1. Overview of Experience for Long-term insurers in SA 2005 Presented to ASSA members 14 November 2006 – Cape Town 16 November 2006 – Johannesburg

2. Why are we here? To provide information to practicing life actuaries on representative SA Statutory Valuation Method bases reported in 2005.

3. What will we show you? Brief overview of the LT Insurance market in 2005. Review the representative: –Reported AOS results (C7), –Reported valuation assumptions (G10.x) and –Reported actual experience (B - statements) for certain key elements in a valuation basis.

4. Overview of the LT Insurance market in 2005

5. Overview - some rankings

6. Overview - by year-end

7. Overview - by license

8. Overview - by business class

9. Overview - across time Amounts in R billion 20052004200320022001 Total assets 1,069906817783750 Total liabilities 975817736706668 Excess assets 9489817782 CAR before management action 6563738277 CAR after management action 2727323529 Funding factor (Excl CAR) 1.101.111.111.111.12 CAR Cover 3.483.282.552.182.82 CAR after / CAR before 41%43%44%43%38%

10. Overview – Spread of CAR cover

11. Overview – Distribution of CAR

12. TCAR - Breakdown

13. OCAR - Breakdown

14. Overview - key indicators glranc Total R’b 2005 Total R’b 2004 Total R’b 2003 Number of active insurers 281279114717067 Net premiums received 71%26%1.6%0.4%0.5%0.7%166151165 Net benefits paid 76%22%1.2%0.2%0.3%0.3%160162157 Acquisition expenses 94%1%1.7%0.7%0.8%1.8%151211 Operational expenses 93%3%1.8%0.9%0.7%0.7%1088 Investment yield 22.7%16.0%9.5%12.4%26.1%1.4%21.5%17.4%8.0%

15. Overview – PH asset allocation

16. Overview – SH asset allocation

17. Overview – assets per industry As % of Columns glranc Equities and convertible debentures 47%45%5%4%59%9% Fixed interest 22%9%65%7%30%20% Collective investment schemes 10%21%0%46%1%7% Other10%10%9%14%3%41% Cash and deposits 7%14%21%27%7%23% Property4%0%0%2%0%0% Total (R'b) 889 889 161 161 8 1 7 4

18. Overview - liabilities and CAR gl Total (R'b) 2005 Total (R'b) 2004 Total (R'b) 2003 Linked liabilities 56.2%42.8%373303253 Non-linked liabilities 98.0%0.0%563477454 Total liabilities 81.8%16.4%975817736 Excess assets 97.0%0.6%948981 CAR before management action 98.6%0.1%656373 CAR after management action 97.8%0.2%272732 23% ↑ 18% ↑

19. Overview - AOS Amounts in R billion 20052004 2003 Start excess assets 8976.2 New business (1.6) Change in valuation basis (0.8)(0.8) Release of margins 5.7 Investment experience 24.920.25.7 Mortality experience 2.41.61.6 Morbidity experience 1.10.80.7 Expense experience (0.7)(0.5)(0.1) Early withdrawals 0.1 Tax(3.8)(4.5) Other(9.8)1.6 Income from subsidiaries 1.1 Dividends paid (12.8)(5.9) End excess assets 9489

20. Major Items in AOS

21. AOS Split

22. Release of Margins - AOS Weighted Average in Millions 20052004 % Change All1,07187522% g1,10990722% l5423% r4268-38% a33-10% n23-31%

23. Representative valuation basis - Expenses

24. Expenses - AOS Profit (R’m) IndividualGroupShareholder Total 2005 Total 2004 Min (201) (201)(192)(193)(201)(180) Max 137 137 115 115 2 137 137 106 106 Total(98)(95)(554)(747)(589) Average(2)(3)(18)(7)(6) Weighted average(22)(86)(80)(61)(22)

25. Expenses – AOS Total expense loss split R’000 2004 2005

26. Expenses – AOS Max and Min per category

27. Expenses – Expense inflation assumption

28. Expenses – Actual expense inflation (individual business) 8%20% 3%79%

29. Per policy recurring expense assumption - Individual Business

30. Initial expense assumption Individual business

31. Actual initial expenses Individual business per industry

32. Actual initial expenses Individual business per class of business

33. Actual operating expenses Individual business per industry

34. Actual operating expenses Individual business per class of business

35. Representative valuation basis - Discount rates

36. Investment return - AOS Profit (R’m) IndividualGroupShareholder Total 2005 Total 2004 Min(51)(2)0.0(51)0.1 Max1,561889,9359,9357,565 Total4,25833820,30724,90320,202 Average9512294175297 Weighted average251594,2561,8414,168

37. Discount rate assumed Individual business Central discount rate

38. Real Return Cumulative Distribution of Assumed Real Return

39. Investment yield observed Individual business Investment yield observed

40. Future bonus rates Vesting – On sum assured Representative 3% for with-profit business Little spread for annuities and more for non-annuities – On bonuses Representative 2% for annuities and 4% for non-annuities Greater spread for non-annuities Non-vesting Representative 5% with greatest spread

41. Representative valuation basis – Mortality Rates

42. Mortality – AOS results Profit (R’m) IndividualGroup Total 2005 Total 2004 Total 2003 Min(11)(26) (72)18 Max386152386333266 Total1,9804472,4261,6301,588 Average4514323435 Weighted average 22265150218156

43. Male Assurance Mortality with 1σ confidence intervals

44. Female Assurance Mortality with 1σ confidence intervals

45. Assurance Mortality without AIDS loading

46. Assurance Mortality with AIDS loading

47. Assurance Mortality AIDS loading

48. Annuity mortality

49. Actual : Expected Mortality For assurance products: – Individual: 79% (79%) actual vs. expected – Group: 93% (97%) actual vs. expected For annuity products: – Individual: 114% (115%) actual – Group: 93% (88%) actual vs. expected

50. Representative valuation basis – Morbidity Rates

51. Morbidity – AOS results Profit (R’m) IndividualGroup Total 2005 Total 2004 Total 2003 Min(4)(6) (4)(10) Max274136274249289 Total7563471,103834667 Average3219263630 Weighted average 716568114117

52. Income disability morbidity

53. Lump sum morbidity without AIDS loading

54. Lump sum morbidity AIDS loading

55. Dread disease rates with AIDS loading

56. Actual : Expected Morbidity For lump sum disability: – Individual: 73% (70%) – Group: 80% (80%) For income disability: – Individual: 43% (39%) – Group: 81% (70%)

57. Representative valuation basis - Withdrawal rates

58. Withdrawal rates - AOS Individual business Profit (R’m) IndividualGroup Total 2005 Total 2004 Min(174)0(174)(145) Max87438761 Total207696(175) Average1193(6) Weighted average (6)4212(9)

59. Assumed lapse rates Individual business

60. Assumed surrender rates Individual business

61. Observed withdrawal rates Individual business

62. Observed withdrawal rates Group Business

63. Questions? Thank you for your time Contact details: Hantie van Heerden (012) 422 2801 hantiev@fsb.co.za Sias Esterhuizen (012) 422 2915 siase@fsb.co.za