Discovery was particularly affected by the NHI’s singing, while other South African medical insurers with a more diverse portfolio seemed to stem investor jitters. <\/p>\n\n\n\n
Additionally, although the signing of the controversial bill impacted South Africa’s JSE-listed hospitals, the lack of growth in medical aid is a growing concern. <\/p>\n\n\n\n
On Monday (13 May), shares in Discovery and other South African medical insurers slumped after President Cyril Ramaphosa said he\u2019d sign into law the National Healthcare Insurance (NHI) that businesses oppose.<\/p>\n\n\n\n
The president has vowed on the campaign trail to use the legislation to end \u201chealthcare apartheid.\u201d<\/p>\n\n\n\n
Following this, Discovery dropped as much as 8%, the most since March, while peers, including Momentum Metropolitan, Sanlam and Old Mutual, also traded lower.<\/p>\n\n\n\n
Discovery has dropped over 18% this year, compared with a 2.7% increase in the FTSE\/JSE Africa All Share Index.<\/p>\n\n\n\n
However, despite Discovery taking a hit, other insurers who provide medical insurance, such as Momentum and Sanlam, were less affected\u2014still posing a year-to-date (YTD) gain of 2.2% and 1.58%, respectively. <\/p>\n\n\n\n
According to Bloomberg data, Discovery derives about 34% of its earnings from its South African health business, while the others have more diversified portfolios. <\/p>\n\n\n\n
Avior Capital Markets analyst Adrienne Damant said that under the NHI Bill, one of Discovery’s key divisions will no longer be allowed to operate.<\/p>\n\n\n\n
\u201cUltimately, it\u2019s an essential part of Discovery\u2019s business that regulation is outlawing,\u201d she said.<\/p>\n\n\n\n
South Africa\u2019s FTSE\/JSE Health Care Providers Index was among the biggest decliners on the Johannesburg stock exchange Tuesday, with hospital operator Netcare leading a retreat in the sector, falling 5.7%, the most since April 2023.<\/p>\n\n\n\n
Interestingly, although shares in Life Healthcare dropped 2% on the bill’s signing, they posted a massive loss of over 40% YTD. <\/p>\n\n\n\n
This drop resulted from market reactions. Analysts’ concern was that margins came under strain even as occupancies increased.<\/p>\n\n\n\n
Director and portfolio manager at Sentio Capital Imtiaz Suliman said the update was mixed. Decent revenue growth was driven by Life Molecular Imaging, while the SA result reflected a tough environment.<\/p>\n\n\n\n
“Medical aid membership hasn’t grown in SA over the last number of years, which is a headwind for companies like Life Healthcare,” he said, citing the decline in core profit as the negative in the update.<\/p>\n\n\n\n
The president signed the NHI into law at a ceremony on Wednesday (15 May).<\/p>\n\n\n\n
Despite this major legislation change, Discovery CEO Adrian Gore sent a notice to all Discovery medical aid members clarifying what the signing of the National Health Insurance (NHI) into law means for the group. <\/p>\n\n\n\n
Gore said that medical aid members need not panic, noting that the new laws will not affect medical scheme cover and benefits \u201cfor a long time to come.\u201d<\/p>\n\n\n\n