Banking

Discovery sees strong growth as it targets new initiatives

Staff Writer

 ·4 Sep 2018

Insurer Discovery said on Tuesday that it delivered a strong financial performance for the year ended June 2018.

Normalised operating profit increased by 17% to R8.266 billion, while normalised headline earnings increased by 16% to R5.401 billion.

Diluted headline earnings per share increased 16% to 836.9 cents, it said.

Value grew by 15% on an annualised basis to R65.6 billion, and return on equity exceeded risk-free + 9%, despite considerable investment in new businesses.

The group invested R7.8 billion in new business and R2 billion in new initiatives, with favourable returns, it said.

Discovery said that every business grew operating profit ‘at least in line with expectation’, and with the exception of VitalityLife, all established businesses generated cash, positive
experience variances, and returns on capital at or near the group target.

In addition, over the period 7% of earnings was invested in new initiatives including Umbrella Funds, VitalityInvest, Discovery Insure Commercial Insurance and Discovery Bank.

For Discovery Health, operating profit increased by 11% to R2.78 billion; new business API increased by 8% to R6.573 billion (excluding take-on of new closed schemes); and lives under management reached 3.5 million.

Discovery Health continued to grow its restricted medical scheme client base, to 18 client schemes, with over 667,000 lives under management.

Discovery Life business grew earnings by 7% to R3.84 billion, benefiting from a strong second half. New business market share increased to 31% in the retail affluent protection segment, while the value of new business (individual) grew by 8%.

Looking ahead, the group said that it is well positioned for growth.

“Setting apart the effect of the bank, Discovery expects continued growth without recourse to additional capital. The investment in (Discovery Bank) will impact earnings for the 2019 year, as post launch the amortisation of the build cost will emerge.

“Thereafter, the organic growth model is expected to revert to its long-term average,” it said.

Discovery was granted a banking licence by the Registrar of Banks in 2017. The group is expected to open its commercial offering in the fourth quarter.

Read: These are the 18 biggest banks in South Africa – including Discovery