Group overview

Discovery Group

Discovery services the health care funding and insurance markets in South Africa and the United Kingdom. It is a preeminent developer of integrated financial services products and operates under the Discovery Health, Discovery Life, Discovery Invest, Discovery Card, Vitality, PruHealth and PruProtect brand names.

Overview

Discovery’s performance exceeded expectation, despite the difficult economic conditions and environmental complexity that persisted during the period. The period was characterised by sound performance across all businesses, record levels of new business production and strong earnings growth.

From a financial perspective, key highlights include the following:

Annualised recurring new business grew by 20% to R5,8 billion;
Embedded value increased by 12% to R20,0 billion, while diluted; embedded value per share grew by 12% to R35,83;
Operating profit grew by 32% to R1,7 billion; and
Total dividend for the year increased by 31% to 58,5 cents.

Business unit review

Discovery’s consumer-engaged methodology proved particularly successful in negating the impact of adverse market conditions. Over the period Discovery introduced a number of product innovations that enhanced value-for-money for its clients; further entrenched its brand leadership position in health and life insurance amongst consumers and intermediaries; improved its capital strength across all risk-taking entities; and invested significantly in its distribution capability. The combination of these factors contributed to the group’s strong performance over the period and positions it well for a wide range of opportunities in the future.

At the operating company level:

Discovery Health (operating profit +15%, new business +11%) further expanded its unique provider assets and attained regulatory solvency in the medical scheme. Its assets create a powerful partner for Government in an NHI environment.

Discovery Life’s performance was particularly pleasing (operating profit +20%, new business +36%). Despite the increase in lapses that is expected during recessionary cycles, new business grew strongly and distribution channels were expanded.

Discovery Invest (cumulative gross inflows of R4,5 billion) continued to build out its assets and capabilities in a difficult investment climate, and is well positioned for a turn in the investment cycle.

PruHealth (operating losses -34%, covered lives +20%) made solid progress, but the UK recession set the business back against plan.

PruProtect (new business +320%) performed above expectation, with strong new business traction emerging from a repositioned product range and substantial distribution capability.