Financial services group Discovery, which is South Africa's biggest health insurer, has reported a jump in profits for the financial year ended 30 June 2024 (FY2024).
In a statement, Discovery says that at Group level, it delivered increases in normalised operating profit (up 17% to ZAR11,604m [$672m]), headline earnings (up 7% to ZAR7,202m), normalised headline earnings (up 15% to ZAR7,329m), and core new business annual premium income (API) (up 18% to ZAR26,667m).
The key financial highlights of the group include:
- Discovery South Africa (Discovery Health, Discovery Bank, Discovery Life, Discovery Invest, Discovery Insure): normalised profit from operations increased by 16% to ZAR9,717m, and core new business API increased by 19%.
- Vitality UK: normalised profit from operations declined by 14%, impacted by two specific issues: claims experience in VitalityHealth and a basis strengthening for the back book under VitalityLife. New business API grew strongly by 17% to ZAR4,444m.
- Vitality Global: normalised profit from operations increased by 57%. Core new business API for Ping An Health Insurance’s (PAHI) own licence increased by 14% to ZAR2,486m. Discovery has a stake of 25% in PAHI. Notably, PAHI achieved a key milestone over the period, paying its maiden shareholder dividend, with a payout ratio of 30% of the 2023 calendar year’s distributable profits. Discovery’s share, after withholding tax, was ZAR25m.
Group chief executive, Mr Adrian Gore, said, “The full-year reporting period continued to be characterised by complexities in the macro-economic environment, including heightened consumer pressure due to cumulative interest rate increases, constrained economic growth, and political uncertainties on many fronts. Within this context, Discovery remained focused on delivering strong growth in earnings, value, cash generation and capital resilience.”
Mr Gore provided an update on the Group’s long-term strategy as the Group enters a new phase in its lifecycle. “Over the past eight years, we have been through a cycle of significant investment, with a focus on globalising the Group’s capabilities, footprint, and scale, as well as building new ventures such as Discovery Bank. This investment cycle was aimed at creating new avenues for long-term growth and we are confident that the business is positioned well to capitalise on this investment,” he explained.
Discovery has rigorously intensified its focus on scaling the emerging businesses and the initiatives that can meaningfully impact the Group, whle closing those with marginal benefits over the past two years.
Restructuring
Post the reporting period, Discovery announced a restructure in its international businesses, combining Vitality UK and Vitality Global into a single global business of scale with significant organic growth potential. Mr Gore said, “The scale of each of these underlying businesses, which have developed at different paces, given the prevailing considerations for each, underpin the creation of a powerful shared-value life and health insurance composite. Vitality Limited will leverage the opportunity for consistent IP and technology, centralise our product innovation and drive a unified product strategy to deliver value for, and grow, our global partner network.”
He concluded: “Over the past few years our focus has been on investing in emerging and new initiatives. Having entered a new distinct phase of capitalising on our long-term investment and growth strategy, we are now well positioned for sustained growth through two powerful and focused structures; Discovery SA and Vitality Limited.”
Discovery expects the medium-term growth in profit from operations to exceed the longer-term target of CPI+10%, without recourse to further external capital.
-
|
Division
|
Operating Profit
|
New Business
|
|
ZAR m
|
Change %
|
ZAR m
|
Change %
|
|
Health
|
3,972
|
7
|
11,609
|
26
|
|
Life
|
4,765
|
9
|
2,942
|
4
|
|
Invest
|
1,522
|
20
|
3,300
|
8
|
|
Insure
|
248
|
240
|
1,388
|
11
|
|
Bank
|
-454
|
-41
|
|
|
|
Others
|
-366
|
20
|
1,038
|
38
|
|
SA Total
|
9,717
|
16
|
19,737
|
19
|
|
UK Total
|
647
|
-14
|
4,444
|
17
|
|
Vitality Global
|
1,240
|
57
|
2,486
|
14
|
|
Total
|
11,604
|
17
|
26,667
|
18
|
|
Source: Discovery
|