Discovery is rocking – despite UK hit

Discovery posted a strong set of results for the past financial year, with the company benefitting from a positive election outcome in South Africa and continued National Health Service (NHS) backlogs driving demand for its UK offering. 

However, its UK operations remained a drag on overall performance, with normalised profit declining by 14% compared to the same period last year. 

Normalised headline earnings grew 15% while headline earnings increased 7%, the difference explained by the considerable prior period fair value gain from the UK interest rate swaption.

Discovery said the swaption was realised towards the end of the prior financial year and had no profit impact in the current period. 

In its annual results for the financial year to the end of June 2024, Discovery’s South African businesses grew strongly and continue to be the main contributors to the group’s overall profit of R11.6 billion – up 17% year-on-year. 

Normalised profit from Discovery Health and its life insurance business grew 7% and 9%, respectively. These businesses remain the foundation of the group’s operations, contributing R8.7 billion of its overall profit. 

Despite the pending implementation of the National Health Insurance (NHI) scheme, which threatens these businesses, Discovery saw demand for its medical aid product surge 26% over the past year. 

The group’s investment business also showed strong growth in South Africa, with normalised profit up 20% to R1.5 billion. Discovery Insure more than doubled its profit but remains a small contributor to overall profit, making R248 million. 

Discovery Bank posted another loss for the period but exceeded expectations in narrowing its loss by 41% to R454 million. 

The bank continued to show strong growth, with deposits advanced up 29% and 27%, respectively. Its clients now have over two million accounts with the bank – up 40% compared to a year ago. 

Discovery is encouraged by the recent political events in South Africa, particularly the formation of the Government of National Unity (GNU). 

It said it will continue to engage the government at multiple levels regarding the NHI Act as it considers the scheme unworkable in its current form. 

In contrast to its South African operations, Vitality UK came under pressure in the past financial year as its profit declined 14% in rand terms. 

Despite growing membership by 7% to over one million, a sharp increase in higher claims during the period resulted in the health insurance business’ profit more than halving. A similar trend played out with Vitality UK’s life insurance business.

In response, the company has raised premiums to cover the higher claims, and it expects its margins to recover strongly in the coming year. 

Discovery also noted that severe backlogs at the UK’s NHS have increased demand for private health insurance, with its businesses well-poised to benefit. 

Positively, the group began to reap handsome rewards from its investment in Chinese insurance giant Ping An, with its share of profits nearly doubling to R1.1 billion. 

As a result of the strong performance from its South African business and Vitality Global, excluding the UK, Discovery declared a final dividend of 152 cents per share.