Discovery’s investments in the UK and China were the star performers in the group’s financial statements for the six months to end-December.
The group’s UK health business, VitalityHealth, reported a jump in new business in the review period, driven by demand for private medical insurance as a result of backlogs at the National Health Service (NHS), while VitalityLife is now self-funding.
Discovery group CEO Adrian Gore said he was pleased with the growth in its international business.
“Ping An Health, our insurer in China, had an incredible performance. The results we reported are a combination of robust performance throughout the group, but a few growth platforms are emerging,” said Gore.
VitalityHealth reported a 28% rise in new business in the period and a 27% increase in premiums. Still, normalised operating profit fell 20%.
VitalityLife reported 97% rise in normalised profit, while new business rose 17%.
Gore said VitalityLife was capable of more. “VitalityLife has done very well in a few key areas. The biggest issue we have to address in VitalityLife is the embedded profitability of new business,” he said.
“If you look at the investment capital in new business, it’s not getting yield and we believe it requires us to do our business more efficiently to bring the costs down.”
The group also flagged opportunities in most markets where it operates, particularly ageing populations that contribute to growing demand for long-term care services.
The group reported interim normalised operating profit growth of R5.6bn, an increase of 13% with positive contributions from each composite — SA rose 9%, the UK 13% and Vitality Global 71%.
The group said the performance was “robust”, demonstrating resilience and strong underlying growth dynamics in a complex operating environment.
The UK and Vitality Global results benefited from a weaker rand compared with the prior period.
Group new business annualised premium income (API) increased 28% to R14.2bn in the review period as a result of robust growth across the composites. Discovery Health’s new business was augmented by the successful take-on of the Sasolmed medical scheme.
Excluding Discovery Health, new business API for the group increased 11%.
Normalised headline earnings grew 11% to R3.3bn while headline earnings were largely unchanged at R3.26bn. The difference is due to the prior period’s considerable fair value gain from the UK interest rate swap option, which was realised towards the end of the prior financial year. Consistent with prior reporting, headline earnings were normalised for that event.
The group’s embedded value increased to R103.5bn — a 12.1% annualised return — with a positive contribution from experience variances over the period, reflecting the positive dynamics of the shared-value insurance model, said the group.
Earnings were reported under the new IFRS 17 Insurance Contracts accounting standard for the first time and the earnings for the prior period were restated.
The group said the reporting period was characterised by continued macroeconomic complexities.
“Global inflation rates declined from the prior period highs, but remained elevated and cumulative interest rate increases heightened consumer pressures in many regions constraining economic growth,” it said.
Discovery Bank reached breakeven operationally — five years after being launched — reporting a 42% surge in new customers and taking the tally to 825,000. Deposits rose 31% to R16.7bn and advances increased 20% to R5.7bn in the period.
Gore said the bank was on course to launch its home loan product in mid-April. Discovery Bank last year announced plans to make a foray in the market, which is worth about R1.4-trillion.
The group said Discovery Bank clients have about R280bn in home loan balances with other banks — giving it a sizeable pool of potential clients.
Discovery Bank will give clients up to 1.5% off their home loan interest rate for engaging and managing their money well.
An interim dividend of 65c per share was declared.
Discovery share price was 0.64% lower at R127.21 at close of trade on Wednesday.
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