CLIENTELE LIMITED - Condensed Preliminary Group Results and dividend announcement

Release Date: 20/08/2018 17:00
Code(s): CLI
 
Wrap Text
Condensed Preliminary Group Results and dividend announcement

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

Condensed Preliminary Group Results

Net insurance premiums increased by 11% to R2.1 billion
Diluted headline earnings per share increased by 6% to 146.83 cents
Return on average shareholders' interest of 48%
Dividends declared increased by 8.7% to 125 cents per share
Value of New Business of R448 million
Recurring Embedded Value Earnings of R979 million
Recurring Return on Embedded Value of 18%
Diluted Embedded Value per share of 1 885 cents

Comments

Introduction

The results, when considered in the context of the continuing challenging economic environment and the performance of the market in
general, are acceptable. The board, however is disappointed with the results when compared to past performance.

Withdrawals, particularly in respect of new business written have not met management's expectations which has affected insurance premium
revenue, the Value of New Business ("VNB") and Embedded Value Earnings ("EVE"). This has been exacerbated by the ongoing increasing
trend in debit order disputes across the entire banking payment system.

Overall new business production volumes are in line with expectations which has been assisted by the contributions from the new Agency and
Broker distribution channels. These new channels were established over a year ago and are both growing in line with the business plan. In
addition the IFA division performed well, however business from the Telesales channel was behind expectation.

The co-branded single premium products, referred to in previous results, have been well supported by customers and accounts for most of
the increase in financial assets during the year.

Investment performance for the year was good and produced a 13% return from portfolios with a conservative equity content.

The increase in expenses above inflation is mostly attributable to the new business acquisition costs for the Agency and Broker channels as
well as increased production from the IFA distribution network. It should be noted that R15.3 million in respect of the Goodwill incentive
scheme was expensed in the current year and R36.8 million was released in the previous year. If the Goodwill incentive scheme and the
Agency, Broker and other new venture expenses are excluded, then the operating expenses would have increased by 5%.

Operating Results

Group Statement of Comprehensive Income

Net insurance premiums increased by 11% to R2.1 billion (2017: R1.9 billion) on the back of good production over the last eighteen months
and higher average premiums on new business. Diluted headline earnings per share, however, only increased by 6% over the comparative
year due to new business acquisition costs in respect of the new distribution channels and the higher withdrawals referred to above.

Net insurance benefits and claims of R384.5 million (2017: R359.5 million) were 7% higher than the previous year.

Operating expenses of R1.3 billion (2017: R1.1 billion) were 18% higher than the comparative year for the reasons explained above.

Headline earnings for the Group increased by 6% to R492.3 million (2017: R466.3 million) which has resulted in a return on average
shareholders' interests of 48% (2017: 53%).

Group Embedded Value and Value of New Business

The Group Embedded Value ("EV"), after the R384.3 million annual dividend payment during the year, increased from R5.8 billion at 30 June
2017 to R6.3 billion at 30 June 2018, an increase of 8.4%. Recurring Embedded Value Earnings ("REVE") of R979.0 million were recorded for
the year (2017: R939.0 million), an increase of 4.3%.

The VNB was negatively impacted by lower quality new business and decreased by 15% from R527.2 million in the comparative year to
R448.0 million this year.

New business profit margins (excluding single premium investment business) have decreased to 18.3% (2017: 23.2%) due to the factors
mentioned above.

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 R3.2 billion (2017:
R3.1 billion).

Segment Results

Clientèle Life - Long-term insurance

Clientèle Life's Long-term insurance segment remains the major contributor to the Group's performance and generated a 5% increase in net
profit for the year to R423.7 million (2017: R404.4 million). Clientèle Life's VNB of R339.2 million (2017: R408.8 million) decreased by 17%,
and it recorded an REVE of R734.9 million (2017: R760.2 million), a decrease of 3.3%.

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

Clientèle Legal generated a 9% increase in net profit for the year to R67.1 million (2017: R61.8 million). Clientèle Legal's VNB of R108.2 million
(2017: R117.3 million) decreased by 7.8% and its REVE recovered to R230.1 million (2017: R141.6 million), an increase of 62.5%.

Outlook

Management's primary focus is to improve the quality of new business written and to reduce withdrawals, thereby improving margins.

Growth of the Agency and Broker channels are expected to create meaningful value for the group in future.

The new initiatives, "Switch2", an innovative start-up providing niche credit life products to the South African consumer and the "Estate"
product, which were launched in the second half of the financial year are in their infancy and management will monitor their progress closely.

In an exciting development, Clientèle has signed an evergreen agreement with the Shembe Foundation under which it will provide Clientèle
products to Shembe Church members. Policy sales will commence in the next few months.

The Board is encouraged by the new initiatives and their prospects for growth and value creation in the Group's target market.
Dividend Declared

Notice is hereby given that the directors have declared a final gross dividend of 125.00 cents (2017: 115.0 cents) per share on 16 August
2018 for the year ended 30 June 2018.

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) (2017: twenty percent);
- The gross local dividend amount is 125.00 cents (2017: 115.00 cents) per ordinary share for shareholders exempt from the dividends tax;
- The net local dividend amount is 100.00 cents (2017: 92.00 cents) per ordinary share for shareholders liable to pay the dividends tax;
- The local dividends tax amount is 25.00 cents (2017: 23.00 cents) per ordinary share for shareholders liable to pay the dividend withholding tax;
- Clientèle Limited currently has 334,707,747 (2017: 334,003,379) 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, 18 September 2018
Shares commence trading "ex" dividend                  Wednesday, 19 September 2018
Record date                                            Friday, 21 September 2018
Payment date                                           Tuesday, 25 September 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 19 September 2018 and Friday, 21 September 2018,
both days inclusive.

By order of the Board


GQ Routledge             BW Reekie
Chairman                 Managing Director

Johannesburg
20 August 2018


Condensed Group Statement of Financial Position

                                                                                           Year ended 30 June

(R'000's) Reviewed                                                                         2018         2017

Assets
Intangible assets                                                                        41,099       35,751
Property and equipment                                                                   45,877       46,518
Owner-occupied properties*                                                              423,513      422,013
Deferred tax                                                                             46,309       42,817
Inventories                                                                               2,765        1,894
Reinsurance assets                                                                        2,925        2,504
Financial assets at fair value through profit or loss**                               3,591,715    2,196,020
Financial assets at amortised cost***                                                   153,185      288,627
Loans and receivables including insurance receivables                                    41,862       34,891
Current tax                                                                                              990
Cash and cash equivalents                                                               372,656      221,047

Total assets                                                                          4,721,906    3,293,072

Total equity and reserves                                                             1,129,667    1,015,996

Liabilities
Policyholder liabilities under insurance contracts                                      630,496      652,614
Financial liabilities at fair value through profit or loss - investment contracts**   2,464,295    1,159,676
Loans at amortised cost                                                                 113,009      113,043
Employee benefits                                                                        92,990       97,339
Deferred tax                                                                             50,061       43,855
Accruals and payables including insurance payables                                      234,585      210,180
Current tax                                                                               6,803          369

Total liabilities                                                                     3,592,239    2,277,076

Total equity and liabilities                                                          4,721,906    3,293,072

*   Owner-occupied properties are disclosed at level 3 in the fair value measurement hierarchy. A
    discounted future cashflow method was applied with a discount rate of between 8.13% and 8.34%
    (2017: 8.25% and 9%).
**  The increase in "Financial liabilities at fair value through profit or loss" relates to the increase in single
    premium business underwritten during the year, particularly in respect of co-branded single premium
    policies. This corresponds with the increase in "Financial assets at fair value through profit or loss"
    during the year and matches the policyholder liabilities.
*** 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 reduction relates to the early surrender
    of fixed deposits.


Condensed Group Statement of Comprehensive Income

                                                                                            Year ended 30 June
                                                                                                                         %
(R'000's) Reviewed                                                                          2018          2017      Change

Revenue
Insurance premium revenue                                                             2,199,439      2,003,255
Reinsurance premiums                                                                   (123,112)      (130,690)

Net insurance premiums                                                                2,076,327      1,872,565          11
Other income                                                                            167,560        156,113
Interest income                                                                          34,276         40,090
Fair value adjustment to financial assets at fair value through profit or loss          280,311        136,881

Net income                                                                            2,558,474      2,205,649          16
Net insurance benefits and claims                                                      (384,490)      (359,470)

Gross insurance benefits and claims                                                    (486,195)     ( 460,145)
Insurance claims recovered from reinsurers                                              101,705        100,675

Decrease in policyholder liabilities under insurance contracts                           22,118         37,488

Increase/(decrease) in reinsurance assets                                                   421           (285)
Fair value adjustment to financial liabilities at fair value through profit or loss    (172,115)       (99,346)
Interest expense                                                                         (9,819)        (9,866)
Operating expenses                                                                   (1,335,172)    (1,132,005)         18

Profit before tax                                                                       679,417        642,165           6
Tax                                                                                    (189,094)      (175,468)          8

Profit for the year                                                                     490,323        466,697           5

Attributable to:
- Non-controlling interest - ordinary shares                                                 21            199
- Equity holders of the Group                                                           490,302        466,498           5

Profit for the year                                                                     490,323        466,697           5

Other comprehensive income:
(Losses)/gains on property revaluation#                                                  (1,535)         8,475
Income tax relating to losses/(gains) on property revaluation#                              460         (2,155)

Other comprehensive income for the year net of tax                                       (1,075)         6,320

Total comprehensive income for the year                                                 489,248        473,017

Attributable to:
- Non-controlling interest - ordinary shares                                                 21            199
- Equity holders of the Group                                                           489,227        472,818

# Items that cannot be recycled to profit or loss.


Condensed Group Statement of Changes in Equity



                                                                                                                            SARs and*
                                                                                          Common                        Bonus Rights                                     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 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
Balance as at 1 July 2017                                   6,680        365,888        (220,273)    152,295   770,432        21,293       71,694     1,015,714           282    1,015,996
Ordinary dividends                                                                                         -  (384,261)                                (384,261)         (303)    (384,564)
Total comprehensive income                                      -              -               -           -   490,302             -       (1,075)      489,227            21      489,248

- Net profit for the year                                                                                  -   490,302                                  490,302            21      490,323
- Other comprehensive income                                                                               -                               (1,075)       (1,075)                    (1,075)

Shares issued                                                  14         11,869                      11,883                                             11,883                     11,883
SARs and Bonus Rights Schemes allocated                                                                    -                   8,987                      8,987                      8,987
Transfer from shares issued                                                                                -    (4,575)       (7,308)                   (11,883)                   (11,883)

Balance as at 30 June 2018                                  6,694        377,757        (220,273)    164,178   871,898        22,972       70,619     1,129,667             -    1,129,667

* SAR Scheme - the Clientèle Limited Share Appreciation Rights Scheme.
* Bonus Rights Scheme - the Clientèle Limited Bonus Rights Scheme.
* 0.7 million (2017: 2.2 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                                                           2018            2017

Cash flows from operating activities                                      200,483          41,503

Profit from operations adjusted for non-cash items                        661,631         632,279
Working capital changes                                                   (70,137)        (29,753)
Separately disclosable items(1)                                          (111,335)        (96,040)
Increase in financial liabilities(2)                                    1,132,504         150,511
Net acquisition of investments(3)                                        (960,431)       (204,210)
Interest received                                                          88,568          80,023
Dividends received                                                         22,767          16,017
Dividends paid                                                           (384,588)       (332,846)
Tax paid                                                                 (178,496)       (174,478)

Cashflows from investing activities(4)                                    (35,126)        (34,549)
Cashflows from financing activities                                       (13,748)          4,245

Net increase in cash and cash equivalents                                 151,609          11,199
Cash and cash equivalents at the beginning of the year                    221,047         209,848

Cash and cash equivalents at the end of the year                          372,656         221,047

1. Interest and dividends received.
2. Financial liabilities - investment contracts in respect of single premium contracts.
3. Investment in respect of insurance operations and investment contracts (Single premium contracts).
4. Mainly relates to the acquisition of intangible assets, property and equipment.

Segment Information

The Group's results are analysed across the South African geographical segment.

The Group's main operating segments are Long-term Insurance, Short-term Insurance (legal insurance policies) and Other (Clientèle Limited
and Switch2 Cover). The vast majority of policies written are in respect of individuals.

Segment Assets and Liabilities

                                                                              Year ended 30 June

(R'000's) Reviewed                                                           2018            2017

Assets
Long-term Insurance                                                     4,318,004       2,932,597
Short-term Insurance                                                      291,898         251,861
Other                                                                     126,212         121,292
Inter segment                                                             (14,208)        (12,678)

Total Group Assets                                                      4,721,906       3,293,072

Liabilities
Long-term Insurance                                                     3,532,806       2,225,884
Short-term Insurance                                                       69,238          61,617
Other                                                                       4,403           2,253
Inter segment                                                             (14,208)        (12,678)

Total Group Liabilities                                                 3,592,239       2,277,076


Segment Statements of Comprehensive Income

                                                          Long-term      Short-term                   Inter
(R'000's) Reviewed                                        Insurance       Insurance      Other      segment         Total

30 June 2018
Insurance premium revenue                                 1,795,433         404,006                             2,199,439
Reinsurance premiums                                       (123,112)                                             (123,112)

Net insurance premiums                                    1,672,321         404,006          -            -     2,076,327
Other income                                                180,150             717    385,032     (398,339)      167,560
Interest income                                              30,533           1,276      2,467                     34,276
Fair value adjustment to financial assets at fair
value through profit or loss                                252,988          19,815      7,508                    280,311

Segment revenue                                           2,135,992         425,814    395,007     (398,339)    2,558,474
Segment expenses and claims                              (1,550,406)       (334,164)    (7,276)      12,789    (1,879,057)

Net insurance benefits and claims                          (344,573)        (39,917)                             (384,490)
Decrease/(increase) in policyholder liabilities
under insurance contracts                                    22,558            (440)                               22,118
Increase in reinsurance assets                                  421                                                   421
Fair value adjustment to financial liabilities
at fair value through profit or loss                       (172,115)                                             (172,115)
Interest expense                                             (9,819)                                               (9,819)
Operating expenses                                       (1,046,878)       (293,807)    (7,276)      12,789    (1,335,172)

Profit before tax                                           585,586          91,650    387,731     (385,550)      679,417
Tax                                                        (161,918)        (24,557)    (2,619)                  (189,094)

Net profit for the year                                     423,668          67,093    385,112     (385,550)      490,323

Attributable to:
Non-controlling interest - ordinary shareholders                                            21                         21
Equity holder of the Group - ordinary
shareholders                                                423,668          67,093    385,091     (385,550)      490,302


                                                          Long-term      Short-term                   Inter
(R'000's) Reviewed                                        Insurance       Insurance      Other      segment         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 or 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 or 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


Notes to the Results

These condensed consolidated financial results for the year ended 30 June 2018 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

There were no changes to the Board for the year under review.

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, intangible
assets 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                                                              2018            2017

Current and deferred tax                                                    (190,203)       (176,204)
Capital gains tax                                                                (27)          1,065
Overprovision/(underprovision) in prior years                                  1,136            (329)

Tax                                                                         (189,094)       (175,468)


The Individual Policyholder Fund has an estimated tax loss of R2.79 billion (2017: R2.84 billion).

Reconciliation of Net Profit to Headline Earnings

                                                                                 Year ended 30 June
                                                                                                                  %
(R'000's) Reviewed                                                              2018            2017         Change

Net profit for the year attributable to equity holders of the Group          490,302         466,498              5
Add: Impairment of intangible assets                                           2,177
Less: Profit on disposal of property and equipment                              (175)           (207)

Headline earnings for the year                                               492,304         466,291              6


Ratios per Share

                                                                                 Year ended 30 June
                                                                                                                   %
(Cents) Reviewed                                                                2018            2017          Change

Headline earnings per share                                                   147.22          140.29               5
Diluted headline earnings per share                                           146.83          139.06               6

Earnings per share                                                            146.62          140.35               4
Diluted earnings per share                                                    146.24          139.12               5

Net asset value per share                                                     337.51          304.19              11
Diluted net asset value per share                                             336.93          303.00              11

Dividends per share - paid                                                    115.00          100.00              15
Dividends per share - declared                                                125.00          115.00               9

Ordinary shares in issue ('000)                                              334,708         334,003
Weighted average ordinary shares ('000)                                      334,392         332,381
Diluted weighted average ordinary shares ('000)                              335,282         335,312


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 2018:

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

Assets
Listed equity securities                                                    594,926                                         594,926
Unlisted equity securities                                                                    3,850                           3,850
Promissory notes and fixed deposits                                                       2,146,585         132,092       2,278,677
Funds on deposit                                                                            599,652                         599,652
Fixed interest securities                                                                    39,424           2,620          42,044
Government and public authority bonds                                                        72,566                          72,566

Total assets                                                                594,926       2,862,077         134,712       3,591,715

Liabilities
Financial liabilities at fair value through profit of loss                                2,332,203         132,092       2,464,295

Total Liabilities                                                                         2,332,203         132,092       2,464,295


Policyholders' linked exposure to African Bank Limited through investments in zero coupon fixed deposits of R132.1 million as at 30 June
2018 are disclosed at level 3 on the fair value hierarchy as values are estimated indirectly using valuation techniques and models. Key inputs
include the zero coupon risk free yield curve.

Promissory notes and fixed deposits classified as level 3 reduced during the year as a result of fixed deposit maturities.

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 2017 financial year Clientèle Limited provided further financial assistance through the issuance of a guarantee in the amount of
R223 million (with a net unhedged exposure of R155 million) in respect of additional Ordinary Shares which YTI purchased or will purchase,
the majority of which have already been purchased.

As at 30 June 2018, both guarantees remained in place.

Events After the Reporting Date

The Board declared a final gross dividend of 125.00 cents per share on 16 August 2018 for the year ended 30 June 2018. The dividend is
subject to dividend withholding tax that was introduced with effect from 1 April 2012.

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 2018.

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; and
- Annuity income arising from non-insurance contracts 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                                                                 2018           2017

Required capital                                                                 474,317        425,232
Free surplus                                                                     686,638        632,484

Adjusted Net Worth ("ANW") of covered business                                 1,160,955      1,057,716

CoC                                                                             (108,092)       (84,267)
PVIF                                                                           5,268,725      4,858,112

EV of covered business                                                         6,321,588      5,831,561


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                                                                  2018          2017

Total equity and reserves per the Statement of Financial Position               1,129,667     1,015,996
Adjusted for deferred profits and impact of compulsory margins on
investment business                                                                33,792        29,326
Adjusted for minority interests                                                                    (282)
Adjusting subsidiaries to Net Asset Value                                          33,123        33,583
Bonus Rights Scheme adjustment                                                    (26,434)      (20,907)
Reversal of Switch2 intangible asset                                               (9,193)

ANW                                                                             1,160,955     1,057,716


The CoC is the opportunity cost of having to hold the Required Capital of R474.3 million as at 30 June 2018 (30 June 2017: R425.2 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 2018 was 2.44 times (30 June 2017: 2.43 times) on the statutory valuation basis.
Clientèle General Insurance's Statutory CAR cover ratio at 30 June 2018 was 1.47 times (30 June 2017: 1.44 times) on the statutory valuation
basis.


Value of New Business ("VNB")
                                                                                Year ended 30 June

(R'000's) Unaudited                                                            2018            2017

Total VNB                                                                   447,981         527,184
Present Value of New Business premiums                                    3,747,458       2,466,148
New Business profit margin                                                    12.0%           21.4%
New Business profit Margin (excluding single premium investment
business)                                                                     18.3%           23.2%


The Present Value of New Business premiums has increased due to a considerable increase in single premium investment business written
over the period. The relatively low profit margin on this block of business has resulted in a marked decrease in the overall New Business profit
margin.

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 2018, 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                                                                   2018            2017

Risk discount rate                                                              12.4            12.2
Non-unit investment return                                                       8.9             8.7
Unit investment return                                                          10.0             9.7
Expense inflation                                                                6.1             6.1
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% (2017: 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 0.2674 in the calculation of the RDR. The Board draws the reader's attention to
the RDR sensitivity analysis in the next table, which allows for sensitivity comparisons using various alternative RDR's.
The resulting RDR utilised for the South African business as at 30 June 2018 was 12.4% (30 June 2017: 12.2%).


RDR Sensitivities

(R'000's) Unaudited                                        EV          VNB

RDR 10.4%                                           7,215,465      585,162
RDR 11.4%                                           6,705,893      511,244
RDR 12.2% (as at June 2017)                         6,396,401      459,721

RDR 12.4% (as at June 2018)                         6,321,588      447,981

RDR 13.4%                                           5,977,652      394,216
RDR 14.4%                                           5,669,513      349,291


EV per Share
                                                        Year ended 30 June

(Cents) Unaudited                                        2018         2017

EV per share                                         1,888.69     1,745.96
Diluted EV per share                                 1,885.45     1,739.15


Segment Information

The EV can be split between segments as follows:
(R'000's) Unaudited                                      ANW          PVIF        CoC           EV

30 June 2018
Long-term Insurance                                  850,823     4,220,656    (78,395)   4,993,084
Short-term Insurance                                 218,497     1,042,067    (29,697)   1,230,867
Other                                                 91,635         6,002                  97,637

Total                                              1,160,955     5,268,725   (108,092)   6,321,588

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

The VNB can be split between segments as follows:
                                                        Year ended 30 June
(R'000's) Unaudited                                     2018          2017

Long-term Insurance                                  339,162       408,763
Short-term Insurance                                 108,203       117,321
Other                                                    616         1,100

Total                                                447,981       527,184


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 2018                      Year ended
                                                                                                                                  30 June 2017

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

Closing EV                                                              1,160,955      5,268,725      (108,092)     6,321,588        5,831,561
Opening EV                                                              1,057,716      4,858,112       (84,267)     5,831,561        5,230,643
Dividends                                                                (384,261)                                   (384,261)        (331,897)

Adjusted EV at the beginning of the year                                  673,455      4,858,112       (84,267)     5,447,300        4,898,746

EV earnings                                                               487,500        410,613       (23,825)       874,288          932,815
Impact of once-off economic assumption changes                             (3,806)        63,779         8,005         67,978            6,196
Impact of once-off debit order submission failure*                          4,320         15,000                       19,320                -
Reversing impact of Switch2 purchase & costs                               17,544           (111)                      17,433                -

Recurring EV earnings                                                     505,558        489,281       (15,820)       979,019          939,011
Recurring Return on EV                                                                                                  18.0%            19.2%

Return on EV                                                                                                            16.0%            19.0%

Components of EV earnings

VNB                                                                      (452,000)       915,299       (15,318)       447,981          527,184
Expected return on covered business                                                      594,001        12,927        606,928          553,610
Expected profit transfer                                                  922,667       (922,667)                           -                -
Withdrawal and unpaid premium experience variance                         (12,425)       (66,802)       (2,407)       (81,634)         (99,458)
Other changes in non-economic assumptions and modelling                    29,773        (62,915)      (10,807)       (43,949)         (85,410)
Claims and reinsurance experience variance                                  3,420                                       3,420            2,920
Sundry experience variance                                                 (7,735)        (3,594)                     (11,329)            (195)
Expected return on ANW                                                     73,470                                      73,740           59,945
Set-up costs for new ventures                                              (6,087)                                     (6,087)               -
YTI guarantee costs                                                        (4,461)                                     (4,461)               -
SAR and Bonus Rights Schemes                                                3,460                                       3,460           24,087
Goodwill and Medium-term incentive schemes                                (41,915)        35,959                       (5,956)         (12,785)
Benefit enhancements                                                                                                        -           (7,622)

EV operating return                                                       508,167        489,281       (15,605)       981,843          962,276

Investment return variances on ANW                                         (2,609)                        (215)        (2,824)         (23,265)

Recurring EV earnings                                                     505,558        489,281       (15,820)       979,019          939,011

Effect of economic assumption changes                                       3,806        (63,779)       (8,005)       (67,978)          (6,196)
Impact of once-off debit order submission failure*                         (4,320)       (15,000)                     (19,320)               -
Reversing impact of Switch2 purchase and costs                            (17,544)           111                      (17,433)               -
EV earnings                                                               487,500        410,613       (23,825)       874,288          932,815

* Impact of an operational breakdown at a service provider responsible for the monthly processing of policyholder premiums.

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
PO Box 61051, Marshalltown 2107, South Africa

Sponsor: PricewaterhouseCoopers Corporate Finance Proprietary Limited

Directors: GQ Routledge BA LLB (Chairman); BW Reekie BSc(Hons), FASSA* (Managing Director);
B Du Toit (Nee Frodsham) BCom*; ADT Enthoven BA, PhD (Political Science); PR Gwangwa BProc LLB, LLM;
IB Hume CA(SA), ACMA*; BY Mkhondo BCom, MBA; D Molefe MCom, CA(SA); PG Nkadimeng BSc Statistics and Economics; BA Stott
CA(SA); RD Williams BSc(Hons), FASSA. (* Executive Director)
Company secretary: W van Zyl CA(SA)

Johannesburg

Monday 20 August 2018

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