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Discovery posts strong full-year operating results; Discovery Bank progressing excellently

21 September 2023 Discovery

Discovery Group today presented its financial year-end results to investors and analysts. Chief Executive, Adrian Gore commented, “Discovery’s three business composites – South Africa, United Kingdom and Vitality Global – delivered excellent performances in line with the Group’s strategy and ambition.”

For the reporting period, Discovery posted an increase in normalised profit from operations, up 24% from R9 384 million to R11 661 million. Headline earnings increased by 5% to R5 490 million; normalised headline earnings increased by 32% to R7 678 million; and core new business annual premium income (API) rose 12% to R22 788 million. Embedded value increased to R98 176 million, which represented a 13.2% return on embedded value.

In a year characterised by significant macroeconomic uncertainty, Discovery continued its focus on delivering quality earnings and cashflow with a strong balance sheet; while following a clear growth strategy for each composite (SA, UK and Vitality Global). The Group invested in its proprietary Vitality Shared-value model, and intensified the focus on key initiatives while closing business areas with marginal benefits.

The Group remained financially resilient with high levels of liquidity and the financial leverage ratio (FLR) improving to 20%. Organic cash generation was robust during the year following growth in quality earnings, a significant recovery in Discovery Life’s cash generation following elevated COVID-19-related claims in the previous reporting period, and the reduction in the cost of new initiatives. The robust balance sheet and cash positions support the resumption of dividends, and the directors declared a final gross cash dividend of 110 cents per ordinary share.

Discovery’s performance is further underpinned by continued investment in its business model, with excellent results for each composite:

• The SA Composite’s normalised operating profit increased by 22% to R9 096 million and new business by 11% to R16 818 million. Discovery Health showed strong growth across all metrics with prior investment in technology driving efficiencies and continued innovation. Discovery Life had a resilient performance with positive variances, with Group Life returning to profit. Discovery Invest generated significant growth in profit, given higher investment markets and other in-period gains. Discovery Insure delivered on its profit turnaround, following actions taken in previous periods. Discovery Bank continued with excellent progress across all metrics, as acquisition of quality clients accelerated over the year.
• The UK Composite‘s normalised operating profit increased by 14% to £83.4 million (up 21% to R1 788 million). Earned premiums increased by 11% year-on-year to £989.2 million (up 17% to R21 199 million), and total lives insured increased by 11% to 1.72 million. Core new business API was strong, increasing by 19% to £177 million (26% to R3 785 million), excluding VitalityInvest (VI), following the prior decision to close the business.
• Vitality Global increased operating profits by 49% to US$44 million (74% to R777 million). Ping An Health Insurance had a particularly strong result, with its contribution increasing 76% in a complex operating environment in China, with a solid operational performance and significantly improved investment returns.

Gore concluded, “Discovery’s growth strategy is based on the efficacy, repeatability, and scalability of our Vitality Shared-value model. It is a powerful platform from which to drive new business and enables us to pursue growth through our organic businesses and global partnerships. The Group is now focused on evolving the model into an integrated value chain with bespoke modules to drive growth and market leadership across each of the composites."

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