Wrap Text
Discovery Holdings Limited - Discovery has robust operational half-year and
clinches US deal
DISCOVERY HOLDINGS LIMITED
(Registration : 1999/007789/06)
ISIN : ZAE000022331
Share Code : DSY
Big business growth locally and internationally, and a partnership about to be
signed with a big US insurer
DISCOVERY has boosted local half-year operational earnings for the six-months to
December by 30% to R258m, but that translated into a slender 6% increase in
headline earnings to R85m after deduction of costs at its US operation Destiny
Health.
Discovery is the JSE-listed holding company for four key businesses: healthcare
company Discovery Health, life insurer Discovery Life, lifestyle company
Discovery Vitality and US-based healthcare company Destiny Health.
Ironically, Destiny Health had its best half-year ever with an 84% surge in
annualised premium income, and is about to conclude an agreement with a major
Fortune 500 insurance company. It will sell the Destiny health plan to its large
US client base, creating in the process the first mainstream consumer-driven
healthcare offering.
"We took the full financial effect of Destiny`s costs, which was compounded by
the fact that it attracted no tax relief - hence the impact on our headline
earnings," says Discovery CEO Adrian Gore. "But we are happy with our
investment there, and have laid the foundation for strong earnings growth in the
lucrative North American market."
Destiny`s health plan, modeled on Discovery Health`s proven SA model, is one of
the most advanced of its kind on offer in the growing consumer-driven healthcare
market in the US. Over the past 12 months, the number of lives covered by the
plan has increased four-fold from 3 800 to 14 800.
Destiny Health`s pending deal with the US insurer explains the cautionary
announcement that Discovery has had in the local press recently.
"Final details will be announced shortly," says Discovery CEO Adrian Gore, who
describes the agreement as having tremendous importance for Destiny`s earnings
potential. "It gives Destiny access to significant brand and financial
credibility, nationwide distribution and the ability to share the variable costs
of market expansion."
Meanwhile, the necessary measures are being taken to ensure a leaner, more cost-
effective infrastructure - already, 25% of Destiny`s client calls are being
handled locally at Discovery`s own call-centres. "Independently of this
partnership, Destiny is already on track to break even on a monthly basis by
December 2003," says Gore.
Meanwhile, here in South Africa, Discovery`s local operations - Health, Life and
Vitality - were firing on all cylinders, and together produced a 30% increase in
operating profit from R198m to R258m.
* Discovery Health, the group`s flagship company and key earnings generator,
increased operating profit by 28% from R141m to R181m. This was despite the
financial impact of last year`s settlement with the Registrar of Medical
Schemes, which resulted in a reduction in the company`s administration fees as
well as premiums earned from reinsurance. An additional 206 000 members came on
board (a 19% increase); an innovative, low-cost healthcare option, KeyHealth,
was launched and is running ahead of budget in terms of new business; and a
substantial focus on technology and infrastructure dramatically increased
operational efficiency and member satisfaction.
"The Discovery Health Medical Scheme performed particularly well, posted among
the lowest premium increases in the industry for 2003 and was able to meet the
7,3% solvency level agreed with the Council of Medical Schemes," says Gore.
* Discovery Life, formed barely two years ago, posted a 95,8% increase in
annualised new premium income over the six-month period, from R110m to R215m. It
broke even during the year, going from a loss of R1,3m to a profit of R20,2m.
Discovery Life is now one of the top risk providers, and the rest of the life
insurance industry has started to copy its innovative "risk-only" approach to
its policies. But, Gore points out, with the launch of Integrator, which allows
Discovery Health, Life and Vitality clients to integrate their benefits,
Discovery Life is in "a strong market position that is difficult to replicate".
* Discovery Vitality, which encourages a healthy lifestyle through a range of
innovative programmes and benefits, experienced significant membership growth
and greatly increased its benefit structure - which includes a recent deal with
Ster-Kinekor cinemas allowing Vitality clients to watch movies for only R8.
However, this impacted profits, which fell from R23,1m to R11,7m.
"This fall in earnings wasn`t unexpected as we carefully balance the benefits
paid out to Vitality members with the value they represent to the group in terms
of healthier, more loyal clients and future earnings potential," says Gore. "We
expect to maintain future short-term earnings at these new levels, and grow them
from there."
Gore concludes: "Most of the building blocks are now in place for our business
to generate continued earnings growth and customer satisfaction for our ever-
expanding client base."
Ends.
FOR FURTHER INFORMATION PLEASE CONTACT:
Rosemary Renton/Roz McComb
Corporate Communications Consultants (Pty) Ltd
Tel: (011) 783-8926 Fax: (011) 783-7608 E-mail: roslinm@corpcom.co.za
Rosemary Renton Cell: 082 491 0364 and Roz McComb Cell: 082 925 8806
On behalf of: Adrian Gore - CEO
Discovery
Contact: (011) 529-2800
Date: 25 February 2003
Date: 25/02/2003 09:12:23 AM Supplied by www.sharenet.co.za
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