CLEARVIEW WEALTH LIMITED — Earnings Release 2019

Jul 17, 2019

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Market Release

18 July 2019

ClearView Preliminary Results, Business and Trading Update

ClearView Wealth Limited (ClearView ASX: CVW) has provided an update on its expected results for FY19 ahead of its FY19 results announcement, along with a strategic business update following a reset and refocusing of the business in 2H FY19. While its actual FY19 results are still being finalised and are subject to audit review, ClearView expects:

• Underlying NPAT[1] for year ended 30 June 2019 of $25.1m; this result includes $1.8m adverse impact on FY19 result from the change in income protection claims assumptions;

• Reported NPAT for year ended 30 June 2019 of $4.0m; positive impacts of a lower discount rate in policy liabilities (net of a change in CPI assumptions), offset by impairment write-off of Goodwill, Intangibles and other costs considered unusual to ordinary activities (see table below).

• Reset of expense, claims, lapse and discount rate assumptions for valuations and business management to take into account observed recent experience; removal of financial advice segment from Embedded Value calculations;

• Net impact of assumption and methodology changes of -$3.5m[2] on Embedded Value at 30 June 2019 with Embedded Value expected to be approximately $671.5m[3] at 30 June 2019; and

• Given that ClearView is now at a point of generating capital, it is actively considering, in light of the current share price, a share buyback program. This will be subject to market conditions and ClearView’s overall capital management strategy.

Operating Environment

FY19 has been a difficult year for the financial services industry. This includes the impact of the Royal Commission, progressively difficult emerging economic conditions, combined with increasing community (consumer and regulator) focus on prices in a lowering interest rate environment.

Over the past twelve to eighteen months, ClearView has not been immune to this. All of these have involved substantial costs and management distraction. The remediation programs are now substantially complete and being transitioned to business as usual functions. The business has been reset and refocused in 2H FY19:

• Completed a material cost transformation program and IT strategy review in 2H FY19;

• Terminated certain poor performing life insurance distribution relationships;

• Repriced and enhanced our life insurance and wealth management products;

• Reviewed our financial advice business strategy, dealer group pricing model and launched LaVista Licensee Solutions, a new dealer to dealer, licensee services offer; and

• Positioned the life insurance business to capitalise on opportunities arising from the breakdown of vertical integration and the opening up of APLs.

• Underlying Net Profit After Tax (NPAT) consists of consolidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy liabilities and costs considered unusual to the Group’s ordinary activities.

• Net impact made up of the following assumption and basis changes: -$28.3m for claims and lapses, +$9.8m for maintenance expenses, +$33m for adopting revised risk free rate of 2% and linked inflation rate, -$21.1m for reporting Financial Advice segment at net assets and +$3.1m other net changes. Calculated at 4% discount rate margin.

• Embedded Value at 4% discount rate margin, including a value for the future franking credits, accrued franking credits and Employee Share Plan (ESP) Loans. As with the other expected results, the Embedded Value at 30 June 2019 is approximate and an estimate as calculations are in the process of being finalised at the time of this announcement.

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MARKET RELEASE 18 JULY 2019

The overall impacts of key strategic decisions and actions on the expected FY19 result and key assumption changes are as follows:

	Preliminary FY19 Proft After Tax	Embedded Value Estimate4	Strategic Decision/ Action
Embedded Value (EV) – 31 December 2018 $671.0m EV as reported at halfyear result.
EV Roll Forward (including Unwind of Discount Rate, Value of New Business, Capital Items and Experience Items) $10.4m
FY19 Underlying NPAT/EV pre assumption changes – FY19 $26.9m $681.4m Underlying NPAT and Embedded Value prior to assumption changes.
Expense Assumption changes - $9.8m Material cost transformation program completed in 2H.
Claims Assumptions changes ($1.8m) ($10.9m) Based on observed experience, in particular incomeprotection claims.
Lapse Assumptions changes - ($17.4m) Terminated certain poor performing life insurance distribution relationships.
Other Assumption and Basis Changes (pre discount rate change) - $3.1m Other net changes in assumptions, predominantly related to commission changes.
Reported Underlying NPAT FY19/ EV post assumption changes – FY19 $25.1m $666.0m Adopting consistent risk free rate of 4% and linked infation rate as at 31 December 2018 with 4% discount margin for EVpurposes.
Risk free rate and CPI rate changes $6.6m $33.0m Lowering interest rate environment; alignment of risk free rate and infation assumptions (net impact). Adopting revised risk free rate of 2% and linked infation rate for EV as at 30 June 2019 with 4% discount margin.
Software Impairment ($6.0m) ($6.0m) IT strategy review - reinvigorated IT strategyand road map.
Financial Advice Client Books Impairment, Goodwill Impairment and FY19 Amortisation of Client Books ($14.1m) ($21.1m) Review of advice strategy and repositioning given structural change - now value segment at Net Assets in EV.
Royal Commission Costs/Direct Remediation program ($2.4m) ($0.5m) Costs associated with Direct Remediation and Royal Commission.
Restructure Costs ($3.8m) ($3.8m) Upfront costs associated with implementation of cost transformation program.
Retention Bonuses ($1.4m) - As disclosed in the FY18 Remuneration Report and reported at halfyear result.
FrankingCredits/ESP Loans at 30 June 2019 - $3.9m Net change betweenperiods.
Reported FY19 NPAT/EV Estimate as at 30 June 2019 $4.0m $671.5m3
EV per share (including ESP Loans/value of Franking credits) $0.97 - $1.00 Range provided given fnal EV calculations are in the process of being fnalised at time of announcement.

Further details will be provided with the release of the FY19 results announcement.

4 Profit results and analysis are for the 12 months to 30 June 2019, Embedded Value analysis and movements are for the 6 months to 30 June 2019. These are estimates at the date of this release and are subject to final review and audit finalisation.

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MARKET RELEASE 18 JULY 2019

Capital Management

Historically, the Board has paid dividends at sustainable levels and has a target payout ratio of between 40% and 60% of Underlying NPAT. Given the current share price, the Board believes that buying back shares is a better use of shareholder capital than dividends. Given this, the Board has decided to suspend the FY19 dividend and intends to institute a share buy back program in 1H FY20, following the formal announcement of the annual results. This will be subject to market conditions and ClearView’s capital management requirements.

FY19 Results Release and Investor Teleconference

ClearView advises that the final FY19 results are due to be released to the ASX before market opens on Thursday, 29 August 2019.

The results will be presented by Simon Swanson, Managing Director, and Athol Chiert, Chief Financial Officer and Company Secretary, on a teleconference at 9.30am on Thursday, 29 August 2019.

A live (passive) URL link to the teleconference will be available at http://www.openbriefing.com/OB/3383.aspx or www.clearview.com.au .

An archive of the event will be placed on the company’s website later that day.

ENDS

For further information, please contact:

Investor inquiries

Trevor Franz Principal, Catapult Partners M: 0406 882 736

Media inquiries

Leng Ohlsson Head of marketing and corporate affairs T: (02) 8095 1539 M: 0409 509 516

E: leng.ohlsson@clearview.com.au

Forward Looking Statements and Important Notices

This announcement may contain some references to forecasts, estimates, assumptions and other forward-looking statements. Although the Company believes that its expectations, estimates and forecast outcomes are based on reasonable assumptions, it can give no assurance that they will be achieved. All numbers in this announcement are under review by external auditors and based on management accounts at the time of release. All references to dollars ($) and cents in this announcement are to Australian currency, unless otherwise stated.

Investors should make and rely upon their own enquiries before deciding to acquire or deal in the Company’s securities.

About ClearView

ClearView is an ASX-listed diversified financial services company which partners with financial advisers to help Australians protect and build their wealth, achieve their goals and secure a comfortable financial future. The group’s three business segments: Life Insurance, Wealth Management and Financial Advice are focused on delivering quality products and services.

Additional information is available at www.clearview.com.au .

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