Slide 1: Unaudited interim results and cash dividend declaration
Unaudited interim results and cash dividend declaration FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 1
Slide 2: Core new business, normalised operating profit and headline earnings
Core new business Investment in new Normalised operating Normalised headline businesses profit earnings to R9 049m to R3 799m to R2 376m +16% to R9 508m incl. DH take-on of new closed Excludes DSY JV Card profits and includes allocated schemes and gross revenue for Vitality Group finance costs 2
Slide 3: Established and emerging businesses performance
Operating profit New business3 -4% +16% Strong performance in a difficult macroeconomic environment with continued excellence from DHMS evidenced by +10% +3%4 robust growth and average contributions now 16.6% lower than competitors. Ongoing investment in technologies resulting in operational efficie
Slide 4: Core new business annualised premium income
Core new business annualised premium income 6 months 6 months % Rm2 to 31 Dec to 31 Dec 2018 2017 change to R9 049m +16% to R9 508m incl. DH take-on of new closed 3 420 3 324 +3% schemes and gross revenue for Vitality Group +16% 1 212 1 121 +8% Relative growth by industry Established 1 387 1 220 +14
Slide 5: Normalised operating profit
Normalised operating profit 6 months 6 months Established have grown strongly % (9% CAGR since 2015) Rm to 31 Dec to 31 Dec to R3 799m 2018 2017 change 1 464 1 332 +10% H1 H1 H1 H1 H1 +18% 1 500 1 721 -13% 2015 2016 2017 2018 2019 -4% Established +14% 455 419 +9% CPI- Emerging now cover their own fi
Slide 6: Net cash flow
Net cash flow Cash Cash generated Funding used Established and Emerging Net cash flow1 Debt Tax, dividends and Rm finance costs Equity Raise R1.8bn 1 141 New business 3 579 R4.2bn Cash generated from 228 in-force business R9.6bn New businesses -208 R3.7bn 20 Net cash flow1 -58 R2.3bn -160 1Movement
Slide 7: Capital management
Capital management FLR decreasing Sufficient cash buffer 28% 26.7% 26.5% 25.8% Cash buffer: R1bn – R2bn 30-Jun-17 31-Dec-17 30-Jun-18 31-Dec-18 31-Dec-17 30-Jun-18 31-Dec-18 7
Slide 8: Return on Embedded Value (EV)
Return on Embedded Value (EV) Annualised return Rm Growth in EV over 6 months 2,858 193 457 68,795 5 332 68,025 633 137 1,300 65,624 Opening EV Value of New Unwind of Risk Life Claims Economic Other Methodology and EV before New New Initiatives Change in equity Closing EV Business Discount Rate Assu
Slide 9: Normalised headline earnings
Normalised headline earnings to R2 376m 6 months ended 6 months ended % Higher finance costs Rm Dec 2018 Dec 2017 change due to increase in borrowings to fund Profit from operations 3 799 3 941 -3.6 new initiatives Finance costs (479) (351) Equity and bond Profit from operations after finance costs
Slide 10: Basic earnings
Basic earnings to R2 286m 6 months ended Dec 6 months ended Dec % Rm 2018 2017 change Normalised headline earnings 2 376 2 829 -16.0 Initial expenses related to Prudential Book transfer (11) 0 Unrealised losses on foreign exchange contracts not designated as hedges (26) 0 Debt restructuring costs re
Slide 11: Rationale, strategy and our businesses
Rationale, strategy and our businesses 11
Slide 12: Countries and operating profit over time
1994 2000 2013 2018 Countries Countries Countries Operating profit Operating profit Operating profit (CY18)
Slide 13: Make people healthier and enhance and protect their lives
Make people healthier Life insurance and enhance and protect their lives Health insurance Short-term insurance Long-term savings Banking 13
Slide 14: Life & Health insurance and behaviour
Life & Health insurance • • • • Poor diet Physical inactivity Tobacco use Excess alcohol intake 4 Lifestyle 4 Chronic Deaths behaviours conditions worldwide Behavioural Wearable economics devices 4 4 60 102.4m 5 3 devices sold in • Excessive drinking 2016 Motor • Cellphone use while driving • Excess
Slide 15: Shared-value model
Value Incentive ∆ Behaviour Bent (qx) Value = × × × Member Member Incentive ∆ Behaviour Bent (qx) Shared-Value Vitality Programs Make people Product chassis healthier 15
Slide 16: Operating, capital and cash model
Operating model Group profit growth of CPI + 10% Capital model Cash model risk free + 10% FLR Cash buffer < 28% R1-2bn Return on capital 16
Slide 17: Deliberate strategy to grow organically
Deliberate strategy to grow organically Operating profit in 2018 terms Consequences 50 9 out of 10 successful organically grown businesses Operating Profit (in 2018 Rm) -50 5-year average breakeven -150 1. Initial strain on earnings 2. Increase in financing costs -250 3. Depletes Embedded Value Dest
Slide 18: Organic growth engine has been a successful mechanism for growth
Organic Growth Engine has been a successful mechanism for growth 4000 New Emerging Established 3500 3000 2500 Operating Profit ( Rm) 2000 1500 1000 500 0 -500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Years since Inception 18
Slide 19: Life, Health, Short-term, Long-term savings, Banking
Life Health Short-term Long-term Banking savings 19
Slide 20: Perfect composite model, #1 in every industry
1 Perfect composite model, #1 in every industry, and laboratory for shared value in financial services. A successful entry into banking 2 The best insurer in the UK, making use of a composite shared-value model 3 Vitality is the world’s largest and most sophisticated behavioural platform linked to f
Slide 21: Doubling of investment into new initiatives
Doubling of investment into new initiatives of earnings, excluding Card profits Discovery Discovery VitalityInvest Vitality1 Umbrella and after allowing for finance costs Business Bank Funds 21% Insurance 18% 14% 12% 11% 11% 10% Total capital injected to 31 December 2018: R2.625bn £33.5m R552m R92m
Slide 22: Launching the world's first behavioural Bank
Launching the world’s first behavioural Bank Behavioral Improved economics banking efficiency Members 5 3 80 Lower rates on borrowing, higher rates saving. Better Banking financial management and greater wealth Unable to deal with Catalyst for behaviour unplanned expenses 80% change of defaults now
Slide 23: Discovery Bank
—_— @Discovery 5))) Bank DYNAMIC INTEREST RATES. DYNAMIC DISCOUNTS: swuncsATe ———_sonMOWNG ATE vaults, scene as 2 it. Sem Insurance Retirement 23
Slide 24: Doubling of investment into new initiatives
Doubling of investment into new initiatives of earnings, excluding Card profits Discovery Discovery VitalityInvest Vitality1 Umbrella and after allowing for finance costs Business Bank Funds 21% Insurance 18% 14% 12% 11% 11% 10% Total capital injected to 31 December 2018: R2.625bn £33.5m R552m R92m
Slide 25: SA composite model
a SA COMPOSITE MODEL > beled UK COMPOSITE MODEL PARTNER COMPOSITE MODEL
Slide 26: SA composite model
SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL 26
Slide 27: Discovery Health core new business and operating profit
Core new business API (Rm) Membership Normalised Operating Profit (Rm) +2.9% to R3 420m >3.5m under administration +10% to R1 464m excl. take-on of new closed schemes 40% market share 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2
Slide 28: DHMS continued excellence in a challenging environment
DHMS continued excellence in a challenging environment Growth in a difficult economic environment Competitive contribution rates Continuing stability and security 56.6% Market share as at Sep 2018 -16.6% Lowest premiums in the scheme market 27.3% Unaudited solvency +2.1% Membership growth (2018: -16
Slide 29: Growth is under pressure due to the economic environment
Growth is under pressure due to the economic environment Open medical scheme membership has remained largely static since 2015 Slowing Type II growth Only 3 open schemes are experiencing growth New business API for DHMS and LA Health and gaining market share Market share of top 10 open medical schem
Slide 30: Strategic objective to become the lowest cost administrator
Strategic objective to become the lowest cost administrator Ongoing investment in technologies to optimise operational efficiency and Admin fees reducing service levels DHMS All other open schemes >R548m spend on technology in 2018 AI BASED VIRTUAL AGENT 4,300 daily users WEB AND APP ASSETS 400k+ mo
Slide 31: Positively influencing service experience through Affinity Matching
Positively influencing the service experience of members through Affinity Matching FACTORS Age Clusters based on which MEMBER members have best experience with each SATISFACTION SCORE Gender Most 8.88 significant group of agents Health plan factors Personality Chronic status Vitality status FIRST CA
Slide 32: A world-class claims and administration platform
A world-class claims and administration platform >R300m ACCESS MANAGEMENT BENEFIT MANAGEMENT CLAIMS ADMINISTRATION Partnership to build and sell the next generation global Spent on DH system claims management platform BENEFIT CLAIMS PROVIDER MANAGEMENT >258k CONFIGURATOR PROCESSING BENEFIT PHARMACEU
Slide 33: Managing a complex regulatory environment
Managing a complex regulatory environment Council of Medical Health Market National Health Schemes Inquiry Insurance Bill Managing an evolving Comprehensive and Phased roll-out policy environment insightful Micro regulation Macro regulation 33
Slide 34: Discovery Life results and cash generated
Discovery Life and Invest cash Normalised Operating Profit (Rm) Core new business API (Rm) generated -13% to R1 500m +8% to R1 212m R5.5bn Cash from existing R3.6bn Net cash flow generated H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 34
Slide 35: Earnings impacted by claims volatility
Earnings impacted by claims volatility, primarily due to large claims Claims within the Spike in mortality Volatility in high-value Reinsurance in place to premium loadings experience mortality claims reduce future volatility Reinsurance structure: 511 % large mortality claims Expenses & commission
Slide 36: Vitality correlations over time are intact
Vitality correlations over time are intact Vitality distribution history Mortality claims experience by Vitality Status Dec 2013 vs. Dec 2018 Normalised expected assumptions by Vitality Status 55% 44% 22% 20% 18% 9% 10% Long Term Long Term Long Term Long Term 9% H1 2019 H1 2019 H1 2019 H1 2019 5% 6%
Slide 37: Vitality engagement driving improving persistency
Vitality engagement has been a driver of improving persistency Actual lapse rate better than the market average Vitality engagement results in lower lapse rates Total lapse rate by competitor Lapse experience by Lapse experience by Vitality Status Vitality status and across various durations Lapse R
Slide 38: Steady growth in market share supported by product innovation
Steady growth in market share supported by product innovation Total market share IFA and agency market share Product innovation Annual market share Q4, Retail affluent market share Annual market share Annual Annual market share - IFA Guaranteed Business Purple Life Plan Life Plan Annual market share
Slide 39: Range of plan types available to meet customer needs
Range of plan types available to meet customer needs Allows for various levels of savings Take-up across plan type Funding plan and real premium and flexibility June 2018 build-up over time Implicit Flexibility Projected real premium on average Standard savings Standard Plan Non Standard Plan increa
Slide 40: Number of lapses well below expected
Number of lapses well below expected and reducing by age and duration Overall lapse experience better than expected (policy Larger reduction in actual to expected lapses count basis) observed by age and duration across all plan types Lapse Rate,% Non-standard plans, age, A/E % Best Estimate Basis Re
Slide 41: Projection shows prudent assumption of a smaller book
Projection over time shows that we prudently assume a smaller book than what is rational Projected policy count run-off at June 2018 non-standard plans Percentage of book remaining Irrationality gap 40% 34% 14% 6% 5% 2% 0 10 20 30 40 Duration (years) Expected at Jun18 Expected at Jun18 (no Vitality
Slide 42: Discovery Invest new business, assets and profit
New business API (Rm) Assets under administration Normalised Operating Profit (Rm) +14% to R1 387m +7% to R83.1bn +9% to R455m Jun-11 Jun-08 Jun-09 Jun-10 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Dec-10 Dec-07 Dec-08 Dec-09 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 H1 2015 H1 2
Slide 43: Robust growth in net flows
Robust growth in net flows in a difficult operating environment Strong net flows Continued success of the model +11% Reduced Longer terms Higher Lower income Healthier lapses to retirement savings rates drawdowns clients to R3 641m Discovery Life Collective -29.3% + 3.3 years + 173% -2.4% +133% +173
Slide 44: Tangible improvements in performance through shared value
Tangible improvements in performance through shared value Impact of extra return for living well on sector performance ranking Medium Fund Name ASISA Sector Base Low Engagement High Engagement Engagement Discovery Balanced SA MA High Equity 2nd quartile Top quartile Top quartile Top quartile Discove
Slide 45: Discovery Insure premium, new business and profit
Gross written premium (Rm) New business API (Rm) Normalised Operating Profit (Rm) +21% to R1 557m +4% to R517m +325% to R51m excl. CMT profits Focus on R4bn >83% quality of new business in-force premium in of sales take-up Vitality drive Feb-19 at new business stage H2 2014 H1 2015 H2 2015 H1 2016 H
Slide 46: Success of the model in quality of business
Success of the model has manifested in continued quality of business Selection Improving loss ratios Selective lapsation Durational and model by Vitality status impact 91% % Vitality drive uptake at new business stage - Direct 100% 100% 95% 93% 100% 79% 67% 62% 52% 79% 41% 83% 21% 58% No Blue Bronze
Slide 47: Success of diverse distribution strategy
Success of diverse distribution strategy High return on Potential to drive growth Earned premium split Key metrics by channel advertising spend amongst advisers by distribution channel LAPSE RATE 2018 competitor advertising Number of supporting advisers 100% spend R'm 79% 4,4 50 21% 34% 572 Direct I
Slide 48: Success of CMT demonstrates global relevance of the model
Success of CMT demonstrates the global relevance of the model Investment into CMT by the SoftBank Vision Fund Development of the tag in ‘14 collaboration with >25 Discovery Insure US$5m Bluetooth customers low energy >6 Vitalitydrive mobile app continents ‘19 WHITE-LABELED APP + WIRELESS US$500m Ret
Slide 49: UK composite model
SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL 49
Slide 50: Vitality Health results
New business Lives covered Operating profit Contribution to Group EV +13% to R1 216m +13% to 1.147m lives +21% to R746m 22.8% of the Group Embedded Value GBP millions GBP millions H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Slide 51: The manifestation of the Shared-Value Model
The manifestation of the Shared-Value Model The link between Vitality engagement and health The link between Vitality engagement and life lapses claim costs In hospital claims experience from VitalityHealth 12 month rolling lapse rates 100% 44% 29% 80% 41% 51% 45% 60% fewer lapses 40% 20% 0% Neoplas
Slide 52: VitalityLife results
New business Individual new business Lives covered Operating profit +18% to R616m +34% to R354m +9% to 604k lives +26% to R446m GBP millions GBP millions GBP millions H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 201
Slide 53: Strong performance
Strong performance Sustained lower loss ratio Improved retention Strong cash generation Aggregate 6-month loss ratio Lapse rate £46.8m -16% -15% Seasonality smoothing £12.3m H1 2017 H1 2018 H1 2019 Cash Write new Invest in Total cash generated business project generated from inforce initiatives 53
Slide 54: Vitality Invest results
New business Lives covered Operating profit +8% to R600m +16% to 543k lives +15% to R300m GBP millions GBP millions H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 54
Slide 55: Fundamentals remain strong
Fundamentals remain strong Claims experience within Lapses improve following Value of in-force growing expectation management initiatives 100% VitalityLife Lapse Experience 12 months to Dec 2018 +38% Annualised Lapse Rates (%) Expected Gross claims Net claims Dec June Dec Dec-13 Dec-14 Dec-15 Dec-16
Slide 56: Expanding the Vitality proposition
Expanding the Vitality proposition Life and Wealth Expectancy Tool First provider in the UK to link investment products to engagement in healthy lifestyle behaviours £33.5m Invested to 31 December 2018 Interactive Advisor Statements ISA and Sky News Campaigns 56
Slide 57: UK composite
UK composite LIFE HEALTH INVESTMENTS INSURANCE INSURANCE There is a significant cross-sell opportunity to be unlocked PRODUCT PARTNERS Only 1.6% of the inforce PROGRAMS ACTIVE REWARDS HEALTHY AGING MENTAL WELLBEING membership have both VitalityHealth and VitalityLife BRAND 57
Slide 58: Partner composite model
SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL
Slide 59: Ping An Health results
DSY share of PAH’s Discovery’s operating New business1 Written premium operating result pre-tax result pre-tax +117% to R4.3bn +84% to R7.0bn +32% to R97.6m +26% to R61.5m H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 1 100% 59
Slide 60: Excellent underlying dynamics
Excellent underlying dynamics Excellent actuarial dynamics Strong foundation as an insurer Loss ratio Target A- credit rating from AMBest 81.8 SARMRA* score in 2018, ranking the first of the specialisied health insurance companies, and meeting the regulatory target of 80 points 2017 2018 Retention r
Slide 61: Ping An Health investing into future capability
Ping An Health investing considerably into future capability Operating expenses are Significant headcount growth and Investment into future capability increasing investment in technology skills paying off Operating expense Headcount Cumulative growth rate of revenue and RMB, billions operating expen
Slide 62: Development of PAH app
Development of PAH APP as the go-to destination for health and medical services Health management features Registered users iDongBao HelloRun Health Headline Health Live Streaming 8.0m Daily active users 160k New users Medical services features registered daily 10k Hospital inquiry Smart consultatio
Slide 63: Increased automation of sales and servicing processes
Increased automation of sales and servicing processes Operational cost Policy applications Cases* of processing Claim Investment in digitalisation and operational efficiency capacity processed settlement claim per minute per day (CNY) (min) 3-step Insurance Smart E-Quick Application Underwriting cla
Slide 64: Impact of investment in distribution and technology
Impact of investment in distribution and technology is already evident Total premium (RMB million) generated per month Members1 over time 1Excluding Group Other 1,200 1,095 1,000 800 600 400 200 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1 3 5 7 9 11 13 15 17 19 21 23 25 2017 2018 2019 Time s
Slide 65: Vitality Group results
Integrated API by insurance Revenue Operating result partners +249%* +93%* +179% R7bn R441m R95m USD31m USD471m USD6.7m H1 FY2017 H1 FY2018 H1 FY2019 H1 FY2017 H1 FY2018 H1 FY2019 H1 FY2017 H1 FY2018 H1 FY2019 All numbers exclude new VG initiatives, i.e. myOwn and Vitality1 Vitality USA Insurance Pa
Slide 66: Continued membership growth with partner ecosystem
Continued membership growth with a comprehensive partner ecosystem Insurance partner membership Rapid partner expansion across range of categories +95% to 1.1m ~44k New activations monthly Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-18 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-13 66
Slide 67: Expansion of the Vitality Group
Expansion of the Vitality Group National Champions Franchises Adjacencies National Champions Exploit latent potential and scale +4 in next 12 months Franchises Rapid market expansion and penetration Adjacencies Pursue shared-value adjacencies and partnerships GYM & DEVICES GROCERS TRAVEL OTHER ACTIV
Slide 68: Media coverage of John Hancock Vitality move
COMPANIES / FINANCIAL SERVICES SMART INSURANCE US insurer John Hancock to sell only Vitality-linked cover Ebe New York Times Life Insurance Offering More Incentive to Live Longer Business Could a bold move by John Hancock upend the life insurance industry? The Washington Post ark MARIANNE HARRISON J
Slide 69: Extraordinary early impact for V1 platform
Extraordinary early impact for Revolutionary V1 Platform >2x actual number of integrated insurance policies sold relative to other partner markets of similar duration Dedicated partner insurer in a large market 7 in 10 policies take up Vitality Well-developed and refined VG expertise >60% 3 Oct 25 J
Slide 70: Vitality looks and works the same in each market
Vitality looks and works the same in each market Generali Sumitomo AIA Vitality Germany Japan Hong Kong UK 70
Slide 71: Proof points: positive actuarial dynamics
Proof points | Positive actuarial dynamics manifesting across multiple contexts Vitality population exhibits Vitality spurs new business Retention improves by status better mortality growth Lapses relativities in Discovery Life Relative mortality rates in Discovery Life New business growth in Discov
Slide 72: Investments in Vitality1 and anticipated rollout
Investments in Vitality1 and anticipated rollout 1 R552m 3 5k 1k 7 Active markets VHR’s completed Goals achieved Rewards allocated Invested to per day per hour per minute 31 December 72
Slide 73: A pledge from the Vitality network
A pledge from the Vitality network of ixe) ae global health, \ | MILLION MORE 100“ 20% co 2
Slide 74: Perfect composite model, #1 in every industry
1 Perfect composite model, #1 in every industry, and laboratory for shared value in financial services. A successful entry into banking 2 The best insurer in the UK, making use of a composite shared-value model 3 Vitality is the world’s largest and most sophisticated behavioural platform linked to f
Slide 75: What do the next few years look like?
What do the next few years look like? Group profit growth of CPI + 10% ESTABLISHED ~5 years Investment of 10% of EMERGING profit ~5 years Capital model NEW Cash model risk free + 10% FLR Cash buffer < 28% R1-2bn Return on capital 75
Slide 76: Operating model is robust under the base plan
Operating model is robust under the base plan % Invested in New Group earnings growth Financial leverage ratio Return on equity Businesses 4 year operating profit CAGR 25% 22% Target = 28% 14% 20% 12% Risk free + 10% 21.4% 15% Target = 10% 10% 5% - Established Add Emerging Add New 76
Slide 77: Operating model robust maintaining 10% investment in new businesses
Operating model is robust when maintaining 10% investment into new businesses % Invested in New Group earnings growth Financial leverage ratio Return on equity Businesses 4 year operating profit CAGR 25% 14% Target = 28% 19% Risk free + 10% 20% 12% 21.4% 15% Target = 10% 10% 5% - Established Add Eme
Slide 78: SA, UK and partner composite models
S SA COMPOSITE MODEL Ra pind UK COMPOSITE MODEL Vilelity INVEST PARTNER COMPOSITE MODEL OELX PINGAN MM Manulife © suurTowo UFE * cr
Slide 79: Unaudited interim results and cash dividend declaration
Unaudited interim results and cash dividend declaration FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 79