Discovery Annual Results 2016

Discovery Annual results 2016: Discovery delivers a solid performance with continued investment in future growth

Discovery Limited presented its Discovery annual results 2016, for the period ended 30 June 2016 on 6 September 2016. Performance highlights include:

  • New business was up 22% to R16.2 billion
  • Normalised profit increased 11% to R6.4 billion
  • Profit from existing business increased 15% to R7.2 billion
  • The Group’s investment in new initiatives increased by 73% to R823 million
  • Normalised headline earnings were up 7% to R4.3 billion, with normalised headline earnings per share up 1%, diluted through the additional capital raised in the rights issue.

Discovery posted a robust performance over the period. Established businesses showed a solid performance, and the company accelerated its strategy of investing for future growth with a 73% increase in spend on new initiatives, to R823 million. The Group’s investment in building the business is expected to be profit-enhancing over the medium to long term.

With the Vitality Shared-Value Insurance model being rolled out globally, Discovery now has a presence in 14 markets. Discovery will also continue the rollout of Vitality Active Rewards with Apple Watch, into partner markets over the next 12 months.

Established businesses in the UK and South Africa performed strongly Established businesses in Discovery’s Primary Markets of South Africa and the UK continued to show a solid performance. The performance of the medical scheme administrator, Discovery Health, exceeded expectations in a period plagued by high healthcare inflation. Normalised operating profit increased by 12% to R2 265 million. In the restricted medical scheme environment, Discovery Health has also made progress and now has 17 leading corporate medical schemes under management.

Discovery Life accelerated new business activations in the second half to grow normalised operating profit by 14% to R3 373 million for the full-year period. Discovery Life is well capitalised and geared for further strong new business acquisition with a current market share of 28.8% in the retail affluent segment.

New business in Discovery Invest grew by 17% to R1 932 million. Assets under management increased by 21% to over R60 billion. This excellent performance has seen operating profit increase by 22% to R563 million. The business has seen strong interest in its retirement products underpinned by the Vitality Shared-Value Insurance model.

In the United Kingdom, Discovery continued to invest in the Vitality brand and consumer awareness led to impressive new business growth and record-level engagement in Vitality. Despite complex changes in the environment linked to Britain’s intention to leave the European Union, VitalityLife grew normalised profit by 25% to R678 million and new business by 23% to R1 332 million.

The health insurance business, VitalityHealth, also experienced high levels of new business growth, which was up 43% to R1 161 million. The profitable individual market and the direct channels now make up 40% of new business. The exit from the Transitional Service Agreement has started to show benefits, with service levels and claims efficiency improving over the past six-month period.

Discovery Insure grew new business by 14% to R439 million, resulting in overall growth of 7% to R841 million over the full-year period. The business now covers over 145 000 cars, and has achieved a quality of business and scale which is expected to take the business to profitability in the next financial year. Discovery Insure is seeing the positive effects of engagement in Vitalitydrive, including a 28% lower loss ratio among engaged Vitalitydrive clients.

Record investment in building out emerging businesses and new initiatives Discovery announced its intention to develop its banking business. While licence approval is pending, engagement is underway with the South African Reserve Bank and regulatory bodies.

In terms of Discovery’s international expansion strategy, Discovery is now focusing its intentions on partnering with leading global insurers to license Vitality in their markets. In partnership with AIA Vitality, the Vitality Shared Value Insurance model is now part of the core offering in six AIA markets: Singapore, Australia, Hong Kong, Philippines, Thailand and Malaysia.

John Hancock Vitality in the United States continues to see strong adoption rates and Manulife Vitality is anticipated to launch in September in Canada.

Generali Vitality launched to the public in Germany in June 2016 with the first sales occurring in July. The initial market response has been exceptional and the business intends to launch in France on 1 January 2017, followed shortly by Austria.

Ping An Health continued with impressive new business sales with Group cover sales up 27% to RMB151 million and individual cover sales up 50% to RMB595 million. The number of health insurance lives covered increased by 33% over the period to 555 000.

Through the roll out and replication of the Vitality Shared-Value Insurance and the model’s methodology, Discovery expects existing businesses to continue to perform strongly, and for spend on new initiatives to reduce over time, positioning the Group well for continued expansion and robust performance in the future.

Discovery Annual Results 2016 was last modified: October 30th, 2016 by Kenny Williamson

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