Chairperson: Dr RV Simelane Chief Executive & Registrar: Dr M Gantsho Block E Hadefields Office Park 1267 Pretorius Street Hatfield Pretoria 0028

Tel: 012 431 0500 Fax: 012 430 7644 Customer Care: 0861 123 267 Information@medicalschemes.com www.medicalschemes.com

Quarterly Reports for the Period ending 30 September 2011

January 2012

Page 2

Table of Contents

INTRODUCTION ................................................................................................................................................................................. 3

REGULATION 29: MINIMUM ACCUMULATED FUNDS .................................................................................................................... 6

SOLVENCY RATIO GRAPH ............................................................................................................................................................... 7

PRESCRIBED SOLVENCY LEVELS AND NUMBER OF BENEFICIARIES GRAPH ......................................................................... 8

NET ASSETS PER REGULATION 29 GRAPH ................................................................................................................................... 9

INCOME STATEMENT DETAILS ..................................................................................................................................................... 10

BALANCE SHEET DETAILS ............................................................................................................................................................. 11

NUMBER OF BENEFICIARIES GRAPH ........................................................................................................................................... 13

DETAILED FINANCIAL INFORMATION: ACTUAL V BUDGET ........................................................................................................ 14

TOTAL NON-HEALTH EXPENDITURE GRAPH .............................................................................................................................. 15

NET RELEVANT HEALTHCARE EXPENDITURE RATIO: RISK BENEFITS GRAPH ..................................................................... 16

Page 3

INTRODUCTION This report represents the results of the analysis of the quarterly statutory returns for the period ended 30 September 2011. Budget information for the third quarter of 2011 is also provided for comparative purposes. This report reflects consolidated industry data only, as data on an individual scheme level has not been audited and could therefore not be made available to the public. Please note that due to non-availability of information, there is one large medical scheme that has been excluded from this report. CMS provides no assurance on reliability of budget figures contained in this report.

Page 4

Monitoring the financial performance and soundness of medical schemes – a brief summary of the most important trends Accumulated funds and solvency levels

The overall industry average solvency level decreased by 4.1% from the audited solvency level of 31.6% at 31 December 2010 to 30.3% at 30 September 2011. This is mostly attributable to the benefit designs and seasonality of claims patterns of the medical schemes and the fact that solvency is calculated on annualised gross contributions.

Total reserves per Regulation 29 for all medical schemes amounted to R32.3 billion at 30 September 2011, which was 5.2% higher than the reserves of R30.7 billion as at 31 December 2010.

The solvency level at 30 September 2011 was 3.2% higher than the budgeted solvency level of 29.4% for the same period.

On an industry level, the solvency level exceeded the required minimum level of 25.0%, as per Regulation 29(1) of the Medical Schemes Act 131 of 1998, for both open and restricted schemes.

The 9 (2010: 12) open schemes that failed to meet the prescribed solvency level at 30 September 2011 represent 60.1% (2010: 60.6%) of the total open schemes’ beneficiaries.

Only 6 (2010: 7) restricted schemes were below 25.0%.

The net asset value (per Regulation 29) per beneficiary increased with 4.3% from R3 690.5 at 31 December 2010 to R3 850.0 at 30 September 2011. The net asset value per beneficiary at 30 September 2011 was 2.9% higher than the budgeted net asset value of R3 741.3 for the same period.

Membership, age distribution and pensioner ratio

The total number of principal members of registered medical schemes increased by 1.7% from 3 612 062 at 31 December 2010 to 3 672 243 at 30 September 2011. With the inclusion of the one large scheme whose information is not included in this report, total principal members is 3 705 464, representing a 2.6% increase in total principal members.

The number of total beneficiaries increased by 0.8% from 8 315 718 at 31 December 2010 to 8 383 917 at 30 September 2011. With the inclusion of the one large scheme whose information is not included in this report, total beneficiaries is 8 469 784, representing a 1.9% increase in total beneficiaries.

The average number of members of 3 621 257 for the period ended 30 September 2011 was 0.4% lower than budget, and the average number of beneficiaries of 8 293 521 was 0.4% lower than budget.

The industry average age for all registered schemes for the period ended 30 September 2011 was 31.8 (2010: 31.5) years and the proportion of pensioners, 6.8% (2010: 6.5%).

Contributions and relevant healthcare expenditure

Total gross contribution income for all medical schemes amounted to R79.5 billion for the period ended 30 September 2011, which was 1.2% lower than the budget of R80.5 billion and 10.3% higher than the R72.1 billion for 30 September 2010.

The gross contribution per average beneficiary per month was R1 065.3 for the period ended 30 September 2011. Gross relevant healthcare per average beneficiary per month was R960.4 for the period ended 30 September 2011.

The gross contributions per average beneficiary per month at 30 September 2011 of R1 065.3 went up by 9.2% from R975.3 at 31 December 2010.

Total risk contributions of R72.1 billion was 1.4% lower than budget. The risk contribution per average beneficiary per month for the period ended 30 September 2011 was R966.4.

The relevant healthcare ratio of 88.4% at 30 September 2011 was 0.1% lower than the budgeted relevant healthcare ratio of 88.5% and was 0.9% lower than the 30 September 2010 ratio of 89.2%. The relevant healthcare

Page 5

per average beneficiary per month for the period ended 30 September 2011 was R854.4. Total relevant healthcare for the period ended 30 September 2011 was R63.8 billion compared to the budgeted relevant healthcare of R64.7 billion, representing a 1.5% variance. Compared to the same period of the previous year, total relevant healthcare increased by 9.3% from R58.4 billion in September 2010.

Relevant healthcare expenditure per average beneficiary per month at 30 September 2011 of R854.4 went up by 10.3% from R774.6 at 31 December 2010.

The utilisation of the prior year’s outstanding claims provision was 96.9% for all schemes as at 30 September 2011. Non-health expenses

Total non-health expenses for all medical schemes amounted to R9.0 billion for the period ended 30 September 2011, which was 1.0% lower than the R9.1 billion budgeted for and 5.9% higher than the R8.5 billion at the end of September 2010.

The non-health expense per average beneficiary per month for the period ended 30 September 2011 was R120.0, which was 2.7% higher than the industry average of R116.9 at 31 December 2010.

Non-health expenses, when expressed as a percentage of risk contributions, decreased from 13.2% at 31 December 2010 to 12.4% at 30 September 2011.

At 30 September 2011, the industry averages of the various components of non-health expenses expressed as a percentage of total non-health expenses were as follows:

September ‘11 Dec ’10

- Gross administration expenses 67.6% 67.6%

- Managed care: management services 20.0% 19.5%

- Broker service fees (including distribution costs and broker fees) 11.2% 11.4%

- Net impairment losses: trade and other receivables 1.2% 1.5%

Operating results

Registered medical schemes incurred net healthcare deficits (before taking investment and other income into account) of R601.0 million compared to a budgeted deficit of R746.9 million at 30 September 2011. The total deficit for net healthcare results is 19.5% lower than budgeted.

Open schemes incurred net healthcare deficits (before taking investment and other income into account) of R635.9 million compared to a budgeted deficit of R159.1 million whereas restricted schemes incurred net healthcare surpluses (before taking investment and other income into account) of R34.9 million compared to a budgeted deficit of R587.8 million.

The inclusion of investment and other income resulted in all registered schemes making a surplus of R1.7 billion at 30 September 2011 compared to a budgeted surplus of R1.0 billion, which represents an actual to budget variance of 64.4%.

In 2010 schemes incurred net healthcare deficits of R460 million and net surpluses of R2.9 billion.

Investments

The current assets to current liabilities ratio for open schemes at 30 September 2011 is 2.5 (2010: 2.7), whereas for restricted schemes it is 2.6 (2010: 3.3).

The total assets to total liabilities ratio for open and restricted schemes is 3.3 (2010: 3.5) and 3.6 (2010: 4.0) respectively.

Page 6

REGULATION 29: MINIMUM ACCUMULATED FUNDS Annexure A (SOLVENCY RATIO) INDUSTRY AVERAGE:

2004

%

Change

2004

2005

%

Change

2005

2006

%

Change

2006

2007

%

Change

2007

2008

%

Change

2008

2009

%

Change

2009

2010

%

Change

2010

2010 -

Quarter

3

Actual

2011 -

Quarter

3

Actual

2011 -

Quarter

3

Budget

% Change

Actual 2011

vs Budget

2011

Open schemes 28.5% 36.4% 29.6% 3.7% 27.7% -6.2% 28.6% 3.2% 29.8% 4.2% 27.4% -8.1% 27.4% 0.0% 26.1% 27.2% 26.6% 1.9%

Restricted

schemes 58.8% 18.6% 63.5% 8.0% 64.7% 1.8% 58.7% -9.2% 49.7% -15.3% 42.5% -14.5% 38.4% -9.6% 35.6% 34.9% 33.4% 4.5%

All registered

schemes 37.3% 27.3% 39.1% 4.8% 37.9% -3.1% 38.0% 0.3% 36.6% -3.7% 32.9% -10.1% 31.6% -4.0% 29.7% 30.3% 29.4% 3.2%

Page 7

SOLVENCY RATIO GRAPH Annexure B

26.6%

33.4%

29.4%

15.1%

20.9%

28.5% 29.6% 27.7% 28.6% 29.8%27.4%

27.4% 27.2%

41.3%

49.6%

58.8%63.5% 64.7%

58.9%

49.7%

42.5%38.4% 34.9%

22.9%

29.3%

37.3% 39.1% 37.9% 37.8% 36.6%32.9% 31.6% 30.3%

0%

10%

20%

30%

40%

50%

60%

70%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q3

Percentage

Open Schemes - Budget (Q3-2011) Restricted Schemes - Budget (Q3-2011)

All Registered Schemes - Budget (Q3-2011) Open Schemes - Actual

Restricted Schemes - Actual All Registered Schemes - Actual

Page 8

PRESCRIBED SOLVENCY LEVELS AND NUMBER OF BENEFICIARIES GRAPH Annexure C

1215

7

66

9

16

6

65

2918

1882

1685

1831

2808

1864

18261878

0

500

1 000

1 500

2 000

2 500

3 000

3 500

0

10

20

30

40

50

60

70

Below Prescribed Level Above Prescribed Level Below Prescribed Level Above Prescribed Level

OPEN SCHEMES RESTRICTED SCHEMES

Thousand beneficiariesNumber of schemes

Number of Medical schemes - December (2010) Number of Medical schemes - Quarter 3 (2011)

Beneficiaries - December (2010) Beneficiaries - Quarter 3 (2011)

Page 9

NET ASSETS PER REGULATION 29 GRAPH Annexure D

4 431 6 929 10 262 11 384 11 573 12 908 14 604 14 917 16 445 17 151 5 152 6 827 8 570 9 535 10 229 11 948 12 483 12 963 14 244 15 127

9 584

13 756

18 832 20 919 21 802

24 856

27 086 27 880

30 689 32 278

936.7 1 468.3

2 158.1 2 320.5 2 310.8

2 598.9 3 001.1 3 088.1

3 426.1 3 671.0 2 598.2

3 495.6

4 494.0 4 940.3

5 183.7 4 826.0

4 389.9 4 160.7 4 051.4 4 075.3

1 427.4

2 061.7

2 826.7 3 060.1 3 122.8 3 339.8

3 513.3 3 508.6 3 690.5 3 850.0

0.0

1 000.0

2 000.0

3 000.0

4 000.0

5 000.0

6 000.0

7 000.0

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (Q3)

PBRand million

Open Schemes (R) Restricted Schemes (R) All Registered Schemes (R)

Open Schemes (PB) Restricted Schemes (PB) All Registered Schemes (PB)

Page 10

INCOME STATEMENT DETAILS for the period ended 30 September 2011 Annexure E

OPEN SCHEMES

RESTRICTED SCHEMES

TOTAL REGISTERED SCHEMES

Average members 2,129,196 1,492,331 3,621,527

Average beneficiaries 4,663,110 3,630,411 8,293,521

Average age Years 33.5 29.7 31.8

Pensioner ratio (65+ years) % 8.0 5.2 6.8

No. of dependants per member 1.2 1.4 1.3

Gross contributions (risk + PMSA) R'000 47,332,575 32,183,065 79,515,640

Gross relevant healthcare (gross +PMSA) (Note a) 42,108,616 29,575,087 71,683,703

Gross Administration Expenses (risk + PMSA) 4,329,934 1,726,217 6,056,152

Managed care: management services 1,164,486 625,922 1,790,408

Broker service fees (including distributions costs) 975,194 27,048 1,002,243

Net impairment losses: trade and other receivables R'000 73,681 34,927 108,608

Net healthcare results (635,911) 34,937 (600,974)

Surplus/ (deficit) 918,382 782,778 1,701,161

NOTES: a) Including managed care: healthcare benefits included in risk transfer arrangements. * PMSA = Personal Medical Savings Account

Page 11

BALANCE SHEET DETAILS at 30 September 2011 Annexure F

OPEN SCHEMES RESTRICTED SCHEMES

TOTAL REGISTERED SCHEMES

Members at 30 September 2011 2,143,612 1,528,631 3,672,243

Dependants at 30 September 2011 2,528,471 2,183,203 4,711,674

Beneficiaries at 30 September 2011 4,672,083 3,711,834 8,383,917

Non-current assets R'000 6,152,832 8,484,300 14,637,133

Current assets R'000 19,420,894 13,826,878 33,247,772

Trade & other receivables R'000 3,414,994 1,117,915 4,532,909

Contribution days outstanding 12.5 6.7 10.2

Cash & cash equivalents R'000 9,462,913 10,193,962 19,656,475

Total assets R'000

25,573,726 22,311,179 47,884,904

Members' funds (net assets per BS) 17,767,357 16,146,960 33,914,316

Accumulated funds 17,294,941 15,123,649 32,418,590

Non-current liabilities 18,048 855,132 873,180

Current liabilities 7,788,321 5,309,087 13,097,408

Trade & other payables 2,257,155 1,888,715 4,145,871

Savings liability 3,075,522 1,612,670 4,688,192

Outstanding claims provision 2,455,643 1,807,702 4,263,345

Prior year claims provision utilised % 98.2 95.2 96.9

Total liabilities R'000 7,806,369 6,164,219 13,970,588

Total assets: total liabilities 3.3 3.6 3.4

Current assets: current liabilities 2.5 2.6 2.5

Page 12

Gross claims incurred: cash & cash equivalents coverage

Months 5.8 3.1 2.5

Net assets per Regulation 29 R'000 17,151,300 15,126,963 32,278,263

Solvency ratio % 27.2 34.9 30.3

NOTES: * In respect of trade and other receivable outstanding days, the denominator is annualised gross contributions. * In respect of prior year claims provision utilised = prior year payments / provision at the beginning of the year. * In respect of gross claims incurred: cash & cash equivalents coverage = cash and cash equivalents includes current investments. * We do not express an opinion on the accuracy of the split between current and non-current assets, and current and non-current liabilities.

Page 13

NUMBER OF BENEFICIARIES GRAPH Annexure G

4 731 4 719 4 755 4 906 5 050 4 951 4 889 4 815 4 800 4 672

1 983 1 953 1 907 1 9302 077 2 527 2 986 3 253 3 516 3 712

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(Q3)

Beneficiaries(Thousands)

Open schemes Restricted schemes

Page 14

DETAILED FINANCIAL INFORMATION: ACTUAL V BUDGET for the period ended 30 September 2011 Annexure H

OPEN SCHEMES RESTRICTED SCHEMES TOTAL REGISTERED SCHEMES

Actual Budget % variance

Actual Budget % variance

Actual Budget % variance

Members 2,143,612 2,173,689 -1.4% 1,528,631 1,519,181 0.6% 3,672,243 3,692,870 -0.6%

Beneficiaries 4,672,083 4,753,656 -1.7% 3,711,834 3,712,890 0.0% 8,383,917 8,466,546 -1.0%

Gross Contribution Income (GCI) R’000

47,332,575 48,327,776 -2.1% 32,183,065 32,148,866 0.1% 79,515,640 80,476,642 -1.2%

Risk Contribution Income (RCI) 41,373,011 42,316,494 -2.2% 30,761,287 30,808,917 -0.2% 72,134,297 73,125,412 -1.4%

Gross relevant healthcare (incl. PMSA & managed care claims) (Note a) 42,108,616 N/A 0.0% 29,575,087 N/A 0.0% 71,683,703 N/A 0.0%

Relevant healthcare incurred (incl. managed care claims) (Note a) 35,465,626 35,790,473 -0.9% 28,311,514 28,938,731 -2.2% 63,777,140 64,729,203 -1.5%

Gross (incl. PMSA)/net non-health expenses 6,543,296 6,649,211 -1.6% 2,414,835 2,403,480 0.5% 8,958,131 9,052,690 -1.0%

Net healthcare results (635,911) (159,107) 299.7% 34,937 (587,789) 105.9% (600,974) (746,896) -19.5%

Surplus/(deficit) R’000 918,382 879,773 4.4% 782,778 154,943 405.2% 1,701,161 1,034,716 64.4%

Quarter end reserve position (per Regulation 29) (Note c) 17,151,300 17,175,554 -0.1% 15,126,963 14,500,415 4.3% 32,278,263 31,675,969 1.9%

NOTES: a) Including managed care: healthcare benefits included in risk transfer arrangements. b) Gross non-health expenses = administration expenses, managed care: management services, broker costs (including broker fees and distribution fees) and net impairment losses. c) The budgeted amount was calculated by using the budgeted accumulated funds per Balance Sheet as basis, and by adjusting for the following actual amounts as at 30 September 2011: cumulative net gains on disposal of investments and property plant and equipment included in the Income Statement, specific assets encumbered for third-party liabilities and sub-ordinated loans as approved by the Council. * PMSA = Personal Medical Savings Account * GCI = Gross Contribution Income * RCI = Risk Contribution Income * NA = information not available

Page 15

TOTAL NON-HEALTH EXPENDITURE GRAPH Annexure I

6 056

1 790

1 002

109

8 958

6 256 1 760 1 082 (45) 9 053 (1)

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

6 000

6 500

7 000

7 500

8 000

8 500

9 000

9 500

Gross Administration Expenditure

Managed Care: Management Services

Broker Fees Impaired Receivables Total Non-Health Expenditure

Rand Million

Year to date - September 2011 (actual) Year to date -September 2011 (budget)

Page 16

NET RELEVANT HEALTHCARE EXPENDITURE RATIO: RISK BENEFITS GRAPH Annexure J

PABPM = per average beneficiary per month

966.4 975.7

854.4

863.6

88.4%

88.5%

88%

88%

88%

88%

88%

88%

88%

89%

89%

89%

0

100

200

300

400

500

600

700

800

900

1000

1100

Year to date - September 2011 (actual) Year to date -September 2011 (budget)

Relevant healthcare expenditure ratioRand PABPM

Risk Contributions PABPM Relevant healthcare expenditure incurred PABPM

Relevant healthcare expenditure Ratio