CLIENTELE LIMITED - Condensed preliminary group results for the year ended 30 June 2017

Release Date: 21/08/2017 17:00
Code(s): CLI
 
Wrap Text
Condensed preliminary group results for the year ended 30 June 2017

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

Condensed preliminary group RESULTS
For the year ended 30 June 2017

Diluted headline earnings per share increased by 13% to 139.06 cents
Net insurance premiums increased by 8% to R1.9 billion
Return on average shareholders' interest of 53%
Dividends declared per share increased by 15% to 115.00 cents
Value of New Business of R527.18 million
Recurring Embedded Value Earnings of R939.01 million
Recurring Return on Embedded Value of 19.20%
Embedded Value per share of 1 746 cents

Comments

Introduction

The Board is pleased to report that Clientèle's operating results improved in the second half of the financial year with production in
all traditional channels returning to expected levels. Withdrawals in the second half have improved, but as always remain a risk and
thus a focus of attention.

The new agency distribution channel is growing in line with the business plan, which is very encouraging. The broker distribution
channel, which was started in October 2016, has found traction but it is still in its infancy.

South Africa's economic environment remains very tough, particularly for Clientèle's customers, and this demands and gets much
management time and energy.

Operating Results

Group Statement of Comprehensive Income

Net insurance premiums increased by 8% to R1.9 billion (2016: R1.7 billion), on the back of strong production in prior years and
higher average premiums on new business, with a consequent diluted headline earnings per share increase of 13% over last year.

Net insurance benefits and claims of R359.5 million (2016: R325.8 million) were 10% higher than the previous year.

Investment returns of R86.5 million (2016: R65.1 million) were 33% higher than last year and include an amount of R18.4 million
(2016: R nil) in respect of the fair value adjustment of African Bank (renamed Residual Debt Services) unsubordinated stub paper.

Headline earnings for the Group increased by 14% to R466.3 million (2016: R410.6 million) which has resulted in a return on
average shareholders' interests of 53% (2016: 55%).

Group Embedded Value and Value of New Business

Although Group Embedded Value was negatively impacted by higher withdrawals during the year, this increased from R5.2 billion
to R5.8 billion. Recurring Embedded Value Earnings ("REVE") were also impacted and reduced by 6% to R939.0 million (2016:
R1 billion).

The Value of New Business ("VNB") was negatively impacted by lower than expected production in the first half of the year and by
the higher withdrawals referred to above. This has resulted in a decrease in VNB of 20% to R527.2 million (2016: R660.3 million).

New business profit margins have consequently declined to 21.4% (2016: 26.5%).

The Group follows a conservative accounting practice of eliminating negative reserves. As acquisition costs are expensed upfront,
the recovery of these costs and the profits are deferred over the policy life. The present value of this discretionary margin amounts
to R3.1 billion (2016: R2.8 billion).

Segment Results

Clientèle Life - Long-term insurance

Clientèle Life's Long-term insurance segment remains the major contributor to the Group's performance. Clientèle Life's VNB of
R408.8 million (2016: R519.6 million) decreased by 21% as a consequence of increased withdrawals (largely as a result of an
increase in disputes). Nonetheless, Clientèle Life recorded REVE of R760.2 million (2016: R746.5 million) due to strong production
in prior years and generated a 17% increase in net profit for the year to R404.4 million (2016: R344.2 million).

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

Clientèle Legal's VNB of R117.3 million (2016: R138.5 million) decreased by 15% and as a consequence of this and increased
withdrawals (largely as a result of an increase in disputes) felt more acutely in the general insurance segment, Clientèle Legal
recorded REVE of R141.6 million (2016: R232.4 million). Nonetheless, due to strong production in prior years, Clientèle Legal
generated an 11% increase in net profit for the year to R61.8 million (2016: R55.6 million).

Outlook

The discussions with the Payments Association of South Africa, the Association for Savings and Investment and individual Banks
concerning the increase in withdrawals due to the increase in debit order disputes by policyholders are ongoing with the intention
of achieving an outcome which is in the best interests of policyholders and Clientèle.

Management's focus is currently directed at continuing the recent momentum built up in production, encouraging the growth of the
new distribution channels, introducing new products and further improving withdrawals.

Dividend Declared

Notice is hereby given that the directors have declared a final gross dividend of 115.00 cents (2016: 100.00 cents) per share on 17
August 2017 for the year ended 30 June 2017.

The Board of Clientèle Limited confirms that the Group will satisfy the solvency and liquidity tests immediately after completion of
the dividend distribution. The dividend will be subject to dividends tax. In accordance with the JSE Listings Requirements, the
following additional information is disclosed:

- The dividend has been declared out of income reserves;
- The local dividends tax rate is 20% (twenty percent) (2016: 15% (fifteen percent));
- The gross local dividend amount is 115.00 cents (2016: 100.00 cents) per ordinary share for shareholders exempt from the
  dividends tax;
- The net local dividend amount is 92.00 cents (2016: 85.00 cents) per ordinary share for shareholders liable to pay the
  dividends tax;
- The local dividends tax amount is 23.00 cents (2016: 15.00 cents) per ordinary share for shareholders liable to pay the dividend
  withholding tax;
- Clientèle Limited currently has 334,003,379 (2016: 331,805,599) ordinary shares in issue;

Clientèle Limited's income tax reference number is 9465071166.

In compliance with the requirements of STRATE Limited, the electronic settlement and custody system used by the JSE Limited,
the following salient dates for the payment of the dividend are applicable:

Last day to trade                               Tuesday, 19 September 2017
Shares commence trading "ex" dividend           Wednesday, 20 September 2017
Record date                                     Friday, 22 September 2017
Payment date                                    Tuesday, 26 September 2017

Share certificates may not be dematerialised or rematerialised between Wednesday, 20 September 2017 and Friday,
22 September 2017, both days inclusive.

By order of the Board

G Q Routledge           B W Reekie
Chairman                Managing Director
Johannesburg
17 August 2017


Condensed Group Statement of Financial Position

                                                                                    Year ended 30 June

(R'000's) Reviewed                                                                 2017            2016

Assets
Intangible assets                                                                35,751          36,435
Property and equipment                                                           46,518          47,509
Owner-occupied properties^                                                      422,013         408,651
Deferred tax                                                                     42,817          45,666
Inventories                                                                       1,894           1,148
Reinsurance assets                                                                2,504           2,789
Financial assets at fair value through profit or loss***                      2,196,020       1,854,928
Financial assets at amortised cost*                                             288,627         264,023
Loans and receivables including insurance receivables                            34,891          44,396
Current tax                                                                         990           1,459
Cash and cash equivalents                                                       221,047         209,848

Total assets                                                                  3,293,072       2,916,852

Total equity and reserves                                                     1,015,996         865,548

Liabilities
Policyholder liabilities under insurance contracts                              652,614         690,102
Financial liabilities at fair value through profit or loss -
investment contracts***                                                       1,159,676         909,819
Financial liabilities - Loans at amortised cost**                               113,043          98,932
Employee benefits#                                                               97,339         139,586
Deferred tax                                                                     43,855          38,977
Accruals and payables including insurance payables                              210,180         168,469
Current tax                                                                         369           5,419

Total liabilities                                                             2,277,076       2,051,304

Total equity and liabilities                                                  3,293,072       2,916,852

^   Owner-occupied properties are disclosed at level 3 in the fair value measurement
    hierarchy. An earnings yield valuation method was applied with capitalisation rates of
    between 8.25% and 9.00% (2016: 8.25% and 9.50%).
*   Zero coupon fixed deposits held in African Bank Limited have been classified as financial
    assets at amortised cost. The fair value approximates amortised cost.
**  The increase in loans at amortised cost relates to financing of owner-occupied properties.
*** The increase in "financial assets at fair value through profit or loss" and "financial liabilities
    at fair value through profit and loss - investment contracts" relates to increased production
    of single premium business during the year.
#   The reduction in "Employee benefits" relates to a reduction in benefits in respect of the
    "medium term" and "goodwill" staff incentive schemes.


Condensed Group Statement of Comprehensive Income

                                                                             Year ended 30 June
                                                                                                               %
(R'000's) Reviewed                                                           2017           2016          Change

Revenue
Insurance premium revenue                                               2,003,255      1,852,516               8
Reinsurance premiums                                                     (130,690)      (126,525)

Net insurance premiums                                                  1,872,565      1,725,991               8
Other income                                                              156,113        157,495
Interest income                                                            40,090         21,209
Fair value adjustment to financial assets at fair value through
profit or loss                                                            136,881        120,916

Net income                                                              2,205,649      2,025,611               9
Net insurance benefits and claims                                        (359,470)      (325,777)

Gross insurance benefits and claims                                      (460,145)      (425,313)
Insurance claims recovered from reinsurers                                100,675         99,536

Decrease in policyholder liabilities under insurance contracts             37,488          8,780
Decrease in reinsurance assets                                               (285)          (226)
Fair value adjustment to financial liabilities at fair value through
profit or loss                                                            (99,346)       (90,401)
Interest expense                                                           (9,866)        (4,135)
Reversal of impaired advances                                                             12,349
Operating expenses                                                     (1,132,005)    (1,061,901)              7

Profit before tax                                                         642,165        564,300              14
Tax                                                                      (175,468)      (149,579)             17

Net profit for the year                                                   466,697        414,721              13

Attributable to:
- Non-controlling interest - ordinary shareholders                            199          4,235
- Equity holders of the Group - ordinary shareholders                     466,498        410,486              14

Profit for the year                                                       466,697        414,721              13

Other comprehensive income:
Gains on property revaluation#                                              8,475          8,727
Income tax relating to gains on property revaluation#                      (2,155)        (9,544)*

Other comprehensive income for the year net of tax                          6,320           (817)

Total comprehensive Income for the year                                   473,017        413,904              14

Attributable to:
- Non-controlling interest - ordinary shares                                  199          4,235
- Equity holders of the Group                                             472,818        409,669              15


#  Items that cannot be recycled to profit or loss.
*  The higher amount in 2016 was primarily in respect of the difference in accounting and tax treatment of the new
   office development.


Condensed Group Statement of Changes in Equity



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

Balance as at 1 July 2015                                                  6,613       310,185       (220,273)     96,525    552,882        27,699      66,191       743,297        (3,102)     740,195
Ordinary dividends                                                                                                      -   (297,759)                               (297,759)                  (297,759)
Total comprehensive income                                                     -             -              -           -    410,486             -        (817)      409,669         4,235      413,904

- Net profit for the year                                                                                               -    410,486                                 410,486         4,235      414,721
- Other comprehensive income                                                                                            -                                 (817)         (817)                      (817)

Shares issued                                                                 23        18,690                     18,713                                             18,713                     18,713
SARs and Bonus Rights Schemes allocated                                                                                 -                    9,208                     9,208                      9,208
Transfer from shares issued                                                                                             -    (10,330)       (8,383)                  (18,713)                   (18,713)

Balance as at 30 June 2016                                                 6,636       328,875       (220,273)    115,238    655,279        28,524      65,374       864,415         1,133      865,548

Balance as at 1 July 2016                                                  6,636       328,875       (220,273)    115,238    655,279        28,524      65,374       864,415         1,133      865,548
Ordinary dividends                                                                                                      -   (331,897)                               (331,897)       (1,050)    (332,947)
Total comprehensive income                                                     -             -              -           -    466,498             -       6,320       472,818           199      473,017

- Net profit for the year                                                                                               -    466,498                                 466,498           199      466,697
- Other comprehensive income                                                                                            -                                6,320         6,320                      6,320

Shares issued                                                                 44        37,013                     37,057                                             37,057                     37,057
SARs and Bonus Rights Schemes allocated                                                                                 -                   10,378                    10,378                     10,378
Transfer from shares issued                                                                                             -    (19,448)      (17,609)                  (37,057)                   (37,057)

Balance as at 30 June 2017                                                 6,680       365,888       (220,273)    152,295    770,432        21,293      71,694     1,015,714          282     1,015,996

* SAR Scheme - the Clientèle Limited Share Appreciation Rights Scheme.
* Bonus Rights Scheme - the Clientèle Limited Bonus Rights Scheme.
* 2.2 million (2016: 1.2 million) shares were issued in terms of the SAR and Bonus Rights Schemes.


Condensed Group Statement of Cash Flows


                                                                                Year ended 30 June

(R'000's) Reviewed                                                              2017          2016

Cash flows from operating activities                                          41,503        73,061

Profit from operations adjusted for non-cash items                           632,279       645,910
Working capital changes                                                      (29,753)      (51,906)
Separately disclosable items(1)                                              (96,040)      (99,959)
Increase/(Decrease)in financial liabilities(2)                               150,511      (122,918)
Net (acquisition)/disposal of investments(3)                                (204,210)       59,375
Interest received                                                             80,023        63,421
Dividends received                                                            16,017        36,538
Dividends paid                                                              (332,846)     (297,713)
Tax paid                                                                    (174,478)     (159,687)

Cashflows from investing activities(4)                                       (34,549)     (146,854)
Cashflows from financing activities(5)                                         4,245        59,702

Net increase/(decrease) in cash and cash equivalents                          11,199       (14,091)
Cash and cash equivalents at beginning of the year                           209,848       223,939

Cash and cash equivalents at end of the year                                 221,047       209,848

1.   Interest and dividends received.
2.   Financial liabilities - investment contracts.
3.   Investment 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.



Condensed segment Information

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

The Group's main operating segments are Long-term insurance, Short-term insurance (legal insurance policies) and Other
(Clientèle Limited and Clientèle Loans Direct). The vast majority of policies written are in respect of individuals.


Segment Assets and Liabilities


                                                                               Year ended 30 June
(R'000's) Reviewed (2016 Restated)                                              2017          2016

Long-term Insurance                                                        2,932,597     2,624,384
Short-term Insurance                                                         251,861       216,278
Other                                                                        121,292        84,442
Inter segment                                                                (12,678)       (8,252)

Total Group Assets                                                         3,293,072     2,916,852

Long-term Insurance                                                        2,225,884     1,993,868
Short-term Insurance                                                          61,617        60,852
Other                                                                          2,253         4,836
Inter segment                                                                (12,678)       (8,252)

Total Group Liabilities                                                    2,277,076     2,051,304


Segment Statements of Comprehensive Income


                                                                                                                  Inter
                                                                                                                segment
                                                                       Long-term     Short-term                (revenue)/
(R'000's) Reviewed                                                     insurance      insurance      Other      expense         Total

30 June 2017
Insurance premium revenue                                              1,651,594        351,661                             2,003,255
Reinsurance premiums                                                    (130,690)                                            (130,690)

Net insurance premiums                                                 1,520,904        351,661          -            -     1,872,565
Other income                                                             164,253            564    360,343     (369,047)      156,113
Interest income                                                           37,234          1,262      1,594                     40,090
Fair value adjustment to financial assets at fair value through
profit and loss                                                          123,375         10,250      3,256                    136,881

Segment revenue                                                        1,845,766        363,737    365,193     (369,047)    2,205,649
Segment expenses and claims                                           (1,290,946)      (278,681)    (6,200)      12,343    (1,563,484)

Net insurance benefits and claims                                       (319,313)       (40,157)                             (359,470)
Decrease in policyholder liabilities under insurance contracts            36,130          1,358                                37,488
Decrease in reinsurance assets                                              (285)                                                (285)
Fair value adjustment to financial liabilities at fair value through
profit and loss                                                          (99,346)                                             (99,346)
Interest expense                                                          (9,866)                                              (9,866)
Operating Expenses                                                      (898,266)      (239,882)    (6,200)      12,343    (1,132,005)

Profit before tax                                                        554,820         85,056    358,993     (356,704)      642,165
Tax                                                                     (150,465)       (23,222)    (1,781)                  (175,468)

Net profit for the year                                                  404,355         61,834    357,212     (356,704)      466,697

Attributable to:
Non-controlling interest - ordinary shareholders                                                       199                        199
Equity holders of the Group - ordinary shareholders                      404,355         61,834    357,013     (356,704)      466,498


                                                                                                                  Inter
                                                                                                                segment
                                                                       Long-term     Short-term                (revenue)/
(R'000's) Reviewed                                                     insurance      insurance      Other      expense         Total

30 June 2016 (Restated)
Insurance premium revenue                                              1,550,567        301,949                             1,852,516
Reinsurance premiums                                                    (126,525)                                            (126,525)

Net insurance premiums                                                 1,424,042        301,949          -            -     1,725,991
Other income                                                             156,196            498    315,034     (314,233)      157,495
Interest income                                                           18,365          1,394      3,103        1,653        21,209
Fair value adjustment to financial assets at fair value through
profit or loss                                                           110,556          8,355      2,005                    120,916

Segment revenue                                                        1,709,159        312,196    320,142     (315,886)    2,025,611
Segment expenses and claims                                           (1,238,701)      (235,300)     4,703        7,987    (1,461,311)

Net insurance benefits and claims                                       (292,741)       (33,036)                             (325,777)
Decrease/(increase) in policyholder liabilities under insurance
contracts                                                                 10,314         (1,534)                                8,780
Decrease in reinsurance assets                                              (226)                                                (226)
Fair value adjustment to financial liabilities at fair value through
profit or loss                                                           (90,401)                                             (90,401)
Interest expense                                                          (4,052)                   (1,736)       1,653        (4,135)
Reversal of impaired advances                                                                       12,349                     12,349
Operating expenses                                                      (861,595)      (200,730)    (5,910)       6,334    (1,061,901)

Profit before tax                                                        470,458         76,896    324,845     (307,899)      564,300
Tax                                                                     (126,240)       (21,252)    (2,087)                  (149,579)

Net profit for the year                                                  344,218         55,644    322,758     (307,899)      414,721

Attributable to:
Non-controlling interest - ordinary shareholders                                                     4,235                      4,235
Equity holders of the Group - ordinary shareholders                      344,218         55,644    318,523     (307,899)      410,486


Notes to the Results

These condensed consolidated financial results for the year ended 30 June 2017 have been reviewed, in terms of International
Standards on Review Engagements, (ISRE 2410), by PricewaterhouseCoopers Inc., who expressed an unmodified review
conclusion. A copy of the auditor's review report is available for inspection at the company's registered office together with the
financial results identified in the auditor's report.

The condensed consolidated preliminary Financial Statements were prepared under the supervision of Mr I B Hume (CA(SA),
ACMA), the Group Financial Director.

Changes to the Board

Mr PG Nkadimeng was appointed as a Director of Clientèle Limited on 1 March 2017.

Accounting Policies

Statement of compliance

The condensed consolidated preliminary Financial Statements are prepared in accordance with the JSE Limited Listings
Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements
require preliminary 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 Financial Pronouncements as issued by the Financial Reporting Standards Council and must
also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The report has been so prepared.

The accounting policies applied in the preparation of the condensed consolidated preliminary 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 preliminary 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 estimates and judgments.

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

Tax

                                                                               Year ended 30 June

(R'000's) Reviewed                                                              2017            2016

Current and deferred tax                                                    (176,204)       (146,708)
Capital gains tax                                                              1,065          (2,400)
Underprovision in prior years                                                   (329)           (471)

Tax                                                                         (175,468)       (149,579)


The Individual Policyholder Fund has an estimated tax loss of R2.8 billion (2016: R2.8 billion).


Reconciliation of Net Profit to Headline Earnings

                                                                                Year ended 30 June
                                                                                                                     %
(R'000's) Reviewed                                                             2017            2016             Change

Net profit for the year attributable to equity holders of the Group         466,498         410,486                 14
(Less)/Add: (Profit)/loss of disposal of property and equipment                (207)             81

Headline earnings for the year                                              466,291         410,567                 14


Ratios per Share

                                                                                 Year ended 30 June                  %

(Cents) Reviewed                                                                 2017            2016           Change

Headline earnings per share                                                    140.29          124.00               13
Diluted headline earnings per share                                            139.06          122.99               13

Earnings per share                                                             140.35          123.98               13
Diluted earnings per share                                                     139.12          122.97               13

Net asset value per share                                                      304.19          260.86               17
Diluted net asset value per share                                              303.00          259.29               17

Dividends per share - paid                                                     100.00           90.00               11
Dividends per share - declared                                                 115.00          100.00               15

Ordinary shares in issue ('000)                                               334,003         331,806
Weighted average ordinary shares ('000)                                       332,381         331,093
Diluted weighted average ordinary shares ('000)                               335,312         333,809


Financial Assets and Liabilities 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
30 June 2017:


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

Assets
Listed equity securities                                                     491,916                                          491,916
Unlisted equity securities                                                                      3,850                           3,850
Promissory notes and fixed deposits                                                           793,220          169,434        962,654
Funds on deposit                                                                              618,226                         618,226
Fixed interest securities                                                                      45,316            4,013         49,329
Government and public authority bonds                                                          70,045                          70,045

Total assets                                                                 491,916        1,530,657          173,447      2,196,020

Liabilities
Financial liabilities at fair value through profit of loss                                    990,242          169,434      1,159,676

Total Liabilities                                                                  -          990,242          169,434      1,159,676


Policyholders' linked exposure to African Bank Limited through investments in zero coupon fixed deposits of R169.4 million as at
30 June 2017 are disclosed at level 3 on the hierarchy as values are estimated indirectly using techniques and models. Key inputs
include the zero coupon risk free yield curve.

Capital and Other Commitments

During the 2016 financial year Clientèle Limited provided financial assistance resulting in a net exposure through guarantees of R45
million for the purchase of approximately 3.92% of Clientèle's issued shares ("ordinary Shares") by Yellowwoods Trust Investments
(Pty) Ltd ("YTI") a wholly owned subsidiary of the Hollard Foundation Trust, a BBBEE Trust.

During the current financial year Clientèle Limited provided further financial assistance through the issuance of a guarantee in the
amount of R223 million (with an exposure of R155 million) in respect of additional Ordinary Shares which YTI purchased.

Restatement of comparative segments results

The Group has incorporated the "Investment Contracts" segment into the "Long-term Insurance" segment and Clientèle Limited
into the "other" segment to align with internal reporting practices.

The corresponding amounts have been restated accordingly.

Events after the Reporting Date

No material items to report after the reporting date.

Related Party Transactions

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

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 30 June 2017.

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 business where EV Methodology has been used to determine future shareholder entitlements.

The EV calculations have been certified by the Group's independent actuaries, QED Actuaries & Consultants (Pty) Ltd. The EV
can be summarised as follows:


                                                                                     Year ended 30 June

(R'000's) Unaudited                                                                  2017          2016

Required capital                                                                  425,232       377,076
Free surplus                                                                      632,484       495,969

Adjusted Net Worth ("ANW") of covered business                                  1,057,716       873,045

CoC                                                                               (84,267)      (83,190)
PVIF                                                                            4,858,112     4,440,788

EV of covered business                                                          5,831,561     5,230,643


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


                                                                                     Year ended 30 June

(R'000's) Unaudited                                                                  2017          2016

Total equity and reserves per the Statement of Financial Position               1,015,996       865,548
Adjusted for deferred profits and impact of compulsory margins
on investment business                                                             29,326        11,820
Adjusted for minority interests                                                      (282)       (1,133)
Adjusting subsidiaries to Net Asset Value                                          33,583        31,427
SAR and Bonus Rights Schemes adjustment                                           (20,907)      (34,617)

ANW                                                                             1,057,716       873,045


The CoC is the opportunity cost of having to hold the Required Capital of R425.2 million as at 30 June 2017 (30 June 2016:
R377.1 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 Scheme 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 (CAR) was calculated as the maximum of TCAR, OCAR and MCAR, with
TCAR being the highest of the three.

Clientèle Life's Statutory CAR cover ratio at 30 June 2017 was 2.43 times (30 June 2016: 2.35 times) on the statutory
valuation basis.

Clientèle General Insurance's Statutory CAR cover ratio at 30 June 2017 was 1.44 times (30 June 2016: 1.35 times) on the
statutory valuation basis.

Value of New Business ("VNB")

                                                                              Year ended 30 June

(R'000's) Unaudited                                                          2017            2016

Total VNB                                                                 527,184         660,328
Present Value of New Business premiums                                  2,466,148       2,488,674
New Business profit margin                                                  21.4%           26.5%


The VNB (excluding any allowance for the Management 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 year ended 30 June 2017 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

                                                                              Year ended 30 June

(%) Unaudited                                                                 2017           2016

Risk discount rate                                                            12.2           12.1
Non-unit investment return                                                     8.7            8.6
Unit investment return                                                         9.7            9.8
Expense inflation                                                              6.1            7.1
Corporate tax                                                                 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 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% (2016: 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
consideration, the Board has decided to continue to use a more conservative beta of 1, as opposed to its actual beta of 0.1333 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 RDR's.

The resulting RDR utilised for the South African business as at 30 June 2017 was 12.2% (30 June 2016: 12.1%).

RDR Sensitivities

(R'000's) Unaudited                                                            EV             VNB

RDR 10.2%                                                               6,673,123         666,784
RDR 11.2%                                                               6,212,644         589,983
RDR 12.1% (as at June 2016)                                             5,861,327         534,179

RDR 12.2% (as at June 2017)                                             5,831,561         527,184

RDR 13.2%                                                               5,503,661         465,022
RDR 14.2%                                                               5,222,306         415,064


EV per Share

                                                       Year ended 30 June

(Cents) Unaudited                                        2017         2016

EV per share                                         1,745.96     1,576.42
Diluted EV per share                                 1,739.15     1,563.62


Segment Information

The EV can be split between segments as follows:

(R'000's) Unaudited                                      ANW          PVIF       CoC          EV

30 June 2017
Long-term insurance                                  774,375     3,963,841   (57,575)   4,680,641
Short-term insurance                                 187,134       887,721   (26,692)   1,048,163
Other                                                 96,207         6,550         -      102,757

Total                                              1,057,716     4,858,112   (84,267)   5,831,561

30 June 2016 (Restated)
Long-term insurance                                  664,848     3,623,279   (54,990)   4,233,137
Short-term insurance                                 152,490       810,689   (28,200)     934,979
Other                                                 55,707         6,820         -       62,527

Total                                                873,045     4,440,788   (83,190)   5,230,643


The VNB can be split between segments as follows:

                                                        Year ended 30 June

(R'000's) Unaudited (2016 Restated)                     2017          2016

Long-term insurance                                  408,763       519,649
Short-term insurance                                 117,321       138,545
Other                                                  1,100         2,134

Total                                                527,184       660,328


Embedded Value Earnings Analysis

EV earnings (per APN 107) comprises the change in EV for the year after adjusting for capital movements and dividends paid.


                                                                                Year ended 30 June 2017                         Year ended
                                                                                                                              30 June 2016
(R'000's) Unaudited                                                   ANW           PVIF            CoC             EV                  EV

Closing EV                                                      1,057,716      4,858,112        (84,267)     5,831,561           5,230,643
Opening EV                                                        873,045      4,440,788        (83,190)     5,230,643           4,601,300
Dividends                                                        (331,897)                                    (331,897)           (297,759)

Adjusted EV at the beginning of the year                          541,148      4,440,788        (83 190)     4,898,746           4,303,541

EV earnings                                                       516,568        417,324         (1,077)       932,815             927,102
Impact of once-off economic assumption changes                     (1,340)         6,703            833          6,196              75,384

Recurring EV earnings                                             515,228        424,027           (244)       939,011           1,002,486
Recurring Return on EV                                                                                            19.2%               23.3%

Return on EV                                                                                                      19.0%               21.5%

Components of EV earnings

VNB                                                              (371,368)       910,991        (12,439)       527,184             660,328
Expected return on covered business                                     -        543,786          9,824        553,610             498,133
Expected profit transfer                                          838,432       (838,432)             -              -                   -
Withdrawal and unpaid premium experience variance                 (12,477)       (83,317)        (3,664)       (99,458)            (50,393)
Changes in withdrawals & other decrement assumptions               10,498       (120,114)       (13,110)      (122,726)                  -*
Other changes in non-economic assumptions and modelling             1,040         16,987         19,289         37,316            (132,366)
Claims and reinsurance experience variance                          2,920              -              -          2,920              (5,499)
Sundry experience variance                                         (1,177)           982              -           (195)              5,076
Expected return on ANW                                             59,945              -              -         59,945              47,899
SAR and Bonus Rights Schemes                                       24,087              -              -         24,087              28,286
Goodwill and Medium-term incentive schemes                        (13,251)           466              -        (12,785)            (20,730)
Benefit enhancements                                                 (156)        (7,322)          (144)        (7,622)                  -

EV operating return                                               538,493        424,027           (244)       962,276           1,030,734

Investment return variances on ANW                                (23,265)             -              -        (23,265)            (28,248)

Recurring EV earnings                                             515,228        424,027           (244)       939,011           1,002,486

Effect of economic assumption changes                               1,340         (6,703)          (833)        (6,196)            (75,384)

EV earnings                                                       516,568        417,324         (1,077)       932,815             927,102

* This item was not split out in the 2016 results.

Registered office: Clientèle Office Park, Cnr Rivonia and Alon Roads, Morningside,
Johannesburg 2196, South Africa
PO Box 1316, Rivonia 2128, South Africa

Transfer secretaries: Computershare Investor Services Proprietary Limited, First Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 South Africa

Sponsor: PricewaterhouseCoopers Corporate Finance Proprietary Limited

Directors: GQ Routledge BA LLB (Chairman); BW Reekie BSc(Hons), FASSA* (Managing Director);
ADT Enthoven BA, PhD (Political Science); B Frodsham BCom*; PR Gwangwa BProc LLB, LLM;
IB Hume CA(SA), ACMA*; BY Mkhondo BCom, MBA; D Molefe MCom, CA(SA); BA Stott CA(SA);
RD Williams BSc(Hons), FASSA, PG Nkadimeng BSc Comp Scie & E Eng. (* Executive Director)

Company secretary: W van Zyl CA(SA)

Date of release: 21 August 2017

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