{"id":407735,"date":"2020-06-15T10:25:49","date_gmt":"2020-06-15T08:25:49","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=407735"},"modified":"2020-06-15T10:25:49","modified_gmt":"2020-06-15T08:25:49","slug":"discovery-highlights-covid-19-dilemma","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/407735\/discovery-highlights-covid-19-dilemma\/","title":{"rendered":"Discovery highlights Covid-19 dilemma"},"content":{"rendered":"

South Africa’s largest private medical insurer, Discovery on Monday (15 June), updated the market on its financial position amid the Covid-19 pandemic, showing a substantial decline in headline earnings.<\/p>\n

In a trading statement for the year ending June 2020, Discovery said that over the past four months, Covid-19 has caused significant disruption to lives and economies worldwide.<\/p>\n

As at 14 June 2020, total infections and deaths climbed to over 65,000 and 1,400 respectively in South Africa; 290,000 and 40,000 in the
\nUnited Kingdom; and two million and 110,000 in the US.<\/p>\n

“In addition to its health impacts, the pandemic has driven extreme market volatility, as evidenced by interest rates and equity market movements.<\/p>\n

“For insurers specifically, Covid-19 has created a uniquely-complex operating and economic environment, with pressure on new business, lapse rates, and potential future claims; and volatility in interest rates and investment returns,” it said.<\/p>\n

Headline earnings, the group said, will be affected by the significant rise in interest rates in South Africa due to Covid-19 and the ratings
\ndowngrade, and the historically low rates in the UK.<\/p>\n

“Given basic and headline earnings include this effect, these measures are very difficult to predict with a reasonable degree of certainty, and could potentially result in a decline of those measures between 70% to 90% compared to the prior year,” it said.<\/p>\n

It said that Vitality Group recorded a temporary slow-down of insurance partner sales due to Covid-19 lockdowns.<\/p>\n

“The business is well diversified across geographies, with a significant part of its earnings being USD based, and revenue arrangements are a blend of fixed and performance-based fees.”<\/p>\n

The group stressed that new initiatives remain a key strategic focus, despite revenue growth expected to be more challenging in the period.<\/p>\n

Discovery said it remains confident about the potential of new initiatives having taken some strategic shifts to allow for the different market conditions over the next few periods.<\/p>\n

It’s high profile shift towards commercial banking, Discovery Bank continues to attract new clients with over 177,000 clients and 330,000 accounts.<\/p>\n

Financial performance<\/strong><\/p>\n

\u2022 New business increased 4% for the eleven months ended 31 May 2020 compared to the prior corresponding period.
\n\u2022 Normalised profit from operations before providing for potential future Covid-19 impacts for the year ending 30 June 2020 is expected to be between 15% to 25% higher excluding the results of Discovery Bank, and between 5% to 15% higher including the results of Discovery Bank.
\n\u2022 Approximately R3.3 billion will be provided for potential future Covid-19 impacts.
\n\u2022 Normalised profit from operations is expected to be between 18% and 28% lower than the prior year, after including the potential future Covid-19 impacts.
\n\u2022 Normalised headline earnings is expected to be between 20% and 30% lower than the prior year.<\/p>\n

Discovery anticipates reserving R3.3 billion for the potential claims and lapse impact of Covid-19 that are projected to emerge in future periods.<\/p>\n

\"\"<\/a><\/p>\n

\n

Read: Discovery launches new healthcare cover for domestic workers \u2013 here\u2019s how it works<\/p>\n","protected":false},"excerpt":{"rendered":"

Discovery has on Monday updated the market on its financial position amid the Covid-19 pandemic, showing a substantial decline in headline earnings.<\/p>\n","protected":false},"author":10,"featured_media":334389,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[4883,26],"class_list":["post-407735","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-discovery","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/407735","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=407735"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/407735\/revisions"}],"predecessor-version":[{"id":407771,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/407735\/revisions\/407771"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/334389"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=407735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=407735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=407735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}