Discovery performs strongly, despite UK headwinds | Fin24
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Discovery performs strongly, despite UK headwinds

Feb 23 2017 18:05
Lameez Omarjee

Discovery CEO, Adrian Gore. (Picture supplied).

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Johannesburg – Despite adverse economic activity in the UK, Discovery reported a strong performance with increased earnings and new business growth.

Discovery released its results for the six months ended 31 December 2016, on Thursday. According to the group’s SENS, falling exchange and interest rates in the UK impacted the group’s earnings by 4%.

However, normalised profit from operations increased by 13% to R3.4bn and new business growth was up 15% to R8.2bn. Headline earnings were up 14%, to more than R2bn.

“A combination of three main drivers contributed to our robust performance,” said chief executive, Adrian Gore. These are the group’s Vitality shared-value insurance model, the group’s “organic approach” to growth and its capital management philosophy, he explained.

Over the period, operating profit of existing business grew by 11% to R3.7bn, and new business grew 9% to R6.4bn.

The group’s emerging businesses, Discovery Insure, Ping An Health and Vitality Group delivered growth of 43% in new business to R1.7bn. Ping An Health’s new business in China grew by 55% and Vitality Group is active in 12 markets, according to the SENS.

Business performance in South Africa

Businesses Discovery Health, Life, Invest and Insure each reported strong growth. Discovery Health’s operating profit increased 12% to R1.1bn. Discovery Life’s operating profit increased 13% to R1.7bn.

Discovery Invest’s operating profit grew to R326m, this is 21% higher than the same period the year before.  The business’s market share increased by 80% in the retirement annuity and preservation funds space, and by 50% in the retirement income space for the year ending September 2016.

READ: Discovery expects profit increase

Discovery Insure’s new business growth was up 23% to R495m and is close to monthly breakeven.

The group also received authorisation from the Registrar of Banks to establish banking operations in South Africa. Discovery has 12 months to fulfil the conditions and make an application for a final approval.

“Discovery anticipates being in a position to launch its proposed banking offering during the course of 2018,” the SENS read.

UK business performance

Discovery’s UK business, comprising VitalityHealth and VitalityLife, reported a 6% increase in new business to £57.7m (R932.2m) and a 10% increase in normalised operating profit to £22.5m (R363.5m).

“VitalityLife produced a steady performance in a complex period with volatility in interest rates and exchange rate movements,” the group said in a statement.

The share was trading at R125.90 at 12.30pm.

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