)
Value of puttable non-controlling interests at 31 December 2014 -
Other significant items in these results
Share-based payments
Included in marketing and administration expenses, in employee costs, is R203 million (2013: R137 million) in respect of phantom shares and options granted under
the employee share incentive schemes, which is expensed in accordance with the requirements of IFRS 2. Discovery has entered into transactions to hedge its
exposure to changes in the Discovery share price arising from these schemes. As at 31 December 2014, approximately 92.6% (2013: 90%) of this exposure was
hedged. Fair value gains of R96 million (2013: R49 million) relating to the hedge were recognised in profit or loss resulting in a net expense to Discovery of R107
million (2013: R88 million).
Taxation
For South African entities that are in a tax paying position, tax has been provided at 28% (2013: 28%) in the financial statements. No deferred tax has been raised
on the assessed losses in Discovery Insure, VitalityHealth and The Vitality Group.
Material transactions with related parties
Discovery Health administers the Discovery Health Medical Scheme (DHMS) and provides managed care services for which it charges an administration fee and a
managed healthcare fee respectively. These fees are determined on an annual basis and approved by the trustees of DHMS. The fees totalled R2 094 million for the
six months ended 31 December 2014 (2013: R1 942 million). Discovery offers the members of DHMS access to the Vitality programme.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss have increased by R3.2 billion due to the sale of Discovery Invest products.
Negative reserve funding
The negative reserve funding liability on Discovery's Statement of Financial Position represents the acquisition costs that are funded by Prudential on behalf of
VitalityLife. The liability unwinds and is repaid on a matched basis as the cash flows emerge from the assets arising from insurance contracts. In the event that the
cash flows do not emerge as anticipated, VitalityLife would be required to repay these liabilities from other resources.
The increase in the negative reserve funding liability relates to the increase in new business written by VitalityLife in the current period.
Deferred tax liability
The deferred tax liability is primarily attributable to the application of the Financial Services Board directive 145. This directive allows for the zeroing on a statutory
basis of the assets arising from insurance contracts. The statutory basis is used when calculating tax payable for Discovery Life, resulting in a timing difference
between the tax base and the accounting base.
Shareholder information
Directorate
There were no changes to the Board of Discovery Limited during the current period.
Dividend policy and capital
The following final dividends were paid during the current period:
- Preference share dividend of 442.19178 cents per share, paid on 22 September 2014.
- Ordinary share dividend of 78.0 cents per share, paid on 13 October 2014.
On the statutory basis the capital adequacy requirement of Discovery Life was R519 million (2013: R517 million) and was covered 3.5 times (2013: 3.9 times).
B preference share cash dividend declaration:
On 19 February 2015, the Directors declared a gross cash dividend of 465.0 cents (395.25 cents net of dividend withholding tax) per B preference share for
the period 1 July 2014 to 31 December 2014. The dividend has been declared from income reserves and no secondary tax on companies' credits has been used. A
dividend withholding tax of 15% will be applicable to all shareholders who are not exempt.
The issued preference share capital at the declaration date is 8 million B preference shares.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Friday, 6 March 2015
Shares commence trading "ex" dividend Monday, 9 March 2015
Record date Friday, 13 March 2015
Payment date Monday, 16 March 2015
B preference share certificates may not be dematerialised or rematerialised between Monday, 9 March 2015 and Friday, 13 March 2015, both days inclusive.
Ordinary share cash dividend declaration
Notice is hereby given that the Directors have declared an interim gross cash dividend of 85.5 cents (72.675 cents net of dividend withholding tax) per ordinary
share for the six month period ended 31 December 2014. The dividend has been declared from income reserves and no secondary tax on companies' credits has
been used. A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt.
The issued ordinary share capital at the declaration date is 591 872 390 ordinary shares.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Friday, 13 March 2015
Shares commence trading "ex" dividend Monday, 16 March 2015
Record date Friday, 20 March 2015
Payment date Monday, 23 March 2015
Share certificates may not be dematerialised or rematerialised between Monday, 16 March 2015 and Friday, 20 March 2015, both days inclusive.
Accounting policies
The interim results have been prepared in accordance with International Financial Reporting Standards including IAS 34, as well as the South African Companies
Act 71 of 2008. The accounting policies adopted are consistent with the accounting policies applied in the last annual report.
Embedded value statement
for the six months 31 December 2014
The embedded value of Discovery at 31 December 2014 consists of the following components:
- the free surplus attributed to the covered business at the valuation date;
- plus: the required capital to support the in-force covered business at the valuation date;
- plus: the present value of expected future shareholder cash flows from the in-force business;
- less: the cost of required capital.
The present value of future shareholder cash flows from the in-force covered business is calculated as the value of projected future after-tax shareholder cash flows
of the business in force at the valuation date, discounted at the risk discount rate.
The value of new business is the present value, at the point of sale, of the projected future after-tax shareholder cash flows of the new business written by
Discovery, discounted at the risk discount rate, less an allowance for the reserving strain (for Life), initial expenses and cost of required capital. The value of new
business is calculated using the current reporting date assumptions.
For Life, the shareholder cash flows are based on the release of margins under the Statutory Valuation Method ("SVM") basis.
The embedded value includes the insurance and administration profits of the subsidiaries in the Discovery Limited group. Covered business includes business
written in South Africa through Discovery Life, Discovery Invest, Discovery Health and Discovery Vitality, and in the United Kingdom through VitalityLife (previously
PruProtect) and VitalityHealth (previously PruHealth). For The Vitality Group (USA), AIA Vitality, Ping An Health and Discovery Insure, no published value has been
placed on the current in-force business as the businesses have not yet reached suitable scale with predictable experience.
In November 2014, Prudential Assurance Company (Prudential) agreed to sell its remaining 25% shareholding in Prudential Health Holdings Limited (PHHL) to
Discovery Limited for GBP 155 million (R2 790 million). Following the purchase of the remaining 25% in PHHL, PruHealth and PruProtect have been rebranded as
VitalityHealth and VitalityLife respectively.
In November 2014, the HumanaVitality partnership concluded. As a result, Humana purchased The Vitality Group's 25% shareholding in HumanaVitality and The
Vitality Group purchased Humana's 25% shareholding in TVG LLC.
During the 2011 financial year, put options were granted to the non-controlling interests of PHHL and TVG LLC, entitling the non-controlling interest to sell their
interests in the subsidiaries to Discovery at contracted dates at fair value. In November 2014, both these put options lapsed, with the purchase by Discovery of the
remaining 25% of PHHL and TVG LLC.
For accounting purposes, in accordance with IAS32, Discovery has included 100% of the subsidiaries' results. The fair value of the non-controlling interest, being the
present value of the estimated purchase price, is recognised as a financial liability in the Statement of Financial Position (Puttable non-controlling interest). For
embedded value purposes, the accounting treatment is unwound to reflect Discovery's 75% shareholding in these subsidiaries up to the date Discovery's
shareholding increased to 100%.
In August 2011, Discovery raised R800 million through the issue of non-cumulative, non-participating, non-convertible preference shares. For embedded value
purposes, the capital raised, net of share issue expenses, has been excluded from the adjusted net worth.
The 31 December 2014 embedded value results and disclosures were not subjected to an external review or audit.
Table 1: Group embedded value
31 December 31 December % 30 June
R million 2014 2013 change 2014
Shareholders' funds 20 599 16 332 26 17 411
Adjustment to shareholders' funds from published basis(1) (16 441) (10 894) (11 799)
Adjusted net worth 4 158 5 438 5 612
- Free surplus 192 2 248 2 311
- Required capital(2) 3 966 3 190 3 301
Value of in-force covered business before cost of required capital 42 299 35 189 38 368
Cost of required capital (1 003) (845) (930)
Discovery Limited embedded value(3) 45 454 39 782 14 43 050
Number of shares (millions) 574.2 574.1 574.1
Embedded value per share R79.16 R69.29 14 R74.98
Diluted number of shares (millions) 591.2 591.2 591.2
Diluted embedded value per share(4) R78.25 R68.55 14 R74.13
(1) A breakdown of the adjustment to shareholders' funds is shown in the table below:
31 December 31 December 30 June
R million 2014 2013 2014
Life net assets under insurance contracts (12 119) (10 451) (11 691)
VitalityHealth and VitalityHealth Insurance Limited deferred acquisition costs (net of
deferred tax) (226) (214) (243)
VitalityLife receivable relating to the Unemployment Cover benefit (net of deferred tax) (43) (32) (34)
Goodwill and intangible assets (net of deferred tax) relating to the acquisition of Standard
Life Healthcare and the Prudential joint venture (3 274) (2 356) (2 550)
Unwind puttable non-controlling interest liability - 2 927 3 511
Non-controlling share of profits/losses included in retained earnings - 11 (13)
Net preference share capital raised (779) (779) (779)
(16 441) (10 894) (11 799)
(2) The required capital at December 2014 for Life is R1 037 million (June 2014: R1 043 million; December 2013: R1 033 million), for Health and Vitality is R635
million (June 2014: R614 million; December 2013: R589 million), for VitalityHealth and VitalityHealth Insurance Limited is R1 647 million (June 2014: R1 154 million;
December 2013: R1 173 million) and for VitalityLife is R647 million (June 2014: R490 million; December 2013: R397 million). For Life, the required capital was set
equal to two times the statutory Capital Adequacy Requirement ("CAR"). For Health and Vitality, the required capital was set equal to two times the monthly renewal
expense and Vitality benefit cost. For VitalityHealth, the required capital amount was set equal to 1.25 times the capital prescribed by the Prudential Regulatory
Authority under the Individual Capital Adequacy Standards ("ICAS") framework. For VitalityLife, the required capital was set equal to the UK Pillar 1 capital
requirement.
(3) The Discovery Limited embedded value is calculated based on a risk discount rate using the CAPM approach with specific reference to the Discovery beta
coefficient. The Discovery beta coefficient used at 31 December 2014 is 0.33 (30 June 2014: 0.4). The Discovery beta coefficient reflects the historic performance of
the Discovery share price relative to the market and may not allow fully for non-market related and non-financial risk. Investors may want to form their own view on
an appropriate allowance for the non-financial risks which have not been modelled explicitly. To illustrate the sensitivity of the embedded value to the beta coefficient,
the 31 December 2014 embedded value would be R1 042 million lower had the beta coefficient as at 30 June 2014 of 0.4 been used. As a prudent response to the
recent significant reduction in the beta coefficient used in the Discovery EV, a review of the methodology will be undertaken.
(4) The diluted embedded value per share allows for Discovery's BEE transaction where the impact is dilutive i.e. where the current embedded value per share
exceeds the current transaction value.
Table 2: Value of in-force covered business
Value before Value after
cost of Cost of cost of
required required required
R million capital capital capital
at 31 December 2014
Health and Vitality 14 670 (207) 14 463
Life and Invest(1) 22 050 (523) 21 527
VitalityHealth(2) 3 996 (122) 3 874
VitalityLife(2) 1 583 (151) 1 432
Total 42 299 (1 003) 41 296
at 31 December 2013
Health and Vitality 12 942 (199) 12 743
Life and Invest(1) 18 835 (392) 18 443
VitalityHealth(2) 2 411 (150) 2 261
VitalityLife(2) 1 001 (104) 897
Total 35 189 (845) 34 344
at 30 June 2014
Health and Vitality 13 879 (209) 13 670
Life and Invest(1) 20 701 (481) 20 220
VitalityHealth(2) 2 762 (130) 2 632
VitalityLife(2) 1 026 (110) 916
Total 38 368 (930) 37 438
(1) Included in the Life and Invest value of in-force covered business is R800 million (June 2014: R735 million; December 2013: R673 million) in respect of
investment management services provided on off balance sheet investment business. The net assets of the investment service provider are included in the adjusted
net worth.
(2) The value of in-force has been converted using the closing exchange rate of R18.03/GBP (June 2014: R18.17/GBP; December 2013: R17.37/GBP). The value
of in-force at 31 December 2014 represents Discovery's 100% ownership of VitalityHealth and VitalityLife, compared to 75% in prior periods.
Table 3: Group embedded value earnings
Six months ended Year ended
31 December 31 December 30 June
R million 2014 2013 2014
Embedded value at end of period 45 454 39 782 43 050
Less: Embedded value at beginning of period (43 050) (35 721) (35 721)
Increase in embedded value 2 404 4 061 7 329
Net change in capital (1) (1 021) (1 020)
Dividends paid 495 413 878
Transfer to hedging reserve (41) 70 30
Embedded value earnings 2 857 3 523 7 217
Annualised return on opening embedded value 13.7% 20.7% 20.2%
Table 4: Components of Group embedded value earnings
Six months
ended Year
31 ended
December 30 June
Six months ended 31 December 2014 2013 2014
Value of
Cost of in-force
Net required covered Embedded Embedded Embedded
R million Worth capital business Value Value Value
Total profit from new business (at point of sale) (1 127) (61) 2 409 1 221 1 086 2 248
Profit from existing business
- Expected return 1 687 25 191 1 903 1 581 3 234
- Change in methodology and assumptions(1) 1 382 51 (502) 931 (108) 21
- Experience variances (44) (11) 560 505 625 1 433
Acquisition of Prudential joint venture(2) (1 978) (78) 1 282 (774) - -
Acquisition of Discovery Insure joint venture - - - - (297) (297)
Intangibles no longer allocated to minorities(3) (765) - - (765) - -
Increase in goodwill and intangibles (90) - - (90) (125) (256)
Other initiative costs(4) (219) - 8 (211) (185) (445)
Non-recurring expenses(5) (100) - - (100) (9) (23)
Acquisition costs(6) (32) - (2) (34) (36) (2)
Finance costs (19) - - (19) (11) (37)
Foreign exchange rate movements 68 1 (7) 62 765 986
Other(7) 140 - (8) 132 - -
Return on shareholders' funds(8) 96 - - 96 237 355
Embedded value earnings (1 001) (73) 3 931 2 857 3 523 7 217
(1) The changes in methodology and assumptions will vary over time to reflect adjustments to the model and assumptions as a result of changes to the operating
and economic environment. The current period's changes are described in detail in Table 6 below (for previous periods refer to previous embedded value
statements).
(2) The net worth item represents the difference between the purchase price and the minority share of PHHL's tangible net asset value at the acquisition date. The
value of in-force covered business and cost of required capital items represent the 25% of the value in-force and cost of required capital that Discovery purchased in
the transaction.
(3) This item reflects the unwinding of the goodwill and intangible assets (net of deferred tax) relating to the acquisition of Standard Life Healthcare and the
Prudential joint venture allocated to minorities.
(4) This item reflects Group initiatives including expenses relating to the investment in The Vitality Group, Vitality International, once-off expenses in Invest,
Discovery Insure and other new business initiatives.
(5) This item includes rebranding costs, as well as other once-off costs relating to the acquisition of 25% of PHHL, totalling R73 million.
(6) Acquisition costs relate to commission paid on Life business and expenses incurred in writing Health and Vitality business that has been written over the period
but will only be activated and on risk after the valuation date. These policies are not included in the embedded value or the value of new business and therefore the
costs are excluded.
(7) This item includes the tax benefit that will be obtained as the VitalityHealth DAC and intangible software assets amortise.
(8) The return on shareholders' funds is shown net of tax and management charges.
Table 5: Experience variances
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value Value Value Value
Net of Net of Net of Net of
R million worth in-force worth in-force worth in-force worth in-force Total
Renewal expenses 1 - 2 2 (67) - 6 - (56)
Other expenses 2 - - - - - - - 2
Lapses and surrenders 4 124 (90) 61 - (25) 15 (2) 87
Mortality and morbidity - - 79 (6) 98 - 23 - 194
Policy alterations(1) - (11) (188) 159 - - (11) 3 (48)
Premium and fee income (1) 19 (32) 67 - - - - 53
Economic assumptions - - (69) 19 - - - - (50)
Commission - - - - 30 - - - 30
Tax(2) (4) - 115 (124) (15) - 12 - (16)
Reinsurance - - - - 33 - - - 33
Maintain modelling term(3) - 107 - 96 - 26 - - 229
Vitality benefits 23 - - - (5) - - - 18
Other 51 3 (49) 36 (0) 0 (7) (5) 29
Total 76 242 (232) 310 74 1 38 (4) 505
(1) Policy alterations relate to changes to existing benefits at the request of the policyholder.
(2) The tax variance for Life and Invest arises due to a movement in the deferred tax asset which delays the payment of tax.
(3) The projection term for Health and Vitality, Life, Group Life and VitalityHealth at 31 December 2014 has not been changed from that used in the 30 June 2014
embedded value calculation. Therefore, an experience variance arises because the total term of the in-force covered business is effectively increased by six months.
Table 6: Methodology and assumption changes
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value Value Value Value
Net of Net of Net of Net of
R million worth in-force worth in-force worth in-force worth in-force Total
Modelling changes - - (23) (27) - - 3 (1) (48)
Expenses - - - - - - - - -
Lapses - - (30) 26 - - - - (4)
Mortality and morbidity - - - - - (1) - - (1)
Benefit enhancements - - - - - - - - -
Vitality benefits - (1) - - - - - - (1)
Tax - - - - - - - - -
Economic assumptions(1) - 242 (18) 760 - 383 (11) 98 1 454
Premium and fee income(2) - - (157) (205) - - - - (362)
Reinsurance(3) - - 1 497 (1 584) 121 (141) - - (107)
Other - - - - - - - - -
Total - 241 1 269 (1 030) 121 241 (8) 97 931
(1) This is due to the reduction in the risk discount rate following the reduction in the risk free rate since 30 June 2014, and the change in the beta coefficient from
0.4 at 30 June 2014 to 0.33 at 31 December 2014. For VitalityHealth and VitalityLife, this further includes the impact of aligning the equity risk premium assumption
used across the Discovery EV, resulting in a change from 4.0% at 30 June 2014 to 3.5% at 31 December 2014.
(2) Higher levels of engagement in the Vitality programme resulted in lower levels of future premium and higher policyholder benefits being projected.
(3) For Life and VitalityHealth, the reinsurance item primarily relates to the impact of the financing reinsurance arrangements.
Table 7: Embedded value of new business
Six months ended Year ended
31 December 31 December % 30 June
R million 2014 2013 change 2014
Healthy and Vitality
Present value of future profits from new business at point of sale 269 244 570
Cost of required capital (9) (8) (19)
Present value of future profits from new business at point of sale after cost of
required capital(1) 260 236 10 551
New business annualised premium income(2) 1 032 944 9 2 858
Life and Invest
Present value of future profits from new business at point of sale(3) 680 556 1 191
Cost of required capital (29) (26) (52)
Present value of future profits from new business at point of sale after cost of
required capital(1) 651 530 23 1 139
New business annualised premium income(4) 1 239 1 065 16 2 163
Annualised profit margin(5) 6.2% 6.3% 6.3%
Annualised profit margin excluding Invest Business 9.5% 10.1% 10.1%
VitalityHealth
Present value of future profits from new business at point of sale 22 70 118
Cost of required capital (6) (10) (21)
Present value of future profits from new business at point of sale after cost of
required capital(1,6) 16 60 (73) 97
New business annualised premium income (Rand)(7) 345 348 (1) 761
Annualised profit margin(5) 0.7% 3.1% 2.3%
VitalityLife(8)
Present value of future profits from new business at point of sale 311 274 493
Cost of required capital (17) (14) (32)
Present value of future profits from new business at point of sale after cost of
required capital(1,6) 294 260 13 461
New business annualised premium income (Rand) 391 315 24 647
Annualised profit margin(5) 9.5% 11.4% 10.0%
(1) The Discovery Limited embedded value of new business is calculated based on a risk discount rate using the CAPM approach with specific reference to the
Discovery beta coefficient. The Discovery beta coefficient used at 31 December 2014 is 0.33 (30 June 2014: 0.4). The Discovery beta coefficient reflects the historic
performance of the Discovery share price relative to the market and may not allow fully for non-market related and non-financial risk. Investors may want to form
their own view on an appropriate allowance for the non-financial risks which have not been modelled explicitly. To illustrate the sensitivity of the embedded value of
new business to the beta coefficient, the 31 December 2014 embedded value of new business would be R53 million lower had the beta coefficient as at 30 June
2014 of 0.4 been used. As a prudent response to the recent significant reduction in the beta coefficient used in the Discovery EV, a review of the methodology will
be undertaken.
(2) Health new business annualised premium income is the gross contribution to the medical schemes. The new business annualised premium income shown
above excludes premiums in respect of members who join an existing employer where the member has no choice of medical scheme, as well as premiums in
respect of new business written during the period but only activated after 31 December 2014.
The total Health and Vitality new business annualised premium income written over the period was R2 910 million (June 2014: R5 206 million; December 2013: R2
713 million).
(3) Included in the Life and Invest embedded value of new business is R32 million (June 2014: R39 million; December 2013: R18 million) in respect of investment
management services provided on off balance sheet investment business.
Risk business written prior to the valuation date allows certain Invest business to be written at financially advantageous terms, the impact of which has been
recognised in the value of new business.
(4) Life new business is defined as Life policies or Discovery Retirement Optimiser policies which incepted during the reporting period and which are on risk at the
valuation date. Invest new business is defined as business where at least one premium has been received and which has not been refunded after receipt.
The new business annualised premium income of R1 239 million (June 2014: R2 163 million; December 2013: R1 065 million) (single premium APE: R481 million
(June 2014: R865 million; December 2013: R385 million)) shown above excludes automatic premium increases and servicing increases in respect of existing
business. The total Life new business annualised premium income written over the period, including automatic premium increases of R457 million (June 2014: R773
million; December 2013: R387 million) and servicing increases of R252 million (June 2014: R473 million; December 2013: R255 million) was R1 948 million (June
2014: R3 409 million; December 2013: R1 707 million) (single premium APE: R502 million (June 2014: R904 million; December 2013: R409 million)). Single
premium business is included at 10% of the value of the single premium.
Policy alterations, including Discovery Retirement Optimisers added to existing Life Plans are shown in Table 5 as experience variances and not included as new
business.
Term extensions on existing contracts are not included as new business.
(5) The annualised profit margin is the value of new business expressed as a percentage of the present value of future premiums.
(6) VitalityHealth and VitalityLife new business values have been prorated to allow for Discovery's ownership increasing from 75% to 100% in November 2014.
(7) VitalityHealth new business is defined as individuals and employer groups which incepted during the reporting period. The new business annualised premium
income shown above has been adjusted to exclude premiums in respect of members who join an existing employer group after the first month as well as premiums
in respect of new business written during the period but only activated after 31 December 2014.
(8) VitalityLife new business is defined as policies which incepted during the reporting period and which are on risk at the valuation date.
Table 8: Embedded value economic assumptions
31 December 31 December 30 June
2014 2013 2014
Beta coefficient
South Africa 0.33 0.43 0.40
United Kingdom 0.33 0.43 0.40
Equity risk premium (%)
South Africa 3.50 3.50 3.50
United Kingdom 3.50 4.00 4.00
Risk discount rate (%)
Health and Vitality 10.155 10.500 10.650
Life and Invest 10.155 10.500 10.650
VitalityHealth 3.03 4.70 4.24
VitalityLife 4.22 5.76 5.50
Rand/GB Pound Exchange Rate
Closing 18.03 17.37 18.17
Average 17.82 16.20 17.06
Medical inflation (%)
South Africa 8.00 8.00 8.25
United Kingdom 6.50 6.50 6.50
Expense inflation and CPI (%)
South Africa 5.00 5.00 5.25
United Kingdom - VitalityHealth 3.00 3.40 3.30
- VitalityLife 3.00 3.40 3.30
Pre-tax investment return (%)
South Africa - Cash 7.50 7.50 7.75
- Bonds 9.00 9.00 9.25
- Equity 12.50 12.50 12.75
United Kingdom - VitalityHealth investment return 1.87 2.94 3.16
- VitalityLife investment return 3.26 4.00 3.90
Income tax rate (%)
South Africa 28.00 28.00 28.00
United Kingdom - Long Term 20.00 20.00 20.00
Projection term
- Health and Vitality 20 years 20 years 20 years
- Life value of in-force 40 years 40 years 40 years
- Group Life 10 years 10 years 10 years
- VitalityHealth 20 years 20 years 20 years
Life and Invest mortality, morbidity and lapse and surrender assumptions were derived from internal experience, where available, augmented by reinsurance and
industry information.
The Health and Vitality lapse assumptions were derived from the results of recent experience investigations.
The VitalityHealth assumptions were derived from internal experience, augmented by industry information.
VitalityLife assumptions were derived from internal experience, where available, augmented by reinsurance, industry and Discovery group information.
Renewal expense assumptions were based on the results of the latest expense and budget information.
The initial expenses included in the calculation of the embedded value of new business are the actual costs incurred excluding expenses of an exceptional or
non-recurring nature.
The South African investment return assumption was based on a single interest rate derived from the risk-free zero coupon government bond yield curve. Other
economic assumptions were set relative to this yield. The current and projected tax position of the policyholder funds within the Life company has been taken into
account in determining the net investment return assumption.
The best estimate investment return assumption for VitalityHealth and VitalityLife was based on the single interest rate derived from the risk-free zero coupon
sterling yield curve. The United Kingdom expense inflation assumption was set in line with long-term United Kingdom inflation expectations.
It is assumed that, for the purposes of calculating the cost of required capital, the Life and Invest required capital amount will be backed by surplus assets consisting
of 100% equities and the Health, Vitality and VitalityHealth required capital amounts will be fully backed by cash. The VitalityLife required capital amount is assumed
to earn the same return as the assets backing the VitalityLife policyholder liabilities. Allowance has been made for tax and investment expenses in the calculation of
the cost of capital. In calculating the capital gains tax ("CGTc") liability, it is assumed that the portfolio is realised every 5 years. The Life and Invest cost of capital is
calculated using the difference between the gross of tax equity return and the equity return net of tax and expenses. The Health and Vitality and VitalityHealth cost of
required capital is calculated using the difference between the risk discount rate and the net of tax cash return. The VitalityLife cost of required capital is calculated
using the difference between the risk discount rate and the net of tax asset return assumption.
Sensitivity to the embedded value assumptions
The embedded value has been calculated in accordance with the Actuarial Society of South Africa's Advisory Practice Note APN 107: Embedded Value Reporting.
The risk discount rate, calculated in accordance with the guidance note, uses the CAPM approach with specific reference to the Discovery beta coefficient. The
Discovery beta coefficient reflects the historic performance of the Discovery share price relative to the market and may not allow fully for non-market related and
non-financial risk. Investors may want to form their own view on an appropriate allowance for the non-financial risks which have not been modelled explicitly. As a
prudent response to the recent significant reduction in the beta coefficient used in the Discovery EV, a review of the methodology will be undertaken. The sensitivity
of the embedded value and the embedded value of new business at 31 December 2014 to changes in the risk discount rate is included in the tables below.
For each sensitivity illustrated below, all other assumptions have been left unchanged. No allowance has been made for management action such as risk premium
increases where future experience is worse than the base assumptions.
Table 9: Embedded value sensitivity
Health and Vitality Life and Invest VitalityHealth VitalityLife(2)
Cost of Cost of Cost of Cost of
Adjusted Value of required Value of required Value of required Value of required Embedded %
R million net worth in-force capital in-force capital in-force capital in-force capital value change
Base 4 158 14 670 (207) 22 050 (523) 3 996 (122) 1 583 (151) 45 454
Impact of:
Risk discount rate +1% 4 158 13 791 (236) 19 595 (458) 3 701 (225) 1 366 (208) 41 484 (9)
Risk discount rate -1% 4 158 15 650 (174) 25 071 (603) 4 328 (4) 1 857 (76) 50 207 10
Lapses -10% 4 158 15 235 (218) 24 024 (560) 4 622 (127) 1 714 (169) 48 679 7
Interest rates -1%(1) 4 158 14 760 (196) 22 576 (574) 4 299 (115) 2 204 (177) 46 935 3
Equity and property market value -10% 4 055 14 670 (207) 21 856 (522) 3 996 (122) 1 583 (151) 45 158 (1)
Equity and property return +1% 4 158 14 670 (207) 22 249 (523) 3 996 (122) 1 583 (151) 45 653 0
Renewal expenses -10% 4 158 16 130 (192) 22 314 (521) 4 329 (122) 1 555 (150) 47 501 5
Mortality and morbidity -5% 4 158 14 670 (207) 23 407 (511) 5 371 (122) 1 557 (148) 48 175 6
Projection term +1 year 4 158 14 896 (210) 22 261 (527) 4 058 (122) 1 583 (151) 45 946 1
(1) All economic assumptions were reduced by 1%.
(2) The sensitivity impact on the VitalityLife value of in-force excludes the net of tax change in negative reserves.
The following table shows the effect of using different assumptions on the embedded value of new business.
Table 10: Value of new business sensitivity
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value of Cost of Value of Cost of Value of Cost of Value of Cost of Value of
new required new required new required new required new %
R million business capital business capital business capital business capital business change
Base 269 (9) 680 (29) 22 (6) 311 (17) 1 221
Impact of:
Risk discount rate +1% 245 (10) 541 (25) 8 (10) 293 (25) 1 017 (17)
Risk discount rate -1% 295 (7) 843 (33) 37 (1) 335 (10) 1 459 19
Lapses -10% 287 (9) 811 (31) 47 (6) 361 (20) 1 440 18
Interest rates -1%(1) 273 (8) 711 (32) 35 (5) 321 (20) 1 275 4
Equity and property return +1% 269 (8) 698 (29) 21 (6) 312 (18) 1 239 1
Renewal expense -10% 311 (8) 695 (29) 42 (6) 323 (18) 1 310 7
Mortality and morbidity -5% 269 (8) 738 (28) 78 (6) 328 (18) 1 353 11
Projection term +1 year 274 (9) 690 (29) 22 (6) 312 (18) 1 236 1
Acquisition costs -10% 277 (8) 735 (29) 27 (2) 336 (18) 1 318 8
(1) All economic assumptions were reduced by 1%.
Transfer secretaries Computershare Investor Services Pty Limited (Registration number 2004/003647/07) Ground Floor, 70 Marshall Street, Johannesburg 2001,
PO Box 61051, Marshalltown 2107
Sponsors Rand Merchant Bank (A division of FirstRand Bank Limited)
Secretary and registered office MJ Botha, Discovery Limited (Incorporated in the Republic of South Africa) (Registration number: 1999/007789/06) Company tax
reference number: 9652/003/71/7
JSE share code: DSY ISIN: ZAE000022331 JSE share code: DSBP ISIN: ZAE000158564
155 West Street, Sandton 2146 PO Box 786722, Sandton 2146 Tel: (011) 529 2888 Fax: (011) 539 8003
Directors MI Hilkowitz (Chairperson), A Gore* (Chief Executive Officer), HL Bosman, Dr BA Brink, SE de Bruyn Sebotsa, JJ Durand, SB Epstein (USA), R Farber*
(Financial Director), HD Kallner*, NS Koopowitz*, Dr TV Maphai, HP Mayers*, TT Mboweni, Dr A Ntsaluba*, AL Owen (UK), A Pollard*, JM Robertson*, T Slabbert,
B Swartzberg*, SV Zilwa
*Executive
Interim financial results
- prepared by L Capon CA(SA) and L van Jaarsveldt CA(SA)
- supervised by R Faber CA(SA), FCMA
Embedded value statement
- prepared by M Curtis FIA
- supervised by A Rayner FASSA, FIA
24 February 2015
Date: 24/02/2015 08:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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