Innovation, growth and quality drive strong results for Discovery

05 September 2011 Discovery

Discovery today announced its financial results for the year ended 30 June 2011. The company made significant progress across all businesses -established, emerging and developing – in a decisive period that saw Discovery advance its ability to replicate its unique business model in other markets.

Adrian Gore, Chief Executive Officer of Discovery, shared the highlights of the Group’s performance with the analyst and investor community:

· An overall strong financial performance with operating profit growing 32% and normalised headline earnings, 31%

· Discovery’s existing businesses – Discovery Health, Discovery Life, Discovery Vitality and DiscoveryCard – executed a solid performance with strong embedded value growth and improved new business margins

· The performance of Discovery’s emerging businesses - PruHealth, PruProtect and Discovery Invest – surpassed expectations, with all three delivering profits

· Discovery’s youngest businesses, Discovery Insure, The Vitality group in the US and Ping An Health in China, are gaining traction in their respective markets and are positioned well for future growth

Gore was especially pleased with the stellar performance from Discovery’s emerging businesses, “PruHealth, PruProtect and Discovery Invest certainly exceeded our expectations. I believe all three businesses are now coming of age and showing their real potential. They are significantly profitable and positioned well for profitability going forward. The scale of these emerging businesses is shown in their combined business run rate that is now almost a third of Discovery’s total new business.”

Gore further explained why the past year has been such a significant one for Discovery, “Discovery has posted strong financial results and we are extremely pleased with this performance. The significance of this past year, however, lies in the progress we’ve made in furthering the development of the Vitality framework and its applications locally and internationally. We’ve bedded down our business model into a ‘repeatable’ construct that underpins our expansion into new markets.”

Vitality, Discovery’s science-based wellness programme, forms the foundation of all Discovery’s businesses and its ability to replicate the Discovery model successfully in new markets. Gore comments, “We’ve done a considerable amount of work during the past year on the Vitality model to ensure its repeatability in markets such as China, the United States and the United Kingdom. We also applied this model as the basis for Discovery Insure launched in May 2011; applying the principles of behavioural economics to the science of driving, thereby giving consumers more value.”

Discovery’s existing businesses continue to drive the overall performance for the Group with Discovery Health increasing its operating profits by 14% to R1 357 million and Discovery Life growing its operating profit by 16% to R1 558 million. Importantly, both businesses continued to deliver quality and value to consumers. Discovery Health invested in tools to improve quality and minimise the cost of care for members. PracticeXpress, a comprehensive range of technology applications used with an iPad, allows healthcare professionals to access their patient’s healthcare records and makes it easier for doctors to interact with the healthcare system.

Discovery Life launched a range of innovative products aimed at meeting the complex needs of consumers. The AccessCover™ product gives consumers the choice to cash in a portion of their life cover during a life-changing event.

In addition, Discovery consolidated its capacity and potential for growth going forward. Discovery’s capital base was strengthened by the issuing of R800 million of perpetual preference shares, placing the Group in a strong position to fund continued growth without recourse to additional capital.

“Overall, we are excited about the potential embedded in all our businesses. Discovery is well positioned and capitalised for growth, and importantly, for delivering continued value and innovation to our clients,” Gore concluded.

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