Slide 1: Results and cash dividend declaration for the year ended 30 June 2018
Results and cash dividend declaration for the year ended 30 June 2018
Slide 2: Key results highlights
Normalised Core new business Headline earnings Normalised operating profit headline earnings to R8 266m to R16 137m to R5 803m to R5 401m +6% to R16 878m incl. DH take-on of new closed schemes and gross revenue for the Vitality Group 2
Slide 3: Strategic observations for the period
Strategic observations for the period 2018 Ambition Discovery’s core purpose has manifested in a globally relevant Shared-Value Insurance model. Our confidence in the efficacy and impact of the model led to the 2018 Ambition and consequent operating framework. Financial This framed the financial res
Slide 4: Established and emerging businesses performance
Operating profit New business1 Net cash flow5 RoE Experience variances2 +17% +10% Excellent performance. Mandate is to continue to provide its +11% +8%3 R2,828m >rf+10% R214m members access to quality, affordable healthcare on a sustainable basis, assisting in enhancing the healthcare system for all
Slide 5: Make people healthier and enhance and protect their lives
Life insurance Make people healthier and Health insurance enhance and protect their lives Short-term insurance Long-term savings Banking 5
Slide 6: Trends underpinning the Shared-Value model remain relevant
Trends underpinning the Shared-Value model remain relevant Societies require companies to fulfil a socially progressive core purpose Consumers live in a technology-dominated world and seek solutions instead of services The nature of risk is behavioural and solutions are becoming increasingly persona
Slide 7: Controllable behaviours that led to Shared-Value model
Controllable behaviours that led to Shared-Value model Life insurance Health insurance Motor insurance Long-term savings Banking 4 4 4 4 5 3 3 3 4 Lifestyle Chronic Deaths Lifestyle Chronic Deaths Driving Driving Fatal Controllable Conditions Inadequate Controllable Credit behaviours conditions worl
Slide 8: Dynamics of the model manifest across all industries
Dynamics of the model manifest across all industries Sales x Selection x Behaviour x Lapses → Life 15%+ insurance 20%-30% 20%+ >50% lower lapse rates increase in better claims experience lower mortality on market share compared to non-Vitality highly engaged Stayers have 50% Higher VNB mortality of
Slide 9: 2018 Ambition: best insurer in the world and a powerful force for social good
2018 Ambition: best insurer in the world and a powerful force for social good BUSINESSES FINANCIAL AND SOCIAL IMPACT 1 Insurgent 1 R10bn in pre-tax earnings 2 Significant 2 CPI + 10% profit growth engagement 3 Risk free + 10% return on capital 3 Superior dynamics actuarial 4 10m Vitality members 4 M
Slide 10: Operating model
Operating model Group profit growth of Return on capital FLR Cash buffer 10
Slide 11: Organic growth engine
Organic growth engine Group profit growth of risk free + 10% Return on capital FLR Cash buffer < 28% R1-2bn 11
Slide 12: Core new business
Core new business 12 12 to R16 137m months months % +6% to R16 878m incl. DH take-on of new closed Rm schemes and gross revenue for the Vitality Group to 30 Jun to 30 Jun change 2018 2017 6 573 6 109 +8% Continued growth off a high base 2 188 2 175 +1% Established +10% Individual life new business +
Slide 13: Impacting a significant number of members globally
Impacting a significant number of members globally 17.8m Lives Ping An Vitality lives UK 6.4m PAH* 1.1m lives 4.3m Run Vitality 5.9m 11.4m 1.1m Vitality members Vitality Group (excl. US) Vitality Group 0.8m Vitality members (US) 5.5m 0.8m Vitality members South Africa 4.4m lives Insurance Vitality s
Slide 14: Operating profit by business
Operating profit By business DISCOVERY HEALTH DISCOVERY LIFE 12 months 12 months % DISCOVERY INVEST Rm to 30 Jun to 30 Jun VITALITY to R8 266m 2018 2017 change VITALITYHEALTH VITALITYLIFE 2 777 2 505 +11% DISCOVERY INSURE VG PAH 3 837 3 588 +7% Established 885 744 +19% By industry +10% Relative grow
Slide 15: Normalised headline earnings
Normalised headline earnings 12 months 12 months % Rm ended June ended June to R5 401m change 2018 2017 Profit from operations 8 266 7 048 17 Normalised headline (959) (478) Higher finance earnings per share Finance costs costs (diluted) Other 105 (798) +8% Profit before tax 7 412 5 772 28 +11% +1%
Slide 16: Impact of finance lease accounting
Impact of finance lease accounting 1 Discovery Place (Phase 1 and 2) Depreciation Finance costs Cash Payment 12 months 800 % Rm ended June change 2018 700 Headline earnings 5 803 32 600 Finance lease accounting 208 500 Finance costs 210 Rand Millions 400 Depreciation 126 Market-related rental (128)
Slide 17: Established and emerging earnings performance
Performance largely in line with growth engine 12 months 12 months Actual earnings allocation % Rm to 30 Jun to 30 Jun to R8 266m 2018 2017 change 2 777 2 505 +11% 3 837 3 588 +7% Established 885 744 +19% ESTABLISHED Discovery Health Discovery VitalityHealt h VitalityLife 58 25 +132% CPI+9% Life Dis
Slide 18: Cash management framework
Cash management framework Group profit growth of CPI + 10% risk free + 10% Return on capital FLR Cash buffer < 28% R1-2bn 18
Slide 19: Cash generated from in-force business
Cash generated from in-force business Rm Net cash flow1 New business IRR Cash Cash used 2,828 > RF+10% generated Tax, dividends 539 RF+10% 475 and finance costs R3.4bn RF+9% New business -393 RF+7% R7.8bn 2 RF+17% -151 New businesses R2bn 1. Movement in shareholder free cash 19
Slide 20: Capital management philosophy
Capital management philosophy Group profit growth of CPI + 10% Return on capital FLR Cash buffer 20
Slide 21: Performance against capital and cash management philosophy
Performance against capital and cash management philosophy Return on equity Established Emerging Return on capital >RF + 10% businesses businesses 109% Target 87% 87% 71% *Excludes RF + 10% Regulatory deferred tax asset in earnings 52% capital Allocated 28% 35% capital Regulatory capital and reserve
Slide 22: Return on Embedded Value
Return on Embedded Value (EV) 397 67,564 Growth in EV 787 Rm 5,955 305 585 65,624 1,355 Experience Variances: Excl. economic: 678 Economics: -373 2,826 57,294 Opening EV Value of new Unwind of risk Experience Methodology Other EV before new New initiatives Change in capital Closing EV business disco
Slide 23: Operating model
Operating model Group profit growth of Return on capital FLR Cash buffer 23
Slide 24: Established businesses have significant scale and continue to grow
2002 2004 2006 2008 2010 2012 2014 Operating profit (Rm) 2016 2018 2 777 2002 2004 2006 2008 2010 of earnings 2012 R8bn 2014 2016 2018 3 837 2010 2011 2012 2013 2014 2015 2016 2017 2018 885 CPI + 8.6% Established businesses have significant scale and continue to grow 2012 2013 2014 2015 2016 2017 20
Slide 25: Emerging businesses have significant potential
Emerging businesses have significant potential Fastest growing short-term insurer in SA Global platform with leading insurance Top specialist health insurer in China partners FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Shared-Value Insurance Model Accelerating growth Distribution channels Durationa
Slide 26: Substantial new businesses and initiatives in the pipeline
Substantial new businesses and initiatives in the pipeline Discovery For Business VitalityInvest Discovery Bank Risk solutions and employee Long-term savings products Building a fully-fledged benefits for businesses in the UK retail bank Launch: Launch: Launch: Q2 2018 Q2 2018 2018 Business insuranc
Slide 27: Shared-Value model has been rolled out globally
Shared-Value model has been rolled out globally Business is well-positioned for growth: Established businesses are robust and growing strongly Emerging businesses are all profitable and have significant potential New initiatives are substantial and fully funded within the plan The capital plan
Slide 28: SA composite model
= ar | SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL WORLD'S LARGEST BEHAVIOURAL PLATFORM LINKED TO FINANCIAL SERVICES SHOE QOOGSHHSSPHdSOS# OO?
Slide 29: Considerable progress in building Discovery Bank
Considerable progress in building Discovery Bank Approval subject to certain conditions Acquisition of additional 2015 FirstRand Bank Limited to divest its entire 25.01% shareholding interest in 54.99% of the Card Discovery Bank over 5 years APR 2016 Submitted Bank Opportunity to own 100% of licence
Slide 30: Excellent performance of Discovery Card
Excellent performance of Discovery Card Operating profit (Rm) Financial metrics ahead of peers +17% Credit loss ratio Non-performing loans (%) Cost to income (%) to advances to R 414m 1.6% 7.9% 58.5% Advances 40.0% R4.3bn (+3.5%) 3% Turnover spend R25.3bn (+5%) DiscoveryCard SA banks DiscoveryCard S
Slide 31: Link between financial behaviour and wellness engagement
Demonstrable link between financial behaviour and wellness engagement Average monthly spend Annual closure rate Percentage clients going into arrears Vitality status Discovery product Driving behaviour count -76% 4.7x -85% -60% -80% 1 2 3 4 5 6 Average monthly spend Average closure rate
Slide 32: Group Funding Plan would be stretched if purchase funded internally
Group Funding Plan would be stretched, if purchase funded internally Adjusted FLR (%) FLR=28% FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Current plan Card purchase funded internally 32
Slide 33: Partner composite model
> ar ] SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL WORLD'S LARGEST BEHAVIOURAL PLATFORM LINKED TO FINANCIAL SERVICES SHOE QOOGSHHSSPHdSOS# OO?
Slide 34: Vitality-integrated API revenue and operating result
Vitality-integrated API Revenue Operating result +78% * +40% * +131% USD390m USD2.6m R5 014m USD51.1m R34m R657m FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Vitality USA Insurance partners *From insurance partners 34
Slide 35: Accelerated membership growth with significant latent potential
Accelerated membership growth with significant latent potential VG has learnt what works and is taking less time to Insurance Partner Membership make markets successful +91% 8 Months to add 250 000 4 years to get to 0.8m 500 000 members ~40k PREMIUM DISCOUNTS COVER BOOSTS UNIT FUNDS BOOSTS New activ
Slide 36: Single technology platform to deliver Vitality's product roadmap
Single technology platform to deliver Vitality’s product roadmap ONE ENHANCED DIGITAL USER EXPERIENCE Superior customer experience Significant configurability Invested LAYERED CLOUD BASED COMPONENT BASED CLOUD-BASED Scalable Multi-tenancy Multi-currency DISTRIBUTED MULTI TENANT Multi-language Deploy
Slide 37: Vitality works across multiple contexts
Vitality works across multiple contexts Case one: Flat growth in a large life Case two: Large market with Case three: Annually renewable insurance market infrequent customer interaction premiums with >15% lapse rates p.a. 10% Compounded annual Change in exercise days after taking up Active 100% sale
Slide 38: Continued growth will come from three strategies
Continued growth will come from three strategies 01 02 03 15 New Motor Invest Card ETC….. Vitality 11 Discussions attachment 7 Developing business case Vitality 4 Completed business case take-up 3 Signed LOI Engagement 4 Signed 38
Slide 39: Sumitomo Vitality Launch Video
01 Sumitomo Vitality Launch Video 39
Slide 40: Ping An Health results
Ping An Health operating Discovery’s operating New business Written premium profit profit 95% +87% 20x to USD443.6m to USD753.9m to USD29.9m to USD4.4m R5 738m R9 695m R385m R56m FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 After Discovery’s costs 40
Slide 41: Massive opportunity in China
Massive opportunity in China Market in its infancy Significant out-of-pocket expenses PHI expected to grow faster than SHI Private health insurance premiums per capita Healthcare spending in China 9.1 CNY, trillion; % of total healthcare expenditure Out of pocket 1,690 Private health insurance Socia
Slide 42: Potential to extract even more value from distribution
Potential to extract even more value from distribution Ping An Health’s branch network covers Ping An Health’s use of Ping An Life There are two types of digital insurance most of the biggest cities in China agents is increasing platforms and Ping An Health uses both Traditional insurers with online
Slide 43: Ping An Health's own digital distribution channel achieved significant traction
Ping An Health’s own digital distribution channel achieved significant traction in two years New users Registered users registered daily Number of service Premium revenue interactions Monthly active users Rank out of >100k 43
Slide 44: Ping An Health adapts product strategy to market realities
Ping An Health adapts product strategy to market realities Revenue The quality of the business is strong ZAR million and stable Group high end 6 987 Loss ratio Pricing assumption CNY 8,000 average premium Comprehensive cover 5 996 Independent brokers Sold to employers, typically multinationa
Slide 45: Access to affordable cancer drugs is a major social issue in China
Access to affordable cancer drugs is a major social issue in China people die of cancer in China each year Ping An Health launched two cancer protection products in August 2018 people diagnosed with cancer each year average premium DYING TO SURVIVE Provides cover for: Highlights the issue of restric
Slide 46: Ping An Health is investing in scaling operations
Ping An Health is investing in scaling operations Policy applications Cases* processed Operational cost of capacity per minute per day processing claim (CNY) Number of providers Ping An Health has invested in digitalisation and operational efficiency: 4 000 10 000 18.79 1 520 Automated underwriting
Slide 47: Discovery working closely with PAH to ensure profitability and sustainability
Discovery working closely with PAH to ensure profitability and sustainability In development Disease Medical network strategy Interventions Management & outcomes management Member Product builder tools Product development profiling Products and support profiling Hospital AI & Risk analytics Big data
Slide 48: Ping An Health's growth is expected to continue
Ping An Health’s growth is expected to continue Exceptional growth in 2018 Revenue for seven months to July 2018 same as full 2017 Cumulative premium revenue by month 7 months 12 months China’s health insurance 2018 2017 market is expected to keep growing Potential to extract even more value from di
Slide 49: UK composite model
> ar J SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL 1 Manulife ‘SUUITONO UFE WORLD'S LARGEST BEHAVIOURAL PLATFORM LINKED TO FINANCIAL SERVICES SHOE QOOGSHHSSPHdSOS# OO?
Slide 50: UK Vitality Health results
New business Operating profit* Lives covered +12% +44% +11% to R2 279m to R1 104m to 1.084m lives GBP millions GBP millions FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 *VH + VL + TP Margin 50
Slide 51: Building a single UK Vitality platform
Building a single UK Vitality platform LIFE HEALTH HEALTH INVESTMENTS INVESTMENTS 65k INSURANCE INSURANCE INSURANCE Apple watches 330k Monthly Starbucks PRODUCT 160k Monthly cinema tickets PARTNERS PROGRAMS 400k ACTIVE REWARDS HEALTHY AGING MENTAL WELLBEING Ocado deliveries to date BRAND 250k Page v
Slide 52: VitalityLife results
New business Operating profit Lives covered +14% +108% +7% to R1 107m to R589m to 577k lives GBP millions GBP millions FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 52
Slide 53: Operating result driven by Shared-Value model
Operating result driven by Shared-Value model Selection x Behaviour x Lapses Vitality selects healthier customers Change in behaviour directly correlated with claims Engaged members have lower lapses Vitality customers against UK census data Claims relativity by engagement Lapse rate by status Vital
Slide 54: Additional value from pricing sophistication and claims management
Additional value from pricing sophistication and claims management Premium x Claims management Use rich data and AI that leads to sophisticated pricing Tariff and care pathways Claims management initiatives have led to increased claims have kept PLPM costs stable > 100m possible savings over time co
Slide 55: Lower loss ratio, strong cash generation and increasing return
Lower loss ratio, strong cash generation and increasing return Decreasing loss ratio over time Strong cash generation (Rm) Greater return on capital Achieved 12.3% ROC at June 2018 10x -21% Risk free 1 513 1 038 12.3% RF + 10% 7.2% FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 475 Decreasing loss ratio driven
Slide 56: VitalityInvest and UK investments results
New business Operating profit* Lives covered +10% +6% +15% to R1 172m to R515m to 507k lives GBP millions GBP millions FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 *includes Transfer Price Margin 56
Slide 57: Interest rate change introduced to ensure stability going forward
Interest rate change introduced to ensure stability going forward Review assumptions to a long- Continued negative implied real yields and interest rate volatility term view UK Forward Real Gilt Yield UK Forward Nominal Gilt Yield Volatility VitalityLife risk adjusted yield vs passive interest rate
Slide 58: Business reconfigured for a low interest rate environment
Business has been reconfigured for a low interest rate environment Term assurance new business mix Indexed premium new business mix Term Indexed Whole of life Level 24% 38% 67% 96% 2014 2018 2014 2018 58
Slide 59: New business acceleration while maintaining margin
New business acceleration while maintaining margin Strong new business in second New business IRR 4x higher than half of the year Maintained VNB margin risk free VNB margin New Business IRR 4x 11% 18.3 Risk free 17.9 11% 17.2 10% 10% 14.3 8% 8% 6% 5% 5% GBP millions 3% Q1 Q2 Q3 Q4 Jun-14 Jun-15 Jun-
Slide 60: Extending the Vitality platform to investments
Extending the Vitality platform to investments 60
Slide 61: The rationale for VitalityInvest
The rationale for VitalityInvest Key trends in asset management Market size and target opportunity Increased Increased choice Reduced costs Annual new business flows sophistication Authorised funds Fund innovation Asset weighted expense ratio Total investment market of R3 119bn 3458 1.4% VitalityInv
Slide 62: Sophisticated product offering and expanded reach
Sophisticated product offering and expanded reach VitalityInvest product Increased distribution footprint 62
Slide 63: Market-first financial planning tools with personalised life expectancy algorithm
Market-first financial planning tools that incorporate personalised life expectancy algorithm, developed in collaboration with University of Cambridge and RAND Europe Case study: 35-year old male 75% 50% 25% • 79kg, 177cm, 94cm (waist) 1. Current health and • Normal biometrics Improved lifestyle lif
Slide 64: Positively different investments
Positively different investments. 64
Slide 65: SA composite model
SA COMPOSITE MODEL UK COMPOSITE MODEL PARTNER COMPOSITE MODEL 1 Manulife ‘SUUITONO UFE % WORLD'S LARGEST BEHAVIOURAL PLATFORM LINKED TO FINANCIAL SERVICES SHOE QOOGSHHSSPHdSOS# OO?
Slide 66: Discovery Health new business, membership and operating profit
2002 2003 2004 2005 2006 to R6 573m 2007 +8% 2008 New business 2009 excl. take-on of new closed schemes 2010 2011 2012 2013 2014 2015 2016 2017 2018 1993 1995 1997 1999 2001 Membership 2003 2005 >3.5m 2007 2009 under administration 2011 2013 2015 2017 2002 2004 2006 to R2 777m 2008 Operating profit
Slide 67: Scale of Discovery Health
Scale of Discovery Health 16/17 Restricted schemes won over the previous 10 years 18 Restricted schemes 40% Total market share >3.5m Lives under administration 17% Restricted scheme market share >670 000 Lives 1 Open scheme 56.0% Open scheme market share 2013 >2.8m 1993 1994 1995 1996 1997 1998 1999
Slide 68: DHMS continued excellence in a challenging economic environment
DHMS continued excellence in a challenging economic environment Competitive advantage Growth and stability Security -16.4% Lowest premiums in the scheme market 56% Market share 27.44% Solvency (2017: -15.1%) +2.08% Membership growth 4.8% Annualised lapse rate R16.4bn 10.1% DHMS admin and Reserves ma
Slide 69: Regulatory environment
Regulatory environment Discovery Health is actively supporting the development of the NHI and remains committed to growing shared value in South Africa’s healthcare system National Health Medical Schemes Health Market Insurance Bill Amendment Bill Inquiry 1. Slow and phased-in process 1. Most recomm
Slide 70: Discovery Health's social mandate is to bring down the cost of healthcare
Discovery Health’s social mandate is to bring down the cost of healthcare for members Discovery Health average annualised inflation rates (2008 – 2017) 1.0% 4.7% 11.3% 1.9% Supply-side utilisation Supplier induced demand High cost medication 0.5% Technology 6.1% 2.8% Demand-side utilisation
Slide 71: Supply-side utilisation – supplier induced demand
Supply-side utilisation – supplier induced demand Supplier induced demand New hospitals are substantial High cost medication drivers of utilisation Case study: Pietermaritzburg Technology January 2016 to March 2018 Life Hilton hospital opened September 2015 Growth between 2010 and 2016 Total spend T
Slide 72: Demand-side utilisation – increasing cancer incidence rates
Demand-side utilisation – increasing cancer incidence rates Increasing disease burden Severe adverse selection All cancers-lives on scheme All cancers-lives on scheme Ageing insured population All cancers more than 5 years All cancers more than 5 years 2.42X 2.75X 2008-2017 2008-2017 4.12 4.54 Breas
Slide 73: Becoming the lowest cost administrator
Becoming the lowest cost administrator Effective interventions to manage Lowest quartile admin fees Decreasing real admin fee increases claims costs 10.1% DH total fees as a Administration expenditure as % of GCI Impact of Discovery Health and Vitality on % of GCI over time DHMS risk claims in 2017
Slide 74: Fully integrated digital platform to drive engagement
Significant progress in building a fully integrated digital platform to enrich interactions and drive engagement HealthID CARE PATHWAY ENGAGEMENT APP STORE ENGINE ENGINE OMICS Over 1 993 doctors Over 1.7 m member consents POPULATION MANAGEMENT TOOL DrConnect 329 543 members and 2 700+ doctors enroll
Slide 75: Discovery Life new business, operating profit and market share
New business Operating profit Market share +1% +7% 27% 29% 31% of retail affluent market to R2 188m to R3 837m Individual +4% Individual +9% 20% 19% 18% 2015/16 2016/17 2017/18 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2002 2003 2004 2005 2006 2007 2008 200
Slide 76: Discovery Life realisation of Shared Value
Discovery Life realisation of Shared Value Selection x Mortality x Lapses Shared Value Proportion of healthy lives at Actual = Expected (Standard life), risk adjusted Discovery Life Paybacks underwriting (Vitality Rating) Other SA Insurers 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 77: Continued product innovation
Continued product innovation PROACTIVE CLAIMS GLOBAL EDUCATION PROTECTOR PURPLE LIFE PLAN Up to 100% of a 3-year tertiary degree covered through shared-value +135% # of GEP Premium Guaranteed Enhanced policies sold efficiency convertibility to global US dollars treatment CLASSIC GLOBAL SMART LIFE AN
Slide 78: Discovery Life's considerations when reporting earnings
Discovery Life’s considerations when reporting earnings Unique nature of Discovery Life Earnings reporting considerations IRR profile FULL UPFRONT 1 RECOGNITION Long-tailed, predominantly LEVEL OF UPFRONT CASH FLOW RECOGNITION IFRS PROFIT protection business PRUDENT 2 - Profit overstated on Mean dur
Slide 79: Criteria to assess the appropriateness of the accounting policy
Criteria to assess the appropriateness of the accounting policy Earnings reporting considerations Accounting policy FULL UPFRONT Profit emergence aligned with risks RECOGNITION borne and services rendered LEVEL OF UPFRONT CASH FLOW RECOGNITION IFRS PROFIT PRUDENT - Profit overstated on Assumptions E
Slide 80: Assumptions | Resilience of the negative reserve
Assumptions | Resilience of the negative reserve Life and Invest at June 2017 Available margin under various 1 in 200 stresses Assumptions Resilient under 1/200 Compulsory and stresses Discretionary margins R24bn Experience variances Positive non-economic experience variances Base Nominal Int Rate R
Slide 81: Experience variances | Positive
Experience variances | Positive Non-economic EV Claims vs. Lapses vs. Policy alterations Assumptions variances over time expectation expectation Rm Resilient under 1/200 stresses 357 FY 17 FY18 106% 239 162 100% 118 128 83 -74 52 Long-term average Experience variances -242 +24 H2 Positive non-econom
Slide 82: Cash flow and capital | Robust cash, VNB, IRR and CAR
Cash flow and capital| Robust cash, VNB, IRR and CAR Assumptions Cash flow (Discovery Life and Invest) Capital robustness Resilient under 1/200 Rm stresses 12,794 -7,510 Quarterly SCR = ~170% Capital Adequacy Ratio New business IRR 3.9x Experience variances 3.56x 3.5x Positive non-economic Value of
Slide 83: Discovery Invest results
Assets under New business Net flows Operating profit administration -2% +10% +18% +19% to R2 454m to R6 397m to R81.8bn to R885m Up 0.3% if effect of R500m corporate endowment is excluded Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Slide 84: Leveraging behavioural science and Vitality to change the way people invest
Leveraging behavioural science and Vitality to change the way people invest INVESTMENT AD-HOC INCOME Accumulation BOOST INVESTMENT BOOST Withdrawal BOOST SAVE FOR LONGER MANAGE HEALTH AND WEALTH IN RETIREMENT Investment boosts Boost to retirement income 35+ 25-34 20-24 15-19 10-14 Years to retiremen
Slide 85: Product design has improved competitiveness while maintaining margins
Product design has improved competitiveness while maintaining margins Decreased platform fees Higher Discovery fund take-up Profit maintenance 0.7% 100% 4% 92% 4% 0.6% 90% 2.9% 3% 0.6% Discovery fund take-up 80% Platform fees Profit margin 3% 0.5% 70% 2% 0.5% 2% 60% 0.4% 1% 50% 0.4% 1% 0.3% 40% 0% 2
Slide 86: Extending the Shared-Value model
Extending the Shared-Value model Pension and provident fund solutions that maximise retirement outcomes by rewarding good decision-making and healthy living Shared-Value Investment programme Strong new business acquisition tool and offering Compelling product 86
Slide 87: Discovery Insure results
New business Gross written premium Vehicles covered Operating profit +17% +28% +18% to R1 047m to R2 712m to 200k R68m Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 87
Slide 88: Manifestation of Shared Value
Manifestation of Shared Value Selection x Behaviour x Lapses Correlations Better driving compared Improvement in driving Better drivers have lower Correlations between health, to population over time lapses wealth and driving 6x 4x After Before Before After Bad drivers Good drivers Manage Manage hea
Slide 89: Discovery Insure are among the safest drivers globally
Discovery Insure are among the safest drivers globally Discovery Insure drivers have 60% lower Silver+ Discovery Insure drivers have the same road fatalities road fatalities than South African drivers as drivers in the US Driver fatalities per 100,000 motor vehicles Driver fatalities per 100,000 mot
Slide 90: Quality of in-force book is excellent
Quality of in-force book is excellent Longer duration clients are Combined ratio reduces by In-force book is strong better risks duration R324m Non-weather loss ratio by duration, relative to first Cash generated year business from in-force* First year 16% 21% 29% 13% 35 31% Months, average 3% durat
Slide 91: Extending the Shared-Value model to business insurance
Extending the Shared-Value model to business insurance Applying Vitality to fleets Developing better businesses Developed in partnership with Business Health Check produces a diagnostic report 34% 49% 17% Personal Corporate Commercial 91
Slide 92: Strategic observations for the period
Strategic observations for the period 2018 Ambition Discovery’s core purpose has manifested in a globally relevant Shared-Value Insurance model. Our confidence in the efficacy and impact of the model led to the 2018 Ambition and consequent operating framework. Financial This framed the financial res
Slide 93: Results and cash dividend declaration
Results and cash dividend declaration for the year ended 30 June 2018