why we do what we do integrated annual report For the year ended 30 June 2012 Hollard integrated report page

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We started by believing there was a better way We got ahead by doing things differently

about our business. journey is an insightful one. Annual Financial Statements. To the reader the To We are delighted to bring you our very first delighted to bring are We Integrated Report detailing our activities for the Integrated Report detailing financial value are in respect of our audited 2012 in financial value are The commentary is unaudited, but all references to The commentary is unaudited, but all references governance and our approach to risk management. governance and our approach information regarding our non-financial dividends – our our information regarding commentary on our financial results, along with detailed results, along with commentary on our financial where there is strategic alignment with our core business. is strategic alignment with our core there where contribution to customer value, human capital value, social contribution to customer financial year 1 July 2011 to 30 June 2012. We have included We have to 30 June 2012. financial year 1 July 2011 We are conscious of the fact that truly integrated reporting is a conscious of the fact that truly integrated reporting are We In order to provide a complete picture of our activities, we have a complete picture to provide In order capital and natural capital. The report also outlines our ethos of also outlines The report capital and natural capital. included details of our own and related international operations, included details of our own and related we hope to give you an informed sense of why we are passionate are we hope to give you an informed sense of why we journey, rather than a destination and we hope to ensure that our and we hope to ensure rather than a destination journey, The report also describes Hollard’s broader context – why we exist, broader Hollard’s also describes The report what we do and where and how we do it. More than anything else, how we do it. More and what we do and where

Hollard integrated report page contents

a word from our CEO 2 where we do what we do 30 why we do what we do 4 the people who make it possible for us to do what we do 34 how we do what we do 6 the people who lead us 36 how well we do what we do – building financial value 14 the people who guide us 38 Hollard integrated report page how well we do what we do – the vision that guides us 40 building customer value 22 our business aims 42 how well we do what we do – building human capital value 25 our approach to managing risk 44 how well we do what we do – a note from our chairman 46 building social capital 26 Addendum 1 how well we do what we do – Corporate governance building natural capital 28 a word from our CEO

I become more convinced every day that the form of impact on inequality in our communities by ensuring that capitalism we have known for decades must change. our core business serves society better. To achieve this, it is I don’t believe the business world can continue to be essential that we examine everything we do and question driven purely by quarterly results and certainly not by the what impact we are having on social, human and natural sort of greed that underpinned the global financial crisis. capital. We aim to make a positive difference through the Internationally, new legislation will no doubt bring about business we do AND the way we do business. significant change, but the greatest change is likely to be driven by an increasingly knowledgeable, connected and As is evident from our growth and profitability levels over

Hollard integrated report page vigilant general public and the societal pressures arising the past thirty-two years, our commitment to doing well from massive economic differences in our society. by doing good has generated attractive financial dividends. This year has been no exception and this approach to doing Shareholders, governments, customers and members business has enabled us to produce another impressive set of the public are now using all available means to let of results – revenue up 17% on last year, overall profits after businesses, and financial institutions in particular, know tax up 64% – despite the adverse economic environment. what they expect and to demand accountability from business leaders. The current economic climate has In terms of doing good, the success we have achieved in exacerbated the already alarming economic differences contributing to financial inclusion through our innovative between the rich and the poor. The poor have also had products and unique distribution initiatives has undoubtedly enough. They are no longer prepared to live in poverty, impacted positively on the lives of our almost 6 million 2 without jobs and services, and have begun mobilising to South African policyholders, many of whom have never change things for themselves. previously bought an policy. Our involvement in the Harambee initiative for unemployed youth, covered in There is no doubt in my mind that business needs to think more detail in this report, and the substantial contribution far more deliberately about its impact on all stakeholders we have made towards social upliftment through our CSI beyond the financial dividend. As business owners and programmes, have also made a worthy contribution to managers, we have a responsibility to society and our generating a substantial social dividend. shareholders to build social, human and natural capital, to operate in an exemplary manner in terms of governance The challenges of the current local and compliance, to work with government to defuse the and international operating economic disparity time bomb in and to ensure the sustainability of our industry by measuring and environment transparently reporting on our social dividends alongside The new regulatory environment requires us to make our financial dividends. some changes to the way we do things, often at an increased cost and with some loss of speed and agility Even though Hollard focuses a considerable amount of in decision-making and implementation. However, if time and money on corporate social investment, I believe these changes result in better protected consumers that we will have a far more profound and sustainable and a more sustainable industry, then they will be All of this means that to remain effective and relevant, and begin to contribute to Hollard’s overall growth and worth the effort. Our response as Hollardites is to we must become more efficient, improve productivity and geographic diversification objectives. actively and constructively contribute to the process maintain the competitive advantage we enjoy through our of developing new legislation, and to continuously unique culture, which combines continuous innovation South Africa’s participation in BRICS has provided Hollard adapt and improve on our business model in line with and operational excellence. Our industry, and we are no with an exciting opportunity to reshape the world resulting requirements. Embedded in these changes is exception, must focus more on underwriting profits rather insurance landscape by driving greater collaboration the opportunity and indeed responsibility to develop and than relying so heavily on investment income. This is especially within and between the insurance sectors of South Africa market more appropriate and more transparent products, true within the context of the new regulatory environment and its BRICS partners. If our industry, and indeed the and to extend our reach to those previously denied and current economic uncertainty which necessitates a more African insurance industry as a whole, are to benefit from Hollard integrated report page access to the benefits of formal insurance. conservative approach to balance sheet management. the unprecedented African growth story, we must create the capacity to retain more risk, and hence more of the On the economic front, I expect that we are going to be While the global financial crisis has temporarily relieved economics, in our own countries and to develop the facing a tough environment for some time to come. With the skills crisis, the scarcity of appropriate skills remains requisite skills within our own companies. Europe again facing recession, China slowing down and an issue in South Africa. I believe it is up to business to the US struggling with its own debt and unemployment overcome this problem by creating the right environment The financial inclusion megatrend provides us with issues, it is unlikely that the global environment will be to develop new skills, rather than contributing to the another exciting opportunity to challenge the status of any help to us in South Africa. Rather, it will weigh current people merry-go-round. We at Hollard are building quo and to do well by doing good – through addressing down our economy as exports continue to slow and capacity by investing heavily in developing our people. the real needs of low income consumers with carefully unemployment is likely to remain unacceptably high as thought out and well designed products that provide a result. The future real value for money, we will build a sustainable business 3 while making a positive and enduring difference in poor With consumers under pressure, the sluggish economy Despite the many challenges faced by our industry, I am people’s lives. is having a negative impact on all aspects of business. In confident that Hollard’s systemically developed strategy, our own industry, there is pressure on brokers to reduce our diversified and partner-driven business model, our 2013 promises to be a year filled with challenges and rates – insured values and therefore premiums are lower, strong culture and our determination to view everything opportunities – and there is no doubt in my mind that there is less demand for certain classes of insurance such that we do through a social dividend lens will allow us to Hollard is up to the challenge of making the most of as marine and construction, persistency is negatively attain our growth target of 15% in the 2013 financial year them. I invite you to read on to learn more about our affected and in some instances businesses are eliminating and beyond. business and our approach in these exciting times. cover altogether. A meaningful portion of this growth will come from The investment markets remain unpredictable, resulting our international business. Our offshore operations in significant volatility in investment returns. This affects contributed 30% of our growth in profits for the past not only our own returns, but also our ability to market financial year, and it is particularly pleasing to see our investment products. The current low interest rate African and Australian operations making such a significant contribution. Our Indian and Chinese businesses will environment also dampens demand for some of our fixed Nic Kohler continue to build market share, albeit off a small base, interest products. CEO why we do what we do

Why we do what we do What we do

Hollard integrated report page Since we first opened our doors back We are a solutions-driven insurance group providing in 1980 the vision of our principal shareholder, for the short-term insurance, life insurance and investment the Enthoven family, has been that of an organisation needs of our customers. With a team of more than 2 000 that could and would be a catalyst for positive and enduring Hollardites based in 10 countries spread over 4 continents, we, change, first here at home and ultimately on a global stage. in conjunction with our partners, administer insurance policies We continue to develop that vision by building an organisation with annual premiums exceeding R16 billion on behalf of more with a head and a heart, an organisation that contributes than 7 million policyholders. meaningfully to social, human and natural capital in addition to In South Africa, our home base, either directly or through our generating financial capital through our business activities. partners, we underwrite and distribute a broad spectrum of By actively seeking non-financial returns alongside monetary short-term insurance, life insurance and investment products success, by doing things differently in order to make a difference, aimed at meeting the needs of a diverse customer base, 4 by building on our many successes to date and by continuously ranging from individual low-income consumers in rural areas to striving for excellence in everything that we and our partners do, large commercial, corporate and industrial customers requiring we aim to bring about positive systemic change over the long- highly specialised insurance coverage. term, and to earn recognition among the Supporting our underwriting activities and partnership ethos, world’s top insurers. we are investors in insurance businesses where we believe we are able to bring unique insight and value-add to the businesses in which we invest.

“We believe that we will do well by doing good” Hollard integrated report page

5 how we do what we do

Partnership Innovation Partnership, Innovation and More than 100 partnerships We believe we can People, all wrapped up in make a difference by Hollard integrated report page contribute almost 90% a long term view, are the of our South African looking at things magical ingredients of the companies’ earnings through a Hollard success formula. different lens

Innovation 6 Partnership We believe we can make a difference by looking at things Partnership is at the heart of Hollard’s business model, with more than 100 partnerships through a different lens. By thinking and acting differently, contributing almost 90% of our South African companies’ earnings and our international we challenge the status quo, reinventing insurance for our strategy being predicated on extending our partnership model into offshore environments. partners and policyholders.

We form strong, long-term relationships with other participants in the insurance value chain, Our challenger mindset and long-term view have led us including brokers, distribution owners (such as banks and retailers), product underwriting into new and exciting businesses that in turn have earned specialists and reinsurers. These partnerships are all constructed in a way that recognises the us an enviable reputation for innovation throughout our unique contribution and capabilities that each partner brings to the creation of a “win-win- 32-year history. Our innovations extend throughout the win” relationship, whereby the consumer, our partners, and Hollard all benefit meaningfully insurance value chain, from the products that we develop and sustainably. to the way we market them, from the distribution methods Hollard representatives immerse themselves fully in our partner businesses and deep personal we use to the way we service customers, from the way relationships are often formed. All partnerships are characterised by a strong sense of shared our partnership deals are structured to the organisational destiny, and as a consequence we strive to provide each and every one of our partners with a model underlying our business. source of competitive advantage in their own markets. People People Our partnerships and unique Our partnerships and unique approach to business are made possible through our people (we call them Hollardites) and our differentiated and enduring culture, which approach to business are made is built on a deep sense of purpose and strong values. This culture permeates all that possible through our people we do – we call it the Hollard Way... (we call them Hollardites) and We live the Hollard Way – it has its foundations in putting our customers and our differentiated and enduring partners at the heart of everything that we do, in challenging mediocrity and Hollard integrated report page seeking excellence, in dreaming, pioneering and experimenting and in working culture, which is built on a deep together towards the same big dream. We encourage each other to be real while sense of purpose and strong always being mindful of our impact on others. We take what we do seriously, but not ourselves. We recognise the immense power of diversity. We do things values. This culture permeates differently to make a difference and we partner from a perspective of abundance to all that we do – we call it achieve more together. the Hollard Way... We understand that culture is dynamic, and that of necessity, it changes over time. Accordingly, we spend a significant amount of time and effort in understanding what changes are emerging and what changes we need to make to remain relevant 7 to the needs of our people, our partners, our customers and the community in which we live and work.

“We believe that the customer, our partner and Hollard should win in any deal that we put together.”

how we do what we do

Hollard integrated report page

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Legal Power and Protection Partnership

TM

MICROENSURE Helping the poor weather life’s storms Hollard integrated report page

9 how we do what we do

PetSure was Hollard launched the first Hollard launched the formed, South fully-fledged first credit shortfall/ Africa’s first “medical direct-selling life extended cover aid” for pets. In insurance product in South 2000, Petsure operation in Hollard set up the Africa in conjunction became the first pet Hollard integrated report page South Africa first offshore with WesBank insurer in rent-a-captive

1981 1983 1988 1991 1992 1995 1997 1998

10 Hollard was the first Hollard helped Hollard established SMART launched the insurer to utilise pioneer Legal Zimisele, the first first South African preference share Expenses Insurance black-owned insurance product structures – which in partnership with underwriting to insure against later become the LegalWise – the management dents and scratches, classic cell captive product was aimed at agency (UMA) thus protecting the structure – in the providing legal power in South Africa customer’s motor local market to the disadvantaged insurance excess and and disenfranchised no claims bonus, while keeping the vehicle in pristine condition Innovation

Hollard became the first South African insurer Hollard, in partnership to form a joint venture with Amway , Hollard’s UK partners with a soccer brand created the first Correlation started when it teamed up with significant affinity-based the first Direct Life Hollard became Kaizer Chiefs insurance distribution insurance company in the first insurer to business in India Poland offer pure month- Hollard’s partner Altrisk to-month insurance developed the first impaired Hollard launched Hollard launched policies in Zambia lives product range in South Pay As You Drive, the Pay as You Drive in and the first to Africa, including a new first motor insurance Australia – the first offer real-time generation of life cover for policy to base premiums “pay by the kilometre” policy information Hollard integrated report page people living with AIDS on distance travelled product in Australia to brokers in that country

2000 2001 2005 2006 2008 2010 2011 2012

11 Hollard formed a In partnership with In partnership with Hollard Australia joint venture the Pepkor group, D Phone China, introduced the with the Edcon Hollard introduced Hollard launched first “build your group, the first the first over-the- the first mobile own” motor time a counter insurance handset insurance insurance product South African products in product to that market retailer had entered South Africa in China the insurance environment on a The first tyre significant scale insurance in South Africa was launched with Tiger Wheel and Tyre how we do what we do R POSITIVE T FO AN S WELL BY DO D LY DO ING EN A WE GO D T OD U CA R IN A E G B C H Deliver for Customers A Imagine, Innovate and Partners N G E We believe in doing things differently to make a positive difference.

Hollard integrated report page We believe in partnering to achieve more together. Deliver for Customers Choose Be Real Be Mindful Imagine, and Partners We dream, pioneer, experiment. Innovate Excellence We believe that people are our business and that We approach things with an open mind. our customers and partners are at the heart of We challenge the status quo and search for everything we do. They deserve our support and better ways, both big and small. our respect. We believe in abundance. We keep the big picture in mind and step back Team Hollard to consider things from many perspectives. We deliver more for everyone by finding the win-win-win. We take a long term view. We create realistic expectations and then keep our promises. We get the facts, listen to our gut, take We take initiative and deliver with a can-do attitude. calculated risks and we strike while 12 We don’t give up and always get it sorted. the iron is hot 17 September 2012 We’re always fair. We earn the right to a sustainable future each time our customers and partners feel understood, supported and empowered through the service we deliver

We do well by doing good why we do People what we do Team Hollard

We believe that relationships matter – Hollard is about more than just getting things done We believe in empowering people so that they can make a difference. We believe in the power of diversity. We’re one team, working together in pursuit of Choose Excellence the same big dream. We believe in striving to be the best we can be. We each play vital, connected roles. We care about Be Real Be Mindful Hollard integrated report page and are accountable to each other. We challenge mediocrity. We take pride in Be true to yourself but understand your everything we do. We communicate our thinking and expectations impact on others. Ask for feedback. clearly. We provide context We master what we do. We keep learning. We Never compromise your integrity. We Listen. We ask for and value the viewpoints reflect on our mistakes and our successes. of others. We encourage robust debate Take what you do seriously – but not yourself. We focus on the things that count. We don’t We ask for help when we need it. We give milk mice. Be courageous. Have fearless conversations with respect help freely. We’re in this together. for the dignity of others. We work smarter to achieve more with less - We share what we learn for the benefit of others. this makes us more competitive. Get involved. Own your actions, Be a leader We know that trust speeds up business – we’ve got each other’s backs. We think things through and take responsibility Choose to be here because you enjoy what you do. Invest for the consequences of our actions. positive energy to make work fun and fulfilling. We thrive on great performance and we celebrate our successes wholeheartedly We have the courage to make the right calls. Say no to politics – it wastes time and energy 13 and doesn’t work here. We deliver, We get things done Look after your whole self. Get the balance right for you. Build a legacy that makes you proud

We do well by doing good how well we do what we do

Exceptionally strong growth in commission earnings We are building to R1,2 billion in Hollard Financial Services (a company within our Australian group), a 52% increase in the profits from our SADC operations, and the recognition financial value of profit arising from the change in shareholding in We have produced another exceptional set of results, Etana and Lombard more than offset the exclusion of despite tough economic conditions locally and globally. Lombard’s revenue, resulting in bottom line profit before In the year to 30 June 2012, the Hollard Group posted tax for the short-term group of R1,4 billion, growth of Hollard integrated report page profits after tax of R1,96 billion, some 64% up on last R526 million over last year. year. A compound annual growth rate (CAGR) of 22% The South African short-term company (The Hollard per annum has been achieved over the five-year period Insurance Company) saw gross premium income decline to 30 June 2012. Gross premium income for the group by 5% year on year due primarily to the non-renewal of totalled R16,4 billion and profit before tax amounted to a large quota share treaty with a group company, but the R2,5 billion. compound annual growth rate over the last five years is The profit contribution attributable to the global short- a healthy 16% per annum. Improved claims ratios for the term insurance operations was R706 million for the 2012 year were offset by an increase in administration costs, financial year. Gross premium income of R10,7 billion largely driven by increased resource and systems costs needed to meet new regulatory requirements. 14 increased marginally over 2011 levels, with claims and expense ratios similarly marginally up. Hollard fair values the equity investments it holds in partners and other insurance licences. Good growth The short-term group’s results were impacted by two in these businesses, particularly Hollard Australia, transactions completed during the year under review. contributed to the recognition of R684 million of We reduced our shareholding in the Lombard Insurance unrealised gains in investment income for the year. In Group to 47,93% during the year and in the Etana addition, the implementation of Solvency Assessment and Insurance Company to 40% at year end. As a result, our Management (SAM) interim measures in the current year share of gross premium income and other related income resulted in reduced technical reserves with a consequent statement items for Lombard are no longer consolidated positive impact on profits. These factors, together with in the group results on a line by line basis. Our reduced a continued solid underwriting performance by the share of profits is equity accounted and is therefore company, have contributed to net earnings before tax for reflected in the “Share of Profits of Associates” line on the company totalling R1,3 billion. the Group Income Statement. Etana results will be equity accounted from the 2013 financial year. The company’s solvency ratio strengthened from 56,6% in 2011 to 79,4% in 2012, well above Hollard’s targeted minimum of 35%. The profit contribution attributable to the global Hollard Life Group was R821 million for the 2012 financial year. Gross premium income grew 30% over last year, while the compound annual growth rate over the past five years is 18% per annum. A key contributor to this pleasing growth in premiums was an impressive performance by the guaranteed return investment business. Profitability has not tracked the growth in premium income for the year Hollard integrated report page due largely to the low margins achieved on this guaranteed return investment business. Improved equity earnings from the Group’s operations in India and locally helped lift group profit before tax to R1,1 billion for the year, a 23% increase on the 2011 financial year.

In addition, Hollard Life’s embedded value grew by R962 million, bringing total embedded value to R4,8 billion. While lapses have improved for clients at the higher end of the market, there has been a noticeable deterioration in our lapse experience for clients at the 15 lower end of the market, adding to other indications that large segments of South African consumers are under significant pressure.

Hollard Life’s Capital Adequacy Ratio cover improved from 2,9 to 3 times in 2012, which is consistent with the average for the last five years and above the targeted minimum of 2 times.

Brooks Mparutsa

CFO how well we do what we do

Gross premium income Life and Short Term Groups Total assets Rbn profit before tax Rbn R’000

2,5 25,8 16,4 24,7 Hollard integrated report page 15,0

13,5 20,8 5,7 1,8 1,1 4,4 11,7 10,8 17,0 14,3

4,5 1,5 15,0 9,9 8,9 3,1 1,2 0,9

16 8,1 0,8 3,0 0,9 7,5 0,8 10,7 10,6 1,4 9,0 13,0 0,7 7,7 10,9 11,4 0,9 5,9 8,9 0,7 7,5 0,4 0,2

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Life Group Insurance Group Life Group Insurance Group Life Group Insurance Group Policyholder benefits and net claims Embedded value Embedded value profit Rbn Rbn 4,8 Rbn

7,4 1,4 Hollard integrated report page 6,2 6,2 3,9

3,1 3,3

2,1 0,9 2,5 4,5 2,8 0,8 3,8 2,4 0,7 1,2 17 1,2 4,3 4,1 0,3 3,7 3,3 2,6

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Life Group Insurance Group Life Company Life Company consolidated Insurance group for the years ended 30 June five-year review

2012 2011 2010 2009 2008 R’000 R’000 R’000 R’000 R’000

Income statement information

Hollard integrated report page Gross premium income(1) 10 685 181 10 554 654 9 027 854 7 670 320 5 897 663 Net written premium income(2) 8 260 702 7 898 542 6 659 245 5 692 781 4 575 985 Investment income(3) 729 430 546 926 461 183 217 003 303 537 Net insurance claims 4 278 066 4 126 514 3 658 035 3 338 895 2 558 687 Profit attributable to equity holders of the parent 705 671 313 119 371 573 48 150 163 063 Statement of financial position information Insurance liabilities 2 784 548 5 904 670 5 505 481 4 719 767 3 500 219 Equity attributable to equity holders of the parent 1 747 524 1 404 168 1 366 005 1 197 575 1 396 762 Total assets 11 435 811 13 031 842 10 898 269 8 904 566 7 543 281 18 Financial assets (i.e. listed investments and unlisted investments) 2 273 106 2 490 865 2 166 971 1 887 448 2 714 909 Cash and cash equivalents 2 141 922 4 139 863 3 076 181 2 533 244 1 620 457

Trading ratios % % % % % Written premium: Net to gross 77,3 74,8 73,8 74,2 77,6 Combined operating ratio(4) 98,6 97,2 98,5 92,1 97,1 Solvency ratio(5) 79,4 56,6 52,4 49,9 55,0

(1) “Gross premium income” represents the total income arising from insurance contracts only. (2) “Net written premium income” is gross premium income less reinsurance premium outwards. (3) “Investment income” includes net investment income and unrealised gains and/or losses on the investment and trading portfolios. (4) “ Combined operating ratio” is calculated and presented at a company level and is defined as the ratio between the sum of net insurance claims, commission and other acquisition costs, marketing and adminis- trative expenses and net premium income. (5) “Solvency ratio” is the ratio between shareholders’ funds (including contingency reserve for years prior to 2012) and net premium income. Solvency is calculated and presented at a company level. consolidated Life group for the years ended 30 June five-year review

2012 2011 2010 2009 2008 R’000 R’000 R’000 R’000 R’000

Income statement information

Gross premium income(1) 5 744 055 4 430 638 4 504 127 3 051 912 2 978 259 Hollard integrated report page Net premium income(2) 5 185 910 3 945 510 4 068 963 2 719 835 2 708 444 Investment income(3) 927 626 722 633 703 707 314 077 98 638 Policyholder benefits and net insurance claims 3 106 215 2 073 195 2 535 483 1 199 371 1 220 664 Profit attributable to equity holders of the parent 821 099 658 197 572 371 452 620 531 006 Statement of financial position information Total policyholder liabilities 11 391 244 9 212 828 7 617 793 6 134 758 5 619 131 Equity attributable to equity holders of the parent 1 559 968 1 291 060 1 118 987 905 911 949 098 Total assets 14 345 314 11 720 371 9 921 966 8 080 140 7 493 672 Financial assets (i.e. listed investments, unlisted investments and bonds) 12 029 487 9 623 996 7 655 684 5 569 184 4 897 243 19 Cash and cash equivalents 1 449 527 1 331 624 1 547 527 1 827 125 1 989 635 Actuarial information Statutory excess of assets over liabilities (company) 783 389 742 263 673 604 581 081 716 256 Capital adequacy requirement “CAR”(4) 260 091 253 641 214 546 196 744 233 616 Value of in-force business(5) 3 124 274 2 360 064 2 037 854 1 813 144 1 349 521 Total embedded value(5) 4 824 530 3 862 829 3 259 929 2 797 804 2 396 071 Statutory excess of assets over liabilities as a multiple of CAR(6) 3,0 2,9 3,1 3,0 3,1

(1) “ Gross premium income” represents the total income arising from insurance contracts only. In accordance with IAS 39: Financial Instruments: Recognition and Measurement (IAS 39), all items of income and expenditure in respect of investment contracts are excluded from the income statement and accounted for directly against the liability under these contracts in the statement of financial position. (2) “Net premium income” is gross premium income less reinsurance premiums outwards. (3) “Investment income” includes net investment income plus unrealised profits and losses on the investment and trading portfolio. (4) “Capital adequacy requirement” represents a margin against adverse experience in the assumptions underlying the actuarial valuation of both the policyholders’ assets and liabilities. (5) The “value of in-force business” and “total embedded value” information reported above includes profits attributable to Hollard Life’s holding company joint venture partners. (6) From 2008, the “statutory excess of assets over liabilities as a multiple of CAR” explicitly includes credit and operational risk considerations, which has resulted in the reported reduction of the CAR compared to previous financial years. summary financial information for the year ended 30 June 2012 income statement

2012 2011 R’000 R’000 Consolidated Consolidated Hollard Consolidated Consolidated Hollard Life Group Insurance Group Group total Life Group Insurance Group Group total Hollard integrated report page Net premium income 5 185 910 8 200 542 13 386 452 3 945 510 7 975 789 11 921 299 Investment income 927 626 729 430 1 657 056 722 633 546 926 1 269 559 Other income 64 971 1 524 970 1 589 941 80 862 892 793 973 655 Total revenue 6 178 507 10 454 942 16 633 449 4 749 005 9 415 508 14 164 513 Policyholder benefits and net insurance claims 3 106 215 4 278 066 7 384 281 2 073 196 4 126 514 6 199 710 Expenses 1 970 594 4 894 353 6 864 947 1 726 421 4 444 996 6 171 417 Result of operating activities 1 101 698 1 282 523 2 384 221 949 388 843 998 1 793 386 20 Share of profit of associates 46 148 102 052 148 200 (13 643) 14 305 662 Taxation 328 201 246 661 574 862 276 263 327 052 603 315 Profit for the year 819 645 1 137 914 1 957 559 659 482 531 251 1 190 733 summary financial information as at 30 June 2012 statement of financial position

2012 2011 R’000 R’000 Consolidated Consolidated Hollard Consolidated Consolidated Hollard Life Group Insurance Group Group total Life Group Insurance Group Group total Hollard integrated report page Property and equipment 9 149 38 860 48 009 7 730 118 586 126 316 Goodwill and intangible assets 53 745 52 066 105 811 29 700 115 100 144 800 Interests in associates and joint ventures 114 616 542 358 656 974 60 468 236 649 297 117 Financial assets 12 029 487 2 273 106 14 302 593 9 623 996 2 490 865 12 114 861 Non-current asset held for sale – 4 056 843 4 056 843 – 49 259 49 259 Insurance, loans and other receivables 685 906 2 089 910 2 775 816 666 432 5 152 766 5 819 198 Other current assets 2 884 240 746 243 630 421 535 422 535 843 Cash and cash equivalents 1 449 527 2 141 922 3 591 449 1 331 624 4 333 195 5 664 819 Total assets 14 345 314 11 435 811 25 781 125 11 720 371 13 031 842 24 752 213 21 Total equity 1 578 738 2 273 181 3 851 919 1 307 187 2 120 863 3 428 050 Insurance liabilities 11 391 244 2 784 548 14 175 792 9 212 828 5 904 670 15 117 498 Reinsurance liabilities and outstanding claims 345 301 404 896 750 197 286 149 1 031 419 1 317 568 Borrowings 28 735 25 133 53 868 39 090 807 343 846 432 Non-current liability held for sale – 3 873 147 3 873 147 – – – Other liabilities 1 001 296 2 074 906 3 076 202 875 117 3 167 547 4 042 664 Total equity and liabilities 14 345 314 11 435 811 25 781 125 11 720 371 13 031 842 24 752 213 how well we do what we do

To meet the challenge of financial inclusion we have We are building introduced innovations such as flexible premium payment options (including cash payment facilities), customer value off-the-shelf starter packs sold through retailers and plain language policies supported by community-based education projects to help our lower income customers Through Financial Inclusion and potential customers understand what options are

Hollard integrated report page Financial Inclusion describes a global trend whereby available to protect them from the risks they face. This governments, regulators and responsible industry year alone more than 20 000 emerging consumers participants seek to develop and distribute financial and attended our workshops. risk management products and services to communities previously denied access due to lack of affordability, Through embracing Treating restrictive terms and conditions, inadequate physical Customers Fairly (TCF) access and/or a poor understanding of the benefits of Based on a similar initiative by the British Financial such products and services. Services Authority, the Treating Customers Fairly We have embraced the idea that appropriately designed, framework, initiated by the Financial Services Board in 22 distributed and serviced financial products can assist 2010 and expected to come into force in 2014, sets out six “Outcomes” which South African insurance companies poorer communities in escaping the poverty trap, while will be expected to achieve. also representing a sustainable business line. These “Outcomes” are: Achieving financial inclusion for emerging consumers by doing things differently • Customers should be confident that they are dealing with firms where the fair treatment of customers is For over 20 years we have partnered with retailers central to corporate culture. and other affinity partners and used direct response • Products and services marketed and sold in the retail channels to give millions of South Africa’s emerging market should be designed to meet the needs of consumers access to insurance products. These products identified customer groups. are designed to offer financial protection in situations that could leave families destitute and defenceless • Advice should be suitable and take account of the (for example death, hospitalisation, loss of income, customer’s circumstances. legal problems), to smooth cash flows and to help our • Customers must be provided with clear information customers save and gain financial independence. and kept informed before, during and after the point of sale. • Customers should be sold products that perform as • “Hot Seats”: this initiative has been running for a firms have led them to expect, within reasonable number of years and is aimed at putting Hollardites limitations. who are not customer-facing into the “hot seat” of • Customers should not face unreasonable post-sale someone who serves our customers directly on a barriers imposed by firms to change products, switch daily basis. While process improvements are made provider, submit claims or complain. based on formal learnings and feedback, the real value of the programme lies in seeing our products We enthusiastically support the objectives of the and services through the customer’s eyes, often Hollard integrated report page TCF framework and have already made progress at a very emotional time (for example following a towards implementing its very demanding standards. claim incident). We completed the FSB TCF Self-Assessment Pilot and designed a two-year roadmap towards full Through improving our implementation. communication with our customers

Going beyond compliance, we have also designed a Over the past year, more than 100 separate pieces of product development framework through which we are customer communication were reviewed for simplicity able to subject all new products to a customer value test of language and ease of understanding. In addition, that uses TCF as a minimum standard. This framework 15 Hollardites were trained in plain English writing. 23 will be rolled out during the course of 2013. These initiatives are a part of our aim of ensuring that all customer communication is free of jargon and Through listening to our customers understandable to all consumers. We have created a number of initiatives aimed at ensuring that all Hollardites are exposed to and listening out for the voice of our customers. These include: • An Enterprise Feedback Management System: currently in pilot, this initiative is aimed at measuring and managing customer experience through soliciting real-time feedback at various points in the customer journey. The intention is to use this feedback to drive ever-improving standards of customer service and to intervene as early as possible where improvement is necessary. how well we do what we do

Making a

Hollard integrated report page difference through the business that we do

To achieve genuine customer value, we invest in understanding the true needs of our customers and develop innovative products to better suit the situation.

For example, if an orphaned child of a lower income family were to receive a lump sum benefit from a life product it is likely that the 24 money would soon be spent, the child would receive limited benefit from it and would remain trapped in poverty.

So we designed a product which would immediately pay out a small amount to the child, stagger future payments and put some aside for tertiary education. Any child beneficiary would now stand a much better chance of escaping the poverty trap, achieving a tertiary qualification and gaining financial independence. how well we do what we do what we do

human capital. We are immensely proud of the fact that Outside of Hollard We are building 158 Hollardites graduated in 2012, across a wide range of qualifications including everything from FAIS RE exams Hollard is a founding partner of the Harambee initiative, to MBAs. These Hollard team members have mastered which is aimed at filling employment gaps with unemployed human capital value new skills and are better able to guide their own careers, disadvantaged youths who have matriculated but who would and contribute to the well-being of their families and have struggled to find permanent full-time employment. The Within Hollard ultimately of the communities in which they live. programme aims to assist 10 000 youths between the ages of Attracting, retaining and developing the very best people 18 and 24 to secure meaningful employment by 2014.

It is also significant that Hollard spent an average of 4,5% Hollard integrated report page is critical to enable delivery against our business objectives. of payroll on training Hollardites last year. This is more than Interest has been overwhelming – 6 000 applicants were Continuous focus on employee satisfaction is the most double the South African best practice benchmark. This interviewed for the first intake of 30 Harambees! A 90-day effective way to attract and retain scarce talent. In this continuous investment in developing our people not only bridging programme prepares prospective Harambees for the regard, we recognise the value of giving and receiving ensures that we remain competitive, but also that we are workplace and ensures that all the programme’s graduates feedback – enabling a culture that allows for honest yet equipped to take on the challenges of growing our business have the necessary numeracy and literacy skills, occupational respectful feedback is encouraged. Based on feedback and responding to a rapidly changing environment. interests and confidence to contribute to their new employer from our employees, we achieved a top ten place in the Maintaining a relevant and differentiated culture and from day one. The companies who participate in the Deloitte Best Company to Work For survey in 2012, the responding positively to an ever-changing environment programme agree to employ the Harambee for at least one seventh consecutive year that we have been in the top ten. has been essential to Hollard’s business success. In the year, providing Harambees with, at the very least, 12 months’ We are the first company to achieve consistent success past year, we started a deliberate process of nurturing work experience and a track record at a credible employer. 25 for this period of time. For us, this survey provides an and evolving our culture through a comprehensive independent indicator of the health of the environment in company-wide consultation process that ensured that To date the programme has placed 500 youths at which our human capital is being nurtured. every Hollardite has a voice. The development of a eight participating employers with another 200 youths currently undergoing bridging training. Having started in In order to continuously improve retention, we aim to document that seeks to describe the richness of our Johannesburg, Harambee is now operating in Cape Town provide a challenging and rewarding work environment. culture (the Hollard Way) and that serves to guide our and will soon launch in Durban. We are delighted that the In order to support Hollard’s rapidly growing and dynamic behaviour on a daily basis is testament to this. business by getting the right people with the right skills Harambee project has been able to secure R120 million Recognising and cultivating the value of diversity at Hollard in matched funding from the South African Government, in the right jobs at the right time, we have established a is critical to our sustained business success. We believe enabling the programme to expand nationally. career guidance office available to all Hollardites. Team that diversity makes good business sense and that it members receive professional guidance and counsel on promotes the development of innovative solutions, a key Hollard has already employed 60 Harambees in customer career decisions to best meet their and Hollard’s needs. driver of our success. Diversity is far more than achieving service and sales roles and we have retained them for more In addition, we ensure that our reward practices are fair, numerical targets; it is creating a shared understanding of than the promised 12 months. In addition, we are actively competitive, transparent and performance-related. differences and how we can harness those differences to involved in recruiting new employers for the programme The Hollard Academy, our in-house learning facility, is work better together. We have an active diversity forum – three of the eight current employer participants were central to our commitment to the development of our that encourages robust debate amongst Hollardites on our recruited by Hollard. journey towards optimal inclusivity. how well we do what we do

Black Economic Empowerment Act (as certified by We are building Empowerdex). We have scored full points under the SED section for our work in enterprise development and social capital corporate social investment. More importantly, we are committed to actively promoting a transformed, vibrant and globally Through financial inclusion for the competitive financial sector that will ultimately reflect vulnerable poor Hollard integrated report page the demographics of South Africa and contribute to the Hollard defines the “vulnerable poor” as those people establishment of an equitable society. Hollard embraces with a monthly household income of less than R1 600, the letter AND the spirit of the BBBEE Codes and or no reliable regular income. These people often cannot Financial Sector Charter. afford insurance products and require intervention at an We believe that we must recognise racially based past institutional level or “meso” level if they are to escape inequalities and address them through our leadership the poverty cycle through accessing insurance benefits. in mobilising the energy of all South Africans towards Having already helped millions of emerging consumers the sustainable transformation of our country. In 2002 (monthly household income between R1 600 and R8 000) the South African financial sector committed itself to to manage risks that threaten their family stability, to voluntarily develop a Black Economic Empowerment 26 smooth their cash flows and ultimately to navigate their charter. The outcome of this commitment was the way out of poverty, we have gained rich insights that Financial Sector Charter (FSC). Hollard is proud to can be leveraged in developing such interventions for the have played a significant role in contributing to the vulnerable poor. development of the FSC through its participation in a number of industry initiatives. Starting with a nuanced understanding of the needs of the vulnerable poor and how they currently deal with Transformation is woven into our corporate and business the risks they face, we are exploring a guarantee-based unit strategies. It is not something separate from “real solution that will reduce the risks facing institutions which business” but is part of the Hollard DNA and culture – support the vulnerable poor and which will facilitate the way we think, feel, behave and make decisions. quicker access to funds for the recipients thereof. Through making a difference in our Through transformation and Broad- communities Based Black Economic Empowerment The Hollard Foundation (BBBEE) Established in 2006, the objective of the Hollard Hollard is a level 4, or “A”, contributor in terms of Foundation is to provide orphans and other vulnerable the DTI Code of Best Practice under the Broad-based how well we do what we do

children with the opportunity to achieve their full potential the municipality in carrying out its obligations in terms of supported by the Hollard Foundation, to participate in in life. The Foundation is an independent trust. the Children’s Act. As part of this process the skills of the a voluntary payroll giving programme, and to nominate municipal employees responsible for the social systems charities in which they are personally involved to receive The Foundation seeks to achieve sustainable change by have also been upgraded. Based on the experience in donations from Hollard (the Thusano Programme). focusing on orphans and vulnerable children during their Midvaal, a model has been developed which will be used Hollardites are also invited to contribute to in-house early childhood development (ECD) foundation years to facilitate the efficient functioning of the social systems (0−9 years), with particular emphasis on their health, of other municipalities. collection campaigns and support for national CSI days. nutrition and education. At the same time it also enables The Foundation has also helped the municipality to identify Support for the Hollard Foundation entails Hollardites local government to better serve its communities and Hollard integrated report page to fulfil its obligations to these children in terms of the day mothers for government funding and drafted an ECD transferring skills, running sports days and other events Children’s Act. The Foundation supports the Kago Ya policy document which has been submitted to the District for children, maintaining and upgrading facilities, planting Bana programme of the Midvaal municipality, the largest Legal department for approval. vegetable gardens, and interacting with children and municipality in South Africa. Hollard commits a minimum Foundation aims for 2012/2013 assisting with their care. of R10 million to the Foundation each year to fund its activities. 11 of the 23 ECD centres are to be registered, thereby Around 8% of our employees contribute to our payroll qualifying for government funding, and a further nine will giving programme, compared with an international Foundation progress during 2011/2012 have applied for registration during 2013. benchmark for this type of giving of 5%. Since its The Foundation is currently working with 23 ECD centres The 74 ECD practitioners currently in training will complete commencement in 2008, Hollardites have contributed catering for around 3 500 children. During the year it their training and 39 Grade R practitioners will also have over R500 000 to charities in the form of monthly or trained 74 ECD practitioners and identified practitioners for 27 completed their training by December 2012. once-off donations. Another R108 000 was generated Grade R training. In the more rural communities of Midvaal by Hollardites for various charities as part of the Thusano there are no ECD facilities, necessitating the training of All of the children in the ECD centres, as well as those 20 day mothers – these day mothers provide ECD support cared for by the 20 day mothers, will have been weighed Programme. In order to nominate a charity for Thusano, to groups of four to five children each. and measured by 2013. The Foundation will have Hollardites must devote at least 50 hours of their personal facilitated access to nutrition funding for all the mothers time to those charities on an annual basis – Hollard then The impact of the programme is monitored using measures of these children and arranged for vaccination cards for all contributes a monetary amount in recognition of this that indicate the wellbeing of the children, including their the children. contribution. weight, height and school readiness. This year 1 176 children were weighed and measured, 17 of the 23 ECD The Foundation aims to secure a municipal budget Hollard’s non-Foundation donations centres gained access to funding to feed their children and allocation for an ECD centre by December 2013, to have In addition to the Foundation donation and donations by December 2012 all the children in these centres will 18 day mothers funded by government and to have the in respect of the Thusano Programme, during 2012 have been issued with vaccination cards. ECD policy adopted by the Sedibeng district. Hollard contributed an amount of R977 000 to various Hollard Foundation employees are working with the Hollardite Volunteering and Giving charitable organisations operating across education and Midvaal municipality to systemically and sustainably programmes – living the Hollard Way. training, health, orphans and vulnerable children, welfare for the elderly and disabled, youth development and improve the functioning of its social systems, to ensure Hollard has an extensive Employee Volunteering environmental conservation. that the children in the ECD centres are fed and to assist Programme, enabling Hollardites to get involved in projects how well we do what we do

electricity usage areas so that we can investigate more We also belong to groups and NGOs focused on We are building energy-efficient solutions. These and other measures saw addressing the effects of climate change on our industry us reduce CO2 emissions generated by equipment owned and the economy, as well as groups that work with natural capital by us or under our control and purchased electricity (scope Government on the achievement of its own internationally 1 emissions) by 9% from 2009 to 2011. stated targets on energy reduction, carbon emissions In order to reduce air and road travel, we have promoted reduction and water conservation and quality. Through Through reducing our impact on the active participation, we are able to make a substantial environment teleworking and virtual meetings through desk-top Hollard integrated report page and tablet video-conferencing. We have also promoted difference beyond our limited budgetary resources. We started measuring and managing our carbon printing and paper consumption reductions, greened footprint in 2007. While it has taken some time to our IT supply chain, recycled IT assets and have begun Through supporting and developing achieve stability in the measurement approach due in utilising environmentally friendly e-waste disposal. industry environmental initiatives large part to the continued development of our campus, Our group funded the first two years of the development in 2012 we set ourselves five-year reduction targets We have made substantial inroads in managing and of a “green geyser” project that is now an insurance (using our 2011 footprint as a baseline) in the key areas of recycling our waste. Since installing a Joraform composter carbon emissions (scope 1 and 2), energy consumption, and a globe crusher on site in early 2010, we have industry-wide initiative. The industry is now working paper usage and business air travel, which all impact our reduced our waste to landfill from 75,5 tonnes in 2010 to with Government and municipalities to encourage the carbon footprint. In addition, in order to play our part 65,3 tonnes in 2011. We are currently recycling 34,7% of replacement of conventional geysers with solar-powered 28 in addressing South Africa’s water scarcity and quality our waste, with further improvements targeted. geysers and heat pumps. Approximately 50% of the situation, we set targets on water consumption. These geysers installed in any year are insurance replacements In addition, we run a biodiversity programme that targets to 2016 are as follows: – the industry can have a significant impact on electricity includes nurturing and releasing owls on our campus and • Carbon emissions: Reduce by 14% per full-time consumption through replacing failed geysers with reintroducing bats and small rodents, all of which used employee (FTE) energy-efficient alternatives. to inhabit the site before it was developed. We have also • Energy consumption: Reduce by 15% per square planted over 1 000 indigenous water-wise trees on our metre of built space To emphasise our commitment to making a difference campus and in Federation Park (adjoining our campus) and • Paper usage: Reduce by 10% per FTE in the important area of sustainability, Hollard has have gradually cleared out exotic plants and vegetation. • Business air travel: Reduce by 15% per FTE in participated in the formulation of and signed the COP Paterson band D3 and above (senior managers) Through supporting the conservation communiques, the NBI Energy Efficiency Pledge and the • Municipal water consumption: Reduce by 10% of our environment Global Compact. In addition, we are active participants on the South African Insurance Association (SAIA) Board Some years back, we installed energy-saving lights We support the Endangered Wildlife Trust, the Wildlife and Committee for Environmental and Social Risks and the and sensor switches at our campus and reduced air Environment Society of South Africa, the World Wildlife SAIA Strategic Risk Forum, which has initiated a number conditioner running time in an effort to reduce our energy of projects in the areas of social and natural capital. consumption and carbon footprint. We use state of the Fund and Birdlife SA, all of which are committed to art technology to carefully identify and monitor heavy conserving our environment and promoting biodiversity. Our targets to 2016 Hollard integrated report page

Energy Carbon emissions: consumption: Paper usage: Reduce by 14% per Reduce by 15% per Reduce by full-time employee square metre of 10% per FTE (FTE) built space 29

Business air travel: Reduce by 15% per Municipal water FTE in Paterson consumption: band D3 and above Reduce by 10% (senior managers) where we do what we do

Our vision of Hollard as a global organisation developed from lessons learnt in our international expansion process. Our willingness to innovate and do things differently has proven to be a recipe for success wherever we go

Hollard integrated report page in the world. Our decentralised business model – which brings with it a high degree of flexibility – allows us to adapt well to local conditions. From our strong South African skills base, infrastructure and balance sheet, we have established successful short-term insurance and life insurance operations in the Southern African Development Community (SADC) countries of , Africa – , , Mozambique, Namibia and Zambia and also in Australia, China, India, and the (UK). Botswana and Zambia Hollard Namibia, established nearly ten years ago, now 30 While we have had to adapt our South African enjoys a market share of around 20% of the short-term partnership model to suit local conditions, it remains the insurance market. Pleasingly, it was from our successful cornerstone of our business success internationally. We Namibian platform that we were able to launch our have partnered with prominent local businesses in order expansion into neighbouring Zambia. Further growth to help us establish focused insurance businesses, build opportunities exist in corporate underwriting and life on existing platforms and develop new income streams. insurance in particular.

We are also conscious of the changes taking place The International Monetary Fund (IMF) has classified in global economics and the subsequent need to Mozambique as one of the 10 fastest growing economies understand the impacts that Brazil, Russia, India, China in the world with growth mainly driven by commodities and South Africa (BRICS) is likely to have on Africa, as being extracted in its northern provinces, which in turn well as the role South Africa could play in BRICS. As a is driving new infrastructure development and economic result, BRICS currently enjoys a specific focus within our growth in the retail and financial services sectors. Hollard broader international strategy. Mozambique and its partners have already benefited from this growth and we have established two new branches in Nampula and Tete in order to continue to do so. where we do what we do

Affected by global economic conditions, government spending and economic growth in Botswana have been subdued. Nevertheless Hollard Botswana has performed exceptionally well under these circumstances. New

initiatives, such as bancassurance and retailer-based Australia India Hollard integrated report page distribution, have contributed to bottom line growth. Hollard operates in Australia as the Hollard Australia Group, We formed a joint venture with Amway in India in 2004 with the objective of selling a range of life and The latest addition to our SADC operations, Hollard which includes The Hollard Insurance Company, Hollard Financial Services and Real Insurance. Hollard also partners health insurance products to Amway members and their Insurance Zambia Limited opened for business in August with a number of leading underwriting agencies and brokers customers. In the year to 30 June 2012, the Amsure 2010, and Hollard Life Zambia Limited started operating to offer a range of niche products, such as pet insurance, business wrote over R236 million in new business in May 2012. Both entities are entirely Zambian-managed. mobile phone Insurance, and farm insurance, among others. premiums – the operation currently services more than We are delighted that in less than two years our activities 400 000 policyholders. are already profitable and, true to our spirit of innovation, One of our most successful products, sold through Real Insurance, is Pay as you Drive, based on a similar product we are proud to be the first company to introduce monthly One of the ways that our successful partnership differs developed by Hollard South Africa. Another South insurance premiums to Zambia, making insurance cover African innovation, Petsure, has achieved even greater from that of other foreign entrants into the Indian market 31 more accessible to many for whom an annual charge success in Australia than it has in South Africa, with over is that the entire management and staff of Amsure are was simply out of reach. Zambia is also classified as one R400 million of annual premium income generated in the Indian, with a wealth of local knowledge and experience of the ten fastest growing economies in the world by Australian entity. On the life side of our business, we are in serving the needs of their customers. We support this the IMF with a growth rate of close to 8% per annum. now the market leaders in direct life sales in Australia. initiative by secondment of staff from South Africa on a We are ideally placed to play our part in this rapidly needs-driven basis, mainly to assist with information flow In August 2011, building on the success of our retail developing economy. partnerships in South Africa, we signed a multi-year and the provision of technical support from Hollard South Africa. Our ever-expanding African footprint represents an exciting exclusive partnership with Woolworths Australia to sell a range of insurance products under the Woolworths opportunity not only in the local markets but also in In addition to our Amsure partnership, we have established Insurance brand, including pet insurance, life insurance, serving as a vital part of our multinational solutions for travel insurance, home insurance and motor insurance. a Hollard Representative Office, staffed by a small but companies requiring pan-African solutions. knowledgeable team, well positioned to identify future We are currently restructuring our shareholding in the opportunities and to assist not only Hollard, but also our Australian group in order to improve capital efficiency in partners, in understanding opportunities and challenges both South African and Australian operations. presented by this important, vibrant and growing market. where we do what we do

China Pakistan

Hollard integrated report page Our first venture in China was selling cell phone handset We entered the Pakistan market almost 15 years ago on the insurance in partnership with a leading Chinese handset basis of an expectation that the high growth rates anticipated retailer. Whilst China is arguably the world’s largest cell phone of the Indian economy would have a knock-on effect on market by number of handsets sold, we were the first to Pakistan. Unfortunately, that has not been the case, with introduce this cover to the market – we did so in partnership the political situation having deteriorated appreciably since with a leading Chinese insurer. our entry and the economy having suffered as a result. Our operations in Pakistan have not been spared and we are in Subsequently, we have finalised comprehensive cooperation the process of disposing of our shareholding in the Shaheen agreements with China’s largest non-life insurer, the Insurance Company. We have also diluted our shareholding in People’s Insurance Company of China (PICC), as well as the Adamjee Life through not following a rights issue and we are China Pacific Insurance Company (CPIC). Through these currently reviewing our shareholding in that entity. 32 partnerships, we are seeking to identify potential product development and micro-insurance opportunities in China and to develop risk solutions for the Chinese investor on the African continent.

Hollard Insurance Brokers Beijing was established in June 2012. The company will focus on the mobile phone industry in China, and will also play a vital role in the provision of risk management and insurance services to Chinese businesses in Africa. United Kingdom Hollard holds significant minority stakes in UK-based Correlation Risk Partners and the Red Sands Insurance Group, based in Gibraltar. These two entities provide a platform for Hollard partners to expand their activities into the European Union. Correlation have adapted Hollard’s core partnership model to suit local business dynamics, and have also mimicked Hollard’s life insurance direct marketing model in Eastern Europe. Despite tough economic conditions, Correlation’s focus on underserved niches which are ripe for genuine innovation means that growth prospects are exciting. United Kingdom

Pakistan Hollard integrated report page China

India

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Zambia Mozambique

Namibia Botswana

Australia South Africa thewhy people we do who make it possible whatfor we us do to do what we do Hollard integrated report page

34 why we do what we do Our 2011 top performers. People who exemplified the Hollard culture and contributed to business results. Hollard integrated report page

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Siani Malama Rowan Lyle Sonja Holtzhausen Aletta Smith Minkie Kgomo Debbie Ackerman Annelize De Jong Graham Vermaak

Hollard integrated report page

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Francois Wikus Stef Nic Saks Mandla Nyeleti Ian Pierre Brent Potgieter Luus Theofanidis Kohler Ntombela Shezi Shirilele Ross Geyer Wyborn the people

Wikus Luus (BComm (Hons) Actuarial Our Exco Science, FIA) Chief Risk Officer who lead us Nic Kohler (BSc, FIA, FASSA) Group Chief Executive Officer and Joined Hollard in 2012 Executive Director Pierre Geyer (BTech (Purchasing Management), Joined Hollard in 1997 National Diploma (Purchasing Management)) Appointed CEO in July 2007 Managing Director of Hollard Select Brokers and Underwriting Managers Brooks Mparutsa (BCompt (CTA) Unisa, CA(SA)) Chief Financial Officer and Executive Director Joined Hollard in 2005 Joined Hollard as CFO in 2007 Saks Ntombela (BSc (Mechanical Engineering), MBA) Francois Potgieter (BSc (Hons), FIA) Managing Director of Hollard Life Cluster Chief Operating Officer Joined Hollard in 2012 Hollard integrated report page Joined Hollard in 2005 Mandla Shezi (BSc, MBA) Ian Ross Managing Director of Hollard Alternative Chief Underwriting Officer, Head of Distribution International Operations Executive Director of The Hollard Insurance Joined Hollard in 2007 Company Limited Stef Theofanidis (BCompt (Hons)) Joined Hollard in 1995 Managing Director of Hollard Corporate Markets Joined Hollard in 1996

Michelle Davadoss (IMM Diploma) Head of Marketing, Business Development and 37 Digital Solutions Joined Hollard in 2011

Mantsika Matooane (PhD (Computer Science)) Head of Information Technology Joined Hollard in 2006

Nyeleti Shirilele (BProc, Higher Dipl - Tax Law, Attorney) Head of Governance and Group Company Secretary Joined Hollard in 2009

Brent Wyborn (BCom (Hons), International Management Studies (Netherlands)) Head of People Joined Hollard in 1999

Mantsika Michelle Brooks Matooane Davadoss Mparutsa thewhy people we do whowhat guide we do us

“Underpinning our disciplined approach to governance is a determination to maintain a balance between good

Hollard integrated report page governance and the innovative and entrepreneurial spirit that has made Hollard what it is today.” Richard Enthoven, Chairman

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Peter Rob Bonang Francis Babalwa Richard Happy Reg Ward Fihrer Mohale Ngonyama Enthoven Masondo Munro why we do

Happy Masondo (BA, LLB, LLM (Wits Previously, he was the Chief Executive Babalwa is a businesswoman and the Our Board whatUniversity), LLM we (Duke University, do North Officer of Drake & Scull FM SA (Pty) former Chief Financial Officer of Safika Non-executive directors Carolina, USA)) Limited, a facilities management company, Holdings (Pty) Limited. She was also the Chief Executive Shared Services and Group Chief Internal Auditor of Nedbank Independent Non-Executive Director: Richard Enthoven (BA, MSc Associated Companies of Sanlam, a Limited, and an audit partner at Nkonki. Hollard Life Assurance Company Limited Economics (LSE)) member of its executive committee, She was also a member of Deloitte’s and The Hollard Insurance Company Limited alternate director of the Sanlam Limited Financial Institutions Services Team Chairman of Hollard Life Assurance main Board, Chairman of the Board of Happy is currently a partner at Werksmans (FIST) division, where she was also lead Company Limited and The Hollard TASC and a director of Innofin, Gensec Attorneys where she specialises in general partner on the audit of one of the leading Insurance Company Limited Property Services and Fundamo. He was corporate law, with a specific focus on women’s financial services groups in Chairman of the Reinsurance Committee also Executive Vice-President at South energy law and information technology the country. She completed the Women Richard is the founder and Managing African Airways (SAA) and Managing law. Previously she was Assistant Legal in Leadership Programme at Harvard

Director of the Hollard Australia Group, Hollard integrated report page Adviser to the President, an associate at Director of OTIS (Pty) Limited. University in Boston and received an which includes Hollard Insurance, Hollard White and Case LLP, General Counsel at award as a BBQ businesswoman visionary Financial Services and Real Insurance. Reg Munro (BSc, FASSA (Fellow of the South African Airways and a director of in 2008. He has also served as a director of The Actuarial Society of South Africa)) law firm, Prinsloo, Tindle & Andropoulos Inc. Hollard Insurance Company and Hollard Peter Ward (CA(SA), Diploma in Independent Non-Executive Director: Life Assurance Company since 2003 (Certificate Alternate Dispute Resolution, Certificate in Bonang Francis Mohale Hollard Life Assurance Company Limited and as Chairman of both companies in Marketing and Sales Management, Theory Accounting, BCom) since 2008. Diploma in Marketing Management Chairman of the Actuarial Committee Independent Non-Executive Director: The (IMM), Chartered Marketer (IMM)) Rob Fihrer (BCom) Reg obtained his Fellowship of the Faculty Hollard Insurance Company Limited and Independent Non-Executive Director: Hollard Holdings (Proprietary) Limited Non-Executive Director: Hollard Life of Actuaries in 1971. From 1979 until Hollard Life Assurance Company Limited Assurance Company Limited, The Hollard 1998 he served as a member of Old Chairman of the Audit Committee and The Hollard Insurance Company Insurance Company Limited Mutual’s Senior General Management 39 Limited team. After retiring in 1998 he became Peter retired as a partner of Deloitte & Rob founded Capricorn Ventures involved in management, actuarial and Touche in 2006 following a career with Chairman of the Social and Ethics International (Pty) Limited with Geoff the firm spanning 34 years. During the Committee scenario consulting. Snelgar and Gavin Chadwick in 2003. He period he held several roles including is responsible for sourcing and evaluating Bonang is currently the Chairman and Babalwa Ngonyama (CA, Masters those of Audit partner and leader of transactions, performing due diligence Country General Manager: Commercial of in Business Administration, Diploma in the firm’s Forensic Audit unit. Peter is investigations and managing portfolio Shell South Africa (Pty) Limited, where he Advanced Banking) currently also a director of Aveng, where investments. He is also responsible is Chairman of the Boards of Shell South he chairs the Audit Committee and is a for the day-to-day management of Independent Non-Executive Director: member of the Risk Committee. His Board Africa Holdings (Pty) Limited, Shell South Hollard Life Assurance Company Capricorn Fund Managers. Prior to Africa Energy (Pty) Limited, Shell South experience includes chairing the Audit and joining Capricorn, Rob spent nine years Limited and The Hollard Insurance Risk Committees at Adcorp and Imperial Africa Marketing (Pty) Limited and Shell Company Limited at Gensec Bank, where he gained South Africa Refinery (Pty) Limited. Bank. He is an active member of the extensive experience as an equity trader, IoD and regularly attends most of their bond and equity portfolio manager and forums, including the Audit Committee corporate financier. Forum. During 2008, he attended the three-day Banking Board leadership programme run by GIBS. the vision that guides us

Our vision is to claim a place among the top 20 insurance Hollard integrated report page companies on the global stage by 2020, acting as a catalyst for positive and enduring change. This is a call to excellence in everything we and our partners do, the ultimate measure of which is recognition by our peers. 40 why we do what we do Hollard integrated report page #1 on any Voted #1 given www.hollard.co.za short-term Sunday an authorised financial services provider 41 insurer Sunday Times Top Brands Survey 2012 our business aims which arise from our vision

We set ourselves seven aims to the year 2015; aims which will help us to answer the call to excellence inherent in the vision. These aims impact on everything that we do on a day-to-day basis and all of our actions are in service of these aims. The accomplishments covered in this report have arisen precisely because of the actions undertaken in pursuit of one or more of these aims. Hollard integrated report page

To be a significant To be recognised, To win the war for To grow Hollard’s value contributor to human, trusted and talent by attracting, by 15% per annum on a social and natural capital recommended developing and retaining sustainable basis through the business that above all others by the best people through our we do and the way we do our customers business partnership philosophy 42

To provide each and To generate 50% of To achieve a every one of our competitive our growth in profits partners with a source advantage through offshore by 2015 of competitive operational advantage in their excellence own markets To be a significant contributor to To grow Hollard’s value by 15% per little evidence to suggest that this is consistently delivered human, social and natural capital annum on a sustainable basis through in our industry. This aim is delivered through a disciplined through the business that we do and our partnership philosophy and consistent application of continuous improvement principles in our business. the way we do business This aim sets the financial objectives for the organisation, This aim underpins our purpose of doing well by doing balancing the objectives of growth and cash flow To provide each and every one of our good. It requires us to embrace a more responsible form of management, and ensuring appropriate focus on sustainable partners with a source of competitive capitalism, going beyond corporate social investment (CSI) to value creation rather than short-term profitability. advantage in their own markets Hollard integrated report page balance our financial objectives with our desire to contribute It recognises further that the path to this growth is the Our success as a partnership based business over more positively to human, social and natural capital. We do this development, maintenance and defence of our highly than 32 years is linked to the way in which we establish through the business we do and the projects we undertake, differentiated partnership-based business model. a win-win-win arrangement in each of our partnerships as well as through the way that we do business and conduct – our customer must have a real need met with an ourselves on a daily basis. It has meant introducing additional To be recognised, trusted and appropriate value for money product, our partner must decision-making frameworks in all aspects of our business, recommended above all others by our achieve his or her growth and profit objectives, and Hollard requiring us to consider our impact on people, on the customers must benefit from supporting a sustainable business line. communities in which we operate, and on our environment, Our customer aim underscores the fact that our customers This aim ensures that we invest in developing a nuanced as an extension of the traditional business case. are at the heart of our activities; they are the reason understanding of our partners’ businesses so that we can 43 we exist as a business. We seek to develop a deep assist them to achieve a competitive advantage through To win the war for talent by understanding of our customers and turn these insights attracting, developing and retaining leveraging the insights, skills, capabilities, resources and into TCF-aligned, measurable initiatives aimed at delivering scale we enjoy by virtue of being a partner aggregator. the best people jargon-free, understandable insurance products that meet We recognise that our partnership-based business model real needs and deliver against customer expectations. They To generate 50% of our growth in and uniquely empowering culture demand that we employ should do this job so well that our customers become our profits offshore by 2015 the very best in an environment where skilled people are best advertising medium and word-of-mouth becomes our This aim sets out our geographic diversification objectives, in significant demand. This relative scarcity means that most important marketing platform. aiming to leverage the skills, infrastructure, capabilities and we must create a working environment where Hollardites relationships enjoyed by our South African base in rapidly are fully engaged due to their sense of purpose, access to To achieve a competitive advantage growing markets with well-developed but innovation- development opportunities, ability to make a difference, through operational excellence friendly regulatory environments. We are focused on enjoyment of the working environment, embracing of a In an industry that delivers products that remain intangible Africa, Australia, India and China. differentiated culture, and satisfaction with a performance- until a claim or maturity event arises, operational excellence based recognition and reward system that is both fair is the path to winning the trust of our customers. While it and motivating. is often cited as being “entry to the game”, there is very our approach to managing risk Ethics Risk management Our governance of risk can best be illustrated by the diagram alongside. Ethics is all about an inherent desire to do business in the We have begun a process of significantly enhancing best possible way – about doing the right thing when our risk management framework. This is underpinned The board-approved risk appetite is translated into nobody is watching. The Hollard Way is rich with ethical by our long-held understanding that we are in the transactional and risk acceptance limits and is embedded guidance – specific statements such as “Never compromise business of accepting and managing risk on behalf of our throughout Hollard by the Risk and Compliance your integrity”, “Be true to yourself”, “Own your actions”, policyholders; that it is through the taking of risk that Committee via the Risk Management Function. “We’re always fair”, “We take responsibility for the we protect the best interests of our policyholders. Taking

Hollard integrated report page Appropriate board committees oversee the operation risk responsibly enables us to create value and deliver on consequences of our actions”, “We have the courage to of business within prescribed risk limits. The respective the promises we make. We therefore have a tolerance, make the right calls” and “We know that trust speeds board committees have mandates that relate to specific and by design, the capacity to accept risk on behalf of up business” are all statements reflecting the ethical risk exposures. The consolidated view of risk is prepared our policyholders. We focus on accepting risk that we are foundation of our culture. under the guidance of our Chief Risk Officer, and able to understand and measure and have the skills to assessed within the context of Hollard’s overall risk In terms of compliance, we established our Board Social manage in line with our risk appetite limits, as approved appetite by the Risk and Compliance Committee. and Ethics Committee in early 2012 in accordance with by our boards. The most significant risk-related development in the the requirements of Section 72 (4) and regulation 43 (2) Improving our integrated approach to risk and capital regulatory environment is the anticipated risk-based of the Companies Act, 2008. One of this committee’s management will require us to strike the optimal balance solvency regime to be introduced by the Financial Services responsibilities is to ensure that ethical leadership is a between the acceptance and retention of risk and the 44 Board from January 2015. Solvency Assessment and priority for us. utilisation of our available capital resources. Management (SAM) will require insurers to demonstrate, Governance We categorise the risks we face as strategic, via their Own Risk Solvency Assessment (ORSA), an underwriting, market, credit, liquidity or operational increased understanding of their risk exposures, capital “Our disciplined approach to governance, accounting and risks. From a strategic perspective, we ensure that our adequacy and impact of financial controls. reporting throughout the group has made it possible for customer, product and distribution initiatives complement All current and planned activities related to the us to thrive and grow while effectively managing risk. We and strengthen the execution of our business vision. believe that appropriate governance creates value and development of Hollard’s risk management framework facilitates risk management. Underpinning this considered From an operational perspective, we continuously strive are such that they will enable the execution of an ORSA approach to governance is the determination to maintain a to improve our internal business processes and those of under the SAM regime. balance between controlling critical aspects of our business our partners to eliminate or minimise the risks associated with running the organisation, without negatively centrally and continuing to support the innovative and impacting on customer service. entrepreneurial spirit that made the group what it is today.” Ultimately, our approach to risk management is that we Hollard Corporate Governance Report 2012. do not view it as an inhibitor of business, but rather as a (Full report is attached) tool to help us to understand where to best deploy our capital resources. whyour weapproach do whatto managing we do risk Hollard “business”

(Responsible for managing risk within prescribed limits)

Business Part- Operational Units ners Support Units

Hollard risk exposure/profile Hollard integrated report page

Risk and Risk Board Compliance Management (Responsible for risk Committee Function governance and (Oversees embedding of (Operational execution approving risk Risk Management of the mandate provided appetite limits) Framework and Risk by Risk and Compliance Appetite Limits) Committee) 45 ExternalFunctions Audit (Combined assurance and reporting) (Combined Board committees (Responsible for risk oversight within prescribed limits)

Investment IT Actuarial Committee Committee Committee Reporting Budget & Reinsurance Strategic Internal activities: Compliance, and Independent control Committee Committee Oversight/Mandate/Limits Audit Committee

Interaction/Review/Support a note from our Chairman

The year to June 2012 saw the related themes of ethics Underpinning our disciplined approach to governance and governance feature prominently on the global is a determination to maintain a balance between good business agenda. Repeated corporate governance failures governance and the innovative and entrepreneurial spirit and instances of questionable ethics dominated the that has made Hollard what it is today. As we prepare business headlines over the past year. By contrast, Hollard the organisation to comply with an evolving regulatory has always embraced the idea that an ethical approach environment, maintaining this balance is a particular to business is non-negotiable – the events of this year challenge both at board level and throughout the group.

Hollard integrated report page have served to strengthen our resolve to ensure that this I believe however that Hollard and its partners will adapt remains the case. positively to these new regulations, identifying new opportunities to find innovative win-win-win solutions. Clear accountability for how we run Hollard is a As Nic Kohler has said in his introduction, if it results fundamental part of our corporate governance. It requires in a better-protected consumer and a more sustainable us to look closely at whether we are acting with integrity industry it will indeed be worth all the effort. and forethought. Are we making the right decisions for the sustainable prosperity of our business and the My thanks to the members of our boards and their on-going wellbeing of all our stakeholders? Reporting on committees for the invaluable contribution they make our results holds us accountable to all our stakeholders in to the leadership of the group and my thanks also to 46 a transparent and structured way, compelling us to take all Hollardites and our partners and other suppliers who responsibility for actually doing what we say. make it possible for us to achieve our goal of doing well by doing good. Our Board Charter sets out the roles and responsibilities of the boards. As Chairman I am responsible for the overall effectiveness of the boards and their committees and for ensuring that they provide effective strategic leadership and appropriate oversight.

The clear separation between my responsibilities and Richard Enthoven those of the Chief Executive Officer is documented in the Chairman Charter. The executive directors, who are also members of Hollard’s executive committee, are responsible for developing Hollard’s strategies for approval by the boards and for implementing those strategies. why we do what we do Hollard integrated report page

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