Slide 1: Results and cash dividend declaration
Results and cash dividend declaration for the year ended 30 June 2017
Slide 2: Core new business, operating profit, headline earnings
Core new business Normalised operating profit Normalised headline earnings +16% +10% +8% to R 16 993m to R 7 048m to R 4 656m +11% incl. DH take-on of new closed schemes and gross revenue for the Vitality Group of R18 250m 2
Slide 3: Core new business, operating profit, headline earnings (constant currency)
Core new business Normalised operating profit Normalised headline earnings +16% +10% +8% to R 16 993m to R 7 048m to R 4 656m +11% incl. DH take-on of new closed schemes and gross revenue in respect of the Vitality Group to R18 250m Constant currency terms Core new business Normalised operating prof
Slide 4: Financial impact
New business Operating profit Financial impact +16% +10% Earnings growth of 12% and new business growth of 22% in constant currency terms; 10.2% return on EV, robust capital philosophy and cash management Established businesses +18%* +11% >43 000 new lives; 254% ROI on risk interventions; 7.9% DHMS
Slide 5: Make people healthier and enhance and protect their lives
WHY HOW WHAT Members Improved health, better value through improved price and benefits Make people Health insurance healthier and Life insurance enhance and Long-term savings protect their lives Short-term insurance Society Insurer Intent to enter banking Healthier society Lower claims Improved prod
Slide 6: Deconstructing the 2018 Ambition
Deconstructing the 2018 Ambition BUSINESSES IMPACT 1 Insurgent 1 CPI + 10% profit growth 2 Significant 2 Risk free + 10% return on capital engagement 3 10m Vitality members 3 Superior dynamics actuarial 4 Meeting complex consumer needs 5 Exceptional service FOUNDATION 1 Global platform, science and
Slide 7: Financial results
Financial results New business Earnings Embedded Value Return on capital Cash 7
Slide 8: 2018 Ambition
2018 Ambition IMPACT 1 Operating profit growth of CPI + 10% 2 Risk free + 10% return on capital/equity 3 10m Vitality members 8
Slide 9: Organic growth methodology
Organic growth methodology Profit growth of ESTABLISHED CPI + 5% ~3 years Group profit Investment Profit growth of growth of of 10% of profit EMERGING CPI + 30% ~5 years Growth in investment of NEW CPI + 10% Mathematical derivation CPI + 10% = X(CPI+5%) + Y(CPI + 30%) + Z (CPI + 10%) X + Y + Z = 1;
Slide 10: Strong core new business growth
Strong core new business growth +16% Rm 12 months 12 months to 30 Jun 2017 to 30 Jun 2016 % change to R 16 993m +11% total new business incl. DH take-on of new closed schemes and gross revenue for the Vitality Group of R18 250m +16% 6 1091 5 1871 +18% 2 175 1 866 +17% Established +12% 2 496 2 413 +3
Slide 11: Core new business growth in constant currency terms
Core new business growth in constant currency terms +16% Rm 12 months 12 months to 30 Jun 2017 to 30 Jun 2016 % change +22% In constant currency terms +22% 6 1091 5 1871 +18% +7% 2 175 1 866 +17% Established 2 496 2 413 +3% 562 542 +4% 622 62 -1% 895 749 +19% Emerging 6343 5123 +24% FY 2013 FY 2014
Slide 12: Robust operating profit growth
Robust operating profit growth +10% Rm 12 months 12 months to 30 Jun 2017 to 30 Jun % change 2016 to R 7 048m 2 505 2 265 +11% +12% 3 588 3 271 +10% Established +12% +10% In constant currency terms 744 665 +16% in constant currency terms 1401 121 16.42 8.72 +89% 28.12 31.62 -11% (21) (151) +86% +39%
Slide 13: Emerging businesses are growing at a rapid rate
Emerging businesses are growing at a rapid rate Discovery Insure in-force Ping An Health written premium Vitality Group integrated premium RMBbn insurance premiums $m +31% 15 Months R3bn +85% +164% ¥2bn R2bn 22 Months ¥1bn R1bn 35 Months 44 months 16 months 1 11 21 31 41 51 61 71 1 5 9 13 17 21 25 2
Slide 14: Continued investment in new initiatives
Continued investment in new initiatives 8% Initiatives in the pipeline Launch date of earnings Intention to Intent to enter banking launch by end of R 577m Q2 2018* % of earnings 823 Vitality Invest Q1* 2018 8% 577 Commercial insurance Q2 2018 492 480 477 Umbrella funds Q2 2018 Global Vitality Netwo
Slide 15: Performance against the organic growth methodology
Performance against the organic growth methodology Target Performance In constant currency terms CPI +6% * CPI +55% * 8% of earnings CPI +7% Group profit growth of CPI + 10% * * Weighted average CPI rate of 4.8% based on CPI rates in markets 15
Slide 16: Reconciliation to normalised headline earnings
Reconciliation to normalised headline earnings 2017 2016 % change Normalised profit from operations 7,048 6,407 10% Investment income 150 265 Tax Finance costs -478 -293 Amortisation Other -104 -57 Rebranding Income tax -1,959 -2,006 o PruHealth Adjustments from normalised profit1 -253 -675 o PruPro
Slide 17: Capital management philosophy
Capital management philosophy Three pillars of capital Solvency Allocated Capital Capital Return on capital Dedicated capital and reserves Dedicated capital for risk free + 10% 5 Year Capital Plan Projection planned initiatives Additional Individual business ORSA Solvency 5 Year Buffer FLR assessmen
Slide 18: Performance against the capital management philosophy
Performance against the capital management philosophy Three pillars of capital Solvency Allocated Capital Capital Return on capital 5 Year Capital Plan Projection Dedicated Return on capital risk free + 10% risk free + 9.3% Individual business ORSA Solvency capital for assessment including new 1 in
Slide 19: Cash management supports aggressive growth
Cash management supports aggressive growth R7.2bn cash generated by the group New initiatives Discovery Life and Invest VitalityLife R2bn 2,986 2,863 2,577 Intent to enter banking Umbrella funds myOwn 1,350 Vitality Invest Other Ping An Health Vitality Group Cash spent on new initiatives Discovery I
Slide 20: Strong Discovery Life IRR favours investment in new business
Strong Discovery Life IRR favours investment in new business Discovery Life new business growth 2001 – 2017 (June) +25.5% CAGR * IRR = 21.5% ` 2010 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 * New Business API including Servicing and Contractual Premium Increases 20
Slide 21: VitalityLife presents a short-term cash strain
VitalityLife presents a short-term cash strain with net cash buffer achieved post Part VII transfer VitalityLife funding (GBPm) Part VII FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Funding required Excess funds 21
Slide 22: Return on embedded value (EV)
Return on embedded value (EV) Rm 60 407 1 599 +7.9% Increase in EV 1 914 57 294 1 199 Forex movement -3% decrease in EV Other initiatives -3% 53 080 decrease in EV +10.2% Return on EV Opening EV Value of New Unwind of Other Impact of EV before Forex Change in Closing EV Business Risk Discount initia
Slide 23: Performance summary
Performance summary Performance o New business growth +22% core new business growth Earnings o Group profit growth CPI + 7% growth o Established businesses CPI + 6% o Emerging businesses CPI + 55% o Return on capital risk free +9.3% Capital philosophy o Financial leverage ratio 26.7% o Cash buffer R
Slide 24: Foundation
OU J AI IOd LIOT)
Slide 25: 2018 Ambition: brand, employer of choice, values-based culture
2018 Ambition 1 Powerful, distinctive and aspirational brand 2 Employer of choice for all critical skills Ave 1,500 applications for each new managerial hire 3 Value-based culture Great people Innovation and optimism Liberating the best in people Business astuteness and prudence Intellectual leaders
Slide 26: Mathematics of Vitality Shared-Value Insurance
Mathematics of Vitality Shared-Value Insurance Value Incentive ∆ Behaviour Bent (qx) Value = × × × Member Member Incentive ∆ Behaviour Bent (qx) Shared value Vitality chassis Programmes Make people Product healthier Vitality Age Screening Morbidity Dynamic & mortality pricing Vitality Points Active
Slide 27: Global Vitality Network
Global Vitality Network ACTIVE 16 countries INSURERS >7m Vitality members DATA +150,000 new TECHNOLOGY COVER/FUND BOOST VITALITY FUND DYNAMIC PRICING WEDGE FUNDING C M L E PRODUCTS members per month analysis and research repository ONE Single Global Platform for 200m+ exercise activities insurers, c
Slide 28: Data is substantial
Data is substantial Mortality and morbidity data Driving data Financial data Overall health claims costs Proportion of drivers with higher-than-average % of clients going into arrears in 2016 scores Vitality status Vitality status Vitality status No Vitality No Vitality Blue Blue Blue Bronze Bronze
Slide 29: Data is substantial: over 2 petabytes
Data is substantial >2 petabytes of behaviour-linked insurance data Health data Demographic information Driving data Cost of claims Demographic information Provider visits Kilometers driven Hospital admissions Driver behaviour Condition management Accident impact Health outcomes Driver routes Out of
Slide 30: Causes of mortality vary substantially by age
Causes of mortality vary substantially by age Top 10 causes of death Region of the Americas, males 15-29 30-49 60-69 Leukaemia Prostate cancer Lower respiratory Exposure to infections Diabetes Kidney disease mechanical forces Lower respiratory Stroke Colon and rectum infections cancer Ischaemic hear
Slide 31: Vitality Active: Rewards for being active and driving well
Vitality Active | Rewards for being active and driving well Get 25% off gym membership Rewards for weekly fitness and driving goals Goal streaks Supports the Discovery product range aimed at young adults 31
Slide 32: Businesses
OpEcorery OPiscovery — Discovery QDscovery liyHealth lable BINGAN Vielity
Slide 33: 2018 Ambition: Significant client engagement
2018 Ambition IMPACT 1 Insurgent 2 Significant client engagement 3 Superior actuarial dynamics Products meeting complex consumer 4 needs 5 Exceptional service ecosystem 33
Slide 34: 5 criteria for brilliant businesses
5 criteria for brilliant businesses • Top 3 market share Insurgency • Growth/target market growth > 1 Engagement • > 30% of clients engaged Superior actuarial • Actual < Target market expected; dynamics Vitality engagement-based correlations Ability to meet complex • Market Share x Retention x Engag
Slide 35: Business portfolio
Business portfolio Established Emerging Market share 1st 1st Top 10 Top 4 Top 4 1st Top 3 Top 3 Growth/Target market growth >1 >1 >1 ~1 ~1 >1 >1 Varies by market Insurgency Engagement Lapse rates Sales effect Superior actuarial Loss ratio Drawdown effect dynamics Client rating Client rating Client r
Slide 36: Business portfolio
Business portfolio Established Emerging Insurgency (market share) Engagement Superior actuarial dynamics Ability to meet complex consumer needs Exceptional service ecosystem Earnings (>0) 36
Slide 37: New business and operating profit
New business Operating profit +18% +11% to R 6 109m excl. closed schemes to R 2 505m 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 37
Slide 38: Discovery Health Medical Scheme performance
Discovery Health Medical Scheme performance Growth Stability Security 55% Market share 94% No movement 26.3% Solvency >43 000 Net new lives 3% Upgrade 2.7 million 3% Downgrade R14.2bn Reserves 3% R1.3bn 94% Total surplus 3% 2012 2013 2014 2015 2016 Next 10 largest open schemes’ Next 10 largest open
Slide 39: Social mandate to bring down the cost of healthcare
Social mandate to bring down the cost of healthcare Utilisation and risk management interventions Making people healthier through Vitality 2016 Cumulative Vitality savings since 2008, in 2016 values R million 254% ROI R9.65bn Cumulative risk claims savings 68% of current reserves Positive demographi
Slide 40: Value for money
Value for money Lowest quartile admin fees Low contribution increases Lowest contributions 7.7% 7.9% CPI + 2% -15% Lower premiums compared to market average (weighted) Administration fees of Gross Contribution Income For 2018 DHMS weighted average contribution increase VS 9% - 11% CPI + 4% to 6% For
Slide 41: Focus and strategy
Focus and strategy Extending the Vitality Model Technology Member NEW Comprehensive, doctor reviewed health content, interactive doctor chat, video consults Scree n shot Doctor 41
Slide 42: New business and operating profit
New business Operating profit +17% +10% to R 2 175m to R 3 588m 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 42
Slide 43: Strong growth in market share
Strong growth in market share 2012 1 in 4 new policies 2016 1 in 3 new policies Lead | 1.3% Lead | 12.4% 29.7% 24.1% 22.8% 17.3% Discovery Insurer A Insurer B Insurer C Insurer D Other Discovery Insurer A Insurer B Insurer C Insurer D Other NMG RDM Life Insurance New Sales Quarterly Report 43
Slide 44: Actuarial dynamics
Actuarial dynamics Lapses vs. expectation VNB growth R million VNB margin growth Expected +17.1% +7.4% 10.20% 885 9.50% 756 Actual 2016 2017 2016 2017 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-17 Jun-16 Dec-12 Dec-11 Dec-13 Dec-14 Dec-15 Dec-16 44
Slide 45: Robust performance despite claims volatility
Robust performance despite claims volatility Individual life claims vs. expected Spike caused by an increase in non-natural deaths Actual vs. expected Examples: 104% Airplane crash 100% Asphyxiation Attack 97% Expected Burns Carbon-monoxide poisoning Fall Gun shot Hijacking Micro light accident Murd
Slide 46: Insurance risk is primarily from natural causes
Insurance risk is primarily from natural causes Breakdown of death claims Mortality by physical activity 2011 – 2016 Other -34% -55% MVA Non- Suicide natural 35% Crime deaths Trauma Cancer Natural deaths Heart diseases Etc. 62% Vitality Insured average Exercise 1x per week Exercise >2x per week (200
Slide 47: New business, operating profit, assets under administration
New business R million Operating profit R million Assets under Administration +3% +12% +14% to R 2 496m to R 744m to R 69.5bn Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 2014 2015 2016 2017 2014 2015 2016
Slide 48: Vitality Shared-Value Insurance in retirement products
Vitality Shared-Value Insurance (SVI) in retirement products Vitality SVI model Engagement Value shared INVEST EARLIER Investing earlier +2 years 50% Higher fund value (Boosts and saving earlier) 15.3 13.3 Higher Fee income Investment boost +6 years of income in retirement GET Prior to launch Dec-16
Slide 49: Operating profit, new business API, lives covered
Operating profit New business API Lives covered +10% to ₤44.4m +1% to ₤118m 1m lives 49
Slide 50: Vitality programme
Vitality programme Engagement Every month… Behaviour change Indexed 2014/01 = 1 270k 18bn +19% 5x 6 growth in proportion of healthy food Discounted gym visit Steps recorded in members’ shopping baskets 5 Increase 4 150k 3 2 Starbucks coffees 100k +41% Increase in physical activity Cinema tickets awa
Slide 51: Operating profit and new business API
Operating profit New business API +89% to ₤16.4m +4% to ₤56.2m 51
Slide 52: Operating profit
Operating profit +89% Return on capital to £16.4m +32% (+15% p.a.) Risk free + 10% 2013 2014 2015 2016 2017 2017 52
Slide 53: Improvement in loss ratio
Improvement in loss ratio Loss ratio Contributing factors Loss ratio (2015 = 1) -7% Unique data sets Sophisticated rating methodologies Machine learning Individual comprising over Focus on 50% of new business mix business Individual SME Corporate Healthcare Purchasing Alliance 2015 2016 2017 53
Slide 54: Sophisticated rating methodologies combined with Vitality Shared-Value Insurance
Sophisticated rating methodologies combined with Vitality Shared-Value Insurance Unique data sets Machine learning Improvements in first year loss ratios 1.6 million life years Prior year Traditional -17% -29% underwriting data Age Gender Industry Historic claims Duration Module choices Geography Et
Slide 55: Strong cash position and generation
Strong cash position and generation Progression of own funds (GBP) 42.9 120.5 37.8 Low interest bearing cash New business acquisition costs are fully funded by cash generation of the in-force portfolio. Own funds In-force cash Acquisition costs 55
Slide 56: Operating profit and new business API
Operating profit New business API -11% to ₤28.1m -1% to ₤61.8m 56
Slide 57: Drop in interest rates from Brexit
Drop in interest rates from Brexit UK risk-free rate Weighted average of UK forward Gilt Yield curve Brexit 25% drop 2.13% Impact on earnings – release of 2nd tier margins Reduced embedded value Sustained low interest environment Lower VNB and ROC 57
Slide 58: Impact of Brexit
Impact of Brexit Operating profit Value of new business -11% Relative Net* VNB (Indexed) ~25% of profit to £28.1m Lost Margin released in prior year Brexit High interest rate, Jun 16 Mix Low interest rate, Jun 16 Mix Index Index 2013 2014 2015 2016 2017 *Net cost of capital 58
Slide 59: Remedies have reverted value of new business to prior levels
Remedies have reverted value of new business to prior levels Actions taken VNB now robust in a low interest environment Relative Net* VNB (Indexed) 1 Reprice of Whole of Life new business 2 Remedies Escalating products 3 Increased Optimiser take-up Brexit Vitality Optimiser Wellness Optimiser High i
Slide 60: Optimised products have been successful
Optimised products have been successful Improvement in claims Higher average premium Higher benefit take-up Average APE Average number of benefits Expected -3.5% -14% 62% X 1.8 Wellness Optimiser Higher X 1.5 Vitality 60% Optimiser Higher Non- Optimiser Non-Optimiser Vitality Wellness Jun-16 Jun-17
Slide 61: New business, in force premium, operating result
New business In force premium Operating result +19% +86% 15 Months +31% R3bn Operating profit in H2 to R 895m to -R 21m R9m R2bn 22 Months R1bn 35 Months 1 11 21 31 41 51 61 71 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Months 61
Slide 62: Impact of the model is significant
Impact of the model is significant Loss ratio and lapse rates Behaviour change Improving book Loss ratio by status Driving score over time for Discovery Insure The proportion of good vs. bad drivers insured clients Selective lapsation and behaviour change -60% +12% 127 70% 62% +15% 115 Blue Bronze S
Slide 63: Financial dynamics
Financial dynamics Loss ratio over time Expense ratio over time Net claims/Gross premium -58% Reduction in cost of telematics since 2013 61% 38% -58% 2014 2015 2016 2017 2014 2015 2016 2017 2013 2015 2017 63
Slide 64: Significant value built up
Significant value built up ~R3bn Free Assets (Combined) R1bn In value created ~R2bn CoC + Fin Re Repayment Free Assets Value in force Solvency Capital Retained Losses CAPITAL INVESTED EMBEDDED VALUE New business IRR = 25.6% (RF + 20%) 64
Slide 65: Global technology partnership with CMT
Global technology partnership with CMT Active programmes in 17 countries, 20 countries by end of 2017 19% equity stake in CMT Insurers include: Liberty Mutual, Admiral Group, Aioi Nissay Dowa, Desjardin, Vodaphone, AIG 65
Slide 66: Sophisticated technology
Sophisticated technology Driver DNA Impact Alert Crowd Search Pothole detection Your driving behaviour 3.7g +Z +Yaw 1.6g +X +Y +Pitch +Roll +Sideslip +V Unusual driving behaviour POTHOLES Discovery has over 500 000 clients all over South Africa with the Discovery app Theft and safety Medical emergen
Slide 67: Expanding the Vitality Shared-Value Insurance model
Expanding the Vitality Shared-Value Insurance model Avis SafeDrive Pay-how-you-drive model for young drivers Powered by Launch: 20% Upfront premium discount 2x July 2017 Accident rate for rentals over private vehicles ImpactAlert + Late night driving Panic Button Per km rate by status Vitality Activ
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Slide 69: Fee income, Vitality integrated API, operating result
Fee income Vitality integrated API Operating result +33% +164% +34% to $47m to $219m to -$8.5m Markets added in FY17 France Canada Vietnam Sri Lanka 2016 2017 2013 2014 2015 2016 2017 2015 2016 2017 69
Slide 70: Global recognition
Global recognition Ping An Health AIA Vitality (Hong Kong) AIA Vitality (Australia) Generali Vitality (France) John Hancock Vitality Vitality USA won 2016 China won five gold awards in won 2016 Customer awarded 2017 Innovation named 2017 Most named as Leading Remuneration and recognition of their Vi
Slide 71: Growth model
Growth model Insurers Penetration Engagement Country 1 Term Country 2 Insurance Whole of Country 3 Life Country 4 Universal Critical Country 5 Illness Unit Linked Country 6 Early partnership Health duration Country 7 Country 8 ACTIVE INSURERS 3x letters of intent Country 9 50% target Target Minimum
Slide 72: Launch of myOwn in Australia
Launch of myOwn in Australia Australian Health Insurance Partnership between Partnership will soon also integrate with AIA Life to create a compelling offer that combines both health and life insurance with Vitality 72
Slide 73: Ping An Health
Ch ()e se PING AN
Slide 74: New business, written premium, operating result
New business Written premium Operating result +103% +85% +66% to RMB 1.6 bn to RMB 2.75bn to –R 33m ¥2bn ¥1bn 16 44 months months 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 2016 2017 2013 2014 2015 2016 2017 74
Slide 75: Continued acceleration in growth
Continued acceleration in growth +428% to 3.7m lives • Online PHI • Run Vitality • Vitality 2.0 • Group-mid market, White- label individual products • Individual high-end health products • Good Doctor • Vitality • Hospital networks, automated claims systems • Fund products • Service products • Group
Slide 76: Stable and high-quality actuarial dynamics
Stable and high-quality actuarial dynamics Retention rates stable and improving Loss ratios stable Group Insurance business Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Individual insurance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Slide 77: Strategic focus for Ping An Health
Strategic focus for Ping An Health Group products New PAH branch opened Profitability: Operational efficiency, claims control, analytics and underwriting margin Chengdu (Sichuan Province) 14.4m people (city) Individual products 87m people (province) Distribution: Reinsurance licence allows broader u
Slide 78: Deconstructing the 2018 Ambition
Deconstructing the 2018 Ambition BUSINESSES IMPACT 1 Insurgent 1 CPI + 10% profit growth 2 Significant 2 Risk free + 10% return on capital engagement 3 10m Vitality members 3 Superior dynamics actuarial 4 Meeting complex consumer needs 5 Exceptional service FOUNDATION 1 Global platform, science and
Slide 79: Summary
Summary CPI + 7% group profit growth Financial performance +22% core new business growth* Risk free + 9.3% return on capital 16 countries Foundation >7m Vitality members +150,000 per month Businesses Intent to enter banking New initiatives Vitality Invest 8% of earnings Commercial Insurance Launch b
Slide 80: Results and cash dividend declaration
Results and cash dividend declaration for the year ended 30 June 2017