2020 INTEGRATED REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) for the year ended 31 December 2020 Change in Change in Change in liability liability variable 2020 2019 Variable % R’m % change R’m % change Liability per note 12.2 5 172 3 973 Worsening in mortality 10 1 041 20.11 1 161 29.36 Worsening in morbidity rates 10 2 003 38.74 2 046 51.73 Worsening in PI inception rate 10 769 14.88 897 22.68 Lowering of investment returns (1) 2 238 43.26 2 079 52.58 Lowering of terminations (10) 799 15.45 615 15.54 Worsening of maintenance expense level 10 1 541 29.80 1 360 34.39 Worsening of expense inflation rate 10 3 169 61.27 2 477 62.63 The above analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated – for example, change in interest rate and change in market values; change in lapses and future mortality. The size of the sensitivities were chosen to illustrate the impacts for changes in key variables that would have a significant impact on the non-DPF liabilities, as well as mainly chosen to facilitate comparison with the sensitivities disclosed by other major insurers. e. Compulsory margins The published liabilities are on the FSV basis and include the following margins that need to be added to the best estimate margins. The following compulsory margins which have not changed since 2005 were added for both 2019 and 2020: Assumption Margin Mortality 7.5% (increase or decrease, depending on which alternative increases liabilities) Morbidity 10% Medical 15% Lapse 25% (increase or decrease, depending on which alternative increases liabilities) Terminations for disability income benefits in payment 10% Surrenders 10% (increase or decrease, depending on which alternative increases liabilities) Expenses 10% Expense inflation 10% (of estimated escalation rate) Charge against investment return 25 basis points in the management fee for and equivalent asset-based or investment performance-based margin 12. LONG-TERM INSURANCE POLICY LIABILITIES, AND PPS PROFIT-SHARE ACCOUNTS (continued) 12.1 Long-term life insurance contracts – assumptions, change in assumptions and sensitivity (continued) d. Sensitivity analysis (continued) 156 | PPS INTEGRATED REPORT 2020