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Integrated Annual Report 2015 Our Core Purpose and Ambition

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Integrated Annual Report 2015 Our Core Purpose and Ambition CREATING SHARED VALUE Integrated Annual Report 2015 Our core purpose and ambition Our core purpose is to Discovery is a shared value Our unique approach has make people healthier insurance company whose underpinned our success purpose and ambition globally, with substantial and enhance and protect are achieved through a new business growth and their lives. pioneering business model an impressive increase in that incentivises people to be normalised operating profi t healthier, and enhances and and headline earnings. Our ambition is to protects their lives. Today, Discovery covers over be the best insurance 5.1 million clients, and Our shared value insurance organisation in the world generates in excess of model delivers better health R37. 8billion of annual revenue. and a powerful force for and value for clients, superior social good. actuarial dynamics for the In this report we explain insurer, and a healthier society. what shared value insurance means for us, for our strategy and for the way in which we evaluate our performance. Our main clients are large-, medium-, and small-sized employers for health insurance, as well as individuals who buy health, life and short-term insurance and savings and investment products from us. Through our scalable business model, we are exporting Discovery’s intellectual property from our home market of South Africa to other industries and markets, including the United Kingdom, United States, China, Singapore, Hong Kong, Australia and Europe. INTEGRATED ANNUAL REPORT 2015 Our values Our values frame our decisions and form the foundation of everything we do. It is brought alive by our people, in how we think and through our actions. Great people Liberating the best in people Innovation and optimism Intellectual leadership Dazzle clients Business astuteness and prudence Drive, tenacity and urgency Integrity, honesty and fairness 1 ABOUT DISCOVERY | PERFORMANCE REVIEWS | GOVERNANCE | FINANCIALS Contents 01 Our core purpose, ambition and values 04 About this report 06 Key observations on our performance 08 Reviews Adrian Gore, Discovery Chief Executive 8 Richard Farber, Discovery Group Chief Financial Officer 12 2 INTEGRATED ANNUAL REPORT 2015 18 About Discovery Discovery: a global view 18 Our shared value insurance model 20 Measuring our shared value performance 22 Characteristics of our markets 24 30 Performance Reviews Discovery Health 30 Discovery Life 42 Discovery Invest 48 Discovery Insure 54 Discovery Vitality 62 VitalityHealth 66 VitalityLife 74 Discovery Partner Markets 78 84 Governance Our leadership 84 Remuneration Review 90 Corporate Governance Review 102 Compliance Review 110 Risk Review 114 120 Financials Audited and Abridged Annual Financial Statements 120 Five-year Review 149 3 ABOUT DISCOVERY | PERFORMANCE REVIEWS | GOVERNANCE | FINANCIALS About this report This report has been prepared broadly in line with the guidelines of the International Integrated Reporting Council (IIRC). Building on our reporting Material issues in previous years, we have aimed to make this document more concise, Achieving new business growth by Continue to grow internationally, presenting our readers with a complete 01 continuing to innovate products 04 fi nding models that leverage our picture of our integrated business model and services, and increasing our South African intellectual property and strategy, but remaining focused on ability to capture value across for Discovery Partner Markets the issues which are material for the the chain in our chosen business segments business and for shareholders. ❚ Group Chief Executive Officer page 8 This integrated annual report is ❚ Group Chief Executive Officer page 8 ❚ supplemented by a separate People Group Chief Financial Officer page 12 andSustainable Development Report, ❚ Group Chief Financial Officer page 12 ❚ Discovery Partner Markets page 78 inwhich we provide additional detail about our framework for sustainable ❚ All business reviews page 30 Ensuring the best skills, depth development and our sustainability 05 of leadership and diversity in strategy. Consolidating recent acquisitions, our business that will enable 02 particularly the transition of the Scope and boundary continued innovation to benefi t UK business to full ownership our clients and help us to become In this report, we cover the operations under the Vitality brand, and the best insurance organisation in of Discovery Limited, including Discovery obtaining our UK life insurance the world Health, Discovery Vitality, Discovery Life, license in our UK primary market Discovery Invest, and Discovery Insure in ❚ People and Sustainable Development Report South Africa, VitalityHealth and ❚ Group Chief Executive Officer page 8 VitalityLife in the UK, as well as our other www.discovery.co.za/info/2015PSDReport international operations, falling under ❚ Group Chief Financial Officer page 12 Discovery Partner Markets. These Navigating an increasingly include Ping An Health, The Vitality ❚ VitalityHealth and VitalityLife pgs 66 06 complex regulatory environment Group (including the John Hancock and 74 partnership), AIA Vitality and the ❚ Compliance Review page 110 Generali partnership. Continue to explore adjacent 03 industries in the South African ❚ Group Chief Executive Officer page 8 Non-financial data is included for all market that leverage our South African-based operations. behavioural-based business model; and explore opportunities In addition to the material issues, we believe Material issues for reporting to export successful local it is important to use this report to We identified six issues which we believe adjacencies to international communicate our approach to the creation represent some of the most material markets of shared value through our business challenges for the business today and model. which have driven our selection of During 2015 we made progress in further ❚ Group Chief Executive Officer page 8 content for this report. The issues refining this approach and in developing our were identified following extensive understanding of what constitutes shared ❚ Group Chief Financial Officer page 12 management discussions and value metrics. workshops, as well as a review of key ❚ Discovery Partner Markets page 78 risks identified by the organisation and issues highlighted in commentary from external stakeholders. Preparation of Discovery’s Annual Financial Statements In the interest of keeping our report for the year ended 30 June 2015: concise, we have not devoted a section to analysing these material issues, but ❚ Annual Financial Statements ❚ Embedded Value Statement have instead covered them throughout – L Capon CA(SA) and – M Curtis FASSA, FIA (prepared) the document. The box alongside gives L van Jaarsveldt CA(SA) (prepared) – A Rayner FASSA, FIA (supervised) an indication of where information on – R Farber CA(SA) FC MA (supervised) each issue can be found. 4 INTEGRATED ANNUAL REPORT 2015 Reporting frameworks We used the guidelines provided by the International Integrated Reporting Framework and the Global Reporting Initiative (GRI) G3.1 guidelines in preparing our 2015 Integrated Annual Reportand People and Sustainable Development Report. Theapplication of G4 guidelines for future reporting is under review. Our self-declared application level according to the Approval by the Discovery Board of Directors Global Reporting Initiative is B+ and this application level has The Discovery Limited Board of Directors approved the Discovery received third-party verification from Indyebo Incorporated. Integrated Annual Report on 6 October 2015, based on the Thestatement from Indyebo Incorporated is available in our recommendation of Discovery’s Audit Committee. 2015 People and Sustainable Development Report. Our Annual Financial Statements were prepared in accordance with Signed by the Chairperson of the Discovery Limited Board of Directors. International Financial Reporting Standards. Monty Hilkowitz Statement from Discovery Group Internal Audit Discovery Group Internal Audit performed a limited review of the statements and quantitative data contained in the Discovery 2015 How we report to our stakeholders Integrated Annual Report, with the exception of the Annual Together with our Integrated Annual Report, there is a Financial Statements. number of other reports and publications we make available to stakeholders. These reports provide detailed information Set out below is a summary of the procedures performed on Discovery and our economic, financial, and social pertaining to the financial and non-financial information as performance during the past financial year, as well as contained in the Integrated Report, as well as for the Key our prospects. Performance Indicators (KPIs) and the Global Reporting Initiative (GRI) indicators in the People and Sustainable Development Report Integrated Annual Report for the year ending 30 June 2015, which were included in the scope Our Integrated Annual Report provides an analysis of our of the limited assurance engagement. financial, economic, and social performance in relation to ❚ Discovery Group Internal Audit obtained an understanding of: ourbusiness strategy going forward. − The stakeholder engagement process www.discovery.co.za/info/2015integratedreport − The selection and application of integrated and sustainability Annual Financial Results Presentation reporting policies A presentation of Discovery’s annual financial results − How management has applied the principle of materiality toinvestors. inpreparing the Integrated Annual Report and
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