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DISCOVERY HOLDINGS LIMITED
(REGISTRATION NUMBER 99/07789/06)
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2000
REVENUE UP 65%
OPERATING PROFIT BEFORE TAXATION UP 94%
EMBEDDED VALUE UP 76%
THE YEAR UNDER REVIEW HAS BEEN THE MOST COMPLEX, YET MOST SUCCESSFUL TO DATE.
IT MAY APPEAR THAT THE MAJOR ACHIEVEMENTS INVOLVED CORPORATE ACTIVITY,
SPECIFICALLY THE COMPANY'S LISTING ON THE JSE. HOWEVER, THE REAL ACHIEVEMENTS
WERE IN THE ABILITY OF THE COMPANY TO RAPIDLY INTENSIFY FOCUS AND TRANSLATE ITS
VISION FROM THE FINANCING OF HEALTHCARE TOWARD A FAR MORE PROFOUND BUT VALUABLE
ONE OF MAKING PEOPLE HEALTHIER AND ENHANCING THEIR LIFESTYLES. DISCOVERY'S
PRODUCTS AND SERVICES FOLLOWED THIS VISION.
FINANCIAL RESULTS
IN THE YEAR UNDER REVIEW DISCOVERY'S PERFORMANCE HAS EXCEEDED EXPECTATIONS.
GROSS REVENUE INCREASED 65% TO R3 546,7 MILLION FROM R2 144,5 MILLION. NEW
BUSINESS RECURRING ANNUALISED PREMIUM INCOME INCREASED BY 23% TO R1 322,0
MILLION FROM R1 076,0 MILLION. THIS CONTRIBUTED TO AN INCREASE IN EMBEDDED
VALUE OF 76% TO R2 112,9 MILLION FROM R1203,9MILLION. OPERATING PROFIT BEFORE
TAXATION INCREASED 94% AFTER ABSORBING THE START-UP COSTS OF ALL DISCOVERY'S
NEW VENTURES. HEADLINE EARNINGS PER SHARE INCREASED 29% TO 35,4CENTS PER SHARE
FROM 27,4 CENTS PERSHARE.
DISCOVERY HEALTH
DISCOVERY HEALTH PERFORMED EXCEPTIONALLY WELL OVER THE YEAR. MEMBERSHIP TO THE
HEALTH PLANS GREW 38% TO 701 395 LIVES FROM 509 858 LIVES. THE IMPLEMENTATION
OF THE NEW MEDICAL SCHEMES ACT OCCURRED DURING THE YEAR. THIS NECESSITATED A
SUBSTANTIAL CHANGE IN STRUCTURE OF THE PLANS REQUIRING A COMPLETE RETHINK OF
THE ACTUARIAL BASIS OF THE PLANS. THE RESULT WAS A SIGNIFICANT ADVANCE IN THE
UNDERSTANDING OF RISK MANAGEMENT AND CONSIDERABLE ADVANCES IN THE ABILITY TO
MANAGE THE RISK OF A POPULATION RATHER THAN THE INDIVIDUAL. THE PLANS ARE NOW
WELL PLACED IN TERMS OF BOTH THE NEW REGULATION AND THE COMPETITION.
THE "DEMARCATION DEBATE" BETWEEN MEDICAL SCHEME AND INSURANCE BUSINESS WAS
SPARKED OFF BY THE COMPANY'S OCTOBER 1999 PRODUCT LAUNCH. HOWEVER, THE FINAL
PLANS' STRUCTURE JETTISONED ALL FORMS OF INSURANCE AND INDIVIDUAL RISK RATING
ALLOWING THE COMPANY TO MOVE AHEAD COMPETITIVELY AND WITH CERTAINTY.
VITALITY
VITALITY PERFORMED EXCEPTIONALLY WELL OVER THE YEAR. VITALITY'S ABILITY TO
ENHANCE MEMBERS' HEALTH AND LIFESTYLES WAS CONSIDERABLY ENHANCED DURING THE
YEAR WITH THE ADDITION OF THE LEISURE SUITE OF BENEFITS AND THE IMPLEMENTATION
OF OUTCOME-BASED FITNESS MEASURES ANDREWARDS. VITALITY MEMBERSHIP GREW A
CONSIDERABLE 64% TO 469 904 MEMBERS FROM 285947MEMBERS PROVIDING IT WITH THE
CRITICAL MASS NEEDED TO ACHIEVE ITS VISION.
DESTINY HEALTH
DESTINY HEALTH, DISCOVERY'S USA INITIATIVE, LAUNCHED ITS PRODUCTS TO THE MARKET
IN CHICAGO IN MAY 2000 AFTER REGULATORY APPROVAL WAS RECEIVED. DESTINY STARTED
ACCEPTING NEW BUSINESS FROM JULY 2000. THE PRODUCTS WERE ENTHUSIASTICALLY
RECEIVED BY THE INTERMEDIARY COMMUNITY. MORE THAN 400 INTERMEDIARIES HAVE BEEN
TRAINED GENERATING OVER 500 QUOTATIONS FOR EMPLOYERS, OF WHICH SEVERAL HAVE
BEEN ACTIVATED AS NEW BUSINESS. SYSTEMS, SALES AND ADMINISTRATIVE STRUCTURES
HAVE BEEN DEVELOPED TO SUPPORT THE SALES AND OPERATIONAL ACTIVITIES OF THE NEW
PRODUCTS. DISCOVERY HAS CONTINUED ITS STRATEGY OF COMBINING THE TECHNOLOGY AND
INTELLECTUAL CAPITAL DEVELOPED IN SOUTH AFRICA WITH AN EXPERIENCED UNITED
STATES MANAGEMENT TEAM. THIS IS PROVING TO BE EFFECTIVE. THE US HEALTH CARE
ENVIRONMENT CONTINUES TO DEVELOP AS EXPECTED WITH A COMBINATION OF RISING
MEDICAL INFLATION AND RISING DISSATISFACTION WITH TRADITIONAL MANAGED CARE
PRODUCTS - THUS PROVIDING DESTINY WITH A UNIQUE OPPORTUNITY FOR MARKET
PENETRATION.
PROSPECTS
THE ORGANIC GROWTH OF DISCOVERY HEALTH AND VITALITY, AMONGST THE 7 MILLION
TARGET MARKET IN SOUTH AFRICA, CONTINUES TO BE SUBSTANTIAL. MANAGEMENT BELIEVES
THAT THIS GROWTH CAN BE MAINTAINED IN THE FORTHCOMING FINANCIAL YEAR.
AS MENTIONED ABOVE, THE LAUNCH OF DESTINY HEALTH IN THE US OFFERS DISCOVERY THE
OPPORTUNITY TO PROVE THE EFFECTIVENESS OF ITS CORE STRATEGIES IN OTHER MARKETS.
DISCOVERY WILL LAUNCH ITS LIFE INITIATIVE TO THE MARKET IN SEPTEMBER 2000.
PROTECTION AGAINST DEATH, DISABILITY AND DREAD DISEASE IS A CRUCIAL COMPONENT
IN DISCOVERY'S BUSINESS MODEL AND IS A NATURAL EXTENSION OF THE GROUP'S SKILLS
AND POSITIONING.
EDISCOVERY WILL BE LAUNCHED TO THE MARKET IN OCTOBER 2000. THIS WILL OFFER
FURTHER VALUE TO OUR CLIENTS BY PROVIDING ACCESS TO THE RANGE OF DISCOVERY'S
PRODUCTS AND SERVICES IN A FULLY INTERACTIVE ON-LINE ENVIRONMENT AND BY
OFFERING NEW PRODUCTS AND SERVICES IN AN EXCITING AND CREATIVE WAY.
DISCOVERY HEALTH IS ALSO ACTIVELY INVESTIGATING POTENTIAL PRODUCTS FOR THE
EMPLOYED BUT UNINSURED POPULATION IN SOUTH AFRICA.
THE BOARD OF DIRECTORS IS CAUTIOUSLY OPTIMISTIC AND LOOKS FORWARD TO A YEAR
FILLED WITH NEW CHALLENGES AND OPPORTUNITIES.
GROUP CONSOLIDATED
EMBEDDED VALUE STATEMENT
AT 30 JUNE 2000
EMBEDDED VALUE IS AN ACTUARIAL VALUATION OF THE BUSINESS OF DISCOVERY HOLDINGS
AND ITS SUBSIDIARIES.
THE EMBEDDED VALUE IS MADE UP OF TWO KEY COMPONENTS:
- THE CURRENT VALUE OF SHAREHOLDERS' FUNDS;
- THE PRESENT VALUE OF ALL FUTURE PROFITS ON EXISTING BUSINESS.
EMBEDDED VALUE AT 30 JUNE 2000
PRO FORMA CHANGE
R MILLION 2000 1999 %
SHAREHOLDERS' FUNDS 597,6 295,7 102
VALUE OF CURRENT BUSINESS
(NET OF COST OF SOLVENCY
CAPITAL) 1 515,3 908,2 67
TOTAL EMBEDDED VALUE 2 112,9 1 203,9 76
EMBEDDED VALUE PROFIT FOR
THE YEAR ENDED 30 JUNE 2000
PRO FORMA CHANGE
R MILLION 2000 1999 %
EMBEDDED VALUE AT YEAR-END 2 112,91 1 203,9 76
EMBEDDED VALUE AT BEGINNING
OF YEAR 1 203,9 585,2 106
INCREASE IN EMBEDDED VALUE 909,0 618,7 47
CAPITAL RAISED (190,8) (70,0)
EMBEDDED VALUE PROFIT 718,2 548,7 31
COMPONENTS OF EMBEDDED VALUE PROFIT
PRO FORMA CHANGE
R MILLION 2000 1999 %
PROFIT FROM NEW BUSINESS 396,8 317,5 25
PROFIT FROM EXISTING BUSINESS
- EXPECTED RETURN 177,1 95,6 85
- EXPERIENCE VARIANCES 110,7 131,3 (16)
- RETURN ON SHAREHOLDERS'
FUNDS 33,6 4,3 681
EMBEDDED VALUE PROFIT 718,2 548,7 31
EMBEDDED VALUE OF NEW
BUSINESS
PRO FORMA CHANGE
R MILLION 2000 1999 %
NEW BUSINESS ANNUALISED
PREMIUM INCOME 1 322,0 1 076,0 23
EMBEDDED VALUE OF NEW
BUSINESS 396,8 317,5 25
GROUP CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2000
PRO FORMA CHANGE
R MILLION 2000 1999 %
GROSS REVENUE 3 546,7 2 144,5 65
REINSURANCE, MEDICAL
SCHEME AND MONEY MARKET
CONTRIBUTIONS 1 675,3 1 095,5 53
NET PREMIUM INCOME 1 871,4 1 049,0 78
INVESTMENT INCOME 107,4 52,2
TOTAL INCOME 1 978,8 1 101,2
EXPENSES AND CLAIMS 1 684,8 911,9 85
PROFIT BEFORE TRANSFERS 294,0 189,3 55
TRANSFERS TO RESERVES 78,8 97,0
NET OPERATING PROFIT OF
DISCOVERY HEALTH AND
VITALITY 215,2 92,3 133
START-UP COSTS 37,5 0,9
LIFE INITIATIVE 2,6 -
EDISCOVERY 3,3 -
DESTINY HEALTH 31,6 0,9
NET OPERATING PROFIT
BEFORE TAXATION 177,7 91,4 94
TAXATION 70,2 -
ATTRIBUTABLE TO
CURRENT YEAR 45,4 -
ARISING ON PRIOR YEAR
PROFITS AS A RESULT OF
CHANGES IN INCOME TAX
LEGISLATION 24,8 -
NET PROFIT FOR THE YEAR 107,5 91,4 18
OUTSIDE SHAREHOLDERS'
INTEREST 0,2 -
GROUP PROFIT ATTRIBUTABLE
TO SHAREHOLDERS 107,7 91,4 18
WEIGHTED AVERAGE NUMBER OF
SHARES IN ISSUE 373 907 863 333 196 247 12
EARNINGS PER SHARE
(CENTS) 28,8 27,4 5
HEADLINE EARNINGS PER
SHARE (CENTS) 35,4 27,4 29
GROUP CONSOLIDATED
BALANCE SHEET
AT 30 JUNE 2000
PRO FORMA
R MILLION 2000 1999
ASSETS
NON-CURRENT ASSETS
FIXED ASSETS 128,8 78,9
INVESTMENTS 737,4 495,9
866,2 574,8
CURRENT ASSETS
AGENTS AND OTHER RECEIVABLES 282,1 131,2
CASH AND CASH EQUIVALENTS 242,6 242,2
524,7 373,4
1 390,9 948,2
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
ISSUED CAPITAL 486,5 295,7
ACCUMULATED PROFITS 107,7
594,2 295,7
ACTUARIAL LIABILITIES
AND RESERVES 467,8 385,6
MINORITY INTEREST 0,4 -
CURRENT LIABILITIES 328,5 266,9
1 390,9 948,2
GROUP CONSOLIDATED
CASH FLOW
FOR THE YEAR ENDED 30 JUNE 2000
PRO FORMA
R MILLION 2000 1999
CASH GENERATED BY UNDERWRITING ACTIVITIES 92,4 156,1
CASH GENERATED BY UNDERWRITING OPERATIONS 191,7 154,8
CASH (UTILISED)/GENERATED BY WORKING
CAPITAL CHANGES (99,3) 1,3
CASH UTILISED BY INVESTMENT ACTIVITIES (223,2) (134,7)
CASH GENERATED BY FINANCING ACTIVITIES 131,2 75,1
PROCEEDS FROM SHARES ISSUED 143,7 75,1
PRELIMINARY AND SHARE ISSUE EXPENSES (12,5) -
NET INCREASE IN CASH AND CASH EQUIVALENTS 0,4 96,5
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 242,2 145,7
CASH AND CASH EQUIVALENTS AT END OF YEAR 242,6 242,2
FINANCIAL INFORMATION
THE PRO FORMA EMBEDDED VALUE STATEMENT, INCOME STATEMENT, CASH FLOW STATEMENT
AND BALANCE SHEET FOR THE YEAR ENDED 30 JUNE 1999 REPRESENT THE CONSOLIDATED
FINANCIAL STATEMENTS OF DISCOVERY HEALTH LIMITED AND DESTINY HEALTH INC. AT
THAT DATE.
NOTES TO THE EMBEDDED VALUE STATEMENT
THE EMBEDDED VALUE RESULTS HAVE BEEN PREPARED USING THE SAME BASIS AS DISCLOSED
IN ANNEXURE 1 OF THE PROSPECTUS DATED 27 SEPTEMBER 1999, WITH THE FOLLOWING
BASIS CHANGES:
- PRODUCT CHANGES: THE EMBEDDED VALUE IS BASED ON THE CURRENT HEALTH PLANS SOLD
BY DISCOVERY HEALTH.
- REINSURANCE: NO REINSURANCE PROFITS HAVE BEEN INCLUDED IN THE EMBEDDED VALUE
CALCULATION.
- TAX: THE CHANGE IN BASIS OF CALCULATION OF INCOME TAX FOR LONG-TERM INSURERS,
WHICH IS EXPECTED TO INCREASE THE PAYMENT OF TAX, IS INCORPORATED IN THE
EMBEDDED VALUE.
30 JUNE 2000 30 JUNE 1999
RISK DISCOUNT RATE 19,5% 21,0%
MEDICAL INFLATION 11,5% 13,0%
EXPENSE INFLATION 9,5% 11,0%
THE RISK DISCOUNT RATE HAS BEEN CHANGED TO REFLECT THE REDUCTION IN SOUTH
AFRICAN LONG-TERM GOVERNMENT BOND INTEREST RATES BETWEEN 30 JUNE 1999 AND 30
JUNE 2000. MEDICAL AND EXPENSE INFLATION ASSUMPTIONS HAVE BEEN ADJUSTED TO
REFLECT THE DECREASE IN EXPECTED FUTURE INFLATION RATES.
THE RESULTS HAVE BEEN REVIEWED BY HYMANS ROBERTSON CONSULTING ACTUARIES WHO
HAVE CONFIRMED THAT THE METHODOLOGY AND ASSUMPTIONS USED TO DETERMINE THE
EMBEDDED VALUE ARE REASONABLE.
NEW BUSINESS ANNUALISED PREMIUM INCOME (API) WRITTEN DURING THE YEAR COMPRISES
NEW EMPLOYERS AND EXCLUDES ADDITIONS TO EXISTING EMPLOYERS AND INFLATIONARY
INCREASES.
NOTES TO THE INCOME STATEMENT
GROSS REVENUE INCREASED BY 65% TO R3 546,7 MILLION FROM R2 144,5 MILLION FOR
THE YEAR UNDER REVIEW.
NET PREMIUM INCOME INCREASED 78% TO R1 871,4 MILLION FROM R1 049,0 MILLION DUE
TO A DECREASE IN REINSURANCE REQUIRED BY DISCOVERY HEALTH RESULTING FROM A
STRENGTHENING OF THE GROUP'S FINANCIAL POSITION. THIS, IN TURN, RESULTED IN A
CORRESPONDING INCREASE IN CLAIMS AND POLICYHOLDERS' BENEFITS, DUE TO REDUCED
REINSURANCE RECOVERIES.
INVESTMENT INCOME IMPROVED SUBSTANTIALLY DUE TO AN INCREASE IN INTEREST EARNED
AND IMPROVED PERFORMANCE OF LISTED EQUITIES ON THE JSE. INVESTMENT INCOME ON
POLICYHOLDERS' FUNDS WAS TRANSFERRED TO RESERVES NET OF POLICYHOLDERS'
WITHDRAWALS.
THE GROWTH IN EXPENSES AND CLAIMS WAS MAINLY ATTRIBUTABLE TO THE GROWTH IN
CLAIMS AND POLICYHOLDERS' BENEFITS CAUSED BY THE REDUCTION IN REINSURANCE
RECOVERIES MENTIONED ABOVE.
TRANSFERS TO RESERVES DECREASED IN THE CURRENT YEAR DUE TO THE LOWER RESERVES
REQUIRED BY DISCOVERY HEALTH AS THE DISCOVERY HEALTH MEDICAL SCHEME NOW RETAINS
MORE RISK PREMIUM THAN IN THE PRIOR YEAR.
THE ABOVE RESULTED IN THE GROWTH IN THE NET OPERATING PROFIT OF DISCOVERY
HEALTH AND VITALITY OF 133% TO R215,2 MILLION FROM R92,3 MILLION.
DESTINY HEALTH'S DEVELOPMENT OF ITS INFRASTRUCTURE AND THE LAUNCH OF ITS
PRODUCTS WERE ACHIEVED TIMEOUSLY AND AT A LOWER COST THAN EXPECTED.
THE INCOME TAX CHARGE IN THE INCOME STATEMENT HAS ARISEN BECAUSE OF A CHANGE IN
THE INCOME TAX LEGISLATION GOVERNING LIFE ASSURERS. THE TAXATION IS SPLIT INTO
THREE AMOUNTS:
- THE CURRENT TAX PAYABLE ON VITALITY PROFITS SINCE ITS OPERATION AS A SEPARATE
COMPANY (R2,8MILLION);
- THE DEFERRED TAX ATTRIBUTABLE TO THE CURRENT YEAR'S PROFIT (R42,6 MILLION);
AND
- THE DEFERRED TAX RELATING TO PRIOR YEARS' PROFITS (R24,8 MILLION).
THE TAX HAS BEEN SPLIT BETWEEN THE PRIOR YEARS AND THE CURRENT YEAR, BY
CALCULATING THE EFFECT OF THE NEW LEGISLATION ON THE CURRENT YEAR'S TAXABLE
PROFIT AND THE BALANCE BEING ATTRIBUTABLE TO PRIOR YEARS.
THE OUTSIDE SHAREHOLDERS' INTEREST IS THE START-UP COSTS ATTRIBUTABLE TO THE
MANAGEMENT SHAREHOLDERS OF DESTINY HEALTH INC.
GROUP PROFIT ATTRIBUTABLE TO SHAREHOLDERS INCREASED 18% TO R107,7 MILLION FROM
R91,4MILLION AFTER ABSORBING THE INCREASED TAX CHARGE AND START-UP COSTS OF
DESTINY HEALTH, DISCOVERY'S LIFE INITIATIVE AND EDISCOVERY.
HEADLINE EARNINGS PER SHARE WAS CALCULATED BY ADDING BACK THE TAXATION
ATTRIBUTABLE TO PRIOR YEARS' PROFITS (R24,8 MILLION) AND DIVIDING THE RESULT BY
THE WEIGHTED AVERAGE NUMBER OF SHARES IN ISSUE FOR THE YEAR.
NOTES TO THE BALANCE SHEET
THE GROWTH IN FIXED ASSETS REFLECTS THE INCREASED INVESTMENT IN TECHNOLOGY AND
THE GROWTH OF THE BUSINESS.
INCLUDED IN AGENTS AND OTHER RECEIVABLES IS A LOAN TO THE GROUP SHARE INCENTIVE
TRUST OF R63,5 MILLION (1999: R4,7 MILLION)
INCLUDED IN CURRENT LIABILITIES IS CURRENT TAX PAYABLE OF R2,8 MILLION (1999: R
NIL) AND DEFERRED TAX OF R67,4 MILLION (1999: R NIL).
ON BEHALF OF THE BOARD
L L DIPPENAAR A GORE
(CHAIRMAN) (CHIEF EXECUTIVE OFFICER)
25 AUGUST 2000
WWW.DISCOVERYHEALTH.CO.ZA
DIRECTORS
L L DIPPENAAR (CHAIRMAN), A GORE (CHIEF EXECUTIVE OFFICER),
B SWARTZBERG (CHIEF OPERATING OFFICER), S D WHYTE*, N S KOOPOWITZ*, HMAYERS*, J
M ROBERTSON*, R B GOUWS, H P MEYER, W E LUCAS-BULL, F J C TRUTER.
*EXECUTIVE
TRANSFER SECRETARIES
COMPUTER SHARE SERVICES LIMITED
(REGISTRATION NUMBER 58/03546/06)
2ND FLOOR, EDURA, 41 FOX STREET
JOHANNESBURG, 2000
PO BOX 61051, MARSHALLTOWN, 2107
SECRETARY AND REGISTRATION OFFICE
AUBREY CIMRING
DISCOVERY HEALTH
1ST FLOOR, 25 FREDMAN DRIVE, SANDTON, 2146
PO BOX 786722, SANDTON, 2146
TEL: (011) 881-2888 FAX: (011) 881-2547
E-MAIL QUESTIONS TO: ASKTHECFO@DISCOVERYHEALTH.CO.ZA
DISCOVERY HOLDINGS POSTS STRONG ANNUAL RESULTS
PRESS RELEASE
AUGUST 30, 2000
DISCOVERY, THE SPECIALIST HEALTHCARE COMPANY THAT LISTED IN THE FINANCIAL
SHORT-TERM INSURANCE SECTOR OF THE JSE IN OCTOBER 1999, HAS RECORDED A STRONG
SET OF ANNUAL RESULTS FOR THE 12 MONTHS TO 30 JUNE 2000, EXCEEDING PRE-LISTING
FORECASTS.
ADRIAN GORE, CHIEF EXECUTIVE OFFICER, NOTES THAT DISCOVERY CONTINUED TO GROW IN
ALL SEGMENTS OF ITS BUSINESS IN THE REVIEW PERIOD. GROSS REVENUE GREW BY 65% TO
R3457M (1999, R2145M). EMBEDDED VALUE INCREASED BY 76% TO R2113M FROM R1204M.
OPERATIONAL PROFITS FROM DISCOVERY HEALTH AND VITALITY GREW 133% TO R215,2M
(1999: R92,3M). NEW BUSINESS ANNUAL PREMIUM INCOME INCREASED 23% TO R1332M
(1999: R1076M). THE NUMBER OF LIVES COVERED BY THE DISCOVERY HEALTH PLANS
INCREASED 38% TO 701,395 (1999:509,858).
HEADLINE EARNINGS PER SHARE INCREASED BY 29% TO 35.4C PER SHARE FROM 27.4C PER
SHARE. THIS EXCEEDED THE PRE-LISTING FORECAST OF 25C PER SHARE BY 42%.
DUE TO A CHANGE IN INCOME TAX LEGISLATION, DISCOVERY HEALTH WILL PAY TAX
EARLIER THAN ANTICIPATED AT THE TIME OF THE PROSPECTUS AND HAS THUS PROVIDED
FOR THIS DEFERRED TAX CHARGE IN THE INCOME STATEMENT. DISCOVERY'S AFTER-TAX
EARNINGS INCREASED 18% TO R107.7M (1999: R91,4M) AFTER ABSORBING THE START-UP
COSTS OF DESTINY HEALTH OF R31.6M (1999: R0,9M), DISCOVERY'S LIFE INSURANCE
INITIATIVE R2.6M (1999: RNIL) AND EDISCOVERY R3.3M (1999: RNIL). THIS EXCEEDED
THE FORECAST OF R92.7M BY 16%.
AN AMOUNT OF R78,8 MILLION WAS TRANSFERRED TO INVESTMENT, ACTUARIAL,
CONTINGENCY AND OTHER RESERVES.
IN THE CURRENT FINANCIAL YEAR, DESTINY HEALTH IN THE UNITED STATES RECEIVED
APPROVAL FROM THE APPLICABLE REGULATORS AND LAUNCHED ITS PRODUCTS IN MAY 2000.
GORE SAYS DISCOVERY ALSO BEGAN WORK ON TWO NEW INITIATIVES, A LIFE INSURANCE
INITIATIVE AND EDISCOVERY, WHICH WILL BE LAUNCHED IN THE FIRST AND SECOND
QUARTER OF THE NEXT FINANCIAL YEAR RESPECTIVELY.
DISCOVERY ALSO PURCHASED 30% IN HEALTHBRIDGE (PLY) LTD, A PROVIDER OF
ELECTRONIC COMMERCE COMMUNICATION INFRASTRUCTURE, ESTABLISHED TO ENHANCE THE
COMMUNICATION AND BILLING BETWEEN MEDICAL SCHEMES AND HEALTHCARE PROVIDERS.
COMMENTING ON DISCOVERY'S PERFORMANCE, GORE SAYS, "THE YEAR UNDER REVIEW HAS
BEEN THE MOST COMPLEX, YET MOST SUCCESSFUL, TO DATE. WHILE IT MAY APPEAR THAT
THE MAJOR ACHIEVEMENTS INVOLVED CORPORATE ACTIVITY, SPECIFICALLY THE COMPANY'S
LISTING ON THE JSE, THE REAL ACHIEVEMENTS WERE OUR ABILITY TO RAPIDLY INTENSIFY
OUR FOCUS AND TRANSLATE OUR VISION FROM FINANCING HEALTHCARE TO A FAR MORE
PROFOUND BUT VALUABLE ONE."
"DISCOVERY'S VISION, SIMPLY PUT, IS TO MAKE PEOPLE HEALTHIER AND ENHANCE THEIR
LIFESTYLES. OUR METHODOLOGY IS TO CREATE AN ORGANISATION WHOSE PRODUCTS PEOPLE
WANT TO BUY. THE TOOLS OF OUR TRADE ARE THE TALENT AND INTELLECT OF OUR PEOPLE,
TOGETHER WITH THEIR EXCEPTIONAL ENERGY AND DRIVE," GORE SAYS THE SUCCESSFUL
IMPLEMENTATION OF THIS STRATEGY IS COMPLEX AND REQUIRES BLURRING BOUNDARIES OF
TRADITIONAL INDUSTRIES SUCH AS INSURANCE, BANKING AND HEALTHCARE, AND BLENDING
SKILLS. "THE RESULT IS A BUSINESS OF CONSIDERABLE VALUE. PEOPLE PLACE AN
EXCEPTIONAL PREMIUM ON HEALTH AND LIFESTYLE AND A COMPANY THAT CAN PROTECT AND
ENHANCE THESE ISSUES CAN GENERATE SUBSTANTIAL VALUE. IN ADDITION, IT ABSOLUTELY
ALIGNS CLIENT INTERESTS WITH SHAREHOLDER VALUE."
"OUR METHOD IS TO CREATE PRODUCTS THAT PEOPLE ASPIRE TO PURCHASE - AN ATTRIBUTE
LACKING IN TRADITIONAL FINANCIAL SERVICE PRODUCTS. ONCE THEY BECOME PART OF
THIS 'DISCOVERY COMMUNITY', WE WORK HARD TO DAZZLE THEM - WHEN THEY USE OUR
PRODUCTS OR TOUCH THE COMPANY IN ANY WAY."
DISCOVERY BEGAN AS A SPECIALIST HEALTH INSURER. GORE SAYS THE COMPANY'S
EVOLUTION HAS ENABLED IT TO BUILD A BUSINESS MODEL THAT PIVOTS AROUND
HEALTHCARE AND THE ABILITY TO FINANCE AND MANAGE IT. THE COMPLEXITY OF
DEVELOPING AND MANAGING PRODUCTS THAT PROVIDE SUSTAINABLE ACCESS TO HEALTHCARE
GENERATES CONSIDERABLE R&D CAPABILITIES, RISK MANAGEMENT AND CLINICAL SKILLS,
AND TECHNOLOGY INFRASTRUCTURE THAT PROVIDES AN ENABLING FOUNDATION TO MAKE
PEOPLE HEALTHIER AND ENHANCE THEIR LIFESTYLES."
"THE PURSUIT OF OUR VISION HAS SET US OFF ALONG PARALLEL BUT COMPLEMENTARY
PATHS OF INNOVATION. DEVELOPMENTS SUCH AS MEDICAL SAVINGS ACCOUNTS, INTEGRATED
CARE AND VITALITY HAVE MADE THE COMPANY A LEADER IN THE MARKETS IN WHICH WE
COMPETE. THESE DEVELOPMENTS HAVE ALSO OPENED UP NEW AREAS OF BUSINESS THAT ALL
WORK TOGETHER TOWARD THE ULTIMATE VISION OF THE COMPANY.
IMPORTANTLY, THEY PROVIDE DIFFERENT AND DIVERSE SOURCES OF PROFIT."
GORE SAYS DISCOVERY'S CORE BUSINESS, THE DISCOVERY HEALTH PLANS, PERFORMED
EXCEPTIONALLY WELL OVER THE YEAR. THE HEALTH PLANS PROVIDE ACCESS TO AND COVER
AGAINST THE EXPENSES OF HEALTHCARE. "THEY COMBINE MEDICAL SAVINGS ACCOUNTS WITH
MANAGED CARE AND PIVOT ON VITALITY TO ENHANCE THE HEALTH OF THE POPULATION
COVERED. THIS INTEGRATED CARE APPROACH (WHICH IS THE SUBJECT OF A HARVARD
BUSINESS SCHOOL CASE STUDY) HAS HAD A SIGNIFICANT IMPACT ON THE PERFORMANCE OF
THE PLANS."
OBVIOUSLY, THE CHALLENGE DURING THE YEAR WAS TO ENSURE THE PLANS COMPLIED WITH
THE NEW MEDICAL SCHEMES ACT, WHICH CAME INTO FORCE ON 1 JANUARY 2000.
IT TOOK THE COMPANY THREE HIGHLY-PUBLICISED INTENSIVE DEVELOPMENT CYCLES FROM
OCTOBER 1999 TO FEBRUARY 2000 TRANSFORM THE HEALTH PLANS INTO A STRUCTURE THAT
COMPLIED WITH THE NEW ACT. "THE CHALLENGE OF COMPLIANCE BROUGHT OUT THE BEST IN
US AND RESULTED IN CONSIDERABLE PROGRESS FROM AN INTELLECTUAL, ACTUARIAL AND
CLINICAL PERSPECTIVE. THE ULTIMATE MANIFESTATION WAS A SUBSTANTIALLY DIFFERENT
STRUCTURE THAT NOT ONLY COMPLIED WITH THE ACT, BUT PROVIDES A POWERFUL
FOUNDATION FOR CONTINUED GROWTH."
THE ORGANIC GROWTH POTENTIAL FOR DISCOVERY HEALTH AND VITALITY IS EXPECTED TO
REMAIN SUBSTANTIAL. IN ADDITION, THE OPPORTUNITIES OFFERED BY THE LAUNCH OF
DISCOVERY'S LIFE INITIATIVE, EDISCOVERY AND DESTINY HEALTH, PROVIDE DISCOVERY
WITH EXCITING PROSPECTS FOR THE YEAR AHEAD.
ENDS
MR ADRIAN GORE CONTACT : MR ADRIAN GORE
DISCOVERY HEALTH TEL : 011 881 2800
25 FREDMAN DRIVE FAX : 011 881 2055
SUNNINGHILL CELL : 082 600 2800
BY:
FASEDEMI NEWMAN LEO BURNETT CONTACT : MS JANNI NEWMAN/
CATHY FIDDIAN-GREEN
LEO BURNETT HOUSE TEL : 011 235 4323
3 SIMBA RD FAX : 011 235 4301
SUNNINGHIL1 CELL : 082 882 8888 / 083 601 2526
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