One South African company taking over the UK

Discovery’s Vitality UK business had a standout performance in the company’s interim results, with it now being the third-largest health insurer in Great Britain and having the highest brand awareness in the market. 

This has been coupled with strong financial performance in the previous financial year and in the first half of Discovery’s new financial year. 

One of the biggest drivers of the company’s performance has been the increased demand for private health insurance in the UK as the National Health Service comes under increasing pressure. 

Vitality now covers over two million lives in the UK, with CEO Adrian Gore flagging this trend for the past two years as a key driver of Discovery’s operations in Great Britain. 

However, Gore more recently has pointed to the British business beginning to leverage the value of the Vitality shared-value model more effectively. 

“I personally think the Vitality shared-value model has resonated very well in the UK. We did a lot of work on getting that right in the first place,” Gore told Daily Investor. 

“It has been executed well, and we did a lot of work on it. We have learned a lot of lessons in a lot of different places. I think the execution in the UK has been brilliant.” 

Gore explained in an earlier presentation that the UK health insurance market is highly lucrative, with it being the fourth largest in the world. 

Due to its size, the market has become highly sophisticated and immensely competitive. Crucially, this has also meant that the market has become highly commoditised. 

This means that much of the success of a health insurer in the UK is based on the ability to attractively price an offering and ensure that the pricing strategy is sustainable. 

“You have got a highly commoditised market. You have got agents and brokers and intermediaries and advisors using portals to price. So, you can outbid any margin to win business,” Gore explained. 

“But, using the dynamic underwriting and dynamic pricing of the shared-value model, with all the incentives, we have managed to get massive amounts of business on the right terms that are sustainable.” 

Gore said that, ultimately, the consumer in the UK has been very receptive to the model and that the actual science behind the model has worked brilliantly. 

“This has given us growth at a good margin. I think it is excellent and you can see, I think, the quality of the Vitality Health offering as being substantially better than anything else in the UK,” Gore said. 

“It is in the top three in terms of scale and, in terms of quality, I think it is incredible.”

The Vitality UK business has also benefitted immensely from its growing profile, ensuring the shared-value model and its benefits are front of mind for Britons. 

Its brand awareness is now higher than its competitors, with Vitality becoming front of mind for Britons through its sponsorship of The Hundred cricket tournament and Premier League team Bournemouth’s football stadium.

Taking on the continent

The success of the UK business has proven that Discovery can grow its Vitality model globally and in a profitable way. 

Previously, Gore explained that for Discovery to reach its ambitious target of doubling its operating profit by 2029, it will need several things to go right. 

One of these elements is the need for the company’s Vitality Network business, where it effectively licenses its shared-value model, to have a breakout in the United States or Europe. 

“The core businesses have to perform well and grow robustly. I think scaling the bank is a key issue and breaking through globally on the Vitality Network is important,” Gore said. 

“This means the United Kingdom business has to continue to grow, life and health have to grow in South Africa, and the bank has to scale alongside a strong breakthrough elsewhere in the world.”

The breakout in Europe or the United States is proving challenging, but Gore is confident that Discovery will get it right. 

“We have had a partnership with John Hancock from the get-go in the United States, and it has worked incredibly well. The issue is that we have an exclusivity with them in certain parts of the market, so we are limited to them,” Gore said. 

“In Europe, it is an open field now after we ended our Generali agreement. It is a massive market that we will now look to grow into.”

With the potential for strong growth in Europe through multiple partnerships, Gore said Discovery is focusing on the continent and has paused its expansion in the US. 

“We are focusing on Europe at the moment in terms of the scale of what needs to be done. We have been through a process of finding partners. We have probably met with over 20 across the continent and analysed many more,” Gore explained. 

“So, it is still early to tell, but there is very good interest in what we are trying to do. The ideal situation is to get a few key national champions in different markets, and that is where we are trying to settle.” 

Gore explained that this is not easy, with any deal taking a significant amount of time and resources to secure. 

“It takes a long time, and you will appreciate that this is not retail sales, it is not even corporate sales. It is almost a merger where you are partnering at the core of the business model,” Gore said.