Wrap Text
Audited results and cash dividend declaration for the year ended 30 June 2018
Discovery Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1999/007789/06)
Company tax reference number: 9652/003/71/7
JSE share code: DSY ISIN: ZAE000022331
JSE share code: DSBP ISIN: ZAE000158564
JSE bond code: DSY01 ISIN: ZAG000148362
JSE bond code: DSY02 ISIN: ZAG000148347
JSE bond code: DSY03 ISIN: ZAG000148354
JSE bond code: DSY04 ISIN: ZAG000153271
Audited results and cash dividend declaration for the year ended 30 June 2018
Normalised profit from operations
up 17% to R8 266 million
Core new business annualised premium income (API)
up 10% to R16 137 million
Embedded value
up 15% to R65 624 million
Normalised headline earnings
up 16% to R5 401 million
Transfer secretaries Computershare Investor Services Pty Limited
(Registration number: 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
PO Box 61051, Marshalltown 2107
Sponsors Rand Merchant Bank (A division of FirstRand Bank Limited)
Secretary and registered office MJ Botha, Discovery Limited
1 Discovery Place, Sandton 2146 PO Box 786722, Sandton 2146
Tel: (011) 529 2888
Fax: (011) 539 8003
Directors MI Hilkowitz (Chairperson), A Gore* (Chief Executive Officer), HL Bosman, Dr BA Brink, SE de Bruyn Sebotsa, R Enslin (USA), R Farber(1), HD Kallner*,
F Khanyile, NS Koopowitz*, Dr TV Maphai, HP Mayers*, TT Mboweni, Dr A Ntsaluba*, AL Owen (UK), A Pollard*, JM Robertson(2), B Swartzberg*, DM Viljoen*
(Financial Director), SV Zilwa
*Executive
(1) Redesignated as a non-executive director effective 1 April 2018
(2) Retired 31 August 2018
Annual financial statements
- prepared by L van Jaarsveldt CA(SA) and A Nel CA(SA)
- supervised by DM Viljoen CA(SA)
Embedded value statement
- prepared by M Curtis FASSA, FIA
- supervised by A Rayner FASSA, FIA
Discovery delivers on 2018 Ambition as the Group evolves into a powerful global platform
Commentary
The 2018 Ambition and its frameworks delivered a strong financial performance across the Group
Discovery's core purpose of making people healthier and enhancing and protecting their lives has manifested in a globally relevant model of Shared-Value Insurance.
The Group's confidence in the efficacy and impact of this model resulted in the setting of the 2018 Ambition four years ago, core to which are Discovery's growth
engine, capital philosophy and cash framework. These have proved to be robust mechanisms for managing the Group's growth and investment, as demonstrated over
the period. In addition, the 2018 Ambition has served as a powerful strategic framework to guide the mandate and priorities of Discovery's businesses, which all
performed excellently over the financial year, and are well positioned for continued growth. The financial results must be viewed in this light.
Discovery delivered a strong financial performance for the 12 months ended 30 June 2018. Normalised operating profit increased by 17% to R8 266 million; normalised
headline earnings increased by 16% to R5 401 million (20% increase to R5 609 million excluding the impact of finance lease accounting in respect of 1 Discovery Place);
core new business Annualised Premium Income (which excludes Discovery Health's take-on of new closed medical schemes and gross revenue of Vitality Group)
increased by 10% to R16 137 million; and normalised headline earnings per share increased 16% to 836.9c (diluted). The Embedded Value grew by 15% on an
annualised basis to R65.6 billion, and return on equity exceeded risk-free + 9%, despite considerable investment in new businesses.
The Group generated R10.6 billion in cash from in-force businesses, and after payment of tax, dividends and interest on debt, invested R7.8 billion in new business and
R2 billion in new initiatives, with favourable returns - the Group new business internal rate of return was 26%, growth in value of new business was 16%, and
investments met the criteria of risk-free + 10%, validating the approach to continue to invest significantly without breaching the capital plan.
Discovery maintained a within-guidance cash buffer of R1.7 billion as at 30 June 2018 and the Financial Leverage Ratio reduced to 25.8% at the end of the financial year,
remaining below the limit of 28%.
The diversified portfolio of businesses performed excellently with strong growth potential
Every business grew operating profit at least in line with expectation, and with the exception of VitalityLife, all established businesses generated cash, positive
experience variances, and returns on capital at or near the Group target.
The established businesses achieved combined growth in operating profit of 14% to R8 661 million (CPI + 9%) - above the targeted CPI + 5%. All are of scale and
continue to grow, with Discovery Health leading in open scheme market share, Discovery Life leading in new business market share, Discovery Invest in the top three
takers of net flows in the retail space, and VitalityHealth and VitalityLife in the top five market leaders. In addition, these businesses entered adjacencies over the
period, including the launch of Discovery for Business in South Africa; and the long-term savings business, VitalityInvest, in the UK - further building out the UK
composite model.
The emerging businesses of Discovery Insure, Vitality Group, and Ping An Health grew operating profit by 193% to R158 million, exceeding their target of CPI + 30%.
These businesses all turned profitable over the period and have significant latent potential. Discovery Insure is the fastest-growing short-term insurer in the country;
Vitality Group is building a global franchise with leading partners; and Ping An Health is the top specialist health insurer in China. All three businesses continued to scale
and innovate while maintaining positive actuarial dynamics, adding value to the Group.
In addition, over the period 7% of earnings was invested in new initiatives including Umbrella Funds, VitalityInvest, Discovery Insure Commercial Insurance and
Discovery Bank.
Individual business performance
Discovery Health
Discovery Health delivered excellent results for the period. Operating profit increased by 11% to R2 777 million; new business API increased by 8% to R6 573 million
(excluding take-on of new closed schemes); and lives under management reached 3.5 million. Discovery Health continued to grow its restricted medical scheme client
base, to 18 client schemes, with over 667 000 lives under management. The business was awarded the tender for the Engen Medical Benefit Fund, which came onto the
Discovery Health platform on 1 July 2018. The Discovery Health Medical Scheme (DHMS) continued to create value for members, with average contributions 16.4%
lower than the eight nearest open scheme competitors on a plan-for-plan basis. DHMS membership increased by 2% to 2.8 million lives, with an annualised lapse rate
of 4.8%. Discovery Health's mandate remains clear - to provide its members with access to high quality, affordable healthcare on a sustainable basis, while assisting in
enhancing the healthcare system for all South Africans. In this regard, there were three major themes over the period under review: Discovery Health's response to
regulatory developments; its efforts to curb the impact of steep medical inflation by providing better value for money and deflationary administration fees; and the
development of a richer, more integrated value offering for employers.
Discovery Health continues to engage actively with all regulators in relation to key developments including the Health Market Inquiry, the National Health Insurance Bill,
and the Medical Schemes Amendment Bill. Most of the findings and recommendations in the provisional report of the Health Market Inquiry released in June 2018 are
sound and consistent with Discovery Health's views, and will have a positive impact on the private healthcare system if implemented as proposed. Discovery Health also
maintains its strong support for the proposed National Health Insurance system, and continues to work closely with the National Department of Health and other
stakeholders to ensure optimal outcomes.
High medical inflation remains endemic, driven by a combination of supply and demand factors, as well as the recent increase in VAT. Supply-side factors include
growth in new hospital facilities and new high-cost medicines and devices. Key demand-side factors include ongoing adverse selection trends and the increasing burden
of chronic diseases and cancer, as well as the gradual ageing of the Scheme's membership base.
To manage these trends, Discovery Health continued to invest substantially in risk management assets and systems; healthcare quality improvement programmes; an
integrated digital technology platform; as well as data science and artificial intelligence capabilities and systems. Over the past year, approximately R140 million was
invested in these and related initiatives, delivering significant improvements in operational efficiencies and enhancing Discovery Health's globally leading Shared-Value
health insurance model. This model benefits all of Discovery Health's 19 medical scheme clients as well as their more than 3.5 million members, by securing the lowest
cost of care available in the South African market, material improvements in the quality of healthcare services, and best-in-class client services.
Fraud control was another major focus, with recoveries for 2018 projected to be in excess of R500 million. In the case of DHMS, Discovery Health achieved risk
management savings of approximately R5.7 billion during 2017, representing 11.9% of potential risk claims, and return on investment on the Scheme's managed care
fees of 269%.
In May 2018, Discovery Health launched Discovery for Business along with other Discovery business units. This is an integrated corporate offering including
PrimaryCare, Discovery HealthyCompany (a digitally driven, science-based Employee Assistance Programme), as well as Umbrella Fund and Group Risk products. This
new offering provides a complete health and wellness solution for businesses, contributing to increases in business productivity and wellbeing. The response has been
extremely positive thus far, with strong growth and pipelines for all products.
Discovery Life
Discovery Life delivered a robust performance with a focus on quality, prudence and enhancing the Shared-Value Insurance model. The business grew earnings
by 7% to R3 837 million, benefiting from a strong second half, while new business Annualised Premium Income increased by 1% to R2 188 million. New business
market share increased to 31%(1) in the retail affluent protection segment, while the value of new business (individual) grew by 8%. Individual Life new business grew
4% in tough market conditions and Group Risk new business was down 29% off a high base, due to a single large scheme being acquired in the second half of the 2017
financial year.
Discovery Life continued to enhance the impact of the Shared-Value model, with considerable product innovation over the period. This led to growth in market share
and VNB margin, with engaged Vitality members continuing to exhibit lower mortality experience. The Global Education Protector was recognised as one of the most
innovative life insurance products globally(2); while the new Purple Life plan led to a 23% increase in policies with cover over R10 million. The clinical refinement of the
Vitality points structure, which accelerated over the period, resulted in positive behaviour change as clients strove to maintain their integration benefits (PayBacks of
R973 million were paid to Discovery Life policyholders).
Another theme was the considerable focus on assumptions and financial and actuarial management. Discovery Life differs from its competitors in that it is less than
two decades old and has grown in-force premium at 25% per annum organically from June 2002 to June 2018; transacts predominantly long-term Whole of Life
business; and uses the Shared-Value Insurance model to dynamically adjust premiums and benefits based on Vitality engagement. While this results in additional
complexity in predicting policyholder behaviour and its impact on profit emergence, the efficacy of the actuarial control framework was demonstrated over the period.
Although management interventions resulted in a positive policy alterations variance for the second half of the financial year, further prudence was introduced by a
strengthening of assumptions. The economic assumptions were updated to better align with the observed shapes of the yield curves. Additional prudence was
introduced in the Embedded Value by limiting the term of valuing shareholder cash flows to 40 years.
Claims experience recovered in the second half of the year, at 91% of expected compared to 108.3% at December 2017. The claims experience in the first half was
impacted by a number of large, non-natural deaths. Policy lapses were 82% of expectation, emphasising the efficacy of the model.
Discovery Life remains well-capitalised at 3.5x CAR cover and generated cash after tax of R3 519 million (including Discovery Invest) from the in-force book over the
period (before reinsurance and acquisition-related costs). It invested the majority of this in profitable new business growth, ending in a net cash generation of R539
million. The implementation of SAM in 2018/19 is expected to result in a significant release of capital from Discovery Life, resulting in lower assets being held and lower
associated investment income, although improving the business's return on capital.
(1) NMG Life Insurance New Sales Report Q2 2018.
(2) EFMA Accenture Global Innovation in Insurance Awards, Paris 2018.
Discovery Invest
Discovery Invest's performance was robust amid weak financial markets. Operating profit grew 19% to R885 million, driven by an 18% increase in assets under
administration to R81.8 billion, with 77% of linked funds in Discovery funds. Net flows grew by 10% to R6.4 billion. Discovery Invest also saw a significant improvement
in new business in the second half of the year, smoothing out the first half to end flat for the full-year (excluding the effect of the R500 million corporate endowment
sold in June 2017). The focus over the period was refining the use of the Shared-Value model in the context of long-term savings.
The Discovery Life Collective Investment Scheme remained in the top 10 retail flow takers while the Discovery Balanced Fund continued to perform well, placing in the
first performance quartile over one, three, five and 10 years. In the PlexCrown Ratings, a widely-quoted unit trust rating agency in South Africa, Discovery Invest
remained in the top five fund managers.
The business saw continued evidence of positive behaviour change as a result of the Shared-Value model. Discovery Invest's Boosts led to demonstrable results in
terms of members saving for longer, in greater quantities, getting healthier, and withdrawing less. This manifested in superior long-term retirement outcomes for
clients, as well as sustainable profitability for the business. Discovery Invest also advanced its digital programme, launching an intuitive digital hub for advisers'
investment servicing and more interactive investment statements for clients.
In May 2018, Discovery extended its Shared-Value model by launching an Umbrella Fund together with a revised Group Risk Payback product, under the banner of a
new Discovery Employee Benefits solution.
Discovery Insure
Discovery Insure had a strong period, turning to profitability to deliver a full-year profit of R68 million. Gross Premium Income grew 28% to R2.7 billion and new
business increased by 17% to R1.05 billion. The business focused on executing its business model in the personal lines market, with proven results in selection,
behaviour change, and selective lapsation, evidenced by the high quality of the in-force book. This bodes well for future growth in profitability as the quality of the
in-force book improves with policy duration. Based on this experience, Discovery Insure launched a powerful interpretation of its shared-value model for the SME
market.
Discovery Insure's strong performance over the period was driven by the continued success of the Vitality Shared-Value Insurance model, which incentivises and
rewards good driving behaviour. Loss ratios are highly correlated to engagement resulting in an improving book over time, with a 7.1% absolute reduction in loss ratio
over the past 24 months. Data analytics played a role in improving efficiencies in pricing, fraud detection and network management. This resulted in the existing
Discovery Insure book (excluding the impact of new business) producing R235 million in profit over the full financial year.
Based on the proven efficacy of the model, Discovery Insure entered the commercial insurance market over the period. The commercial offering deals with traditional
physical risks as well as modern risks such as reputational and cyber, and uses technology to enhance risk assessment techniques. The fleet product rewards drivers
and fleet owners, while a partnership with leading global business accelerator, Endeavor, offers clients a diagnostic to identify risks, as well as a curated market place
with business development partners.
In terms of global strategy, Discovery Insure continues to explore the opportunity to extend the model into international markets as an extension of the Global Vitality
Network.
Vitality UK businesses
Discovery's UK business produced excellent results during the period, with combined new business increasing by 12% to R2.28 billion (£132 million); operating profit
growing by 44% to R1.1 billion (£64 million); and total lives growing by 11% to 1.1 million. The composite business is attaining scale in the UK, with both the launch of
VitalityInvest and the exceptional performance over the period creating considerable opportunity for continued growth. The value of in-force for the UK business
increased by 25% to R12.5 billion over the period.
VitalityInvest brings together behavioural economics, savings and wellness to incentivise people to save sooner, invest for longer, manage their income drawdown and
look after their health. Successful delivery relies on bespoke financial planning and cash flow modelling tools built on Vitality's proprietary research and data on life
expectancy. This has been developed in collaboration with partners such as the University of Cambridge and RAND Europe.
Vitality continued to see positive member engagement, with 46% growth in points-earning activities (includes screenings, nutrition and physical activity) to 36 million,
and high levels of benefit utilisation, from Starbucks to cinema tickets. Vitality also made ongoing investments in its brand, adding Disney in a partnership aimed at
children; signing on two new ambassadors; and extending its presence and sponsorship in cricket, football and hockey.
VitalityHealth
VitalityHealth delivered outstanding results. New business increased by 14% to R1.1 billion (£64 million), with the Individual segment up 13%, making up half of total
sales. Operating profit increased by 108% to R589 million (£34 million), reflecting continued strong performance across all business metrics, including improved risk
profile of new business, increased member engagement, sophisticated care pathways, enhanced robustness in claims management, and benefits from the Health
Purchasing Alliance (HPA) arrangement.
The strong Vitality chassis and aspirational brand, combined with the effects of various interventions over the past few years (such as claims management) resulted in
better selection, exceptional Vitality engagement and strong positive selective lapsation. The enhanced claims management initiatives resulted in excellent performance
for the period. During the financial year the VitalityHealth back book generated excess cash of R1.6 billion. After new business acquisition costs and investment in
developing the business, R475 million of cash surplus was generated.
VitalityLife
This was an important period for VitalityLife, as it continued its focus on being fit for purpose in the low interest rate environment. New business increased by 10% to
R1.17 billion (£67.7 million), with particularly strong sales in the second half of the year. VitalityLife's operating profit increased by 6% to R515 million (£29.7 million). The
business completely reengineered itself for a low interest rate environment, with all new business repriced and the business mix changed towards more term
assurance and indexed business. The profit result also reflects a shift toward a passive investment rate assumption.
VitalityLife continued to innovate within the UK protection market. Following the success of the Optimiser products launched in 2016, VitalityLife introduced a new
version of the product aimed at smaller policies. The combined impact resulted in over 70% of all new business being optimised. At the same time, VitalityLife
continued to strongly promote the benefit of indexation of premiums in protecting customers from the financially eroding effect of inflation. The new business margin
increased from 36% to 39% year-on-year.
Product development was supported by growth in the distribution footprint across all channels, which has positioned VitalityLife for continued sales growth in future.
Strong sales for the year resulted in the business surpassing the milestone of half a million lives insured during 2018.
The fundamentals of the VitalityLife business remained strong, with positive claims variances over the year and improving lapse experience seen over the second half
of the financial year. The VitalityLife investment rate assumption was reviewed and set in line with the long-term risk-adjusted yield expected from a basket of fixed
interest securities. The move to a long-term view of the investment assumption improves the reliability and stability of IFRS results.
Vitality Group
Vitality Group delivered excellent results for the period under review, transitioning to profitability with a profit of $2.6 million (R34 million), compared to an $8.5 million
(R116 million) loss in 2017. Fee income reached $50 million (R645 million) and new business integrated insurance premiums grew 78% to $390 million (R5 billion).
Insurance partners' membership increased by 91% to over 750 000 and total Vitality Group membership reached 1.56 million*. All business segments are now profitable,
achieved through strong growth and operational efficiencies, as well as continued investment in the Global Vitality Platform and its ability to serve partners and
customers. Vitality Group is well positioned for growth, with a codified model for extracting maximum value per market, which includes the following broad strategies:
1) Exploiting latent potential by partnering with the leading insurers in the largest insurance markets; 2) partnering with Hannover Re to rapidly roll out repeatable
Vitality offerings in smaller markets; and 3) expanding Vitality to adjacencies beyond insurance or traditional distribution channels. Importantly, the Vitality One technology
infrastructure went live over the period, offering a globally unified systems architecture that all markets can access.
* Membership represents full Vitality members only.
A significant development over the period was the launch of Vitality Shared-Value Insurance with Sumitomo Life in Japan. The launch took place in Tokyo on 17 July
2018, with excellent reception and media coverage, and Sumitomo Life has gone live on the Vitality One platform.
In addition to this, the partnership with Hannover Re will see three new markets signed on in the next 12 months.
Vitality USA
Vitality USA serves the employees of its corporate clients in the United States, and saw high and sustained engagement among users. Vitality USA is making significant
progress in extending its offering to clients beyond employers with its Apple Watch and Active Rewards programmes. Vitality USA has also extended its platform
through its Gateway offering by providing access to a curated list of health applications and services. This offering has broad application to all businesses interested in
the value generated from behavioural change.
AIA Vitality
AIA Vitality, the most mature Vitality Group insurance partnership, continued its exceptional performance across all launched territories. Over the period, new business
Annualised Net Premium grew by 85% and Vitality membership grew by 110%. Vitality continues to gain traction in existing markets - as at 30 June 2018, Vitality was
integrated with over 60 AIA products and was live in 10 AIA markets.
John Hancock and Manulife Vitality
Both John Hancock Vitality and Manulife Vitality demonstrated strong sales growth, increased engagement and an uptick in net promoter scores over the period. The
increase in sales was achieved through the launch of new Vitality integrated products, increasing broker and consumer adoption, and the strong performance of the
direct-to-consumer channel in the United States.
Generali Vitality
Generali Vitality operates in three markets, Germany, France and Austria, of which Germany and France are Generali's second and third largest markets by premium
volume respectively. Progress was made over the year to expand the distribution channels and develop the products in the markets. In the second half of the financial
year, Vitality membership numbers grew by 40%, reflecting the successful launch of Generali Vitality in Austria and Germany's biggest distribution force's (DVAG's)
introduction to Generali Vitality-linked insurance products.
Ping An Health
Ping An Health had an exceptional year with new business growing by 87% to RMB 2.9 billion and revenue growing by 80% to RMB 4.9 billion. Discovery's share of Ping
An Health's profit, net of Discovery costs, increased by 279% to $4.4 million. The business fundamentals remained strong, with lapses meeting expectation and the
overall loss ratio performing better than expectation. Ping An Health's growth and strategy is being driven by five important factors: China's health insurance market is
expected to continue growing significantly; there is potential to extract more value from distribution by using technology; product strategies are being adapted to
market realities; investments are being made into scaling operations; and Discovery is increasing the sophistication of risk management to ensure sustainability.
The business mix moved significantly towards individual retail products over the last two years, with Ping An Health's internet product showing exceptional growth and
performance. The Group high-end and individual mid-end products continued to make good progress, and the growth remains within the existing capital and business
plan.
Ping An Health's current performance implies that capital required to sustain business growth over the next three years is unlikely to exceed R500 million. Ping An
Health is adequately capitalised from a solvency perspective, but additional capital is required to maintain an A credit rating by AM Best to retain its reinsurance licence
(Ping An Health acquired a reinsurance licence to attain national distribution for its products. Ping An Life agents now sell Ping An Health products in regions where
Ping An Health does not have an insurance licence, and Ping An Health gets access to the underwriting profits through a reinsurance agreement with Ping An Life).
It should be noted that Ping An Health profit for FY2019 will be impacted by a higher effective tax rate.
The market for private healthcare in China has continued to grow on the back of macroeconomic factors that strengthen demand: more than 100 million people are
expected to join the Chinese middle class in the next decade; and more than $100 billion in annual healthcare costs are still out-of-pocket. In addition, China leads the
world in fintech adoption, which has led to the accelerated rise of premiums from health insurance products distributed through the internet.
Ping An Health's strategic imperative is to utilise technology to become China's largest health insurer. There has been considerable focus on expanding operations and
investing in technology to sustain its fast growth. The objective is to continue growing the client base, while giving clients the best experience and increasing efficiencies.
Ping An Health is also working on initiatives to develop additional distribution channels and expand into new cities and provinces.
The Ping An Health App was launched in 2016 for the distribution of health insurance products and member servicing, and has since attracted over 8.5 million users.
Premium revenue sold directly on the app exceeded RMB 100 million in the second half of the 2018 financial year. It was the first internet insurance app to reach
breakeven within two years of its launch and is widely recognised by the industry.
In August 2018, Ping An Health launched the I-Kang Bao elderly medical product on the Ping An Health App, giving protection for cancer and accidental in-patient
reimbursement. This product aims to get younger people to download the App and buy products for their parents, as the target age range is 45+. A similar product,
targeting ages 0-70, was also launched for sale through all other channels including Ping An Life agents, and together these products have achieved a run rate of more
than 1.5 million RMB in sales per day since launch.
The business also saw continued engagement in Run Vitality with Ping An Life, which reached over four million members on Vitality, with an engagement rate of 68%.
A considerable focus was placed on the build and shareholding of Discovery Bank
Shareholders are referred to the SENS announcement on 16 October 2017 wherein they were advised that Discovery had been granted a banking licence by the
Registrar of Banks (now the Chief Executive Officer of the Prudential Authority, SARB). At the time we also advised that the approval from the Registrar contained
certain conditions relating to the shareholding of Discovery Bank, the impacts of which were being considered by all affected parties.
A condition relating to the shareholding of Discovery Bank imposed by the Registrar, is that the proposed 25.01% ultimate crossholding in Discovery Bank by FirstRand
Investment Holdings Limited ("FRIHL") should be reduced and ultimately exited over a period of time.
Given this condition, Discovery and FRIHL have since agreed that it would be preferable for FRIHL to exit entirely as soon as practically possible.
The proposed transaction therefore includes:
- the acquisition of the effective 25.01% interest of FRIHL in Discovery Bank
- acquiring the remaining 25.01% economic interest that FirstRand currently owns in the Discovery Card joint venture business
- Discovery Bank acquiring all rights to the Discovery card book and related assets which will be migrated over time
The transaction is subject to approval by certain regulatory authorities including the Prudential Authority and the Competition Authorities.
The total combined acquisition price payable by Discovery to the FirstRand Group will be R1.8 billion. Discovery has provided guidance that it plans to pursue existing
growth initiatives without recourse to additional capital. As demonstrated in its performance during the period under review, the Group and its growth initiatives have
delivered strongly, and the capital plan has evolved stronger than expected. This gives Discovery the opportunity of continued growth accompanied by a stronger balance
sheet with less leverage and larger cash buffers. Since the acquisition of the remaining 25% constitutes a new initiative and presents an important opportunity for the
Group, the Board decided that this acquisition should be funded by way of an equity issuance limited to the purchase price. Given the relative immateriality, the
transaction does not require shareholder approval.
Although these developments have delayed the process slightly, the Bank build is progressing well and remains within budget, and the launch is expected before the
end of 2018.
In relation to this, Discovery Card's performance was excellent, and bodes well for the Bank. In the group's segmental reports, the Discovery Card joint venture profits
and additional 54.99% profit share (received by way of after tax dividends) have been reallocated to Discovery Bank and disclosed in "All other segments" and
comparatives were restated where appropriate. Profits for the Discovery Card JV with FNB grew by 17% to R414 million and revenue increased by 6% to R1 billion. In
addition, Discovery's credit card base is less sensitive to negative market conditions due to a substantially better risk profile. Both its percentage of non-performing
loans and cost to income ratio were significantly below the average of other South African banks.
Prospects for growth
Discovery is well positioned for growth. Setting apart the effect of the Bank, Discovery expects continued growth without recourse to additional capital. The investment
in Bank will impact earnings for the 2019 year, as post launch the amortisation of the build cost will emerge. Thereafter, the organic growth model is expected to revert to its long-term average.
On behalf of the Board
MI HILKOWITZ A GORE
Chairperson Group Chief Executive
Sandton
3 September 2018
Notes to analysts:
- Any forecast financial information contained in this announcement has not been reviewed or reported on by the company's external auditors.
- Discovery has published supplemental unaudited information on the website. For this and other results information, go to https://www.discovery.co.za/corporate/
investor-relations and page down to Financial results and reports, Annual Results 2018.
Statement of financial position
at 30 June 2018
Group Group
2018 2017
R million Audited Audited
ASSETS
Assets arising from insurance contracts 43 625 37 691
Property and equipment 4 272 1 210
Intangible assets 5 491 4 071
Deferred acquisition costs 1 150 1 025
Goodwill 2 247 2 107
Investment in equity-accounted investments 1 159 979
Financial assets
- Available-for-sale investments 7 547 7 298
- Investments at fair value through profit or loss 71 246 58 948
- Derivatives 494 392
- Loans and receivables including insurance receivables 7 543 6 470
Deferred income tax 1 968 1 337
Current income tax asset 38 34
Reinsurance contracts 308 263
Cash and cash equivalents 10 894 9 098
Total assets 157 982 130 923
EQUITY
Capital and reserves
Ordinary share capital and share premium 8 308 8 306
Perpetual preference share capital 779 779
Other reserves 1 280 346
Retained earnings 27 227 22 859
37 594 32 290
Non-controlling interest * *
Total equity 37 594 32 290
LIABILITIES
Liabilities arising from insurance contracts 61 488 52 477
Liabilities arising from reinsurance contracts 8 918 6 746
Financial liabilities
- Negative reserve funding - 847
- Borrowings at amortised cost 14 079 8 524
- Investment contracts at fair value through profit or loss 17 927 14 867
- Derivatives 78 135
- Trade and other payables 9 043 7 369
Deferred income tax 8 007 6 963
Deferred revenue 324 291
Employee benefits 232 191
Current income tax liability 292 223
Total liabilities 120 388 98 633
Total equity and liabilities 157 982 130 923
* Amount is less than R500 000.
Income statement
for the year ended 30 June 2018
Group Group
2018 2017 %
R million Audited Audited change
Insurance premium revenue 36 685 33 533
Reinsurance premiums (4 356) (3 837)
Net insurance premium revenue 32 329 29 696
Fee income from administration business 9 252 8 372
Vitality income 4 491 4 267
Investment income 895 758
- investment income earned on shareholder investments and cash 209 150
- investment income earned on assets backing policyholder liabilities 686 608
Net realised gains on available-for-sale financial assets 10 8
Net fair value gains on financial assets at fair value through profit or loss 5 823 2 108
Net income 52 800 45 209 17
Claims and policyholders' benefits (20 714) (19 237)
Insurance claims recovered from reinsurers 2 735 2 816
Recapture of reinsurance - (858)
Net claims and policyholders' benefits (17 979) (17 279)
Acquisition costs (5 594) (5 237)
Marketing and administration expenses (17 219) (15 652)
Amortisation of intangibles from business combinations (123) (171)
Recovery of expenses from reinsurers 2 542 2 985
Net transfer to/from assets and liabilities under insurance contracts (4 859) (3 362)
- change in assets arising from insurance contracts 5 141 5 346
- change in assets arising from reinsurance contracts 36 (109)
- change in liabilities arising from insurance contracts (8 088) (6 625)
- change in liabilities arising from reinsurance contracts (1 948) (1 974)
Fair value adjustment to liabilities under investment contracts (1 308) (248)
Profit from operations 8 260 6 245 32
Finance costs (959) (478)
Foreign exchange losses (4) (21)
Share of net profits from equity-accounted investments 115 26
Profit before tax 7 412 5 772 28
Income tax expense (1 677) (1 278) (31)
Profit for the year 5 735 4 494 28
Profit attributable to:
- ordinary shareholders 5 652 4 411 28
- preference shareholders 83 83
- non-controlling interest * *
5 735 4 494 28
Earnings per share for profit attributable to ordinary shareholders of the
company during the year (cents):
- undiluted 876.1 684.2 28
- diluted 875.6 683.6 28
* Amount is less than R500 000.
Statement of other comprehensive income
for the year ended 30 June 2018
Group Group
2018 2017 %
R million Audited Audited change
Profit for the year 5 735 4 494
Items that are or may be reclassified subsequently to profit or loss:
Change in available-for-sale financial assets 37 17
- unrealised gains 64 29
- capital gains tax on unrealised gains (19) (6)
- realised gains transferred to profit or loss (10) (8)
- capital gains tax on realised gains 2 2
Currency translation differences 840 (1 575)
- unrealised gains/(losses) 856 (1 581)
- tax on unrealised (gains)/losses (16) 6
Cash flow hedges 2 33
- unrealised gains 200 159
- tax on unrealised gains (32) (25)
- gains recycled to profit or loss (188) (123)
- tax on recycled gains 22 22
Share of other comprehensive income from equity-accounted investments 42 (58)
- change in available-for-sale financial assets (9) (1)
- currency translation differences 51 (57)
Other comprehensive income/(losses) for the year, net of tax 921 (1 583)
Total comprehensive income for the year 6 656 2 911 129
Attributable to:
- ordinary shareholders 6 573 2 828 132
- preference shareholders 83 83
- non-controlling interest * *
Total comprehensive income for the year 6 656 2 911 129
* Amount is less than R500 000.
Headline earnings
for the year ended 30 June 2018
Group Group
2018 2017 %
R million Audited Audited change
Basic earnings per share (cents):
- undiluted 876.1 684.2 28
- diluted 875.6 683.6 28
Headline earnings per share (cents):
- undiluted 899.6 683.1 32
- diluted 899.0 682.5 32
Normalised headline earnings per share (cents):
- undiluted 837.4 722.2 16
- diluted 836.9 721.5 16
The reconciliation between earnings and headline earnings is shown below:
Net profit attributable to ordinary shareholders 5 652 4 411 28
Adjusted for:
- gain on disposal of property and equipment net of CGT (3) (1)
- impairment of intangible assets net of tax 162 -
- realised gains on available-for-sale financial assets net of CGT (8) (6)
Headline earnings 5 803 4 404 32
- accrual of dividends payable to preference shareholders 1 (1)
- amortisation of intangibles from business combinations net of deferred tax 109 154
- deferred tax asset raised on assessed losses (352) -
- deferred tax timing difference related to new 'adjusted IFRS' tax basis (119) -
- duplicate building costs 37 -
- unrealised gains on foreign exchange contracts not designated as hedges (77) -
- initial expenses related to Prudential Book transfer (1) -
- rebranding and business acquisitions expenses - 99
Normalised headline earnings 5 401 4 656 16
Weighted number of shares in issue (000's) 645 014 644 651
Diluted weighted number of shares (000's) 645 408 645 236
Refer to 'Significant transactions affecting the current results' for details on the accounting treatment of Discovery's new head office.
Normalised operating profit per the segmental information, reflects the cash rental costs separately from the International Financial Reporting Standards (IFRS) finance
lease treatment, as individual business expenses and margins are managed on underlying cash rental costs incurred by each business.
Normalised headline earnings adjusted for the impact of the accounting treatment of the new head office lease, would result in an increase of R208 million in
normalised headline earnings to R5 609 million (increase of 20% compared to the prior financial year). The adjustment is calculated by replacing the depreciation of
R126 million and finance charges of R210 million recognised in line with IFRS, with the actual market related rentals of R128 million.
Normalised headline earnings per share (with market related cash rentals)(cents) would be 869.5 on an undiluted basis and 869.0 on a diluted basis.
Statement of changes in equity
for the year ended 30 June 2018
Attributable to equity holders of the Company Attributable to equity holders of the Company
Foreign
Share capital Preference Share-based Available- currency
and share share payment for-sale translation Hedging Retained Non-controlling
R million (audited) premium capital reserve investments(1) reserve reserve earnings Total interest Total
Year ended 30 June 2018
At beginning of year 8 306 779 314 180 (147) (1) 22 859 32 290 * 32 290
Total comprehensive income for the year - 83 - 28 891 2 5 652 6 656 - 6 656
Profit for the year - 83 - - - - 5 652 5 735 - 5 735
Other comprehensive income - - - 28 891 2 - 921 - 921
Transactions with owners 2 (83) 13 - - - (1 284) (1 352) - (1 352)
Delivery of treasury shares 2 - - - - - - 2 - 2
Employee share option schemes:
- Value of employee services - - 13 - - - - 13 - 13
Dividends paid to preference shareholders - (83) - - - - - (83) - (83)
Dividends paid to ordinary shareholders - - - - - - (1 284) (1 284) - (1 284)
At end of year 8 308 779 327 208 744 1 27 227 37 594 * 37 594
Year ended 30 June 2017
At beginning of year 8 300 779 319 164 1 485 (34) 19 594 30 607 * 30 607
Total comprehensive income for the year - 83 - 16 (1 632) 33 4 411 2 911 - 2 911
Profit for the year - 83 - - - - 4 411 4 494 - 4 494
Other comprehensive income - - - 16 (1 632) 33 - (1 583) - (1 583)
Transactions with owners 6 (83) (5) - - - (1 146) (1 228) - (1 228)
Increase in treasury shares (4) - - - - - - (4) - (4)
Delivery of treasury shares 11 - - - - - (11) - - -
Share buy-back (1) - - - - - 1 - - -
Employee share option schemes:
- Share schemes cancelled - - (19) - - - 12 (7) - (7)
- Value of employee services - - 14 - - - - 14 - 14
Dividends paid to preference shareholders - (83) - - - - - (83) - (83)
Dividends paid to ordinary shareholders - - - - - - (1 148) (1 148) - (1 148)
At end of year 8 306 779 314 180 (147) (1) 22 859 32 290 * 32 290
(1) This relates to the fair value adjustments of available-for-sale financial assets.
* Amount is less than R500 000.
Statement of cash flows
for the year ended 30 June 2018
Group Group
2018 2017
R million Audited Audited
Cash flow from operating activities 3 414 (832)
Cash generated by operations 10 875 9 672
Purchase of investments held to back policyholder liabilities (24 217) (32 104)
Proceeds from disposal of investments held to back policyholder liabilities 16 179 25 020
Working capital changes 250 (4 146)
3 087 (1 558)
Dividends received 252 197
Interest received 2 062 1 711
Interest paid (759) (437)
Taxation paid (1 228) (745)
Cash flow from investing activities (2 433) 15
Purchase of financial assets (23 631) (14 083)
Proceeds from disposal of financial assets 23 621 16 208
Purchase of property and equipment (470) (239)
Proceeds from disposal of property and equipment 7 5
Purchase of software and other intangible assets (1 940) (1 353)
Proceeds from the sale of intangible assets - 7
Increase in investment in associate (20) (530)
Cash flow from financing activities 609 1 913
Dividends paid to ordinary shareholders (1 284) (1 152)
Dividends paid to preference shareholders (83) (83)
Increase in borrowings 2 654 3 514
Repayment of borrowings (678) (366)
Net increase in cash and cash equivalents 1 590 1 096
Cash and cash equivalents at beginning of year 9 097 8 614
Exchange losses on cash and cash equivalents 201 (613)
Cash and cash equivalents at end of year 10 888 9 097
Reconciliation to statement of financial position
Cash and cash equivalents 10 894 9 098
Bank overdraft included in borrowings at amortised cost (6) (1)
Cash and cash equivalents at end of year 10 888 9 097
Additional information
at 30 June 2018
Fair value hierarchy of financial instruments
The Group's financial instruments measured at fair value have been disclosed using a fair value hierarchy. The hierarchy has three levels that reflect the significance of
the inputs used in measuring fair value. These are as follows:
Level 1 includes financial instruments that are measured using unadjusted, quoted prices in an active market for identical financial instruments. Quoted prices are
readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly
occurring market transactions on an arm's length basis.
Level 2 includes financial instruments that are valued using techniques based significantly on observable market data. Instruments in this category are valued using:
(a) quoted prices for similar instruments or identical instruments in markets which are not considered to be active or
(b) valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.
Level 3 includes financial instruments that are valued using valuation techniques that incorporate information other than observable market data and where at least
one input (which could have a significant effect on instruments' valuation) cannot be based on observable market data.
30 June 2018
R million (audited) Level 1 Level 2 Level 3 Total
Financial assets
Financial instruments at fair value through profit or loss:
- Equity securities 29 769 873 - 30 642
- Equity linked notes - 211 - 211
- Debt securities 15 120 534 - 15 654
- Inflation linked securities 1 096 - - 1 096
- Money market securities 610 5 255 - 5 865
- Mutual funds 17 778 - - 17 778
Available-for-sale financial instruments:
- Equity securities 166 9 - 175
- Equity linked notes - 20 - 20
- Debt securities 840 573 - 1 413
- Inflation linked securities 2 - - 2
- Money market securities 2 382 1 787 - 4 169
- Mutual funds 1 768 - - 1 768
Derivative financial instruments at fair value:
- Hedges - 337 - 337
- Non-hedges - 157 - 157
69 531 9 756 - 79 287
Financial liabilities
Derivative financial instruments at fair value:
- Hedges - 51 - 51
- Non-hedges - 27 - 27
- 78 - 78
There were no transfers between level 1 and 2 during the current financial year.
Specific valuation techniques used to value financial instruments in level 2
- Discovery has invested in equity linked notes offered by international banks in order to back certain unit-linked contract liabilities. The calculation of the daily value of
the equity linked investments is made by the provider of the note. Discovery has procedures in place to ensure that these prices are correct. Aside from the daily
reasonableness checks versus similar funds and movement since the prior day's price, the fund values are calculated with reference to a specific formula or index,
disclosed to the policyholders, which is recalculated by Discovery in order to check if the price provided by the provider is correct.
- If a quoted market price is not available on a recognised stock exchange or from a broker for non-exchange traded financial instruments, the fair value of the
instrument is estimated by the asset managers, using valuation techniques including the use of recent arm's length market transactions, reference to the current fair
value of another instrument that is substantially the same, discounted cash flow techniques, option pricing models or other valuation techniques that provide a
reliable estimate of prices obtained in actual market transactions.
- The fair value of the hedged derivatives is calculated as follows:
(a) The fair value of call options is calculated on a Black-Scholes model.
(b) The fair value of the return swaps is calculated by discounting the future cash flows of the instruments.
(c) The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.
30 June 2017
R million (audited) Level 1 Level 2 Level 3 Total
Financial assets
Financial instruments at fair value through profit or loss:
- Equity securities 24 069 - - 24 069
- Equity linked notes - 2 557 - 2 557
- Debt securities 11 815 462 - 12 277
- Inflation linked securities 386 - - 386
- Money market securities 590 5 628 - 6 218
- Mutual funds 13 441 - - 13 441
Available-for-sale financial instruments:
- Equity securities 145 - - 145
- Equity linked notes - 17 - 17
- Debt securities 94 147 - 241
- Inflation linked securities 5 - - 5
- Money market securities 642 1 588 - 2 230
- Mutual funds 4 660 - - 4 660
Derivative financial instruments at fair value:
- Hedges - 354 - 354
- Non-hedges - 38 - 38
55 847 10 791 - 66 638
Financial liabilities
Derivative financial instruments at fair value:
- Hedges - 29 - 29
- Non-hedges - 106 - 106
- 135 - 135
Exchange rates used in the preparation of these results
USD GBP
30 June 2018
- Average 12.86 17.33
- Closing 13.81 18.16
30 June 2017
- Average 13.61 17.29
- Closing 13.12 17.03
SEGMENTAL INFORMATION
for the year ended 30 June 2018
IFRS reporting adjustments
Normalised
SA SA SA SA UK UK All other Segment UK profit IFRS
R million (audited) Health Life Invest Vitality Health Life segments total Life(2) DUT(3) adjustments(4) total
Income statement
Insurance premium revenue 30 11 103 12 056 - 7 471 4 031 2 665 37 356 (671) - - 36 685
Reinsurance premiums (2) (2 141) - - (1 165) (1 559) (160) (5 027) 671 - - (4 356)
Net insurance premium revenue 28 8 962 12 056 - 6 306 2 472 2 505 32 329 - - - 32 329
Fee income from administration business 6 911 31 1 875 - 30 - 401 9 248 - - 4 9 252
Vitality income - - - 2 323 444 91 1 633 4 491 - - - 4 491
Investment income earned on assets backing policyholder liabilities - 472 44 - 11 18 141 686 - - - 686
Finance charge on negative reserve funding - - - - - (160) - (160) 160 - - -
Inter-segment funding(1) - (708) 708 - - - - - - - - -
Net fair value gains on financial assets at fair value through profit or loss 2 589 3 741 - (1) 92 18 4 441 - 1 312 70 5 823
Net income 6 941 9 346 18 424 2 323 6 790 2 513 4 698 51 035 160 1 312 74 52 581
Claims and policyholders' benefits (2) (6 943) (7 375) - (4 029) (997) (1 590) (20 936) 447 (225) - (20 714)
Insurance claims recovered from reinsurers 1 1 534 - - 938 584 125 3 182 (447) - - 2 735
Net claims and policyholders' benefits (1) (5 409) (7 375) - (3 091) (413) (1 465) (17 754) - (225) - (17 979)
Acquisition costs (3) (1 606) (1 046) (76) (536) (1 887) (280) (5 434) (160) - - (5 594)
Marketing and administration expenses
- depreciation and amortisation (305) (8) - (3) (238) (18) (242) (814) - - (126) (940)
- impairment (7) - - - (193) - - (200) - - - (200)
- other expenses (3 855) (1 639) (808) (2 186) (2 849) (1 620) (3 163) (16 120) (27) - 68 (16 079)
Recovery of expenses from reinsurers - - - - 625 1 917 - 2 542 - - - 2 542
Transfer from assets/liabilities under insurance contracts
- change in assets arising from insurance contracts - 3 405 - - - 2 855 - 6 260 (1 119) - - 5 141
- change in assets arising from reinsurance contracts - 25 - - 5 6 (1) 35 1 - - 36
- change in liabilities arising from insurance contracts (1) (35) (8 031) - 76 (10) (49) (8 050) (1) (21) (16) (8 088)
- change in liabilities arising from reinsurance contracts - (239) - - - (2 828) - (3 067) 1 119 - - (1 948)
Fair value adjustment to liabilities under investment contracts - (3) (279) - - - - (282) - (1 066) 40 (1 308)
Share of net profits from equity-accounted investments 8 - - - - - 107 115 - - - 115
Normalised profit/(loss) from operations 2 777 3 837 885 58 589 515 (395) 8 266 (27) - 40 8 279
Investment income earned on shareholder investments and cash 66 39 26 30 1 6 41 209 - - - 209
Net fair value gains on financial assets at fair value through profit or loss - - - - - - 110 110 - - (110) -
Net realised gains on available-for-sale financial assets - 6 1 - - - 3 10 - - - 10
Initial expenses related to Prudential Book transfer - - - - - (2) - (2) - - 2 -
Amortisation of intangibles from business combinations - - - - - - (123) (123) - - - (123)
Market rentals related to Head Office building adjusted for finance costs
and depreciation - - - - - - (208) (208) - - 208 -
Finance costs (41) (9) - - (1) (2) (713) (766) - - (193) (959)
Foreign exchange (losses)/gains (3) - (9) - - (3) 11 (4) - - - (4)
Profit before tax 2 799 3 873 903 88 589 514 (1 274) 7 492 (27) - (53) 7 412
Income tax expense (718) (929) (253) (25) (13) (85) 303 (1 720) 27 - 16 (1 677)
Profit for the year 2 081 2 944 650 63 576 429 (971) 5 772 - - (37) 5 735
(1) The inter-segment funding of R708 million reflects a notional allocation of interest earned on the negative reserve backing policyholders' funds of guaranteed investment products and hence is transferred to Discovery Invest.
The segment information is presented on the same basis as reported to the Chief Executive Officers of the reportable segments. The segment total is then adjusted for accounting reclassifications and entries required to produce IFRS compliant results. These adjustments
include the following:
(2) The VitalityLife results, for business written on the Prudential Assurance Company license, are reclassified to account for the contractual arrangement as a reinsurance contract under IFRS 4.
(3) The Discovery Unit Trusts (DUT) are consolidated into Discovery's results for IFRS purposes. In the Segment information the DUT column includes the effects of consolidating the unit trusts into Discovery's results, effectively being the income and expenses relating to
units held by third parties.
(4) The effects of eliminating intercompany transactions on consolidation and normalised operating profit adjustments.
IFRS reporting adjustments
SA All other Normalised
SA SA SA Vitality UK UK segments Segment UK profit IFRS
R million (Audited and restated) Health Life Invest Restated(2) Health Life Restated(2) total Life(3) DUT(4) adjustments(5) total
Income statement
Insurance premium revenue 16 9 993 11 515 - 7 040 3 617 2 076 34 257 (724) - - 33 533
Reinsurance premiums (2) (1 838) - - (1 335) (1 183) (203) (4 561) 724 - - (3 837)
Net insurance premium revenue 14 8 155 11 515 - 5 705 2 434 1 873 29 696 - - - 29 696
Fee income from administration business 6 314 26 1 677 - 24 - 331 8 372 - - - 8 372
Vitality income - - - 2 059 538 94 1 576 4 267 - - - 4 267
Investment income earned on assets backing policyholder liabilities - 431 38 - 15 18 106 608 - - 608
Finance charge on negative reserve funding - - - - - (43) - (43) 43 - - -
Inter-segment funding(1) - (573) 573 - - - - - - - - -
Net fair value gains on financial assets at fair value through profit or loss - 476 1 317 - - (109) - 1 684 - 424 - 2 108
Net income 6 328 8 515 15 120 2 059 6 282 2 394 3 886 44 584 43 424 - 45 051
Claims and policyholders' benefits (1) (6 241) (6 800) - (4 376) (740) (1 426) (19 584) 347 - - (19 237)
Insurance claims recovered from reinsurers 1 1 365 - - 1 125 407 265 3 163 (347) - - 2 816
Recapture of reinsurance - - - - (858) - - (858) - - - (858)
Net claims and policyholders' benefits - (4 876) (6 800) - (4 109) (333) (1 161) (17 279) - - - (17 279)
Acquisition costs - (1 565) (1 022) (79) (574) (1 744) (210) (5 194) (43) - - (5 237)
Marketing and administration expenses
- depreciation and amortisation (303) (15) - - (214) (6) (161) (699) - - - (699)
- other expenses (3 520) (1 521) (663) (1 955) (2 533) (1 431) (2 926) (14 549) (103) (202) (99) (14 953)
Recovery of expenses from reinsurers - - - - 1 566 1 419 - 2 985 - - - 2 985
Transfer from assets/liabilities under insurance contracts
- change in assets arising from insurance contracts - 3 577 - - - 1 406 - 4 983 363 - - 5 346
- change in assets arising from reinsurance contracts - (4) - - (111) 8 - (107) (2) - - (109)
- change in liabilities arising from insurance contracts - (124) (5 867) - (25) (14) (35) (6 065) 2 - (562) (6 625)
- change in liabilities arising from reinsurance contracts - (397) - - - (1 214) - (1 611) (363) - - (1 974)
Fair value adjustment to liabilities under investment contracts - (2) (24) - - - - (26) - (222) - (248)
Share of net profits from equity-accounted investments - - - - 1 - 25 26 - - - 26
Normalised profit/(loss) from operations 2 505 3 588 744 25 283 485 (582) 7 048 (103) - (661) 6 284
Investment income earned on shareholder investments and cash 55 26 21 17 2 6 23 150 - - - 150
Net realised gains on available-for-sale financial assets - 1 7 - - - - 8 - - - 8
Rebranding and business acquisitions expenses - - - - (91) - (8) (99) - - 99 -
Amortisation of intangibles from business combinations - - - - - - (171) (171) - - - (171)
Finance costs (49) (8) - - (2) (1) (418) (478) - - - (478)
Foreign exchange losses - - (8) - - - (13) (21) - - - (21)
Profit before tax 2 511 3 607 764 42 192 490 (1 169) 6 437 (103) - (562) 5 772
Income tax expense (685) (1 008) (214) (13) (21) (119) 117 (1 943) 103 - 562 (1 278)
Profit for the year 1 826 2 599 550 29 171 371 (1 052) 4 494 - - - 4 494
(1) The inter-segment funding of R573 million reflects a notional allocation of interest earned on the negative reserve backing policyholders' funds of guaranteed investment products and hence is transferred to Discovery Invest.
The segment information is presented on the same basis as reported to the Chief Executive Officers of the reportable segments. At each reporting date, Discovery must review whether the segments being disclosed still comply with IFRS 8 - Segment reporting. Based on this
review, the following change was required:
(2) The management control over the credit card operations in the Group has moved from Discovery Vitality to Discovery Bank and disclosed accordingly in the segmental report in the 'All other segments'.
The segment total is then adjusted for accounting reclassifications and entries required to produce IFRS compliant results. These adjustments include the following:
(3) The VitalityLife results, for business written on the Prudential Assurance Company license, are reclassified to account for the contractual arrangement as a reinsurance contract under IFRS 4.
(4) The Discovery Unit Trusts (DUT) are consolidated into Discovery's results for IFRS purposes. In the Segment information the DUT column includes the effects of consolidating the unit trusts into Discovery's results, effectively being the income and expenses relating
to units held by third parties.
(5) The effects of eliminating intercompany transactions on consolidation and normalised operating profit adjustments.
Review of Group results
for the year ended 30 June 2018
New business annualised premium income
The new business annualised premium income (API) set out below provides a view of the scale of new business across all operations of the Group and does not
necessarily reflect the new business attributable to the legal entities within the Group. For instance, Discovery Health Medical Scheme (DHMS) new business is
attributable to the medical scheme but is under the administration and marketing of Discovery Health which earns a fee in respect of such services.
Core new business API increased by 10% for the year ended 30 June 2018 when compared to the prior financial year.
June June %
R million 2018 2017 change
Discovery Health - DHMS 5 422 5 157 5
Discovery Health - Closed Schemes(1) 1 151 952 21
Discovery Life 2 188 2 175 1
Discovery Invest 2 454 2 496 (2)
Discovery Insure 1 047 895 17
Discovery Vitality 162 167 (3)
VitalityHealth 1 107 972 14
VitalityLife 1 172 1 068 10
Ping An Health(2) 1 434 778 84
Core new business API of Group 16 137 14 660 10
New Closed Schemes(1) 96 623 (85)
New business API of Group including new Closed Schemes 16 233 15 283 6
Gross revenue Vitality Group(3) 645 634 2
Total new business API and other new business 16 878 15 917 6
(1) The new business API for Closed Schemes includes additional lives on existing closed schemes. The new business API for New Closed
Schemes includes contracted new business API and business in the first twelve months of on-boarding. Closed Schemes refer to those
restricted to certain employers and industries.
(2) Previously Ping An Health included 100% of the new business API. This has been restated to only include 25% in line with the Group's
effective shareholding of 25% of this associate.
(3) Vitality Group new business includes gross recurring and lump sum revenues earned by Vitality Group and specifically excludes
revenue related to cost recoveries and rewards.
Calculation of new business API
New business API is calculated at 12 times the monthly premium for new recurring premium policies and 10% of the value of new single premium policies. It also
includes both automatic premium increases and servicing increases on existing long-term insurance policies. The amounts exclude indirect taxes.
The new business API in the table above differs from the new business API disclosed in the embedded value largely as a result of:
- Inclusion of automatic premium increases and servicing increases on existing life policies - These are included in the table above but excluded in the embedded value
API values disclosed.
- The timing of inclusion of policyholders in the calculation of new business API - In the embedded value, new business is included from the earlier of the date that
the first premium has been received or when the policy is on risk, whereas in the table above, new business is included when the policy has been contractually
committed.
Refer to the footnotes to Table 7: Embedded Value of New Business for a more detailed description of the differences in new business disclosures between the
embedded value and the table above.
Gross inflows under management
Gross inflows under management measures the total funds collected by Discovery. Gross inflows under management increased by 9% for the year ended 30 June 2018
when compared to the prior financial year.
June June %
R million 2018 2017 change
Discovery Health 75 430 68 226 11
Discovery Life 11 134 10 019 11
Discovery Invest 19 901 19 461 2
Discovery Insure 2 694 2 099 28
Discovery Vitality(1) 2 323 2 059 13
VitalityHealth 7 945 7 602 5
VitalityLife 4 122 3 711 11
All other businesses 2 005 1 884 6
Gross inflows under management 125 554 115 061 9
Less: collected on behalf of third parties (74 459) (68 165) 9
Discovery Health (68 489) (61 896) 11
Discovery Invest (5 970) (6 269) (5)
Gross income of Group per the segmental information 51 095 46 896 9
Gross income is made up as follows:
- Insurance premium revenue 37 356 34 257 9
- Fee income from administration business 9 248 8 372 10
- Vitality income 4 491 4 267 5
Gross income of Group per the segmental information 51 095 46 896 9
(1) The comparative has been restated to include the DiscoveryCard joint arrangement gross inflows under management in 'All other
businesses', which was previously included in Discovery Vitality gross inflows under management. This restatement was necessary as
the management control over the credit card operations in the Group has moved from Discovery Vitality to Discovery Bank and
disclosed accordingly in the segmental report. The DiscoveryCard joint arrangement gross inflows amounts to R427 million
(2017: R413 million).
Normalised profit from operations
The following table shows the main components of the normalised profit from operations for the year ended 30 June 2018:
June June %
R million 2018 2017 change
Discovery Health 2 777 2 505 11
Discovery Life 3 837 3 588 7
Discovery Invest 885 744 19
Discovery Vitality(1) 58 25 132
VitalityHealth 589 283 108
VitalityLife 515 485 6
Normalised profit from established businesses 8 661 7 630 14
Emerging businesses 158 (170) 193
- Discovery Insure 68 (21) 424
- Vitality Group 90 (149) 160
Development and other segments (553) (412) (34)
Normalised profit from operations 8 266 7 048 17
(1) The comparatives have been restated to reallocate the DiscoveryCard joint arrangement and the additional 54.99% DiscoveryCard
profit share from established businesses to the 'Development and other segments'. This restatement was necessary as management
control over the credit card operations in the Group has moved from Discovery Vitality to Discovery Bank and disclosed accordingly in
the segmental report. The Discovery Card joint arrangement and 54.99% DiscoveryCard profit share amounts to R259 million (2017:
R165 million). The latter in the form of after tax dividends.
Emerging businesses are those businesses that have achieved sufficient scale to be profitable or profitable in the near future, although not yet significant in cash
generation for the Group and likely to require funds to support new business growth. These businesses are approximately 5 years into their launch. Discovery Insure,
which has been disclosed in 'Emerging businesses', excludes the commercial offering which is a new venture that commenced during the year under review and is
shown in 'Development and other segments'.
'Development and other segments' include costs of start-up businesses and expenses incurred to investigate new products and markets. Start-up costs include costs in
relation to the Discovery Bank, Vitality Invest which is the recently launched UK investment business, a commercial offering in Discovery Insure, and an Umbrella Fund
offering in Discovery Invest. Unallocated head office costs are also included in this segment.
Significant transactions affecting the current results
Discovery's new head office
Discovery has entered into a 15 year lease agreement for its new head office which comprises two phases of development. The lease commenced November 2017 and
March 2018 for Phase I and Phase II respectively. Discovery started taking occupancy of the buildings at those dates, on a phased approach.
IAS 17: Leases, requires a lessee to classify a lease as either a finance lease or an operating lease. A lease is classified as a finance lease if it transfers substantially all
the risks and rewards incidental to ownership. All other leases are classified as operating leases.
In terms of the indicators provided in IAS 17.10 and IAS 17.11, Discovery has classified the lease as a finance lease given that the present value of the minimum lease
payments amounts to at least substantially all of the fair value of the leased asset. This accounting treatment has resulted in the recognition of an asset of R3 155
million, which has been disclosed in 'Property and equipment' and a corresponding lease liability, which has been disclosed in 'Borrowings' in the Statement of financial
position. It should be noted that ownership of the building does not transfer at the end of the lease period but remains that of the landlord.
The treatment under IFRS 16: Leases, effective for reporting periods commencing on or after 1 January 2019, would result in a similar treatment with the lease
capitalised and as a result the accounting treatment in respect of this particular lease is aligned with the future accounting standard effective not yet adopted by
Discovery.
The recognised asset is depreciated over the lease term, using the straight-line method. R126 million depreciation has been recognised in profit or loss for the
respective periods since beneficial occupancy. Finance charges of R210 million have been recognised in profit or loss in respect of the finance lease liability. Normalised
profit from operations includes the market related rental paid.
As Discovery took occupancy of the new building on a phased approach various building costs, such as rental, have been duplicated during the transitional period in
the current financial year as costs were incurred on both the new and old premises. For the calculation of normalised headline earnings, duplicate rental charges of R37
million have been added back.
Borrowings at amortised cost
June June
R million Reference 2018 2017
Bank borrowings 9 050 6 774
- United Kingdom borrowings i 1 810 2 174
- South African borrowings ii 7 240 4 600
Redeemable preference shares 1 402 1 400
Finance lease liability 3 621 349
- New building 3 237 -
- Other finance lease liabilities 384 349
Bank overdraft 6 1
Total borrowings at amortised cost 14 079 8 524
i. United Kingdom borrowings
Discovery previously entered into term facilities totaling GBP 150 million. These borrowings have been used to fund the new business
acquisition costs incurred by VitalityLife, which were previously funded by The Prudential Assurance Company Limited (Prudential) and
disclosed as Negative Reserve Funding in the Statement of financial position.
Discovery repaid GBP 15 million of this facility in previous financial periods and a further GBP 28 million of this facility during 2018, of
which GBP 13 million was a voluntary prepayment. The balance owing at 30 June 2018 amounts to GBP 99.7 million (R1 810 million)
(2017: GBP 127.5 million (R2 174 million)).
Interest rates on these facilities are floating, linked to 3 month LIBOR, payable quarterly in arrears. Finance charges of R40 million
(2017: R50 million) in respect of these borrowings have been recognised in profit or loss.
ii. South African borrowings
June June
R million Reference 2018 2017
Balance at beginning of the period 4 600 1 620
Issuance of listed debt a. 1 500 -
Draw down on existing and new facilities b. c. 1 154 2 996
Repayment of borrowings b. (80) (48)
Accrued interest 77 34
Raising fees capitalised (11) (2)
Balance at end of the period 7 240 4 600
Moody's assigned a Aa3.za issuer rating to Discovery Limited on 20 October 2017.
a. During the current financial year, Discovery registered an unsecured R10 billion Domestic Medium Term Note (DMTN)
programme. In terms of this programme, Discovery issued R1.5 billion JSE Listed Notes in its inaugural issuance on 21 November
2017, with the following profile:
Interest
payable in Amount
Interest arrears Capital repayment maturity date (R million)
Floating rate linked to 3 month JIBAR, plus 161 bps(1) Quarterly 21 November 2022 500
Floating rate linked to 3 month JIBAR, plus 191 bps(2) Quarterly 21 November 2024 800
Fixed rate at 10.46% per annum Semi-annually 21 November 2024 200
1 500
(1) Interest rates on these notes have been fixed at 9.71% per annum, through an interest rate swap.
(2) Interest rates on these notes have been fixed at 10.31% per annum, through an interest rate swap.
b. Discovery Central Services, a subsidiary of the Discovery Group, concluded a 10 year loan facility agreement of R650 million in
December 2016, of which R495 million was utilised in the previous financial year. The remaining portion of this facility of R155
million was utilised during this financial period and R73 million was repaid in terms of the agreement. Interest rates on the facility
are fixed at a weighted average rate of 11.56% per annum, with capital and interest repayable in instalments over the duration of
the loan facility.
c. Discovery Limited entered into a new unsecured R1 billion 5 year loan facility agreement in March 2018, which was fully drawn
down in June 2018. Interest rates on this facility is linked to 3 month JIBAR, plus 245 bps. Interest is payable quarterly in arrears
and capital is repayable in full at maturity on 2 March 2023. Interest rates on this facility have been fixed at 10.275% per annum,
through an interest rate swap.
Finance charges of R512 million (2017: R368 million) in respect of these South African borrowings have been recognised in profit or loss.
Negative reserve funding (acquisition cost funding)
This liability represents the acquisition costs in respect of business written on the Prudential Assurance Company's (Prudential) life insurance license and were funded
by Prudential. The liability is repaid on a matched basis as the cash flows emerge from this business. In the event that the cash flows do not emerge as anticipated,
VitalityLife would be required to repay these liabilities from other resources.
In terms of the level premium reinsurance treaty entered into in respect of this business, a security deposit was required to be placed by the reinsurer, to reduce
counterparty risk. At 30 June 2018, GBP 169 million (R3 065 million) (2017: GBP 147 million (R2 501 million)) was held as a security deposit. The contractual arrangement
in respect of the business written on the Prudential license is accounted for as a reinsurance contract under IFRS 4 and as a result, the 'deposit back' held has been
disclosed as a reduction of the negative reserve funding liability.
During the 2018 financial year, additional amounts were received as 'deposit back' in excess of the negative reserve funding. The agreements indicate that offset is
applicable up to the amount of the negative reserve funding. Any additional amounts of the deposit back received thereafter, are included in cash. The corresponding
liability to the reinsurer has been accounted for in Trade and other payables.
The decrease in the negative reserve funding liability in the current financial year, relates to the partial repayment of funding by VitalityLife as well as an increase in the
amount of deposit back held, which has been offset against the liability. There is still an amount payable to Prudential of GBP120.5 million (R2 189 million) at 30 June
2018.
Consolidation of Discovery Unit Trusts
The Discovery Unit Trusts are consolidated into Discovery's results for accounting purposes, which results in the recognition of the underlying assets and liabilities of
each of the funds.
Assets and liabilities of the Discovery Unit Trusts increased by R7 689 million respectively compared to the prior financial year with movements in the following line
items on the Group's Statement of financial position:
- Investments at fair value through profit or loss increased by R8 269 million.
- Investment contracts at fair value through profit or loss increased by R7 836 million.
- Cash and cash equivalents decreased by R617 million.
- Trade and other payables decreased by R144 million.
- Other assets increased by R37 million.
- Other liabilities decreased by R3 million.
As these policies are linked, the consolidation of the Discovery Unit Trusts has no impact on the net asset value for Discovery shareholders.
Other significant items in these results
Material transactions with related parties
Discovery Health administers the Discovery Health Medical Scheme (DHMS) and provides managed care services for which it charges an administration fee and a
managed healthcare fee respectively. These fees are determined on an annual basis and approved by the trustees of DHMS. The fees totalled R5 496 million for the
year ended 30 June 2018 (2017: R5 090 million). Discovery offers the members of DHMS access to the Vitality programme.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss have increased by R12.3 billion due to market growth and the sale of Discovery Invest products. This includes the
impact of consolidating the Discovery Unit Trusts into the Group's results. The increase in the financial assets at fair value through profit or loss has been presented in
'Purchase of investments held to back policyholder liabilities' of R24 217 million in the Statement of cash flows.
Deferred tax
With the promulgation of the South African Insurance Act 18 of 2017, in January 2018, the new 'adjusted IFRS' tax basis, effective 1 July 2018, has been substantively
enacted as at 30 June 2018. As a result, deferred tax has been calculated on this basis and reflects the values at which the tax liabilities will ultimately be settled. A
reduction in the deferred tax liability of R119 million has been recognised as a timing difference, and has been adjusted for in the calculation of normalised headline
earnings.
During the current year a deferred tax asset has been recognised on the assessed loss in Discovery Insure. Further amounts were raised during the current year in
respect of the VitalityHealth assessed losses. These amounted to R243 million and R109 million respectively, and have been added back in the calculation of normalised
headline earnings.
Taxation
For South African entities that are in a tax paying position, tax has been provided at 28% (2017: 28%) in the financial statements. Where an entity is in an assessed loss
position, a deferred tax asset is recognised to the extent that it is probable that there will be future taxable profits against which assessed losses can be utilised.
Shareholder information
Directorate
Changes to the Board of Discovery Limited from 1 July 2017 to the date of this announcement are as follows:
- Mr R Farber relinquished his role as Chief Financial Officer and Group Financial Director of Discovery in the prior financial year and remained a director of the Board
of Discovery Limited. Effective 1 April 2018, Mr R Farber was redesignated as a non-executive director.
- Mr JM Robertson has retired as executive director and Group Chief Information Officer from the Board of Discovery Limited with effect from 31 August 2018.
Dr BA Brink, Ms SE de Bruyn Sebotsa, Dr TV Maphai and Mr TT Mboweni retire by rotation at the forthcoming Annual General Meeting of shareholders and are eligible
and available for re-election.
Dividend and capital
Interim dividends paid in respect of the 2018 financial year
The following interim dividends were paid during the current financial year:
- B preference share dividend of 518.15068 cents (414.52054 cents net of dividend withholding tax), paid on 12 March 2018.
- Ordinary share dividend of 101 cents per share (80.8 cents net of dividend withholding tax), paid on 19 March 2018.
Final dividend declaration in respect of the 2018 financial year
B preference share cash dividend declaration:
On 23 August 2018, the directors declared a final gross cash dividend of 501.91781 cents (401.53425 cents net of dividend withholding tax) per B preference share for
the period 1 January 2018 to 30 June 2018, payable from the income reserves of the Company. A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt.
The issued preference share capital at the declaration date is 8 million B preference shares.
The salient dates for the dividend were as follows:
Last day of trade to receive a dividend Tuesday, 11 September 2018
Shares commence trading "ex" dividend Wednesday, 12 September 2018
Record date Friday, 14 September 2018
Payment date Monday, 17 September 2018
B preference share certificates may not be dematerialised or rematerialised between Wednesday, 12 September 2018 and Friday, 14 September 2018, both days
inclusive.
Ordinary share cash dividend declaration:
Notice is hereby given that the directors have declared a final gross cash dividend of 114 cents (91.2 cents net of dividend withholding tax) per ordinary share, out of
income reserves for the year ended 30 June 2018. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.
The issued ordinary share capital at the declaration date is 646 844 992 ordinary shares.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Tuesday, 2 October 2018
Shares commence trading "ex" dividend Wednesday, 3 October 2018
Record date Friday, 5 October 2018
Payment date Monday, 8 October 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 3 October 2018 and Friday, 5 October 2018, both days inclusive.
Capital requirements
The table below summarises the capital adequacy requirement (CAR) on the statutory basis, across the Group subsidiaries, and the actual solvency capital held in
relation to this requirement, at 30 June.
2018 2017
Statutory CAR cover Statutory CAR cover
Discovery Life R866 million 3.5 times R705 million 3.9 times
Discovery Insure R630 million 2.0 times R473 million 2.2 times
Vitality Health GBP 87 million (R1 580 million) 1.4 times GBP 83 million (R1 420 million) 1.5 times
Vitality Life GBP 133 million (R2 414 million) 1.9 times GBP 87.5 million (R1 490 million) 2.1 times
Events after reporting date
Banking
As detailed in the operating commentary, subsequent to balance sheet date, Discovery and FirstRand Investment Holdings Limited (FRIHL) have agreed that it would be
preferable for FRIHL to exit their shareholding in Discovery Bank as soon as practically possible.
The proposed transaction includes:
(i) the acquisition of the effective 25.01% interest of FRIHL in Discovery Bank
(ii) acquiring the remaining 25.01% economic interest that FirstRand Bank currently owns in the Discovery Card joint venture business
(iii) Discovery Bank acquiring all rights to the Discovery card book and related assets which will be migrated over time
The transaction is subject to approval by the regulatory authorities including The Chief Executive Officer of the Prudential Authority, SARB and The Competition
Authorities.
The total combined acquisition price payable by Discovery to the FirstRand Group will be R1.8 billion. Since the acquisition of the remaining 25% constitutes a new
initiative and presents an important opportunity for the Discovery Group, the Board have decided that this acquisition should be funded by way of an equity issuance,
limited to the purchase price. Given the relative immateriality, the transaction does not require shareholder approval.
Listed debt issue
On 29 August 2018, as part of its ongoing capital management process, Discovery Limited issued further Floating Rate Notes in terms of its Domestic Medium Term Note
Programme (DMTN) totalling R700 million. Capital repayment is on maturity date being 21 August 2026. The coupon interest rate in respect of the notes is linked to 3
month JIBAR plus 180bps, with interest payable quarterly in arrears. Interest rate have been fixed at 10.29% per annum, through interest rate swaps. This brings the
total nominal value in issue under the DMTN programme to R2.2 billion.
Basis of preparation
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports,
and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and
to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated
financial statements from which the summary consolidated financial statements were derived are in terms of International Financial Reporting Standards and are
consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.
Audit
The summary consolidated financial statements are extracted from audited information, but are not audited. The annual financial statements were audited by
PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon.
The audited annual financial statements and the auditor's report thereon are available for inspection at the company's registered office, together with the financial
statements identified in the respective auditor's reports.
The directors of Discovery take full responsibility for the preparation of this report and that the financial information has been correctly extracted from the underlying
annual financial statements.
Embedded value statement
for the year ended 30 June 2018
The embedded value of Discovery consists of the following components:
- the adjusted net worth attributed to the business at the valuation date;
- plus: the present value of expected future shareholder cash flows from the in-force covered business;
- less: the cost of required capital.
The present value of future shareholder cash flows from the in-force covered business is calculated as the value of projected future after-tax shareholder cash flows of
the business in-force at the valuation date, discounted at the risk discount rate.
The required capital are the assets attributed to the covered business above the amount required to back covered business liabilities, whose distribution to
shareholders is restricted as they are allocated to cover regulatory and internal capital requirements.
The value of new business is the present value, at the point of sale, of the projected future after-tax shareholder cash flows of the new business written by Discovery,
discounted at the risk discount rate, less an allowance for the reserving strain, initial expenses and cost of required capital. The value of new business is calculated
using the current reporting date assumptions.
For Discovery Life, the shareholder cash flows are based on the release of margins under the Statutory Valuation Method ("SVM") basis.
The embedded value includes the insurance and administration profits of the covered business in the Discovery Limited group. Covered business includes business
written in South Africa through Discovery Life ("Life"), Discovery Invest ("Invest"), Discovery Health ("Health") and Discovery Vitality ("Vitality"), and in the United Kingdom
through VitalityLife and VitalityHealth. For Vitality Group, Ping An Health, MyOwn Health, Discovery Insure and VitaltyInvest, no published value has been placed on the
current in-force business as the businesses have not yet reached suitable scale with predictable experience.
In August 2011, Discovery raised R800 million through the issue of non-cumulative, non-participating, non-convertible preference shares. For embedded value purposes
this capital, net of share issue expenses, has been excluded from the adjusted net worth.
The 30 June 2018 embedded value results and disclosures were subjected to an external review.
Table 1: Group embedded value
30 June 30 June %
R million 2018 2017 change
Shareholders' funds 37 594 32 290 16
Adjustment to shareholders' funds from published basis(1) (32 261) (27 558)
Adjusted net worth(2) 5 333 4 732
Value of in-force covered business before cost of required capital 62 702 54 756
Cost of required capital (2 411) (2 194)
Discovery Limited embedded value 65 624 57 294 15
Number of shares (millions) 645.1 645.0
Embedded value per share R101.73 R88.83 15
Diluted number of shares (millions) 646.2 646.2
Diluted embedded value per share(3) R101.56 R88.67 15
(1) A breakdown of the adjustment to shareholders' funds is shown in the table below. An additional adjustment has been included as at
30 June 2018 to reverse the IAS 17 accounting treatment of the 1 Discovery Place lease contract. Future rental payments in respect of the
covered businesses under the lease are capitalised in the value of in-force for covered business, consistent with the treatment of other
renewal expenses. Note that where relevant, adjustments have been converted using the closing exchange rate of R18.16/GBP (June 2017:
R17.03/GBP):
30 June 30 June
R million 2018 2017
Life net assets under insurance contracts (21 479) (18 354)
Vitality Life Limited and Discovery funded VitalityLife business on the Prudential
licence net assets under insurance contracts (4 834) (3 620)
VitalityHealth financial reinsurance asset (1 898) (1 440)
VitalityHealth and VitalityHealth Insurance Limited deferred acquisition costs (net
of deferred tax) (331) (252)
VitalityLife receivable relating to the Unemployment Cover benefit (net of
deferred tax) (27) (27)
Goodwill and intangible assets (net of deferred tax) relating to the acquisition of
Standard Life Healthcare and the Prudential joint venture (3 121) (3 086)
Net preference share capital (779) (779)
Reversal of 1 Discovery Place IAS 17 financial lease accounting 208 -
(32 261) (27 558)
(2) The following table sets out the capital position of the covered businesses with the required capital on a consistent
basis to that used in the embedded value:
30 June 30 June
R million 2018 2017
Shareholders' funds 37 594 32 290
Adjustment to shareholders' funds (32 261) (27 558)
Adjusted net worth 5 333 4 732
Excess of available regulatory capital over adjusted net worth 5 411 4 100
Available regulatory capital 10 744 8 832
Regulatory required capital 5 691 4 477
Required capital buffer 3 224 2 664
Required capital 8 915 7 141
Excess available capital 1 829 1 691
The excess of available regulatory capital over adjusted net worth reflects the difference between the adjusted net
worth and the available regulatory capital. This includes the net preference share capital of R779 million which is
included as available regulatory capital. At 30 June 2018, this adjustment also includes the difference between Vitality
Life Limited's Solvency II Pillar 1 Own Funds and its adjusted net worth and adds back the negative reserves eliminated
on the Discovery funded VitalityLife business on the Prudential licence.
The required capital at June 2018 for Life is R1 732 million (June 2017: R1 409 million), for Health and Vitality is
R840 million (June 2017: R797 million), for VitalityHealth is R2 133 million (June 2017: R1 984 million) and for VitalityLife
is R4 210 million (June 2017: R2 951 million). For Life, the required capital was set equal to two times the statutory
Capital Adequacy Requirement. For Health and Vitality, the required capital was set equal to two times the monthly
renewal expense and Vitality benefit cost. For VitalityHealth, the required capital amount was set equal to 1.35 times
(previously 1.4 times) the Solvency II Pillar 1 Solvency Capital Requirement. For the VitalityLife business on the
Prudential licence, the required capital was set equal to the UK Solvency I long term insurance capital requirement as
per the agreement with Prudential. For the business sold on the Vitality Life Limited licence, the required capital was set
equal to the excess of 1.4 times the Solvency II Pillar 1 Solvency Capital Requirement. The Regulatory Required Capital
is calculated as the relevant regulatory solvency capital requirement for each insurance business.
(3) The diluted embedded value per share allows for Discovery's BEE transaction where the impact is dilutive i.e. where the
current embedded value per share exceeds the current transaction value.
Table 2: Value of in-force covered business
Value before Value after
cost of Cost of cost of
required required required
R million capital capital capital
at 30 June 2018
Health and Vitality 21 046 (380) 20 666
Life and Invest(1) 28 066 (909) 27 157
VitalityHealth(2) 7 057 (336) 6 721
VitalityLife(2) 6 533 (786) 5 747
Total 62 702 (2 411) 60 291
at 30 June 2017
Health and Vitality 18 595 (352) 18 243
Life and Invest(1) 25 102 (780) 24 322
VitalityHealth(2) 5 959 (307) 5 652
VitalityLife(2) 5 100 (755) 4 345
Total 54 756 (2 194) 52 562
(1) Included in the Life and Invest value of in-force covered business is R1 317 million (June 2017: R1 153 million) in respect of investment
management services provided on off balance sheet investment business. The net assets of the investment service provider are
included in the adjusted net worth.
(2) The value of in-force has been converted using the closing exchange rate of R18.16/GBP (June 2017: R17.03/GBP).
Table 3: Group embedded value earnings
Year Ended
30 June 30 June
R million 2018 2017
Embedded value at end of period 65 624 57 294
Less: Embedded value at beginning of period (57 294) (53 080)
Increase in embedded value 8 330 4 214
Net change in capital(1) (2) 4
Dividends paid 1 367 1 231
Transfer to hedging reserve 3 (29)
Employee share option schemes (13) (7)
Embedded value earnings 9 685 5 413
Annualised return on opening embedded value 16.9% 10.2%
(1) The net change in capital reflects an increase (decrease) in treasury shares in the period.
Table 4: Components of Group embedded value earnings
Year ended
Year ended 30 June 2018 30 June 2017
Value of
Cost of in-force
Net required covered Embedded Embedded
R million worth capital business value value
Total profit from new business (at point of sale) (4 151) (205) 7 182 2 826 2 437
Profit from existing business
- Expected return 5 450 (39) 544 5 955 5 220
- Change in methodology and assumptions(1) 1 025 141 (379) 787 858
- Experience variances 580 (45) (230) 305 66
Impairment, amortisation and fair value adjustment(2) (54) - - (54) (95)
Increase in goodwill and intangibles (246) - - (246) (203)
Other initiative costs(3) (308) - 23 (285) (691)
Non-recurring expenses(4) (30) - - (30) (103)
Acquisition costs(5) (124) - 2 (122) (196)
Finance costs (714) - - (714) (500)
Foreign exchange rate movements 272 (70) 814 1 016 (1 569)
Other(6) (6) 1 (10) (15) 4
Return on shareholders' funds(7) 262 - - 262 185
Embedded value earnings 1 956 (217) 7 946 9 685 5 413
(1) The changes in methodology and assumptions will vary over time to reflect adjustments to the model and assumptions as a result of changes to the operating
and economic environment. The current period's changes are described in detail in Table 6 below (for previous periods refer to previous embedded
value statements).
(2) This item reflects the amortisation of the intangible assets reflecting the DiscoveryCard profit share arrangement, banking costs and the PrimeMed acquisition.
(3) This item includes costs of start-up businesses and expenses incurred to investigate new products and markets. Start-up costs include costs in relation to the
Discovery Bank, the recently launched UK investment business, Vitality Invest, a commercial offering in Discovery Insure, and an Umbrella Fund offering in
Discovery Invest. Head office costs which relate to non-covered business are also included in this item.
(4) This item includes once-off costs relating to systems development spend in Discovery Health.
(5) Acquisition costs relate to commission paid on the VitalityLife and Life business and expenses incurred in writing Health and Vitality business that has been
written over the period but will only be activated and on risk after the valuation date. These policies are not included in the embedded value or the value of new
business and therefore the costs are not deducted from the value of new business.
(6) This item includes, among other items, the tax benefits or losses that will emerge as the VitalityHealth DAC and intangible software assets amortise or increase.
(7) The return on shareholders' funds is shown net of tax and management charges.
Table 5: Experience variances
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value Value Value Value
Net of Net of Net of Net of
R million worth in-force worth in-force worth in-force worth in-force Total
Renewal expenses 210 - 46 (7) (17) - 15 - 247
Lapses and surrenders 18 226 (176) 254 - (191) (141) (68) (78)
Mortality and morbidity(1) - - 57 (21) 673 - 27 - 736
Policy alterations - 60 (473) 399 - - (21) (32) (67)
Premium and fee income(2) (26) (691) (34) 11 - - 8 11 (721)
Economic assumptions - - 10 (383) - - - - (373)
Commission - - - - (95) - - - (95)
Tax(3) 76 - 230 (267) 172 - 99 - 310
Reinsurance - - - - (43) - 46 (4) (1)
Maintain modelling term(4) - 304 - 77 - 9 - - 390
Vitality benefits (14) - - - - - - - (14)
Other 52 (1) (111) 98 (22) - 14 (59) (29)
Total 316 (102) (451) 161 668 (182) 47 (152) 305
(1) The mortality and morbidity experience for VitalityHealth arises due to improvements in risk management, sales and retention models, claim payment
processes, and an increase in Vitality engagement, resulting in lower experience loss ratios over those expected.
(2) The premium and fee income experience for Health and Vitality reflects the impact on administration and managed care fees due to the in-period inflation being
lower than that assumed.
(3) The tax variance for Life and Invest arises due to a movement in the deferred tax asset which delays the payment of tax.
(4) The projection term for Health and Vitality, Group Life and VitalityHealth at 30 June 2018 has not been changed from that used in the 30 June 2017 embedded
value calculation. Therefore, an experience variance arises because the total term of the in-force covered business is effectively increased by twelve months.
Table 6: Methodology and assumption changes
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value Value Value Value
Net of Net of Net of Net of
R million worth in-force worth in-force worth in-force worth in-force Total
Modelling changes(1) - - (279) (610) - 343 (68) (101) (715)
Expenses(2) - 726 (19) (118) - - 75 17 681
Lapses(3) - - 316 (1 744) - - (16) (59) (1 503)
Mortality and morbidity - - - - - - - - -
Benefit enhancements - - (20) (21) - - - - (41)
Vitality benefits - - - - - - - - -
Tax - - - 38 - - - 3 41
Economic assumptions(4) - 798 (651) 2 127 - (23) 232 245 2 728
Premium and fee income - (317) - - - - (1) (64) (382)
Reinsurance(5) - - 1 746 (1 772) (18) (33) - - (77)
Other(6) - - (53) 62 - - (219) 265 55
Total - 1 207 1 040 (2 038) (18) 287 3 306 787
(1) For Life and Invest, the modelling change item includes a change to the projection term limit of the value of in-force from valuing shareholder cash flows over
their full term to a shorter 40 year projection term. VitalityHealth changed their methodology to calculate the value in-force from 30 June 2018. Under the new
methodology, the value in-force at the valuation date is derived as the in-force written premium multiplied by the Margin multiplied by the Annuity Factor. The
assumptions for the Margin and Annuity Factor are shown in Table 8.
(2) For Health and Vitality, the expenses item reflects a revision to the renewal expense assumption in light of the lower in-period inflation relative to expected.
(3) An increase was made to the Life lapse rate as a proxy for the impact of net policy alterations.
(4) The South African investment return assumptions for Life, Invest, Health and Vitality were changed from being applied in the model as a single interest rate to
the full yield curve. Consistent with this, the real yield assumption was set relative to the observed real yield curve, adjusted to remove volatility due to the
nature of the index linked government bond market. VitalityLife have adopted a passive investment return and real yield assumption, with the assumptions
remaining fixed unless market conditions depart significantly from the assumptions at the financial year end.
(5) For Life the reinsurance item primarily relates to the impact of the financing reinsurance arrangements.
(6) For VitalityLife, the other item relates to the margin reset to offset acquisition costs and assumption and methodology changes, as per the accounting policy, and
an alignment of the compulsory margins in VitalityLife to those used by Life.
Table 7: Embedded value of new business
Year ended
30 June 30 June %
R million 2018 2017 change
Health and Vitality
Present value of future profits from new business at point of sale 985 820
Cost of required capital (29) (31)
Present value of future profits from new business at point of sale after cost of
required capital 956 789 21
New business annualised premium income(1) 4 086 4 533 (10)
Life and Invest
Present value of future profits from new business at point of sale(2) 1 376 1 304
Cost of required capital (74) (73)
Present value of future profits from new business at point of sale after cost of
required capital 1 302 1 231 6
New business annualised premium income(3) 2 773 2 840 (2)
Annualised profit margin(4) 5.6% 5.5%
Annualised profit margin excluding Invest business 10.7% 10.2%
VitalityHealth(5)
Present value of future profits from new business at point of sale 263 157
Cost of required capital (44) (46)
Present value of future profits from new business at point of sale after cost of
required capital 219 111 97
New business annualised premium income (Rand)(6) 1 161 958 21
Annualised profit margin(4) 3.1% 1.8%
VitalityLife(7)
Present value of future profits from new business at point of sale 407 432
Cost of required capital (58) (126)
Present value of future profits from new business at point of sale after cost of
required capital 349 306 14
New business annualised premium income (Rand) 898 844 6
Annualised profit margin(4) 5.4% 5.2%
(1) Health new business annualised premium income is the gross contribution to the medical schemes. The new business annualised
premium income shown above excludes premiums in respect of members who join an existing employer where the member has no
choice of medical scheme, as well as premiums in respect of new business written during the period but only activated after
30 June 2018.
The total Health and Vitality new business annualised premium income written over the period was R6 735 million (June 2017:
R6 276 million).
(2) Included in the Life and Invest embedded value of new business is R110 million (June 2017: R109 million) in respect of investment
management services provided on off balance sheet investment business.
Risk business written prior to the valuation date allows certain Invest business to be written at financially advantageous terms, the
impact of which has been recognised in the value of new business.
(3) Life new business is defined as Life policies to which Life became contractually bound during the reporting period, including policies
whose first premium is due after the valuation date. Invest new business is defined as business where at least one premium has been
received and which has not been refunded after receipt. Invest new business also includes Discovery Retirement Optimiser policies to
which Life and Invest became contractually bound during the reporting period, including policies whose first premium is due after the
valuation date.
The new business annualised premium income of R2 773 million (June 2017: R2 840 million) (single premium APE: R1 195 million
(June 2017: R1 169 million)) shown above excludes automatic premium increases and servicing increases in respect of existing business.
The total new business annualised premium income written over the period, including automatic premium increases of R1 254 million
(June 2017: R1 172 million) and servicing increases of R615 million (June 2017: R659 million), was R4 642 million (June 2017:
R4 671 million) (single premium APE: R1 248 million (June 2017: R1 277 million)). Single premium business is included at 10%
of the value of the single premium.
Policy alterations and internal replacement policies, including Discovery Retirement Optimisers added to existing Life Plans, are shown
in Table 5 as experience variances and not included as new business. Term extensions on existing contracts are not included as
new business.
(4) The annualised profit margin is the value of new business expressed as a percentage of the present value of future premiums.
(5) The VitalityHealth value of new business is calculated as the value at point of sale of the new business written premium in-force at the
valuation date multiplied by the Margin multiplied by the Annuity Factor less the new business cash flows from point of sale to the
valuation date. The assumptions for the Margin and Annuity Factor are shown in Table 8.
(6) VitalityHealth new business is defined as individuals and employer groups which incepted during the reporting period. The new
business annualised premium income shown above has been adjusted to exclude premiums in respect of members who join an
existing employer group after the first month, as well as premiums in respect of new business written during the period but only
activated after 30 June 2018.
(7) VitalityLife new business is defined as policies to which VitalityLife became contractually bound during the reporting period, including
policies whose first premium is due after the valuation date.
Basis of preparation
Table 8: Embedded value economic assumptions
30 June 30 June
2018 2017
Beta coefficient
0.75 0.75
Equity risk premium (%) 3.5 3.5
Risk discount rate (%)
Health and Vitality(1) 12.155 12.125
Life and Invest(1) 12.875 12.875
VitalityHealth 4.02 3.90
VitalityLife 4.725 4.755
Rand/GB Pound exchange rate
Closing 18.16 17.03
Average 17.33 17.29
Margin over Expense inflation to derive Medical inflation (%)
South Africa 3.00 3.00
Expense inflation (%)
South Africa(2) - Health and Vitality 6.85 6.25
- Life and Invest 7.48 6.25
United Kingdom 3.30 3.25
Pre-tax investment return (%)
South Africa - Cash(1) 8.75 8.75
- Life and Invest bonds(3) 10.25 10.25
- Health and Vitality bonds(3) 9.53 9.50
- Equity(1) 13.75 13.75
United Kingdom - VitalityHealth investment return 1.40 1.28
- VitalityLife investment return 2.50 2.13
Income tax rate (%)
South Africa 28 28
United Kingdom - long term(4) 17 17
VitalityHealth Assumptions
- Margin (net of tax and cost of capital) (%) 14.1 -
- Annuity Factor 6.00 -
Projection term
- Health and Vitality 20 years 20 years
- Discovery Life - ViF 40 years No cap
- Group Life 10 years 10 years
- VitalityLife No cap No cap
- VitalityHealth(5) 20 years 20 years
(1) Derived as a margin over (or below for cash) the respective pre-tax investment return for bonds.
(2) The inflation assumption is derived as the difference between the nominal and real yield curve at each duration.
As an indication, the cash flow weighted average inflation is shown in the table.
(3) As indications, the cash flow weighted averages derived from the relevant yield curve(s) are shown.
(4) The United Kingdom Corporation tax rate assumed is 20% in 2017, 19% in 2018 to 2020, and 17% beyond that.
(5) The VitalityHealth projection term of 20 years is used in the derivation of the Annuity Factor.
The Discovery Limited embedded value is calculated based on a risk discount rate using the CAPM approach with specific reference to the Discovery beta coefficient.
The assumed beta is fixed at 0.75. This has been set such that the risk discount rate proxies the result of a Weighted Average Cost of Capital approach with reference to
the capital structure of the Group and the observed beta calculated using daily returns over a long time period. The observed beta is calculated with reference to the
ALSI. The assumed beta will only change if the capital structure of the Group and/or the observed beta calculated using daily returns over a long time period suggest
the beta assumption should depart significantly from the assumption at the financial year end. As beta values reflect the historic performance of share prices relative to
the market they may not allow fully for non-market related and non-financial risk. Investors may want to form their own view on an appropriate allowance for these
risks which have not been modelled explicitly.
Life and Invest mortality, morbidity, lapse and surrender assumptions were derived from internal experience, where available, augmented by reinsurance and industry
information.
The Health and Vitality lapse assumptions were derived from the results of recent experience investigations.
The VitalityHealth assumptions were derived from internal experience.
VitalityLife assumptions were derived from internal experience, where available, augmented by reinsurance, industry and Discovery Limited group information.
Renewal expense assumptions were based on the results of the latest expense and budget information.
The initial expenses included in the calculation of the embedded value of new business are the actual costs incurred excluding expenses of an exceptional or
non-recurring nature.
From 30 June 2018, the South African investment return assumptions for Life, Invest, Health and Vitality were based on the publicly available Prudential Authority
risk-free nominal yield curve. The real yield assumption was set based on the publicly available Prudential Authority risk-free real yield curve, adjusted to remove
volatility due to the nature of the index linked government bond market. Other economic assumptions were set relative to these two yield curves. The 30 June 2017
investment return assumptions, and other related economic assumptions, were based on a single interest rate derived from the risk-free zero coupon government
bond yield curve.
The current and projected tax position of the policyholder funds within the Life company has been taken into account in determining the net investment return
assumption.
The best estimate investment return assumption for VitalityHealth was based on the single interest rate derived from the risk-free zero coupon sterling yield curve.
From 30 June 2018, VitalityHealth calculate the value in-force at the valuation date as the in-force written premium multiplied by the Margin multiplied by the Annuity
Factor, as set out in the table above. The Annuity Factor assumption is derived from assumed future lapse rates and premium increases. The Margin assumption
reflects profit margins after tax and Cost of Capital. The assumptions underlying the Annuity Factor and Margin are set taking into account the current experience in the
business at different durations.
VitalityLife adopts a passive approach for setting economic assumptions. The nominal investment return and real return rate are fixed unless market conditions depart
significantly from the assumptions at the financial year end. Other economic assumptions were set relative to these two passive yields.
It is assumed that, for the purposes of calculating the cost of required capital, the Life and Invest required capital amount will be backed by surplus assets consisting of
100% equities and the Health, Vitality, and VitalityHealth required capital amounts will be fully backed by cash. Vitality Life Limited and the VitalityLife business on the
Prudential licence required capital amount is assumed to earn the same return as the assets backing the VitalityLife policyholder liabilities. Allowance has been made
for tax and investment expenses in the calculation of the cost of required capital. In calculating the capital gains tax liability, it is assumed that the portfolio is realised
every 5 years. The Life and Invest cost of required capital is calculated using the difference between the gross of tax equity return and the equity return net of tax and
expenses. The Health, Vitality, and VitalityHealth cost of required capital is calculated using the difference between the risk discount rate and the net of tax cash return.
Vitality Life Limited and the VitalityLife business on the Prudential licence cost of required capital is calculated using the difference between the risk discount rate and
the net of tax asset return assumption.
The embedded value has been calculated in accordance with the Actuarial Society of South Africa's Advisory Practice Note ("APN") 107: Embedded Value Reporting,
except the recommended disclosure of Free Surplus and Required Capital has been adjusted to take into account the revised capital requirements and resources
arising from Solvency II in the United Kingdom as can be seen in Table 1 note 2.
Sensitivity to the embedded value assumptions
The risk discount rate uses the CAPM approach with specific reference to the Discovery beta coefficient. As beta values reflect the historic performance of share prices relative to the market they may not allow fully for non-market related and
non-financial risk. Investors may want to form their own view on an appropriate allowance for these risks which have not been modelled explicitly. The sensitivity of the embedded value and the embedded value of new business at 30 June 2018 to
changes in the risk discount rate is included in the tables below.
For each sensitivity illustrated below, all other assumptions have been left unchanged. No allowance has been made for management action such as risk premium increases where future experience is worse than the base assumptions.
Table 9: Embedded value sensitivity
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value Cost of Value Cost of Value Cost of Value Cost of
Adjusted of required of required of required of required Embedded %
R million net worth(2) in-force capital in-force capital in-force capital in-force capital value change
Base 5 333 21 046 (380) 28 066 (909) 7 057 (336) 6 533 (786) 65 624
Impact of:
Risk discount rate +1% 5 333 19 790 (413) 25 316 (811) 6 648 (316) 6 156 (939) 60 764 (7)
Risk discount rate -1% 5 333 22 442 (342) 31 357 (1 028) 7 507 (357) 6 965 (572) 71 305 9
Lapses -10% 5 191 21 775 (398) 30 240 (976) 7 942 (377) 6 936 (554) 69 779 6
Interest rates -1%(1) 4 295 20 981 (365) 28 469 (956) 7 582 (357) 6 290 (1 266) 64 673 (1)
Equity and property market value -10% 5 267 21 046 (380) 27 740 (909) 7 057 (336) 6 533 (786) 65 232 (1)
Equity and property return +1% 5 333 21 046 (380) 28 384 (909) 7 057 (336) 6 533 (786) 65 942 -
Renewal expenses -10% 5 408 23 071 (352) 28 460 (907) 7 558 (336) 6 594 (743) 68 753 5
Mortality and morbidity -5% 5 508 21 045 (380) 29 861 (893) 8 094 (336) 6 645 (769) 68 776 5
Projection term +1 year 5 333 21 379 (385) 28 252 (914) 7 110 (338) 6 533 (786) 66 184 1
(1) All economic assumptions were reduced by 1%.
(2) The sensitivity impact on the VitalityLife net of tax change in negative reserves is included in the adjusted net worth column.
The following table shows the effect of using different assumptions on the embedded value of new business.
Table 10: Value of new business sensitivity
Health and Vitality Life and Invest VitalityHealth VitalityLife
Value of Cost of Value of Cost of Value of Cost of Value of Cost of Value of
new required new required new required new required new %
R million business capital business capital business capital business capital business change
Base 985 (29) 1 376 (74) 263 (44) 407 (58) 2 826
Impact of:
Risk discount rate +1% 921 (32) 1 109 (66) 210 (46) 297 (64) 2 329 (18)
Risk discount rate -1% 1 092 (26) 1 691 (84) 323 (51) 532 (45) 3 432 21
Lapses -10% 1 064 (31) 1 647 (79) 385 (54) 558 (71) 3 419 21
Interest rates -1%(1) 1 010 (28) 1 449 (78) 317 (51) 331 (82) 2 868 1
Equity and property return +1% 985 (29) 1 418 (74) 263 (44) 407 (58) 2 868 1
Renewal expenses -10% 1 137 (28) 1 422 (74) 330 (44) 427 (54) 3 116 10
Mortality and morbidity -5% 985 (29) 1 505 (73) 411 (44) 443 (54) 3 144 11
Projection term +1 year 1 023 (30) 1 393 (74) 271 (49) 407 (58) 2 883 2
Acquisition costs -10% 1 010 (29) 1 516 (74) 306 (44) 459 (58) 3 086 9
(1) All economic assumptions were reduced by 1%.
SENS release date: 4 September 2018.
Date: 04/09/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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