2014 PGC Annual Report

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

32. Taxation 16,941,062 12,464,081 11,690 55,147
Major components of the tax expense (income) 91,868 - - -
Current
Local income tax - current period 11,690 55,147
Local income tax - recognised in current tax for prior
periods

17,032,930 12,464,081

Deferred 2,701,351 (171,365) (818,118) 1,095,529
Originating and reversing temporary differences (806,428) 1,150,676

19,734,281 12,292,716

Reconciliation of the tax expense

Reconciliation between accounting (loss) / profit and tax expense.

Accounting (loss) / profit (3,348,861) 49,995,092 (93,977,722) 160,220,191

Tax at the applicable tax rate of 28% (2013: 28%) (937,681) 13,998,626 (26,313,762) 44,861,653

Tax effect of adjustments on taxable income 30,677,711 43,461,123 29,173,168 -
Non-deductible items (13,600,147) (43,974,398) (2,619,452) (43,180,020)
Non-taxable income
Capital gain 4,126,798 (3,129) - -
Tax loss utilised (246,218) (1,747,398) (228,264) -
Tax loss not recognised - 1,091,137 -
Correction to prior years (84,579) - (117,995)
Difference in tax rates used 395,534 (120,269) (220,981) (412,962)
Reversal of deferred tax previously recognised on (597,137) (412,976) -
financial assets -
- (597,137)

19,734,281 12,292,716 (806,428) 1,150,676

33. Auditor's remuneration 2,465,008 1,935,299 185,774 135,062 110011
Fees - (2,384) - - PGC Annual Report | 2014
Adjustment for previous year - -
Tax and secretarial services 544,959 119,312

financial assets 19,734,281 12,292,716 (806,428) 1,150,676

33. Auditor's remuneration 2,465,008 1,935,299 185,774 135,062
Fees - (2,384) - -
Adjustment for previous year - -
Tax and secretarial services 544,959 119,312
3,009,967 2,052,227 185,774 135,062

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

34. Cash generated from (used in) operations 52 (3,348,861) 49,995,092 (93,977,722) 160,220,191
(Loss) profit before taxation
Adjustments for: 6,013,464 6,655,581 392,652 729,514
Depreciation and amortisation (22,409,879) (105,791) --
(Profit) loss on sale of property and equipment (25,720) --
Loans written off - (306,906) (1,326,175) (306,906)
Loss (profit) on sale of other financial assets (1,326,175) (435,941) (6,263,530) (144,980,312)
Dividends received (575,196) (5,295,415)
Interest income (338,316) (10,765,240) 52
Finance expense (5,490,945) 2,073,356 (1,683,029) (4,068,081)
Fair value adjustments (2,972,276) 66,384,790 (8,240,954)
Impairment loss (reversal) 245,003 (5,671,603) --
Movements in operating lease assets (3,742,409) (67,835) --
Loss (profit) on sale of business 80,838,797 2,689,638 --
Movements in provisions (185,328) --
Prior period errors - Leasehold property (899,119) (2,277,491) (666,770) (17,389,772)
Other non-cash items - - --
Movement in warranty claims 1,409,142 --
Movement in policyholder liabilities (5,418,846) (608,576) --
Movement in insurance contract liabilities - 756,516
Changes in working capital: -
Inventories -
Trade and other receivables
Prepayments 2,478,870
Trade and other payables 3,887,758

110022 PGC Annual Report | 2014 35. Tax (paid) refunded (271,712) 86,714 - -
Balance at beginning of the year (18,259,212) (3,824,307) 1,616,626 (744,586)
2,391,725
308,275 - -
(8,662,961) (9,852) 212,007 (10,930,346)
23,603,732
38,800,898 (35,886,342) (31,006,665)

2,284,250 (6,515,204) 3,624,875 3,667,390

Changes in working capital: (271,712) 86,714 - -
Inventories (18,259,212) (3,824,307) 1,616,626 (744,586)
Trade and other receivables 2,391,725
Prepayments 308,275 - -
Trade and other payables (8,662,961) (9,852) 212,007 (10,930,346)
23,603,732
38,800,898 (35,886,342) (31,006,665)

35. Tax (paid) refunded 2,284,250 (6,515,204) 3,624,875 3,667,390
Balance at beginning of the year (17,032,930) (12,464,081) (11,690) (55,147)
Current tax for the year recognised in profit or loss - -
Prior year adjustment (806,728) -
Balance at end of the year (1,592,293) (2,284,250) (659,592) (3,624,875)
2,953,593 (12,632)
(17,147,701) (21,263,535)

36. Dividends paid (1,500,000) (2,500,000) (1,500,000) (2,500,000)
Dividends

A final dividend of 15 000 cents per share, R1 500 000, was approved by the board of directors on 12 July 2013 in South
African currency in respect of the year ended 28 February 2014. The dividend payment date was 23 July 2013.

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

37. Sale of businesses 53 - 2,999,000 - -
Carrying value of assets sold - 60 - -
Goodwill - 39 - -
Other financial assets - (22,365) - -
Trade and other receivables - 2,711,904 - -
Trade and other payables -
Cash - 5,688,638 - -
Total net assets sold -
Net assets sold - 5,688,638 - -
Loss on disposal - (2,688,638) -

Consideration received - 3,000,000 -
Amount due from Popcru Trust
Net cash outflow on acquisition - 3,000,000 - 3,000,000
Cash consideration received
Cash balances disposed - 3,000,000 - 3,000,000 PGC Annual Report | 2014 110033
- (2,711,904) --

Net assets sold - 5,688,638 - -
Loss on disposal - (2,688,638) - -
- 3,000,000 - -

Consideration received - 3,000,000 - 3,000,000
Amount due from Popcru Trust

Net cash outflow on acquisition - 3,000,000 - 3,000,000
Cash consideration received - (2,711,904) --
Cash balances disposed - 288,096 - 3,000,000

38. Commitments 2,500,814 2,364,107 - -
Concession - SANPARK 15,388,240 27,022,064 - -
Minimum lease payments due 16,663,322 - - -
- within one year
- in second to fifth year inclusive
- later than five years

34,552,376 29,386,171 - -

Operating lease payments represent concession fees payable to SANParks. The agreement is for a period of 20 years
commencing on 1 February 2005. The lease escalates every year in January with a rate equal to the ruling Consumer Price
Index.
Operating leases – as lessee (expense)

Minimum lease payments due 19,497,215 5,603,901 - -
- within one year 23,244,557 9,268,927 - -
- in second to fifth year inclusive 14,305,877 - - -
- later than five years

57,047,649 14,872,828 - -

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

39. Contingencies

Workerslife Direct Proprietary Limited Rainier Gerhardu5s4van Rooyen Vermaak (its former employee) for alleged unfair
The company is involved in litigation against
retrenchment. The matter is currently pending before the court. The possible financial exposure of the company is
R 1 193 562 which is expected to increase every month by R 66 309 until the matter is finalised.
110044 PGC Annual Report | 2014The company successfully claimed an amount of R 7.5 million plus interest at a rate of 15.5% per annum accruing from 1
December until the date of payment against the National Union of Mineworkers of South Africa Financial Services Proprietary

39. Contingencies
Workerslife Direct Proprietary Limited
The company is involved in litigation against Rainier Gerhardus van Rooyen Vermaak (its former employee) for alleged unfair
retrenchment. The matter is currently pending before the court. The possible financial exposure of the company is
R 1 193 562 which is expected to increase every month by R 66 309 until the matter is finalised.
The company successfully claimed an amount of R 7.5 million plus interest at a rate of 15.5% per annum accruing from 1
December until the date of payment against the National Union of Mineworkers of South Africa Financial Services Proprietary
Limited (NUMSA) in an arbitration. NUMSA has appealed against the arbitration ruling. The appeal was heard in May 2014.
Judgement on the appeal is still pending.
Workers Life Assurance Company Limited
The shareholder of the company has lodged a claim of R 57 632 815 against the previous shareholder, Zenith Administration
Services Proprietary Limited. This claim relates to unauthorised withdrawals from the company's bank accounts.
There is also a claim instituted by Zenith Administration Services Proprietary Limited against the company for R 17 337 003
plus interest plus costs.
As at February 2014, the above mentioned litigation will not, in the opinion of the the attorney, result in any loss and
management believes that the above disclosure accurately reflects the circumstances.
Popcru Group of Companies Proprietary Limited
On advice of the attorneys, the directors are in the opinion that there is a probable loss which will be incurred as a result of
an investment made with Trinity Asset Management Proprietary Limited amounting to R 2 809 250.
Currently, there is ongoing litigation for the recovery of R 14 411 931 from the insurers of Trinity Asset Management
Proprietary Limited and Grindstone Investment 132 Proprietary Limited. However, we have impaired the investment in the
current year to the value of the funds held in trust of R 1 287 788. On advice of the attorneys, the possibility of recovery of
the entire amount, however, seems positive.
As disclosed in the 2010 financial statements of Workers Life Assurance Limited, the shareholder of the company has
communicated its intent to claim an amount of R 57 632 815 from the previous shareholders. This claim relates to
unauthorised withdrawals from the company's bank accounts.
The present shareholders also dispute the profit share, administration fees and facility fees disclosed in the 28 February 2010
financial statements amounting to R 24 476, R 23 144 234 and R 5 100 900 respectively, and for 2011; R 720 062, R 17 248
033, R 1 868 100, R 3 873 985 relating to management and profit share, sub administration, facility fee agreements, Zenith
Administration Services control account receivable respectively.
The resolution of the above may materially influence the prior period financial statements.
As at 28 February 2014, there is no additional information in relation to the claim of R 57 632 815 in relation to the
probability of success and management believes that the above disclosure still accurately reflects the circumstances.

PGC Annual Report | 2014 110055

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

40. First-time adoption of International Financial Reporting Standards

The group has applied IFRS 1, First-time adoption of International Financial Reporting Standards, to provide a starting point
for the reporting under International Reporting and Accounting Standards. On principle these standards have been applied
retrospectively and the 2012/13 comparatives contained in these consolidated and separate financial statements differ from
those published in the consolidated and separate financial statements published for the year ended 28 February 2014.

The date of transition was 1 March 2013.

41. Related parties

R` elationships POPCRU Trust
Holding company Refer to note 7
Subsidiaries Refer to note 8
Associates As listed in the Directors' Report
Directors PGC Management Services Proprietary Limited
Other related companies and entities Pytron Consulting Proprietary Limited
Unique Standing Investments 108 Proprietary Limited
Police Prison Civil Rights Union
PSU Investments Proprietary Limited
Zenith Administration Services

Related party balances

Loan accounts - Owing (to) by related parties - - 19,507,524 32,939,478
PGC Investment Holdings Proprietary Limited - - - (9,897,184)
Workerslife Direct Proprietary Limited - - 49,120,241 49,274,816
Shishangeni Lodge Proprietary Limited - - 31,765,286 31,765,286
Gemvest 53 Proprietary Limited - - 13,333,576 8,309,113
Riskcon Security Holdings Proprietary Limited - - 933,676 933,676
Riyabopa Training and Consulting Solutions Proprietary
Limited - - (1,000) (1,000)
Workers Life Group Proprietary Limited 1,000,000 4,850,000 1,000,000 3,000,000
Popcru Trust 15,968,239 14,302,324
RED Employee Benefits Proprietary Limited (14,771,471) - -
Police and Prison Civil rights Union - 17,917,113 - -
PGC Management Services Proprietary Limited (2,306,929) (2,307,029) 17,917,113
14,661,310
110066 PGC Annual Report | 2014 22,297,966 113,352,274 134,241,298
Amounts included in trade receivables (trade

Riyabopa Training and Consulting Solutions Proprietary - - 933,676 933,676
Limited
Workers Life Group Proprietary Limited - - (1,000) (1,000)
Popcru Trust 1,000,000 4,850,000 1,000,000 3,000,000
RED Employee Benefits Proprietary Limited 15,968,239 14,302,324
Police and Prison Civil rights Union (14,771,471) - -
PGC Management Services Proprietary Limited - 17,917,113 - -
Amounts included in trade receivables (trade (2,306,929) (2,307,029) 17,917,113
payables) regarding related parties 14,661,310
Popcru Trust 22,297,966 113,352,274 134,241,298
Workers Life Assurance Proprietary Limited
Workerslife Direct Proprietary Limited - 79,640 - -
Workerslife Direct Proprietary Limited -- 1,632,130 -
PGC Management Services Proprietary Limited -- 17,671
PGC Management Services Proprietary Limited -- 2,938 (812)
Workers Life Management Services Proprietary Limited -- (900) 44,312
PGC Investment Holdings Proprietary Limited -- -
PGC Investment Holdings Proprietary Limited -- 7,559 2,203
Riskcon Security Holdings Proprietary Limited -- (30) 77,380
Grosskopf Attorneys -- (127,735)
PGC Management Services Proprietary Limited -- 1,847 7,658
RED Employee Benefits Proprietary Limited - 142,965 - -
- (10,245,157) - -
- 210,897 - -
- 20,677
-
-

- (9,811,655) 1,643,544

56

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

41. Related parties (continued) - - (930) (128,547)
Amounts payable to related parties - - 1,644,474 149,224
Amounts receivable from related parties
- - 1,643,544 20,677
Related party transactions
Interest paid to (received from) related parties - (1,330,743) - - 110077
RED Employee Benefits Proprietary Limited - 1,740,104 - -
Police and Prisons Civil Rights Union -- 246,469 280,167
PGC Investment Holdings Proprietary Limited -- 171,260 72,829 PGC Annual Report | 2014
Riskcon Security Holdings Proprietary Limited - 409,361 417,729 352,996

- - 1,643,544 20,677

Related party transactions - (1,330,743) - -
Interest paid to (received from) related parties - 1,740,104 - -
RED Employee Benefits Proprietary Limited -- 246,469 280,167
Police and Prisons Civil Rights Union -- 171,260 72,829
PGC Investment Holdings Proprietary Limited - 409,361 417,729 352,996
Riskcon Security Holdings Proprietary Limited
- (202,725) --
Rent paid to (received from) related parties -- - 518,825
Grosskopf Attorneys - (202,725) - 518,825
PGC Investment Holdings Proprietary Limited
- 1,987,856 - -
Management fees paid to (received from) related - (18,000,000) - -
parties - (16,012,144) - -
Grosskopf Attorneys
PGC Management Services Proprietary Limited - (33,600,000) - -

Shared service fee - 9,335,274 - -
PGC Management Services Proprietary Limited
Services rendered by a director - 36,417,466 - -
Grosskopf Attorneys - 12,451,978 - -
Referral fee paid to related parties - 48,869,444 - -
PGC Management Services Proprietary Limited
Police and Civil Rights Union - 1,543,661 - -

Administration fee paid to related parties - 75,000 - -
Grosskopf Attorneys
Sale of assets
PGC Management Services Proprietary Limited

110088 PGC Annual Report | 2014 57

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

41. Related parties (continued) - - (3,000,000) -
Dividends (received) paid - - (3,000,000) -
Workers Life Insurance Limited 1,500,000 2,500,000 1,500,000 2,500,000
Workers Life Assurance Limited 1,500,000 2,500,000 (4,500,000) 2,500,000
Popcru Trust

Equipment and telephone rentals recouped from - - 171,260 72,829
related parties - - 175 -
PGC Management Services Proprietary Limited - - 23,764 -
Riskcon Security Holdings Proprietary Limited - - 44,008 -
Workerslife Direct Proprietary Limited
Workers Life Management Services Proprietary Limited

- - 239,207 72,829

42. Directors' emoluments
Executive
2014

No emoluments were paid to the directors or any individuals holding a prescribed office during the year.
2013

In connection with the affairs of the company Emoluments Other benefits Bonuses Total
7,458,798 2,198,466 24,757,270 34,414,534

Non-executive Attendance at Total
2014 meetings 512,475
512,475
Services as directors

2013 PGC Annual Report | 2014 110099

Non-executive Attendance at Total
2014 meetings 512,475
512,475
Services as directors

2013 Attendance at Total
Services as directors meetings 493,481
493,481

43. Prior period errors
Certain comparative figures have been reclassified for fairer presentation. These are as follows:
The company concluded an Underwriting Management Agreement (UMA) including a Binding Agreement with Constantia
Insurance Company Limited from 01 March 2012. The company company acted as an agent of Constantia with the profit
commission from the agreement accruing to the company. The financial statements now reflect an outstanding claims
reserve and incurred but not reported claims reserve of R 19 440 740 which, in terms of the existing IFRS 4 for insurance
contracts, is an in-substance financial adjustment but factually represents an advance in the profit commission due to the
company.

Popcru Group of Companies Proprietar5y8 Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

43. Prior period errors (continued)

During the prior year, leasehold improvements held by Workerslife Direct Proprietary Limited were incorrectly capitalised
and subsequently depreciated, resulting in a decrease in total comprehensive income for the year.

The correction of the error(s) results in adjustments to Group as follows:

Statement of Financial Position 2013 2012
Decrease in retained earnings 13,872,845 45,577
Decrease in property, plant and equipment (2,277,491) (45,577)
Increase in insurance contract liabilities (16,104,658) -
Increase in deferred tax asset -
4,509,304

Statement of Comprehensive Income (9,182,590)
Decrease in total comprehensive income (135,273) -
Decrease in depreciation -
Increase in gross claims incurred 16,104,658 -
111100 2014IInnccrreeaassee in taxation 4,509,304 -
PGC Annual Report | in gross written premium -
(49,004,003) -
Increase in acquisition costs 34,017,479

Decrease in retained earnings 13,872,845 45,577
Decrease in property, plant and equipment (2,277,491) (45,577)
Increase in insurance contract liabilities (16,104,658)
Increase in deferred tax asset 4,509,304 -
-

Statement of Comprehensive Income (9,182,590) -
Decrease in total comprehensive income (135,273) -
Decrease in depreciation -
Increase in gross claims incurred 16,104,658 -
Increase in taxation 4,509,304 -
Increase in gross written premium -
Increase in acquisition costs (49,004,003) -
Decrease in administration fee received 34,017,479
14,986,524

No prior year errors affected Popcru Group of Companies Proprietary Limited numbers.

44. Comparative figures

Certain group comparative figures have been reclassified for fairer presentation from amounts in trade and other payables to
amounts payable to related parties and from amounts in trade and other payables to related parties and from amounts in
trade and other receivables to trade and other payables.

Statement of financial position Consolidated Separate
Investment property 2013 2013
Property and equipment (16,925)
Intangible assets 26,487,116 16,925
Loans to related parties - non current (26,747,561) (4,666,190)
Loans to related parties - current 4,666,190
Loans from related parties - current 260,444
Other financial liabilities - non current 18,927,578 -
Policyholder liabilities (23,777,578) -
Provisions
Insurance contract liabilities 4,850,000
13,851,647
(13,851,647)

1,240,575
(1,240,575)

Profit or loss (118,609,823) (554,922)
Revenue/Insurance premium revenue 58,249,370 -
Cost of sales/Insurance claims incurred
Other income 118,527,152 554,922
Operating expenses (36,675,690) -
Acquisition costs (21,491,009) -

Statement of cash flow (398,106) (18,034,122)
Net cash from operating activities 6,875,119 665,029
Net cash from investing activities (3,765,109) (20,678)
Net cash from financing activities (2,711,904)
Total cash at the end of the year 17,389,771

59 PGC Annual Report | 2014 111111

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

45. Risk management

The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to
provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.

The capital structure of the group consists of debt, which includes the borrowings disclosed in notes 9, 19 & 20 cash and cash
equivalents disclosed in note 15, and equity as disclosed in the statement of financial position.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholder,
return capital to shareholder, issue new shares or sell assets to reduce debt.

Long-term insurance risk

Workers Life Assurance Company Limited is exposed to a variety of risks including insurance related risk, such as mortality,
morbidity and lapse risk. This section contains a summary of the terms and conditions of products sold and provides further
background for an understanding of the business and its related risks.

Terms and conditions of the products

Linked group products
These are pure linked investment contracts that pay out the account balance at maturity.

Linked individual products
The general structure of the business is as follows:
 A portion of the premiums paid in respect of these policies is used to meet the cost of administering the

policy,providing rider benefits and covering any profit criterion. The balance is invested with an investment
manager.
 The gross premium less the risk premium for life cover and ancillaries (riders), administration fees and commission is
deposited in an investment account and used to purchase units based on unit prices at the purchase date. There is
an annual management charge based on a percentage of the fund value. There are monthly investment management
fees calculated based on the performance of the investments.
On death, before the maturity date, the amount payable will be the greater of the sum assured and the investment
account less any debt against the policy.
On maturity, the balance on the investment account is payable. There is a continuation option. In addition to the
above, optional disability, accident and dread disease cover riders are available.

Group individual funeral business
This is funeral business, providing a death benefit in respect of lives assured. There are limitations regarding maximum age
at entry and maximum initial covers for various groups of beneficiaries.

111122 Non-linked individual products
PGC Annual Report | 2014Term assurance
Premiums are guaranteed and may be payable monthly, quarterly, half-yearly or annually. Premiums cease at the age pf the

account less any debt against the policy.
On maturity, the balance on the investment account is payable. There is a continuation option. In addition to the
above, optional disability, accident and dread disease cover riders are available.

Group individual funeral business
This is funeral business, providing a death benefit in respect of lives assured. There are limitations regarding maximum age
at entry and maximum initial covers for various groups of beneficiaries.

Non-linked individual products

Term assurance
Premiums are guaranteed and may be payable monthly, quarterly, half-yearly or annually. Premiums cease at the age pf the
policy term. The sum assured is payable on death within the policy term.

Mortgage protection
Mortgage products are specifically designed for the purpose of cessioned cover for mortgage loans. The product is designed
with built-in reducing term, to take the fact that the loan decreases as the mortgage loan ages into account. Different
variations of this product offer a combination of disability, accident and dread disease ancillary benefits.

Waiver of premium benefits and family funeral benefits are available as optional riders on either linked or non-linked
business.

Popcru Group of Companies Proprietary Limited 111133

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements 60

45. Risk management (continued)
Capital risk management
Externally imposed capital requirements are set and regulated by the Financial Services Board. These requirements are put
in place to ensure sufficient solvency margins. Further objectives are set by the group to maintain a strong credit rating and
healthy capital ratios in order to support its business objectives and maximise shareholders value.
The group manages its capital (shareholders' equity) requirements by assessing shortfalls between reported and required
capital levels on a regular basis. Adjustments to current capital levels are made in light of changes in economic conditions
and risk characteristics of the company's activities.
The group fully complied with the externally imposed capital requirements during the reported financial periods and no
changes were made to its capital base, objectives, policies and processes from the previous year.

Financial risk management
Fair value
The carrying amounts of the company's financial instruments approximates their fair values.
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with the financialPGC Annual Report | 2014
instruments. The following policy and procedures are in place to mitigate the company's exposure to liquidity risk.

The group fully complied with the externally imposed capital requirements during the reported financial periods and no
changes were made to its capital base, objectives, policies and processes from the previous year.

Financial risk management
Fair value
The carrying amounts of the company's financial instruments approximates their fair values.
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with the financial
instruments. The following policy and procedures are in place to mitigate the company's exposure to liquidity risk.
Company liquidity risk is managed by holding financial assets for which there is a liquid market and holding deposits at
recognised financial institutions to meet any negotiated upcoming liquidity requirements. There has been no change in the
group's liquidity risk management policy.
Maturity profiles
The table below summaries the maturity profiles of the financial liabilities of the company based on remaining undiscounted
contractual obligations.

At 28 February 2014 Up to a year* Total
Trade and other payables 35,876,804 35,876,804
Policyholder liabilities 16,330,517 16,330,517
Insurance contract liabilities 21,232,991 21,232,991
Bank overdraft 789,243
Amounts payable to related parties 930 789,243
Loans from related parties 1,307,029 930

75,537,514 1,307,029
75,537,514

At 28 February 2013 Up to a year* Total
Trade and other payables 44,970,965 44,970,965
Policyholder liabilities 13,851,647 13,851,647
Insurance contract liabilities 17,345,833 17,345,833
Bank overdraft 137,104
Amounts payable to related parties 128,547 137,104
128,547
76,434,096 76,434,096

*Up to a year includes all commitments which are either due within the time frame or are payable on demand.

61

111144 PGC Annual Report | 2014

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

45. Risk management (continued)
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risk: market interest rates (interest rate risk), foreign exchange rates
(currency risk) and market prices (price risk).
The group's risk policy sets out the assessment and determination of what constitutes market risk for the group. Compliance
with the policy is monitored and exposure and breaches are reported.
Market risk is monitored by the directors on a quarterly basis.
Interest rate risk
As the group has no significant interest-bearing assets, the group’s income and operating cash flows are substantially
independent of changes in market interest rates.
The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash
flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk.

Cash and cash equivalents Change in 2014 2013
Interest rate increase variables 949,371 943,374
Interest rate decrease (949,371) (943,374)
1%
-1%

Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates.

The group transacts in Rands and therefore is not exposed to foreign currency risk.

PGC Annual Report | 2014 111155

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

45. Risk management (continued)

Price risk

Price risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in
market prices (other than those arising from interest rate or currency risk).

The table below summarises the impact of increases/decreases of the indexes on the group's post-tax profit for the year and
on equity. The analysis is based on the assumption that the equity indexes has increased/decreased by 10 - 20% with all
other variables held constant and all the group's equity instruments moved according to the historical correlation with the
index:

Group

` Impact on post tax profit in Impact on post tax profit in
Rand - 10% Rand - 20%
Financial instrument 2014 2013 2014 2013
Collective investments 2,728,879 2,319,512 5,457,757 4,639,025

Fair value hierarchy

As at 28 February 2014, Workers Life Assurance Company Limited held financial instruments measured at fair value:

The company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
techniques:

Level 1:
Quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:
Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly, (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level 3:
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Assets measured at fair value 2014 Level 1 Level 2 Level 3
Investments at fair value through profit or loss R R R R
- -
27,288,788 27,288,788

Assets measured at fair value 2013 Level 1 Level 2 Level 3
R R R R
Investments at fair value through profit or loss - -
111166 PGC Annual Report | 2014 23,195,124 23,195,124

prices) or indirectly (i.e. derived from prices); and
Level 3:
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Assets measured at fair value 2014 Level 1 Level 2 Level 3
Investments at fair value through profit or loss R R R R
- -
27,288,788 27,288,788

Assets measured at fair value 2013 Level 1 Level 2 Level 3
Investments at fair value through profit or loss R R R R
- -
23,195,124 23,195,124

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

Consolidated Separate

Figures in Rand 2014 2013 2014 2013

45. Risk management (continued)

Credit risk

This risk arises from the inability or unwillingness of a counter party to a financial instrument to discharge its contractual
obligations.
The group seeks to avoid unacceptable concentration of cred6it3risk to groups of counter parties, to business sectors, product
types, etc. Amounts receivable in terms of long term insurance business are secured by the underlying value of the unpaid
policy benefits in terms of the policy contract. Exposure to outside financial institutions concerning deposits and similar
transactions are monitored against approved limits.

No assets are considered to have a significant credit risk and none are classified as impaired or "past due". The company
policy is to deposit cash surpluses with major banks and financial institutions of high quality credit standing.

Credit exposure:
The table below shows the maximum exposure to credit risk for the components of the Statement of Financial Position items:

Trade and other receivables 38,423,100 24,436,968 627,337 2,177,475
Amounts receivable from related parties - - 1,644,474 149,225
Cash and cash equivalents 1,197,107
101,243,907 84,563,496 3,468,918 1,888,553
139,667,007 109,000,464 4,215,253

Group exposure Fitch rating Exposure Group - 2014 Group - 2013
Institution AAA percentage
ABSA Bank Limited AA 11.46% 11,604,119 5,891,121
FirstRand Bank Limited A+ 4.12% 4,170,478 3,425,435
Investec Private Bank AA- 16.76% 16,964,743 24,393,954 111177
JP Morgan Limited AA 6.05% 6,127,692 - PGC Annual Report | 2014
Nedbank Limited
9.16% 9,277,564 331,875

Cash and cash equivalents 101,243,907 84,563,496 1,197,107 1,888,553
Group exposure 139,667,007 109,000,464 3,468,918 4,215,253
Institution
ABSA Bank Limited Fitch rating Exposure Group - 2014 Group - 2013
FirstRand Bank Limited AAA percentage
Investec Private Bank AA 11.46% 11,604,119 5,891,121
JP Morgan Limited A+ 4.12% 4,170,478 3,425,435
Nedbank Limited AA- 16.76% 16,964,743 24,393,954
Mercantile Bank Limited AA 6.05% 6,127,692 -
RMB Private Bank Limited AA- 9.16% 9,277,564 331,875
Sanlam Life Insurance Limited AA - 4,441
Standard Bank of South Africa Limited 0.01% 5,452 -
Cash on hand Unrated 17.76% 17,983,839 17,103,533
Trade receivables AA 34.62% 35,045,976 33,383,114
Company exposure 64,044 30,023
Institution Unrated 38,423,100 24,436,968
ABSA Bank Limited Unrated
FirstRand Bank Limited
Investec Private Bank 139,667,007 109,000,464
Rand Merchant Bank
Trade and other receivables Fitch Rating Exposure Company - Company -
Amounts receivable from related parties percentage 2014 2013

AAA 72.09% 863,093 104,359
AA 27.45% 328,562 30,292
A+
AA 0% - 1,748,450
Unrated 0.46% 5,452 5,452
Unrated 627,337
1,644,474 2,177,475
3,468,918 149,225

4,215,253

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements 64

45. Risk management (continued)

Insurance risk

Underwriting risks
This is the risk that actual mortality, morbidity and medical claims will exceed the expected claims.

These risks are managed through the Workers Life Assurance Company Limited's product development process and
underwriting policies to prevent anti-selection and ensure appropriate premium rates for substandard risks, adequate
reinsurance arrangements to limit exposure per individual, claims handling policy and adequate pricing and reserving.

111188 Regular actuarial investigations are also performed to assist in the timely identification of experience variations.
PGC Annual Report | 2014

Concentrations of insurance risk

Underwriting risks
This is the risk that actual mortality, morbidity and medical claims will exceed the expected claims.

These risks are managed through the Workers Life Assurance Company Limited's product development process and
underwriting policies to prevent anti-selection and ensure appropriate premium rates for substandard risks, adequate
reinsurance arrangements to limit exposure per individual, claims handling policy and adequate pricing and reserving.

Regular actuarial investigations are also performed to assist in the timely identification of experience variations.

Concentrations of insurance risk
The portfolio is well diversified and limits the exposure of Workers Life Assurance Company Limited in this regard.
Appropriate reinsurance treaties are in place with a number of reputable reinsurance companies to ensure that the
company's claims exposure is contained within the constraints implied by its capital adequacy requirements.

Economic Assumptions

Investment return
The investment return assumption for all classes of business, except those where the liability has a specific asset backing it,
was determined as the expected return on the underlying assets backing liabilities of the company less and allowance for
credit risk and a compulsory margin of 0.25%.

The following key long-term assumptions were assumed for each asset class (net of any credit risk premium):

Fixed interest government bonds 8.01%*
Cash 6.51%
Equities 11.51%
Property 9.01%
Unit trusts 11.51%
Fixed assets 0.00%
Net current asset 0.00%

*Based on a term of 3.36 years consistent with the discounted mean term of the non-unit linked business.

Inflation
The current assumed level of future expense inflation is 7.0% p.a., after adjusting for internal and external factors.

Taxation
Future taxation and taxation relief are allowed for at the rates and on the bases applicable to Section 29A of the Income Tax
Act at the reporting date. Workers Life Assurance Company Limited's current tax position is taken into account, and taxation
rates, consistent with that position and the likely future changes in that position, are allowed for.

Valuation assumptions

Individual Business

The liability for individual business was calculated by projecting all the expected future cash flows for each policy and
discounting them at the appropriate interest rate. The principles and assumptions can be summarised as follows:

PGC Annual Report | 2014 111199

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

45. Risk management (continued) 8% per annum net of tax (the Individual Policyholder Fund of the
General parameters Company id currently and for the foreseeable future in a tax loss
Investment return position)
8.1% per annum
Unit growth rate 7% per annum
Expense inflation These were allowed for in addition to the assumptions as per the
Compulsory margins Actuarial Society of South Africa's Standard of Actuarial Practice SAP104
(version 8)
Linked Individual Business
Expenses R381.10 per policy per annum
Mortality
Other morbidity riders 100% of SA85-90
AIDS
10% of the charge was projected to be released as a profit
Management fees
Withdrawals 115% of the ASSA 2003 Light AIDS model tables were used in calculating
the AIDS reserve
Non-linked Individual Business
Expenses As per the policy designs
Mortality
Other morbidity riders Year 1 : 30% per annum
Funeral riders Year 2 : 20% per annum
AIDS Thereafter : 15% per annum
112200 PGC Annual Report | 2014Withdrawals/Lapses
R381.10 per policy per annum

100% of SA85-90

In-house tables

Experience was modelled as 100% of SA1985-90

115% of the ASSA 2003 Light AIDS model tables were used in calculating
the AIDS reserve

Year 1 : 30% per annum
Year 2 : 20% per annum

Mortality 100% of SA85-90

Other morbidity riders In-house tables

Funeral riders Experience was modelled as 100% of SA1985-90

AIDS 115% of the ASSA 2003 Light AIDS model tables were used in calculating
the AIDS reserve

Withdrawals/Lapses Year 1 : 30% per annum
Year 2 : 20% per annum
Thereafter : 15% per annum

Group Individual Funeral Business

For Group Individual Funeral business, the reserve has been calculated as an IBNR reserve. This actuarial reserve has been
determined by examining run-off triangles and claim patterns for the business and then setting up a reserve for claims
Incurred But Not Reported (commonly referred to as an IBNR reserve) based on the Bornhuetter-Ferguson method. Our
reserving assumptions are outlined below.

The Bornhuetter-Ferguson method (B-F Method) of estimating outstanding claims combines an estimated loss ratio method
with a projection method. Here, "projection method" refers to methods such as the basic chain ladder method which are
based on past claim amounts and/or numbers.

The B-F Method therefore improves on the sole use of a loss ratio method by taking account of the information provided by
the latest development pattern of the claims, whilst the addition of the loss ratio to a projection method method serves to
add some stability against distortions in the development pattern.

66

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

45. Risk management (continued)

The concepts behind the method are:

 Whatever claims have already developed in relation to a given event month, the future development pattern will
follow that experience for other event months.

 The past development for a given event month does not necessarily provide a better idea of future claims than a
more general loss ratio estimate.

The method typically gives more weight to a chain ladder method estimate for the earlier (and more developed) event
months. For the more recent event months, the technique gives more weight to the loss ratio estimates.

The B-F Method leads to the following approach to the calculation of IBNR claim reserves:

Step 1 - Determine the initial estimate of the total ultimate claims from each event month. PGC Annual Report | 2014 112211
Step 2 - Divide these estimates by ultimate projection factors determined using the basic chain ladder method,
from a claims development table. These are effectively estimates of the claims that should have

follow that experience for other event months.

 The past development for a given event month does not necessarily provide a better idea of future claims than a
more general loss ratio estimate.

The method typically gives more weight to a chain ladder method estimate for the earlier (and more developed) event
months. For the more recent event months, the technique gives more weight to the loss ratio estimates.

The B-F Method leads to the following approach to the calculation of IBNR claim reserves:

Step 1 - Determine the initial estimate of the total ultimate claims from each event month.
Step 2 - Divide these estimates by ultimate projection factors determined using the basic chain ladder method,
Step 3 - from a claims development table. These are effectively estimates of the claims that should have
developed to date.
Subtract these amounts from the corresponding total ultimate claims figures to give an estimate of the
amount of claims that are yet to develop. This gives the IBNR reserve.

It is assumed that the initial loss ratio will be around 75%. Furthermore, it is assumed that premium rates will be increased
timeously in the case of adverse mortality experience.

The IBNR set up for the Group Individual Funeral business equates to approximately one month's claim.

Additional reserves

A claims handling expense reserve of 7.5% of the Group Individual Funeral Reserves was set up.

To ensure that no policy is treated as an asset, negative reserves were eliminated.

A data contingency reserve was maintained for the individual Life data.

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

45. Risk management (continued)

Sensitivity to changes in the valuation assumptions

The sensitivity of the insurance liabilities to the main assumptions was tested by calculating the effect of certain
assumptions not being met.

The following sensitivities were tested:
 Increasing renewal expenses by 10%;
 Increasing inflation by 1% (absolute change in rate);
 Reducing the assumed rate of investment by 1% (absolute change in rate);
 Increasing claims by 10%; and
 Increasing withdrawals 10%.

112222 The results of the sensitivity analysis on the actuarial liabilities (PBR) for insurance contracts, can be summarised as follows:

PGC Annual Report | 2014 2014 Percentage 2013 Percentage

R '000 change % R '000 change %

The following sensitivities were tested:
 Increasing renewal expenses by 10%;
 Increasing inflation by 1% (absolute change in rate);
 Reducing the assumed rate of investment by 1% (absolute change in rate);
 Increasing claims by 10%; and
 Increasing withdrawals 10%.

The results of the sensitivity analysis on the actuarial liabilities (PBR) for insurance contracts, can be summarised as follows:

Main basis 2014 Percentage 2013 Percentage
Expenses plus 10% R '000 change % R '000 change %
Inflation plus 1%
Investment return less 1% 12,643 - 11,116 -
Claims plus 10% 12,740 0.8 11,223 1.0
Withdrawals plus 10% 12,664 0.2 11,143 0.2
12,691 0.4 11,176 0.5
13,349 5.6 111,745 5.7
12,578 (0.5) 11,040 (0.7)

The above figures combine discounted and undiscounted liabilities.
The investment contracts are not sensitive to changes in assumptions since they are valued retrospectively i.e. a minimum of
the account balance is held.
46. Going concern
The directors believe that the company has adequate financial resources to continue in operation for the foreseeable future
and accordingly the consolidated and separate financial statements have been prepared on a going concern basis. The
directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient
borrowing facilities to meet its foreseeable cash requirements. The directors are not aware of any new material changes that
may adversely impact the directors. The directors are also not aware of any material non-compliance with statutory or
regulatory requirements or of any pending changes to legislation which may affect the company.
47. Events after the reporting period
Subsequent to the financial year end, the group gained on its investment in Protea Hospitality Holdings Proprietary Limited
from the disposal of the business to Marriott International. As part of the transaction, the previous owners of Protea
Hospitality Group created an independent property ownership company that retained ownership of the hotels Protea
Hospitality Group formerly owned, and entered into long-term management and lease agreements with Marriott for those
hotels. The property ownership company also retained a number of minority interests in other Protea hotels.
The company will realise these assets over the next five years further enhancing the cashflow and profitability of the
company.
This will have a substantial influence on the profitability and sustainability of the group.
The company received a dividend amounting to R40 828 624 as a result of the sale of business of Protea Hospitality Holdings
Proprietary Limited.
On 1 May 2014, Workers Life Insurance Limited terminated its underwriting management agreement with Constantia
Insurance Company Limited following the approval of the variation license by the Financial Services Board.

PGC Annual Report | 2014 112233

68

The company received a dividend amounting to R40 828 624 as a result of the sale of business of Protea Hospitality Holdings
Proprietary Limited.
On 1 May 2014, Workers Life Insurance Limited terminated its underwriting management agreement with Constantia
Insurance Company Limited following the approval of the variation license by the Financial Services Board.

Popcru Group of Companies Proprietar6y8 Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Notes to the financial statements

47. Events after the reporting period (continued)
The directors are not aware of any significant matter or circumstance arising since the end of the financial year, not
otherwise dealt with in the consolidated consolidated and separate financial statements, which significantly affect the
financial position of the group or the results of its operations to the date of this report.

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Statement of actuarial values of assets and liabilities

1. Excess Assets

The excess of assets over liabilities on the Published Reporting Basis is shown in the table below:

Balance sheet assets * 28 February 28 February
Deferred acquisition costs 2014 2013 **
Total assets R'000 R'000
Less: Liabilities 81,223 71,807
- -
Actuarial liabilities 81,223 71,807
Other policyholder liabilities
Current liabilities 12,643 11,116
Deferred tax liability 3,688 2,736
Total liabilities
Excess of assets over liabilities 23,897 22,050
112244 PGC Annual Report | 2014* Gross of current liabilities. 609 429

40,837 36,331
40,386 35,476

Less: Liabilities 12,643 11,116
Actuarial liabilities 3,688 2,736
Other policyholder liabilities
Current liabilities 23,897 22,050
Deferred tax liability 609 429

Total liabilities 40,837 36,331
Excess of assets over liabilities 40,386 35,476

* Gross of current liabilities.

** The AFS was revised after finalisation of last year’s valuation report; however, the financial position remained
unchanged.

The excess of assets over liabilities on the Statutory Basis is shown in the table below:

Balance sheet assets * 28 February 28 February
Disallowed assets 2014 2013 **
Statutory assets R'000 R'000
Less: Liabilities 81,223 71,807
- -
Actuarial liabilities 81,223 71,807
Current liabilities
Deferred tax liability 16,330 13,850
Total liabilities 23,897 22,050
Excess of assets over liabilities
Capital adequacy requirement (CAR) 609 429
CAR ratio 40,836 36,329
40,387 35,478
13,870 12,894

291 275

* Gross of current liabilities.
** The AFS was revised after finalisation of last year’s valuation report; however, the financial position remained

unchanged.

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Statement of actuarial values of assets and liabilities

In terms of Sections 29 and 31(1)(c) of the Long-term Insurance Act, the financial position of the Company on the SVM after
taking into account the asset spreading limitations (as per draft Statement E11 of the LT2014 Statutory Returns) is
summarised below:

70 28 February 28 February
2014 2013 ***
R'000 R'000
Balance sheet assets * 81,223 71,807 112255
Less: Disallowed assets - - PGC Annual Report | 2014
Less: Asset spreading restrictions ** -
(17,540)

In terms of Sections 29 and 31(1)(c) of the Long-term Insurance Act, the financial position of the Company on the SVM after
taking into account the asset spreading limitations (as per draft Statement E11 of the LT2014 Statutory Returns) is
summarised below:

Balance sheet assets * 28 February 28 February
Less: Disallowed assets 2014 2013 ***
Less: Asset spreading restrictions ** R'000 R'000
Statutory assets 81,223 71,807
Less: Liabilities - -
- (17,540)
Actuarial liabilities 81,223 54,267
Current liabilities
Deferred tax liability 16,330 13,850
Total liabilities 23,897 22,050
Excess of assets over liabilities
Capital adequacy requirement (CAR) 609 429
CAR ratio 40,836 36,329
40,387 17,938
13,870 12,894

291 139

* Gross of current liabilities.

** As informed by Management, the FSB approved the Company’s application for exemption to exceed the individual
limitation of 20% per banking institution (as per Regulation 2.2 of the Act) and may invest up to 100% of non-linked
liabilities and CAR in Standard Bank Limited. This exemption is valid until 28 February 2015.

*** The AFS was revised after finalisation of last year’s valuation report; however, the financial position remained
unchanged.

2. Analysis of Change in Excess Assets on the Published Reporting Basis

The abbreviated analysis of the change from the previous reporting period in the Excess Assets on the Published Reporting
Basis is shown below:

Excess Assets at the beginning of reporting period Year ending Year ending
Excess Assets at end of reporting period 28 February 28 February
Change in Excess Assets Over the Reporting Period
The change in excess assets is due to the following factors: 2014 2013
Investment income on excess assets R'000 R'000
Capital appreciation on excess assets
Total Investment return on excess assets 35,476 40,965
Operating profit/(loss) 40,386 35,476
Changes in valuation methods or assumptions 4,910 (5,489)
Tax
Total Earnings 1,098 1,780
Dividends paid 1,473 801
112266 PGC Annual Report | 2014Total Change in Excess Assets 2,571
9,533 2,581
21,448
(398) (2,531)
(3,796) (5,987)
7,910 15,511
3,000 21,000
4,910 (5,489)

Capital appreciation on excess assets 1,473 801
Total Investment return on excess assets 2,571 2,581
Operating profit/(loss) 9,533 21,448
Changes in valuation methods or assumptions (2,531)
Tax (398) (5,987)
Total Earnings (3,796) 15,511
Dividends paid 7,910 21,000
Total Change in Excess Assets 3,000 (5,489)
4,910

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Statement of actuarial values of assets71and liabilities

3. Reconciliation of Excess Assets to Reported Earnings

The change in the excess of assets over liabilities in this statement on the Published Reporting Basis reconciles to the net
income of the life operations as follows:

Net profit/(loss) per financial statements 28 February 28 February
Transfer to Non-distributable reserve 2014 2013
R'000 R'000
4,910 (5,489)
- -
4,910 (5,489)

4. Reconciliation of Excess Assets between Published Reporting Basis and the Statutory Basis

The Excess Assets shown on the Published Reporting Basis reconciled to those shown for Statutory Reporting Basis as follows:

Excess Assets on Published Reporting Basis 28 February 28 February
IFRS treatment of Investment Business 2014 2013
Disallowed Assets R'000 R'000
Excess Assets on Statutory Basis 40,386 35,476
1 2
- -
40,387 35,478

5. Change in Published Reporting Valuation Method and Assumptions

The following main methodology and valuation assumption changes (before allowing for compulsory margins) were made
since the last valuation:
 The valuation interest rate has been decreased from 5.25% p.a. to 8.0% p.a. for non-unit linked liabilities and
increased from 6.6% p.a. to 8.1% p.a. for unit linked liabilities;
 Expected future inflation has been revised from 5.56% p.a. to 7.0% p.a.; and,
 Renewal expenses per policy increased with inflation from R361.03 p.a. to R381.10 p.a. per policy (this is not a
basis change); and, 112277
 The Data Contingency Reserve increased from R2.5 million to R3.0 million for the Individual Life business. PGC Annual Report | 2014

5. Change in Published Reporting Valuation Method and Assumptions
The following main methodology and valuation assumption changes (before allowing for compulsory margins) were made
since the last valuation:

 The valuation interest rate has been decreased from 5.25% p.a. to 8.0% p.a. for non-unit linked liabilities and
increased from 6.6% p.a. to 8.1% p.a. for unit linked liabilities;

 Expected future inflation has been revised from 5.56% p.a. to 7.0% p.a.; and,
 Renewal expenses per policy increased with inflation from R361.03 p.a. to R381.10 p.a. per policy (this is not a

basis change); and,
 The Data Contingency Reserve increased from R2.5 million to R3.0 million for the Individual Life business.
6. Published Reporting Valuation Method and Assumptions
The assets and liabilities of Workerslife Assurance Limited have been calculated and disclosed in accordance with the
Actuarial Society of South Africa’s Standards of Actuarial Practice and Advisory Practice Notes and in particular APN103
(version 6) and SAP104 (version 8). Assets and liabilities were valued on consistent bases. The valuation is a gross premium
method of valuation. Where policy values are linked to the value of underlying units, the reserve has been set equal to the
sum of the value of the Investment Account and a Rand Reserve allowing for, inter alias, expenses, risk benefits, risk charges
and management fees.
Valuation assumptions regarding future mortality, morbidity, expenses and yields are based on prudent best estimates taking
into account the Company’s current and expected future experience (where possible) and allowing for any specific
conditions of various policy classes.
For the majority of non-linked liabilities (Group Individual business), Incurred But Not Reported Reserves have been
established. For the balance of the liability, the liability has been based on cashflow projections on the assumptions
contained in Note 7 below.

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Statement of actuarial values of assets and liabilities

7. Published Reporting Liability Valuation Method and Ass7u2mptions

Insurance Contracts

The valuation of the policy liabilities in respect of insurance business was conducted on a basis consistent with the valuation
of the assets.

Compulsory margins have been allowed for as outlined in the Actuarial Society of South Africa’s Standard of Actuarial
Practice – SAP104 (version 8). The following additional discretionary margin was established:

 No policy was treated as an asset. The reserve in this regard amounted to R0 (R54 as at 28 February 2013).

Specific allowance has been made for the expected deterioration in mortality and morbidity experience due to AIDS and HIV
infection.

A Data Contingency Reserve was determined for the Individual Life business.

For Group Individual business, Incurred But Not Reported reserves have been established based on the Bornhuetter-Ferguson
method.
112288 PGC Annual Report | 2014

For the balance of the insurance business, cashflows have been utilised, taking into account expected mortality, expenses,
market related investment returns and current approved reinsurance arrangements. The main assumptions for business

 No policy was treated as an asset. The reserve in this regard amounted to R0 (R54 as at 28 February 2013). 112299
Specific allowance has been made for the expected deterioration in mortality and morbidity experience due to AIDS and HIV
infection.
A Data Contingency Reserve was determined for the Individual Life business.
For Group Individual business, Incurred But Not Reported reserves have been established based on the Bornhuetter-Ferguson
method.
For the balance of the insurance business, cashflows have been utilised, taking into account expected mortality, expenses,
market related investment returns and current approved reinsurance arrangements. The main assumptions for business
valued on a prospective cashflow basis, before allowing for compulsory margins, were as follows (figures for the previous
valuation are shown in brackets):

 A risk-free interest rate of 8.0% (5.25%) per annum was utilised (this is based on a DMT of 3.36 years);
 The expense allowance for the year after the valuation date was R381.10 (R361.03) per policy (this is based on

recent experience), inflating at 7.0% (5.56%) per annum; and,
 Withdrawals were allowed for based approximately on recent market experience for similar products.
Investment Contracts without Discretionary Participation Features
In the calculation of liabilities for the investment contracts, the greater of the account balance and the reserve calculated
on a prospective basis has been held as the value of the liability. No negative Rand reserves have thus been held for these
contracts.
8. Published Reporting Asset Valuation Method and Assumptions
All assets have been taken at balance sheet values as described in the accounting policies.
9. Statutory Capital Adequacy Requirement
The Statutory Capital Adequacy Requirement (CAR) is the additional amount required, over and above the actuarial liabilities
on the statutory basis, to enable Workerslife Assurance Limited to meet material deviations in the main parameters affecting
the life assurer’s business. The CAR was calculated according to the Standard of Actuarial Practice (SAP104) issued by the
Actuarial Society of South Africa.
For the purposes of grossing up the Intermediate Ordinary Capital Adequacy Requirements (IOCAR) to determine the OCAR, it
has been assumed that assets backing the CAR have the same asset spread as the excess of assets over the liabilities.
The Ordinary Capital Adequacy Requirement (OCAR) exceeded the Minimum Capital Adequacy Requirement (MCAR) as well as
the Termination Capital Adequacy Requirement (TCAR) and thus the CAR has been based on the OCAR.
Hence, the CAR of Workerslife Assurance Limited, as at 28 February 2014 was R13.87 million. As the excess of assets over
liabilities, on the Statutory Valuation Method, is R40.4 million, this equates to a CAR ratio of 291% before considering asset
spreading restrictions.
10. Excess of Assets over Liabilities
The excess of assets over liabilities reflects the financial position of the Company based on the methodology used and the
assumptions assumed. In terms of current legislation the excess on the Statutory Basis must cover the Capital Adequacy
Requirement.

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PGC Annual Report | 2014

Popcru Group of Companies Proprietary Limited

(Registration number 2004/024657/07)
Consolidated and separate financial statements for the year ended 28 February 2014

Statement of actuarial values of assets and liabilities

11. Report by the Statutory Actuary
 It should be noted that the data issues on the Individual Life business persists and that various assumptions were
made regarding the incomplete data and do not guarantee the completeness nor integrity of the data. Although a
conservative approach was taken to create a complete database, it should be noted that the solvency of the
Company is dependent on the assumptions made, the actuarial liabilities and the information received pertaining
to the data build-up. The Auditors were unable to verify the accuracy and completeness of neither the data nor
the unit prices. The same data qualifications as stipulated in the Financial Statements therefore carry over to the
calculation of the actuarial liabilities. We have valued the Individual Life business on the data received and have
also set up a data contingency reserve. We recommend that a data clean-up is performed before the next year-
end valuation. We also recommend an asset-liability matching exercise be carried out and the investment policy of
the Company be reviewed.

I hereby certify that:
 The valuation on the Statutory Basis of Workerslife Assurance Company Limited as at 28 February 2013, the results
of which are summarised above, has been conducted in accordance with, and this Statutory Actuary’s Report has
been produced in accordance with, applicable Actuarial Society of South Africa’s Actuarial Standards and Advice;
 In terms of the Statutory Valuation Method, Workerslife Assurance Company Limited has assets exceeding the
liabilities and Capital Adequacy Requirement as at 28 February 2013 before considering asset spreading
restrictions;
 In terms of Section 31(c) of the Long-term Insurance Act of 1998, some of Workerslife Assurance Company
Limited’s assets exceed the maximum allowable level. The disallowed assets in terms of asset restrictions
amounted to approximately R15 million as at 28 February 2014; these pertained mainly to overexposure of cash
investments pertaining to their trading account at Standard Bank. However, the regulator approved the
Company’s application for exemption to exceed the individual limitation of 20% per banking institution (as per
Regulation 2.2 of the Act) and may invest up to 100% of non-linked liabilities and CAR in Standard Bank Limited.
Hence, Workerslife Assurance Company Limited was financially sound as at 28 February 2014 as the assets are
sufficient to cover the liabilities and the CAR as required per Section 31(c) of the Long-term Insurance Act of 1998.
Therefore, Workerslife Assurance Company Limited was financially sound as at 28 February 2013 in terms of
Section 29 of the Act;
 We recommend that the Company maintain a CAR ratio after asset spreading restrictions of at least 200%.
Management should also consider the impact of future regulatory changes such as SAM when determining their
internally targeted CAR ratio. The latest SA QIS3 results indicate that the capital requirement approximately
doubled without much change to the excess assets available to cover the solvency capital requirement;
 In order for Workerslife Assurance Company Limited to remain financially sound, it is important that the asset
spreading restrictions and experience (claims and expenses) are monitored regularly and remedial action taken
where necessary; and,
 My statement on the financial position of Workerslife Assurance Company Limited is subject to the same Auditors’
qualification as disclosed in the Financial Statements. The financial position of the Company may be restated
upon resolution of the impending claims pertaining to the profit share and sub-administration and facility fee
agreements.

R I Chauhan
Statutory Actuary
113300 PGC Annual Report | 2014Fellow of the Actuarial Society of South Africa

I hereby certify that:
 The valuation on the Statutory Basis of Workerslife Assurance Company Limited as at 28 February 2013, the results
of which are summarised above, has been conducted in accordance with, and this Statutory Actuary’s Report has
been produced in accordance with, applicable Actuarial Society of South Africa’s Actuarial Standards and Advice;
 In terms of the Statutory Valuation Method, Workerslife Assurance Company Limited has assets exceeding the
liabilities and Capital Adequacy Requirement as at 28 February 2013 before considering asset spreading
restrictions;
 In terms of Section 31(c) of the Long-term Insurance Act of 1998, some of Workerslife Assurance Company
Limited’s assets exceed the maximum allowable level. The disallowed assets in terms of asset restrictions
amounted to approximately R15 million as at 28 February 2014; these pertained mainly to overexposure of cash
investments pertaining to their trading account at Standard Bank. However, the regulator approved the
Company’s application for exemption to exceed the individual limitation of 20% per banking institution (as per
Regulation 2.2 of the Act) and may invest up to 100% of non-linked liabilities and CAR in Standard Bank Limited.
Hence, Workerslife Assurance Company Limited was financially sound as at 28 February 2014 as the assets are
sufficient to cover the liabilities and the CAR as required per Section 31(c) of the Long-term Insurance Act of 1998.
Therefore, Workerslife Assurance Company Limited was financially sound as at 28 February 2013 in terms of
Section 29 of the Act;
 We recommend that the Company maintain a CAR ratio after asset spreading restrictions of at least 200%.
Management should also consider the impact of future regulatory changes such as SAM when determining their
internally targeted CAR ratio. The latest SA QIS3 results indicate that the capital requirement approximately
doubled without much change to the excess assets available to cover the solvency capital requirement;
 In order for Workerslife Assurance Company Limited to remain financially sound, it is important that the asset
spreading restrictions and experience (claims and expenses) are monitored regularly and remedial action taken
where necessary; and,
 My statement on the financial position of Workerslife Assurance Company Limited is subject to the same Auditors’
qualification as disclosed in the Financial Statements. The financial position of the Company may be restated
upon resolution of the impending claims pertaining to the profit share and sub-administration and facility fee
agreements.

R I Chauhan
Statutory Actuary
Fellow of the Actuarial Society of South Africa
26 June 2014

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113322 PGC Annual Report | 2014