Discovery enjoys strong trading, good new-business growth

INTERIM profit from Discovery’s South African operations were expected to increase by between 20% to 25%. Photo: Simphiwe Mbokazi/African News Agency(ANA)

INTERIM profit from Discovery’s South African operations were expected to increase by between 20% to 25%. Photo: Simphiwe Mbokazi/African News Agency(ANA)

Published Feb 20, 2023

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Discovery, the JSE-listed private healthcare group, said on Friday that it expected normalised headline earnings a share to increase by between 27% and 22% after a period of good trading in the six months to December 31.

The group said in a trading statement Friday that the “strong performance” would see normalised profit from operations likely increase by between 20% and 23%, while headline earnings are expected to decline by between 7% and 12% for the period.

The share price rose 1.6% to R145.45 on Friday, 11% below the R164.96 that it traded at on the same day a year previously.

Profit from the South African operations were expected to increase by between 20% to 25%, while profit from the UK Composite, including new initiatives, was expected to increase by between 12% and 17%.

The group described its operating performance as “robust”, coupled with strong customer engagement in the Vitality shared-value model.

These had led to good lapse and persistence experience and strong new business growth, driving strong operating profit growth.

The cost of new initiatives fell, close to the group’s guidance of 10% of normalised operating profit, with Discovery Bank performing well with good high-quality customer growth and spending within plan.

The period coincided with lockdowns in China and the lifting of that country’ zero-Covid policy, and the impact was a reduction in new business and weak investment returns. Ping An Health Insurance took a conservative reserving approach to Covid, although claims to date had been limited. The combined effect of these was a decline in earnings.

Significant movements of interest rates in the markets where the group operates had created volatility in headline earnings, but had little impact on solvency, liquidity and cash flows and had no impact on the operations of the group, Discovery’s directors said.

Normalised Heps (Nheps) was expected to be between 27% and 32% higher to between 555.9 cents and 577.8c, compared to the reported Nheps (basic) of 437.7 cents for the prior period.

The interim results are expected to be published next Thursday.

Last week, Discovery launched an affordable health insurance product, Flexicare, which will aim to provide primary care cover to those who do not have medical aid.

Medical aid schemes have some 8.9 million beneficiaries in South Africa, but there are an estimated 5 to 8 million people formally employed who pay for their own private healthcare.

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