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DISCOVERY HOLDINGS GROUP LIMITED
PRESS RELEAS
HIGHLIGHTS
Gross inflows under management up 55% and pre-tax profit up 56%
66% growth in new business premium income to R2.16-billion from R1.3 billion
Number of lives covered reached 965 000 (from 700,000 a year ago)
Net profit from Discovery Health and Vitality up 77%
Earnings per share up 18%
Headline earnings per share up 31%
Premium increases contained to 13.8% in the face of soaring medical
inflation
Discovery Life well established
Destiny Health (US) gaining traction.
In what chief executive officer Adrian Gore describes as "an exceptional
year", Discovery Health reported a 56% increase in pre-tax profit for the
year to June 2001. This was after funding the full expenses related to the
start-up of Discovery Life and Destiny Health in the US.
"The core operations performed exceptionally well, particularly after
funding the launch of these two new businesses from current profits," says
Gore.
New business premium income grew at an annualised 66% to R2.16-billion and
the number of lives covered now exceeds 965,000 (2000: 700,000).
Headline earnings per share were up 31% to 46.3c from 35.4c for the previous
year. Earnings per share were up 18% to 34.0c from 28.8c the previous year,
after accounting for costs associated with the start-up of Discovery Life
and Destiny Health in the US, and a R47.7-million tax provision following
recent changes to the tax law.
"These results exceeded our expectations, and this at a time of great
turmoil for the industry," says Gore. "The industry has gone through a very
difficult time from a competitive and regulatory point of view. These
results are an endorsement of our business vision to enhance the health and
lifestyle of our members. Each of our business units is driven by this same
vision.
"The performance from the Discovery Health plans was extremely good,
especially compared to that of many competitors who performed very poorly.
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"We worked tirelessly to build a robust infrastructure and our service
levels are now better than ever."
A key feature of the results is cost containment, reflected in the 13.8%
increase in premiums versus a market norm of more than 25%. Gore says the
Vitality wellness programme, which rewards members for living healthier
lifestyles, contributed to low cost increases. Vitality membership grew to
more than 700,000 from 500,000 the previous year. Points are earned for
health and lifestyle improvements, such as giving up smoking, attending gym
and undergoing preventive medical check-ups. Gore says members taking
advantage of these benefits now fill one Jumbo passenger plane a day.
The relationship with VirginActive (formerly Health and Racquet Club) was
restructured earlier in the year, with Vitality members enjoying more than
100,000 workouts a month in VirginActive facilities.
"We strengthened our relationship with Virgin Active and other partners in
the Vitality programme and are busy with some very interesting developments
which will expand the range of benefits for members," says Gore.
Discovery Life, launched last year, has revolutionised the life business in
much the same way Discovery Health turned the private health care market on
its head when it launched in 1992. The "Invested Risk Benefits" technology,
which forms the basis of the product range, separates risk from investment
products and introduces a level of flexibility and innovation not previously
available in the market. Discovery Life achieved annualised premium income
of R93.7 million in its first eight months of operation. A new countrywide
distribution channel, Discovery Consulting Services, was created to offer
broker high level marketing advice.
"We see massive growth potential for Discovery Life," says Gore. "We have
yet to start leveraging the Discovery Health database for business."
Destiny Health, Discovery's US arm, got off to a relatively slow start after
launch in May 2000. The first six months were spent building a quality
infrastructure in the Chicago area, followed by a focus on marketing and
distribution in the early part of 2001. The business was re-evaluated and
the product range relaunched in May 2001, with very positive results. Total
lives covered by August 2001 exceeds 1,500, with a target of 10,000 by end
June 2002. Discovery Holdings will raise capital of R250 million to fund
Destiny's cash flow requirements going forward.
Gore says the timing of Destiny's launch is ideal, given the consumer
backlash against managed health care companies in the US, rising
contributions and the Bush administration's endorsement of a Patient's Bill
of Rights.
"We're starting to get traction in the US, and I'm cautiously optimistic
about the future," he says.
Discovery Life should become cash positive during the coming financial year,
while Destiny Health will continue to require funding in the coming year.
Gore says relations with regulatory authorities had improved, and there had
been some meeting of minds with the Medical Schemes Council. "The year began
with allegations and counter-allegations leading to a destructive process
that clouded the need for debate around important issues. Toward the end of
the year, a more constructive process began, enabling substantial progress
toward resolution and closure. Importantly, the Company remains concerned
that the current regulatory environment is inflationary, and Discovery
Health will play a constructive role in working toward an environment of
increasing access, affordability and stability" says Gore.
Looking forward, Gore says the group enters the new financial year on a
strong foundation. With roughly 15% of the private health care market in SA,
Discovery has plenty room for growth in the domestic market. Discovery Life
continues to redefine the competitive boundaries of the life business, and
is poised for another excellent year.
"We see opportunities to improve the efficiency of the Discovery health
plans and deliver even better quality health care to our members," says
Gore. "We will continue to focus on cost containment and expand the number
of lives covered by our health plans, as well as our Vitality membership. We
also expect to see strong growth from Discovery Life and Destiny."
ends
FOR FURTHER INFORMATION PLEASE CONTACT:
Roz McComb (082 925 8806) / Marina Smithers (082 556 2084)
Corporate Communications Consultants (Pty) Ltd
Tel: (011) 783-8926 Fax: (011) 783-7608
E-mail: roslinm@corpcom.co.za
On behalf of : Adrian Gore
Chief Executive Officer
Discovery
Contact : (011) 529 2800
Date : 29 August 2001
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