Unaudited interim results and cash dividend declaration FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 1
Core new business Investment in new Normalised operating Normalised headline businesses profit earnings to R9 049m to R2 376m to R3 799m +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
Operating profit New business 3 -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 efficiency, service levels and improving margins. A complex period for the business coinciding with the effective date of SAM and with earnings impacted by Established businesses -13% +8% significant claims volatility. The business remains strong with continuing growth, improved policy alterations experience and positive cash flow. +9% +14% Robust performance amid weak financial markets saw a 7% growth in assets under administration, and positive behaviour change in the context of long-term savings due to the Shared-Value model. +26% +18% Stand-out performance driven by record sales, improved retention and sustained low loss ratios. Business continues to generate strong positive cash flow. +15% +8% Robust performance despite economic uncertainty. There was a significant improvement in fundamentals following management action. The business is taking action to differentiate in a tough environment. Continued excellent performance with gross premium income growing by 21% and continued improvements in the +114% +4% Emerging businesses quality of the in- force book, a consequence of the durational impact and the efficacy of the model. Softbank’s Vision Fund invested USD500m in CMT, a transaction that will contribute USD55m to the business’s full year profits. +179% +36% 5 Continued growth from more mature markets as well as a successful launch and high Vitality take-up in Sumitomo Life. Strong franchise markets pipeline, with 2 due to launch this year. +26% 1 +117% Exceptional growth, enabled by significant investments made to future capability. Already seeing value from investment despite temporary dampened profit growth. New 21% 2 Discovery made huge strides in delivering against its strategic plans in the period, with the doubling of investment New of earnings in new initiatives to 21% of earnings. businesses 3 Excludes DH take-on of new closed schemes and gross revenue for the Vitality Group 1 Before tax profits 4 Excludes new scheme take-ons 2 Excludes Discovery Card profits and includes financing costs 3 5 Includes gross recurring and lump sum revenues
Core new business annualised premium income 6 months 6 months % Rm 2 to 31 Dec to 31 Dec change 2018 2017 to R9 049m 3 420 3 324 +3% +16% to R9 508m incl. DH take-on of new closed schemes and gross revenue for Vitality Group 1 212 1 121 +8% +16% Relative growth by industry Established 1 387 1 220 +14% 18% 14% 13% Life +9% 616 522 +18% Health 4% Invest +11% 600 557 +8% P&C Life Health Invest P&C 7 235 6 744 +7% +10% Established businesses By region +15% 517 495 +4% 85% SA Emerging 441 324 +36% UK 1 080 1 497 1 +117% Other 13% 6% H1 H1 H1 H1 H1 2 038 1 316 +55% 2015 2016 2017 2018 2019 Emerging businesses SA UK Other Consistent long-term growth Continuing excellent growth from emerging businesses 1 Represents 25% of Ping An Health new business API 4 2 Excludes Vitality SA, other new businesses and new closed schemes
Normalised operating profit Established have grown strongly 6 months 6 months % (9% CAGR since 2015) Rm to 31 Dec to 31 Dec to R3 799m change 2018 2017 1 464 1 332 +10% H1 H1 H1 H1 H1 1 500 1 721 -13% 2015 2016 2017 2018 2019 +18% -4% Established 455 419 +9% CPI- Emerging now cover their own +14% 0.3% financing costs +6% 446 355 +26% +17% 300 261 +15% H1 H1 H1 H1 H1 4 185 4 103 +2% Established businesses 2015 2016 2017 2018 2019 62 29 +114% Historically less than 10% 95 34 +179% Emerging earnings in New >100% 12 36 -67% H1 H1 H1 H1 H1 18% 2015 2016 2017 2018 2019 169 99 +71% Emerging businesses 9% 7% 2% 5% New 18% (679) (385) +76% H1 H1 H1 H1 H1 New businesses 2015 2016 2017 2018 2019 of earnings Using an earnings weighted CPI rate across SA and UK DSY Card profits excluded from New businesses DSY Life profits for 2017 have been restated by R118m for SAM capital release 5 Non-insurance based business excluded – Vitality SA
Net cash flow Cash Cash Established and Emerging Funding generated used Net cash flow 1 Tax, dividends and Debt Rm finance costs R1.8bn Equity Raise 1 141 New business 3 579 R4.2bn 228 Cash generated from in-force business R9.6bn -208 New businesses R3.7bn 20 -58 Net cash flow 1 R2.3bn -160 6 1 Movement in shareholder free cash
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
Return on Embedded Value (EV) Annualised return Rm Growth in EV over 6 months 2,858 457 193 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 Assumption Initiatives and other Changes Experience Variances 8
Normalised headline earnings to R2 376m 6 months ended 6 months ended % Higher finance costs Dec 2018 Dec 2017 change due to increase in Rm borrowings to fund 3 799 3 941 -3.6 Profit from operations new initiatives (479) (351) Finance costs Equity and bond 3 320 3 590 -7.5 Profit from operations after finance costs market movements resulted in fair value (116) - Fair value adjustments losses (IFRS9) (142) (47) Finance lease accounting 247 235 Due to timing of Investment income move , prior period 18 109 Impairment of intangible assets does not account for full 6 months 4 (17) Other 3 331 3 870 -13.9 Normalised profit before tax (915) (1 000) -8.5 Normalised tax (40) (41) Profit attributable to preference shareholders 2 376 2 829 -16 Normalised headline earnings Dividend declaration of: 101cps (+0%) 9
Basic earnings to R2 286m 6 months ended Dec 6 months ended Dec % Rm 2018 2017 change 2 376 2 829 -16.0 Normalised headline earnings (11) 0 Initial expenses related to Prudential Book transfer (26) 0 Unrealised losses on foreign exchange contracts not designated as hedges (33) 0 Debt restructuring costs resulting from DiscoveryCard joint venture transaction (54) (55) Amortisation of intangibles from business combinations net of deferred tax 0 (25) Duplicate building costs 2 252 2 749 -18.1 Headline earnings 51 0 Gain on dilution of equity-accounted investments (17) (99) Impairment of intangible assets, net of tax 0 6 Realised gains on available-for-sale assets net of CGT 2 286 2 656 -13.9 Basic earnings 10
Rationale, strategy and our businesses 11
1994 2000 2013 2018 Countries Countries Countries Operating profit Operating profit Operating profit (CY18)
Make people healthier Life insurance and enhance and protect their lives Health insurance Short-term insurance Long-term savings Banking 13
4 4 Life & Health Poor diet • Physical inactivity • insurance Tobacco use • Excess alcohol intake • Lifestyle Chronic Deaths behaviours conditions worldwide Behavioural Wearable economics devices 4 4 60 102.4m 5 3 devices sold in Excessive drinking • Motor 2016 Cellphone use while driving • Excessive speeding • insurance Cancer Harsh braking The Quantified Self • Driving Driving Fatal 60% 60% Tailgating behaviours conditions accidents • Mental well-being of deaths Coffee Lung disease Steps worldwide Exercise Sleep Alcohol Weight Diabetes 3 3 Diet Insufficient contribution • Spending Blood glucose levels Heart rate Heart disease Long-term Menstruation Inadequate investment • Productivity terms savings Irresponsible • Controllable Conditions Inadequate withdrawals in behaviours retirement “Society is funding retirement demanding that companies serve a social purpose. 5 3 Larry Fink CEO BlackRock Corrosive consumption • Banking Lack of financial protection • Not saving for emergencies • Credit defaults Controllable Conditions Excess secured debt • and retirement behaviours Low retirement savings • shortfalls 14
Incentive ∆ Behaviour Value Value Bent (qx) = × × × Member Member Incentive ∆ Behaviour Bent (qx) Vitality Make people Shared-Value Programs Product chassis healthier 15
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
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