Discovery 'too hot to handle'
Johannesburg - Financial services firm Discovery Holdings [JSE:DST] was simply too hot for its competitors, which is the main reason why the company increased its market share over the past 12 months.
This is the view of Discovery CEO Adrian Gore, commenting on the group's annual results for the year to end-June.
"We are red hot in terms of competitiveness," said Gore, claiming Discovery has increased its market share in both the life and healthcare insurance industries on the back of its "scale and sophistication relative to its peers".
"It was a case of flight to quality," he said, explaining Discovery had won major contracts during the period under review, including from listed corporates such as Remgro and Allied Electronics Corporation, as well as from food giant Mars and credit card firm Visa in the UK.
The group's headline earnings per share were up 24% to 278.8c, while profits rose 36% to R2.5bn. A final dividend of 36 cents per share was declared.
The market responded positively to the results, with the share up 103c (2.9%) to trade at 3 660c around noon on Thursday.
Gore said the integrated nature of Discovery's business divisions was one of the group's strongest points.
He said 310 000 customers within Discovery make use of the Life, Health and Vitality products and 70% of the life policyholders make use of other Discovery products.
"If you ride the Discovery chassis, you will bring the costs down," he said.
The last financial year has given impetus to Discovery's international expansion strategy.
The company has recenly acquired Standard Life Healthcare in the UK for R1.56bn, which merged with the PruHealth joint venture. Discovery has hereby increased its interest in both PruHealth and PruProtect from 50% to 75%.
"If you look at the levels of government debt, private healthcare will continue to grow," he said.
Other major deals included its expansion into China through the Ping An Healthcare transaction, through which Discovery took a 20% stake in the Chinese business. Gore said there is a potential market of 83 million consumers looking for healthcare insurance in the country.
He also said Discovery's Vitality operation in the US was continuing to tick along satisfactorily and had recently partnered with consumer healtchare giant Johnson & Johnson to offer wellness-related products.
Little to criticise
Analysts could find little to criticise in Discovery.
UBS analyst Michael Christelis questioned Gore on the performance of the PruHealth business, arguing that its operating performance was not as rosy as Gore had said.
Gore responded Discovery had been "very conservative" in in its accounting assumptions for PruHealth.
Brian Mushonga of Credit Suisse Standard Securities asked whether Discovery Health had faced any questions from the competition regulator about the group's growing market share in SA.
Gore said the company had not had any questions from regulators, and still had only 30% of the market.
Stockbrokerage Imara SP Reid recently updated Discovery as an "add", saying the strong influx of new clients and the opportunities the Ping An transaction presented boded well for the group.
Hahaha, I cannot believe that Discovery themselves state that due to the "scale and sophistication relative to its peers" they are "too hot to handle".
Too bad this sophistication is used to lure individuals into products that are not beneficial to them.
Corporate thugs - milk the members to reward the shareholders. Medical aids, by their very nature, as well as hospital organisations, should never ever be allowed to list on any stock exchange. The man-in-the-street is yet again the ultimate loser because of these greedy rich & affluent opportunistic capitalists who are intentionally pushing up the cost of healthcare in this country in the face of pathetic service & delivery by Presently Dysfunctional Incumbent focussed public sector. Many of us pay taxes for absolutely no services & then we have to pay more yet again for exorbitant prices charged almost at will for private sector services that we cannot really do without. This world of today stinks rotten!!!
It seems there are many people and customers whoa re very unhappy with Discovery at this point. I think they have forgotten about the golden goose.
100% agree with Shorts. Discovery is milking their members to please their shareholders. Boasting a R2,5bn profit should make them ^%$# embarressed !! This at the expense of members who have to continually face cutback of benefits yet the premiums increase !!
Margaret @ Shorts
Medical aids are not listed in the Stock Exchange. BY LAW medical aids are not for profit organisations. The holding company is listed. This does include profit making separate entities like Vitality, Discoverycard, Insureance and Finance which each have their own individual company registration numbers.
If you actually look at the manner in which Discovery operates - you will find that they are all about negotiating the best possible rates for their members. The lower the rates for the members the lower the premiums required to cover those rates, and the less you have to pay at the point of contact with the healthcare entity. But I suppose it's easier to point fingers at the provider than to take responsibility for one's own choices.
absoloutely agree with Shaun, every single time I have had to make claims with discovery they have convienently changed what they used to pay for and I end up paying in as much if not more than they pay out. It's about time they stoppped pouring money into sponsorship and hoo-haa projects and put it back into the health care of the people who pay them for medical expense coverage.
discoverys products,health ,life and invest is probably the best in the market,with integration and vitality as the chassis of discovery,our members are living healthier lives,and are enjoying the rewards that goes with it.discovery health"s premiums only increased by 9.8%,the lowest inthe industry,as some of our competitors increased by up to 15%
if you look at uor investment portfolios ,you will find that uou equity and property portfolios are rated in the top 5 portfolios in sa,out of more than 100 portfolios,we also offer gurentees on these portfolios,also a first in the market
through vitality and integration you can get up to 60% of your life insurance premiums paid back to you on a 5 yearly basis,we have got the best dreaded disease product in the market,as we cover all body systems.uor dissabillty product offers protection of own ocupation.
wahat more can i say,the results speak for it self,if you dont understand the value prposition,call me or email me ,i will gladly explain!
Thanks I would like to email you, but you neglected to provide your email address.
I am just wondering where did you learn to spell?
Shaun & Shorts, why don't you actually start looking at what Discovery actually pays out! apart from all the health and life pay-outs they are also currently paying for over 1700 children’s education..., or why don't you go and have a look at the ombudsman's website and look over the last two years which company has the less claims submitted to the ombud, and if you don't want to look over the last two years of all claims submitted to the ombud only 0.5% & 1% were from Discovery. Those are facts!
The remark of Discovery milking its members is not even close to being True. Like all other Medical Aids in SA, they are regulated as to the percentage they can take from members premiums. With that in mind, Discovery in the same playing field as all other Medical Aids, have performed far better. This is purely down to Discovery’s Operational brilliance. With this in mind, you add the continuous savings and benefits, Discovery keep coming up with and you have a sure winner for members.
Discovery drive to not only produce the best service, but also the best products is a continuous journey in the company. They are always looking for ways to make members lives healthier and more affordable. Free Gym, discounts at Pick n Pay are just few to mention. Discovery’s remarkable financial results is a result of the above and with the strong growth in customers, you can see they are on the right track. 2 million people wrong. I doubt it……
Saxon @ Shorts
To Shorts - This may be news to you (and I'm sure lots of other facts too) but Discovery Health is NOT a madical aid, it is a administrator. Discovery gets paid a fixed % to administrate teh medical aid which is a stand-alone entity. Paying less or pushing up the cost of Health care is not in the inerest of Discovery (the administrator) as it will make the scheme uncompetetive. The more members (thus best value for money), the more administration income for Discovery...
It is simple, if you can spend 3 hours a year on Vitality, you will reach Silver or Gold status, if your status is silver or gold, no other product on the market can come close to Discovery in terms of Life insurance and Investment.
Thos unhappy clients probably have blue status...I am on Diamond, no company can even come close to what I have, will all the discounts and paybacks, my Life Insurance is free over a 5 year period.
AND my medical aid (with Health Plan Protector) enables me to get a portion of my medical aid contributions for the hospital expenses back every 5 years, no one can compete with this