Media statement: Strong organic growth at Discovery supports new ventures. -Strong contribution from Discovery Life -Destiny Health in US profitable -Launch of PruHealth in UK and DiscoveryCard in SA -Discovery Life to develop risk product for
* Organic growth increased Discovery Holdings’ headline earnings for the six months to December by 43%, to R191 million (2003: R134 million).
* Diluted headline earnings per share grew 35% to 35.7 cents (2003: 26.4 cents).
* Diluted embedded value per share rose 26% to R14.71 (2003 R11.67).
This was achieved along with a significant investment in the start-up of PruHealth and the DiscoveryCard during the period. There were particularly strong performances from Discovery Life and Destiny Health in the US.
New business growth saw annualised recurring income rising 34% to R1 957 million (2003:R1 462 million). Growth was strong in all divisions, including Destiny Health, where it rose 116% in US dollar terms, contributing R409 million to the overall new business figure.
“This has been a period in which strong organic growth has driven new business to record levels,” says Discovery CEO Adrian Gore. “At the same time we have seen significant progress in our new ventures and these will create platforms for future growth.”
The US operation, Destiny Health, achieved excellent growth. It reduced its losses in the period to R39 million, from a previous R79 million, and turned profitable in January this year, with a $260 000 (R1.6 million) operating profit for the month.
A key contributor to Destiny’s profitability has been the South African back-office operation, which gives Destiny access to the cost efficiencies of the local Discovery operations. Furthermore, over 200 jobs have been created in South Africa to date.
Destiny benefited from growth in lives covered – membership grew by 81% to 51 473, from a previous 28 449. In addition, the joint venture with Guardian Life performed ahead of expectation.
“Destiny has met all of its targets in terms of expansion, membership and profit,” says Gore. “It now makes up 21% of all new business for Discovery. Destiny is well placed in three important US markets and we are evaluating further expansion in late 2005.
"Domestically, Discovery Life was once again a star performer, contributing R191 million (2003: R105 million) to overall group operating profit of R330 million, an increase of 82%. New business annualised premium income rose 19% to R332 million (December 2003: R279 million). The value of in-force business increased by 73% to R1 641 million (2003: R946 million).
The number of policyholders covered increased 51% to 204 269 (December 2003: 135 186).
Discovery Health turned another solid result, with annualised recurring new business income rising 26% to R1 175 million (2003: R935 million).
Operating profit was R249 million (2003: R216 million), an increase of 15%, thanks to increased membership and improved administration efficiencies. Membership under administration rose 9% to 1 640 151 lives (2003: 1 505 896). Discovery Health is now 1 million members larger than its nearest competitor.
Discovery Health hasa 23,4% market share.
The Discovery Health Medical Scheme generated a surplus of R1.4 billion, and by January 2005 total reserves amounted to R3,2 billion.
Discovery entered the UK private medical insurance market in October – some three months ahead of schedule – with the launch of the PruHealth joint venture with the Prudential plc. As budgeted, this incurred an R80 million upfront charge, and Gore is confident PruHealth will deliver on its targets.
Vitality saw a decline in earnings to R9 million (2003: R20 million). This was attributable to the enhancement of Vitality benefits and the investment in the launch of the DiscoveryCard.
After only three months, over 60 000 new cards have been issued to members.