Discovery chief executive, Adrian Gore, on Monday presented the group’s annual financial results for the period ended June 2017, providing an update on the company’s intention to becoming a bank in 2018.
Gore described Discovery’s performance over the year as ‘robust’ with core new business annualised premium income up by 22% to R17.87 billion and normalised profit from operations growing by 12% to R7.19 billion in constant currency terms.
“Discovery made significant progress during the year under review towards meeting our stated targets, drawn together in our 2018 Ambition, said Gore.
“The group achieved an acceleration in new business growth, combined with strong operating profit gains, notwithstanding our substantial undertaking of significant new initiatives, including the global expansion of the Vitality Shared-Value Insurance model.”
- Normalised profit from operations up 10% to R7.05 billion
- Core new business annualised premium income increased by 16% to R16.99 billion
- Gross inflows under management up by 10% to R115.06 million
- The Vitality Shared-Value Insurance model continues to grow in scale and impact, now operating in 16 countries, serving close to 10 million clients, with over 150,000 new members added each month
In an update on Discovery’s intent to enter banking in South Africa, Gore noted that on 25 October 2016, Discovery received authorisation from the Registrar of Banks to establish a banking presence in South Africa, granted in terms of Section 13(1) of the Banks Act, Act No. 94 of 1990 (“the Banks Act”), subject to certain conditions.
Discovery has 12 months to fulfill the conditions set by the Registrar and to make application for final approval in terms of Section 16 of the Banks Act.
The granting of a banking licence, and the timing of such grant is subject to the approval and discretion of the Registrar of Banks, Discovery said.
“Significant progress has been made in developing the system infrastructure, operating processes, regulatory engagement and the customer value proposition, with a number of key milestones having already been reached,” Gore said.
Discovery anticipates launching its banking offering during 2018.
Gore explained that the group’s 2018 ambition has three overarching criteria against which performance is measured:
- In terms of financial and social impact, the target is R10 billion in normalised profit from operations, with growth of CPI +10%, return on capital of risk-free +10%, and making 10 million people around the world healthier;
- Complemented by the foundation of a powerful and aspirational brand, as an employer of choice for critical skills, driven by sophisticated data and science capabilities;
- Powered by a portfolio of businesses that are insurgent and leading in all areas in their respective markets, underpinned by superior actuarial dynamics, delivering exceptional service to meet complex consumer needs.
Against these targets, during the period, Discovery’s earnings grew by 12% and established businesses achieved the target of CPI +5% (in constant currency terms).
Further, 8% of earnings were invested in new initiatives, including Discovery’s intent to enter banking, the planned UK investment business (subject to regulatory approval), a commercial offering in Discovery Insure, and Discovery Invest’s Umbrella Fund offering, the insurer said.
“The Vitality Shared-Value Insurance model continues to grow in scale and impact, now operating in 16 countries through seven insurers, serving close to 10 million clients, with over 150 000 new members added each month. The last year has seen excellent engagement levels, with most markets experiencing Vitality take-up in excess of 40%,” Gore said.
Discovery Health’s continued investment in its digital capabilities are reflected in the launch of DrConnect, a health information and virtual consultation app, as well as enhancements to the functionality and coverage of Discovery HealthID – the country’s leading electronic health record system.
Discovery said its card business exceeded expectation over the period, with the FNB Card joint venture profits growing by 16% to R355 million.